黃金礦業股份有限公司 限 有 份 股 業 礦 金 東黃 山 SHANDONG CO.,LTD. GOLD MINING 山東黃金礦業股份有限公司 SHANDONG GOLD MINING CO.,LTD. (A joint stock company incorporated in the People’s Republic of China with limited liability) Stock code: 1787

山東黃金礦業股份有限公司 GLOBAL OFFERING SHANDONG GOLD MINING CO.,LTD. Volume 1

Joint Sponsors

Joint Global Coordinators, Joint Bookrunners and Joint Lead Managers Volume 1

Joint Bookrunners and Joint Lead Managers

Joint Lead Managers This Prospectus is printed in three parts that together form the Prospectus. You should read each part of the Prospectus in conjunction with the other parts in order to understand the matters to which the Prospectus relates, particularly the Hongg Kon Public Offering. Prospective investors should read each part of the Prospectus before making any application in response to the Hong Kong Public Offering. Copies of the three parts of this Prospectus are available at the locations set out in the section headed “How to Apply for Hong Kong Offer Shares – 3. Applying for Hong Kong Offer Shares” in this Prospectus. In addition, the complete Prospectus is available at www.hkexnews.hk and www.sdhjgf.com.cn. IMPORTANT

IMPORTANT: If you are in any doubt about any of the contents of this Prospectus, you should obtain independent professional advice.

SHANDONG GOLD MINING CO., LTD. 山東黃金礦業股份有限公司 (a joint stock company incorporated in the People’s Republic of China with limited liability) GLOBAL OFFERING Number of Offer Shares in the Global Offering : 327,730,000 H Shares (subject to the Over-allotment Option) Number of Hong Kong Offer Shares : 32,773,000 H Shares (subject to adjustment) Number of International Offer Shares : 294,957,000 H Shares (subject to adjustment and the Over-allotment Option) Maximum Offer Price : HK$18.38 per H Share, plus brokerage of 1%, Stock Exchange trading fee of 0.005% and SFC transaction levy of 0.0027% (payable in full on application in Hong Kong Dollars and subject to refund) Nominal Value : RMB 1.00 per H Share Stock Code : 1787 Joint Sponsors

Joint Global Coordinators, Joint Bookrunners, Joint Lead Managers

Joint Bookrunners and Joint Lead Managers

Joint Lead Managers

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 Prospectus, 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 Prospectus. A copy of this Prospectus, having attached thereto the documents specified in “Appendix IX — Documents Delivered to the Registrar of Companies and Available for Inspection” to this Prospectus, has been registered by the Registrar of Companies in Hong Kong as required by section 342C of the Companies (WindingUp and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong). The Securities and Futures Commission and the Registrar of Companies in Hong Kong take no responsibility as to the contents of this Prospectus or any other documents referred to above. The Offer Price is expected to be fixed by agreement between the Joint Global Coordinators (for themselves and on behalf of the Underwriters) and us on the Price Determination Date. The Price Determination Date is expected to be on or about Thursday, September 20, 2018 and, in any event, not later than Friday, September 21, 2018. The Offer Price will be not more than HK$18.38 and is currently expected to be not less than HK$14.70. Investors applying for Hong Kong Offer Shares must pay, on application, the maximum offer price of HK$18.38 for each Hong Kong Offer Share together with brokerage of 1%, SFC transaction levy of 0.0027% and Stock Exchange trading fee of 0.005%, subject to refund if the Offer Price should be lower than HK$18.38. If, for any reason, the Joint Global Coordinators (for themselves and on behalf of the Underwriters) and us are unable to reach an agreement on the Offer Price by Friday, September 21, 2018 the Global Offering will not proceed and will lapse. The Joint Global Coordinators (for themselves and on behalf of the Underwriters) may, with our consent, reduce the number of Offer Shares and/or the indicative Offer Price range that stated in this Prospectus at any time prior to the morning of the last day for lodging applications under the Hong Kong Public Offering. In such a case, a notice of the reduction in the number of Offer Shares and/or the indicative offer price range will be published in the South China Morning Post (in English) and Hong Kong Economic Times (in Chinese) as well as our website www.sdhjgf.com.cn not later than the morning of the last day for lodging applications under the Hong Kong Public Offering. Further details are set forth in the sections entitled “Structure of the Global Offering — Conditions of the Hong Kong Public Offering” and “How to Apply for Hong Kong Offer Shares” in this Prospectus. If applications for Hong Kong Offer Shares have been submitted prior to the day which is the last day for lodging applications under the Hong Kong Public Offer, then such applications can be subsequently withdrawn if the number of Offer Shares and/or the indicative Offer Price range is so reduced. We are incorporated, and a significant majority of our businesses are located, in the PRC. Potential investors should be aware of the differences in legal, economic and financial systems between the PRC and Hong Kong and that there are different risk factors relating to investments in PRC-incorporated companies. Potential investors should also be aware that the regulatory framework in the PRC is different from the regulatory framework in Hong Kong and should take into consideration the different market nature of our H Share. Such differences and risk factors are set out in “Risk Factors,” “Appendix VI — Summary of Principal Legal and Regulatory Provisions” and “Appendix VII — Summary of the Articles of Association” to this Prospectus. Prior to making an investment decision, prospective investors should consider carefully all the information set forth in this Prospectus, including but not limited to the risk factors set forth in the section headed “Risk Factors” in this Prospectus. The obligations of the Hong Kong Underwriters under the Hong Kong Underwriting Agreement to subscribe for, and to procure applicants for the subscription for, the Hong Kong Offer Shares, are subject to termination by the Joint Global Coordinators (for themselves and on behalf of the Underwriters) if certain grounds arise prior to 8:00 a.m. on the day that trading in the H Shares commences on the Hong Kong Stock Exchange. Such grounds are set out in the section entitled “Underwriting — Underwriting Arrangements and Expenses — Hong Kong Public Offering — Grounds for Termination” in this Prospectus. It is important that you refer to that section for further details. The Offer Shares have not been and will not be registered under the U.S. Securities Act or any state securities laws of the United States and may not be offered, sold, pledged or transferred within the United States, except that the Offer Shares may be offered, sold or delivered to QIBs in the United States in reliance on an exemption from registration under the U.S. Securities Act provided by, and in accordance with the restrictions of, Rule 144A or another available exemption from registration under the U.S. Securities Act or outside the United States in offshore transactions in accordance with Rule 903 or Rule 904 of Regulation S. September 14, 2018 EXPECTED TIMETABLE

If there is any change in the following expected timetable, we will issue an announcement on the respective websites of the Company at www.sdhjgf.com.cn and the Hong Kong Stock Exchange at www.hkexnews.hk.

Latest time to complete electronic applications under the White Form eIPO service through the designated website at www.eipo.com.hk(2) ..... 11:30 am on Thursday, September 20, 2018

Application lists open(3) ...... 11:45 am on Thursday, September 20, 2018

Latest time to lodge WHITE and YELLOW Application Forms ...... 12:00 noon on Thursday, September 20, 2018

Latest time to give electronic application instructions to HKSCC(4) ...... 12:00 noon on Thursday, September 20, 2018

Latest time to complete payment of White Form eIPO applications by effecting Internet banking transfer(s) or PPS payment transfer(s) ...... 12:00 noon on Thursday, September 20, 2018

Application lists close ...... 12:00 noon on Thursday, September 20, 2018

Expected Price Determination Date(5) ...... Thursday, September 20, 2018

(1) Announcement of:

• the Offer Price;

• the level of indications of interest in the International Offering;

• the level of applications in the Hong Kong Public Offering; and

• the basis of allocations of the Hong Kong Offer Shares to be published in South China Morning Post (in English) and Hong Kong Economic Times (in Chinese),

on or before ...... Thursday, September 27, 2018

(2) Results of allocations in the Hong Kong Public Offering (with successful applicants’ identification document numbers, where applicable) to be available through a variety of channels (see the section headed “How to Apply for Hong Kong Offer Shares — 11. Publication of Results” in this Prospectus) from ...... Thursday, September 27, 2018

Announcement of (1) and (2) above to be published on the website of the Company at www.sdhjgf.com.cn and the website of the Hong Kong Stock Exchange at www.hkexnews.hk on or before ...... Thursday, September 27, 2018

—i— EXPECTED TIMETABLE

Results of allocations in the Hong Kong Public Offering (with successful applicants’ identification document numbers, where appropriate) will be available at www.iporesults.com.hk (alternatively: English https://www.eipo.com.hk/en/Allotment; Chinese https://www.eipo.com.hk/zh-hk/Allotment) with a “search by ID” function ...... Thursday, September 27, 2018

Dispatch/Collection of H Share certificates in respect of wholly or partially successful applications pursuant to the Hong Kong Public Offering on or before(6)(7) ...... Thursday, September 27, 2018

Dispatch/Collection of refund cheques and White Form e-Refund payment instructions in respect of wholly or partially successful applications (if applicable) and wholly or partially unsuccessful applications pursuant to the Hong Kong Public Offering on or before(6)(8) ...... Thursday, September 27, 2018

Dealings in the H Shares on the Hong Kong Stock Exchange expected to commence ...... 9:00 a.m. on Friday, September 28, 2018

The application for the Hong Kong Offer Shares will commence on Friday, September 14, 2018 through Thursday, September 20, 2018. Such time period is longer than the normal market practice of four days. The application monies (including brokerage, SFC transaction levy and Hong Kong Stock Exchange trading fee) will be held by the receiving banks on behalf of our Company and the refund monies, if any, will be returned to the applicant(s) without interest on or before Thursday, September 27, 2018. Investors should be aware that the dealings in H Shares on the Stock Exchange are expected to commence on Friday, September 28, 2018.

(1) All times and dates refer to Hong Kong local times and dates unless otherwise stated.

(2) You will not be permitted to submit your application through the designated website at www.eipo.com,hk after 11:30 a.m. on the last day for submitting applications. If you have already submitted your application and obtained an application reference number from the designated website at or prior to 11:30 a.m., you will be permitted to continue the application process (by completing payment of application money) until 12:00 noon on the last day for submitting applications, when the application lists close.

(3) If there is a “black” rainstorm warning signal or a tropical cyclone warning signal number 8 or above is in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Thursday, September 20, 2018, the application lists will not open on that day. For further information please refer to the section headed “How to Apply for Hong Kong Offer Shares — 10. Effect of Bad Weather on the Opening of the Application Lists” in this Prospectus.

(4) Applicants who apply for Hong Kong Offer Shares by giving electronic application instructions to HKSCC should refer to the section headed “How to Apply for Hong Kong Offer Shares — 6. Applying by Giving Electronic Application Instructions to HKSCC via CCASS” in this Prospectus.

(5) The Price Determination Date is expected to be on or around Thursday, September 20, 2018, and in any event will not be later than Friday, September 21, 2018. If, for any reason, the Offer Price is not agreed among the Joint Global Coordinators (for themselves and on behalf of the Underwriters), our Company on or before Friday, September 21, 2018, the Global Offering (including the Hong Kong Public Offering) will not proceed and will lapse.

—ii— EXPECTED TIMETABLE

(6) Applicants who have applied with WHITE Application Forms for 1,000,000 or more Hong Kong Offer Shares under the Hong Kong Public Offering and have provided all information required by their Application Forms may collect their refund cheques and H Share certificates (as applicable) in person from our H Share Registrar, Computershare Hong Kong Investor Services Limited at Shop 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, from 9:00 a.m. to 1:00 p.m. on Thursday, September 27, 2018 or such other date as notified by us in the newspapers. Applicants being individuals who are eligible to personal collection must not authorise any other person to make collection on their behalf. Applicants being corporations who are eligible to personal collection must attend by their authorised representatives bearing letters of authorisation from their corporation stamped with the corporation’s chop. Both individuals and authorised representatives of corporations must produce, at the time of collection, identification and (where applicable) authorisation documents acceptable to our H Share Registrar. Applicants who have applied with YELLOW Application Forms for 1,000,000 or more Hong Kong Offer Shares under the Hong Kong Public Offering and have provided all information required by their Application Forms, may collect their refund cheques (where applicable) in person but may not collect their H Share certificates, which will be deposited into CCASS for the credit to their designated CCASS Participants’ stock accounts or CCASS Investor Participant stock accounts, as appropriate. The procedures for collection of refund cheques for YELLOW Application Form applicants are the same as those for WHITE Application Form applicants. Applicants who have applied through White Form eIPO service by paying the application monies through single bank accounts may have refund monies (if any) dispatched to the bank account in the form of e-Refund payment instructions. Applicants who have applied through the White Form eIPO service and have paid their application monies through multiple bank accounts may have refund monies (if any) dispatched to the address as specified in their application instructions in the form of refund cheques by ordinary post at their own risk. Applicants who have applied for Hong Kong Offer Shares by giving electronic application instructions to HKSCC via CCASS should refer to the section headed “How to Apply for Hong Kong Offer Shares — 14. Despatch/Collection of Share Certificates and Refund Monies — Personal Collection — (d) If you apply via Electronic Application Instructions to HKSCC” in this Prospectus. H Share certificates (if applicable) and/or refunded cheques (if applicable) for applicants who have applied for less than 1,000,000 Hong Kong Offer Shares and any uncollected H Share certificates (if applicable) and/or refund cheques (if applicable) will be dispatched by ordinary post, at the risk of the applicants, to the addresses specified in the relevant applications shortly after the expiry of the time for collection at the date of dispatch of refund cheque as described in the sections headed “How to Apply for Hong Kong Offer Shares — 13. Refund of Application Monies” and “How to Apply for Hong Kong Offer Shares — 14. Despatch/Collection of Share Certificates and Refund Monies” in this Prospectus. (7) H Share certificates for the Hong Kong Offer Shares are expected to be issued on Thursday, September 27, 2018 but will only become valid certificates of title provided that the Global Offering becomes unconditional in all respects and neither of the Underwriting Agreements has been terminated in accordance with its terms before 8:00 a.m. on the Listing Date. Investors who trade H Shares on the basis of publicly available allocation details prior to the receipt of H Share certificates or prior to the H Share certificates becoming valid certificates of title do so entirely at their own risk. (8) Refund cheques will be issued (where applicable) and e-Refund payment instructions will be dispatched (where applicable) in respect of wholly or partially unsuccessful applications and in respect of successful applications if the final Offer Price is less than the price payable per Offer Share on application. Part of the applicant’s Hong Kong identity card number or passport number, or, if the application is made by joint applicants, part of the Hong Kong identity card number or passport number of the first-named applicant, provided by the applicant(s) may be printed on the refund cheque, if any. Such data would also be transferred to a third party for refund purposes. Banks may require verification of an applicant’s Hong Kong identity card number or passport number before encashment of the refund cheques. Inaccurate completion of an applicant’s Hong Kong identity card number or passport number may invalidate or delay encashment of the refund cheque.

For details of the structure of the Global Offering, including its conditions, and the procedures for applications for Hong Kong Offer Shares, see the sections headed “Structure of the Global Offering” and “How to Apply for Hong Kong Offer Shares” in this Prospectus, respectively.

— iii — CONTENTS

IMPORTANT NOTICE TO INVESTORS

This Prospectus is issued by Shandong Gold Mining Co., Ltd. solely in connection with the Hong Kong Public Offering and does not constitute an offer to sell or a solicitation of an offer to buy any security other than the Hong Kong Offer Shares offered by this Prospectus pursuant to the Hong Kong Public Offering. This Prospectus may not be used for the purpose of, and does not constitute, an offer or a solicitation of an offer to subscribe for or buy, any security in any other jurisdiction or in any other circumstances. No action has been taken to permit a public offering of the Offer Shares or the distribution of this Prospectus in any jurisdiction other than Hong Kong. The distribution of this Prospectus and the offering and sale of the Offer Shares in other jurisdictions are subject to restrictions and may not be made except as permitted under the applicable securities laws of such jurisdictions pursuant to registration with or authorization by the relevant securities regulatory authorities or an exemption therefrom.

You should rely only on the information contained in this Prospectus and the Application Forms to make your investment decision. We have not authorized anyone to provide you with information that is different from what is contained in this Prospectus. Any information or representation not made in this Prospectus must not be relied on by you as having been authorized by us, the Joint Sponsors, Joint Global Coordinators, Joint Bookrunners and Joint Lead Managers, any of the Underwriters, any of our or their respective directors, officers or representatives, or any other person or party involved in the Global Offering.

Page

EXPECTED TIMETABLE ...... i

CONTENTS ...... iv

SUMMARY...... 1

DEFINITIONS ...... 16

SUMMARY OF THE NI 43-101 CODE ...... 34

GLOSSARY OF TECHNICAL TERMS ...... 36

FORWARD-LOOKING STATEMENTS ...... 40

RISK FACTORS...... 42

WAIVERS FROM STRICT COMPLIANCE WITH THE HONG KONG LISTING RULES ...... 78

INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING...... 84

DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING ...... 90

CORPORATE INFORMATION ...... 100

—iv— CONTENTS

Page

INDUSTRY OVERVIEW ...... 102

REGULATORY OVERVIEW ...... 114

HISTORY AND DEVELOPMENT ...... 136

BUSINESS ...... 156

RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDER...... 292

CONNECTED TRANSACTIONS ...... 332

DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT ...... 354

SHARE CAPITAL ...... 377

SUBSTANTIAL SHAREHOLDERS ...... 381

FINANCIAL INFORMATION — GENERAL ...... 384

FINANCIAL INFORMATION — VELADERO MINE...... 454

CORNERSTONE INVESTORS ...... 474

FUTURE PLANS AND USE OF PROCEEDS ...... 483

UNDERWRITING ...... 484

STRUCTURE OF THE GLOBAL OFFERING ...... 494

HOW TO APPLY FOR HONG KONG OFFER SHARES ...... 505

APPENDIX I — ACCOUNTANT’S REPORT...... I-1

APPENDIX IIA — UNAUDITED PRO FORMA FINANCIAL INFORMATION ..... IIA-1

APPENDIX IIB — UNAUDITED INTERIM FINANCIAL INFORMATION ...... IIB-1

APPENDIX III — COMPETENT PERSON’S REPORT — AAI REPORT...... III-1

APPENDIX IV — COMPETENT PERSON’S REPORT — RPA REPORT ...... IV-1

APPENDIX V — TAXATION AND FOREIGN EXCHANGE ...... V-1

APPENDIX VI — SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS ...... VI-1

APPENDIX VII — SUMMARY OF THE ARTICLES OF ASSOCIATION ...... VII-1

APPENDIX VIII — STATUTORY AND GENERAL INFORMATION...... VIII-1

APPENDIX IX — DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES AND AVAILABLE FOR INSPECTION ...... IX-1

—v— SUMMARY

This summary aims to give you an overview of the information contained in this Prospectus. As this is a summary, it does not contain all the information that may be important to you. You should read this Prospectus in its entirety before you decide to invest in the Offer Shares. There are risks associated with any investment. Some of the particular risks in investing in the Offer Shares are set out in the section entitled “Risk Factors” in this Prospectus. You should read that section carefully before you decide to invest in the Offer Shares.

OVERVIEW We were the largest among gold producers listed in the PRC and/or Hong Kong that operate in the PRC with a 6.9% market share in terms of 2017 gold mine production volume in the PRC, which was 944.9 koz in 2017. We controlled and operated 12 PRC Mines as of March 31, 2018 and jointly operated the Veladero Mine with Barrick Gold on a 50-50% basis. As of March 31, 2018, our total Reserves was approximately 10,901 koz (equivalent to approximately 339.0 tonnes), according to the AAI Report and RPA Report1, among which 10,651 koz (equivalent to approximately 331.3 tonnes) were attributable to our Group. As of March 31, 2018, our total Resources were approximately 31,736 koz (equivalent to approximately 987.1 tonnes), among which 31,148 koz (equivalent to approximately 968.8 tonnes) were attributable to our Group. Since our inception, we have operated primarily in Shandong province, the largest gold producing province in China in terms of 2017 gold mine production volume, and have gradually expanded our business into the Inner Mongolia autonomous region, Gansu province and Fujian province. Our four flagship PRC Mines ranked among the ten largest gold mines in the PRC in terms of 2017 gold mine production volume. Our Jiaojia Gold Mine, Sanshandao Gold Mine, Xincheng Gold Mine and Linglong Gold Mine ranked first, second, fifth and sixth, respectively, among gold mines in China in terms of 2017 gold mine production volume, with approximately 233.8 koz, 209.1 koz, 139.7 koz and 130.6 koz, respectively. As of March 31, 2018, the total Reserves and Resources of our PRC Mines were approximately 8,200 koz (equivalent to approximately 255.1 tonnes) and 27,306 koz (equivalent to approximately 849.3 tonnes), respectively, according to the AAI Report. As of the same date, the Reserves and Resources of our PRC Mines attributable to our Group were approximately 7,950 koz (equivalent to approximately 247.4 tonnes) and 26,718 koz (equivalent to approximately 831.0 tonnes), respectively. According to the AAI Report, the LOM of our four flagship PRC mines range from 4 to 13 years. Considering our track record of increasing gold reserves through exploration activities and our high-grade gold resources, AAI believes that our flagship PRC Mines have significant gold resources and strong potential for increasing gold reserves. As the first step in our overseas expansion, on June 30, 2017 we acquired from Barrick Gold, a leading global gold company, a 50% interest in the Veladero Mine located in San Juan province of Argentina. The Veladero Mine was the largest gold mine in Argentina and in South America in terms of 2017 gold mine production volume with approximately 641.1 koz, according to the F&S Report. Through the Veladero Acquisition, we currently operate the largest overseas gold mine among PRC gold companies. Since the completion of the Veladero Acquisition and starting from July 1, 2017, we have consolidated our 50% proportionate share of the assets and liabilities of the Veladero Mine, and are entitled to 50% of the products of, and recognize 50% of the expenses incurred by, the Veladero Mine. We believe that our interest in the Veladero Mine will continue to make a substantial contribution to our gold mine production volume, Resources and Reserves. As of March 31, 2018, Reserves and Resources of the Veladero Mine attributable to us were approximately 2,701 koz (equivalent to approximately 84.0 tonnes) and 4,430 koz (equivalent to approximately 137.8 tonnes), according to the RPA Report. According to the RPA Report, the LOM of Veladero Mine was approximately seven years. Moreover, RPA believes that the Veladero Mine may continue leaching of stacked ore for an additional four years after the LOM as part of LOM improvements, and the potential total gold recoverable during this period and not included in RPA’s Reserve estimate is estimated to be approximately 500 koz.

1 Total Reserves and Resources for our PRC Mines are presented on a 100% basis rather than their respective percentage of ownership by us. Total Reserves and Resources for the Veladero Mine are presented on a 50% basis unless otherwise indicated.

—1— SUMMARY

We are an integrated gold company listed on the SSE since 2003 and engaged in gold exploration, mining, processing, smelting and sales. We seek to increase our gold reserves and resources by conducting in-house exploration during our mining activities. Each of our PRC Mines is equipped with one or more processing facilities. As of March 31, 2018, we had 18 processing facilities and two smelting and refining facilities in China. We are committed to optimizing our operations to enhance production efficiency. The economic parameters of our operations (including dilution rate, mining loss rate, processing recovery rate and smelting recovery rate) are leading in the PRC gold industry according to F&S Report, reflecting our efforts to increase the level of automation and intelligent control in our mining process, develop processing and smelting technologies in-house and invest in world-class imported processing equipment. In addition to smelting and refining gold from our PRC Mines, we also procure doré and standard gold bullion from third parties to refine and produce gold products. Our operating costs are among the lowest in the industry among gold producers listed in the PRC and/or Hong Kong that operate in the PRC, according to the F&S Report. In 2017, the operating cash costs of our PRC Mines and the Veladero Mine were US$682 per ounce and US$836 per ounce, respectively.

Our Controlling Shareholder, SDG Group Co., is a large, state-owned conglomerate controlled by the Shandong SASAC with over 40 years of operating experience in the gold mining industry. Such background, particularly in a province that is the largest gold producing province in China, positions us favorably against competitors when acquiring gold resources. At present, our Controlling Shareholder holds a number of quality gold resources at an early development stage. For instance, in March 2017, SDG Group Co. discovered a significant orebody more than 1,000 meters underground in the Sanshandao Xiling (西嶺) mine area with a resource gold content of approximately 12,300.2 koz. We hold the first right of refusal to acquire such resources from our Controlling Shareholder, and we believe that such resources will be a driving force for our future growth. Moreover, we believe that our Controlling Shareholder’s in-depth experience and technological expertise in gold resource exploration will provide synergies in our discovery of additional resources. For details of the business of our Controlling Shareholder, see “Relationship with Our Controlling Shareholder — Business Delineation and Competition.” Our revenue in 2015, 2016, 2017 and the three months ended March 31, 2017 and 2018 amounted to RMB38,774.5 million, RMB49,072.7 million, RMB51,041.3 million, RMB9,711.1 million and RMB14,166.3 million, respectively, and our gross profit amounted to RMB2,599.4 million, RMB3,505.6 million, RMB3,642.6 million, RMB860.2 million and RMB996.0 million, respectively. OUR GOLD MINES, RESOURCES AND RESERVES

As of March 31, 2018, we controlled and operated 12 PRC Mines, nine of which are located in Shandong province. Our four flagship PRC Mines, namely, Sanshandao Gold Mine, Jiaojia Gold Mine, Xincheng Gold Mine and Linglong Gold Mine, are concentrated in the Laizhou and Zhaoyuan regions located in the northwest Jiaodong peninsula of Shandong province. We also had three gold mines located in Inner Mongolia autonomous region, Gansu province and Fujian province as of March 31, 2018. As the first step in our overseas expansion, we acquired a 50% interest in the Veladero Mine on June 30, 2017. We jointly operate the Veladero Mine with Barrick Gold. Under the NI 43-101 Code, Reserves are the economically mineable parts of measured and indicated Resources after a consideration of the relevant modifying factors, which include mining, metallurgical, economic, marketing, legal, environmental, social and governmental considerations. The CIM Definition Standards provide for a direct relationship between Indicated Mineral Resources and Probable Mineral Reserves and between Measured Mineral Resources and Proven Mineral

—2— SUMMARY

Reserves. For details, see “Summary of the NI 43-101 Code.” The following table sets forth our Reserves and Resources, based on the AAI Report and RPA Report under the NI 43-101 Code, as of March 31, 2018:

Resources(3) Reserves(3) Gold Gold Gold Gold Measured content content content content and (100% (equity (100% (equity Gold Mine Measured Indicated Indicated Inferred Total basis) basis)(1) Proven Probable Total basis) basis)(2) LOM (Mt) (Mt) (Mt) (Mt) (Mt) (koz) (koz) (Mt) (Mt) (Mt) (koz) (koz) (year)

Sanshandao Gold Mine. . . — 29.2 29.2 40.2 69.4 6,688 6,688 — 25.9 25.9 2,290 2,290 13 Jiaojia Gold Mine ..... — 14.1 14.1 19.4 33.5 3,351 3,351 — 9.5 9.5 950 950 4 Xincheng Gold Mine.... — 30.7 30.7 44.8 75.4 7,274 7,274 — 26.1 26.1 2,630 2,630 11 Linglong Gold Mine .... — 5.9 5.9 53.3 59.2 5,440 5,440 — 5.5 5.5 550 550 4 Guilaizhuang Gold Mine . . — 0.8 0.8 1.8 2.6 320 226 — 0.3 0.3 80 60 2 Jinzhou Gold Mine .... — 1.3 1.3 1.3 2.6 244 144 — 1.1 1.1 90 50 5 Qingdao Gold Mine .... — 5.5 5.5 3.6 9.1 1,391 1,391 — 5.7 5.7 670 670 9 Penglai Gold Mine .... — 1.2 1.2 0.9 2.1 470 470 — 1.3 1.3 210 210 5 Yinan Gold Mine ..... — 4.2 4.2 14.6 18.8 660 660 — 0.2 0.2 10 10 — Shandong Province .... — 92.9 92.9 179.9 272.7 25,838 25,644 — 75.8 75.8 7,480 7,420 —

Chifengchai Gold Mine . . — 0.9 0.9 0.4 1.3 225 166 — 0.9 0.9 150 110 3 Fujian Yuanxin Gold Mine . — 1.0 1.0 0.3 1.3 186 168 — 0.8 0.8 100 90 4 Xihe Zhongbao Gold Mine . — 6.9 6.9 7.3 14.2 1,055 739 — 5.9 5.9 450 310 20+ Other Provinces...... — 8.8 8.8 8 16.8 1,466 1,073 — 7.6 7.6 700 510 — China sub-total ...... — 101.7 101.7 187.9 289.5 27,306 26,718 — 83.4 83.4 8,200 7,950 —

Veladero Mine ...... 18.3 162.3 180.7 33.2 213.8 8,859 4,430 15.1 95.9 111.0 5,401 2,701 7 Total ...... 18.3 264.0 282.4 221.1 503.3 36,165 31,148 15.1 179.3 193.4 13,601 10,651 —

(1) As of March 31, 2018, we owned 70.65%, 73.52%, 90.31% and 70% of Guilaizhuang Gold Mine, Chifengchai Gold Mine, Fujian Yuanxin Gold Mine and Xihe Zhongbao Gold Mine, respectively. Jinzhou Gold Mine consists of mining rights owned by Jinzhou Group and its 100% and 90% owned subsidiaries, Fuling Mining and Qianling Mining, respectively. As of March 31, 2018, we beneficially owned 60.43% and 54.39% of Fuling Mining and Qianling Mining through our 60.43% interest in Jinzhou Group. We also owned 100% of the remaining seven PRC Mines as of the same date. (2) As of March 31, 2018, we owned a 50% interest in the Veladero Mine. (3) For the cut-off grades of our Reserves and Resources, see “Business — Our Operations in China — Overview” and “Business — Our Operations in Argentina — Overview.”

THE VELADERO ACQUISITION On June 30, 2017, we completed the Veladero Acquisition, through which we beneficially hold a 50% equity interest in MAG, which operates the Veladero Mine. The consideration for the Veladero Acquisition was US$960.0 million (which was adjusted in November 2017 to US$989.8 million pursuant our Share Purchase Agreement based on certain financial metrics). We jointly operate the Veladero Mine with Barrick Gold. To finance the Veladero Acquisition, we utilized funds from the following sources: (i) a US$740 million drawdown of the Syndicated Term Loan, and (ii) a US$300 million drawdown of the CDB Term Loan. Since the completion of the Veladero Acquisition and starting from July 1, 2017, we have consolidated our 50% proportionate share of the assets and liabilities of the Veladero Mine, and are entitled to 50% of the products of, and recognize 50% of the expenses incurred by, the Veladero Mine. For more information on the Veladero Mine, see “Business — Our Operations in Argentina.”

MAJOR MINING AND EXPLORATION PERMITS As of the Latest Practicable Date, we held a total of 22 valid mining permits and had six mining permit being renewed in China. Our valid mining permits had a permitted mine production volume of approximately 4.0 million tonnes per year and covered a total area of approximately 33.0 square kilometers. In addition, during the Track Record Period, we leased a mining permit for our Jiaojia Gold Mine from our Controlling Shareholder. As of the Latest Practicable Date, our Controlling Shareholder had applied for the expansion of the mining area and mine production volume of this mining permit and intends to transfer this mining permit to us upon approval. We expect to commence the transfer procedure by the end of 2020. For more information, see “Business — Our Operations in China — Our Mining and Exploration Permits — Leased Mining Permit.” As of the Latest Practicable Date, we also held 17 valid exploration permits and had nine exploration permits being renewed. Our valid exploration permits covered a total area of approximately 65.2 square kilometers. Our PRC

—3— SUMMARY

Legal Advisers do not anticipate material legal impediments in the renewal process as long as we meet the substantive and procedural conditions stipulated in the relevant PRC laws and regulations. In September 2017, we acquired two exploration permits in relation to our Qingdao Gold Mine. In November 2017, we also acquired three exploration permits in relation to our Xincheng Gold Mine, Linglong Gold Mine and Yinan Gold Mine from our Controlling Shareholder. See “Business — Our Operations in China — Our Mining and Exploration Permits.”

As of March 31, 2018, the Veladero Mine comprised two mining properties: (i) the Veladero mining group, which consisted of eight mining concessions covering an aggregate area of 119.3 square kilometers; and (ii) the Filo Norte mining group, which consisted of five mining concessions covering an aggregate area of 25.2 square kilometers. The Veladero mining concessions are owned by IPEEM, a provincial mining entity, and operated by MAG pursuant to the IPEEM Agreement and applicable provincial law. The Filo Norte mining concessions are held by MAG. Under the IPEEM Agreement, MAG has the right to conduct mining activities in the regions covered under the Veladero mining concessions for a period of 25 years (from 2003 to 2028). MAG has the sole discretion to renew such agreement upon expiration. MAG is required to pay to IPEEM a royalty of 0.75% of gross sales of doré. OUR BUSINESS MODEL

We are an integrated gold company engaged in gold exploration, mining, processing, smelting and sales. Our business is generally divided into two segments, namely:

• Mining. We engage in gold mining activities and process the gold mined into doré and/or gold concentrates. Most of the doré and gold concentrates produced from our PRC Mines are delivered to our smelteries for smelting and refining. To a lesser extent, a portion of the doré and gold concentrates are sold without undergoing smelting and refining. In addition, we also sold by-products such as silver, copper, iron and zinc. In 2015, 2016, 2017 and the three months ended March 31, 2017 and 2018, the segment revenue from gold mining comprised (i) sale of products, which primarily consist of gold concentrates and doré and amounted to RMB7,051.7 million, RMB8,019.7 million, RMB9,791.6 million, RMB2,020.5 million and RMB2,461.4 million, respectively; and (ii) rental income from leasing of properties, which amounted to RMB20.1 million, RMB11.9 million, RMB19.7 million, RMB2.5 million and RMB2.4 million respectively.

• Refining. We engage in smelting and refining of the doré and gold concentrates produced from our PRC Mines. In addition, we also conduct smelting and refining of (i) doré procured from third-party suppliers, which are produced into standard gold bullion, and (ii) standard gold bullion procured from the Shanghai Gold Exchange, which are produced into customized gold products. The segment revenue from gold refining in 2015, 2016, 2017 and the three months ended March 31, 2018 amounted to RMB37,658.1 million, RMB48,063.3 million, RMB49,048.6 million, RMB9,623.6 million and RMB13,591.1 million, respectively. The revenue from gold mining is subject to inter-segment elimination because the gold concentrates and doré produced from our PRC Mines are sold to our smelteries for refining and sales to external customers. Such elimination amounted to RMB5,955.4 million, RMB7,022.2 million, RMB7,818.6 million, RMB1,935.5 million and RMB1,888.6 million, respectively, during the same periods. OUR PRODUCTS AND CUSTOMERS

During the Track Record Period, we generated revenue primarily from our sales of standard gold bullion, which we sold on the Shanghai Gold Exchange. We also sold customized gold products to commercial banks, precious metals trading companies and other retail customers. To a lesser extent,

—4— SUMMARY we sold doré and gold concentrates produced from certain of our PRC Mines without undergoing smelting and refining, as well as by-products such as silver, copper, iron and zinc. The following table sets forth the breakdown of our revenue by product and geographic region for the period indicated.

For the year ended December 31, For the three months ended March 31, 2015 2016 2017 2017 2018 (Renminbi in millions, except for percentages) (unaudited)

PRC Gold Standard gold bullion PRC Mines(1) .... 7,007.6 18.1% 8,321.6 17.0% 8,028.9 15.7% 2,023.0 20.8% 1,994.4 14.1% Third-party doré . . 30,743.9 79.3 30,820.9 62.8 29,262.7 57.3 5,081.4 52.3 7,110.5 50.2 Subtotal ...... 37,751.5 97.4 39,142.4 79.8 37,291.6 73.1 7,104.4 73.1 9,104.9 64.3 Customized gold products ...... 629.8 1.6 9,614.0 19.6 11,656.9 22.8 2,520.5 26.0 4,512.4 31.8 Subtotal ...... 38,381.3 99.0 48,756.4 99.4 48,948.5 95.9 9,624.9 99.1 13,617.3 96.1 By-products ...... 316.2 0.8 248.4 0.5 263.4 0.5 68.2 0.7 45.7 0.3 Others ...... 77.0 0.2 67.8 0.1 100.6 0.2 18.0 0.2 28.8 0.2 Total PRC sales ...... 38,774.5 100.0 49,072.7 100.0 49,312.5 96.6 9,711.1 100.0 13,691.7 96.6 Argentina Gold bullion ...... ————1,728.8 3.4 — — 474.6 3.4 Total(2) ...... 38,774.5 100.0% 49,072.7 100.0% 51,041.3 100.0% 9,711.1 100.0% 14,166.3 100.0%

(1) Includes revenue from sales of doré and other products produced from our PRC Mines. (2) Represents a breakdown of our revenue by product type, which is different from the segment information set out in Note 5 of “Appendix I — Accountant’s Report”, setting out an analysis of our revenue by business line.

During the Track Record Period, revenue from sales of standard gold bullion produced from our PRC Mines fluctuated primarily due to changes in sales volume, while the average selling price of standard gold bullion generally increased in line with gold prices during this period. Our sales of customized gold products increased significantly during the Track Record Period as we continued to develop this business and increase our sales volume. See “Financial Information — General — Description of Certain Consolidated Statement of Profit or Loss and Other Comprehensive Income Items — Revenue.” In 2015, 2016 and 2017 and the three months ended March 31, 2017 and 2018, our sales volume of standard gold bullion and doré in the PRC amounted to approximately 5.1 Moz, 4.7 Moz, 4.3 Moz, 0.8 Moz and 1.1 Moz, respectively. For the same periods, average selling prices for our standard gold bullion and doré in the PRC was approximately RMB7,350 per ounce, RMB8,360 per ounce, RMB8,590 per ounce, RMB8,480 per ounce and RMB8,550 per ounce, respectively. The price of gold bullion that we sell in the PRC is benchmarked against the prevailing spot price of gold quoted on the Shanghai Gold Exchange. We sell gold bullion from the Veladero Mine to an international broker with reference to the prevailing London spot market price. Our revenue for the year ended December 31, 2017 and the three months ended March 31, 2018 includes revenue from sale of gold bullion from the Veladero Mine for the six months ended December 31, 2017 and the three months ended March 31, 2018.

—5— SUMMARY

The following table sets forth the breakdown of our gross profit and gross profit margin by product type for the period indicated.

For the three months For the year ended December 31, ended March 31, 2015 2016 2017 2017 2018 (Renminbi in millions, except for percentages) (unaudited)

PRC Gold Standard gold bullion PRC Mines(1) ...... 2,427.3 34.6% 3,350.4 40.3% 2,989.5 37.2% 772.2 38.2% 810.0 40.6% Third-party doré .... 30.7 0.1 15.4 0.1 98.7 0.3 43.5 0.9 31.3 0.4 Subtotal ...... 2,458.0 6.5 3,365.8 8.6 3,088.2 8.3 815.8 11.5 841.3 9.2 Customized gold products ...... 0.6 0.1 4.8 0.1 14.1 0.1 1.7 0.1 3.1 0.1 Subtotal...... 2,458.6 6.4. 3,370.6 6.9 3,102.3 6.3 817.5 8.5 844.4 6.2 By-products ...... 140.8 44.5 130.5 52.5 138.0 52.4 41.5 60.9 27.8 61.0 Others ...... 0.0 0.0 4.5 0.0 37.8 37.6 1.2 6.6 1.4 4.9 Total PRC sales ...... 2,599.4 6.7 3,505.6 7.1 3,278.1 6.7 860.2 8.9 873.6 6.4 Argentina Gold bullion...... — — — — 364.5 21.1 — — 122.4 25.8 Total ...... 2,599.4 6.7% 3,505.6 7.1% 3,642.6 7.1% 860.2 8.9% 996.0 7.0%

(1) Includes gross profit from sales of dore´and other products produced from our PRC Mines. During the Track Record Period, a significant portion of our revenue was generated from sale of standard gold bullion produced from third-party doré and customized gold products. In 2015, 2016, 2017 and the three months ended March 31, 2017 and 2018, our gross profit margins with respect to sale of standard gold bullion produced from third-party doré were 0.1%, 0.1%, 0.3%, 0.9% and 0.4%, respectively. For the same periods, our gross profit margins with respect to our customized gold products were 0.1%, respectively. Such relatively low gross profit margins were primarily because we generally procured raw materials based on market price and sold such products on a cost-plus basis. These products are produced at our smelteries as part of our gold refinery business. Despite the relatively low margins, we engaged in the production of these products primarily because the gold refinery business allows us to build and maintain our brand and reputation. As an accredited SGE Gold Ingots and Bars Delivery refiner and a trading member of the Shanghai Gold Exchange, we conduct high volume transactions of standard gold bullion branded with the Group’s Taishan (泰山牌) trademark on the Shanghai Gold Exchange. We also refine third-party doré into Taishan-branded standard gold bullion to increase the circulation of branded products on the market, thereby gaining market share and strengthening brand recognition. According to the F&S Report, such business practice is the industry norm in the gold mining industry. Based on our assessment, although the gold refinery business had relatively low profit margins, the gold refinery business of producing standard gold bullion from third-party doré and customized gold products was not loss-making during the Track Record Period after deducting the other expenses directly attributable to such business. For more information, see “Financial Information — Description of Certain Consolidated Statement of Profit or Loss and Other Comprehensive Income Items — Gross Profit.” Our gross profit amounted to RMB2,599.4 million, RMB3,505.6 million, RMB3,642.6 million, RMB860.2 million and RMB996.0 million in 2015, 2016 and 2017 and for the three months ended March 31, 2017 and 2018, respectively. The increase in our gross profit from RMB3,505.6 million in 2016 to RMB3,642.6 million in 2017 and from RMB860.2 million in the three months ended March 31, 2017 to RMB996.0 million in the three months ended March 31, 2018 was primarily because our

—6— SUMMARY gross profit included sales of gold bullion produced using gold from the Veladero Mine after Veladero Acquisition. Our gross profit increased from RMB2,599.4 million in 2015 to RMB3,505.6 million in 2016 was primarily due to an increase in our sale of standard gold bullion produced using gold from our PRC Mines. Our gross profit margin amounted to 6.7%, 7.1%, 7.1%, 8.9% and 7.0% in 2015, 2016 and 2017 and for the three months ended March 31, 2017 and 2018, respectively. During the Track Record Period, the gross profit margin of standard gold bullion produced using gold from our PRC Mines was significantly higher than that of standard gold bullion using gold procured from third parties and customized gold products. As such, our overall gross profit margin fluctuated primarily due to changes in our product mix for the period, and in particular, the sales volume of standard gold bullion produced using gold from our PRC Mines. In 2015, 2016 and 2017 and the three months ended March 31, 2018, our largest customer was the Shanghai Gold Exchange. For the same periods, sales to our largest customer accounted for 95.5%, 78.4%, 72.8% and 63.8% of our total revenue, respectively. The remainder of our five largest customers were precious metals trading companies engaged in the sale of customized gold products, commercial banks and a financial holding company during the same periods. In 2015, 2016, 2017 and the three months ended March 31, 2018, sales to our five largest customers accounted for 97.2%, 97.1%, 90.5% and 92.7% of our total revenue, respectively. During the Track Record Period, all of our five largest customers procured standard gold bullion or customized gold products from us, except in 2015 when one of our five largest customers procured by-products. OUR PRODUCTION PROCESS AND SALES CYCLE We are an integrated gold company engaged in gold exploration, mining, processing, smelting and sales. During the Track Record Period, our exploration activities were mainly carried out by our in-house exploration team and third-party exploration teams. During the Track Record Period, we mainly focused increasing our Reserves and LOM of our existing mines by conducting exploration of areas close to existing orebodies and gold deposits, where we believe the potential of identifying additional Reserves is high. Our PRC Mines conduct independent mining operations. Our PRC Mines are equipped with processing facilities to process the ores mined on each mine. We conduct centralized smelting and refining of doré and gold concentrates produced from our own mines at our smelteries. In addition, our smelteries also process doré and standard gold bullion procured from third parties to refine and produce gold products. The Veladero Mine is an open pit mine with truck and shovel operations. Most raw ore is transported to crushing facilities at the Veladero Mine. Gold is recovered from the ore at the Veladero Mine using run-of-mine and crushed ore cyanide heap leaching, and a Merrill-Crowe zinc cementation gold recovery plant. After the smelting process, unrefined doré bars are produced and shipped to third-party LBMA-accredited refiners to refine into gold bullion. Nine of our 12 PRC Mines are located in Shandong province, which has developed infrastructure and transportation networks for our operations. For more information on the transportation networks for our PRC Mines, see “Business — Our Operations in China.” We have a transportation fleet that is responsible for (i) transporting gold concentrates and doré to our Shandong Smeltery, and (ii) transporting gold products to the Shanghai Gold Exchange and certain of our customers. We also engage logistics service providers to deliver products to certain customers. For our Argentina operations, logistics service providers are responsible for the transportation of doré. SUPPLIERS AND CONTRACTORS Our standard gold bullion are produced using our gold mined from our PRC Mines and doré procured from third-party suppliers. Our customized gold products are made of standard gold bullion procured from the Shanghai Gold Exchange. We also procure a wide range of raw materials and consumables, such as explosive materials and consumables, diesel, sodium cyanide and cement. We source these raw materials from local suppliers in China for our PRC operations, and MAG sources raw materials from suppliers in Argentina for the Veladero Mine. We also procure international and domestic brand equipment and machinery for our operations. In addition, our suppliers include water and electricity suppliers. We outsource some exploration, drift and shaft excavation, processing and miscellaneous work to reputable and qualified contractors.

—7— SUMMARY

OPERATING CASH COSTS Our operating cash costs mainly include workforce employment costs, consumables costs, fuel, electricity, water and other services costs and on and off-site administration costs. The following table is based on the AAI Report and sets forth the historical and forecasted operating cash costs of our PRC Mines.

Historical Forecast For the three For the year ended months ended December 31, March 31, Cost item Unit 2015 2016 2017 2018 2018E 2019E 2020E

Workforce employment .....US$/ounce produced 221.6 232.8 236.1 245.5 220.2 211.5 180.4 Consumables ...... US$/ounce produced 141.0 127.6 134.3 121.3 117.3 115.1 102.6 Fuel, electricity, water and other services ...... US$/ounce produced 80.4 71.0 74.7 79.7 67.8 62.2 52.9 On and off-site administration . US$/ounce produced 148.5 179.4 178.1 124.8 141.5 146.2 124.4 Environmental protection and monitoring ...... US$/ounce produced 2.2 2.7 2.9 1.9 2.5 3.1 3.1 Transportation of workforce . . US$/ounce produced 1.0 1.4 1.4 1.3 1.2 — — Product marketing and support ...... US$/ounce produced — — — — — — — Non-income taxes, royalties and other government charges ...... US$/ounce produced 73.3 62.2 52.8 17.1 46.0 52.9 46.7 Contingencies...... US$/ounce produced 0.2 0.4 1.3 2.5 1.2 Total ...... US$/ounce produced 668.2 677.5 681.6 594.0 597.9 594.6 514.2

Our operating cash costs are generally lower in the first quarter primarily due to seasonality, as certain cash cost items are only settled at year end and as a result of seasonal downtime. The reason for the decrease in forecasted operating cash costs is the higher average gold content of our Reserves under NI 43-101 Code versus the average gold content of the ore that we typically mine and process. Mining and processing related costs are primarily ore tonnage based, so ore with higher gold content has a lower mining and processing cost per ounce of gold. During the Track Record Period, we conducted mining and processing activities based on internal assessments of economic cut-off grade and other economic parameters. Our forecasted operating cash costs are forecasted in accordance with the N143-101 Code, therefore only ores with higher gold content and above the economic cut-off grade are included. The following table is based on the RPA Report and sets forth the historical and forecasted operating cash costs(1) of the Veladero Mine.

Historical Forecasted For the three For the year ended months ended December 31, March 31, Cost Item Unit 2015 2016 2017 2018 2018E 2019E 2020E

Workforce employment .....US$/ounce produced 144 180 178 165 193 264 249 Consumables ...... US$/ounce produced 283 277 284 274 244 294 253 Fuel, electricity, water and other services ...... US$/ounce produced 232 206 230 223 227 284 274 On and off-site administration . US$/ounce produced 66 51 65 64 51 43 31 Environmental protection and monitoring ...... US$/ounce produced 6 7 13 8 9 10 9 Transportation of workforce . . US$/ounce produced 5 4 6 8 9 12 11 Product marketing and support ...... US$/ounce produced 5 5 5 4 6 7 8 Non-income taxes royalties and other government charges ...... US$/ounce produced 47 53 55 55 52 57 55 Contingencies...... US$/ounce produced — — — — — — — Total ...... US$/ounce produced 788 783 836 801 791 971 890

—8— SUMMARY

(1) The operating cash costs set out above are derived from the RPA Report and exclude changes in inventory and capitalized stripping costs and silver by-product credits in accordance with the requirements of Chapter 18 of the Listing Rules.

The variance between operating cash costs of our PRC Mines and the Veladero Mine is mainly due to differences in operating conditions of different mining jurisdictions, variances in mining and processing methods as well as differences in currency exchange. For details, see “Business — Our Operations in Argentina — Operating Cash Costs” and “Risk Factors — Risks Relating to Our Business and Industry — We may not be able to effectively manage our growth and business expansion.” COMPETITIVE STRENGTHS AND BUSINESS STRATEGY

We believe that we will continue to be an active industry consolidator and maintain our leading market position and continued growth through the following competitive strengths: (i) largest gold company in China in terms of gold mine production volume in the PRC with significant high-grade gold resources and strong potential for growth; (ii) one of the lowest operating costs in the PRC gold industry; (iii) strong acquisition and resource consolidation capability and proven track record of successful acquisitions; (iv) sound capital structure and financial condition; (v) commitment to occupational safety and environmental sustainability; and (vi) management team with extensive industry experience and strong support from our Controlling Shareholder. Our strategic goal is to become a world-class gold company ranking within the top ten gold companies in the world. To that end, we intend to implement the following business strategy: (i) increase operational efficiency through technological innovation, management initiatives and continued enhancement of our mining and production capacity; (ii) continue to consolidate high quality resources through domestic and cross-border mergers and acquisitions; (iii) continue exploration and expansion to increase the reserves of existing mines; (iv) further improve the safety and environmental protection standards in our mining and production process; and (v) optimize capital structure through international and PRC capital markets. SUMMARY FINANCIAL INFORMATION

This summary historical financial information set forth below have been derived from, and should be read in conjunction with, our consolidated audited financial statements, including the accompanying notes, set out in “Appendix I — Accountant’s Report” of this Prospectus, as well as the information set forth in “Financial Information — General.” Our financial information was prepared in accordance with IFRS. Upon completion of the Veladero Acquisition, since the completion of the Veladero Acquisition and starting from July 1, 2017, we have consolidated our 50% proportionate share of the assets and liabilities of the Veladero Mine, and are entitled to 50% of the products of, and recognize 50% of the expenses incurred by, the Veladero Mine. Given the substantial assets, liabilities and operations of the Veladero Mine, our results of operations for the year ended December 31, 2017 and the three months ended March 31, 2018 and financial position as of December 31, 2017 and March 31, 2018 differ substantially from, and may not be comparable with, previous respective periods and dates.

—9— SUMMARY

Summary Financial Data from Consolidated Statement of Profit or Loss

The following table sets forth a summary of our consolidated statement of profit or loss and other comprehensive income for the period indicated.

For the year ended December 31, For the three months ended March 31, 2015 2016 2017 2017 2018 %of %of %of %of %of Amount revenue Amount revenue Amount revenue Amount revenue Amount revenue (Renminbi in millions, except percentages) (unaudited)

Revenue ...... 38,774.5 100.0% 49,072.7 100.0% 51,041.3 100.0% 9,711.1 100.0% 14,166.3 100.0% Cost of sales...... (36,175.1) (93.3) (45,567.1) (92.9) (47,398.7) (92.9) (8,850.9) (91.1) (13,170.3) (93.0) Gross profit ...... 2,599.4 6.7 3,505.6 7.1 3,642.6 7.1 860.2 8.9 996.0 7.0 Selling expenses ...... (34.8) (0.1) (34.4) (0.1) (31.2) (0.1) (7.4) (0.1) (8.3) (0.1) General and administrative expenses ...... (1,090.5) (2.5) (1,225.7) (2.5) (1,214.3) (2.4) (279.1) (2.9) (297.7) (2.1) Research and development costs . . (153.8) (0.3) (265.3) (0.5) (273.6) (0.5) (34.8) (0.4) (22.1) (0.1) Other income ...... 8.5 0.0 14.8 0.0 16.0 0.0 0.3 0.0 0.7 0.0 Other gains/(losses), net...... 68.6 0.2 40.0 0.1 (13.1) 0.0 (22.4) (0.2) 12.3 0.1 Profit from operations ...... 1,397.5 3.6 2,034.9 4.1 2,126.5 4.2 516.8 5.3 680.9 4.8 Finance income ...... 12.4 0.0 11.0 0.0 37.4 0.1 5.2 0.1 9.2 0.1 Finance costs ...... (451.0) (1.1) (375.6) (0.8) (593.5) (1.3) (112.2) (1.2) (209.5) (1.5) Share of profit of an associate . . . 22.9 0.1 27.7 0.1 34.0 0.1 8.0 0.1 9.0 0.1 Profit before income tax ...... 981.7 2.5 1,698.0 3.5 1,604.4 3.1 417.8 4.3 489.6 3.5 Income tax expenses...... (268.5) (0.7)% (385.2) (0.8)% (431.5) (0.8)% (89.3) (0.9)% (136.0) (1.0)% Profit for the year/period ..... 713.3 1.8% 1,312.8 2.7% 1,173.0 2.3% 328.5 3.4% 353.6 2.5% Profit attributable to: Equity shareholders of the Company ...... 647.9 1.7 1,286.6 2.7 1,118.9 2.2 317.9 3.3 327.9 2.3 Non-controlling interests..... 65.3 0.1 26.1 0.0 54.1 0.1 10.6 0.1 25.7 0.2 713.3 1.8% 1,312.8 2.7% 1,173.0 2.3% 328.5 3.4% 353.6 2.5%

Summary Financial Data from Consolidated Statement of Financial Position The following table sets forth a summary of our consolidated statement of financial position as of the date indicated.

As of As of December 31, March 31, 2015 2016 2017 2018 (Renminbi in millions) Non-current assets ...... 24,283.7 26,320.5 36,868.7 36,277.0 Current assets ...... 1,812.7 3,045.9 6,263.0 6,788.8 Current liabilities...... (8,150.8) (7,240.4) (12,752.2) (13,793.8) Net current liabilities ...... (6,338.1) (4,194.5) (6,489.2) (7,005.0) Non-current liabilities ...... (5,523.8) (5,436.3) (12,885.8) (11,429.0) We recorded net current liabilities of RMB6,338.1 million, RMB4,194.5 million, RMB6,489.2 million and RMB7,005.0 million as of December 31, 2015, 2016 and 2017 and March 31, 2018, respectively. Our net current liabilities are primarily a result of the significant amounts of short-term and long-term financing we obtained to finance our acquisition of long-term assets (such as mining rights and property, plant and equipment). We believe that this financial position is common in our industry, as evidenced by a number of other PRC and Hong Kong listed gold companies that also have significant long-term assets and a net current liabilities position. Our standard gold bullion are primarily sold on the spot market and settled immediately and we require customers of customized gold products to make payments prior to delivery. On the other hand, we generally settle balances with our suppliers and certain of our contractors on a monthly basis and record trade payables. As a result, we have a highly liquid operating position with strong cash flow from operations. Moreover, as a gold company, we have access to short-term financing through gold leasing, which is relatively low-cost compared to bank borrowings, with interest rates ranging from

—10— SUMMARY

2.4% to 4.85% during the Track Record Period. Going forward, we expect to satisfy our liquidity requirements by using funds from a combination of cash flows from operations, bank loans, corporate bonds and gold leasing. We believe our net current liabilities position has not adversely affect our liquidity because (i) we have been able to roll over our short-term financing, and (ii) we have significant amounts of unutilized banking facilities to satisfy our working capital needs. As of July 31, 2018, being the latest date for determining our indebtedness, we had RMB16,246.3 million available bank facilities, of which RMB10,645.0 million were unutilized and unrestricted. See “Risk Factors — Risks Relating to Our Business and Industry — We had net current liabilities as of December 31, 2015, 2016 and 2017 and March 31, 2018.” With respect to our gold leasing arrangements, we usually enter into forward purchase contracts under which we agree to purchase the same amount of gold, at the same price and on the maturity date of the lease to repay the leased gold. We recorded realized and unrealized fair value losses on gold leasing contracts of RMB71.7 million, RMB42.3 million, RMB69.9 million and RMB42.7 million in 2015 2016 and 2017 and the three months ended March 31, 2018, respectively. In addition, we entered into hedging transactions to forward sell the gold mined from our PRC Mines. We also entered into forward agreements when we procure doré from third parties and when we sell customized gold products to secure prices in view of the volatility in gold prices. For the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2018, we forwarded sold 185.0 koz, 553.4 koz, 547.5 koz and 48.2 koz of gold through gold forward and futures contract.

Summary Financial Data from Consolidated Statements of Cash Flows

The following table sets forth a summary of our consolidated cash flow statement for the period indicated.

For the three months For the year ended December 31, ended March 31, 2015 2016 2017 2017 2018 (Renminbi in millions) (unaudited)

Net cash generated from operating activities .... 2,422.5 2,808.4 3,850.5 786.9 673.7 Net cash used in investing activities ...... (1,615.5) (1,851.6) (11,135.3) (672.9) (455.9) Net cash (used in)/generated from financing activities ...... (776.2) (295.1) 8,498.4 484.7 (120.2) Net increase in cash and cash equivalents ...... 30.8 661.8 1,213.5 598.6 97.6 Cash and cash equivalents at the beginning of the year/period ...... 466.5 497.3 1,159.8 1,159.8 2,402.8 Exchange gains/(losses) on cash and cash equivalents ...... — 0.8 29.5 (0.0) (26.7) Cash and cash equivalents at the end of the year/period ...... 497.3 1,159.8 2,402.8 1,758.3 2,473.7 KEY FINANCIAL RATIOS The table below sets forth certain of our key financial ratio for the period indicated. For the three months ended/as For the year ended/as of December 31, of March 31, 2015 2016 2017 2018

Return on average equity(1) ...... 5.9% 9.0% 6.9% 8.1%(7) Return on average assets(2) ...... 2.7% 4.7% 3.2% 3.3%(7) Current ratio(3) ...... 0.22 0.42 0.49 0.49 Quick ratio(4) ...... 0.14 0.23 0.26 0.25 Gearing ratio(5)(6) ...... 33.3% 26.4% 62.7% 56.8%

(1) Calculated as profit/(loss) for the year/period divided by average equity, then multiplied by 100%. (2) Calculated as profit/(loss) for the year/period divided by average assets as of the end of the year/period, then multiplied by 100%. (3) Calculated as current assets divided by current liabilities. (4) Calculated as current assets less current portion of inventories divided by current liabilities. (5) Total debt divided by total equity multiplied by 100%.

—11— SUMMARY

(6) Our gearing ratio would have been 71.8%, 45.4%, 95.6% and 93.2% as of December 31, 2015, 2016 and 2017 and March 31, 2018, respectively, if our short-term financings through gold leasing had also been included in the calculation. (7) These ratios are annualized by dividing profit for the three months ended March 31, 2018 by 90 and multiplied by 365, then divided by average assets or average equity, as applicable. SHAREHOLDER INFORMATION AND RELATIONSHIP WITH SDG GROUP Immediately after completion of the Global Offering, assuming the Over-allotment Option is not exercised, SDG Group Co. will hold (including direct and indirect shareholdings) approximately 47.69% of the issued share capital in our Company; if the Over-allotment Option is fully exercised, SDG Group Co. will hold (including direct and indirect shareholdings) approximately 46.64% of the issued share capital in our Company. After completion of the Global Offering, SDG Group Co. will remain as the Controlling Shareholder of our Company. Apart from certain gold mining related business that has not been included in our Group, SDG Group (excluding our Group) is also engaged in the following businesses: (a) other metals and non-ferrous metal mining businesses in the PRC and Mongolia; (b) finance-related services; (c) real estate development; (d) general services, including electricity supply, office support, operation and management of properties, transportation, resort and ancillary recreation facilities; and (e) investment holding in other businesses. We have taken adequate measures and adopted effective mechanism so as to further delineate the business and minimize the competition between our Group and SDG Group, including entrustment arrangements and options to acquire the retained businesses. See “Relationship with Our Controlling Shareholder.” We have entered into a series of agreements with SDG Group, including PRC Trademark License Agreement, Hong Kong Trademark License Agreement, Equity Entrustment Framework Agreement, Property Leasing Framework Agreement, Mining Right Leasing Agreement, Procurement and Sale Framework Agreement and Financial Services Framework Agreement. We have also obtained guarantee from SDG Group Co. for the issuance of the five-year corporate bond issued on March 30, 2015. For details of these connected transactions, see “Connected Transactions.” We have sufficient capital, assets, equipment, technology and human resources required for operating our business independently. Save for the lease of a mining permit of Jiaojia Gold Mine from SDG Group Co., we have obtained or are in the process of obtaining all necessary certificates and licenses required for existing business operations. We have the ownership of or the right to use all patents which are significant to our existing business operations. See “Relationship with our Controlling Shareholder — Independence from SDG Group — Operational Independence” for further information on our operational independence from SDG Group. We have established a finance department independent of SDG Group Co., comprising independent financial personnel, to be responsible for performing the functions of financial control, accounting, reporting, group credit and internal control of the Company. We are able to make financial decisions independently according to our own business needs. We have also established an independent auditing system, a standardized financial accounting system and a comprehensive financial management system. See “Relationship with our Controlling Shareholder — Independence from SDG Group — Financial Independence” for further information on our financial independence from SDG Group. RECENT DEVELOPMENTS AND NO MATERIAL ADVERSE CHANGE Our gold mine production for the three months ended June 30, 2018 amounted to 314.6 koz (equivalent to approximately 9.8 tonnes). Our domestic gold production volume was 278.1, 162.9 and 207.0 koz in April, May and June 2018, respectively. The month-to-month fluctuation in our production volume primarily reflects changes in production plans at our smelteries and the amount of doré and standard gold bullion we procure. Since March 31, 2018 and up to the Latest Practicable Date, the LBMA PM gold spot price has decreased. During this period, gold prices were primarily influenced by the devaluation of the Renminbi and political developments and uncertainties, decreasing from US$1,323.9 per ounce on March 31, 2018 to US$1,196.7 per ounce on September 5, 2018. Fluctuations in gold prices may affect our results of operations and financial performance in 2018 and going forward. See “Risk Factors — Risks Relating to Our Business and Industry — Changes in the market price for gold, which in the past have experienced significant volatility, affect the profitability of our operations and the cash flows generated by those operations.” A decrease in gold price may adversely impact our net profit for the financial year ending 2018.

—12— SUMMARY

We are a public company listed on the Shanghai Stock Exchange and we are required to disclose unaudited quarterly financial statements under the relevant PRC securities laws and regulations. We have disclosed our unaudited condensed consolidated financial information as of and for the six months ended June 30, 2018 in “Appendix IIB — Unaudited Interim Financial Information”, which have been prepared under IFRS and reviewed by our reporting accountant, PricewaterhouseCoopers, in accordance with International Standard on Review Engagements 2410. The following is a discussion of fluctuations of select line items. Our revenue increased by 3.6% from RMB25,124.7 million for the six months ended June 30, 2017 to RMB26,018.6 million for the six months ended June 30, 2018, primarily because our revenue included the revenue from sale of gold bullion produced using gold from the Veladero Mine for the six months ended June 30, 2018. The increase in our revenue was partially offset by a decrease in sales of standard gold bullion produced from our PRC Mines and standard gold bullion produced using doré procured from third parties, and the overall decrease in gold prices during this period. Our cost of sales increased by 2.9% from RMB23,333.0 million for the six months ended June 30, 2017 to RMB24,015.0 million for the six months ended June 30, 2018, primarily because we consolidated 50% of the cost of sales attributable to the Veladero Mine for the six months ended June 30, 2018, partially offset by a decrease in cost of sales attributable to our PRC operations as a result of decreased production. Our gross profit increased by 11.8% from RMB1,791.7 million for the six months ended June 30, 2017 to RMB2,003.6 million for the six months ended June 30, 2018, and our gross profit margin increased from 7.1% to 7.7% during the same periods, primarily because our gross profit for the six months ended June 30, 2018 includes the gross profit from sales of gold bullion produced using gold from the Veladero Mine, which had a relatively higher gross profit margin. Our net current liabilities increased from RMB6,489.2 million as of December 31, 2017 to RMB7,049.2 million as of June 30, 2018, primarily due to a RMB1,847.8 million increase in borrowings, primarily due to an increase in short-term borrowings to supplement our working capital, partially offset by (i) a RMB519.4 million decrease in financial liabilities at fair value through profit or loss, reflecting the fair value of gold leasing contracts we held at the time, (ii) a RMB263.2 million decrease in trade and other payables, and (iii) a RMB204.0 million increase in trade and other receivables mainly because there was a timing difference between our sale of gold bullion from the Veladero Mine and receipt of payment for such sales in our bank accounts, and such trade receivables were subsequently settled in July 2018. On May 18, 2018, we declared dividends on our A Shares in the amount of RMB74.3 million, which have been fully paid as of the Latest Practicable Date. On August 13, 2018, our shareholders approved our proposal to issue green bonds in accordance with the relevant CSRC laws and regulations. The maximum amount of the green bond is RMB1 billion and the maximum term is five years. The interest rate of the green bond is expected to range from 4.8% to 5.3%. We expect to issue the green bond by the end of this year provided our proposal is approved by the CSRC. As of June 30, 2018, being the date of our unaudited condensed consolidated financial information as set out in “Appendix IIB — Unaudited Interim Financial Information” of this Prospectus, our gearing ratio was 65.7%. Assuming that we issued RMB1 billion in green bonds as of June 30, 2018, our gearing ratio would have increased to 71.3%. On September 3, 2018, we fully repaid the principal and interest of the five-year corporate bond we issued in September 2013. To deepen their partnership, our Controlling Shareholder, SDG Group Co., and Barrick Gold are in advanced negotiations regarding a mutual strategic investment agreement (the “Mutual Agreement”). Execution of the Mutual Agreement remains subject to necessary regulatory approval as well as approval by the boards of each of SDG Group Co. and Barrick Gold. Under the proposed Mutual Agreement, SDG Group Co. will purchase common shares of Barrick Gold, and Barrick Gold will purchase shares of the Company, in each case, through the facilities of stock exchanges on which those shares are listed, and with an aggregate purchase price of up to US$300 million (or its equivalent). These mutual investments are expected to be made within 12 months from the date of the Mutual Agreement, unless otherwise agreed. The Mutual Agreement is still subject to further negotiation. Further announcements will be published in due course.

—13— SUMMARY

Our Directors confirm that there has been no material adverse change in our financial, operational or trading positions or prospects since March 31, 2018, being the date of our consolidated financial statements as set out in “Appendix I — Accountant’s Report” of this Prospectus, and up to the date of this Prospectus. GLOBAL OFFERING STATISTICS The statistics in the following table are based on the assumptions that: (i) the Global Offering is completed and 327,730,000 H Shares are issued and sold in the Global Offering; (ii) the Over-allotment Option is not exercised; and (iii) 2,184,848,809 Shares are issued and outstanding upon completion of the Global Offering.

Based on an Offer Price Based on an Offer Price of HK$18.38 per Share of HK$14.70 per Share

Market capitalization of our Shares(1) ...... HK$40,157,521,109 HK$32,117,277,492 Unaudited pro forma adjusted consolidated net tangible asset value per Share(2) ...... HK$ 10.92 HK$ 10.37

(1) The calculation of market capitalization is based on 2,184,848,809 Shares expected to be in issue immediately upon completion of the Global Offering assuming the Over-allotment Option is not exercised. (2) The unaudited pro forma adjusted consolidated net tangible asset per Share is calculated after making adjustments referred to in “Appendix IIA — Unaudited Pro Forma Financial Information.” USE OF PROCEEDS We estimate that we will receive net proceeds from the Global Offering of approximately HK$5,236.0 million (equivalent to approximately US$667.1 million), after deducting the underwriting fees and expenses payable by us in the Global Offering, and assuming an Offer Price of HK$16.54 per Offer Share, being the mid-point of the Offer Price range stated in this Prospectus. Assuming an Offer Price of HK$16.54 per Offer Share (being the mid-point of the Offer Price range stated in this Prospectus), we intend to use our net proceeds from the Global Offering for the repayment of the three-year Syndicated Term Loan with outstanding principal of US$672.0 million maturing on June 8, 2020 and an interest rate of LIBOR plus 1.25%, which was used to finance the Veladero Acquisition. Assuming that the Offer Price is set above the mid-point of the Offer Price range and there are any remaining net proceeds after the full repayment of the Syndicated Term Loan, such net proceeds will be used for the repayment of the three-year CDB Term Loan with an outstanding principal of US$300.0 million maturing on June 26, 2020 and an interest rate of LIBOR plus 1.23%, which was used to finance the Veladero Acquisition. For details, see “Future Plans and Use of Proceeds — Use of Proceeds”. LISTING EXPENSES Our total listing expenses (including underwriting commission) are estimated to be approximately RMB160.6 million, assuming that the Over-allotment Option is not exercised. As only newly issued H Shares will be listed and traded on the Stock Exchange, substantially all of our listing expenses are incremental costs directly attributable to the issuance of the H Shares and should be accounted for as a deduction from equity pursuant to IAS 32. As of March 31, 2018, we incurred listing expenses of RMB40.7 million, of which RMB39.5 million were capitalized as deferred listing expenses and RMB1.2 million were recognized as administrative expenses. These expenses are expected to be charged against equity upon successful listing under the relevant accounting standards. We expect to incur further listing expenses of approximately RMB119.9 million, of which RMB4.9 million will be recognized as administrative expenses and RMB115.0 million is expected to be recognized as a deduction in equity. We do not believe the remaining listing expenses will have a material adverse impact on our results of operations for the year ending December 31, 2018. DIVIDEND POLICY Pursuant to the Articles of Association, we shall distribute cash dividends at least once in any consecutive three years. The total amount of the cash dividend distributed in the most recent three years shall be at least 30% of our average annual distributable profits in the same period. The Company may distribute the cash dividend provided that there are no expected significant investment plans or significant cash expenditures in the following twelve months (excluding fund-raising projects). Upon satisfaction of the cash dividend payout ratios, we may distribute stock dividends if our operating revenue and net profit increase rapidly and our Directors consider that our equity scale

—14— SUMMARY and shareholding structure are reasonable. In addition, we may declare interim dividends based on our financial performance and working capital requirements. For the years ended December 31, 2015, 2016, 2017 and the three months ended March 31, 2018, we paid dividends to shareholders in the amounts of RMB142.1 million, RMB142.1 million, RMB184.2 million and RMB71.2 million, respectively. For the same periods, we paid dividends to non-controlling interests in the amounts of RMB81.1 million, RMB33.7 million, RMB16.4 million and nil, respectively. PROPERTY TITLE DEFECTS

As of the Latest Practicable Date, we owned and occupied 1,715 properties with an aggregate GFA of approximately 884,711.5 square meters in the PRC. We have yet to receive the building ownership certificates of 1,139 properties with an aggregate GFA of approximately 587,143.8 square meters. In addition, we occupied 110 parcels of land with a total area of approximately 3,664,970.9 square meters. Of these parcels of land, we have yet to receive land use rights certificates for 20 parcels of land with a total area of approximately 370,665.8 square meters. Our Controlling Shareholder has undertaken that (a) it would use best efforts to assist us in the title registration of such properties under our name, and (b) if we cannot obtain the title certificates for such properties for any reason and our use of such properties is affected or if we incur any direct or indirect losses as a result, our Controlling Shareholder shall compensate us in full for any direct or indirect loss that we suffer. For details, see “Business — Properties.” RISK FACTORS

Some of the most important risks generally associated with our business include the following: (i) changes in the market price for gold, which in the past have experienced significant volatility, affect the profitability of our operations and the cash flows generated by those operations; (ii) the accuracy of our gold Resources and Reserves estimates are based on a number of assumptions, and we may produce less gold than the current estimates; (iii) we may not be able to meet our estimated gold production volume; (iv) we may not be able to expand our Mineral Resources or Reserves; (v) we may fail to obtain, maintain or renew the government permits, licenses and approvals required for our mining and exploration activities; and (vi) we are subject to risks related to the operation of the Veladero Mine. These risks are not the only significant risks that may affect the value of our Shares. See “Risk Factors” for details of our risk factors, which you should read carefully and in full before you decide to invest in the H Shares.

—15— DEFINITIONS

In this Prospectus, unless the context otherwise requires, the following terms shall have the meanings set out below. Certain other terms are explained in the section headed “Glossary of Technical Terms” in this Prospectus.

“AAI” Agapito Associates, Inc., an independent mining and geological consultant which qualified as a competent person as defined under Rule 18.01 of the Hong Kong Listing Rules, an Independent Third Party;

“AAI Report” Competent Person’s Report prepared by AAI, the effective date of which is March 31, 2018 and details of which are set out in “Appendix III — Competent Person’s Report — AAI Report” to this Prospectus;

“AGB II” Argentina Gold (Bermuda) II Ltd., a company incorporated in Bermuda on October 6, 1994 and registered by way of continuation into the Cayman Islands on November 25, 2015 which is owned as to 50% by SDG Hong Kong and 50% by Barrick Cayman;

“Application Form(s)” WHITE Application Form(s), YELLOW Application Form(s) and GREEN Applications Form(s), or where the context so requires, any of them, relating to the Hong Kong Public Offering;

“AQSIQ” General Administration of Quality Supervision Inspection and Quarantine of the PRC (中華人民共和國國家質量監督檢驗檢 疫總局);

“Argentina Legal Advisers” Brons & Salas Law Firm;

“Argentine Peso” or “AR$” Argentine Peso, the legal currency of Argentina;

“Articles of Association” or the articles of association of our Company, as amended, which “Articles” shall become effective on the Listing Date, a summary of which is set out in “Appendix VII — Summary of the Articles of Association” to this Prospectus;

“associates” has the meaning ascribed to it under the Hong Kong Listing Rules;

“A Shares” domestic shares of our Company, with a nominal value of RMB1.00 each, which are listed on the Shanghai Stock Exchange and traded in Renminbi;

“Barrick Cayman” Barrick Cayman (V) Ltd., an exempted company incorporated in the Cayman Islands on March 29, 2016 and holder as to 50% equity interest in AGB II;

—16— DEFINITIONS

“Barrick Gold” Barrick Gold Corporation, a corporation incorporated in Ontario, Canada on July 14, 1984 and holder as to 100% equity interest in Barrick Cayman;

“Barrick Group” Barrick Gold and all of its subsidiaries;

“Board” or “Board of Directors” the board of Directors;

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

“CAGR” compound annual growth rate;

“CCASS” the Central Clearing and Settlement System established and operated by HKSCC;

“CCASS Clearing Participant” a person admitted to participate in CCASS as a direct clearing participant or general clearing participant;

“CCASS Custodian Participant” a person admitted to participate in CCASS as a custodian participant;

“CCASS Investor Participant” a person admitted to participate in CCASS as an investor participant who may be an individual, joint individuals or a corporation;

“CCASS Operation Procedures” the operational procedures of HKSCC in relation to CCASS, containing the practices, procedures and administrative requirements relating to the operation and functions of CCASS, as from time to time in force;

“CCASS Participant” a CCASS Clearing Participant, a CCASS Custodian Participant or a CCASS Investor Participant;

“CDB Term Loan” the loan available under the term loan facility agreement entered into between SDG Hong Kong and China Development Bank Hong Kong Branch dated June 22, 2017;

“Chaihulanzi Gold” Chifeng Chaihulanzi Gold Mining Co., Ltd. (赤峰柴胡欄子黃 金礦業有限公司), a limited liability company incorporated in the PRC on September 29, 2003, which was held as to approximately 73.52% by the Company, and approximately 22.48% and 3.99% by two individuals, namely Ma Chunming (馬春明) and Li Jinglu (李景祿), respectively. Ma Chunming was also a director and Li Jinglu was a supervisor of Chifengchai Gold;

“Chifengchai Gold Mine” Site 10 as referred to in the AAI Report (赤峰柴礦);

—17— DEFINITIONS

“China” or the “PRC” the People’s Republic of China, but for the purpose of this Prospectus and for geographical reference only and except where the context requires, references in this Prospectus to “China” and the “PRC” do not include Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan;

“CIM Definition Standards” the standards, best practices and guidelines for Mineral Resources and Mineral Reserves issued by the Canadian Institute of Mining;

“close associate(s)” has the meaning ascribed to it under the Hong Kong Listing Rules;

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

“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, supplemented or otherwise modified from time to time;

“Company” or “our Company” Shandong Gold Mining Co., Ltd. (山東黃金礦業股份有限公 司), a joint stock company incorporated in the PRC under the laws of the People’s Republic of China with limited liability on January 31, 2000;

“Competent Person(s)” AAI and RPA, collectively;

“Connected Person(s)” or has the meaning ascribed to it under the Hong Kong Listing “connected person(s)” Rules;

“Controlling Shareholder” has the meaning ascribed to it under the Hong Kong Listing Rules and, unless the context requires otherwise, refers to SDG Group Co.;

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

“CPR(s)” or “competent person AAI Report and RPA Report, collectively; report(s)”

“CSRC” China Securities Regulatory Commission (中國證券監督管理 委員會), a regulatory body responsible for the supervision and regulation of the PRC national securities markets;

“Director(s)” or “our Directors” the director(s) of our Company;

—18— DEFINITIONS

“EIT Law” the Enterprise Income Tax Law of the PRC (中華人民共和國 企業所得稅法), as amended, supplemented or otherwise modified from time to time;

“Exchange Participant(s)” a person: (a) who, in accordance with the Hong Kong Listing Rules, may trade on or through the Hong Kong Stock Exchange; and (b) whose name is entered in a list, register or roll kept by the Hong Kong Stock Exchange as a person who may trade on or through the Hong Kong Stock Exchange;

“Frost & Sullivan” Frost & Sullivan (Beijing) Inc., our independent industry consultant and an Independent Third Party;

“Fujian Yuanxin” Fujian Zhenghe Yuanxin Mining Co., Ltd. (福建省政和縣源鑫 礦業有限公司), a limited liability company incorporated in the PRC on September 7, 2004 which was held as to approximately 90.31% by the Company, and approximately 4.19%, 3.00% and 2.50% by three individuals, namely Zhong Hangsheng (鍾杭生), Lin Rongbin (林容彬) and Huang Runming (黃潤明), respectively. Huang Runming was also a director and Lin Rongbin was a supervisor of Fujian Yuanxin. Zhong Hangsheng was an Independent Third Party;

“Fujian Yuanxin Gold Mine” Site 11 as referred to in the AAI Report (福建源鑫金礦);

“Fuling Mining” Shandong Jinzhou Group Fuling Mining Co., Ltd. (山東金洲 集團富嶺礦業有限公司), a limited liability company incorporated in the PRC on October 27, 2004 and a wholly-owned subsidiary of Jinzhou Group;

“F&S Report” the independent industry report prepared by Frost & Sullivan;

“Global Offering” the Hong Kong Public Offering and the International Offering;

“GREEN Application Form(s)” the application form(s) to be completed by the White Form eIPO Service Provider, Computershare Hong Kong Investor Services Limited;

“Group”, “the Group”, “our our Company and all of our subsidiaries or, where the context Group”, “we” or “us” so requires, in respect of the period before our Company became the holding company of its present subsidiaries, the businesses operated by such subsidiaries or their predecessors (as the case may be);

—19— DEFINITIONS

“Guilaizhuang Gold Mine” Site 8 as referred to in the AAI Report (歸來莊金礦);

“Guilaizhuang Mining” Shandong Gold Guilaizhuang Mining Co., Ltd. (山東黃金歸 來莊礦業有限公司), a limited liability company incorporated in the PRC on August 27, 1994 which was held as to approximately 70.65% by the Company and approximately 29.35% by Pingyi County Finance Bureau (平邑縣財政局);

“High and New Technology High and New Technology Enterprise (高新技術企業); Enterprise(s)” or “HNTE”

“HK$” or “Hong Kong dollars” Hong Kong dollars and cents respectively, the lawful currency “HK dollars” or “cents” of Hong Kong;

“HKSCC” Hong Kong Securities Clearing Company Ltd., a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited;

“HKSCC Nominees” HKSCC Nominees Limited, a wholly-owned subsidiary of HKSCC;

“Hong Kong” the Hong Kong Special Administrative Region of the PRC;

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

“Hong Kong Offer Shares” the H Shares offered by us for subscription pursuant to the Hong Kong Public Offering;

“Hong Kong Public Offering” the offer of the Hong Kong Offer Shares for subscription by the public in Hong Kong at the Offer Price on the terms and conditions described in this Prospectus and the Application Forms;

“Hong Kong Stock Exchange” or the Stock Exchange of Hong Kong Limited, a wholly-owned “Stock Exchange” subsidiary of Hong Kong Exchanges and Clearing Limited;

“Hong Kong Underwriters” the underwriters of the Hong Kong Public Offering listed in the section headed “Underwriting — Hong Kong Underwriters” in this Prospectus;

“Hong Kong Underwriting the underwriting agreement dated September 13, 2018 Agreement” relating to the Hong Kong Public Offering and entered into by, among others, our Company, the Joint Global Coordinators and the Hong Kong Underwriters, as further described in “Underwriting — Underwriting Arrangements and Expenses — Hong Kong Public Offering — Hong Kong Underwriting Agreement” in this Prospectus;

—20— DEFINITIONS

“H Share(s)” overseas listed shares in the share capital of our Company with a nominal value of RMB1.00 each, which are to be subscribed for and traded in HK dollars and for which an application will be made for listing and permission to trade on the Hong Kong Stock Exchange;

“H Share Registrar” Computershare Hong Kong Investor Services Limited;

“IFRS” the International Financial Reporting Standards, which include standards and interpretations promulgated by the International Accounting Standards Board (IASB);

“Indemnity Undertaking” the indemnity undertaking (彌償保證承諾函) dated December 18, 2017 executed by our Controlling Shareholder in favor of our Company (on behalf of ourselves and as trustee of our subsidiaries) pursuant to which, SDG Group Co. agreed to indemnify us against certain tax and other liabilities falling on any member of our Group;

“Independent Third Party(ies)” a person or persons or a company or companies which, to the best of our Directors’ knowledge, information and belief, having made all reasonable enquiries, is independent of and not connected with (within the meaning of the Hong Kong Listing Rules) any of the Directors, chief executive and substantial shareholders (within the meaning of the Hong Kong Listing Rules) of our Company, any of its subsidiaries or any of their respective associates (within the meaning of the Hong Kong Listing Rules);

“International Offer Shares” the 294,957,000 H Shares initially offered by our Company pursuant to the International Offering together with, where relevant, any additional Shares which may be issued by our Company pursuant to the exercise of the Over-allotment Option (subject to reallocation as described in the section headed “Structure of the Global Offering” in this Prospectus);

“International Offering” the offer of the International Offer Shares by the International Underwriters at the Offer Price outside the United States in offshore transactions in accordance with Regulation S and inside the United States to persons who are QIBs only in reliance on Regulation 144A or any other available exemption from the registration requirements under the U.S Securities Act as further described in the section headed “Structure of the Global Offering” in this Prospectus;

—21— DEFINITIONS

“International Underwriters” the group of international underwriters, led by the Joint Global Coordinators, that is expected to enter into the International Underwriting Agreement to underwrite the International Offering;

“International Underwriting the underwriting agreement expected to be entered into on or Agreement” around September 20, 2018 by, among others, our Company and the International Underwriters in respect of the International Offering, as further described in “Underwriting — International Offering” in this Prospectus;

“IPEEM” the Provincial Institute of Mining and Exploration (“Instituto Provincial de Exploraciones y Explotaciones Mineras”), the provincial mining entity responsible for holding title to certain mineral licenses in the San Juan province and for soliciting bids for and granting exploration and mining rights in this province by way of concession through tender;

“IPEEM Agreement” a series of contracts entered into between MAG and IPEEM in respect of the Veladero Mine;

“Jiaojia Gold Mine” Site 2 as referred to in the AAI Report (焦家金礦);

“Jinbo Company” Shandong Jinbo Trade Co., Ltd. (山東金博經貿有限公司), a limited liability Company incorporated in the PRC on November 4, 2005 and an indirectly wholly-owned subsidiary of our Controlling Shareholder;

“Jinchuang Group” Shandong Gold Jinchuang Group Co., Ltd. (山東黃金金創集 團有限公司), a limited liability company incorporated in the PRC on March 17, 1987, which was held as to 65% by SDG Group Co. and as to 35% by Penglai State-owned Assets Administration Bureau (蓬萊市國有資產管理局);

“Jinshi Mining” Shandong Jinshi Mining Co., Ltd. (山東金石礦業有限公司), a limited liability company incorporated in the PRC on July 20, 2009 and a wholly-owned subsidiary of our Company;

“Jinzhou Group” Shandong Jinzhou Mining Group Co., Ltd. (山東金洲礦業集 團有限公司), a limited liability company incorporated in the PRC on November 1, 1999, which was held as to approximately 60.43% by our Company, approximately 23.70% by Rushan Guoxin Asset Operation and Management Co., Ltd. (乳山市國鑫資產經營管理有限公司) and approximately 15.87% by 10 individuals who were employees of our Company;

“Jinzhou Gold Mine” Site 7 as referred to in the AAI Report (金洲金礦);

—22— DEFINITIONS

“Joint Bookrunners” CCB International Capital Limited, China Securities (International) Corporate Finance Company Limited, ICBC International Capital Limited, Morgan Stanley Asia Limited (in relation to the Hong Kong Public Offering only), Morgan Stanley & Co. International plc (in relation to the International Offering only), ABCI Capital Limited, BOCOM International Securities Limited, BNP Paribas Securities (Asia) Limited, CMB International Capital Limited, China Everbright Securities (HK) Limited, Guotai Junan Securities (Hong Kong) Limited, Haitong International Securities Company Limited and Long Asia Securities Limited

“Joint Global Coordinators” CCB International Capital Limited, China Securities (International) Corporate Finance Company Limited, ICBC International Capital Limited, Morgan Stanley Asia Limited (in relation to the Hong Kong Public Offering only) and Morgan Stanley & Co. International plc (in relation to the International Offering only)

“Joint Lead Managers” CCB International Capital Limited, China Securities (International) Corporate Finance Company Limited, ICBC International Securities Limited, Morgan Stanley Asia Limited (in relation to the Hong Kong Public Offering only), Morgan Stanley & Co. International plc (in relation to the International Offering only), ABCI Securities Company Limited, BOCOM International Securities Limited, BNP Paribas Securities (Asia) Limited, CMB International Capital Limited, China Everbright Securities (HK) Limited, Haitong International Securities Company Limited, Long Asia Securities Limited, SDG Securities (HK) Limited, China Galaxy International Securities (Hong Kong) Co., Ltd, Midas Securities Limited (in relation to the Hong Kong Public Offering only), China Industrial Securities International Capital Limited and Zhongtai International Securities Limited

“Joint Sponsors” CCB International Capital Limited, China Securities (International) Corporate Finance Company Limited and ICBC International Capital Limited;

“Laixi Mining” Shandong Gold Mining (Laixi) Co., Ltd. (山東黃金礦業(萊 西)有限公司), a limited liability company incorporated in the PRC on October 11, 2006 and a wholly-owned subsidiary of our Company;

—23— DEFINITIONS

“Laizhou Mining” Shandong Gold Mining (Laizhou) Co., Ltd. (山東黃金礦業(萊 州)有限公司), a limited liability company incorporated in the PRC on May 27, 2003 and a wholly-owned subsidiary of our Company;

“Latest Practicable Date” September 5, 2018, being the latest practicable date for the purpose of ascertaining certain information in this Prospectus prior to its publication;

“LIBOR” the London Interbank Offered Rate, which is the average of interest rates estimated by each of the leading banks in London that it would be charged were it to borrow from other banks;

“Linglong Gold Mine” Site 3 as defined in the AAI Report (玲瓏金礦);

“Linglong Mining” Shandong Gold Mining (Linglong) Co., Ltd. (山東黃金 礦業(玲瓏)有限公司), a limited liability company incorporated in the PRC on February 23, 2010 and a wholly-owned subsidiary of our Company;

“Listing” the listing of our H Shares on the Main Board of the Hong Kong Stock Exchange;

“Listing Committee” the Listing Committee of the Hong Kong Stock Exchange;

“Listing Date” the date expected to be on or about Friday, September 28, 2018, on which dealings in our H Shares first commence on the Hong Kong Stock Exchange;

“London Bullion Market” the London Bullion Market, a well-known wholesale over-the-counter market for the trading of gold and silver;

“MAG” Minera Argentina Gold S.R.L, a sociedad de reponsabilidad limitada incorporated in Argentina on January 31, 1995, held as to 95.6906% by AGB II, 2.1547% by SDG Hong Kong, 1.9529% by Argentina Gold Corporation and 0.2018% by Compania Minera San Jose de Argentina;

“MAG Assigned Debts” the rights, title, interest and benefit under or in connection with 50% of the total sum of the principal amount outstanding and all accrued and unpaid interest (i.e. US$141.4 million) in respect of such principal amount owed by MAG to Barrick Group under a series of loan agreements between MAG and Barrick Group as of June 30, 2017;

—24— DEFINITIONS

“Main Board” the stock exchange (excluding the option market) operated by the Hong Kong Stock Exchange, which is independent from and operated in parallel with the Growth Enterprise Market of the Hong Kong Stock Exchange;

“Mandatory Provisions” the Mandatory Provisions for Articles of Association of Companies to be Listed Overseas (到境外上市公司章程必備 條款), as promulgated by the State Council Securities Commission and the State Restructuring Commission on August 27, 1994 and became effective on the same date, as the same may be amended and supplemented or otherwise modified from time to time;

“MEE” Ministry of Ecology and Environment of the PRC (中華人民 共和國生態環境部), formerly known as Ministry of Environmental Protection of the PRC (中華人民共和國環境 保護部);

“MLR” Ministry of Land and Resources of the PRC (中華人民共和國 國土資源部), the functions of which have been transferred to the MNR in 2018;

“MNR” Ministry of Natural Resources of the PRC (中華人民共和國自 然資源部);

“MOFCOM” Ministry of Commerce of the PRC (中華人民共和國商務部) or its predecessor, the Ministry of Foreign Trade and Economic Cooperation of the PRC (中華人民共和國對外貿易 經濟合作部);

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

“NI 43-101 Code” National Instrument 43-101 — Standards of Disclosure for Mineral Projects, the primary rule governing mineral property disclosure under Canadian securities laws, which was initially enacted in February 2001 and revised in December 2005;

“Non-competition Undertaking” the non-competition undertaking (不競爭承諾函) dated September 7, 2018 executed by our Controlling Shareholder in favor of us (for ourselves and as trustee of our subsidiaries), as further described in “Relationship with Our Controlling Shareholder — Non-Competition Agreement and Undertakings” in this Prospectus;

—25— DEFINITIONS

“Offer Price” the final price per Offer Share in Hong Kong dollars (exclusive of brokerage fee of 1%, SFC transaction levy of 0.0027% and Stock Exchange trading fee of 0.005%) of not more than HK$18.38 and expected to be not less than HK$14.70 at which Hong Kong Offer Shares are to be subscribed for, to be determined in the manner further described in the section headed “Structure of the Global Offering — Pricing and Allocation” in this Prospectus;

“Offer Share(s)” the Hong Kong Offer Shares and the International Offer Shares, together with, where relevant, any additional H Shares which may be issued by our Company pursuant to the exercise of the Over-allotment Option;

“Over-allotment Option” the option expected to be granted by our Company to the International Underwriters, exercisable by the Joint Global Coordinators (on behalf of the International Underwriters) pursuant to the International Underwriting Agreement, pursuant to which our Company may be required to issue up to an aggregate of 49,159,500 additional H Shares, representing 15% of the Offer Shares initially being offered under the Global Offering, at the Offer Price to cover over-allocations in the International Offering, if any, further details of which are described in the section headed “Structure of the Global Offering” in this Prospectus;

“PBOC” the People’s Bank of China (中國人民銀行), the central bank of the PRC;

“Penglai Gold Mine” Site 9 as referred to in the AAI Report (蓬萊礦業金礦);

“Penglai Mining” Shandong Gold Group Penglai Mining Co., Ltd. (山東黃金集 團蓬萊礦業有限公司), a limited liability company incorporated in the PRC on August 1, 2003 and a wholly-owned subsidiary of our Company;

“PRC Company Law” the Company Law of the PRC (中華人民共和國公司法), as amended and adopted by the Standing Committee of the Tenth National People’s Congress on October 27, 2005 and effective on January 1, 2006, as amended, supplemented or otherwise modified from time to time;

“PRC GAAP” generally accepted accounting principles in the PRC;

“PRC Government” the central government of the PRC and all governmental subdivisions (including provincial, municipal and other regional or local government entities) and instrumentalities thereof or, where the context requires, any of them;

—26— DEFINITIONS

“PRC Legal Advisers” King & Wood Mallesons, our legal advisers as to PRC laws;

“PRC Mineral Resources Law” the Mineral Resources Law of the PRC (中華人民共和國礦產 資源法) revised by the 8th Standing Committee of the National People’s Congress on August 29, 1996 and became effective on October 1, 1997, as amended, supplemented or otherwise modified from time to time;

“PRC Mines” Sanshandao Gold Mine, Jiaojia Gold Mine, Xincheng Gold Mine, Yinan Gold Mine, Linglong Gold Mine, Qingdao Gold Mine, Penglai Gold Mine, Jinzhou Gold Mine, Guilaizhuang Gold Mine, Chifengchai Gold Mine, Xihe Zhongbao Gold Mine and Fujian Yuanxin Gold Mine, individually or collectively;

“PRC Securities Law” the Securities Law of the PRC (中華人民共和國證券法), as enacted by the 6th meeting of the 9th Standing Committee of the National People’s Congress on December 29, 1998 and became effective on July 1, 1999, as amended, supplemented or otherwise modified from time to time;

“Price Determination Agreement” the agreement to be entered into by the Joint Global Coordinators (for themselves and on behalf of the Underwriters) and our Company (on behalf of ourselves) on the Price Determination Date to record and fix the Offer Price;

“Price Determination Date” the date, expected to be on or around Thursday, September 20, 2018 (Hong Kong time) on which the Offer Price is determined, or such later time as the Joint Global Coordinators (for themselves and on behalf of the Underwriters) and us (on behalf of ourselves), but in any event no later than Friday, September 21, 2018;

“Prospectus” this Prospectus being issued in connection with the Hong Kong Public Offering;

“QDIIs” qualified domestic institutional investors in the PRC, which are licensed by the CSRC to invest in foreign securities markets;

“Qianling Mining” Shandong Jinzhou Group Qianling Mining Co., Ltd. (山東金 洲集團千嶺礦業有限公司), a limited liability company incorporated in the PRC on August 9, 2001, which was held as to 90% by Jinzhou Group and 10% by Rushan Guoxin Asset Operation and Management Co., Ltd. (乳山市國鑫資產經營管 理有限公司);

—27— DEFINITIONS

“QIBs” a qualified institutional buyer within the meaning of Rule 144A;

“Qingdao Gold” Shandong Gold Group Qingdao Gold Co., Ltd. (山東黃金集團 青島黃金有限公司), a limited liability company incorporated in the PRC on February 8, 2001 and a wholly-owned subsidiary of our Controlling Shareholder;

“Qingdao Gold Mine” Site 6 as referred to in the AAI Report (青島公司金礦);

“Regulation S” Regulation S under the U.S. Securities Act;

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

“RPA” Roscoe Postle Associates Inc., an independent mining and geological consultant which qualified as a competent person as defined under Rule 18.01 of the Hong Kong Listing Rules. Save as mentioned in the RPA Report, Roscoe Postle Associates Inc. is an Independent Third Party;

“RPA Report” the CPR prepared by RPA, the effective date of which is March 31, 2018 and details of which are set out in “Appendix IV — Competent Person’s Report — RPA Report” to this Prospectus;

“Rule 144A” Rule 144A under the U.S. Securities Act;

“SAFE” the State Administration of Foreign Exchange of the PRC (中 華人民共和國國家外匯管理局);

“SAIC” 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);

“Sanshandao Gold Mine” Site 1 as referred to in the AAI Report (三山島金礦);

“SASAC” State-owned Assets Supervision and Administration Commission (國務院國有資產監督管理委員會);

“SAT” State Administration of Taxation of the PRC (中華人民共和國 國家稅務總局);

“SDG Beijing” SDG (Beijing) Industry Investment Co., Ltd. (山東黃金（北 京）產業投資有限公司), a limited liability company incorporated in the PRC on July 8, 2015 and a wholly-owned subsidiary of our Controlling Shareholder;

—28— DEFINITIONS

“SDG Capital Management” SD Gold Capital Management Co., Ltd. (山金金控資本管理有 限公司), a limited liability company incorporated in the PRC on November 14, 2012 and a wholly-owned subsidiary of our Controlling Shareholder;

“SDG Exploration” Shandong Gold Geological Mine Exploration Co., Ltd. (山東 黃金地質礦產勘查有限公司), a limited liability company incorporated in the PRC on January 3, 2003 and a wholly-owned subsidiary of our Controlling Shareholder;

“SDG Group” SDG Group Co. and all of its subsidiaries;

“SDG Group Co.” Shandong Gold Group Co., Ltd. (山東黃金集團有限公司), a limited liability company incorporated in the PRC on July 16, 1996, the Controlling Shareholder of our Company, and was held as to approximately 70% by Shandong SASAC, as to approximately 20% by Shandong Guohui Investment Co., Ltd. (山東國惠投資有限公司) and as to approximately 10% by Shandong Social Security Fund Committee (山東省社會保障 基金理事會);

“SDG Group Finance” Shandong Gold Group Finance Co., Ltd. (山東黃金集團財務 有限公司), a limited liability company incorporated in the PRC on July 17, 2013, which was held as to 30% by our Company and 70% by SDG Group Co.;

“SDG Hong Kong” Shandong Gold Mining (HongKong) Co., Limited (山東黃金 礦業(香港)有限公司), incorporated in Hong Kong on February 27, 2017 with limited liability and a wholly-owned subsidiary of our Company;

“SDG International” Shandong Gold International Mining Co., Ltd. (山東黃金國際 礦業有限公司), a limited liability company incorporated in Hong Kong on November 1, 1994 and a wholly owned subsidiary of our Controlling Shareholder of our Company;

“SDG Non-ferrous” Shandong Gold Non-ferrous Metal Mine Group Co., Ltd. (山 東黃金有色礦業集團有限公司), a limited liability company incorporated in the PRC on August 19, 2008 and was held as to approximately 95.65% by SDG Group Co. and approximately 4.35% by Jinan Jinsui Jincai Investment Partnership (Limited Partnership) (濟南金穗金財投資合夥企 業（有限合夥）);

“SDG Resources Development” Shandong Gold Resources Development Co., Ltd. (山東黃金 資源開發有限公司), a limited liability company incorporated in the PRC on December 26, 2007 and a wholly-owned subsidiary of our Controlling Shareholder;

—29— DEFINITIONS

“SDG S&T” Shandong Gold Mining Science and Technology Co., Ltd. (山 東黃金礦業科技有限公司), a limited liability company incorporated in the PRC on May 3, 2017 and a wholly-owned subsidiary of our Company;

“SDG Smelting” Shandong Gold Smelting Co., Ltd. (山東黃金冶煉有限公司), a limited liability company incorporated in the PRC on July 19, 2016 and a wholly-owned subsidiary of our Company, and its predecessor;

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

“SFC” the Securities and Futures Commission of Hong Kong;

“Shandong SASAC” State-owned Assets Supervision and Administration Commission of Shandong Provincial Government of the PRC (中國山東省人民政府國有資產監督管理委員會);

“Shandong Smeltery” the smelting plant owned and operated by SDG Smelting;

“Shanghai Gold Exchange” or Shanghai Gold Exchange (上海黃金交易所); “SGE”

“Shanghai Stock Exchange” or Shanghai Stock Exchange (上海證券交易所); “SSE”

“Share(s)” shares in the share capital of our Company, with a nominal value of RMB1.00 each, comprising our A Shares and our H Shares;

“Share Purchase Agreement” or the purchase agreement entered into between our Company, “Purchase Agreement” SDG Hong Kong, Barrick Gold and Barrick Cayman on April 6, 2017 in relation to the Veladero Acquisition, particulars of which are set out in “History and Development” in this Prospectus;

“Shareholders” Holder(s) of our Share(s)

“Shareholders’ Agreement” the shareholders’ agreement entered into on June 30, 2017 between the Company, SDG Hong Kong, Barrick Cayman, Barrick Gold, Argentina Gold Corp., Compania Minera San Jose de Argentina, AGB II and MAG that sets forth terms for the management and joint operation of the Veladero Mine, which are set out in “Business” in this Prospectus;

—30— DEFINITIONS

“Shenzhen SDG Precious Metal” Shenzhen SD Gold Mining Precious Metal Co., Ltd. (深圳市 山金礦業貴金屬有限公司), a limited liability company incorporated in the PRC on August 10, 2015, and was held as to 75% by Laizhou Mining and 25% by Guizhou Southwest Gold Operation Center Co., Ltd. (貴州西南黃金經營中心有限 公司), which was held as to 92% by Chen Kaiyuan (陳開元), who was also a director of Guizhou Southwest Gold Operation Center Co., Ltd.;

“Shenzhen Smeltery” the smelting plant owned and operated by Shenzhen SDG Precious Metal;

“SOE” state-owned enterprises;

“Special Regulations” Special Regulations of the State Council on the Overseas Offering and Listing of Shares by Joint Stock Limited Companies (國務院關於股份有限公司境外募集股份上市的特 別規定), promulgated by the State Council on August 4, 1994;

“SSE Listing Rules” the Rules Governing the Listing of Stocks on the Shanghai Stock Exchange (上海證券交易所股票上市規則) as amended supplemented or otherwise modified from time to time;

“Stabilizing Manager” CCB International Capital Limited;

“State Council” State Council of the PRC (中華人民共和國國務院);

“subsidiary(ies)” has the meaning ascribed thereto in the Companies Ordinance;

“substantial shareholder” has the meaning ascribed to it under the Hong Kong Listing Rules;

“Supervisor(s)” supervisor(s) of our Company;

“Supervisory Board” the board of Supervisors;

“Syndicated Term Loan(s)” the loan available under the US$960 million term loan facilities agreement dated June 20, 2017 entered into by, among others, SDG Hong Kong and several financial institutions, for which China Merchants Bank Co., Ltd. New York Branch acted as the facility agent;

“Takeovers Code” the Codes on Takeovers and Mergers and Share Buy-backs issued by the SFC, as amended, supplemented or otherwise modified from time to time;

“Track Record Period” the period comprising the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2018;

—31— DEFINITIONS

“Underwriters” the Hong Kong Underwriters and the International Underwriters;

“Underwriting Agreements” the Hong Kong Underwriting Agreement and the International Underwriting Agreement;

“United States” or “U.S.” the United States of America, its territories, its possessions and all areas subject to its jurisdiction;

“U.S. dollars” or “US$” United States dollars, the lawful currency of the United States;

“U.S. Securities Act” the United States Securities Act of 1933, as amended and supplemented or otherwise modified from time to time, and the rules and regulations promulgated thereunder;

“VAT” value added tax;

“Veladero Acquisition” the transaction contemplated in the Share Purchase Agreement, in which we acquired a 50% equity interest in AGB II, subscribed for the newly issued 2.1547% equity interest in MAG and acquired the MAG Assigned Debt;

“Veladero Mine” the Veladero Mine as referred to in the RPA Report;

“WHITE Application Form(s)” the application form(s) for the Hong Kong Offer Shares for use by the public who require(s) such Hong Kong Offer Shares to be issued in the applicant’s own name;

“White Form eIPO” the application for Hong Kong Offer Shares to be issued in the applicant’s own name by submitting applications online through the designated website of White Form eIPO at www.eipo.com.hk;

“White Form eIPO Service Computershare Hong Kong Investor Services Limited; Provider”

“Xihe Zhongbao Gold Mine” Site 12 as referred to in the AAI Report (西和中寶金礦);

“Xincheng Gold Mine” Site 4 as referred to in the AAI Report (新城金礦);

“Xinhui Mining” Shandong Gold Mining (Xinhui) Co., Ltd. (山東黃金礦業 (鑫 匯) 有限公司), a limited liability company incorporated in the PRC on August 7, 2008 and a wholly-owned subsidiary of our Company;

—32— DEFINITIONS

“Xinyi Company” Shandong Gold Xinyi Jewelry Co., Ltd. (山東黃金鑫意首飾有 限公司), a limited liability company incorporated in the PRC on September 30, 1998 and an indirectly wholly-owned subsidiary of our Controlling Shareholder;

“YELLOW Application Form(s)” the application form(s) for the Hong Kong Offer Shares for use by the public who require(s) such Hong Kong Offer Shares to be deposited directly into CCASS;

“Yinan Gold Mine” Site 5 as referred to in the AAI Report (沂南金礦);

“Yinan Mining” Shandong Gold Mining (Yinan) Co., Ltd. (山東黃金礦業 (沂 南) 有限公司), a limited liability company incorporated in the PRC on August 5, 2008 and a wholly-owned subsidiary of our Company;

“Zhongbao Mining” Xihe Zhongbao Mining Co., Ltd. (西和縣中寶礦業有限公司), a limited liability company incorporated in the PRC on April 1, 2008, which was held as to 70% by the Company, 5% by Gansu Province Non-ferrous Metal Geological Exploration Tianshui Exploration Institute (甘肅省有色金屬地質勘查局 天水勘查院) (an Independent Third Party) and 25% by an individual Ye Youtang (葉友堂), who was also a director of Zhongbao Mining.

Certain amounts and percentage figures included in this Prospectus 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.

For ease of reference, the names of the PRC laws and regulations, governmental authorities, institutions, natural persons or other entities (including certain of our subsidiaries) have been included in the Prospectus in both the Chinese and English languages and in the event of any inconsistency, the Chinese versions shall prevail. English translations of official Chinese names are for identification purpose only.

—33— SUMMARY OF THE NI 43-101 CODE

In this Prospectus, we have used a number of terms defined in the National Instrument 43-101 Standards of Disclosure for Mineral Projects (the “NI 43-101 Code”). The NI 43-101 Code is an internationally accepted mineral resource or reserve classification system which became effective on February 1, 2001. The NI 43-101 Code is used by the Competent Persons to report the Mineral Resources and Reserves of our gold mines in this Prospectus.

NI 43-101 Code incorporates, by reference, the definitions for “Mineral Resource” or “Resource” provided in the section headed “Glossary of Technical Terms” in this Prospectus. Mineral Resources are sub-divided in order of the increasing geological confidence of the estimate into the following categories:

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

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

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

The NI 43-101 Code definition of “Mineral Reserve” or “Reserve” is provided in the section headed “Glossary of Technical Terms” in this Prospectus. The NI 43-101 Code provides for a direct relationship between Indicated Mineral Resources and Probable Mineral Reserves, and between Measured Mineral Resources and Proven Mineral Reserves. Mineral Reserves are the economically mineable parts of measured and indicated Mineral Resources after a consideration of the relevant modifying factors, which include mining, metallurgical, economic, marketing, legal, environmental, social and governmental considerations. These assessments demonstrate at the time of reporting that

—34— SUMMARY OF THE NI 43-101 CODE economic extraction could reasonably be justified. In certain situations, Measured Mineral Resources could convert to Probable Mineral Reserves because of uncertainties associated with the modifying factors that are taken into account in the conversion from Mineral Resources to Mineral Reserves. The NI 43-101 Code deems Inferred Mineral Resources to be too poorly delineated to be transferred into a Mineral Reserve category. Mineral Reserve figures incorporate mining dilution and mining losses and are based on an appropriate level of mine planning, design and scheduling. Mineral Reserves are sub-divided into the following categories:

• Probable Mineral Reserve or Probable Reserve — is the economically mineable part of an Indicated, and in some circumstances, a Measured Mineral Resource. The confidence in the modifying factors applying to a Probable Mineral Reserve is lower than that applying to a Proven Mineral Reserve.

• Proven Mineral Reserve or Proved Reserve — is the economically mineable part of a Measured Mineral Resource. A Proven Mineral Reserve implies a high degree of confidence in the modifying factors.

The following diagram summarizes the general relationships between exploration results, Mineral Resources and Mineral Reserves under the NI 43-101 Code.

Exploration Results

Mineral Resources Mineral Reserves

Inferred

Indicated Probable Increasing level of geological knowledge and confidence

Measured Proven

Consideration of mining, processing, infrastructure, metallurgical, economic, marketing, legal, environmental, social and governmental factors

Mineral Reserves are generally quoted as comprising a portion of total Mineral Resources rather than the Mineral Resources being additional to the Mineral Reserves quoted. Under the NI 43-101 Code, either procedure is acceptable, provided the method adopted is clearly identified. The CPRs in this Prospectus report all Mineral Reserves as part of Mineral Resources.

—35— GLOSSARY OF TECHNICAL TERMS

In this Prospectus, unless the context otherwise requires, explanations and definitions of certain terms used in this Prospectus in connection with our Group and our business shall have the meanings set out below. The terms and their meanings may not correspond to standard industry meaning or usage of these terms.

“AISC” all-in sustaining costs, a metric which gold mining companies may use to report their costs. According to the Guidance Note on Non-GAAP Metrics — All-in Sustaining costs and All-in Costs published by World Gold Council, all-in sustaining costs is the sum of the on-site mining costs (on a sales basis), on-site general and administrative costs, royalties and production taxes, realised gains/losses on hedges due to operating costs, community costs related to current operations, permitting costs related to current operations, third party smelting, refining and transport costs, non-cash remuneration (site-based), stock-piles/product inventory write down, operational stripping costs, by-product credits, corporate general and administrative costs (including share-based remuneration), reclamation and remediation — accretion and amortisation (operating sites), exploration and study costs (sustaining), capital exploration (sustaining), capitalised stripping and underground mine development (sustaining) and capital expenditure (sustaining);

“Au” is the symbol for the chemical element of gold;

“cut-off grade” the grade threshold above which a mineral is considered economic;

“deposit” a natural occurrence of a useful mineral, or an ore, sufficient in extent and degree of concentration to invite exploitation;

“doré” unrefined gold bar produced at the mine site or other gold sources before sending to a refinery where the gold is refined or processed to meet specific requirements;

“drilling” the use of a machine to create holes for exploration or for loading with explosives;

“exploration” activity to prove the location, volume and quality of an orebody;

“GFA” gross floor area;

“gold bullion” refined gold in the form of bars;

—36— GLOSSARY OF TECHNICAL TERMS

“gold concentrate” a powdery product containing an upgraded mineral content resulting from initial processing of mined ore to remove some waste materials. A concentrate is an intermediary product, which would still be subject to further processing, such as smelting, to effect recovery of metal;

“gold mine production volume” production volume of gold that is mined from gold mines and as by-products from non-ferrous metal ores;

“grade,” or “ore grade” the relative amount of valuable elements or minerals contained in a parcel of ore material. For gold, grade is commonly expressed in grams per tonne terms (g/t Au);

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

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

“km” kilometer(s), a metric unit measure of distance;

“KwH” kilowatt hours;

“LBMA” a wholesale over-the-counter market for the trading of gold and silver, which sets gold prices twice daily at 10:30 am and 3:00 pm London BST with the price set in U.S. dollars;

“leach” to dissolve minerals or metals out of ore with chemicals;

“LOM” life of mine;

—37— GLOSSARY OF TECHNICAL TERMS

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

“Mineral Reserve(s)” or is the economically mineable material derived from a “Reserve(s)” Measured and /or Indicated Mineral Resource. It is inclusive of diluting materials and allows for losses that Mineral Reserves to denote progressively increasing uncertainty in their recoverability;

“Mineral Resource(s)” or a concentration or occurrence of solid material of economic “Resource(s)” 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;

“mineralization” an area with continuous distribution belts of mineralization, including the occurrence of deposits, mine sites and alteration of waste rock, as exploration indicators and under control of same geology conditions. It is a key zone for estimation and further planning of exploration of minerals;

“MVA” million volt-amperes, a metric unit measure of energy power;

“ore” mineral bearing rock which can be mined and treated profitably under current or immediately foreseeable economic conditions;

“orebody” natural mineral accumulations which can be extracted for use under existing economic conditions and using existing extraction techniques;

“ore processing” or “processing” the process which in general refers to the extraction of usable portions of ores by using physical and chemical methods;

—38— GLOSSARY OF TECHNICAL TERMS

“ounce(s)” or “oz” a unit of weight for precious metals, and one troy ounce equals 31.1035 grams;

“probable Mineral Reserve(s)” or see the definition under the section headed “Summary of The “probable Reserve(s)” NI 43-101 Code” of this Prospectus;

“processing/smelting recovery the percentage of metal produced compared to the amount of rate” metal contained in the feed ore in the context of a processing plant, or the percentage of metal produced compared to the amount of metal contained in the feed concentrates in the context of a smelting plant;

“proven Mineral Reserve(s)” or see the definition under the section headed “Summary of The “proven Reserve(s)” NI 43-101 Code” of this Prospectus;

“refining” the final stage of the metallurgical process of refining crude metal products to a pure or very pure end-product;

“rehabilitation” in the context of mining, the process of returning the land to another productive use or the restoration of land and environmental values to a mine site after the mining has been completed;

“SGE Gold Ingots and Bars standard gold ingots and bars provided by SGE qualified Delivery” members;

“smelting” a pyro metallurgical process of separating metal by fusion from those impurities with which it is chemically combined or physically mixed;

“tonne” or “t” metric ton, a metric unit of weight;

“underground mine” openings in the earth accessed via shafts and adits below the land surface to extract minerals;

“vein” sheet-like body of minerals formed by fracture filling or replacement of host rock.

—39— FORWARD-LOOKING STATEMENTS

This Prospectus contains certain forward-looking statements and information relating to us and our subsidiaries that are based on the beliefs of our management as well as assumptions made by and information currently available to our management. When used in this Prospectus, the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “going forward,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “will,” “would” and the negative of these words and other similar expressions, as they relate to us or our management, are intended to identify forward-looking statements. Such statements reflect the current views of our management with respect to future events, operations, liquidity and capital resources, some of which may not materialize or may change. These statements are subject to certain risks, uncertainties and assumptions, including the risk factors as described in this Prospectus. You are strongly cautioned that reliance on any forward-looking statements involves known and unknown risks and uncertainties. The risks and uncertainties facing us which could affect the accuracy of forward-looking statements include, but are not limited to, the following:

• our operations and business prospects;

• future developments, trends and conditions in the industry and markets in which we operate;

• our business strategies and ability to implement these strategies;

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

• changes to the regulatory environment, policies, operating conditions and general outlook in the industry and markets in which we operate;

• the actions of and developments affecting our major customers and suppliers;

• the ability of third parties to perform in accordance with contractual terms and specifications;

• our ability to control or reduce costs;

• our dividend policy;

• our capital expenditure plans;

• the amount and nature of, and potential for, future development of our business;

• financial market developments;

• our future debt levels and capital needs;

• competitive environment of the industry and markets in which we operate;

—40— FORWARD-LOOKING STATEMENTS

• the actions of and developments affecting our competitors; and

• certain statements included in the section headed “Financial Information — General” and “Financial Information — Veladero Mine” in this Prospectus with respect to operations, margins, overall market trends, risk management and exchange rates.

By their nature, certain disclosures relating to these and other risks are only estimates and should one or more of these uncertainties or risks materialize or should underlying assumptions prove to be incorrect, our financial condition and actual results of operations may be materially and adversely affected and may vary significantly from those estimated, anticipated or projected, as well as from historical results.

Subject to the requirements of applicable laws, rules and regulations, we do not have any and undertake no obligation to update or otherwise revise the forward-looking statements in this Prospectus, 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 Prospectus might not occur in the way we expect or at all. Accordingly, the forward-looking statements are not a guarantee of future performance and you should not place undue reliance on any forward-looking information. Moreover, the inclusion of forward-looking statements should not be regarded as representations by us that our plans and objectives will be achieved or realized. All forward-looking statements in this Prospectus are qualified by reference to the cautionary statements in this section.

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

—41— RISK FACTORS

You should carefully consider all of the information in this Prospectus, including the risks and uncertainties described below, before making an investment in our H Shares. You should pay particular attention to the fact that we are a PRC company, that most of our business is conducted in the PRC and that we are governed by a legal and regulatory environment which in some respects may differ from those in other countries. We completed the Veladero Acquisition on June 30, 2017, pursuant to which we directly and indirectly hold a 50% equity interest in MAG, the entity that operates the Veladero Mine in Argentina. The risks and uncertainties described below apply to our Argentina operations where applicable. There are risks associated with investing in our H Shares not typical of investment in the capital stock of companies incorporated and/or engaging business in Hong Kong or the United States. Our business, financial condition and results of operations could be materially and adversely affected by any of these risks. The trading price of our H Shares could decline owing to any of these risks, and you may lose all or part of your investment. For more information concerning the PRC and certain related matters discussed below, please see “Regulatory Overview” and “Appendix VI — Summary of Principal Legal and Regulatory Provisions” to this Prospectus. Additional risks and uncertainties not presently known to us or which we currently deem immaterial may arise or become material in the future and may have a material adverse effect on us.

RISKS RELATING TO OUR BUSINESS AND INDUSTRY

Changes in the market price for gold, which in the past have experienced significant volatility, affect the profitability of our operations and the cash flows generated by those operations.

During the Track Record Period, the substantial majority of our revenue was derived from the sale of gold. Historically, the price of gold has experienced significant volatility. See “Industry Overview — Gold Price.” Gold price has been affected by numerous factors beyond our control, including, among others:

• the strength or weakness of the U.S. dollar (the currency in which gold price generally is quoted) and of other currencies, including the Renminbi and the Argentine Peso;

• the demand for gold for industrial uses and use in jewellery;

• demand for gold from relatively new emerging markets, particularly Brazil, Russia, India and China, and the emerging middle class in these markets;

• actual, expected or rumored purchases and sales of gold bullion holdings by central banks or other large gold bullion holders or dealers;

• international or regional political and economic events or trends;

• demand for exchange traded funds which replicate the exact performance of gold;

• demand for gold for investment purposes;

—42— RISK FACTORS

• demand for gold investment alternatives, including the emerging demand for Bitcoin and other cryptocurrency;

• investor confidence in gold and the gold business;

• speculative trading activities in gold;

• the overall level of forward sales by gold companies;

• the overall level and cost of production of gold;

• financial market expectations regarding the rate of inflation; and

• interest rates.

It is not possible for us to predict the aggregate effect of these factors. If gold price falls below the amount it costs us to produce gold and remain at such levels for any sustained period, our revenue and profit would be materially and adversely affected. As a result, we may be forced to curtail or suspend some or all of our projects or operations, or reduce operational capital expenditures in part or completely. In addition, we might not be able to recover any losses incurred during or after such periods. Moreover, since the Reserves estimates are based on assumed gold prices, which are US$1,231.03 per ounce and US$1,200.0 per ounce for our PRC Mines and Veladero Mine, respectively, our Reserves estimates and production may also be affected by significant deviations from and fluctuations in actual gold prices.

Due to the recent changes of the global economic environment, the gold price experienced significant volatility. For example, for the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2017 and 2018, the average spot price of gold on the Shanghai Gold Exchange was RMB7,310.0 per ounce, RMB8,345.2 per ounce, RMB8,571.7 per ounce, RMB8,505.8 per ounce and RMB8,504.4 per ounce, respectively. Since March 31, 2018, the date of our latest audited financial statements, the LBMA PM gold spot price has decreased from US$1,323.9 per ounce to US$1,196.7 per ounce on September 5, 2018, primarily influenced by the devaluation of the Renminbi and political developments and uncertainties. The fluctuations in gold prices have contributed to, and may continue to contribute to, fluctuations in our revenue. As a result, a sustained period of significant gold price volatility may adversely affect our ability to evaluate the feasibility of undertaking new capital projects or continuing existing operations or to make other long-term strategic decisions.

We are subject to risks related to exchange rate fluctuations.

A significant majority of our revenue, operating costs and expenses are, and are expected to be, denominated in Renminbi. Since the trend in gold price in Renminbi is generally consistent with the trend in international gold price, which is denominated in U.S. dollar, our earnings may be materially affected by a material change in the Renminbi/U.S. dollar exchange rate. For example, if the U.S. dollar weakens materially relative to the Renminbi, our operating costs and expenses may increase

—43— RISK FACTORS disproportionally relative to revenue, and as a result, our consolidated financial results could be materially and adversely affected. For foreign exchange risks of our Argentina operations, see “— Risks Relating to Doing Business in Argentina — The financial performance of the Veladero Mine may be affected by fluctuations of the Argentine Peso.”

The accuracy of our gold Resources and Reserves estimates are based on a number of assumptions, and we may produce less gold than the current estimates.

Our Mineral Resources and Reserves estimates are based on a number of assumptions made by the Competent Persons in accordance with the NI 43-101 Code. For more details about the procedures and parameters used for the Mineral Resources and Mineral Reserves estimates, please see the CPRs included as Appendix III and Appendix IV to this Prospectus. The accuracy of estimates depends on the quantity and quality of available data, the assumptions made and the judgements used in engineering and geological interpretation, which may prove to be unreliable. There is no assurance that the estimates will prove accurate or that the Mineral Reserves can be mined or processed profitably.

The Mineral Reserves estimates contained in this Prospectus represent the amount of gold that we believe can be economically mined and processed and are calculated based on a number of economic and technical assumptions. In the future, we may need to revise our Mineral Reserves if, for instance, our production costs increase or gold price decreases and as a result the extraction of a portion (or all) of the Mineral Reserves at our mines becomes uneconomic. In addition, compared to measured or indicated Mineral Resources, inferred Mineral Resources have a greater amount of uncertainty as to their existence and as to whether they can be mined economically as such Mineral Resources are inferred from geological evidence and assumed but not verified. It cannot be assumed that all or part of the inferred Mineral Resources will ever be upgraded to a higher category.

The inclusion of Mineral Resources estimates should not be regarded as a representation that all these amounts can be economically mined or processed, and nothing contained in this Prospectus (including without limitation, the estimates of LOM) should be interpreted as assurances of the economic viability of the mines that we hold mining permits or exploration permits to or the profitability of our future operations.

We may not be able to meet our estimated gold production volume.

Our production estimates are based on, among other things, Mineral Reserves estimates, gold recovery rate, and the assumptions regarding ground conditions and physical characteristics of Mineral Reserves, our mining schedule, utilization of production facilities, costs of production, conditions of the industry, political stability and the general economy. There are uncertainties in our ability to develop sufficient mining flexibility to achieve our mining schedule. Our Mineral Reserves estimates are based on assumed gold price of US$1,231.03 per ounce and US$1,200.0 per ounce for our PRC Mines and Veladero Mine, respectively, and as a result, our reserve estimates, production schedule, operation and actual production may be adversely affected if the actual gold price falls

—44— RISK FACTORS significantly below these gold price assumptions. According to the CPRs, in a hypothetical situation, assuming the current project design, the LOM schedule and all operational factors remain constant, if the gold price decreases by a certain percentage, our projected operations may be considered uneconomic. As a result, our production volume might be affected accordingly.

Actual production may vary from estimates for a variety of reasons, including risks and hazards of the types discussed elsewhere in this Prospectus, including but not limited to:

• actual gold ore mined varying from estimates in grade, tonnage, and metallurgical and other characteristics;

• encountering unusual or unexpected geological conditions;

• mining dilution;

• actual gold recovery rate in formal production lower than estimates during the testing;

• restrictions imposed by government authorities;

• industrial accidents;

• equipment failures;

• natural phenomena such as weather conditions, floods, rock slides and earthquakes;

• changes in the costs of utilities;

• decreases in gold price which may cause Mineral Reserves that are currently economic to become uneconomic;

• labor unrest, strikes, labor turnover;

• interference from local communities and competitors;

• socio-economic impact; and

• shortages of supplies needed for operation.

Such occurrences could result in damage to mineral properties, interruptions in production, injury or death to persons, damage to our property or the property of others, monetary losses and legal liabilities. These factors may cause a mineral deposit that has been mined profitably in the past to become unprofitable. New mining operations frequently experience unexpected issues during the initial development phase. Delays can often occur in the commencement of production. Estimates of production from properties not yet in production or from operations that are to be expanded are based on similar factors (including, in some instances, feasibility studies prepared by our personnel and/or outside consultants), but it is possible that actual facilities utilization, gold recovery rate, cash

—45— RISK FACTORS operating costs and economic returns will differ significantly from those currently estimated. There is no assurance that we will achieve our production estimates. Our inability to achieve our production estimates could have a material and adverse effect on our business, financial condition and results of operations.

We may not be able to expand our Mineral Resources or Reserves.

Discovery of new Mineral Resources and Reserves is crucial to our growth. During the Track Record Period, we continued to carry out exploration work in areas where we hold exploration permits. However, exploration of Mineral Resources and Reserves is speculative in nature and our exploration activities may not result in the discovery of mineable resources. Furthermore, the future mining and development in the areas currently covered by exploration licenses is subject to further government approvals. We cannot guarantee that our future plan to expand our Mineral Resources and Reserves will succeed. Such plans may be delayed or adversely affected by various factors, including failure to obtain relevant regulatory approvals, failure to secure sufficient financing to fund our expansion and production, the occurrence of geotechnical difficulties, constraints on managerial, operational, technical and other resources and the incurrence of higher-than-expected operational costs.

In addition, if a viable deposit is discovered, it could take several years and a large amount of capital expenditure from the initial phases of exploration to production commencement, during which time the presumed market price of gold may change and the capital cost and economic feasibility of such deposit may change. Furthermore, there is also no assurance that reported Resources could be converted into Reserves, and actual results upon production may differ from those anticipated at the time of discovery. Accordingly, there is no assurance that any future exploration activities or development projects will extend the life of our existing mining operations or result in any new economic mining operations. In the event we fail to expand our Resources or Reserves or our future expansion plan is delayed or fails to deliver the expected economic benefits, our business and future growth may be materially and adversely affected.

We may fail to obtain, maintain or renew the government permits, licenses and approvals required for our mining and exploration activities.

Under the PRC Mineral Resources Law, all mineral resources in China are owned by the state. Mining companies, including ourselves, are required to obtain mining and exploration permits prior to undertaking any mining or exploration activities, and the mining and exploration permits are limited to a specific geographic area and a certain time period. Our mining permits in China are generally granted with a term of up to 30 years. Our exploration permits are generally renewed every two years. Under the relevant Argentine laws and regulations, mining concessions provide perpetual mining rights to the holder. In addition, pursuant to relevant PRC and Argentine laws and regulations, before commencing production, we are required to pass a number of inspections and obtain permits and licenses with respect to environmental protection and production safety, among other things.

As of the Latest Practicable Date, we held a total of 22 valid mining permits and had six mining permit being renewed in China. As of the Latest Practicable Date, we also held 17 valid exploration permits and had nine exploration permits being renewed. As of March 31, 2018, the Veladero Mine

—46— RISK FACTORS comprised two mining properties: (i) the Veladero mining group, which consisted of eight mining concessions; and (ii) the Filo Norte mining group, which consisted of five mining concessions. For more information, see “— Risks Relating to Doing Business in Argentina — MAG does not own certain of the mining concessions for the Veladero Mine.” With respect to our mining permits and exploration permits being renewed, our PRC Legal Advisers do not anticipate material legal impediments in the renewal process as long as we meet the substantive and procedural conditions stipulated in the relevant PRC laws and regulations.

Changes in local laws, regulations and policies, including those with respect to environmental protection and mining and exploration activities, that are out of our control will affect our ability to obtain timely renewals for such permits and during this time we will cease mining and exploration activities in accordance with PRC laws and regulations. As advised by our PRC Legal Advisers and Argentina Legal Advisers, as of the Latest Practicable Date, other than the mining permit and exploration permits being renewed, we had obtained the requisite approvals, licenses and permits for our current operations in all material aspects. There can be no assurance that we will be able to fully and economically utilize the entire mineral resources of all of our gold mines during the currently effective permit or approval periods. Moreover, we may not be able to obtain or renew such approvals, licenses or permits, comply with all conditions requested by government authorities to maintain those permits, or obtain, retain or renew other approvals, licenses and permits necessary for our business operations in the future, either in respect of our existing mines or at any mines we may operate in the future.

Historically, we have had a number of instances where our actual production exceeded the permitted annual mine production volume set forth on our mining permits. According to relevant PRC laws and regulations, we may be subject to penalties and/or suspension and revocation of the relevant mining permit. However, our PRC Legal Advisers advised that there is no indication that would cause them to believe that we would be subject to material fines, suspension or revocation of permits for exceeding the permitted annual mine production volume during the Track Record Period.

Any failure to obtain, retain or renew, or any delay in obtaining or renewing, such approvals, licenses or permits could subject us to a variety of administrative penalties or other government actions and adversely impact our business operations.

We face risks associated with leasing a mining permit from our Controlling Shareholder.

Since 2004, we leased one mining permit from our Controlling Shareholder in relation to our Jiaojia Gold Mine, one of our four flagship PRC Mines. Under our lease agreement with our Controlling Shareholder, we utilize the mining permit through a leasing arrangement and pay a leasing fee of approximately RMB5.4 million per annum to use such permit. The lease agreement we entered into with our Controlling Shareholder does not have an expiration date. See “Business — Our Operations in China — Our Mining and Exploration Permits — Leased Mining Permits.” We cannot guarantee that our Controlling Shareholder will not breach the agreement, or that the lease agreement will not be terminated for other reasons. In such an event, and if we are unable to find alternative resources at a favorable price in a timely manner, we may experience a decrease in gold mine production volume, which will have a material and adverse effect on our business and results of operations.

—47— RISK FACTORS

Our operations are subject to risks relating to occupational hazards, production safety and design defects.

As an integrated gold company engaged in mining, processing and exploration, we are subject to extensive laws, rules and regulations imposed by the government regarding production safety. Gold mining, processing and exploration activities are typically exposed to elements of significant risks and hazards. In particular, our operations involve the handling and storage of explosives and other dangerous articles. For example, we use cyanide in our gold processing operations. We have implemented a set of guidelines and rules regarding the handling of dangerous articles, which comply with applicable existing laws, regulations and policies. As the government continues to strengthen the enforcement of safety regulations in relation to the mining industry, there can be no assurance that more stringent laws and regulations regarding production safety will not be implemented or that existing laws and regulations will not be more stringently enforced. In addition, there can be no assurance that accidents arising from the mishandling of dangerous articles will not occur in the future. We may not be able to comply with all existing or future laws and regulations in relation to production safety economically, or at all. Should we fail to comply with any production safety laws or regulations, we may be required to suspend our operations, rectify the production safety problems within a limited period and pay fines.

Our infrastructure and facilities may contain design defects, and the success of commissioning and trial production may not guarantee smooth production in the future. The breakdown or modification of the facilities may delay the production and incur significant costs. We and our third-party contractors may encounter accidents, technical difficulties, mechanical failure or breakdown in the mining, processing and exploration activities, as well as possible flooding, mudslides, instability of the slopes, and subsidence of the working areas and the like due to severe weather conditions and natural disasters. In addition, as we increasingly conduct mining at greater depths, we may face higher operational risks associated with deep underground mining, including but not limited to increased stress on our mining structures, increased temperatures and ventilation difficulties, higher risk of rock bursts and seismic activities that may affect the operation and safety of our gold mines. Deeper mining will require us to enhance our mining infrastructure, methods and techniques, and devote more manpower and utilities to our mining activities, which will increase our costs. For example, from time to time the Veladero Mine may be adversely affected by severe weather conditions. See “— Risks Relating to Doing Business in Argentina — The Veladero Mine is subject to risks related to its geographical location.”

We cannot guarantee that safety accidents will not occur at our gold mines in the future. The occurrence of accidents may result in damage to or destruction of production facilities, personal injuries or casualties, environmental damage, business interruption, delays in production, increased production costs, monetary losses and potential legal liability to us. Such incidents may also result in breaches of the conditions for our mining and exploration licenses or any other approvals, permits or authorizations, which may result in fines and penalties or even possible revocation of such

—48— RISK FACTORS licenses, approvals, permits and authorizations. Should we fail to comply with any relevant laws, regulations or policies or should any accident occur, our business, reputation, financial condition and results of operations may be adversely affected, and we may be subject to penalties, civil liabilities or criminal liabilities.

Moreover, our operations may be affected by safety accidents of third parties. For example, while our Guilaizhuang Gold Mine and Yinan Gold Mine did not experience any material safety accidents during the Track Record Period, local government authorities required gold mines in the region, including these two gold mines, to temporarily suspended operations in October 2015 due to certain industrial safety accidents of third parties in the region. Guilaizhuang Gold Mine and Yinan Gold Mine complied with such requirement and resumed operations in July 2016 and June 2016, respectively. The temporary suspension of operations led to a decrease in gold mine production volume at these gold mines from 61.8 koz in 2015 to 17.9 koz in 2016 for Guilaizhuang Gold Mine and 10.8 koz in 2015 to 4.9 koz in 2016 for Yinan Gold Mine. In addition to adversely affecting our business and results of operations, safety accidents in the region may also adversely affect our reputation.

Our operations are exposed to risks in relation to environmental protection and rehabilitation.

Operations of gold mines are subject to environmental risks and hazards. Our operations are subject to environmental laws and regulations in the regions in which we operate, such as with respect to the treatment and discharge of hazardous wastes and materials and environmental rehabilitation. These laws and regulations set a series of standards for waste substances that may be discharged into the environment, and impose fees for the discharge of such waste substances. We are required to conduct our mining operations in a manner that minimizes the impact on the environment, such as through rehabilitation and revegetation of mined land. In the future, we may have rehabilitation obligations in respect of areas we have cleared for mining and production purposes. Environmental hazards may occur in connection with our operations as a result of human negligence, force majeure or otherwise.

Before the Veladero Acquisition, the Veladero Mine experienced environmental incidents in September 2015, September 2016 and March 2017. For more information, see “— Risks Relating to Doing Business in Argentina — The Veladero Mine experienced environmental incidents during the Track Record Period” and “Business — Environmental Protection.” As advised by our PRC Legal Advisers, we did not have any material incidents of non-compliance with PRC environmental laws and regulations at our PRC Mines that resulted in material penalties during the Track Record Period. We cannot guarantee that our operations will not have environmental risks or hazards in the future. The occurrence of any environmental hazards may delay production, increase production costs, cause personal injuries or property damage, result in liability to us and damage our reputation. Such incidents may also result in breaches of the conditions for our mining and exploration licenses or other approvals, permits or authorizations, which may result in fines or penalties or even possible revocation of such licenses, approvals, permits and authorizations.

—49— RISK FACTORS

We may experience increased production costs arising from compliance with environmental laws and regulations. As the PRC economy develops and the living standards of the population improve, heightened awareness of environmental protection may lead to more stringent environmental laws and regulations being implemented in the future, or the existing environmental laws and regulations may be more strictly enforced. We may not always be able to comply with future laws and regulations in relation to environmental protection and rehabilitation economically or at all. Should we fail to comply with any such laws and regulations, we may be subject to penalties and liabilities, including but not limited to warnings, fines, suspension of production and closure of the facility that fails to comply with the relevant environmental standards.

To the extent that we seek to expand through acquisitions, joint ventures and strategic collaborations, we may experience problems in executing, managing and integrating the acquisitions, joint ventures and strategic collaborations.

We may strategically pursue acquisitions, joint ventures or strategic collaborations to strengthen our industry leadership. Any such acquisition, joint venture or strategic collaboration may change the scale of our business and operations and may expose us to new geographic, geological, political, social, operating, financial, legal, regulatory and contractual risks, including but not limited to:

• significant changes in commodity prices after we have committed to complete a transaction and established a purchase price or share exchange ratio;

• mineral ore bodies that may not meet expectations;

• difficulties integrating and assimilating the operations and personnel of any acquired companies, realizing anticipated synergies and maximizing the financial and strategic position of the combined enterprise, and maintaining uniform standards, policies and controls;

• higher costs of integration than we anticipated;

• diversion of management’s attention from our day-to-day business;

• inability to manage the newly acquired entities due to new operating and regulatory requirements;

• undetected liabilities which may be significant;

• disputes or breaches by our joint venture partners or strategic business partners, or the inability of our joint venture partners or strategic business partners to fulfill contractual obligations due to their businesses or financial condition; and

• difficulties in obtaining various governmental approvals.

—50— RISK FACTORS

In respect of future acquisitions, we may encounter difficulties in integrating acquired operations, services, corporate culture and personnel into our existing business and operations. Further, we may discover previously unidentified liabilities or other issues that we did not discover in our pre-acquisition due diligence investigations. These activities may divert significant management attention from existing business operations, which may harm our business. In addition, acquisitions will require our management to develop expertise in new areas, manage new business relationships and attract new types of customers. There can be no assurance that any acquisition, joint venture or strategic collaboration will achieve the results intended. Any problems experienced by us in connection with an acquisition, joint venture or strategic collaboration as a result of one or more of these or other factors could have a material and adverse effect on our business, financial condition and results of operations.

We may not be able to effectively manage our growth and business expansion.

For the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2017 and 2018, our revenue was RMB38,774.5 million, RMB49,072.7 million, RMB51,041.3 million, RMB9,711.1 million and RMB14,166.3 million, respectively. Our gross profit margin for the same periods amounted to 6.7%, 7.1%, 7.1%, 8.9% and 7.0%, respectively. During the Track Record Period, the gross profit margin of standard gold bullion produced using gold from our PRC Mines is significantly higher than that of standard gold bullion using gold procured from third parties and customized gold products. As such, our overall gross profit margin is affected by our product mix for the period, and in particular, the sales volume of standard gold bullion produced using gold from our PRC Mines. Our production and sales of standard gold bullion produced using gold from our PRC Mines may fluctuate from period to period, and there is no guarantee that we will be able to effectively manage our growth. Moreover, we completed the Veladero Acquisition on June 30, 2017. The operating cash costs of our PRC Mines may differ from that of the Veladero Mine, which is due to differences in operating conditions of different mining jurisdictions, variances in mining and processing methods as well as differences in currency exchange. The differences in operating cash costs and our product mix for a period may have an adverse effect on our profit margins, financial condition and results of operations.

Our future expansion may place a significant strain on our managerial, operational, technical and financial resources. In order to better allocate our resources to manage our growth, we must hire, recruit and manage our workforce effectively and implement adequate internal controls in a timely manner. Our risk management and internal control system may not be effective or adequate. If we fail to maintain sufficient internal sources of liquidity and secure external sources of funding for future growth, we may encounter, among other things, significant delays in production and operational difficulties. If we are unable to effectively manage our growth and the associated increased scale of our operations, the quality of our gold products, our ability to attract and retain key personnel and our business and prospects could be materially and adversely affected.

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Our standard gold bullion are sold on the Shanghai Gold Exchange, and any change in our membership with the Shanghai Gold Exchange may affect our business and results of operations.

During the Track Record Period, the substantial majority of our revenue was generated from the sale of standard gold bullion produced in the PRC on the Shanghai Gold Exchange, which is the only official market for trading domestic gold. SDG Smelting is an accredited SGE Gold Ingots and Bars Delivery refiner. We are also a member of the Shanghai Gold Exchange. We are required to meet relevant criteria to maintain our accreditation and membership. For more information, see “Business — Sales and Customers”. We cannot assure you that we will continue to meet the criteria imposed by Shanghai Gold Exchange, in particular if such criteria are changed. In the event that our accreditation or membership lapses, our standard gold bullion may not be sold on the Shanghai Gold Exchange and we may not be able to conduct trading directly on the Shanghai Gold Exchange, which would have a material and adverse effect on our business and results of operations.

We had net current liabilities as of December 31, 2015, 2016 and 2017 and March 31, 2018.

We had net current liabilities of RMB6,338.1 million, RMB4,194.5 million, RMB6,489.2 million and RMB7,005.0 million as of December 31, 2015, 2016 and 2017 and March 31, 2018, respectively. Our net current liabilities are primarily a result of the significant amounts of short-term and long-term financing we obtained to finance our acquisition of long-term assets (such as mining and exploration rights and property, plant and equipment). Our net current liabilities position exposes us to liquidity risk. Our future liquidity and ability to make additional capital investments necessary for our operations and business expansion will depend primarily on our ability to maintain sufficient cash generated from operating activities and to obtain external financing. There can be no assurance that we will be able to renew existing bank facilities or obtain other sources of financing, such as gold leasing. Further, we cannot assure you that our net current liabilities position can be improved in the future. In the event that we continue to have net current liabilities, our working capital for business operations may be constrained. If we do not generate sufficient positive operating cash flow or obtain additional financing to meet our working capital needs, our business, financial condition and results of operations may be materially and adversely affected.

We may not be able to obtain financing on favorable terms, or at all, to fund our on-going operations, existing and future capital expenditure requirements, acquisitions and investment plans and other funding requirements, and our ability to raise additional funds could be materially affected by the fluctuations in the capital market.

Our mining, production and exploration activities are highly capital intensive. During the Track Record Period, we had funded our working capital and capital expenditure primarily through cash from operations, bank loans, gold leasing contracts and proceeds from the issuance of corporate bonds. To fund our ongoing operations, existing and future capital expenditure requirements, investment plans and other financing requirements, we may need access to additional financing from external sources in addition to internal sources of liquidity. Our ability to obtain external financing in the future depends on a number of factors that are beyond our control, including market conditions, lenders’ perception of our creditworthiness, the economy and regulations that affect the availability and costs of financing. Any disruptions, uncertainty or volatility in the capital and credit market

—52— RISK FACTORS resulting from any global financial crisis may also limit our ability to obtain financing to meet our funding requirements. If adequate funding is not available to us on commercially acceptable terms in time, or at all, it may materially and adversely affect our ability to fund our existing operations, and to develop or expand our business.

Our indebtedness and the conditions and restrictive covenants imposed on us by our financing agreements could materially and adversely affect our business, financial condition and results of operations.

As of July 31, 2018, our total indebtedness was RMB11,955.8 million, which represented approximately 27.7% of our total assets. This indebtedness is primarily related to the financing for the Veladero Acquisition. We also had short-term financing through gold leasing in the amount of RMB5,980.5 million as of July 31, 2018. As of December 31, 2015, 2016 and 2017 and March 31, 2018, our bank borrowings amounted to RMB560.0 million, RMB600.0 million, RMB7,393.6 million and RMB7,350.2 million, respectively, with interest rates ranging from 3.85%-5.70%, 3.80%-5.70%, 2.56%-5.70% and 2.87%-4.75%, respectively. We intend to repay a majority of such indebtedness with the net proceeds from the Global Offering, but we may continue to incur significant debt to fund our daily operations and to pursue our expansion plans. This significant indebtedness could have important consequences for our business and operations including, but not limited to:

• limiting or impairing our ability to obtain financing, refinance any of our indebtedness, obtain equity or debt financing on commercially reasonable terms or at all, which could cause us to default on our obligations and materially impair our liquidity;

• restricting or impeding our ability to access capital markets at attractive rates and increasing the cost of future borrowings;

• reducing our flexibility to respond to changing business and economic conditions or to take advantage of business opportunities that may arise;

• requiring us to dedicate a substantial portion of our cash flow from operations to payments of principal and interest on our indebtedness, thereby reducing the availability of our cash flow for other purposes;

• placing us at a competitive disadvantage compared to our competitors that have lower leverage or better access to capital resources;

• limiting our ability to dispose of assets that secure our indebtedness or utilize the proceeds of such dispositions and, upon an event of default under any such secured indebtedness, allowing the lenders thereunder to foreclose upon our assets pledged as collateral; and

• increasing our vulnerability to downturns in general economic or industry conditions, or in our business.

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In addition, our bank loan agreements include various conditions and covenants that require us to obtain the lending bank’s prior consent for certain transactions, such as disposal of material assets, merger or consolidation, and liquidation or winding-up. We may be required to comply with similar restrictive covenants or other terms under any new loan and other financing agreements in the future. In addition, we are required to comply with various financial covenants. During the Track Record Period, there was one instance where we were unable to meet such financial covenants. For details, see “Financial Information — General — Indebtedness — Bank Borrowings.”

Should market conditions deteriorate, or if our operating results were to be depressed, we may need to request amendments or waivers to the covenants and restrictions under our debt agreements. There can be no assurance that we will be able to obtain such relief should it be needed. A breach of any of these covenants or restrictions could result in a default that would permit our lenders to declare all amounts outstanding thereunder to be due and payable, together with accrued and unpaid interest, trigger cross-default provisions under other debt agreements and, as applicable, cause the termination of commitments of relevant lenders to make further extensions of credit under our financing agreements or credit facilities. If we were unable to repay our indebtedness to our lenders in such an event, the lenders could, among other things, proceed against collateral, which could include substantially all of our assets. Our future ability to comply with financial covenants and other conditions, make scheduled payments of principal and interest or refinance existing borrowings depends on our business performance, which is subject to economic, financial, competitive and other factors, including the other risks described in this prospectus. Any failure to comply with the covenants of our financing agreements or to obtain financing for our business could have a material and adverse effect on our business, financial condition, results of operations and prospects.

We rely on contractors to conduct a portion of our business activities.

We outsource a portion of our exploration, mining and processing activities to contractors. As a result, our operations will be affected by the performance of these contractors. Although we monitor the work of contractors to ensure that they are carried out on time, on budget and in accordance with our specifications and quality standards, we may not be able to control the quality, safety and environmental standards of the works conducted by contractors to the same extent as the works conducted by our own employees. We may become engaged in disputes with our contractors, which could lead to additional expenses, distractions and potential loss of production time and additional costs, any of which could materially and adversely affect our business, financial condition and results of operations. In addition, we may be legally obligated, as an owner of the exploration or mining permit, to ensure operational safety. In the event of any safety-related accident involving a contractor, we may be held directly liable or liable for compensation to the extent of our faults regardless of any contractual provisions to the contrary. Any failure by contractors to meet our quality, safety and environmental standards may result in liabilities to us and could also affect our compliance with government rules and regulations relating to exploration, mining and workers’ safety, which may have a material and adverse effect on our business, financial condition and results of operations.

Our Controlling Shareholder has substantial influence over our Company and its interests may not be aligned with the interests of our other Shareholders.

Our Controlling Shareholder has substantial influence over our business, including matters relating to our management, policies and decisions regarding acquisitions, mergers, expansion plans,

—54— RISK FACTORS consolidations and sales of all or substantially all of our assets, election of Directors and other significant corporate actions. Immediately after completion of the Global Offering, assuming the Over-allotment Option is not exercised, SDG Group Co. will hold (including direct and indirect shareholdings) approximately 47.69% of the issued share capital in our Company; if the Over-allotment Option is fully exercised, SDG Group Co. will hold (including direct and indirect shareholdings) approximately 46.64% of the issued share capital in our Company. This concentration of ownership may discourage, delay or prevent a change in control of our Company, which could deprive other Shareholders of an opportunity to receive a premium for their Shares as part of a sale of our Company and might reduce the price of our Shares. These events may occur even if they are opposed by our other Shareholders. In addition, the interests of our Controlling Shareholder may differ from the interests of our other Shareholders. It is possible that our Controlling Shareholder may exercise its substantial influence over us and cause us to enter into transactions or take, or fail to take, actions or make decisions that conflict with the best interests of our other Shareholders. Moreover, our Controlling Shareholder is also engaged in the business of gold mining, among other things. There is no assurance that our Controlling Shareholder will not compete with us in the future.

We may not be able to maintain the provision of adequate and uninterrupted supplies of electricity, water, materials and equipment at commercially acceptable prices, or at all.

Electricity and water are the main utilities used in our operations. During the Track Record Period, we obtained most of our electricity from the local state grid and our water supply from underground water sources and local water companies for our PRC operations. For certain of our PRC Mines that the local state grid does not reach, we obtained electricity from an electricity supplier. The Veladero Mine sourced water for industrial usage from the Rio de las Taguas and used its own on-site diesel generators for electricity. For more information, see “Business — Utilities.” Principal materials used in our production include explosive materials, diesel, sodium cyanide and cement, most of which we procured from PRC suppliers during the Track Record Period. We also procured doré to produce standard gold bullion and standard gold bullion to produce customized gold products during the Track Record Period. We mainly purchased our major equipment and machinery from domestic suppliers. We regularly monitor the fluctuations in market prices for the materials used in our operations. However, there can be no assurance that supplies of electricity, water, materials or equipment will not be interrupted or that their prices will not increase in the future. For certain of our PRC Mines that are more remote, we cannot guarantee that there will be no interruption in electricity or water. In the event that our existing suppliers cease to supply us with electricity, water, materials or equipment at commercially acceptable prices or at all, our operations will be interrupted, and our business, financial condition and results of operations will be materially and adversely affected. In addition, as all of our PRC Mines during the Track Record Period are underground mines, an interruption of electricity supply will materially and adversely affect our production and safety by disrupting operations including water pumping and ventilation.

We have relatively high concentration of suppliers.

Our raw materials and consumables mainly include doré used to produce standard gold bullion and standard gold bullion used to produce customized gold products. Our five largest suppliers during the Track Record Period were all suppliers of doré or standard gold bullion. For the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2018, purchases from our

—55— RISK FACTORS five largest suppliers accounted for 69.4%, 78.0%, 98.3% and 89.9% of our total cost of sales, respectively. China has limited sources for standard gold bullion, and therefore we primarily procured standard gold bullion from the Shanghai Gold Exchange, and to a lesser extent, a PRC commercial bank. We also procured doré from a limited number of PRC suppliers. Our reliance on a limited number of suppliers may affect our ability to secure necessary supplies in the future. The availability of such supplies may be influenced by a number of factors, including gold prices, regulatory changes and political conditions, among other things. If we are unable to secure necessary supplies of doré or standard gold bullion at favourable prices, if at all, our business, financial condition and results of operations may be materially and adversely affected.

We are subject to risks related to our hedging and gold leasing activities.

During the Track Record Period, we entered into gold leasing contracts, in which we leased gold from commercial banks. Separately, or as part of the same gold leasing contract, we usually also enter into forward contracts under which we agree to purchase the same amount of gold, at the same price and on the maturity date of the gold leasing contracts to repay the leased gold. We also entered into hedging transactions, such as gold forward sales contracts, to secure our revenue in view of the volatility in gold price. See “Business — Sales and Customers.” The fair value of these transactions is recorded as financial liabilities at fair value through profit or loss in our consolidated statement of financial position. We recorded the gains or losses from, and fair value changes of, these transactions as other gains or as finance costs in our consolidated statement of profit or loss. We recorded realized and unrealized fair value losses on gold leasing contracts of RMB71.7 million, RMB42.3 million, RMB69.9 million and RMB42.7 million in 2015, 2016 and 2017 and the three months ended March 31, 2018, respectively.

Changes in gold price may affect the effectiveness of our hedging and gold leasing contracts. Gold price has been fluctuating in the global market and we will continue to assess whether to enter into further hedging or gold leasing activities. In addition, our business, financial condition and results of operations could be materially and adversely affected if for any reason our gold production is unexpectedly interrupted and as a result we are unable to produce sufficient gold to cover any hedging or gold leasing contracts that we have entered into. There is also a risk that the counterparty to any hedging transaction could default on its obligations. Without hedging transactions, we may not be able to lock in our selling price when the gold price decreases, which may reduce the revenue that we may receive. Moreover, we may experience cash flow problems if we do not continue to engage in gold leasing.

We have not obtained title certificates for some of our properties and some of our lessors lack title certificates for properties leased to us, which could materially and adversely affect our right to use such properties.

We have a number of title defects relating to properties (including certain properties occupied and used by Shandong Smeltery) that we own, use or lease. As of the Latest Practicable Date, with respect to our owned buildings and land, we have yet to receive the building ownership certificates of 1,139 properties (with an aggregate GFA of approximately 587,143.8 square meters, or 66.4% of our owned buildings in terms of total GFA) and land use rights certificates for 20 parcels of land (with a total area of approximately 370,665.8 square meters, or 10.1% of our owned land in terms of total

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GFA), respectively. Among our owned buildings and land, 23.1% of our owned buildings in terms of total GFA and 9.8% of our owned land in terms of total GFA were used for mining and production purpose. With respect to our leased buildings and land, two buildings (with an aggregate GFA of approximately 5,335.5 square meters, or 48.7% of our leased buildings in terms of total GFA) and 184 parcels of land (with an aggregate GFA of approximately 3,497,555.5 square meters, or 61.5% of our leased land in terms of total GFA) had title defects. Among our leased buildings and land, 19.7% of our leased buildings in terms of total GFA and 28.0% of our leased land in terms of total GFA were used for mining and production purpose. We estimate that our aggregate maximum potential penalties in relation to these title defects may amount up to RMB124.8 million. See “Business — Properties.” As a result, we cannot assure you that we will not be subject to any challenges, lawsuits or other actions taken against us with respect to the properties owned, used or leased by us for which we or the relevant lessors do not hold valid title certificates. Furthermore, we may be subject to fines and penalties imposed by government authorities with respect to certain title defects. If any of such properties were successfully challenged, we may be forced to relocate our operations on the affected properties. Certain of our operational activities are located on the affected properties, and we may be forced to cease these activities in the event we face challenges in relation to our properties. If we fail to find suitable replacement properties on terms acceptable to us for the affected operations, or if we are subject to any material liability resulting from third-party challenges for our ownership usage or lease of properties for which we or our lessors do not hold valid titles, our business, financial condition and results of operations may be materially and adversely affected.

We received government grants and enjoyed preferential tax treatment during the Track Record Period, and any significant reduction in such grants or tax treatment offered to us may materially and adversely affect our financial condition and results of operations.

The Company and Guilaizhuang Mining were accredited as High and New Technology Enterprises during the Track Record Period and enjoyed a lower tax rate of 15% during this period. The High and New Technology Enterprise accreditation for the Company and Guilaizhuang Mining was renewed for another three-year period from 2015 to 2017 and 2016 to 2018, respectively. Our subsidiaries, Chaihulanzi Gold and Yinan Mining, were also accredited as a High and New Technology Enterprise for a three-year period from 2016 to 2018 and 2017 to 2019, respectively and enjoy a lower tax rate of 15% commencing 2016 and 2017. In support of our research and development projects and mining activities, we have also recognized income from government grants of RMB8.5 million, RMB14.8 million, RMB16.0 million, RMB0.3 million and RMB0.5 million for the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2017 and 2018, respectively. We are required to renew our accreditation as a High and New Technology Enterprise upon its expiration. As of the Latest Practicable Date, the Company was in the process of renewing its High and New Technology Enterprise accreditation, and expects to complete the renewal by the end of 2018. We do not expect any difficulties in such renewal so long as we meet the applicable requirements and conditions and adhere to the procedures set forth in the relevant laws and regulations. However, we cannot guarantee that we will be granted such extension, and if not, we will not be able to continue to enjoy the preferential tax treatment for High and New Technology Enterprises in the future. In addition, we cannot guarantee that the government grants and preferential tax treatments will continue to be available to us. The discontinuation of any preferential tax treatment currently available to us will cause our effective tax rate to increase, which could have an adverse

—57— RISK FACTORS effect on our results of operations. In addition, the PRC Government from time to time adjusts or changes its policies on business tax and other taxes. Such adjustments or changes, together with any uncertainties resulting therefrom, could have an adverse effect on our financial condition and results of operations.

We may be subject to risks relating to developing our overseas business.

In addition to our acquisition of the Veladero Mine, which is the first step in our overseas expansion, we plan to further expand our operations overseas in the future. Overseas operations will expose us to various risks associated with conducting business in foreign countries and territories, which may include, among others:

• an increase in competition from foreign players or failure to anticipate changes to the competitive landscape in overseas markets due to lack of familiarity with the local business environment;

• difficulties integrating business and management systems overseas with our existing operations;

• political risks, including civil unrest, acts of terrorism, acts of war, regional and global political or military tensions and strained or altered foreign relations, which may lead to interruptions in our business operations and/or loss of property;

• economic, financial and market instability and credit risks;

• difficulties and costs associated with complying with, and enforcing remedies under, a wide variety of complex domestic and international laws, treaties and regulations;

• inability to obtain or maintain the requisite licenses, permits, approvals and certificates in foreign jurisdictions;

• economic sanctions, trade restrictions, discrimination, protectionism or unfavorable policies against PRC companies;

• difficulties with staffing, potential loss of key employees and managing overseas operations after localization, including with respect to compliance with local labor laws;

• exposure to litigation or third-party claims outside of China;

• foreign currency exchange controls and fluctuations;

• uncertainties in the interpretation and application of tax laws and regulations, more onerous tax obligations and unfavorable tax conditions;

• potential disputes with, and loss of, foreign customers or other foreign parties we work with;

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• cultural and language difficulties;

• the infringement of our intellectual property rights in foreign jurisdictions; and

• lack of a well-developed or independent legal system in certain foreign countries in which we conduct our business, which may create difficulties in the enforcement of legal rights.

Any of the above factors could lead to, among others, business disruptions, increased costs and losses, which could have a material and adverse effect on our business, results of operations and overall growth strategies.

Our insurance coverage may be inadequate to satisfy potential claims.

Mining, exploration and production activities involve numerous risks, including unexpected or unusual geological conditions, fire, floods, earthquakes, severe weather conditions, other environmental occurrences and political and social instability. These risks can result in, among other things, damage to and destruction of mining assets or production facilities, personal injury, environmental harm, financial losses and legal liability.

We maintain insurance for our operations in line with industry practice in the PRC and Argentina. In China, we maintain social insurance for our employees, which includes work accident insurance. We maintain additional accident insurance for our employees engaged in mining activities and life insurance for our employees handling gold products. We also maintain property insurance of our assets, including equipment and machinery. However, in line with industry practice in the PRC, we have elected not to maintain certain types of insurances, such as business interruption insurance or key man insurance. In Argentina, MAG maintains insurance in accordance with Argentine laws and regulations, including but not limited to all environmental liability insurance required thereunder. Our existing liability insurance contains exclusions and limitations on coverage. In addition, insurance may not continue to be available at economically acceptable premiums. As a result, in the future, our insurance coverage may not cover the extent of claims against it, including, but not limited to, claims for environmental or industrial accidents, occupational illnesses or pollution or any cross-claims made.

We are subject to risks relating to the transport of our inventory.

We have a transportation fleet that is responsible for (i) transporting gold concentrates and doré to our Shandong Smeltery, and (ii) transporting gold products to the Shanghai Gold Exchange and certain of our customers. We also engage third-party logistics service providers to deliver products to certain customers. For our Argentina operations, logistics service providers are responsible for the transportation of doré. Our work in progress and products are valuable items, and we are subject to risk of delay, damage or loss of such items, which may occur for reasons beyond our control, including labor disputes or strikes, acts of war or terrorism and natural disasters. While we seek to ensure the safety of our deliveries through installing GPS tracking systems and engaging security personnel to guard our shipments, we cannot guarantee that there will not be any safety accidents or loss of such deliveries. Moreover, we have less control over third-party logistics service providers. Any delay, damage or loss of our work in progress and products during the transportation process may have a material and adverse effect on our business, financial condition and results of operations.

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We rely on the continued service of our senior management and technically skilled employees, and we may experience labor shortages, disputes, unrest or strikes.

The market for employees with industry experience and technical skills can be highly competitive. We cannot be certain that the services of our senior management and a sufficient number of technically skilled employees in China and in Argentina will continue to be available to us. Any senior management departures or unavailability (due to death, injury, illness or other reasons) or technically skilled worker shortages could adversely affect our operational efficiency and production levels. We may be unable to hire or retain appropriate technically skilled employees or other management personnel, or may have to pay higher levels of remuneration than we currently intend. In particular, qualified personnel may be scarce in certain regions where our mines are located. If we are unable to hire and retain appropriate management and technically skilled personnel, or if there are not sufficient succession plans in place, our business may be materially and adversely affected.

In addition, we may be involved in labor disputes and experience labor unrest or strikes in the ordinary course of our business. On May 28, 2017, before the Veladero Acquisition, the Veladero Mine experienced a labor strike by members of the Asociación Obrera Minera Argentina (AOMA) labor union, a labor union representing mining industry labor in Argentina. AOMA’s primary request in the labor strike was to transfer certain employees of the contractors engaged to provide services for the Veladero Mine from other labor unions to be represented by AOMA. The labor strike lasted for approximately one day and employees resumed work when MAG commenced negotiations with AOMA. As of the Latest Practicable Date, MAG is operating regularly. We cannot guarantee that labor disputes, unrest or strikes will not occur in the future. In the event that we experience such incidents, our mining activity and production levels may be disrupted, which may have a material and adverse effect on our business, financial condition, results of operations, reputation and future prospects.

Natural disasters, epidemics, acts of war or terrorism or other factors beyond our control may have a material adverse effect on our business, financial condition and results of operations.

Natural disasters, epidemics, acts of war or terrorism or other factors beyond our control may adversely affect the economy, infrastructure and livelihood of the people in the regions where we conduct our business. Our operations may be under the threat of flood, earthquake, sandstorm, snowstorm, fire or drought, power, water or fuel shortages, critical equipment failures, malfunction and breakdown of information management systems, unexpected maintenance or technical problems, or are susceptible to epidemics, potential wars or terrorist attacks. Serious natural disasters may result in loss of lives, injury, destruction of assets, reduction in our productivity and disruption of our business and operations. Severe communicable disease outbreaks could result in a widespread health crisis that could materially and adversely affect the economy and financial markets. Acts of war or terrorism may also injure our employees, cause loss of lives, disrupt our business network and destroy our markets. Any of these factors and other factors beyond our control could have an adverse effect on the overall business sentiment and environment, cause uncertainties in the regions where we conduct business, cause our business to suffer in ways that we cannot predict and materially and adversely impact our business, financial condition and results of operations.

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Our existing mining operations have a finite life and eventual closure of our operations will entail costs and risks regarding on-going monitoring, rehabilitation and compliance with environmental standards.

Despite our efforts in identifying and acquiring additional resources in the areas surrounding our existing mines and other regions in the PRC and abroad, our existing mining operations have a finite life and will eventually close. The key costs and risks for mine closures relate to (i) long-term management of permanent engineered structures, (ii) achievement of environmental remediation, rehabilitation and closure standards (including the assessment, funding and implementation of post-closure polluted and extraneous water pumping treatment), (iii) orderly retrenchment of employees, and (iv) relinquishment of the site with associated permanent structures and community development infrastructure and programs to new owners. The successful completion of these tasks is dependent on our ability to successfully implement negotiated agreements with the relevant government authorities, community and employees. The consequences of a difficult closure range from increased closure costs and handover delays to on-going environmental rehabilitation costs and damage to our reputation if a desired outcome cannot be achieved, all of which could materially and adversely affect our business and results of operations.

We incur amortization expenses related to our mining rights and the carrying value of our mining and exploration rights may incur impairments due to material decreases in the amount of our Reserves, which may adversely affect our results of operations.

We amortize our mining rights based on the unit of production method. See Note 2.10 of the Accountant’s Report set out in Appendix I of this Prospectus. For the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2018, our amortization expenses related to our mining rights amounted to RMB588.3 million, RMB580.6 million, RMB609.3 million and RMB151.7 million, respectively. We review the remaining useful life of our mining rights in accordance with our production plans and Reserve levels of each mine. Any material decrease in the amount of our Reserves for our mines or changes to our production plans may result in impairment of the carrying value of our mining and exploration rights, which may have a material and adverse effect on our business, financial condition and results of operations.

We cannot guarantee that we will not be involved in claims, disputes and legal proceedings in our ordinary course of business.

From time to time, we may be involved in claims, disputes and legal proceedings in our ordinary course of business. These may concern issues relating to, among others, health and safety accidents, environmental matters, breach of contract, employment or labor disputes and infringement of intellectual property rights. As of the Latest Practicable Date, we were not involved in any litigations and legal proceedings in the PRC that may materially affect our business and results of operations. Moreover, as of the same date, MAG was not involved in any litigations and legal proceedings in Argentina that may materially affect its business and results of operations. See “Business — Environmental Protection” for more information on the ongoing legal proceedings in relation to the historical environmental incidents of MAG. Any claims, disputes or legal proceedings initiated by us or brought against us, with or without merit, may result in substantial costs and diversion of resources,

—61— RISK FACTORS and if we are unsuccessful, could materially harm our reputation. Furthermore, claims, disputes or legal proceedings against us may be due to defective supplies sold to us by our suppliers, who may not be able to indemnify us in a timely manner, or at all, for any costs that we incur as a result of such claims, disputes and legal proceedings.

We may not be able to detect and prevent fraud, bribery or other misconduct committed by our employees, customers or other third parties.

We may be exposed to fraud, bribery, or other misconduct committed by our employees, customers, or third parties that could subject us to financial losses and sanctions imposed by governmental authorities, which may adversely affect our reputation. Our internal control procedures are designed to monitor our operations and ensure overall compliance. However, our internal control procedures may be unable to identify all incidents of non-compliance or suspicious transactions or incidents of corruption or bribery in a timely manner or at all. Furthermore, it is not always possible to detect and prevent fraud, bribery, and other misconduct, and the precautions we take to prevent and detect such activities may not be effective. We cannot assure you that fraud, bribery, or other misconduct will not occur in the future. If such fraud, bribery, or other misconduct does occur, it may cause negative publicity as a result.

We license all of the material trademarks used in our business from our Controlling Shareholder.

The primary trademarks we use in our business, including “SD-Gold”, “泰山”, “山東黃金”, are licensed to us by our Controlling Shareholder at a total consideration of RMB0.7 million per annum for ten years until 2027. In particular, our standard gold bullion sold on the Shanghai Gold Exchange are imprinted with the “泰山” trademark, and such sales accounted for a significant majority of our revenue during the Track Record Period. We cannot guarantee that our Controlling Shareholder will not breach the license agreement, or that the license agreement will not be terminated for other reasons. In such event, we may no longer be able to use such trademarks in our business, and our business, financial condition and results of operations will be materially and adversely affected.

Moreover, our Controlling Shareholder, is a large, state-owned conglomerate with significant interests in diverse industry sectors, including mining, finance and real estate. Our Controlling Shareholder also licenses the use of the “SD-Gold” and “山東黃金” trademarks to other members of the SDG Group. If these entities take any action that damages the “SD-Gold” brand name, or any material negative publicity is associated with them, our reputation, business, growth prospects, results of operations and financial condition may be adversely affected.

We rely on information technology and communications systems, the failure of which may significantly and adversely impact our operations and business.

We rely on our information technology and communications systems, such as our transportation monitoring and GPS system, toxic gas monitoring system, underground personnel locating system and OA and financial reporting system. These systems are vital to our operations. Our information technology and communications systems could be exposed to, among other things, damage or interruption from telecommunications failure, unauthorized entry and malicious computer code, fire, natural disaster, power loss, industrial action and human error. While we have backup systems in

—62— RISK FACTORS place, the occurrence of any of the above may also disrupt our information technology and communications systems and may lead to important data (including geophysical and geological data) being irretrievably lost or damaged. Such damage or interruption may adversely affect our business, financial condition and results of operations.

Our risk management and internal control systems may not fully protect us against various risks inherent in our business.

We have established risk management and internal control systems consisting of the relevant organizational framework policies, risk management policies and risk control procedures to manage our risk exposures, primarily our operational risk, legal risk and liquidity risk. However, we may not be successful in implementing our risk management and internal control systems. While we seek to continue to enhance such systems from time to time, we cannot assure you that our risk management and internal control systems are adequate or effective notwithstanding our efforts, and any failure to address any potential risks and internal control deficiencies could materially and adversely affect our business, financial condition and results of operations.

Since our risk management and internal control systems depend on their implementation by our employees, we cannot assure you that all of our employees will adhere to such policies and procedures, and the implementation of such policies and procedures may involve human errors or mistakes. Moreover, our growth and expansion may affect our ability to implement stringent risk management and internal control policies and procedures as our business evolves. If we fail to timely adopt, implement and modify, as applicable, our risk management and internal control policies and procedures, our business, financial condition and results of operations could be materially and adversely affected.

We face industry competition.

Our major competitors are large PRC gold companies, including Zhaojin Mining Industry Company Limited and Fujian Zijin Mining Industry Co., Ltd., and international gold companies including Barrick Gold, Newmont Mining Corporation and AngloGold Ashanti. Our competitors may have certain advantages over us, including greater financial, technical and mineral resources, greater economies of scale, broader name recognition and more established relationships in certain markets. Industry competition may lessen our opportunities to acquire new mineral resources or other gold mining companies and ultimately may have a material adverse impact on our business, financial condition, results of operations and growth prospects.

Changes in laws and regulations governing the gold industry may have a material and adverse effect on us.

The governments of China and Argentina exercise a substantial degree of control over the gold industry in their respective countries. Our operations are subject to a range of national, provincial and local laws, regulations, policies, standards and requirements in relation to, among other things, mine exploration, development, production, taxation, labor standards, occupational health and safety, waste treatment and environmental protection and operation management. Any changes to existing laws, regulations, policies, standards and requirements or to the interpretation or enforcement thereof, or

—63— RISK FACTORS any introduction of new existing laws, regulations, policies, standards and requirements may affect our expansion plans, increase our operating costs and thus materially and adversely affect our business and results of operations. Moreover, any failure by us to comply with changes in, or new, laws, regulations, policies, standards and requirements applicable to the gold industry or any changes in existing laws, regulations, policies, standards and requirements may subject us to, among others, suspension of operations and penalties which could have a material and adverse effect on our business.

We are exposed to credit risk in relation to defaults from counterparties.

During the Track Record Period, we had trade receivables primarily relating to our sale of by-products, such as silver, copper and zinc, and doré and other products. We settle payments with certain customers of by-products on a monthly basis. We also sold gold bullion products to banks and other companies and retail customers, where we typically require payment prior to delivery of goods. As of December 31, 2015, 2016 and 2017 and March 31, 2018, our trade receivables amounted to RMB30.4 million, RMB27.3 million, RMB122.1 million and RMB164.4 million, respectively. Our trade receivables turnover days were 0.6, 0.2, 0.5 and 0.9 for the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2018, respectively. We have implemented a customer credit assessment system to evaluate the creditworthiness and financial condition of our customers. We cannot assure you that all of our counterparties are creditworthy and reputable and will not default on us in the future, despite our efforts to conduct credit assessments on them. There is limited financial or public information on many of our counterparties, and as a result, we are exposed to risks that our counterparties may fail to fulfil their obligations to us under our contracts.

Our goodwill may become impaired.

As of December 31, 2015, 2016 and 2017 and March 31, 2018, we had goodwill in the amounts of RMB120.7 million, RMB120.7 million, RMB1,126.7 million and RMB1,088.8 million, respectively. After initial recognition, we determine whether goodwill is impaired annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired based on an estimation of the value in use of the cash-generating units to which the goodwill and other intangible assets with finite useful life are allocated. We cannot assure you that our goodwill will not be impaired in the future, in which case our results of operations may be materially and adversely affected.

Our deferred income tax assets are subject to accounting uncertainties.

In the application of our accounting policies, our management is required to make judgments, estimates and assumptions about the carrying amounts of certain assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Therefore, actual results may differ from these accounting estimates. See Note 2.22 of the Accountants’ Report set out in Appendix I to this Prospectus. As of December 31, 2015, 2016 and 2017 and March 31, 2018, the carrying value of our deferred income tax assets were RMB167.2 million, RMB161.7 million, RMB152.4 million and RMB165.0 million, respectively. Based on our accounting policies, deferred income tax assets are recognized to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilized. The realization of a deferred income tax asset mainly

—64— RISK FACTORS depends on our management’s estimate as to whether sufficient future profits will be available in the future. Management’s assessment is constantly reviewed and additional deferred income tax assets are recognized if it becomes probable that future taxable profits will allow the deferred income tax assets to be recovered. If sufficient future taxable profits are not expected to be generated or are less than expected, a material reversal of deferred income tax assets may arise in future periods.

Failure to maintain appropriate inventory levels could cause us to lose sales or face excessive inventory risks and holding costs, which could have a material adverse effect on our business, financial condition and results of operations.

Demand for our products is dependent on numerous market and other factors, including gold price. See “—Changes in the market price for gold, which in the past have experienced significant volatility, affect the profitability of our operations and the cash flows generated by those operations.” We must maintain an appropriate level of raw materials and finished goods inventory to meet market demand. We adjust our production schedule regularly based on anticipated changes in demand and our customers’ orders so as to maintain our inventory of raw materials at an appropriate level. However, we cannot guarantee that we will be able to maintain an adequate inventory level of our products, and may cause us to lose sales and market share to our competitors. We may also be exposed to risk of holding excessive inventory, which may increase our inventory holding costs and subject us to the risk of inventory obsolescence or write-offs, which could have a material adverse effect on our business, financial condition and results of operations.

RISKS RELATING TO DOING BUSINESS IN CHINA

China’s economic, political and social conditions, government policies may continue to affect our business.

A substantial amount of our businesses, assets, operations and revenues are located in or derived from our operations in China and, as a result, our business, financial condition and results of operations are subject, to a significant degree, to the economic, political, social and regulatory environment in China.

The PRC economy differs from the economies of developed countries in many respects, including, among others, the degree of government involvement, investment control, level of economic development, growth rate, foreign exchange controls and resource allocation. Since the 1970’s, PRC Government has implemented many economic and social reform measures. China’s transition to a market-oriented economy is an on-going process. A substantial portion of productive assets in China, however, is still owned by the PRC Government. The PRC Government also exercises significant control over the economic growth of the PRC through means such as allocating resources, controlling payments of foreign-currency denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. In recent years, the PRC Government has implemented measures emphasizing the utilization of market forces, the reduction of state ownership of productive assets and the establishment of sound corporate governance practices in business enterprises. Some of these measures benefit the overall PRC economy, but may materially and adversely affect us. China has experienced rapid economic growth over the past few decades; however, as China transitions from a fixed asset investment-based to a consumption-based economy,

—65— RISK FACTORS its annual GDP growth rate has declined from 9.5% in 2011 to 6.7% in 2016, according to the National Bureau of Statistics of China (中華人民共和國國家統計局). There is no assurance that the future growth will be sustained at similar rates or at all. Our business, financial position, results of operations and prospects may be materially and adversely affected by PRC Government’s economic, political and social policies, including those to our industry.

The legal protections available to you under the PRC legal system may be limited.

We are incorporated under the laws of the PRC. The PRC legal system is based on written statutes. Prior court decisions may be adduced for reference but have limited precedential value. Since the late 1970s, the PRC Government has promulgated laws and regulations dealing with such economic matters as the issuance and trading of securities, shareholders’ rights, foreign investment, corporate organization and governance, commerce, taxation and trade, with a view towards developing a comprehensive system of commercial law. However, as these laws and regulations are relatively new and as the PRC mining industry continues to evolve, the effect of these laws and regulations on the rights and obligations of the parties involved may involve uncertainty. As a result, the legal protections available to you under the PRC legal system may be limited.

Our operations in the PRC are subject to PRC regulations governing PRC companies. These regulations contain provisions that are required to be included in the articles of association of PRC companies and are intended to regulate the internal affairs of these companies. PRC Company Law and regulations, in general, and the provisions for the protection of shareholder’s rights and access to information, in particular, may be considered less developed than those applicable to companies incorporated in Hong Kong, the United States and other developed countries or regions. In addition, PRC laws, rules and regulations applicable to companies listed overseas do not distinguish between minority and controlling shareholders in terms of their rights and protections. As such, our minority shareholders may not have the same protections afforded to them by companies incorporated under the laws of the United States and certain other jurisdictions.

You may experience difficulties in effecting service of legal process and enforcing judgments against us and our management.

We are a joint stock company incorporated under the laws of the PRC with limited liability, and a substantial amount of our assets are located in the PRC. In addition, a majority of our Directors and Supervisors and all of our senior management personnel reside within the PRC, and substantially all their assets are located within the PRC. As a result, it may not be possible to effect service of process within the United States or elsewhere outside the PRC upon us or most of our Directors, Supervisors and senior management personnel. Furthermore, the PRC does not have treaties providing for the reciprocal enforcement of judgments of courts with the United States, the United Kingdom, Japan or many other countries. In addition, Hong Kong has no arrangement for the reciprocal enforcement of judgments with the United States. As a result, recognition and enforcement in the PRC or Hong Kong of judgments of a court obtained in the United States and any of the other jurisdictions mentioned above may be difficult or impossible.

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On July 14, 2006, the Supreme People’s Court of the PRC and the government of the Hong Kong Special Administrative Region entered into the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by Courts of the Mainland and the Hong Kong Special Administration Region Pursuant to Choice of Court Agreements between Parties Concerned (關於內地與香港特別行政區法院相互認可和執行當事人協議管轄的民商事案件判決的安 排) (the “Arrangement”). Under the Arrangement, where any designated PRC court or any designated Hong Kong court has made an enforceable final judgment requiring payment of money in a civil or commercial case pursuant to a choice of court agreement in writing, any party concerned may apply to the relevant PRC court or Hong Kong court for recognition and enforcement of the judgment. It is not possible to enforce a judgment rendered by a Hong Kong court in the PRC if the parties in dispute have not agreed to enter into a choice of court agreement in writing. In addition, the Arrangement has expressly provided for “enforceable final judgement”, “specific legal relationship” and “written form”. A final judgement that does not comply with the Arrangement may not be recognized and enforced in a PRC court and we cannot assure you that a final judgement that complies with the Arrangement can be recognized and enforced in a PRC court.

We are subject to PRC government controls on currency conversion, and the fluctuation of the Renminbi exchange rate may materially and adversely affect our business and our ability to pay dividends to holders of H shares.

A substantial majority of our revenue is denominated in Renminbi, which is currently not a fully freely convertible currency. A portion of our revenues must be converted into other currencies in order to meet our foreign currency obligations. For example, we need to obtain foreign currency to make payments of declared dividends, if any, on our H Shares.

Under China’s existing laws and regulations on foreign exchange, following the completion of the Global Offering, we will be able to make dividend payments in foreign currencies by complying with certain procedural requirements and without prior approval from SAFE. However, in the future, the PRC government may, at its discretion, take measures to restrict access to foreign currencies for capital account and current account transactions under certain circumstances. As a result, we may not be able to pay dividends in foreign currencies to holders of our H Shares.

The value of the Renminbi against the U.S. dollar and other currencies fluctuates from time to time and is affected by a number of factors, such as changes in China’s and international political and economic conditions and the fiscal and foreign exchange policies prescribed by the PRC Government. From 1994 until July 2005, the conversion of the Renminbi into foreign currencies in the PRC, including the Hong Kong dollar and U.S. dollar, had been based on fixed rates set by the PBOC. On July 21, 2005, the PRC Government changed its decade-old policy of pegging the value of the Renminbi to the U.S. dollar where the Renminbi is permitted to fluctuate in a regulated band that is based on reference to a basket of currencies determined by the PBOC. On June 19, 2010, the PBOC announced that it intends to further reform the Renminbi exchange rate regime by enhancing the flexibility of the Renminbi exchange rate. Following this announcement, the Renminbi had appreciated from approximately RMB6.83 per U.S. dollar to RMB6.12 per U.S. dollar as of June 15, 2015. On August 11, 2015, PBOC further enlarged the floating band for trading prices in the interbank spot exchange market of Renminbi against the U.S. dollar to 2.0% around the closing price in the previous trading session, and the Renminbi depreciated against the U.S. dollar by approximately 1.9%

—67— RISK FACTORS as compared to August 10, 2015, and further depreciated nearly 1.6% on the next day. On November 30, 2015, the Executive Board of the International Monetary Fund completed the regular five-year review of the basket of currencies that make up the special drawing rights and decided that with effect from October 1, 2016, the Renminbi is determined to be a freely useable currency and will be included in the special drawing rights basket as a fifth currency. With the development of foreign exchange market and progress towards interest rate liberalization and Renminbi internationalization, the PRC Government may in the future announce further reforms to the exchange rate system, and we cannot assure you that the Renminbi will not appreciate or depreciate significantly in value against the Hong Kong dollar or the U.S. dollar in the future.

The proceeds from the Global Offering will be received in Hong Kong dollars. As a result, any appreciation of the Renminbi against the U.S. dollar, the Hong Kong dollar or any other foreign currencies may result in the decrease in the value of our proceeds from the Global Offering. Conversely, any depreciation of the Renminbi may adversely affect the value of, and any dividends payable on, our H Shares in foreign currency. In addition, there are limited instruments available for us to reduce our foreign currency risk exposure at reasonable costs. Any of these factors could materially and adversely affect our business, financial condition, results of operations and prospects, and could reduce the value of, and dividends payable on, our H Shares in foreign currency terms.

Holders of H Shares may be subject to PRC taxation on dividends paid by us and gains realized through their disposal of our H Shares.

Non-PRC resident individual holders of H Shares whose names appear on the register of members of H Shares (“non-PRC resident individual holders”) are subject to PRC individual income tax on dividends received from us. Pursuant to the Circular of the SAT on Questions Concerning the Collection of Individual Income Tax Following the Repeal of Guo Shui Fa [1993] No. 045 (Guo Shui Han [2011] No. 348) (國家稅務總局關於國稅發[1993]045號文件廢止後有關個人所得稅徵管問題的 通知 (國稅函)[2011]348號)) issued by the SAT on June 28, 2011, dividends paid to non-PRC resident individual holders of H Shares are generally subject to individual income tax of the PRC at the withholding tax rate of 10%, dependent on whether there is any applicable tax treaty between the PRC and the jurisdiction in which the non-PRC resident individual holder of H Shares resides as well as the tax arrangement between the PRC and Hong Kong. Non-PRC resident individual holders who reside in jurisdictions that have not entered into tax treaties with the PRC are subject to a 20% withholding tax on dividends received from us.

In addition, under the Individual Income Tax Law of the PRC and its implementation regulations, individuals are subject to individual income tax at the rate of 20% on gains from sales of equity interests in PRC resident enterprises. However, pursuant to the Circular Declaring that Individual Income Tax Continues to be Exempted over Income of Individuals from Transfer of Shares issued by the MOF and the SAT on March 30, 1998, gains of individuals derived from the transfer of listed shares in enterprises may be exempt from individual income tax. To our knowledge, as of the Latest Practicable Date, in practice the PRC tax authorities do not collect income tax on the sale or disposal of shares listed on overseas stock exchanges in PRC resident enterprises by non-PRC resident individuals. If such tax is collected in the future, the value of such individual shareholders’ investments in H Shares may be materially and adversely affected.

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Under the EIT Law and its implementation regulations, a non-PRC resident enterprise is generally subject to enterprise income tax at the rate of 10% with respect to PRC-sourced income, including gains derived from the disposal of shares in a PRC resident enterprise, if such non-PRC resident enterprise does not have an establishment or premises in the PRC or has an establishment or premises in the PRC but the PRC-sourced income is not actually connected with such establishment or premises in the PRC, subject to reductions under any special arrangement or applicable treaty between the PRC and the jurisdiction in which the non-PRC resident enterprise resides. Pursuant to the Circular on Issues Relating to the Withholding of Enterprise Income Tax by PRC Resident Enterprises on Dividends Paid to Overseas Non-PRC Resident Enterprise Shareholders of H Shares (Guo Shui Han [2008] No. 897), promulgated by the SAT on November 6, 2008, we intend to withhold tax at 10% from dividends payable to non-PRC resident enterprise holders of H Shares (including HKSCC Nominees). Non-PRC resident enterprises that are entitled to be taxed at a reduced rate under an applicable income tax treaty or arrangement will be required to apply to the PRC tax authorities for a refund of any amount withheld in excess of the applicable treaty rate, and payment of such refund will be subject to the PRC tax authorities’ approval. There remains uncertainty as to how the PRC tax laws, regulations and statutory documents are interpreted and implemented by the PRC tax authorities. PRC tax laws, regulations and statutory documents may also change. If there are any unfavorable changes to applicable tax laws or interpretations or application with respect to such laws, the value of your investment in our H Shares may be materially affected. See “AppendixV—Taxation and Foreign Exchange” to this Prospectus for details.

RISKS RELATING TO DOING BUSINESS IN ARGENTINA

We are subject to risks related to the operation of the Veladero Mine.

On June 30, 2017, we completed the Veladero Acquisition and jointly operate the Veladero Mine with Barrick Gold through MAG and its equityholder AGB II pursuant to the Shareholders’ Agreement. Through the Veladero Acquisition, we expect to benefit from substantial synergies between Barrick Gold and us by building on our joint management and combined research and development capacities. We also believe our increased mineral resources and enlarged production scale resulting from our 50% interest in the Veladero Mine, as well as our expansion into the overseas market will present us with further growth opportunities. However, we cannot guarantee that there will not be any material disputes between Barrick Gold and us in connection with the performance of a party’s obligation or the scope of a party’s responsibilities under the Shareholders’ Agreement and other relevant agreements. We cannot assure you that we will be able to resolve any such disputes through negotiation. In the event such a material dispute cannot be resolved, the business and operations of the Veladero Mine may be adversely affected, and the Shareholders’ Agreement may be terminated by mutual consent of the parties. Furthermore, the operational, financial or other condition of Barrick Gold may deteriorate, which may adversely affect its ability to continue to perform its obligations under the Shareholders’ Agreement or other agreements, which in turn could have an adverse impact on the business of the Veladero Mine. In the event that any of the above occurs, our business, financial condition and results of operations may be adversely affected.

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MAG does not own certain of the mining concessions for the Veladero Mine.

Eight of the 13 mining concessions for the Veladero Mine are owned by IPEEM, a provincial government mining entity, and not MAG. Pursuant to the IPEEM Agreement between IPEEM and MAG, MAG has the right to conduct mining activities in the regions covered under the mining concessions for a period of 25 years. MAG has the sole discretion to renew such agreement upon expiration. Under the IPEEM Agreement, in addition to federal and provincial legislation requiring a royalty of up to 3% for the sales value of the extracted minerals less certain permitted expenses, a 0.75% royalty is payable to IPEEM for the metals produced from the Veladero Mine, including production from the Argenta deposit. In October 2011, MAG and IPEEM agreed to modify the calculation of the 0.75% royalty payable to IPEEM under the IPEEM Agreement, effectively changing the royalty calculation to 0.75% of gross sales of doré. We cannot guarantee that no amendments will be made to the IPEEM Agreement or that the royalties paid to IPEEM will remain at similar levels. Moreover, MAG may lose the right to conduct mining activities on properties owned by IPEEM in the event of an ongoing and uncured material breach of the agreement with IPEEM, and in such case, if MAG has not cured or adopted reasonable measures to cure such breach within the cure period, MAG would not be able to continue mining activities in such regions legally. If this occurs, we cannot assure you that MAG will be able to successfully negotiate with IPEEM to maintain such right, or find alternative resources to maintain the current production volume at the Veladero Mine. We may be required to devote substantial resources and management attention to resolve such issues and our business, results of operations and prospects may be materially and adversely affected.

The Veladero Mine experienced environmental incidents during the Track Record Period.

During the Track Record Period and before the Veladero Acquisition, the Veladero Mine experienced environmental incidents in September 2015, September 2016 and March 2017. As a result of the September 2015 incident, MAG paid approximately US$10 million (at the then-applicable Argentine Peso to US$ exchange rate) in administrative fines in April 2016. As a result of the September 2016 incident, MAG was ordered by the San Juan provincial mining authority and a San Juan provincial court to temporarily suspend operations pending completion of certain urgent works. Operations were suspended for approximately three weeks to complete such works. As a result of the March 2017 incident, the San Juan provincial mining authority issued a violation notice against MAG in connection with this incident and ordered a temporary restriction on the addition of new cyanide to the leach pad until corrective actions on the system were completed. The mining authority lifted the suspension on June 15, 2017, following inspection of corrective actions. As of the Latest Practicable Date, MAG was involved in several ongoing administrative and civil proceedings with respect to these environmental incidents and Veladero Mine’s operations. In relation to the 2016 incident and the 2017 incident, on December 22, 2017, the Ministry of Mining of San Juan Province imposed an administrative fine on MAG of AR$104.4 million (equivalent to approximately US$5.9 million at the then-applicable Argentine Peso to US$ exchange rate) for both incidents. In addition, as of the Latest Practicable Date, MAG was in the process of obtaining approval for the update of its environmental permit. For more information, see “Business — Licenses and Permits.” Although we have been advised by our Argentina Legal Advisers that MAG may conduct its operations while it obtains such approval and there are no foreseeable impediments in doing so, we cannot guarantee that MAG will be able to obtain such approval. While such incidents occurred prior to our acquisition and we will be indemnified until June 30, 2019 for any losses suffered by us in relation to any final decision

—70— RISK FACTORS against MAG in respect of legal proceedings commenced by the third parties (including government authorities) in relation to these incidents and MAG has since implemented more stringent internal control measures to help prevent future occurrences, we cannot guarantee that similar incidents or other safety or environmental incidents will not occur in the future. If MAG experiences any more safety and environmental incidents in the future, it may be subject to material fines, penalties and sanctions by the Argentine government, be required to obtain additional licenses and permits, fulfill additional operational conditions, suspend operations, suffer reputational damage, which may materially and adversely affect our business, financial condition and results of operations.

The Veladero Mine is subject to risks related to its geographical location.

The Veladero Mine is located in a relatively remote location near the Chile-Argentina border. Elevations at the Veladero Mine range from 3,800 meters to 4,800 meters and the closest major commercial center is San Juan, the provincial capital of San Juan province, which is approximately 360 kilometers away. Winter conditions can be severe, with intense winds, blowing snow and extreme cold weather, and can adversely affect mine access and operations. Rocks and gravel airborne by strong gusty winds are a common hazard in mining operations and on access roads. From time to time, access to and operations of Veladero Mine may be adversely affected by severe weather conditions. We cannot assure that we will not encounter severe weather conditions or natural disasters at the Veladero Mine in the future, which may block access roads, limit our supplies, cause property damage, cause personal injury or other operational hazards, or cause the Veladero Mine to suspend operations. In such an event, our business, financial condition and results of operations may be materially and adversely affected.

Moreover, the Veladero Mine is located at a high altitude where glaciers and peri-glaciers form. Argentine federal law prohibits new mining exploration and exploitation activities on glaciers and peri-glacial environments, and requires mining activities that were already in progress to be subject to an environmental assessment. If such audit identifies significant impacts on glaciers and peri-glacial environment, the relevant authority is empowered to take action, which could include the suspension or relocation of the mining activity, according to relevant laws and regulations. San Juan provincial law has a general prohibition on any activity that may entail the destruction or relocation of the glaciers included in the provincial inventory or that may interfere with their advancement. Furthermore, San Juan provincial law provides that mining activities that were in progress may continue to be performed subject to the pre-existing environmental controls. For more information, see “Regulatory Overview — Laws and Regulations Related to Our Argentina Operations.” The relevant government authority of San Juan province has completed the required environmental audit, which concluded that the Veladero mine does not impact glaciers or peri-glaciers. However, we cannot guarantee that environmental impact assessments to be performed in the future will come to the same conclusion, as glaciers form or move as the environment changes. Moreover, glacier laws and regulations in Argentina are constantly evolving and continue to be subject to debate. As such, there is uncertainty in whether glacier laws and regulations are applicable to the Veladero Mine. In the event that the Veladero Mine is deemed to have a significant impact on glacial and periglacial areas, the operations of the Veladero Mine, and our business, financial condition and results of operations may be materially and adversely affected.

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The financial performance of the Veladero Mine may be affected by fluctuations of the Argentine Peso.

Revenue generated by our Argentina operations are denominated in U.S. dollars while operating and capital costs for the Veladero Mine are predominantly denominated in Argentine Peso. As a result, our business, financial condition and results of operations are affected by exchange rate fluctuations between Argentine Peso and the U.S. dollar. Historically, the Argentine Peso has experienced significant fluctuations. During the Track Record Period, the Argentine Peso has steadily depreciated against the U.S. dollar. Under the administration of President Fernandez de Kirchner from 2007 to late 2015, currency controls were imposed that put the Argentine Peso on a mostly fixed exchange rate. The Argentine Peso to U.S. dollar exchange rate was 8.010:1 at month end in January 2014, and rose to 9.688:1 at month end in November 2015. After the newly-elected President Macri removed currency controls in December 2015, the Argentine Peso devalued rapidly to an exchange rate of 13.696:1 at month end in January 2016. By March 31, 2018, the Argentine Peso to U.S. dollar exchange rate was 20.143:1. As of the Latest Practicable Date, the Argentine Peso to U.S. dollar exchange rate was 27.560:1. MAG recognized VAT recoverables for VAT incurred on certain domestic business purchases which are denominated in Argentine Peso and recognized loss on currency translation of US$52.4 million, US$19.1 million and US$5.2 million in 2015 and 2016 and the six months ended June 30, 2017. For the year ended December 31, 2017 and the three months ended March 31, 2018, our net foreign exchange losses of RMB17.5 million and RMB18.8 million, respectively, were primarily due to the depreciation of the Argentine Peso. We cannot guarantee that future fluctuations of the exchange rate would not have a material and adverse impact on our business, financial condition and results of operations.

Argentina’s economic, political and social conditions, government policies may continue to affect our business.

The Veladero Mine is located in Argentina, and, as a result, our business is affected by changes in the economic, political, regulatory and social conditions prevailing in Argentina, including but not limited to:

• high interest rates;

• abrupt changes in currency values;

• high levels of inflation;

• exchange controls;

• wage and price controls;

• regulations to import equipment and other necessities relevant for operations;

• changes in governmental economic or tax policies; and

• political and social tensions.

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The Argentine economy is sensitive to domestic political developments. Since the election of President Macri in late 2015, reforms have been put in place to encourage a free-market economy, including the elimination of exchange restrictions, the partial adjustment of gas and electricity prices and the elimination or reduction of export taxes for certain products. Recently, the Ministry of Economy in Argentina has announced the establishment of temporary trade measures with the aim of reducing Argentina’s fiscal deficit. As from September 4, 2018, an export duty of 12%, with a cap of 4 Argentine Pesos per U.S. dollar, shall be paid for export of goods. The short term and long term effects that these reforms have on the Argentine political climate and economy will continue to affect the business, financial condition and results of operations of the Veladero Mine.

Financial and securities markets in Argentina, and the Argentine economy, are influenced by global economic and market conditions. Argentina’s economy remains vulnerable to external shocks, including those relating to or similar to the global economic crisis that began in 2008 and the uncertainties surrounding European sovereign debt. Although economic conditions vary from country to country, investors’ perceptions of events occurring in one country may substantially affect capital flows into and investments in securities in other countries, including Argentina. In particular, Argentina’s economy is also vulnerable to adverse developments affecting its principal trading partners. A continued deterioration of economic conditions in Brazil, Argentina’s main trading partner, and a deterioration of the economies of Argentina’s other major trading partners, such as China or the United States, could have a material adverse impact on Argentina’s balance of trade and adversely affect Argentina’s economic growth and may consequently adversely affect the financial condition and results of operations of the Veladero Mine. Consequently, there can be no assurance that the Argentine financial system and securities markets will not continue to be adversely affected by events in other regional economies or markets, which could in turn, adversely affect the Argentine economy and, as a consequence, the financial condition and results of operations of the Veladero Mine.

RISKS RELATING TO THE GLOBAL OFFERING

Our A Shares were listed in China in 2003, and the characteristics of the A share and H share markets may differ.

Our A Shares were listed on the Shanghai Stock Exchange in 2003. Following the Global Offering, our A Shares will continue to be traded on the Shanghai Stock Exchange and our H Shares will be traded on the Hong Kong Stock Exchange. Under current PRC laws and regulations, without approval from the relevant regulatory authorities, our H Shares and A Shares are neither interchangeable nor fungible, and there is no trading or settlement between the H share and A share markets. With different trading characteristics, the H share and A share markets have divergent trading volumes, liquidity and investor bases, as well as different levels of retail and institutional investor participation. As a result, the trading performance of our H Shares and A Shares may not be comparable. Nonetheless, fluctuations in the price of our A Shares may adversely affect the price of our H Shares, and vice versa. Due to the different characteristics of the H share and A share markets, the historical prices of our A Shares may not be indicative of the performance of our H Shares. You should therefore not place undue reliance on the previous trading history of our A Shares when evaluating an investment in our H Shares.

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An active trading market for our H Shares may not develop.

Prior to the Global Offering, there was no public market for our H Shares. We cannot assure you that a public market for our H Shares with adequate liquidity will develop and be sustained following the completion of Global Offering. In addition, the Offer Price of our H Shares may not be indicative of the market price of our H Shares following the completion of the Global Offering. If an active public market for our H Shares does not develop following the completion of the Global Offering, the market price and liquidity of our H Shares could be materially and adversely affected.

The market price and trading volume of our H Shares may be volatile, which could result in substantial losses for investors who purchase our H Shares in the Global Offering.

The market price and trading volume of our H Shares may be highly volatile. Several factors, some of which are beyond our control, such as variations in our revenue, earnings and cash flow, strategic alliances or acquisitions, the addition or departure of key personnel, litigation, the removal of the restrictions on H share transactions or volatility in market prices and changes in the demand for our products, could cause large and sudden changes to the market price and trading volume at which our H Shares will trade. The Hong Kong Stock Exchange and other securities markets have, from time to time, experienced significant price and trading volume volatility that are not related to the operating performance of any particular company. This volatility may also materially and adversely affect the market price of our H Shares.

Since there will be a gap of several days between the closing of application lists and the trading of the Offer Shares, holders of our H Shares are subject to the risk that the price of the H Shares could fall during the period before the trading of the H Shares begins.

The Offer Price for our H Shares is expected to be determined on the Price Determination Date. However, our H Shares will not commence trading on the Hong Kong Stock Exchange until they are delivered, which is expected to be five Hong Kong business days after the closing of application lists. As a result, investors may not be able to sell or deal in our H Shares during that period. Accordingly, holders of our H Shares are subject to the risk that the price of our H Shares could fall before trading begins as a result of unfavorable market conditions, or other adverse effects, that could occur between the time of the closing of application lists and the time trading begins.

A future significant increase or perceived significant increase in the supply of our H Shares in public markets could cause the market price of our H Shares to decrease significantly, and/or dilute shareholdings of holders of H Shares.

The market price of our H Shares could decline as a result of future sales of a substantial number of our H Shares or other securities relating to our H Shares in the public market, or the issuance of new shares or other securities, or the perception that such sales or issuances may occur. Future sales, or anticipated sales, of substantial amounts of our securities, including any future offerings, could also

—74— RISK FACTORS materially and adversely affect our ability to raise capital at a specific time and on terms favorable to us. In addition, our Shareholders may experience dilution in their holdings if we issue more securities in the future. New shares or shares-linked securities issued by us may also confer rights and privileges that take priority over those conferred by the H Shares.

Our A Shares can be converted into H Shares if the conversion and trading of the H Shares is duly completed pursuant to the requisite approval process and the approval from the relevant PRC regulatory authorities, including the CSRC, is obtained. In addition, such conversion and trading must, in all aspects, comply with the regulations promulgated by the securities regulatory authority under the State Council and the regulations, requirements and procedures of the Hong Kong Stock Exchange. If a significant number of A Shares are converted into H Shares, the supply of H Shares may be substantially increased, which could have a material and adverse effect on the prevailing market price for our H Shares.

Certain facts and statistics derived from government and third-party sources contained in this Prospectus may not be reliable.

We have derived certain facts and other statistics in this Prospectus from information provided by the PRC and other government agencies, industry associations, independent research institutes and other third-party sources. While we have taken reasonable care in the reproduction of the information, it has not been prepared or independently verified by us, the Joint Sponsors, the Joint Global Coordinators, the Joint Lead Managers, the Joint Bookrunners, the underwriters or any of our or their respective affiliates or advisors and, therefore, we cannot assure you as to the accuracy and reliability of such facts and statistics. Due to possibly flawed or ineffective collection methods or discrepancies between published information and market practice and other problems, the statistics herein may be inaccurate or may not be comparable with statistics produced for other economies, and you should not place undue reliance on them. Furthermore, we cannot assure you that they are stated or compiled on the same basis, or with the same degree of accuracy, as similar statistics presented elsewhere. In all cases, you should consider carefully how much weight or importance you should attach to or place on such facts or statistics.

Payment of dividends is subject to restrictions under PRC law and there is no assurance whether and when we will pay dividends.

For the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2017 and 2018, we paid dividends to shareholders in the amount of RMB142.1 million, RMB142.1 million, RMB184.2 million, nil and RMB71.2 million, respectively. For the same periods, we paid dividends to non-controlling interests in the amount of RMB81.1 million, RMB33.7 million, RMB16.4 million, nil and nil, respectively. Under the applicable PRC laws, the payment of dividends may be subject to certain limitations. The calculation of our profit under applicable accounting standards differs in certain respects from the calculation under IFRS. As a result, we may not be able to pay a dividend in a given year even if we were profitable as determined under IFRS. Our Board may declare

—75— RISK FACTORS dividends in the future after taking into account our results of operations, financial condition, cash requirements and availability and other factors as it may deem relevant at such time. Any declaration and payment as well as the amount of dividends will be subject to our constitutional documents and PRC laws and regulations and requires approval at our shareholders’ meeting. No dividend shall be declared or payable except out of our profits and reserves lawfully available for distribution.

You should not place any reliance on any information released by us in connection with the listing of our A Shares on the Shanghai Stock Exchange.

As our A Shares are listed on the Shanghai Stock Exchange, we have been subject to periodic reporting and other information disclosure requirements in the PRC. As a result, from time to time we publicly release financial and operational information relating to ourselves on the Shanghai Stock Exchange or other media outlets designated by the CSRC. However, the information announced by us in connection with our A Shares is based on the regulatory requirements of the securities authorities, industry standards and market practices in the PRC which are different from those applicable to the Global Offering. The presentation of financial and operational information for the Track Record Period disclosed on the Shanghai Stock Exchange or other media outlets may not be directly comparable to the financial and operational information contained in this Prospectus. For instance, we disclosed certain information in relation to our projected 2018 production plan in our A Share annual report for 2017 pursuant to A share regulatory requirements. Considering the Global Offering and the relevant Listing Rules on disclosure of profit forecasts, on September 10, 2018, we informed investors in an A Share announcement not to regard such production plan as a profit forecast or a guarantee of financial performance. As a result, prospective investors in our H Shares are reminded that, in making their investment decisions as to whether to purchase our H Shares, they should rely only on the financial, operating and other information included in this Prospectus and the Application Forms. By applying to purchase our H Shares in the Global Offering, you will be deemed to have agreed that you will not rely on any information other than that contained in this Prospectus, the Application Forms and any formal announcements made by us in Hong Kong with respect to the Global Offering.

You should read the entire Prospectus carefully, and we strongly caution you not to place any reliance on any information contained in press articles or other media regarding ourselves and the Global Offering.

Prior to the publication of this Prospectus, there had been press and media coverage regarding us and the Global Offering, which contained, among other things, certain financial information, projections, valuations and other forward-looking information about us and the Global Offering. We have not authorized the disclosure of any such information in the press or media and do not accept responsibility for the accuracy or completeness of such press articles or other media coverage. We make no representation as to the appropriateness, accuracy, completeness or reliability of any of the projections, valuations or other forward-looking information about us. To the extent such statements

—76— RISK FACTORS are inconsistent with, or conflict with, the information contained in this Prospectus, we disclaim responsibility for them. Accordingly, prospective investors are cautioned to make their investment decisions on the basis of the information contained in this Prospectus only, and should not rely on any other information.

—77— WAIVERS FROM STRICT COMPLIANCE WITH THE HONG KONG LISTING RULES

In preparation for the Global Offering, our Company has sought and have been granted the following waivers from strict compliance with the relevant provisions of the Hong Kong Listing Rules:

MANAGEMENT PRESENCE

According to Rules 8.12 and 19A.15 of the Hong Kong Listing Rules, the Company must have sufficient management presence in Hong Kong. This normally means that at least two of our executive Directors must be ordinarily resident in Hong Kong. Since our head office and core business operations are principally located, managed and conducted in the PRC, our Company does not, and for the foreseeable future, will not, have executive Directors who are ordinarily resident in Hong Kong for the purpose of satisfying the requirements under Rules 8.12 and 19A.15 of the Hong Kong Listing Rules. Currently, all of the executive Directors of our Company reside in the PRC.

Accordingly, our Company has applied to the Hong Kong Stock Exchange for, and the Hong Kong Stock Exchange has granted our Company a waiver from strict compliance with Rules 8.12 and 19A.15 of the Hong Kong Listing Rules. Our Company has made the following arrangements to maintain effective communication between the Hong Kong Stock Exchange and us:

(i) both of the Company’s authorized representatives, Mr. Tang Qi (湯琦)(“Mr. Tang”), an executive Director, and Ms. Ng Sau Mei (伍秀薇)(“Ms. Ng”), a joint company secretary, will act as the Company’s principal channel of communication with the Hong Kong Stock Exchange. Although all of our executive Directors reside in the PRC, each of them possesses valid travel documents and is able to renew such travel documents when they expire in order to visit Hong Kong. Accordingly, the authorized representatives of the Company will be able to meet with the relevant members of the Hong Kong Stock Exchange on reasonable notice;

(ii) both of the authorized representatives of the Company have means of contacting all Directors (including our independent non-executive Directors) promptly at all times as and when the Hong Kong Stock Exchange proposes to contact a Director with respect to any matter;

(iii) each Director has provided his mobile phone number, office phone number, fax number and e-mail address to the authorized representatives of the Company and the Hong Kong Stock Exchange, and in the event that any Director expects to travel or otherwise be out of the office, he or she will provide the phone number of the place of his or her accommodation to the authorized representatives;

(iv) each of the Directors not ordinarily residing in Hong Kong possesses or can apply for valid travel documents to visit Hong Kong and will be able to meet with the relevant members of the Hong Kong Stock Exchange within a reasonable period; and

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(v) our Company has appointed China Securities (International) Corporate Finance Company Limited as the compliance adviser of the Company, who will also act as an additional channel of communication with the Hong Kong Stock Exchange from the Listing Date to the date when our Company dispatches the annual reports to the Shareholders for the first full financial year immediately after the listing of the H Shares of the Company. China Securities (International) Corporate Finance Company Limited will maintain constant contact with the authorized representatives, Directors and senior management through various means, including regular meetings and telephone discussions whenever necessary.

APPOINTMENT OF JOINT COMPANY SECRETARIES

Rule 8.17

According to Rule 8.17 of the Hong Kong Listing Rules, the issuer must appoint a company secretary who satisfies Rule 3.28 of the Hong Kong Listing Rules.

Rule 3.28

According to Rule 3.28 of the Hong Kong Listing Rules, the secretary of the Company must be a person who, by virtue of his/her academic or professional qualifications or relevant experience, is, in the opinion of the Hong Kong Stock Exchange, capable of discharging the functions of company secretary. The Hong Kong Stock Exchange considers the following academic or professional qualifications to be acceptable:

(i) a member of The Hong Kong Institute of Chartered Secretaries;

(ii) a solicitor or barrister (as defined in the Legal Practitioners Ordinance); and

(iii) a certified public accountant (as defined in the Professional Accountants Ordinance).

In assessing “relevant experience”, the Hong Kong Stock Exchange will consider:

(i) length of employment with the issuer and other issuers and the roles played;

(ii) familiarity with the Hong Kong Listing Rules and other relevant law and regulations including the Securities and Future Ordinance, the Companies Ordinance, 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 Hong Kong Listing Rules; and

(iv) professional qualifications in other jurisdictions.

Our Company has appointed Mr. Tang as a joint company secretary. Mr. Tang has substantial experience in handling corporate, legal and regulatory compliance and administrative matters relating to our Company. Mr. Tang joined our Company in 2000 and has a thorough understanding of the

—79— WAIVERS FROM STRICT COMPLIANCE WITH THE HONG KONG LISTING RULES operations of the Board and our Company. Since Mr. Tang does not possess the professional or academic qualifications as stipulated in Rule 3.28 of the Hong Kong Listing Rules, our Company has appointed Ms. Ng, an associate member of The Hong Kong Institute of Chartered Secretaries and The Institute of Chartered Secretaries and Administrators in the United Kingdom, as a joint company secretary. Over a period of three years from the Listing Date, our Company proposes to implement the following measures to assist Mr. Tang to become a company secretary with the requisite qualifications or relevant experience as required under the Hong Kong Listing Rules:

Mr. Tang will endeavor to attend relevant training courses, including briefings on the latest changes to the relevant applicable Hong Kong laws and regulations and the Hong Kong Listing Rules which will be organized by the Company’s Hong Kong legal advisers on an invitation basis and seminars organized by the Hong Kong Stock Exchange for listed issuers from time to time.

Ms. Ng will assist Mr. Tang to enable him to acquire the relevant experience (as required under Rule 3.28 of the Hong Kong Listing Rules) to discharge the duties and responsibilities as the company secretary of the Company.

Ms. Ng will communicate regularly with Mr. Tang on matters relating to corporate governance, the Hong Kong Listing Rules and any other laws and regulations which are relevant to the Company and its affairs. Ms. Ng will work closely with, and provide assistance to, Mr. Tang in the discharge of his duties as a company secretary, including organizing the Company’s Board meetings and shareholders’ general meetings of our Company.

The appointment of Mr. Tang has an initial period of three years commencing from the Listing Date on condition that Mr. Tang will be assisted by Ms. Ng.

Our Company has applied to the Hong Kong Stock Exchange for, and the Hong Kong Stock Exchange has granted to the Company, a waiver from strict compliance with the requirements of Rules 3.28 and 8.17 of the Hong Kong Listing Rules. Provided that Mr. Tang has obtained relevant experience under Rule 3.28 of the Hong Kong Listing Rules at the end of the initial three-year period of the above arrangement, the above assistance arrangement will no longer be required by the Company.

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CONTINUING CONNECTED TRANSACTIONS

We have entered into, and are expected to continue, transaction(s) which will constitute partially exempt and non-exempt continuing connected transaction(s) of our Group under the Hong Kong Listing Rules upon the Listing. Accordingly, we have applied to the Hong Kong Stock Exchange for, and the Hong Kong Stock Exchange has granted, a waiver in relation to such continuing connected transaction(s) between us and certain connected persons under Chapter 14A of the Hong Kong Listing Rules. See “Connected Transactions” in this Prospectus for further details of these transaction(s).

ALLOCATION OF H SHARES TO EXISTING PUBLIC HOLDERS OF A SHARES AND THEIR CLOSE ASSOCIATES UNDER RULE 10.04 OF AND PARAGRAPH 5(2) OF APPENDIX 6 TO THE HONG KONG LISTING RULES

Rule 10.04 of the Hong Kong Listing Rules provides that a person who is an existing shareholder of the issuer may only subscribe for or purchase any securities for which listing is sought which are being marketed by or on behalf of a new applicant either in his or its own name or through nominees if the conditions in Rules 10.03(1) and (2) of the Hong Kong Listing Rules are fulfilled.

The conditions in Rules 10.03(1) and (2) of the Hong Kong Listing Rules are as follows: (i) no securities are offered to the existing shareholders on a preferential basis and no preferential treatment is given to them in the allocation of the securities: and (ii) the minimum prescribed percentage of public shareholders required by Rule 8.08(1) of the Hong Kong Listing Rules is achieved.

Paragraph 5(2) of Appendix 6 to the Hong Kong Listing Rules provides that, unless with the prior written consent of the Hong Kong Stock Exchange, no allocations will be permitted to directors or existing shareholders of the applicant or their close associates, whether in their own names or through nominees unless the conditions set out in Rules 10.03 and 10.04 of the Hong Kong Listing Rules are fulfilled.

Prior to the Listing, our Company’s share capital comprises entirely A Shares listed on the Shanghai Stock Exchange (stock code: 600547). We have a large and widely dispersed public A Share Shareholder base.

We have applied to the Hong Kong Stock Exchange for, and the Hong Kong Stock Exchange has granted us, a waiver from strict compliance with the requirements of Rule 10.04 of the Hong Kong Listing Rules and its consent under Paragraph 5(2) of Appendix 6 to the Hong Kong Listing Rules to permit the Company to allocate H Shares in the International Offering to existing public holders of A Shares (the “A Shareholders’ Investors”) and their close associates subject to the following conditions:

(i) none of the A Shareholders’ Investors would be in the position to exert influence over our Company or the allocation process in the Global Offering since:

(a) each A Shareholders’ Investor must hold less than 5% of the voting power prior to the listing of our Company on the Hong Kong Stock Exchange;

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(b) such A Shareholders’ Investors and their close associates are not, and will not be, a core connected person (as defined under the Hong Kong Listing Rules) of our Company or any close associate (as defined under the Hong Kong Listing Rules) of any such core connected person immediately prior to or following the Global Offering;

(c) such A Shareholders’ Investors have no right to appoint directors of the company and do not have other special rights;

(d) such A Shareholders’ Investors will be subject to the same book-building and allocation process as other investors in the International Offering at the Offer Price; and

(ii) allocation to such A Shareholders’ Investors and their close associates will not affect our ability to satisfy the public float requirement under Rule 8.08 of the Hong Kong Listing Rules;

(iii) the Company has confirmed to the Stock Exchange that no preferential treatment has been, nor will be, given to the A Shareholders’ Investors or their close associates by virtue of their relationship with the Company;

(iv) the Joint Bookrunners have confirmed to the Stock Exchange that, to the best of their knowledge and belief, no preferential treatment has been, nor will be, given to the A Shareholders’ Investors or their close associates by virtue of their relationship with the Company;

(v) the Joint Sponsors confirm that, based on (a) the discussion with the Company and the Joint Bookrunners, and (b) the Company’s and Joint Bookrunners’ confirmation above, to the best of their knowledge and belief, the Joint Sponsors have no reason to believe that the A Shareholders’ Investors or their close associates have received or will receive any preferential treatment in the Global Offering by virtue of their relationship with the Company; and

(vi) details of the allocation will be disclosed in the allotment results announcement of the Company.

PROPOSED H SHARE SUBSCRIPTION BY ICBC AM

Paragraph 5(1) of Appendix 6 to the Hong Kong Listing Rules provides that, unless with the prior written consent of the Hong Kong Stock Exchange, no allocations will be permitted to “connected clients” of the lead broker or of any distributors.

Paragraph 13(7) of the Appendix 6 states that “connected client” in relation to an exchange participant means any client which is a member of the same group of companies as such exchange participant.

—82— WAIVERS FROM STRICT COMPLIANCE WITH THE HONG KONG LISTING RULES

Each of ICBC International Capital Limited (“ICBCI Capital”) and ICBC International Securities Limited (“ICBCI Securities”) is a subsidiary of Industrial and Commercial Bank of China Limited. 中國工商銀行股份有限公司—理財計劃代理人 (ICBC Asset Management Scheme Nominee) (“ICBC AM”) is the asset management arm of Industrial and Commercial Bank of China Limited. Subject to the PRC laws and regulations, ICBC AM may subscribe for the H Shares of the Company directly or through one or more qualified domestic institutional investor(s). As a result, ICBC AM is a connected client of ICBCI Capital and ICBCI Securities.

ICBCI Capital has been appointed by the Company as one of the Joint Global Coordinators and Joint Bookrunners of the Global Offering, while ICBCI Securities has been appointed by the Company as one of the Joint Lead Managers and Underwriters of the Global Offering.

We have applied to the Hong Kong Stock Exchange for, and the Hong Kong Stock Exchange has granted to us, its consent under paragraph 5(1) of Appendix 6 to the Hong Kong Listing Rules to permit ICBC AM to participate in the Global Offering as a cornerstone investor subject to the following conditions:

1. any H Shares to be allocated to ICBC AM will be held for, and on behalf of, independent third parties;

2. the cornerstone investment agreement entered with ICBC AM does not contain any material terms which are more favourable to ICBC AM than those in other cornerstone investment agreements;

3. neither ICBCI Capital nor ICBCI Securities participated in the decision-making process or relevant discussion among the Company, the Joint Bookrunners and the Underwriters as to whether ICBC AM will be selected as a cornerstone investor;

4. no preferential treatment has been, nor will be, given to ICBC AM by virtue of its relationship with ICBCI Capital nor ICBCI Securities other than the preferential treatment of assured entitlement under a cornerstone investment following principles set out in HKEX-GL-51-13;

5. each of the Joint Sponsors, the Company, the Joint Bookrunners, ICBC AM and ICBCI Securities has provided the Hong Kong Stock Exchange a written confirmation in accordance with HKEX-GL85-16; and

6. details of the allocation has been / will be disclosed in the prospectus and the allotment results announcement.

—83— INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING

DIRECTORS’ RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS

This Prospectus, for which our Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Companies (Winding Up and Miscellaneous Provisions) Ordinance, the Securities and Futures (Stock Market Listing) Rules of Hong Kong and the Hong Kong Listing Rules for the purpose of giving information to the public with regard to us. Our Directors collectively, having made all reasonable enquiries, confirm that to the best of their knowledge and belief that the information contained in this Prospectus is accurate and complete in all material respects and not misleading or deceptive and there are no other matters the omission of which would make any statement in this Prospectus misleading.

CSRC APPROVAL

The CSRC issued an approval letter on May 7, 2018 for the Global Offering and our application to list the H Shares on the Stock Exchange. In granting such approval, the CSRC accepts no responsibility for our financial soundness nor for the accuracy of any of the statements made or opinions expressed in this Prospectus or in the Application Forms. No other approvals are required to be obtained for the listing of the H Shares on the Stock Exchange.

THE HONG KONG PUBLIC OFFERING AND THIS PROSPECTUS

This Prospectus is published solely in connection with the Hong Kong Public Offering, which forms part of the Global Offering. For applicants under the Hong Kong Public Offering, this Prospectus and the Application Forms contain all the terms and conditions of the Hong Kong Public Offering.

The Hong Kong Offer Shares are offered solely on the basis of the information contained and the representations made in this Prospectus and the Application Forms and on the terms and subject to the conditions set out herein and therein. No person is authorized in connection with the Global Offering to give any information or to make any representation not contained in this Prospectus. Any information or representation not contained in this Prospectus must not be relied upon as having been authorized by the Company, any Joint Global Coordinator, any Joint Sponsor, any Joint Bookrunner, any Joint Lead Manager, any Underwriter, any of their respective directors, officers, employees, agents, representatives or advisers or any other person involved in the Global Offering.

Neither the delivery of this Prospectus nor any offering, subscription, acquisition, sale or delivery made in connection with the H Shares shall, under any circumstances, constitute a representation that there has been no change or development reasonably likely to involve a change in our affairs since the date of this Prospectus or imply that the information contained in this Prospectus is correct as of any date subsequent to the date of such information.

—84— INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING

UNDERWRITING

The Global Offering comprises the Hong Kong Public Offering of initially 32,773,000 Hong Kong Offer Shares and the International Offering of initially 294,957,000 International Offer Shares, subject, in each case, to reallocation on the basis as described in “Structure of the Global Offering” and, in case of the International Offering, additionally to any exercise of the Over-allotment Option.

The listing of the H Shares is sponsored by the Joint Sponsors. The Global Offering is managed by the Joint Global Coordinators. The Hong Kong Public Offering is fully underwritten by the Hong Kong Underwriters under the terms of the Hong Kong Underwriting Agreement and is subject to the Joint Global Coordinators (for themselves and on behalf of the Hong Kong Underwriters) and the Company agreeing on the Offer Price on or before the Price Determination Date. An International Underwriting Agreement relating to the International Offering is expected to be entered into on or about Thursday, September 20, 2018, subject to the Company and the Joint Global Coordinators (for themselves and on behalf of the International Underwriters) agreeing on the Offer Price.

We expect that the Offer Price will be fixed by agreement among the Company and the Joint Global Coordinators (for themselves and on behalf of the Underwriters) on the Price Determination Date, which is expected to be on or around Thursday, September 20, 2018 and in any event no later than Friday, September 21, 2018. If, for whatever reason, the Offer Price is not agreed between the Joint Global Coordinators(for themselves and on behalf of the Underwriters) and the Company on or before the Price Determination Date, the Global Offering will not become unconditional and will lapse immediately. Further information about the Underwriters and the underwriting arrangements is set out in “Underwriting.”

RESTRICTIONS ON THE OFFER AND SALE OF THE OFFER SHARES

Each person acquiring the Hong Kong Offer Shares under the Hong Kong Public Offering will be required to, or be deemed by his acquisition of Hong Kong Offer Shares to, confirm that he is aware of the restrictions on offers and sales of the Hong Kong Offer Shares described in this Prospectus and the Application Forms.

No action has been taken to permit a public offering of the H Shares or the distribution of this Prospectus in any jurisdiction other than Hong Kong. Accordingly, this Prospectus may not be used for the purpose of, and does not constitute, an offer or invitation in any jurisdiction or in any circumstances in which such an offer or invitation is not authorized or to any person to whom it is unlawful to make such an offer or invitation. The distribution of this Prospectus and the offering and sales of the Offer Shares in other jurisdictions are subject to restrictions and may not be made except as permitted under the applicable securities laws of such jurisdictions pursuant to registration with or authorization by the relevant securities regulatory authorities or an exemption therefrom. In particular, the Offer Shares have not been offered and sold, and will not be offered or sold, directly or indirectly in the PRC.

—85— INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING

APPLICATION FOR LISTING ON THE STOCK EXCHANGE

We have applied to the Listing Committee of the Stock Exchange for listing of, and permission to deal in, the H Shares in issue and to be issued pursuant to the Global Offering (including any additional H Shares that may be issued pursuant to the exercise of the Over-allotment Option).

Save as disclosed in this Prospectus, no part of the Shares or loan capital of the Company is listed or dealt on any other stock exchange and no such listing or permission to list is being or is proposed to be sought in the near future.

COMMENCEMENT OF DEALINGS IN THE SHARES

Dealings in the Offer Shares are expected to commence at 9:00 a.m. on Friday, September 28, 2018. The Offer Shares will be traded in board lots of 250 Offer Shares each. The stock code of the Offer Shares is 1787.

H SHARES WILL BE ELIGIBLE FOR ADMISSION INTO CCASS

Subject to the granting of listing of, and permission to deal in, the H Shares on the Stock Exchange and our compliance with the stock admission requirements of HKSCC, the H Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the Listing Date or any other date as determined by HKSCC. Settlement of transactions between participants of the Stock Exchange is required to take place in CCASS on the second Business Day after any trading day. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time. Investors should seek the advice of their stockbroker or other professional advisers for the details of the settlement arrangements as such arrangements may affect their rights and interests. All necessary arrangements have been made for the H Shares to be admitted into CCASS.

H SHARE REGISTER

All H Shares issued by us pursuant to applications made in the Hong Kong Public Offering will be registered on our Hong Kong register of members to be maintained in Hong Kong by our H Share Registrar, Computershare Hong Kong Investor Services Limited. Our principal register of members will be maintained by us at our legal address in the PRC.

—86— INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING

REGISTRATION OF SUBSCRIPTION, PURCHASE AND TRANSFER OF H SHARES

We have instructed the H Share Registrar, and it has agreed, not to register the subscription, purchase or transfer of any H Shares in the name of any particular holder unless and until the holder delivers a signed form to the H Share Registrar in respect of those H Shares bearing statements to the effect that the holder:

(i) agrees with us and each of our Shareholders, and we agree with each Shareholder, to observe and comply with the Companies Ordinance, the Companies (Winding Up and Miscellaneous Provisions) Ordinance, the PRC Company Law, the Special Regulations and our Articles of Association;

(ii) agrees with us, each of our Shareholders, Directors, Supervisors, managers and officers, and we acting for ourselves and for each of our Directors, Supervisors, managers and officers agrees with each of our Shareholders to refer all differences and claims arising from our Articles of Association or any rights or obligations conferred or imposed by the PRC Company Law or other relevant laws and administrative regulations concerning our affairs to arbitration in accordance with our Articles of Association, and any reference to arbitration shall be deemed to authorise the arbitration tribunal to conduct hearings in open session and to publish its award. Such arbitration shall be final and conclusive;

(iii) agrees with us and each of our Shareholders that the H Shares are freely transferable by the H Shares holders thereof; and

(iv) authorises us to enter into a contract on his or her behalf with each of our Directors, Supervisors, managers and officers whereby such Directors, Supervisors, managers and officers undertake to observe and comply with their obligations to our Shareholders as stipulated in our Articles of Association.

Persons applying for or purchasing H Shares under the Global Offering are deemed, by their making an application or purchase, to have represented that they are not close associates (as such term is defined in the Hong Kong Listing Rules) of any of the Directors or Supervisors of the Company or an existing Shareholder of the Company or a nominee of any of the foregoing.

STAMP DUTY

Dealings in the H Shares registered on our Hong Kong register will be subject to Hong Kong stamp duty. See the section headed “AppendixV—Taxation and Foreign Exchange.”

PROFESSIONAL TAX ADVICE RECOMMENDED

If you are unsure about the taxation implications of subscribing for, purchasing, holding or disposing of, and dealing in, our H Shares or exercise any rights attached to them, you should consult an expert.

—87— INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING

We emphasize that none of the Joint Global Coordinators, the Joint Sponsors, the Joint Bookrunners, the Joint Lead Managers, the Underwriters, or us, any of our or their respective directors, officers or any other person or party involved in the Global Offering accepts responsibility for any tax effects on, or liability of, any person resulting from the subscription for, purchase, holding, disposition of, or dealing in, the H Shares or the exercise of any rights in relation to the H Shares.

STABILIZATION AND OVER-ALLOTMENT

Further details with respect to stabilization and the Over-allotment Option are set out in “Structure of the Global Offering — Stabilization” and “Structure of the Global Offering — Over-allotment Option,” respectively.

PROCEDURE FOR APPLICATION

The application procedure for the Hong Kong Offer Shares is set out in the section headed “How to Apply for Hong Kong Offer Shares” in this Prospectus and in the relevant Application Forms.

STRUCTURE OF THE GLOBAL OFFERING

Details of the structure of the Hong Kong Public Offering and the International Offering, including their respective conditions, and the Over-allotment Option, are set out in the section headed “Structure of the Global Offering” in this Prospectus.

CONDITIONS OF THE HONG KONG PUBLIC OFFERING

Details of the conditions of the Hong Kong Public Offering are set out in “Structure of the Global Offering — The Hong Kong Public Offering — Conditions of the Hong Kong Public Offering.”

ROUNDING

In this Prospectus, where information is presented in hundreds, thousands, ten thousands, millions or hundred millions, certain amounts of less than one hundred, one thousand, ten thousand, one million or a hundred million, as the case may be, have been rounded to the nearest hundred, thousand, ten thousand, million or hundred million, respectively. Amounts presented as percentages have, in certain cases, been rounded to the nearest tenth or hundredth of a percent. Any discrepancies in any table or chart between totals and sums of amounts listed therein are due to rounding.

LANGUAGE

In the event of any inconsistency between this Prospectus and the Chinese translation of this Prospectus, this Prospectus prevails. Translated English names of Chinese laws and regulations, governmental authorities, departments, entities (including certain of our subsidiaries), institutions, natural persons, facilities, certificates, titles and the like included in this Prospectus and for which no official English translation exists are unofficial translation and for reference only.

—88— INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING

EXCHANGE RATE CONVERSION

Solely for your convenience, this Prospectus contains translations of certain Renminbi amounts into Hong Kong dollar and of Renminbi amounts into U.S. dollars at specified rates. Unless indicated otherwise, the translation of Renminbi into Hong Kong dollars and of Renminbi into U.S. dollars, and vice versa, in this Prospectus was made at the following rates:

• RMB0.86974 to HK$1.00 (being the prevailing exchange rate on September 5, 2018 set by the PBOC);

• RMB6.8266 to US$1.00 (being the prevailing exchange rate on September 5, 2018 set by the PBOC;

• AR$38.8117 to US$1.00 (being the prevailing exchange rate on September 5, 2018 published by Argentine Central Bank); and

• HK$7.8486 to US$1.00 (being the noon buying rate in effect on August 31, 2018 as set forth in the H.10 weekly statistical release of the Board of Governors of the Federal Reserve System of the United States).

No representation is made that any amount in Renminbi, Hong Kong dollars, Argentine Peso or U.S. dollars can be or could have been at the relevant dates converted at the above rates or any other rates or at all.

—89— DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING

DIRECTORS

Name Address Nationality

Executive Directors

Mr. Wang Peiyue (王培月) Unit 4, Building 5-1, Block 1 Chinese Dianliu New Village Lixia District, Jinan PRC

Mr. Tang Qi (湯琦) No. 16 Jiefang Road Chinese Lixia District, Jinan PRC

Non-executive Directors

Mr. Li Guohong (李國紅) Building 84, Jinkouling Village Chinese Tongguanshan District, Tongling PRC

Mr. Chen Daojiang (陳道江) Unit 2, Building 12 Chinese No. 1168 Second Ring East Road Licheng District, Jinan PRC

Mr. Wang Lijun (王立君) No. 2 Xincheng Street Chinese Jincheng Town, Laizhou PRC

Ms. Wang Xiaoling (汪曉玲) Unit 2, Building 7, Block 4 Chinese Dianliu New Village Lixia District, Jinan PRC

Independent Non-executive Directors

Mr. Gao Yongtao (高永濤) Building 49 Chinese No. 30 Xueyuan Road Haidian District, Beijing PRC

Ms. Hui Wing (許穎) 22nd Floor, Block 5 Chinese Aquamarine, 8 Sham Shing Road Kowloon Hong Kong

—90— DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING

Name Address Nationality

Mr. Lu Bin (盧斌) Building 4, No. 15, Yixin Garden Chinese Qinhuai District, Nanjing PRC

SUPERVISORS

Name Address Nationality

Mr. Li Xiaoping (李小平) Unit 5, Building 6 Chinese Gongyuan Qianggen Street Lixia District, Jinan PRC

Mr. Liu Rujun (劉汝軍) Unit 3, Building 7, Block 4 Chinese Dianliu New Village Lixia District, Jinan PRC

Ms. Duan Huijie (段慧潔) Unit 1, Building 6 Chinese No. 24 Liuchangshan Road Huaiyin District, Jinan PRC

Please see “Directors, Supervisors and Senior Management” in this Prospectus for further details of our Directors and Supervisors.

—91— DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING

PARTIES INVOLVED IN THE GLOBAL OFFERING

Joint Sponsors CCB International Capital Limited 12/F., CCB Tower 3 Connaught Road Central Central Hong Kong

China Securities (International) Corporate Finance Company Limited 18/F, Two Exchange Square 8 Connaught Place Central Hong Kong

ICBC International Capital Limited 37/F, ICBC Tower 3 Garden Road Hong Kong

Joint Global Coordinators CCB International Capital Limited 12/F., CCB Tower 3 Connaught Road Central Central Hong Kong

China Securities (International) Corporate Finance Company Limited 18/F, Two Exchange Square 8 Connaught Place Central Hong Kong

ICBC International Capital Limited 37/F, ICBC Tower 3 Garden Road Hong Kong

Morgan Stanley Asia Limited (in relation to the Hong Kong Public Offering only) 46/F, International Commerce Centre 1 Austin Road West Kowloon Hong Kong

—92— DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING

Morgan Stanley & Co. International plc (in relation to the International Offering only) 25 Cabot Square Canary Wharf London E14 4QA United Kingdom

Joint Bookrunners CCB International Capital Limited 12/F., CCB Tower 3 Connaught Road Central Central Hong Kong

China Securities (International) Corporate Finance Company Limited 18/F, Two Exchange Square 8 Connaught Place Central Hong Kong

ICBC International Capital Limited 37/F, ICBC Tower 3 Garden Road Hong Kong

Morgan Stanley Asia Limited (in relation to the Hong Kong Public Offering only) 46/F, International Commerce Centre 1 Austin Road West Kowloon Hong Kong

Morgan Stanley & Co. International plc (in relation to the International Offering only) 25 Cabot Square Canary Wharf London E14 4QA United Kingdom

ABCI Capital Limited 11/F, Agricultural Bank of China Tower 50 Connaught Road Central Hong Kong

BOCOM International Securities Limited 9th Floor, Man Yee Building 68 Des Voeux Road Central Hong Kong

—93— DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING

BNP Paribas Securities (Asia) Limited 59/F to 63/F, Two International Finance Centre 8 Finance Street Central Hong Kong

CMB International Capital Limited 45/F, Champion Tower 3 Garden Road Central Hong Kong

China Everbright Securities (HK) Limited 24/F Lee Garden One 33 Hysan Avenue Causeway Bay Hong Kong

Guotai Junan Securities (Hong Kong) Limited 27/F, Low Block, Grand Millennium Plaza 181 Queen’s Road Central Hong Kong

Haitong International Securities Company Limited 22/F, Li Po Chun Chambers 189 Des Voeux Road Central Hong Kong

Long Asia Securities Limited Unit A, 23/F, The Wellington 198 Wellington Street Sheung Wan Hong Kong

Joint Lead Managers CCB International Capital Limited 12/F., CCB Tower 3 Connaught Road Central Central Hong Kong

—94— DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING

China Securities (International) Corporate Finance Company Limited 18/F, Two Exchange Square 8 Connaught Place Central Hong Kong

ICBC International Securities Limited 37/F, ICBC Tower 3 Garden Road Hong Kong

Morgan Stanley Asia Limited (in relation to the Hong Kong Public Offering only) 46/F, International Commerce Centre 1 Austin Road West Kowloon Hong Kong

Morgan Stanley & Co. International plc (in relation to the International Offering only) 25 Cabot Square Canary Wharf London E14 4QA United Kingdom

ABCI Securities Company Limited 10/F, Agricultural Bank of China Tower 50 Connaught Road Central Hong Kong

BOCOM International Securities Limited 9th Floor, Man Yee Building 68 Des Voeux Road Central Hong Kong

BNP Paribas Securities (Asia) Limited 59/F to 63/F, Two International Finance Centre 8 Finance Street Central Hong Kong

CMB International Capital Limited 45/F, Champion Tower 3 Garden Road Central Hong Kong

—95— DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING

China Everbright Securities (HK) Limited 24/F Lee Garden One 33 Hysan Avenue Causeway Bay Hong Kong

Guotai Junan Securities (Hong Kong) Limited 27/F, Low Block, Grand Millennium Plaza 181 Queen’s Road Central Hong Kong

Haitong International Securities Company Limited 22/F, Li Po Chun Chambers 189 Des Voeux Road Central Hong Kong

Long Asia Securities Limited Unit A, 23/F, The Wellington 198 Wellington Street Sheung Wan Hong Kong

SDG Securities (HK) Limited Suites 5806-5807, 58/F Two International Finance Centre 8 Finance Street Central Hong Kong

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

Midas Securities Limited (in relation to the Hong Kong Public Offering only) 25/F Jubilee Centre 18 Fenwick Street Wan Chai Hong Kong

—96— DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING

China Industrial Securities International Capital Limited 7/F, Three Exchange Square 8 Connaught Place Central Hong Kong

Zhongtai International Securities Limited 19/F Li Po Chun Chambers 189 Des Voeux Road Central Hong Kong

Legal Advisers to our Company As to Hong Kong and United States laws:

Sidley Austin 39/F, Two International Finance Centre 8 Finance Street Central Hong Kong

As to PRC laws:

King & Wood Mallesons 20th Floor, East Tower, World Finance Center 1 Dongsanhuan Zhonglu Chaoyang District, Beijing PRC

As to Argentine laws:

Brons & Salas Law Firm Olga Cossettini 363 (C1107CCG) Ed. Yacht VI Puerto Madero, Buenos Aires Argentina

As to Cayman Islands laws:

Appleby 2206-19 Jardine House 1 Connaught Place Central Hong Kong

—97— DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING

Legal Advisers to the Underwriters As to Hong Kong and United States laws: and the Joint Sponsors Linklaters 10/F, Alexandra House 18 Chater Road Hong Kong

As to PRC laws:

Jia Yuan Law Offices F408, Ocean Plaza 158 Fuxing Men Nei Street, Xicheng District, Beijing PRC

Competent Persons As to PRC Mines:

Agapito Associates, Inc. 715 Horizon Drive Suite 340 Grand Junction USA

As to the Veladero Mine:

Roscoe Postle Associates Inc. 55 University Avenue, Suite 501 Toronto, Ontario Canada

Reporting Accountant and PricewaterhouseCoopers Independent Auditor Certified Public Accountants 22/F Prince’s Building Central Hong Kong

Industry Consultant Frost & Sullivan Room 1018, Tower B 500 Yunjin Road Xuhui District, Shanghai PRC

—98— DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING

Compliance Adviser China Securities (International) Corporate Finance Company Limited 18/F, Two Exchange Square 8 Connaught Place Central Hong Kong

Receiving Banks Wing Lung Bank Limited 45 Des Voeux Road Central Hong Kong

Industrial and Commercial Bank of China (Asia) Limited 33/F, ICBC Tower, 3 Garden Road Central Hong Kong

—99— CORPORATE INFORMATION

Registered Office and Headquarters Building No.3, Shuntai Plaza in the PRC Shunhua Road No. 2000 Jinan, Shandong Province PRC

Principal Place of Business Rooms 4009-4010 in Hong Kong 40th Floor China Resources Building No. 26 Harbour Road Hong Kong

Company’s Website http://www.sdhjgf.com.cn (The information on the website does not form part of this Prospectus)

Joint Company Secretaries Mr. Tang Qi No. 16 Jiefang Road Lixia District, Jinan PRC

Ms. Ng Sau Mei Member of the Hong Kong Institute of Chartered Secretaries and member of the Institute of Chartered Secretaries and Administrators in UK 36/F, Tower Two, Times Square 1 Matheson Street, Causeway Bay Hong Kong

Authorized Representatives Mr. Tang Qi No. 16 Jiefang Road Lixia District, Jinan PRC

Ms. Ng Sau Mei 36/F, Tower Two, Times Square 1 Matheson Street, Causeway Bay Hong Kong

Audit Committee Mr. Lu Bin (chairman) Ms. Hui Wing Mr. Gao Yongtao Mr. Li Guohong Ms. Wang Xiaoling

— 100 — CORPORATE INFORMATION

Nomination Committee Mr. Gao Yongtao (chairman) Mr. Lu Bin Ms. Hui Wing Mr. Wang Lijun Mr. Wang Peiyue

Remuneration and Appraisal Ms. Hui Wing (chairman) Committee Mr. Lu Bin Mr. Gao Yongtao Ms. Wang Xiaoling Mr. Tang Qi

Strategy Committee Mr. Li Guohong (chairman) Mr. Chen Daojiang Mr. Wang Peiyue Mr. Gao Yongtao Mr. Lu Bin

H Share Registrar Computershare Hong Kong Investor Services Limited Shops 1712-1716, 17th Floor, Hopewell Centre 183 Queen’s Road East Wanchai Hong Kong

Principal Bank Bank of China Limited, Shandong Branch No. 22 Luoyuan Avenue Lixia District, Jinan Shandong Province PRC

— 101 — INDUSTRY OVERVIEW

Certain information and statistics set out in this section and elsewhere in this Prospectus relating to the industry in which we operate are derived from the F&S Report prepared by Frost & Sullivan, an independent industry consultant which was commissioned by us. The information extracted from the F&S Report should not be considered as a basis for investments in the Offer Shares or as an opinion of Frost & Sullivan as to the value of any securities or the advisability of investing in our Company. We believe that the sources of such information and statistics are appropriate for such information and statistics and have taken reasonable care in extracting and reproducing such information and statistics. We have no reason to believe that such information and statistics are false or misleading or that any fact has been omitted that would render such information and statistics false or misleading in any material respect. Our Directors have further confirmed, after making reasonable enquiries and exercising reasonable care, that there is no adverse change in the market information since the date of publication of the F&S Report or any of the other reports which may qualify, contradict or have an impact on the information in this section. No independent verification has been carried out on such information and statistics by us, the Joint Sponsors, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Underwriters or any other parties involved in the Global Offering or their respective directors, officers, employees, advisers, or agents, and no representation is given as to the accuracy or completeness of such information and statistics. Accordingly, you should not place undue reliance on such information and statistics. Unless and except for otherwise specified, the market an industry information and data presented in this Industry Overview section is derived from the F&S Report.1

THE GLOBAL GOLD INDUSTRY

Introduction to Gold

Gold is one of the first known metals and has been sought throughout history for its aesthetic, physical and chemical properties. Gold is deemed as both a commodity and monetary asset. As a

1 Frost & Sullivan’s market engineering forecasting methodology integrates several forecasting techniques with the market engineering measurement-based system. It relies on the expertise of the analyst team in integrating the critical market elements investigated during the research phase of the project. These elements include: (i) expert-opinion forecasting methodology; (ii) integration of market drivers and restraints; (iii) integration with the market challenges; (iv) integration of the market engineering measurement trends; and (v) integration of econometric variables.

In compiling and preparing the F&S Report, Frost & Sullivan has adopted the following assumptions: (i) the social, economic and political environment of PRC is likely to remain stable in the forecast period; and (ii) related industry key drivers are likely to drive the market in the forecast period.

Frost & Sullivan has conducted detailed primary research which involved discussing the status of the industry with certain leading industry participants and conducting interviews with relevant parties. Frost & Sullivan has also conducted secondary research which involved reviewing company reports, independent research reports and data based on its own research database. Frost & Sullivan has obtained the figures for the estimated total market size from historical data analysis plotted against macroeconomic data as well as considered the above-mentioned industry key drivers.

The contract sum to Frost & Sullivan is RMB300,000 for the preparation and use of the F&S Report, and we believe that such fees are consistent with the market rate. Frost & Sullivan is an independent global consulting firm, which was founded in 1961 in New York. It offers industry research and market strategies and provides growth consulting and corporate training. Its industry coverage includes automotive and transportation, chemicals, materials and food, commercial aviation, consumer products, energy and power systems, environment and building technologies, healthcare, industrial automation and electronics, industrial and machinery, and technology, media and telecom.

— 102 — INDUSTRY OVERVIEW commodity, gold is primarily used in the production of jewelry, coinage, electronics and other industrial and decorative applications. As a monetary asset, gold is primarily used for monetary exchange and investment purposes. Gold is often regarded as one of the world’s oldest international currencies. The demand and price of gold are greatly affected by currency exchange rate, political conditions and macroeconomic factors, such as interest rate, inflation and economic growth. On the other hand, supply of gold mainly comes from mine production and recycled gold.

The following diagram sets forth the gold industry value chain.

Gold Mining and Processing Raw Material Suppliers Global End Users Companies

Mineral Exploration Ore Mining Gold Smelting Fabrication Separation

• Once the potential • The ore is • Gold minerals and • Gold ore concentrate •Gold are deposit is extracted as other minerals and is then sent to a fabricated into discovered, companies coarse ore. impurity elements are smelter to extract the jewellery , coins, evaluate and then separated by means pure gold from the ore, electronics exploit the orebody if of flotation, magnetic by means of melting sectors, among feasible. separation, and electrolysis with other things. electromagnetism, certain chemicals, among among other methods. other methods.

Source: Frost & Sullivan Analysis

Global Gold Supply

Gold supply mainly comes from mining production and recycled gold. Gold mine production is the most important source of gold supply, accounting for approximately 70% of the gold supplied in recent years. The following chart sets forth the volume of global gold mine production for the year indicated.

Source: Frost & Sullivan Analysis

Global gold mine production experienced steady growth from 2012 to 2017 at a CAGR of 2.3%. The gold mine production growth from 2012 to 2017 was primarily driven by technological

— 103 — INDUSTRY OVERVIEW advancements in exploration, mining and smelting activities, which enhanced production efficiency and quality and yielded more gold in the process. Global gold mine production is expected to grow at a lower CAGR of 0.8% from 2018 to 2021, mainly because the decrease in gold price since 2013 has caused a decrease in capital expenditures on mining activities. Global gold mine production volume in 2017 amounted to 3,268.7 tonnes (equivalent to approximately 105,091 koz). The following diagram sets forth a breakdown of 2017 global gold mine production volume by geographic location. Total Production= 3,268.7 tonnes

China

Other Countries 13.0% 24.8% Australia 8.8%

Kazakhstan 1.7% 8.3% Russia Papua New Guinea 1.9% 2.0% Argentina 2.7% Uzbekistan 2.8% 7.5% United States Brazil 3.5% 5.2% Indonesia 3.7% 4.0% 5.1% Mexico 4.8% Canada Ghana Peru South Africa

Source: Frost & Sullivan Analysis China has been the largest gold mine producer since 2007. In 2017, China’s gold mine production volume reached 426.1 tonnes (equivalent to approximately 13,699 koz) and accounted for 13.0% of global gold mine production volume. Other than China, Australia, Russia, the United States and Canada have consistently been top gold mine production countries in the world. Collectively, the amount of gold mine production volume from the top five gold mine production countries accounted for 42.8% of global gold mine production volume in 2017. As the leading global producer, China’s economy and gold mining industry have a material effect globally. Recycled gold is another source of gold supply other than gold mine production. Recycled gold represents gold that is extracted and recycled from materials such as jewelry, electronic appliances, medical devices and other materials and products. The follow diagram sets forth the volume of recycled gold globally for the year indicated.

Source: Frost & Sullivan Analysis Global Gold Demand Global demand for gold is generally divided into the following categories: (i) jewelry, (ii) bullion, which represents bars, coins and medals, (iii) central bank reserves, (iv) industrial use, and

— 104 — INDUSTRY OVERVIEW

(v) exchange traded funds (ETFs). Jewelry and bars, coins and medals are the primary sources of demand for gold, accounting for 52.4% and 25.3% of global gold demand in 2017. The following chart sets forth the volume and breakdown of global gold demand for the year indicated.

Jewelry Exchange Traded Funds Bullion Central Bank Reserve Industry Total Tonnes CAGR2012-2017 0.0% -7.9% -4.7% -8.2% -2.7% -2.8% 6,000 CAGR2018E-2021E 1.0% 0.7% 0.6% 0.7% 0.9% 0.8%

4,703.1 5,000 4,492.6 4,299.2 4,269.8 4,362.2 4,071.7 4,128.0 4,173.2 4,206.4 4,232.0 Total Demand 4,000 2,701.9 2,138.7 2,498.8 2,411.6 2,053.6 3,000 2,135.5 2,180.4 2,213.1 2,233.0 2,244.2 Jewelry 306.1 546.8 Exchange Traded Funds 2,000 1,722.9 202.8 203.4 204.4 205.8 207.4 1,307.7 1,052.1 1,074.7 Bullion 1,048.7 1,029.2 1,032.2 1,037.4 1,043.6 1,050.9 1,000 Central Bank Reserve 569.3 623.8 583.9 576.5 389.8 371.4 372.5 374.4 377.0 380.4 381.3 Industry 0 355.9 348.7 332.0 323.4 332.8 339.5 343.9 347.0 349.1 -912.0 -184.3 -125.1 -1,000 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E

Source: Frost & Sullivan Analysis

From 2013 to 2016, demand for jewelry and gold-backed ETFs fluctuated in part due to changes in gold price. Since 2016, the demand for jewelry decreased in part due to an increase in gold tariffs in India, which was the second largest consumer of jewelry and accounted for approximately one quarter of global jewelry consumption in 2017.

Going forward, global demand for gold is expected to recover slightly, growing at a CAGR of 0.8% from 2018 to 2021. Demand is expected to recover in 2017 as gold prices are expected to rise and gold tariffs are expected to be reduced in India. After experiencing a decline from 2012 to 2017, physical investment in gold bars, coins and medals is likely to recover and is expected to grow at a CAGR of 0.6% from 2018 to 2021. The demand for gold ETFs is expected to increase as gold prices are expected to increase in the coming years. However, demand for gold ETFs are expected to fluctuate in part due to the impact resulting from the strength of the U.S. dollar and global political uncertainty. As more industrial applications of gold are being developed, demand for gold for industrial use is expected to grow steadily going forward. Considering uncertainties of the macroeconomic and geopolitical climate in the coming years, central banks are expected to increase gold reserves.

Global demand for gold jewelry, bars, coins and medals in 2017 amounted to 3,164.7 tonnes. The following diagram sets forth a breakdown of 2017 global demand for gold jewelry and bars, coins and medals by geographic location.

Source: Frost & Sullivan Analysis

— 105 — INDUSTRY OVERVIEW

China and India have the highest demand for gold jewelry and bars, coins and medals in the world, each accounting for 31.6% and 23.0% of global demand in 2017, respectively. China and India play an important role in the global gold market, with aggregate demand from China and India accounting for over half of global demand. Gold mine production from China and India is lower than demand from each of these countries, and the excess demand from such countries are met with imported gold supply.

PRC GOLD INDUSTRY

PRC Gold Supply

Gold mine production is the major source of gold supply in China. Gold mine production comprises gold produced from gold mines and gold produced as by-products from non-ferrous metal (NFM) ores. The following chart sets forth gold mine production volume in China for the period indicated.

Tonnes Gold produced as by-product from NFM ores Gold produced from gold mines

500 451.8 450.0 453.5 428.2 426.1 428.4 432.9 437.6 443.2 403.0 58.6 400 83.4 70.6 56.9 57.0 57.4 58.0 58.7 61.2 77.2 300

200 394.9 384.5 341.8 351.0 368.4 379.4 369.2 371.4 375.5 379.6 100

0 2012 20132014 2015 2016 2017 2018E 2019E 2020E 2021E

Note: Recycled gold is excluded from gold supply, which only includes gold mine production volume. Source: Frost & Sullivan Analysis

Since 2007, China has overtaken South Africa as the largest gold mine producer. Gold mine production volume in China has grown steadily at a CAGR of 1.1% from 2012 to 2017. Going forward, gold mine production volume in China is expected to continue to increase at a CAGR of 1.3% from 2018 to 2021. The relatively low growth rate is primarily due to decreases in capital expenditures as a result of fluctuations in gold prices since 2013 and stricter environmental protection laws and regulations, which are expected to force marginal gold production operations to close.

Gold mine production in China is relatively concentrated. Gold produced from gold mines in Shandong, Henan, Yunnan and Xinjiang provinces and Inner Mongolia autonomous region accounted for 41.4% of total gold produced from gold mines in China in 2017.

Gold is also sourced through individual suppliers from jewellery stores, commercial banks, other companies or individual customers in the PRC. Gold supply from jewellery stores and other companies are mainly sourced from recycled gold. Recycled gold represents gold that is extracted and recycled from materials such as jewelry, electronic appliances, medical devices and other materials and products. The supply of recycled gold in the PRC amounted to 157.30 tonnes and 282.51 tonnes in 2016 and 2017, respectively. As the market for recycled gold is fragmented and supplied through a wide range of sources, recycled gold is primarily supplied by regional and local companies and individuals with established regional supply networks. The gold extracted from recycled materials will be sold to more sizable refiners for production of gold.

Individual suppliers also purchase non-standard gold bars, such as those sold by commercial banks, and other gold products on the market, which they sell to refiners for the production of standard gold bars and bullion that can be traded on the Shanghai Gold Exchange.

— 106 — INDUSTRY OVERVIEW

There are approximately 2,000 to 3,000 individual gold doré suppliers in China who collect gold doré and resell such gold doré to refineries for the production of standard gold bullion. Such individual suppliers typically engaged in trading of precious metals, and processing, refining and procuring of ores. These individual suppliers generally have a team to collect gold doré and have established business connections with numerous small scale and remotely located local gold suppliers from a wide range of geographical regions. The individual suppliers have been able to play a major role in the gold doré market in the PRC because (i) they are more mobile and can effectively collect gold doré from small scale local gold suppliers that are located in remote and dispersed regions, and (ii) they have developed business relationships by leveraging their business network, understanding of local business practices, operation experience and reputation in the market. As a result of these factors, individual suppliers are able to maintain a stable supply of gold doré from such small scale suppliers. From the perspective of large scale gold companies seeking to procure gold doré, it is efficient in terms of cost and time to procure gold doré from such individual suppliers that have already centralized the supply of gold doré.

Shandong Gold Supply

Historically, Shandong province has been the largest gold mine production province in China. In 2017, gold produced from gold mines in Shandong province was 55.6 tonnes, accounting for 15.1% of gold produced from gold mines in China in 2017. Gold resources in Shandong province amounted to 3,756.6 tonnes as of December 31, 2017, accounting for 28.5% of total gold resources in China as of the same date. In particular, the Laizhou and Zhaoyuan regions are generally known to have the largest gold deposits in Shandong province. Modern gold mining activities have been present in Shandong province for over thirty years. As a result, Shandong province has developed mature mining infrastructure, including transportation, logistics and supply of electricity, water, raw materials, equipment and ancillary services.

PRC Gold Demand

Demand for gold in China is generally divided into the following categories: (i) jewelry, (ii) investment gold bars, (iii) official gold coins, and (iv) industrial use. Jewelry is the primary source of demand for gold, accounting for 64.0% of gold demand in China in 2017. The following chart sets forth the volume and breakdown of gold demand in China for the year indicated.

Official Gold Coin Industry Demand Investment Gold Bar Jewelry Total CAGR2012-2017 0.5% 7.0% 2.9% 6.7% 5.5%

Tonnes CAGR2018-2021E 1.1% 5.7% 2.6% 5.1% 4.5% 1,400 1,340.8 1,302.7 1,247.4 27.0 26.7 117.7 1,176.4 1,176.3 26.4 114.2 1,200 107.7 59.1 25.0 1,089.1 26.1 1,045.9 26.0 99.6 22.8 975.4 311.7 1,000 951.1 68.4 90.2 306.5 12.8 31.2 298.7 375.7 66.1 75.4 288.6 832.2 201.0 25.3 276.4 800 64.2 165.1 257.6

600 240.0 Official Gold Coin 855.3 884.4 400 762.0 814.6 716.5 707.1 753.7 696.5 Industry Demand 611.2 502.8 Investment Gold Bar 200 Jewelry

0 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E

Source: Frost & Sullivan Analysis

Gold demand in China has displayed steady growth at a CAGR of 5.5% from 2012 to 2017, primarily driven by the growing demand for jewelry in line with the growing economy and increasing wealth of the PRC population. In addition, industrial applications for gold are being developed, which is expected to increase gold demand. Gold demand in China is expected to maintain a similar rate of growth with a CAGR of 4.5% from 2018 to 2021. The demand for gold jewelry is anticipated to continue to be the main driver for the demand increase as the PRC economy is expected to continue to grow at a steady pace.

— 107 — INDUSTRY OVERVIEW

ARGENTINA GOLD INDUSTRY

Argentina is the 13th largest gold producing country in the world with a gold mine production volume of 65.0 tonnes in 2017, accounting for 2.0% of global gold mine production volume. The Veladero Mine was the largest gold mine in Argentina in terms of 2017 gold mine production volume, with 19.9 tonnes in 2017, accounting for 30.6% of total gold mine production volume in Argentina. Based on the same standards, the Veladero Mine was also the largest gold mine in South America. The following table sets forth the gold mine production volume in Argentina for the period indicated.

CAGR: +3.4% Tonnes 80 CAGR:+3.5% 75.3 76.8 69.4 72.9 70 65.0 59.6 60 54.7 56.1 57.5 50.7 50 40 30 20 10 0 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E

Source: Frost & Sullivan Analysis

Other than a decrease in gold mine production volume from 2012 to 2013, gold mine production volume has increased steadily from 2013 to 2017. Since the election of President Macri in 2015, reforms have been put in place to encourage a free-market economy. Signals of economic recovery in Argentina are expected to boost capital investments in the gold mining industry with prospects of increases in gold price. As such, gold mine production volume in Argentina is forecasted to grow steadily in the coming years to reach 76.8 tonnes by 2021, representing a CAGR of 3.4% from 2018 to 2021.

Argentine Peso Exchange Rate

The following chart sets forth the exchange rate of Argentine Peso to U.S. dollar for the period indicated.

Note: Represents the monthly average of daily Argentine Peso to U.S. dollar exchange rate published by the Argentina Central Bank. Source: Argentina Central Bank; Frost & Sullivan Analysis

Historically, the Argentine Peso has steadily depreciated against the U.S. dollar. Under the administration of President Fernandez de Kirchner from 2007 to late 2015, currency controls were imposed that put the Argentine Peso on a mostly fixed exchange rate. The Argentine Peso to U.S. dollar exchange rate was 8.018:1 at month end in January 2014, and rose to 9.688:1 at month end in November 2015. After President Macri was elected in late 2015 and removed currency controls in December 2015, the Argentine Peso devalued rapidly to an exchange rate of 13.904:1 at month end

— 108 — INDUSTRY OVERVIEW in January 2016. By March 31, 2018, the Argentine Peso to U.S. dollar exchange rate was 20.143:1. Going forward, the Argentine Peso exchange rate will continue to be affected by a number of factors, including the Argentine and global economy, political environment, financial markets, among others. It is expected that the Argentine Peso exchange rate will further depreciate under current Argentine government policies aimed to attract investors and stimulate the economy.

GOLD PRICE

The following chart sets forth the monthly average LBMA PM gold spot price in U.S. dollars for the period indicated.

USD/oz 2000 1800 1600 1,471.5 1400 1200 1,200.6 1000 800 600 400 200 0 2012/1 2012/3 2012/5 2012/7 2012/9 2013/1 2013/3 2013/5 2013/7 2013/9 2014/1 2014/3 2014/5 2014/7 2014/9 2015/1 2015/3 2015/5 2015/7 2015/9 2016/1 2016/3 2016/5 2016/7 2016/9 2017/1 2017/3 2017/5 2017/7 2017/9 2018/1 2018/3 2018/5 2018/7 2018/9 2019/1 2019/3 2019/5 2019/7 2019/9 2020/1 2020/3 2020/5 2020/7 2020/9 2021/1 2021/3 2021/5 2021/7 2021/9 2012/11 2013/11 2014/11 2015/11 2016/11 2017/11 2018/11 2019/11 2020/11 2021/11

Source: Frost & Sullivan Analysis

Gold prices in China have closely followed global gold prices. Gold prices are sensitive to the global political and economic climate. Gold is often used as a hedging instrument against risk when the political or economic environment is uncertain or when stock markets are volatile, which causes gold prices to rise in such an event. Moreover, central bank policies, such as currency exchange rate fluctuations and macroeconomic factors such as interest rate and inflation expectations, affect gold prices. Gold prices decreased steadily from US$1,747.0 per ounce in October 2012 to US$1,068.1 per ounce in December 2015. Gold prices recovered to US$1,341.1 per ounce in August 2016 primarily due to political and economic uncertainty as a result of Brexit, the U.S. presidential election and conflicts in the Middle East, and decrease to US$1,150.7 per ounce in December 2016 over speculations of an interest rate hike, which was later announced by the U.S. Federal Reserve at the end of 2016. Going forward, it is expected that risks related to the macroeconomic and geopolitical environment will remain, including uncertainty over the new U.S. administration’s trade and foreign policies, particularly with respect to North Korea, Brexit negotiations, tensions between Russia and European countries, Middle Eastern conflicts and the PRC economy, which will generally lead to an increase in demand for gold. As such, global gold price is expected to reach a bull peak of US$1,481.9 per ounce in 2021 according to the F&S Report.

Since there is no official gold trading markets in Argentina, a large amounts of gold produced in Argentina are traded in international gold trading center, such as the LBMA, where the gold price is set based on the gold price system of such gold trading center. Therefore, the gold price in Argentina generally follows the global gold price.

MARKET DRIVERS AND TRENDS

The following are key market drivers and trends of the global and PRC gold mining industry:

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• Increasing global and PRC demand. Demand for gold is closely tied to the global economy. From 2018 to 2021, global nominal GDP is expected to grow at a CAGR of 5.6%. In particular, the PRC economy is forecasted to grow at a faster rate with a CAGR of 9.3% from 2018 to 2021, primarily driven by application of consistent macroeconomic policies and the structural adjustment of the PRC economy from an investment-driven model to a consumption-driven model. As overall living standards improve and purchasing power grows, consumer demand for gold jewelry is expected to increase. In particular, according to the statistics provided by National Bureau of Statistics of the PRC, the consumer price index has risen continuously from 2010 to 2015 at a CAGR of 2.8%. Moreover, as the PRC Government loosen currency controls, the Renminbi is expected to depreciate, which may lead to increasing investment in gold. Meanwhile, continued development of science and technology is expected to increase applications and demand for gold in aerospace and other industries.

• Global political and economic climate. Gold prices are sensitive to the global political and economic climate. Gold is an important tool used to hedge against risks when the political or economic environment is uncertain or when stock markets are volatile, which generally cause gold prices to rise under such circumstances. Moreover, central bank policies, such as currency exchange rate policies and macroeconomic factors such as interest rate and inflation expectations, generally have an impact on gold prices.

• Increasing PRC central bank reserves. The Renminbi has been included in the Special Drawing Right (SDR) since October 2016 and is increasingly recognized as an international reserve currency. In part to support the increasing internationalization of the Renminbi, PRC Central Bank reserves of gold increased from 1,054.1 tonnes in December 2012 to 1,842.6 tonnes in December 2017, and gold reserves as a percentage of total PRC Central Bank reserves increased from 1.7% to 2.4% as of the same dates. Going forward, F&S expects that PRC Central Bank will continue to increase its reserves of gold as the Renminbi becomes more internationalized, considering that as of December 2017, gold reserves as a percentage of total PRC Central Bank reserves was only 2.4%. The percentage of gold reserves of the PRC Central Bank was far lower than that of the top five countries by central bank gold reserves, all of which accounted for over 60% of total central bank reserves.

• Green mining. Growing global awareness for environmental protection and stricter regulations will drive gold companies to focus on developing environmentally- friendly exploration and mining technologies to fulfill their social responsibility. Environmental indicators, such as the quality and level of ecological rehabilitation and restoration has gradually become an important assessment criteria as to the overall quality of the mining project. Gold companies are also moving away from ore processing techniques that involve toxic substances such as mercury, chlorine and cyanide. More environmentally-friend and energy-saving technologies are being developed and are expected widely adopted in the future.

• Automation and intelligent technologies. Gold companies are increasingly exploring automation and intelligent technologies, such as unmanned mining technologies and

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automatic detection and control technologies, to lower costs, increase quality and efficiency and decrease the likelihood of safety accidents. In China, the Ministry of Science and Technology has listed intelligent mining technology research for underground mining in the National 863 Plan. Moreover, the research and development of unmanned underground mining technologies has been established as a project in the 13th Five-year Plan.

• Industry consolidation and cooperation. There is currently an imbalance in which countries that are rich in gold resources may not have the requisite advanced technologies to exploit such resources. As a result, gold companies with strong technological abilities are expected to engage in increased cross-border acquisitions or cooperate with local gold companies in resource-rich regions to develop and capitalize on the mineral resources. Gold companies with acquisition and integration experience, as well as those with a sound capital structure and strong financing capabilities will be more successful in such transactions.

ENTRY BARRIERS

Principal entry barriers to the gold industry include the following:

• Mineral resources. Gold reserves and resources is a gold company’s key to sustainable development. As a majority of domestic gold mines and exploration rights are owned by mid to large gold companies, it is difficult for new entrants to obtain substantial gold resources. Gold companies that do not own gold mines have to rely on gold ore suppliers, which gives rise to uncertainty concerning the stability of the supply of gold resources and may affect their operating performance.

• Capital. Intensive capital investment is required for both start-up and stay-in mining operations in the gold industry. Capital availability plays a critical role in determining gold mining projects’ practicability and therefore poses high barriers to new entrants with limited financing capability.

• Technology. As gold resources in surface mining and shallow-depth mining are depleted, gold mining increasingly requires advanced technologies to extract gold ore in deep underground mining. New entrants may not have and may not be able to develop the technical know-how and experience, the research capabilities to develop the relevant technologies and the capital to procure advanced equipment and machinery necessary to develop such mines.

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• Exploration capabilities. Exploration is an important foundation for increasing gold resources. Exploration activities usually require significant capital investment. Results of exploration activities may vary and depend on the experience and capability of the exploration team. Leading gold companies are usually equipped with experienced exploration teams and advanced equipment, conduct comprehensive planning and utilize scientific exploration methods, which enable them to be more likely to detect gold resources. It is difficult for new entrants to develop exploration capabilities, which make it difficult for them to compete with leading gold companies.

THREATS AND CHALLENGES

The U.S. Federal Reserve is expected to raise interest rates, and the strong position of the U.S. dollar may continue to exert greater pressure on gold. Gold prices are affected by a series of factors, which may further impact global gold supply and demand. Uncertainties of the global economy may make it more difficult for market players to predict gold prices.

COMPETITIVE LANDSCAPE

The top ten gold producers listed in the PRC and/or Hong Kong that operate in the PRC by gold mine production volume in the PRC collectively accounted for 27.3% of total gold mine production volume in China in 2016. We ranked first with a 6.9% market share in terms of 2017 domestic gold mine production volume with 944.9 koz (equivalent to approximately 29.4 tonnes). The following chart sets forth the top ten gold producers listed in the PRC and/or Hong Kong that operate in the PRC in terms of domestic gold mine production in the PRC volume in 2017.

Tonnes 1 Shandong Gold Mining Co., Ltd. 29.39(6.9%)

2 Zhongjin Gold Corp., Ltd. 25.39

3 Zhaojin Mining Industry Co. Ltd. 20.30

4 Zijin Mining Group Company Limited 17.95

5 China Gold International Resources Corp. Ltd. 7.30

6 Hunan Gold Corporation Limited 4.97

7 Western Region Gold Co.,Ltd 3.63

8 Hengxing Gold Holding Co. Ltd. 2.64

9 Lingbao Gold Group Co. Ltd. 2.56 Total PRC Gold Mine Production = 426.14 tonnes

10 Yintai Resources Co., Ltd. 2.15

Source: Frost & Sullivan Analysis

The top ten gold producing mines in China had a total gold mine production volume of 48.77 tonnes in 2017. Five of the top ten gold producing mines in China are located in Shandong province. Of these top ten mines, the largest and second, fifth and sixth largest, being Jiaojia Gold Mine, Sanshandao Gold Mine, Xincheng Gold Mine and Linglong Gold Mine, respectively, are owned by the Group. The aggregate production volume of these four gold mines in 2017 was 712.8 koz (equivalent to approximately 22.2 tonnes).

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The gold mining industry in Argentina is well-developed with steadily increasing gold mine production. The Veladero Mine was the largest gold mine in Argentina in terms of 2017 gold mine production volume at 19.9 tonnes, accounting for 30.6% of total gold mine production volume in Argentina. It was also the largest gold mine in South America and the 11st largest gold mine globally by the same standard. Shandong Gold’s joint operation partner for the Veladero Mine, Barrick Gold, is the largest gold producer in the world in terms of 2017 gold mine production volume.

AISC AND TOTAL CASH COSTS

The following graph sets forth the PRC industry average for gold production cost for the period indicated.

USD/oz 1,300 1,247 1,237 1,200 1,100

1,000 876 862 900 844 830 All-in Sustaining Cost 800 762 721 711 715 681 700 Total Cash Cost 616

0 2012 2013 2014 2015 2016 2017

Source: Frost & Sullivan Analysis

AISC, or all-in sustaining cost, is a recognized method of evaluating gold producers’ current and sustaining operational efficiency. AISC is the total sustaining costs for mining operations of a gold producer and usually denoted in U.S. dollars per ounce of gold produced. AISC is calculated as the sum of total cash costs plus community costs, sustaining capital expenses, corporate, general and administrative expenses (net of stock expenses) and exploration expenses.

Total cash costs includes all direct and indirect mine site cash costs related directly to the activities of producing metals, including mining, ore processing, general and administrative costs, third-party refining expenses, royalties and production taxes, net of by-product revenues. The average total cash cost of PRC gold mines in China declined from US$762 per ounce in 2012 to US$616 per ounce in 2014, mainly caused by declines in raw materials, and the improvement of productivity benefited from the upgraded technical level and improved automation level. The total cash cost then rose to US$715 per ounce in 2017, primarily resulted from the lowering ore grade and increasing refractory mineral resources. This overall decrease was mainly caused by declines in the cost of raw materials such as crude oil, and improvement of productivity as PRC mines upgrade their technologies and enhance automation.

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LAWS AND REGULATIONS RELATED TO OUR PRC OPERATIONS

Overview

PRC gold enterprises are subject to a large number of PRC laws and regulations and extensive government supervision. Such laws and regulations encompass the areas of investment, exploration, mining, processing, smelting, sales, trade as well as environmental protection and labor with respect to gold mines and gold products.

We are mainly supervised and regulated by the following PRC government bodies:

The State Council, as the highest administrative body, which is responsible for formulating and reforming the Chinese government’s investment system, approval system and investment project catalog for governmental approval.

The NDRC, which is responsible for (i) formulating and implementing main policies on China’s economic and social development; (ii) planning the major construction projects and distribution of productive forces; and (iii) examining and approving investment projects with expenditure exceeding certain amount or in special industrial sectors. The competent investment departments of all levels of local governments are responsible for (i) implementing the specific policies formulated by the NDRC; (ii) examining and approving investment projects that are not examined and approved by the NDRC; and (iii) the filing of other enterprise investment projects that do not require examination and approval.

The Ministry of Industry and Information Technology, which is responsible for (i) formulating the planning, industrial policies and standards of industry and information and other sectors (including the gold industry); (ii) setting the access conditions of industry and information and other sectors (including the gold industry); and (iii) organizing and implementing the access conditions of such industries (including the gold industry). The competent departments of industry and information of all levels of local governments are responsible for the production and supervision of the enterprises of industry and information (including the gold industry) within their administrative divisions.

The Ministry of Land and Resources, which is authorized (i) to grant the land use right certificate and the mining right permit; (ii) to approve the transfer and lease of mining rights; and (iii) to review the mining fees and reserves assessment. The competent departments of land and resources of all levels of local governments are responsible for the land and mining administration within their administrative divisions. Due to the institutional reform of the State Council, the functions of the Ministry of Land and Resources are assigned to the MNR. To date, the reform of various levels of provincial and local land and resources branches has not commenced.

The Ministry of Environmental Protection, which is responsible for (i) formulating guidelines, policies and regulations of national environmental protection; and (ii) conducting environmental impact assessment of the major economic and technological policies, development plans and major economic development plans. The competent environmental protection departments of all levels of local governments are responsible for the supervision and inspection of the “Three Simultaneities” of the construction projects within their administrative divisions, as well as the permit

—114— REGULATORY OVERVIEW and supervision of the sewage of the industrial and mining enterprises. Due to the institutional reform of the State Council, the functions of the Ministry of Environmental Protection are assigned to the MEE. To date, the reform of various levels of provincial and local environmental protection branches has not commenced.

The State Administration of Work Safety, which is responsible for the national supervision and administration of work safety to ensure the implementation of relevant national laws and regulations on work safety. The competent work safety supervision and administration departments of all levels of local governments are responsible for the supervision and administration of work safety of industrial and mining enterprises within their administrative divisions, and the supervision and inspection of work safety of the construction projects in terms of the “Three Simultaneities”.

The AQSIQ, which is responsible for leading national product quality administration, product technology supervision, standardization and other items. The competent quality supervision and administration departments of all levels of local governments are responsible for the supervision and administration of product quality of the industrial and mining enterprises within their administrative divisions.

Laws and Regulations Relating to Mineral Resources

According to the PRC Mineral Resources Law, which was promulgated by the Standing Committee of the National People’s Congress on March 19, 1986 and became effective on October 1, 1986, and was amended on August 29, 1996 and August 27, 2009 respectively, all mineral resources of the PRC are owned by the State. The geology and mineral resources department of the State Council, which is now the MNR, is responsible for the supervision and administration of the exploration and mining of mineral resources nationwide. The geology and mineral resources departments of the people’s governments in the respective provinces, autonomous regions and municipalities directly under the central government are responsible for the supervision and administration of the exploration and mining of mineral resources within their own jurisdictions.

According to the Regulation for Registering to Explore For Mineral Resources Using the Block System (礦產資源勘查區塊登記管理辦法), effective as of February 12, 1998 and amended on July 29, 2014, and the Procedures for Administration of Registration of Mining of Mineral Resources (礦產資 源開採登記管理辦法), effective as of February 12, 1998 and amended on July 29, 2014, exploration or mining of mineral resources must obtain exploration permits and mining permits as well as filing registration according to law.

Rights and Obligations of Holders of Exploration Permits

According to the Implementation Rules for the Mineral Resources Law (礦產資源法實施細則) which became effective on March 26, 1994, the rights exercisable by a holder of an exploration permit include, among other things, the following: (i) to carry out exploration in the designated area and within the prescribed time; (ii) to have access to the exploration area and its adjacent areas; (iii) to

—115— REGULATORY OVERVIEW temporarily use the land in accordance with the needs of the exploration project; (iv) to have the priority in obtaining the mining right of the mineral resources as specified on the exploration permit and the exploration right of other newly discovered minerals within the designated exploration area; (v) upon fulfillment of the prescribed minimum expenditure requirements, to transfer the exploration right to any third party upon government approval; and (vi) to sell the mineral products extracted from the surface of the land in the exploration area, except for those mineral products which are required by the State Council to be sold to designated units.

The obligations of a holder of an exploration permit include, among other things, the following: (i) to commence and complete the exploration work within the term of the exploration permit; (ii) to carry out the exploration work in accordance with the exploration plan and to ensure no occurrence of unauthorised mining activities; (iii) to carry out integrated exploration and assessment on the paragenetic and associated mineral resources; and (iv) to submit an exploration report of the mineral resources to the relevant government authority for approval.

Pursuant to the Regulation for Registering to Explore for Mineral Resources Using the Block System (礦產資源勘查區塊登記管理辦法) which became effective on February 12, 1998 and amended on July 29, 2014, holders of the exploration permits shall complete the minimum exploration investment from the date of obtaining the exploration permit: (1) RMB2,000 per square kilometer for the first exploration year; (2) RMB 5,000 per square kilometer for the second exploration year; and (3) RMB10,000 per square kilometer for each exploration year from the third exploration year.

Rights and Obligations of Holders of Mining Permits

According to the Implementation Rules for the Mineral Resources Law (礦產資源法實施細則), the rights exercisable by a holder of a mining permit include, among other things, the following: (i) to engage in mining activities in the designated area and within the term prescribed under the mining permit; (ii) to set up production facilities and amenities within the designated area; (iii) to engage in exploration and production within the vicinity of the mine as set out in the mining permit; (iv) to sell the mineral products, except for those minerals which are required by the State Council to be sold to designated units; and (v) to acquire the land use rights attaching to the mine.

The obligations of a holder of a mining permit include, among other things, the following: (i) to carry out mining activities in the prescribed designated area and within the term of the mining permit; (ii) to effectively protect and reasonably extract the mineral resources and to integrate the use of the mineral resources; (iii) to pay resources tax and resources compensation levy; (iv) to submit to the supervision and management by the relevant government authorities; and (v) to submit a report on the utilization of mineral resources to the relevant government authority.

Usage Fees and Renewal of Exploration and Mining Permits

Holders of exploration permits and holders of mining permits are subject to exploration right usage fees and mining right usage fees, respectively. In accordance with the Regulation for Registering to Explore For Mineral Resources Using the Block System (礦產資源勘查區塊登記管理

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辦法), exploration right usage fees shall be calculated according to the exploration year and shall be payable on an annual basis. The rate of exploration right usage fee for the first year to the third year of exploration shall be RMB100 per square kilometer per year. From the fourth year of exploration onwards, the rate will be increased by RMB100 per square kilometer per year. However, the annual maximum rate shall not exceed RMB500 per square kilometer. In accordance with the Procedures for Administration of Registration of Mining of Mineral Resources (礦產資源開採登記管理辦法), mining right usage fees shall be payable on an annual basis. The rate of mining right usage fee shall be RMB1,000 per square kilometer of mining area per year.

In accordance with the Regulation for Registering to Explore For Mineral Resources Using the Block System, the maximum validity period of exploration permits shall be three years. In accordance with the Procedures for Administration of Registration of Mining of Mineral Resources, the validity period of a mining permit shall be determined according to the scale of the mine. The maximum validity period of the initial term of a mining permit for a big-scale mine, medium-scale mine and small-scale mine shall be 30 years, 20 years and 10 years, respectively.

In accordance with the relevant provisions stipulated in the Regulation for Registering to Explore For Mineral Resources Using the Block System and the Procedures for Administration of Registration of Mining of Mineral Resources, exploration permits and mining permits can be renewed within a prescribed period prior to their expiration, upon compliance with the prescribed extension procedure. Each renewal of exploration permit shall not exceed two years. If a holder of a exploration permit or mining permit fails to renew its permit, such exploration or mining permit shall be automatically annulled upon expiration.

Related Resources Tax

Pursuant to the Provisional Regulations on Resource Tax of the PRC (中華人民共和國資源稅暫 行條例) which became effective on January 1, 1994 and amended on September 30, 2011, the mineral resource tax rate for raw ore of non-ferrous metal minerals other than rare earth ore is RMB 0.4-30/tonne, and the amount of resources tax payable is the sales or private usage of mineral products multiplied by the applicable tax rate.

The MOF and the SAT issued the Notice on Policies with respect to Adjusting the Resource Tax of Rock Gold Ore (關於調整岩金礦資源稅有關政策的通知), which became effective on May 1, 2006. The notice, among other things, adjusted upwards the rates of resource tax for various grades of rock gold ore. The resource tax rates applicable to rock gold ore ranges from RMB1.5-7/tonne.

Pursuant to the Circular of Ministry of Finance and State Administration of Taxation Concerning Comprehensive Implementation of Resource Tax Reform (財政部、國家稅務總局關於全面推進資源稅 改革的通知) (Cai Shui [2016] No. 53) issued by MOF and SAT on May 9, 2016 and became effective on July 1, 2016, the basis of calculation for resource tax of 21 categories of resources (including gold ore) shall be changed from sales quantity of raw ore to sales amount of raw ore, concentrates (or raw ore processed products), sodium chloride junior products or gold ingots with effect from July 1, 2016, in which the basis of tax calculation for gold ore will be the sales amount of gold ingots at the tax rate of 1% - 4%. Also, for mineral resources produced from eligible mines in the depletion period, the resource tax amount levied will be reduced by 30%.

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Laws and Regulations Relating to the Administration of Gold

Pursuant to the Administrative Regulations on Gold and Silver of the PRC (中華人民共和國金 銀管理條例) promulgated and implemented on June 15, 1983 and revised on January 8, 2011, purchases of gold and silver were made centrally by the PBOC. No entity or individual was permitted to purchase gold and silver without the consent of the PBOC. All gold and silver produced by mining enterprises, rural communes, brigades, armed forces or individuals engaged in the production of gold and silver (including those with ore exploration, production and smelting as their supplementary business) were required to be sold to the PBOC, and could not be retained individually for sale, exchange or use. Entities requiring gold and silver for use were required to submit a proposal to the PBOC on the proposed use of gold and silver for examination and approval.

On October 30, 2002, the SGE commenced operation under the supervision of the State Council. Thereafter, the PBOC ceased its operation in gold allocation and gold purchase. All PRC gold companies are now required to sell their standard gold bullion through the SGE, and prices of gold on the SGE are determined by market demand and supply, which essentially converge with the price of gold in the international market. On February 27, 2003, the State Council promulgated the Decision of the State Council in relation to Termination of the Second Batch of Administrative Approval Projects and Amendment of the Management Method of Certain Administrative Approval Projects (國 務院關於取消第二批行政審批專案和改變一批行政審批專案管理方式的決定) and cancelled the approval requirements for the production and sale of gold. As a result, the policy of “centralized purchase and allocation of gold” as stipulated under the Administrative Regulations on Gold and Silver of the PRC has been terminated in practice.

Since the promulgation of the Administrative Permission Law of the PRC (中華人民共和國行政 許可法) on August 27, 2003 (implemented on July 1, 2004), the State Council reformed the administrative approval system and clarified that the outstanding projects would be subject to administrative approval by its departments. The State Council promulgated the Decision of the State Council on the Enactment of Administrative Permission for Certain Administrative Approval Projects Which Shall Be Retained (國務院對確需保留的行政審批專案設定行政許可的決定) on June 29, 2004 and made revisions on January 29, 2009 and August 25, 2016. According to the Decision and Measures for the Import and Export of Gold and Gold Products (黃金及黃金製品進出口管理辦法), the import and export of gold and gold products remain subject to administrative examination and approval. The authority responsible for such examination and approval is the PBOC. Such decision became effective as of April 1, 2005.

Laws and Regulations Relating to Environmental Protection

The Ministry of Ecology and Environment is responsible for supervising and administering environmental protection matters throughout the country and formulating national environmental quality and pollutant discharge standards and takes charge of the supervision and administration of environmental protection matters throughout the country, while the competent departments of the environmental protection administration at or above the county level take charge of the administration and supervision of environmental protection matters within their jurisdictions.

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The PRC laws and regulations relating to environmental protection mainly include: Environmental Protection Law of the People’s Republic of China (中華人民共和國環境保護法) (revised on April 24, 2014 and implemented on January 1, 2015), Water Pollution Prevention and Control Law of the People’s Republic of China (中華人民共和國水污染防治法) (promulgated on June 27, 2017 and implemented on January 1, 2018), Atmospheric Pollution Prevention and Control Law of the People’s Republic of China (中華人民共和國大氣污染防治法) (promulgated on June 27, 2017 and implemented on January 1, 2018), Law of the People’s Republic of China on the Prevention and Control of Environment Pollution Caused by Solid Wastes (中華人民共和國固體廢物污染環境防治法) (promulgated and implemented on November 7, 2016) and Implementation Regulation on the Environmental Protection Tax Law of the People’s Republic of China (中華人民共和國環境保護稅法 實施條例) (promulgated on December 25, 2017 and implemented on January 1, 2018).

Pursuant to the aforesaid laws and regulations, enterprises that discharge and dispose of toxic and dangerous substances such as waste water, waste gas and solid waste must comply with the national and local standards of use, and shall declare to and register with the relevant environmental protection administration authorities and pay pollution discharge fees as required depending on the circumstances.

Pursuant to the Law on Environmental Impact Assessment of the PRC (中華人民共和國環境影響 評價法) coming into effect on September 1, 2003 and revised on July 2, 2016, construction entities should prepare or fill in the environment impact reports, reporting forms of environment impact or registration forms of the environment impact according to the degree of environmental impact caused by the construction projects. If a construction project may result in a material impact on the environment, an environmental impact report is required, which thoroughly appraises the potential environmental impact. If the construction project may result in a slight impact on the environment, an environmental impact report of analyzing or appraising the specific potential environmental impact is required; and if the construction project may result in very little impact on the environment, an environmental impact appraisal is not required but an environmental impact form shall be filed.

Pursuant to the Management Measures for Environmental Protection Acceptance of Completed Construction Projects (建設項目竣工環境保護驗收管理辦法) coming into effect on February 1, 2002 and revised on October 11, 2015 and the Regulations on the Administration Construction Project Environmental Protection (建設項目環境保護管理條例) revised on July 16, 2017 and implemented on October 1, 2017, a construction project shall not be put into production or use before environmental protection completion acceptance.

According to the “Several Opinions on Demarcating and Strictly Keeping the Ecological Redlines”《關於劃定並嚴守生態保護紅線的若干意見》 ( ) issued by the General Office of the CPC Central Committee (中共中央辦公廳) and the General Office of the State Council on 7 February 2017, an ecological redline system shall be preliminarily established by the end of 2020. According to the Notice of the General Office of the People’s Government of Shandong Province on Further Enhancing the Task of Ecological Redline Demarcation (Lu Zhen Ban No. [2016] 59) (山東省人民政府辦公廳關 於進一步做好生態紅線劃定工作的通知(魯政辦字[2016]59號), the governments and authorities at all levels shall complete the task of demarcating and surveying the ecological redline by the end of November 2017. As of the Latest Practicable Date, the adjustment work for the ecological redline was still ongoing.

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Laws and Regulations Relating to Production Safety

The PRC government has formulated a relatively comprehensive set of laws and regulations on production safety, including the Law on Work Safety of the PRC (中華人民共和國安全生產法) (coming into effect on November 1, 2002 and revised on August 31, 2014), the Law on Mine Safety of the PRC (中華人民共和國礦山安全法) (coming into effect on May 1, 1993 and revised on August 27, 2009) as well as Implementation Rules for the Mine Safety Law of the People’s Republic of China (中華人民共和國礦山安全法實施條例) (coming into effect on October 30, 1996) promulgated by the State Council, covering mineral resources exploration, mining and mine construction. The State Administration of Work Safety (國家安全生產監督管理總局) is responsible for the overall supervision and management of the safety production nationwide, while the departments in charge of safety production at the county level or above are responsible for the overall supervision and management of the safety production within their own jurisdictions.

The PRC government implements a licensing system for production safety of mining enterprises under the Regulations on Work Safety Permits (安全生產許可證條例) (coming into effect on January 13, 2004 and revised on July 29, 2014). No mining enterprise may engage in production activities without holding a valid production safety license. Enterprises which fail to fulfill the production safety conditions may not carry out any production activity. Mining enterprises which have obtained the production safety licenses shall not lower their production safety standards, and shall be subject to the supervision and inspection by the licensing authorities from time to time. If the licensing authorities are of the opinion that the mining enterprises do not fulfill the production safety requirements, the production safety licenses may be withheld or revoked.

The PRC Government has also formulated a set of national standards on production safety for the mining industry. In general, the mine design shall comply with production safety requirements and industry practice.

Mining enterprises must establish and improve the safe production responsibility system. Managers of mines shall be responsible for the safe production in their respective enterprises. Mining enterprises must give safety education and training to their workers and staff; those without receiving safety education and training may not take up a post of duty.

Pursuant to the relevant requirements of the Law on Mine Safety of the PRC (中華人民共和國礦 山安全法), the Regulations on Reporting, Investigation and Treatment of Work Safety Accidents (生產安全事故報告和調查處理條例) (State Council Order No. 493), the Notice on Regulating the Inspection for Acceptance upon Completion of Safety Facilities in Metal and Non-metal Mine Construction Projects (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 (SAWS — [2016] No.14), the authorities in charge of mining enterprises under the people’s governments at or above the county level shall exercise the following functions and responsibilities with respect to the control of safety work in mines: (i) to inspect the implementation of laws and regulations on safety in mines by mining enterprises; (ii) to examine and

— 120 — REGULATORY OVERVIEW approve designs of safety facilities in mine construction projects; (iii) to supervise the inspection for acceptance upon completion of safety facilities in mine construction projects; (iv) to manage the training of managers of mines and personnel in charge of safety work in mining enterprises; (v) to investigate and handle work safety accidents at mines; and (vi) other controlling functions and responsibilities provided for in laws and administrative rules and regulations.

Upon occurrence of accidents, mining enterprises shall immediately take measures to rescue their workers and report any casualty to the relevant authority. In the event of a general mine accident, the mining enterprise shall be responsible for investigating and handling the case. In the event of a fatal accident, the government, the relevant authority, the labor union and the mining enterprise shall conduct investigation and handle the case together. In addition, mining enterprise shall pay compensation to any staff who was injured or died in the accident in accordance with the national requirements. Such mining enterprise may only resume production after the relevant danger at the scene has been eliminated.

Pursuant to Measures on the Implementation of Work Safety Permit for Non-Coal Mining Enterprises (非煤礦礦山企業安全生產許可證實施辦法) (coming into effect on May 17, 2004 and revised on May 26, 2015), non-coal mining enterprises must obtain the production safety permit and are prohibited from engaging in any production activities without obtaining the permit.

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 revised on August 28, 2004 and 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) promulgated on January 1, 1999 and revised on July 29, 2014, land in the PRC is either state-owned or collectively-owned. Land owned by the state and collectively-owned by peasants may be allocated to units or individuals for use according to law. Lawfully registered land ownership and land use rights are protected by law. In the case of temporary use of state-owned land or land collectively-owned by farmers 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. Land users shall sign contracts with relevant land administrative department or rural economic collective organizations or village committees for the temporary use of land, depending on the ownership of land and shall pay land compensation fees as stipulated in the contracts for the temporary use of land. The term for the temporary use of land shall generally not exceed two years.

Pursuant to the PRC Mineral Resources Law, in mining mineral resources, a mining enterprise or individual must observe the legal provisions on environmental protection to prevent pollution of the environment. In mining mineral resources, a mining enterprise or individual must economize on the use of land. In case cultivated land, grassland or forest land is damaged due to mining, the mining enterprise concerned shall take measures to utilize the land affected, such as by reclamation, tree and grass planting, as appropriate to the local conditions. Anyone who, in mining mineral resources, causes losses to the production and well-being of other persons shall be liable for compensation and shall adopt necessary remedial measures.

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Pursuant to the Regulation on Land Reclamation (土地復墾條例) promulgated and coming into effect on March 5, 2011 and the Measures for the Implementation of the Regulation on Land Reclamation (土地復墾條例實施辦法) promulgated on December 27, 2012 and coming into effect on March 1, 2013, the production and construction entities or individuals shall be responsible for the reclamation of the land destroyed by their production and construction activities. A land user shall, when handling the application for a piece of construction land or handling the application for the mining right, submit the plan for land reclamation for approval. Where the plan for land reclamation does not meet the relevant requirements, the construction land use right or the mining license cannot be obtained. If a land user implements land reclamation in accordance with the land reclamation plan, he shall report to the competent land and resources authorities of the local people’s governments at or above the county level for examination and acceptance.

Laws and Regulations Related to the Enterprise Income Tax

Pursuant to the EIT Law which became effective on January 1, 2008 and amended on February 24, 2017, and the Regulations for the Implementation of Enterprise Income Tax Law《企業所得稅法 ( 實施條例》) which became effective on January 1, 2008, enterprises lawfully incorporated in the PRC or enterprises incorporated according to the laws of foreign countries (regions) but with de facto management organization located in the PRC are resident enterprises. Resident enterprises shall pay enterprise income tax on all income sourced within and outside the PRC at the tax rate of 25%. For industries and projects which receive key support and encouragement for development from the State, preferential treatment on enterprise income tax will be available; qualified small enterprises with thin profit will be levied enterprise income tax at a reduced tax rate of 20%; high-tech enterprises receiving key support from the State will be levied enterprise income tax at a reduced tax rate of 15%.

Laws and Regulations Related to Labour and Personnel

In accordance with the Labour Law of the PRC《中華人民共和國勞動法》 ( ) which became effective on January 1, 1995 and amended on August 27, 2009, labour contract shall be entered between all employers and employees. The policy of the wages shall be paid according to the performance, equal pay for equal work, lowest wage protection and special labour protection for female worker and juvenile workers shall be implemented. The Labour Contract Law of the PRC《中 ( 華人民共和國勞動合同法》) which became effective on January 1, 2008 and amended on December 28, 2012, and Implementing Regulations of the Labour Contract Law of the PRC《中華人民共和國 ( 勞動合同法實施條例》) which became effective on September 18, 2008, regulate the relationships between employers and their employees as well as the entering, execution, performance, modification, withdrawal or termination of labour contracts; improve the labour contractual system, clarify the respective rights and obligations of both parties to labour contracts, and protect the legal rights of employers and employees.

In accordance with the Social Insurance Law of the PRC《中華人民共和國社會保險法》 ( ) which became effective on July 1, 2011, and the Several Provisions on Implementing the Social Insurance Law of the PRC《實施〈中華人民共和國社會保險法〉若干規定》 ( ), the State establishes social insurance systems such as basic pension insurance, basic medical insurance, work-related injury

— 122 — REGULATORY OVERVIEW insurance, unemployment insurance and maternity insurance so as to protect the rights of citizens in receiving material assistance from the State and the society in accordance with the law when getting old, sick, injured at work, unemployed and giving birth. Employers and individuals within the territory of the PRC shall pay their social insurance premiums in accordance with laws.

In accordance with the Regulation on the Management of Housing Provident Fund《住房公積 ( 金管理條例》) which became effective on April 3, 1999 and amended on March 24, 2002, an employer shall go to a management center of housing provident fund to make deposit registration and go to an entrusted bank to go through the procedures for opening its employee’s housing provident fund account when approved by the Management Center of Housing Provident Fund. When employing new staff or workers, the employer shall undertake housing fund payment and deposit registration at a management center of housing provident fund within 30 days from the date of the employment, and shall go through the formalities of opening or transferring housing provident fund accounts of staff and workers at a commissioned bank with the verified documents of the management center of housing provident fund.

Laws and Regulations Related to Foreign Investment

The Company Law of the PRC (the “Company Law”) was promulgated by the Standing Committee of the National People’s Congress of the PRC (中國全國人民代表大會常務委員會)on December 29, 1993 and became effective on July 1, 1994, which was further amended on December 25, 1999, August 28, 2004, October 27, 2005 and December 28, 2013, with the latest amendment became effective on March 1, 2014. The Company Law governs two types of companies: limited liability companies or joint stock limited companies incorporated within the territory of PRC. Both types of companies have the status of legal persons. Shareholders’ liabilities of both limited liability company and joint stock limited company are limited to the registered capital contributed by the Shareholder. The Company Law shall also apply to foreign-invested companies. Where laws on foreign investment have other stipulations, such stipulations shall apply.

The Catalogue for Guidance of Foreign Investment Industries《外商投資產業指導目錄》 ( ) jointly promulgated by the National Development and Reform Commission and the MOFCOM, on which the latest amendment was made on June 28, 2017 and became effective on July 28, 2017, and Special Management Measures for Market Entry of Foreign Investment (Negative List) (2018 version) (《外商投資准入特別管理措施(負面清單)(2018年版)》), promulgated on June 28, 2016 and became effective on July 28, 2018 regulate the market entry of foreign investment in different industries. Foreign investment industries are divided into two categories and covered by “Catalogue for Encouraged Foreign Investment Industries” and “Special Management Measures for Market Entry of Foreign Investment (Negative List for the Market Entry of Foreign Investment)”. Among which, the Special Management Measures for Market Entry of Foreign Investment (Negative List for the Market Entry of Foreign Investment) is further divided into “Catalogue for Restricted Foreign Investment Industries” and “Catalogue for Prohibited Restricted Foreign Investment Industries”. Industries not included in the Special Management Measures for Market Entry of Foreign Investment (Negative List for the Market Entry of Foreign Investment) are permitted foreign investment industries. Businesses of the Company and its subsidiaries in the PRC are all not included in the “Special Management Measures for Market Entry of Foreign Investment”.

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The Provisional Measures for the Filing Administration of Establishment and Changes of Foreign-Invested Enterprises (2018 Revision)《外商投資企業設立及變更備案管理暫行辦法 ( (2018修訂)》) promulgated by the MOFCOM on June 29, 2018 and became effective on June 30, 2018 set out the prescribed procedures for the establishment and changes of foreign-invested enterprises which are not subject to the special management measures on admission as stipulated by the State. Foreign-invested enterprises and their investors shall provide information for filing and completing the declaration form for filing application truthfully, accurately and completely according to such provision measures without any false records, misleading statements or material omission.

Other Relevant Laws and Regulations

Reforms of Investment Systems by the State Council

Pursuant to the Decision of the State Council on the Reform of Investment System (國務院關於 投資體制改革的決定), which came into effect on July 16, 2004, significant changes have been made to the government approval regime for major investment projects in the PRC. All projects that do not use governmental funds will no longer require the implementation of an approval system but requiring the implementation of the endorsement system and registration system. With respect to non-government invested projects, endorsements will only be provided for large and restricted projects. Other projects, regardless of the scale, will only require registration. Pursuant to the Catalog of Investment Projects for the Approval of the Government (2016 version) (政府核准的投資項目目錄 （2016年本）), gold mining and processing projects shall be approved by provincial governments.

LAWS AND REGULATIONS RELATED TO OUR ARGENTINA OPERATIONS

Law on Foreign Investments

As a general rule, Section 20 of the Argentine Constitution (“AC”) provides that “Foreigners enjoy within the territory of the Nation all the civil rights of citizens; they may exercise their industry, trade and profession; own real property, buy and sell it... They are not obliged to accept citizenship or to pay extraordinary compulsory taxesѧ”.

In accordance with such section, the Law 21,382 on Foreign Investments provides in its relevant part as follows:

• Foreign investors who invest capital in Argentina for the promotion of new economic activities, or for the development or improvement of existing ones, shall have the same rights and obligations as those granted to national investors by the AC and the laws, subject to the terms of this law and to the terms of any promotion or special regimes.

• Foreign investors may transfer abroad the net realized profits derived from their investments, as well as repatriate their investments.

• Foreign investors may use any of the legal forms of organization provided under national laws.

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Local companies with foreign capital may have access to domestic credit facilities with the same rights and under the same conditions as local companies with domestic capital

Major Laws and Regulations on Mining and Gold Production

The Argentine Constitution

Argentina is organized as a federal regime. The country is formed by provinces and the autonomous City of Buenos Aires. Under such federal regime, the provinces retain all powers not expressly delegated to the National Government through the AC. Each of the provinces are, in turn, formed by municipalities.

According to the AC, (i) provinces are the owners of the natural resources located therein (Section 124); (ii) provincial authorities are the ones that award mining rights and concessions (Section 121), and (iii) National Congress has been and is in charge of issuing the Argentine Mining Code (the “AMC”).

The AMC

The AMC governs the rights, obligations and procedures related to the acquisition, exploitation and use of the minerals in all of the Argentine territory. Provinces retain the power to regulate procedures within the AMC.

The following are the main principles of the AMC: (i) these principles uniformly applicable throughout all the Argentine territory (i.e., all provinces); (ii) provide that clear and final title to mining concessions is granted for an indefinite term; (iii) contain a general prohibition for the state to exploit mines (concessions are granted to individual or companies); (iv) priority of mining activities over surface activities (and owners) are recognized and established as principle.

The AMC divides minerals in three categories according to the importance/value thereof, and in the case of the mines corresponding to the first category, that includes gold and silver, the soil or surface is considered an accessory of the mine. This category of mines belongs exclusively to the province where said mines are located, and can be exploited by private institutions or individuals only by virtue of a legal concession granted by the competent authority.

The AMC separates the property of the mine from the property of the surface land and treats them independently. The mine and the land over it constitute two different properties. Mines are considered in the AMC as real estate separately from the surface property over them. Private institutions or individuals can obtain from the respective provincial mining entities the exclusive rights to explore and mine minerals via permits and concessions.

The AMC considers that both mining exploration and exploitation, and the concession of a mine and related acts, have higher priority than any other activity of the soil (this concept is called “utilidad pública” or public interest). Consistently, surface owners cannot prevent the granting of mining rights and properties or commencement and/or continuity of mining activities thereon, but have a right to

— 125 — REGULATORY OVERVIEW collect an indemnity as a consequence of the use of the land by the miner and the damages derived from mining activities. Moreover, land over which a mining concession has been granted is legally subject to different types of easements (for example, right of way, occupation of land, use of water, among others).

According to the AMC, mining rights are granted by means of exploration permits or mining concessions.

A cateo is an exclusive exploration permit granted by the correspondent mining authority for a certain period of time that covers a specific area2. The size of a cateo is measured in units of 500 hectares (“has.”). The minimum size of a cateo is one unit and the maximum size is 20 units (10,000 has.). A cateo of one unit has a duration of 150 days. For each additional unit, its duration is increased by 50 additional days. Cateos exceeding 4 units in size must be periodically reduced in size. Once 300 days have elapsed, 50% of the area in excess of 4 units must be relinquished. After 700 days, 50% of the remaining area in excess of 4 units must be relinquished.

Mainly, the steps to be taken to obtain a cateo may be summarized as follows: (i) application and payment of canon (exploration fee); (ii) graphic register certification that the area is available; (iii) registration of the application; (iv) publication of the application and notice to the surface owner; (v) grant of the cateo to the applicant. The cateo application filed with the correspondent mining authority in order to obtain the cateos, vests the applicant with priority vis-à-vis third parties claiming permits for the same areas.

Under the AMC, mines are ore deposits that are granted through concession to privates individuals or companies in units called pertenencias (mine claims). A discovery claim becomes a mine once it is registered and granted as such. The steps to be taken to obtain a mine may be summarized as follows: (i) application (discovery claim) (the date and time of the claim is registered and a sequential number is assigned to the presentation); (ii) graphic register certification that the area is available; (iii) registration and concession of the mine; (iv) publication of the registration and concession of the mine; (v) statutory works (labor legal), claim of pertenencias and survey of the land by the interested party; (vi) grant of the pertenencias to the applicant (equivalent to a property title). Discovery claims are written applications filed with the correspondent mining authority in order to obtain the mines, which vest the applicant with priority vis-à-vis third parties claiming mining rights in the same areas, provided that the applications concerned do not overlap with other mining rights granted or applied for before. To claim a discovery, the discoverer must submit to the mining authority, jointly with the discovery claim, a sample of the ore discovered. The discovery claims must state the point of discovery (which must be the same place as that from which the submitted sample was taken) using Gauss Kruger coordinates. The discoverer must also indicate by Gauss Kruger coordinates an area not larger than twice the maximum size of the mining concession (twice the maximum area of the mine claims, named exclusion area), within which the discoverer will perform exploration works to confirm the discovery. The area must include the discovery point and must be regular (except as affected by pre-existing claims or surface obstacles). This area will remain unavailable to third parties until legal survey approval takes place.

2 There is no limit related to the depth of a cateo.

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According to the AMC the mining concession vests the concessionaire with a property title over the mine, and therefore mining concessions are also called mining properties. Within the concession the miner can carry out exploitation works.

The mining properties (also known as mining concessions or mines) are, by law, granted for an indefinite term under certain conditions including: (i) the fulfillment of certain legally required works on the mine; (ii) the payment of exploitation fees to the province called Canon; (iii) the presentation and fulfillment of a plan containing minimum investment requirements; and (iv) avoid abandonment of the works and mining activity.

The Argentine government, through Mining Investment Law 24,1963 (as amended by Laws 24,2964 and 25,429,5 the “MIL”), established the investment system applicable to mining activities (“Mining Investment System”), which was regulated by Decree 2686/19936 and by other regulatory, amending and supplementary rules. The main benefits arising from the MIL are the following:

(i) Mining projects are granted with fiscal (including tax and custom duties) and foreign exchange control regulations stability for a term of 30 years at the national, provincial and municipal level (which is counted as from the filing of a feasibility study for the project);

(ii) The amounts invested in prospecting, exploration and feasibility studies can be deducted from income tax;

(iii) The early return of VAT fiscal credits resulting from exploration works is provided. This benefit entails the return of all VAT effectively paid for all the operations subject to tax and related to the activities, assets and services that legally allow for the application of the benefit;

(iv) The accelerated amortization of capital goods is admitted, setting forth a method to allocate accelerated amortization intended to prevent the losses from becoming statute barred;

(v) The assets imported to be included in the mining production process are duty free; and

(vi) A cap is placed on the royalties payable to the pertinent provincial government at 3% of the production value over pit head value to all provinces that adhered to MIL.

The scope of the benefits arising from MIL depends on the characteristics of each concession. Some of the benefits arise directly from the terms of the MIL without further requirements or conditions to be fulfilled by the beneficiaries; and other benefits require the fulfillment of certain obligations as a condition precedent to the application thereof.

3 Published in the Official Bulletin on May 24, 1993. 4 Published in the Official Bulletin on January 13, 1994. 5 Published in the Official Bulletin on June 1, 2001. 6 Published in the Official Bulletin on January 3, 1994.

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Gold Exports

According to the regulations on the goods related to the following tariff listings of the Mercosur Harmonized Tariff Schedule: 7108.12.10, “gold alloy or gold bullion”; 7108.12.90, “rough gold (including platinum gold), in ingots”; and 7108.12.90, “rough gold absorbed on fine coal”, no restrictions exist regarding to gold exports in Argentina.

As from September 4, 2018, an export duty of 12%, with a cap of 4 Argentine Pesos per U.S. dollar, shall be paid for export of goods.

Major Laws and Regulations on Environmental Protection in Connection with Mining

The provisions related to environmental protection applicable to the mining activity are included in the AMC.

Section 233 of the AMC establishes that “Miners may freely exploit their mining concessions, without being subject to rules other than those pertaining to their safety, police and environmental protection. The protection of the environment and the preservation of the natural and cultural heritage in the mining activity field shall be subject to the provisions of Section Two of this Title and to those laid down in due time as per section 41 of the National Constitution”.

With regards to environmental management instruments, the AMC establishes that those performing the mining activities must submit to the (provincial) enforcement authority, prior to commencing with any activity an Environmental Impact Report (the “EIR”). Likewise, AMC provides for an EIR assessment procedure, which may conclude with its approval through the issue by the competent provincial authority of an Environmental Impact Statement (the “EIS”) for each project or actual implementation stages (Section 252). The EIS must be renewed at least every two years (Section 256).

Each of the mining phases (i.e. prospection, exploration and exploitation) have to be evaluated through the submission of an EIR. The minimum content of the EIR for each stage is regulated. Once the project is environmentally approved, the provincial mining entities monitor the fulfillment of the environmental conditions, commitments and requirements arising from the EIR and the EIS.

Regarding environmental licenses, the EIS is the most important permit needed from the environmental side to perform operations. At the provincial level (San Juan), the EIS is regulated by Provincial Law 6571, amended by Provincial Law 6800, which basically states that all works or activities projects that might directly or indirectly alter the province environment shall require an EIS issued by the Environmental Policy Office (Subsecretaría de Política Ambiental), which shall be the enforcement authority hereof, except for mining activities governed by complementary title “Environmental Protection of Mining Activities” of the AMC. In the case of such activities, the Mining Department (Departamento de Minería) or any agency that replaces it shall enforce this law and issue the EIS, with the intervention of the Environmental Policy Office.

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Mining companies are required to submit an update of its Environmental Impact Report (EIR) at least every two years. Such update must describe the results of the environmental protection actions taken by those companies and the occurrence of new events.

As a consequence of the 1994 amendment to Section 41 of the AC, the National Congress has been empowered to issue minimum environmental protection standards applicable to all activities, including mining. In short, pursuant to the provisions of Section 41 of the AC and provided that the local jurisdictions are not altered, the National Government (National Congress) is expressly empowered to impose on all provinces a series of conditions and minimum environmental protection parameters and the provinces may lay down more stringent rules above those requirements or which regulate them without impairing or reducing the scope thereof.

Based on the powers granted by Section 41 of the AC, the National Congress enacted the General Environmental Law (Law No. 25,675) establishing Minimum Environmental Protection Standards also applicable to mining.

Some of the Minimum Environmental Protection Standards included under the General Environmental Law are the following: (i) the obligation, prior to the execution of any activity, to submit and obtain approval of an environmental impact report, (ii) the existence of a non-binding public hearing with members of the communities that could be affected by a certain project or activity, (iii) the hiring of an environmental insurance policy, etc.

Federal Hazardous Waste Law No. 24,051 (the “HWL”) is applicable to the generation, handling, transportation, treatment and final disposal of hazardous waste that is generated or located in places subject to national jurisdiction and that is subject to an interjurisdictional management. Main obligations arising from the HWL, its regulatory decree and complementary regulations are: (a) registration with the National Registry of Generators and Operators of Hazardous Waste (Registro Nacional de Generadores y Operadores de Residuos Peligrosos) and obtain a hazardous waste generation certificate; (b) register the generation, transportation and final disposal of hazardous in a document known as a manifest; (c) file annual affidavits and pay an annual fee; (d) keep a book to record all aspects of hazardous waste management; (e) adequately manage hazardous waste with authorized providers (treatment facilities and carriers); and (f) adequately store hazardous waste. Administrative penalties imposed because of violations of the HWL range from fines to the cancellation and suspension of enrollment in the register. For a second offense, the penalties increase. The province of San Juan adheres to the HWL.

By reason of the increase in mining activities in areas of the Andean region, certain regulations aimed at protecting glaciers and the periglacial environment have been issued. In this context, Law No. 26,639 on Minimum Standards for the Protection of Glaciers (the “Glaciers Law”) has been passed.

The Glaciers Law establishes a prohibition that prevents, almost completely, to conduct activities in glaciers and in periglacial areas. Therefore, it is extremely important to take such prohibitions into account upon assessing a mining project located in areas containing glaciers or comprised in periglacial areas.

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San Juan province, where Veladero Mine is located, has been passed its own provincial law for the protection of glaciers (Law No 8144). The San Juan glacier law does not prohibit a specific activity, but establishes a generic prohibition on any activity that may entail the destruction or relocation of the glaciers included in the Provincial inventory or that may interfere with their advancement. Furthermore, with respect to the activities that were in progress before the entry into force of the law, the San Juan law provides that they may continue to be performed, subject to the pre-existing environmental controls.

Major Laws and Regulations on Health and Safety

The provisions on occupational health and safety are built on Law 19,587 and its regulatory decree (Decree 351/79), and the relevant supplementary and regulatory provisions. These provisions contain the minimum occupational health and safety standards that must be observed at workplaces (medical service, check-ups, etc.) and also technical issues related to each area (lighting, loads, physical positions, weight handling, machinery, noise, environmental pollution, etc.). In addition, specific regulations may be adopted with respect to certain activities, which regulations shall exclusively and solely apply to the relevant activity.

Decree 249/2007 provides specific health and safety rules applicable to mining activities. Mining companies must formulate internal health and safety programs and file them with the enforcement authority for review and approval. Further, mining companies must implement a health and hygiene service that can be internal or external.

Major Laws and Regulations on Labor and Employment

Regulations on labor relations establish the minimum guidelines that must be followed between the parties. The Employment Contract Law (Law 20,744) and its regulatory and supplementary provisions set forth the duties and rights of the parties (employer and employee) and also the minimum standards on types of employment contracts, work schedule, remuneration, leaves of absence, manner of termination and severances. These regulations apply to individual employment relationships.

Law 23,551 and its regulatory and supplementary provisions define the framework applicable to collective bargaining relations between the company and the relevant trade union and contain provisions on trade union organizations, rights and obligations of trade unions, collective bargaining, content of collective bargaining agreements and process for negotiation and approval thereof.

A collective bargaining agreement is an agreement entered into by and between the trade union acting on behalf of the relevant industry workers and one company or group of companies or entity representing companies engaged in a given industry. A collective bargaining agreement contains specific labor conditions applicable to the industry (categories, work schedule, salaries, benefits, etc.), its scope of application and representation (both territorial and personal) as well as the base remuneration of each job category, which is regularly negotiated on an annual basis.

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Major Laws and Regulations on Tax

In Argentina there are three levels of authorities that may create and levy taxes, namely the federal government, the provinces (or states) and the municipalities (or counties). The main Argentine taxes applicable to a company (subsidiary or a branch) are those described below.

Federal Taxes

Income Tax (“ITL”).

Corporate Income

For fiscal years initiated before January 1, 2018, companies pay a flat income tax rate amounting to 35% on their net taxable income at the end of the fiscal year.

Law 27,430, in force since December 30, 2017 (the “Tax Reform”), contemplates a gradual reduction of the corporate income tax rate from 35% to 25%. For fiscal years beginning as from January 1, 2018 and until December 31, 2019, the rate will be 30%. For fiscal years beginning as from January 1, 2020, the rate will be 25%.

Dividends

Since the Tax Reform dividend taxation is as follows:

(i) Dividends arising from fiscal years in which the company paying the dividend was subject to a 35% corporate income tax rate (which is the tax rate applicable for fiscal years initiated before January 1, 2018) are not subject to any income tax withholding. However, any dividend payment or profit distribution, in excess of the taxable income accumulated at the end of the fiscal year preceding its distribution or remittance (minus any income tax paid plus any dividends received) is subject to an income tax withholding of 35% commonly referred to as the equalization tax.

The equalization tax may also be applicable in case of a company liquidation and/or redemption of shares or ownership interests of local entities.

(ii) Dividends arising from fiscal years in which the company paying the dividend was subject to a 30% corporate income tax rate (which is the tax rate applicable for fiscal years beginning as from January 1, 2018 and until December 31, 2019) are subject to a tax withholding of 7%.

(iii) Dividends arising from fiscal years in which the company paying the dividend was subject to a 25% corporate income tax rate (which is the tax rate applicable for fiscal years beginning as from January 1, 2020) are subject to a tax withholding of 13%.

The equalization tax shall not be applicable to dividend distributions arising from profits accrued in fiscal years initiated as from January 1, 2018.

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Thin Capitalization — Limitation on interest deductibility

The Tax Reform established new rules on the limitation of interest deductibility on financial debts applicable for fiscal years beginning as from January 1, 2018. According to these new rules, which are still subject to certain implementation regulations to be issued by the executive branch, the deduction of financial interest arising from related parties (local and from abroad) in a fiscal year cannot exceed the higher of: (i) 30% of the company’s net income (before deducting the interest on financial debts and the depreciations authorized by the ITL) or (ii) a cap per year to be determined by the executive branch. There is limited possibility to carry forward disallowed interest (up to five fiscal years) or excess capacity (from the last three fiscal years) for relief in other fiscal years. For these purposes, the term “interest” also comprises foreign exchange differences and adjustments, if applicable, originated in the financial debts. These limitations will not be imposed if it can be duly evidenced: (i) that the ratio of the interest subject to the limitation to the net income in the local company is not greater than the worldwide consolidated group’s ratio of financial debts with independent parties to its net income; or (ii) that the beneficiary of the interest has been subject to taxation for these profits.

Transfer Pricing

Transactions between related parties must be carried at arm’s length. Transfer pricing rules apply when an Argentine company enters into business transactions with: (i) A related company located abroad, or (ii) A non-related company located in a non-cooperative jurisdiction in the exchange of information or a low tax jurisdiction, and the prices agreed upon in such transactions do not reflect normal market practices (for example, are not at arm’s length).

To the extent that the taxpayer cannot prove the foregoing, the tax authorities can make transfer pricing adjustments to the income and expenses allocated between the parties.

Sale of Shares

In the case of non-residents, gains from the transfer of shares or interests in local companies shall be subject to an effective tax rate of 13.5% on the gross sales price or alternatively, to an effective tax rate of 15% on the net gain (by deducting from the sales price the actual costs allowed under Argentine regulations).

Indirect transfers of assets located in Argentina

As from the Tax Reform a transfer by a non-resident of a share or interest in a company, fund, trust or similar entity, permanent establishment or any other equivalent entity organized, domiciled or located outside Argentina, when the value of such share or interest is derived substantially from assets located in Argentina, shall be taxable in Argentina. For such transfer to be treated as Argentine-source income and, thus, subject to taxation in Argentina, the following conditions must be met:

(a) the market value of the shares, ownership interests, membership interests, securities or rights alienated or interest held by the alienor in the foreign entity, at the time of the sale or in any of the twelve months immediately preceding the sale, derives at least in a 30%

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from the value of one or more of the following assets, the ownership of which is held by the foreign entity directly or through other entity or entities, namely: (i) shares, rights, membership interests or other equity securities conferring the ownership or control of or a right to the profits in a company, fund, trust or entity organized in Argentina; (ii) a permanent establishment in Argentina; or (iii) any other assets located in Argentina or rights thereto; and

(b) the shares, ownership interests, membership interests, securities or rights alienated — per se or jointly with other entities controlled by or affiliated with the alienor, with the alienor’s spouse, cohabitant or other taxpayers who are the alienor’s relatives (lineal ascendants or descendants or collaterals, relatives by consanguinity or affinity, up to the third degree) — represent, at the time of the sale or in any of the twelve months immediately preceding the sale, at least 10% of the equity of the foreign entity that directly or indirectly holds the assets mentioned in (a) above.

The Argentine-source income shall be proportionate to the value that the assets in Argentina represent in the value of the alienated interest. If incontestable evidence is furnished, in the manner provided by the regulations, that such transfers occurred within a group of companies, then no Argentine-source taxable income shall be deemed to exist.

Implementation regulations are still pending issuance by the Argentine Executive Branch to ascertain the scope of this new taxable event that will be applicable to transfer of shares or interest in foreign entities acquired as from December 30, 2017.

Tax on Minimum Deemed Profit

Tax on minimum deemed profit is levied at a 1% rate on assets, located in Argentina or abroad, owned (among others) by Argentine companies. Assets owned by companies benefited by the Mining Investment Law 24,196 and used for their activity are exempted from this tax. According to Law 27,260 this tax shall not be levied for fiscal years beginning on or after January 1, 2019.

Value Added Tax

VAT is levied on the sales of movables in Argentina, on contracts for the performance of works and services in general, and on imports of movables. Also, VAT is payable on services rendered from abroad which are effectively used in Argentina and on leases of real state (with some exemptions). The general VAT rate is 21%, while some taxable events are subject to a 27% rate. For certain activities or capital goods a reduced rate applies amounting to 10.5%. Exports of goods and/or services are not subject to VAT. Exporters are allowed to request for the reimbursement of the input VAT related to exports, generating a balance in its favor.

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Personal Assets Tax

This tax is payable by local companies at a rate of 0.25% of the equity value (valor patrimonial proporcional, as reflected in the last financial statement closed) of any shares or interests in local companies, held at December 31 of each year by individuals, undivided estates and foreign entities. The local company has the right to be reimbursed by the shareholders for the tax paid; including by foreclosing on the shares or by withholding dividends.

Tax on Bank Credits and Debits

This tax is levied on any credit and debit in a bank current account. The general tax rate applicable is equal to 0.6% for each credit and 0.6% for each debit, although in certain cases a decreased rate may apply. A 34% of the 0.6% applicable on the amounts credited in a bank accounts may be computed as a credit for payment of income tax or tax on minimum deemed profit.

Tax on Bank Credits and Debits

This tax is levied on any credit and debit in a bank current account. The general tax rate applicable is equal to 0.6% for each credit and 0.6% for each debit, although in certain cases a decreased rate may apply. Also, there are certain specific tax rates for cases where the use of a bank account is avoided, etc. Please be advised that a percentage equal to 33% of the 0.6% tax levied on credits as well as on debits in the said bank accounts may be computed as a credit for payment of Income Tax or Tax on Minimum Deemed Profit for fiscal years commencing as from January 1, 2018.

Provincial Taxes

Turnover Tax

Turnover tax (Impuesto sobre los Ingresos Brutos), is levied on all kinds of industrial or commercial activities carried out habitually and for a consideration by each of the Argentine provinces and the city of Buenos Aires. The tax base comprises gross income (or the total amount received in cash, in kind or as a service) accrued as a result of the taxpayer’s commercial activity and the tax rate varies depending upon the activity and the jurisdiction.

Exports of goods are currently exempted from this tax (while exports of services are exempted in most jurisdictions, but not all). In case activities are carried out in more than one province, an agreement (Convenio Multilateral) entered into amongst the provinces and the city of Buenos Aires is applied to avoid multiple taxation. The province of San Juan grants an exemption of this tax for mining activities.

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Stamp Tax

Stamp tax is levied by most provinces on documents evidencing transactions for a consideration, such as contracts, acknowledgement of debts, incorporation of companies, promissory notes, corporate capital increases, transfer of real estate, etc. In general, the rate applied amounts to 1% on the economic value of the agreement, except on the transfer of real estate which rate is usually higher. Acts, contracts and operations relating to the exploration and exploitation of mineral substances are exempted from this tax in the province of San Juan.

Municipal Taxes

Municipal taxes are grouped in various categories and their respective taxable basis and applicable rate depend on the kind of activities carried out and the appropriate jurisdiction but, in general terms, they are not relevant in economic terms.

Major Laws and Regulations on Foreign Exchange Control

Repatriation, Dividend, Capital Reduction or Foreign Financing

At present there are no foreign exchange restrictions regarding repatriation and/or payment of dividends abroad to a foreign investor. The following internal decision procedures and disclosure responsibilities need to be complied for repatriation, dividend, capital reduction or foreign financing.

Pursuant to the Argentine General Companies Law. No. 19,550 (AGCL), both corporate resolutions (repatriation or dividend) must be duly approved by the local company. Basically, a quotaholders’ meeting in case of a company, or shareholders’ meeting in case of a corporation, duly summoned, must be held to consider the approval of the repatriation or dividend, which shall be based on a closed and approved financial statement, and managers’ and syndic reports.

In the case of capital reductions, public notices must also be published. The local company must also be updated in its mandatory reports with the Argentine Central Bank regarding foreign indebtedness and report on direct investments. Regarding foreign indebtedness, according to the latest regulations of the Argentine Central Bank (BCRA) and the National Secretariat of Finance, proceeds from borrowings abroad are not subject to the obligation of being entered and traded on the Argentine FX Market and there is no minimum mandatory stay period in Argentina for money borrowed from abroad.

Exports of goods and services

With regards to the exports of goods and services from Argentina, Decree 893/2017, recently issued7, repeals the obligation to bring into Argentina the proceeds in foreign currency from export of goods transactions.

7 Published in the Official Bulletin on November 2, 2017.

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OVERVIEW

We were the largest among gold producers listed in the PRC and/or Hong Kong that operate in the PRC in terms of 2017 gold mine production volume in the PRC. We are engaged in gold exploration, mining, processing, smelting and sales. With our base in Shandong province, the largest gold producing province in China in terms of 2017 gold mine production volume, we have achieved rapid development through organic growth as well as domestic and overseas acquisitions. As of March 31, 2018, we controlled and operated a total of 12 PRC Mines located in Shandong province, Inner Mongolia autonomous region, Fujian province and Gansu province and operated the Veladero Mine in Argentina jointly with Barrick Gold, a leading global gold company, through our 50% indirect interest in MAG. According to the F&S Report, Veladero Mine was the largest gold mine in operation in South America in terms of 2017 gold mine production volume.

OUR HISTORY

Our key promoter, SDG Group Co., is a large-scale state-owned enterprise with more than 40 years of experience in the gold business. It was established in July 1996 by conversion from its predecessor, Shandong Province Gold Industry Company (山東省黃金工業總公司), which was incorporated in 1975. Our Company was established in January 2000, and our A Shares have been listed on the Shanghai Stock Exchange since August 28, 2003.

As of the Latest Practicable Date, our registered capital was RMB1,857,118,809, comprising 1,857,118,809 Shares. For details of the previous changes in our share capital after the establishment of our Company, please see “Appendix VIII — Statutory and General Information” in this Prospectus.

Milestones

Major milestones in our history of establishment and development are summarized as follows:

January 2000 Our Company was established by our key promoter, SDG Group Co., and four other promoters.

February 2001 “Research on Mining Methods of Deposits under the Complex Conditions of Xincheng Gold Mine” (新城金礦複雜條件礦床 採礦方法研究) led by Xincheng Gold Mine won the Second Prize of the National Science and Technology Progress Awards (國家科學技術進步獎二等獎) granted by the Ministry of Science and Technology of the PRC.

December 2001 We became an accredited gold supplier of the Shanghai Gold Exchange (in establishment).

August 2003 We were listed on the Shanghai Stock Exchange.

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January 2008 We acquired (i) exploration and mining permits of Linglong Gold Mine, Sanshandao Gold Mine, Yinan Gold Mine and Qingdao Gold Mine-Xinhui mine area, and (ii) mining permits of Sizhuang mine area and Wangershan mine area of Jiaojia Gold Mine, which laid the foundation for our strategic layout of gold mines in Shandong.

December 2008 We acquired approximately 73.52% interest in Chifengchai Gold Mine, which was our first mine outside Shandong province and realized our strategic layout of gold mines in Inner Mongolia autonomous region.

March 2011 Our Xincheng Gold Mine, Sanshandao Gold Mine and Guilaizhuang Gold Mine were selected by the MLR as the first batch of “National Level Pilot Green Mines” (國家級綠色礦山試點單位) in the PRC.

March 2012 We acquired 70% interest in Xihe Zhongbao Gold Mine and realized our strategic layout of gold mines in Gansu province.

October 2012 We acquired 80% interest in Fujian Yuanxin Gold Mine and realized our strategic layout of gold mines in Fujian province.

October 2016 We acquired (i) exploration and mining permits of Linglong Gold Mine-Dongfeng mine area, (ii) exploration permit of Sanshandao Gold Mine-Xinli mine area, (iii) entire interest in Penglai Gold Mine, and (iv) 70.65% interest in Guilaizhuang Gold Mine, which further boosted our mining resources in Shandong.

December 2016 We were admitted as a constituent stock of SSE 50 Index of the Shanghai Stock Exchange.

June 2017 We acquired 50% interest in the Veladero Mine located in San Juan Province of Argentina, being our first overseas mine, and realized our strategic layout of gold mines in Argentina of South America.

September 2017 We were admitted as a constituent stock of the Hang Seng China A Industry Top Index.

November 2017 According to F&S Report, our Jiaojia Gold Mine and Linglong Gold Mine were among the few gold mines in China that have reached a cumulative gold mine production volume of 100 tonnes, (equivalent to approximately 3,215.1 koz).

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Promoting for Establishment

In July 1996, with approval from the People’s Government of Shandong Province (山東省人民 政府), the former Shandong Province Gold Industry Company (山東省黃金工業總公司) and the Linglong Gold Mine, Xincheng Gold Mine, Jiaojia Gold Mine, Sanshandao Gold Mine and Yinan Gold Mine of Shandong province were converted into a wholly state-owned enterprise and formed SDG Group Co. Our Company was established on January 31, 2000 with approval from Shandong Province Economic System Reform Commission (山東省經濟體制改革委員會) and the People’s Government of Shandong Province. Our largest shareholder, SDG Group Co., acted as the key promoter to establish our Company together with four other promoters, namely Shandong Zhaojin Group Co., Ltd. (山東招金集團有限公司), Shandong Laizhou Gold (Group) Co., Ltd. (山東萊州黃金(集團)有限公司), Jinan Yuquan Development Centre (濟南玉泉發展中心) (subsequently renamed as Jinan Yuquan Development Co., Ltd. (濟南玉泉發展有限公司)) and Rushan Gold Mine (乳山市金礦) (subsequently renamed as Shandong Jinzhou Mining Group Co., Ltd. (山東金洲礦業集團有限公司)). Most of our promoters were state-owned enterprises in Shandong province. At the time of our establishment, SDG Group Co., Shandong Zhaojin Group Co., Ltd., Shandong Laizhou Gold (Group) Co., Ltd., Jinan Yuquan Development Centre and Rushan Gold Mine held as to 97%, 1%, 1%, 0.6% and 0.4% of our shareholders’ equity, respectively.

Listing of A Shares

In August 2003, we completed the initial public offering of our A shares and listing on the Shanghai Stock Exchange (stock code: 600547). Immediately after the listing of A Shares, our shareholding structure was as follows:

Approximate shareholding percentage

SDG Group Co...... 60.625% Shandong Zhaojin Group Co., Ltd...... 0.625% Shandong Laizhou Gold (Group) Co., Ltd...... 0.625% Jinan Yuquan Development Centre ...... 0.375% Rushan Gold Mine ...... 0.250% Public shareholders ...... 37.500% Total ...... 100%

Since the listing of our A Shares on the Shanghai Stock Exchange and up to the Latest Practicable Date, we had not received any notification from the Shanghai Stock Exchange indicating that we were involved in any non-compliance issues. Our Directors considered that our operation was in compliance with the relevant listing rules of the Shanghai Stock Exchange in all material aspects since the listing date of our A Shares on the Shanghai Stock Exchange.

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Major Shareholding Changes

Equity Division Reform

In March 2006, after obtaining approval from the Shandong SASAC, the Company completed the equity division reform. The shareholders of non-tradable shares of the Company, namely, SDG Group Co., Shandong Zhaojin Group Co., Ltd., Shandong Laizhou Gold (Group) Co., Ltd., Jinan Yuquan Development Centre and Rushan Gold Mine advanced Shares to all the then shareholders of tradable shares on a basis of 2.5 Shares for every 10 existing Shares at nil consideration, in order to convert all non-tradable shares into restricted tradable shares. Upon completion of the equity division reform, all our Shares became tradable shares.

Private Placement in 2008

In January 2008, we completed the private placement of 17,884,051 Shares. Such private placement was divided into two parts, being asset subscription and cash subscription. In respect of the asset subscription, SDG Group Co. and SDG Group Pingdu Gold Co., Ltd. (山東黃金集團平度黃金有 限公司)(“Pingdu Gold”, a subsidiary of SDG Group Co. and subsequently renamed as Qingdao Gold) subscribed for an aggregate of 8,944,051 Shares at a total consideration of RMB992,163,693.20 settled by way of (i) a combination of assets in Linglong Gold Mine, Sanshandao Gold Mine and Yinan Gold Mine, and 2% equity interest in SDG Jincang Mining Co., Ltd. (山東黃金集團金倉礦業有限公 司) held by SDG Group Co., and (ii) assets of Xinhui Gold Mine held by Pingdu Gold. The value of the above assets was appraised by an independent asset valuation institution. In respect of the cash subscription, China Life Asset Management Company Limited (中國人壽資產管理有限公司)(“China Life Asset Management”), China International Fund Management Co, Ltd. (上投摩根基金管理有限 公司)(“CIFM”), China Southern Asset Management Co., Ltd. (南方基金管理有限公司)(“CSAM”), Beijing Kaiyuan Jiusheng Investment Co., Ltd. (北京開元久盛投資有限公司)(“Kaiyuan Jiusheng”) and Rongtong Fund Management Co. (融通基金管理公司)(“Rongtong Fund”) contributed a total of RMB991,714,200 in cash to subscribe for 8,940,000 Shares.

The final issue price for the private placement was RMB110.93 per Share, which was determined on the basis of the average closing price of A Shares of the Company for 20 trading days preceding the announcement date of the Board resolution and having duly considered the interests of the shareholders with tradable shares. In January 2008, the change of registration at the Shanghai branch of China Securities Depository and Clearing Corporation Limited (中國證券登記結算有限公司上海分 公司) was completed in respect of the above Shares. At the time of the private placement, except for SDG Group Co., our Controlling Shareholder and its wholly-owned subsidiary Pingdu Gold, all the other counterparties were Independent Third Parties.

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The table below sets out the shareholding structure immediately before and after the private placement in January 2008:

Approximate Approximate shareholding shareholding percentage percentage immediately immediately before private after private placement placement

SDG Group Co...... 51.53% 50.25% Pingdu Gold...... — 1.13% China Life Asset Management ...... — 1.12% CIFM...... — 1.12% CSAM ...... — 1.09% Kaiyuan Jiusheng ...... — 0.84% Rongtong Fund ...... — 0.84% Other shareholders of tradable shares...... 48.47% 43.60% Total ...... 100% 100%

Capital Increases in 2008, 2009 and 2010

In July 2008, the registered capital of the Company was increased to RMB355,768,102 by way of capital reserve transfer to share capital on a basis of 10 existing Shares for 10 shares for all the then shareholders.

In June 2009, the registered capital of the Company was increased to RMB711,536,204 by way of capital reserve transfer to share capital on a basis of 10 existing Shares for 10 shares for all the then shareholders.

In December 2010, the registered capital of the Company was increased to RMB1,423,072,408 by way of capital reserve transfer to share capital on a basis of 10 existing Shares for 5 shares for all the then shareholders and stock dividends in respect of retained earnings on a basis of 10 existing Shares for 5 shares for all the then shareholders.

Private Placement in 2016

In October 2016, we acquired the exploration and mining permits of Linglong Gold Mine — Dongfeng mine area, 70.65% equity interest in Guilaizhuang Gold Mine, 100% equity interest in Penglai Gold Mine and the exploration permit of Sanshandao Gold Mine — Xinli mine area through private placement with concurrent financing.

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As consideration for the acquisition of the above assets, we issued an aggregate of 316,621,055 Shares to SDG Group Co., SDG Non-ferrous, SDG Exploration, Yantai Jinmao Mining Co., Ltd. (煙臺市金茂礦業有限公司)(“Jinmao Mining”) and an individual, Wang Zhiqiang (王志強), who was also the controlling shareholder of Jinmao Mining, at RMB14.13 per Share in an aggregate amount of RMB4,473,855,507.15. Of which, 116,836,100 Shares, 71,932,142 Shares, 99,424,515 Shares, 11,603,387 Shares and 16,824,911 Shares were issued to SDG Group Co., SDG Non-ferrous, SDG Exploration, Jinmao Mining and Wang Zhiqiang, respectively. The issue price was determined based on 90% of the average trading price of A Shares of the Company for 20 trading days preceding the pricing base date of this placement, and correspondingly adjusted pursuant to the 2014 and 2015 profit distribution plans.

For concurrent financing, we issued an aggregate of 117,425,346 Shares to Shandong Province State-owned Assets Investment Holding Co., Ltd. (山東省國有資產投資控股有限公司)(“Shandong Province State Holding”), Qianhai Kaiyuan Fund Management Co., Ltd. (前海開源基金管理有限公 司)(“Qianhai Kaiyuan”), SDG Capital Management, Jinmao Mining and the Employee Shareholding Scheme (as defined below) at RMB14.30 per Share for a total amount of RMB1,679,182,447.80. Of which, 25,349,650 Shares, 52,458,041 Shares, 20,979,020 Shares, 6,993,006 Shares and 11,645,629 Shares were issued to Shandong Province State Holding, Qianhai Kaiyuan, SDG Capital Management, Jinmao Mining and the Employee Shareholding Scheme, respectively. The issue price was determined based on 90% of the average trading price of A Shares of the Company for 20 trading days preceding the pricing base date of this placement, and correspondingly adjusted pursuant to the 2014 and 2015 profit distribution plans and the actual subscription amount of the Employee Shareholding Scheme.

With respect to the Employee Shareholding Scheme, we obtained approval from the shareholders’ general meeting of our Company to establish the Phase One Employee Shareholding Scheme of Shandong Gold Mining Co., Ltd. (山東黃金礦業股份有限公司第一期員工持股計劃) (the “Employee Shareholding Scheme”) in May 2015. The eligible participants of the Employee Shareholding Scheme included certain then management members of our Company, our subsidiaries and target companies in connection with the private placement in 2016. On September 19, 2016, our Company issued an aggregate of 11,645,629 Shares to 128 individuals at the price of RMB14.30 per Share under the Employee Shareholding Scheme for a subscription amount of RMB166,532,494.70. The relevant Shares were subject to a lock-up period of 36 months and are currently kept and managed by a professional asset manager. As of the Latest Practicable Date, these Shares accounted for approximately 0.63% of the total number of our Shares. There were no outstanding Shares to be subscribed under the Employee Shareholding Scheme as of the Latest Practicable Date. Certain Directors and senior management of the Company are currently interested in our Shares under the Employee Shareholding Scheme. For details of their shareholding, please see “Directors, Supervisors and Senior Management” in this Prospectus. The Employee Shareholding Scheme does not constitute a share option scheme pursuant to Chapter 17 of the Hong Kong Listing Rules.

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In October 2016, the change of registration at the Shanghai branch of China Securities Depository and Clearing Corporation Limited for the above Shares was completed. The table below sets out the shareholding structure immediately before and after the private placement in October 2016:

Approximate Approximate shareholding shareholding percentage percentage immediately immediately before private after private placement placement

SDG Group Co...... 50.25% 44.80% SDG Exploration ...... — 5.35% SDG Non-ferrous ...... — 3.87% Qianhai Kaiyuan ...... — 2.82% Shandong Province State Holding ...... — 1.37% SDG Capital Management ...... — 1.13% Jinmao Mining ...... — 1.00% Wang Zhiqiang...... — 0.91% Qingdao Gold ...... 1.13% 0.86% Employee Shareholding Scheme ...... — 0.63% Other shareholders ...... 48.62% 37.20% Total ...... 100% 100%

Among the counterparties to this private placement, SDG Group Co. was our Controlling Shareholder at the time of this private placement. SDG Non-ferrous, SDG Exploration and SDG Capital Management were direct or indirect wholly-owned subsidiaries of our Controlling Shareholder. Wang Zhiqiang also was one of the participants of the Employee Shareholding Scheme of our Company and the controlling shareholder of Jinmao Mining. Qianhai Kaiyuan, Shandong Province State Holding were our Independent Third Parties.

OUR MAJOR SUBSIDIARIES

As of the Latest Practicable Date, we directly owned equity interest in 15 subsidiaries in the PRC and Hong Kong, and we indirectly owned equity interest in three subsidiaries and one associated company. In addition, we jointly operated the Veladero Mine through our 50% indirect interest in MAG.

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In general, we own and manage numbers of gold mines through different subsidiaries. Information about our major subsidiaries and branch companies is set out below. For information on our shareholding structure, please see “— Our Shareholding and Corporate Structure” in this Prospectus.

Place of Date of Shareholding Other shareholders and Name incorporation establishment percentage Major business/assets percentage of their shareholdings

Shandong Gold Mining PRC May 27, 2003 100% Holder of Sanshandao N/A (Laizhou) Co., Ltd. Gold Mine and operating Jiaojia Gold Mine

Shandong Gold Group PRC August 1, 2003 100% Holder of Penglai Gold N/A Penglai Mining Co., Ltd. Mine

Shandong Gold Mining PRC October 11, 2006 100% Holder of Qingdao Gold N/A (Laixi) Co., Ltd. Mine-Shanhou mine area

Shandong Gold Mining PRC August 5, 2008 100% Holder of Yinan Gold N/A (Yinan) Co., Ltd. Mine

Shandong Gold Mining PRC August 7, 2008 100% Holder of Qingdao Gold N/A (Xinhui) Co., Ltd. Mine-Xinhui mine area

Shandong Jinshi Mining PRC July 20, 2009 100% Holder of Xincheng N/A Co., Ltd. Gold Mine – Qujia exploration permit

Shandong Gold Mining PRC February 23, 2010 100% Holder of Linglong Gold N/A (Linglong) Co., Ltd. Mine

Shandong Gold Smelting PRC July 19, 2016 100% Gold smelting N/A Co., Ltd.

Shandong Gold Mining PRC May 3, 2017 100% Research and N/A Science and Technology development of core Co., Ltd. mining technology

Fujian Zhenghe Yuanxin PRC September 7, 2004 90.31% Holder of Fujian Zhong Hangsheng 4.19% Mining Co., Ltd. Yuanxin Gold Mine (鍾杭生)

Lin Rongbin (林容彬) 3.00%

Huang Runming (黃潤明) 2.50%

Chifeng Chaihulanzi PRC September 29, 2003 73.52% Holder of Chifengchai Ma Chunming (馬春明) 22.48% Gold Mining Co. Ltd. Gold Mine Li Jinglu (李景祿) 3.99%

Shandong Gold PRC August 27, 1994 70.65% Holder of Guilaizhuang Pingyi County Finance 29.35% Guilaizhuang Mining Gold Mine Bureau (平邑縣財政局) Co., Ltd.

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Place of Date of Shareholding Other shareholders and Name incorporation establishment percentage Major business/assets percentage of their shareholdings

Xihe Zhongbao Mining PRC April 1, 2008 70% Holder of Xihe Tianshui Exploration 5% Co., Ltd. Zhongbao Gold Mine Institute of Gansu Province Non-ferrous Metal Geological Exploration Bureau (甘肅省有色金屬地質勘 查局天水勘查院)

Ye Youtang (葉友堂) 25%

Shandong Jinzhou PRC November 1, 1999 60.43% Holder of Jinzhou Gold Total of 10 individuals 15.87% Mining Group Co., Ltd. Mine and participating who were employees of in the utilization of our Company tailings Rushan Guoxin Asset 23.70% Operation and Management Co., Ltd. (乳山市國鑫資產經營管 理有限公司)

Shandong Gold Mining Hong Kong February 27, 2017 100% Holder of 50% interest N/A (HongKong) Co., Limited in Veladero Mine in Argentina

Shandong Gold Mining PRC October 8, 2000 Branch Holder of Xincheng N/A Co., Ltd. Xincheng Gold company of Gold Mine Mine our Company

MAJOR ACQUISITIONS

Since our incorporation in 2000, we have been striving to achieve integration of resources through acquisitions to expand our gold reserves.

Linglong Gold Mine, Sanshandao Gold Mine, Yinan Gold Mine and Qingdao Gold Mine — Xinhui Mine Area (玲瓏金礦、三山島金礦、沂南金礦及青島金礦 — 鑫匯礦區)

In February 2007, we entered into a share purchase by asset subscription agreement with SDG Group Co. and Pingdu Gold, and an aggregate of 8,944,051 Shares were issued. Pursuant to which, SDG Group Co. used the assets of Linglong Gold Mine, Sanshandao Gold Mine and Yinan Gold Mine and 2% equity interest in SDG Jincang Mining Co., Ltd. held by it to subscribe for 6,937,217 Shares at the consideration of RMB769,545,600. Pingdu Gold used the Xinhui Gold Mine held by it to subscribe for 2,006,834 Shares at the consideration of RMB222,618,200. The above acquisition price was determined based on the evaluation result of an asset valuation report prepared by an independent asset valuer as of June 30, 2006. In January 2008,the delivery of the above assets and the change of registration in respect of the above equity interests were completed. For details of this private placement, please see “— Major Shareholding Changes — Private Placement in 2008”.

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Chifengchai Gold Mine (赤峰柴金礦)

In December 2008, we entered into an agreement with the authorized representative of 274 individual shareholders of Chaihulanzi Gold for the acquisition of 73.52% equity interest in Chaihulanzi Gold held by the said individual shareholders at the consideration of RMB261,741,500. To the best of our knowledge, except for certain transferors being the then management members of Chaihulanzi Gold at the time of launch of the Employee Shareholding Scheme in 2016, the other remaining transferors of this transaction were our Independent Third Parties. The consideration for the transaction was determined through negotiations based on the evaluation result of the asset valuation report prepared by an independent asset valuer as of October 31, 2008 and the long-term reserves of the gold mine under the mining permit held by Chaihulanzi Mining. As of January 18, 2011, the consideration of such acquisition was fully settled.

Jinshi Mining (金石礦業)

In November 2010, we entered into an agreement with Huang Jiayuan (黃加園), who was the individual shareholder of Jinshi Mining and an Independent Third Party, for the acquisition of 75% equity interest in Jinshi Mining at the consideration of RMB1,245,000,000. In December 2011, we entered into another agreement with Huang Jiayuan for the acquisition of remaining 25% equity interest in Jinshi Mining at the consideration of RMB415,000,000. Jinshi Mining owned the exploration permit in relation to Xincheng Gold Mine — Qujia exploration area. The consideration for the transactions was determined through negotiations with reference to an asset valuation report as of October 31, 2010 and an exploration permit valuation report as of August 31, 2010 prepared by independent valuers. In October 2013, we entered into a supplementary agreement with Huang Jiayuan and pursuant to which we agreed to pay an additional sum of RMB3,354,624,000 as supplementary consideration to the acquisition of the equity interest in Jinshi Mining. The supplementary consideration was determined with reference to the gold reserve volume newly discovered by the exploration work completed and filed on May 3, 2013. As of January 23, 2014, the consideration of such transaction was fully settled.

Xihe Zhongbao Gold Mine (西和中寶金礦)

In March 2012, we entered into an agreement with Tian Guolong (田國龍) and Ye Youtang (葉友堂), the individual shareholders of Zhongbao Mining and our Independent Third Parties, for the acquisition of 70% equity interest in Zhongbao Mining held by them at the consideration of RMB723,507,000. The consideration for the transaction was determined with reference to the valuation of reserves within the mine areas under the three exploration permits held by Zhongbao Mining. As of November 29, 2014, we have paid RMB531,680,250 of the consideration. As two of the three exploration permits are currently in the process of boundary and capacity expansion and cannot be transferred, pursuant to relevant terms of the agreement, the remaining unpaid amount of RMB191,826,750 is expected to be settled after the conversion of the said exploration permits into mining permits.

— 145 — HISTORY AND DEVELOPMENT

Fujian Yuanxin Gold Mine (福建源鑫金礦)

In October 2012, we entered into an agreement with five individual shareholders of Fujian Yuanxin, namely Fan Shunsheng (范順生), Lin Rongbin (林容彬), Zhong Hangsheng (鍾杭生), Huang Runming (黃潤明) and Wu Yunying (吳雲英), for the acquisition of 80% equity interest in Fujian Yuanxin held by them at the consideration of RMB490,400,000. The consideration for the transaction was determined based on the asset valuation report prepared by an independent asset valuer as of June 30, 2012. In January 2014, we entered into another agreement with Fan Shunsheng and Fuzhou Dongxin Mining Technology Co., Ltd. (福州東鑫礦業技術有限公司) for the acquisition of 10.31% equity interest in Fujian Yuanxin at the consideration of RMB62,800,000. The consideration for the transaction was determined through negotiations with reference to the asset valuation report prepared by an independent asset valuer as of October 31, 2013. As of May 30, 2014, the consideration for the abovementioned acquisitions was fully settled. Huang Runming was a director and Lin Rongbin was a supervisor of Fujian Yuanxin as of the Latest Practicable Date. Other counterparties of the aforesaid transactions were our Independent Third Parties.

Mawan Exploration Permit (麻灣探礦權)

In May 2014, our wholly-owned subsidiary, Xinhui Mining, entered into an agreement with Qingdao Gold for the acquisition of the exploration permit in Mawan, Shandong province owned by Qingdao Gold at the consideration of RMB236,972,700. Qingdao Gold, as the transferor of this agreement, was a wholly-owned subsidiary of our Controlling Shareholder. The consideration for the transaction was determined with reference to the asset valuation report prepared by an independent asset valuer as of December 31, 2013 and taking into account the actual exploration costs incurred. As of September 27, 2014, the consideration of such transaction was fully settled.

Sizhuang Exploration Permit (寺庄探礦權)

In August 2014, our wholly-owned subsidiary, Laizhou Mining, entered into an agreement with our Controlling Shareholder for the acquisition of the exploration permit in Sizhuang, Shandong province at the consideration of RMB599,279,600. The consideration for the transaction was determined with reference to the asset valuation report prepared by an independent asset valuer as of September 30, 2013 through competitive bidding. As of June 2, 2016, the consideration of such transaction was fully settled.

Penglai Gold Mine and Guilaizhuang Gold Mine (蓬萊金礦及歸來莊金礦)

In May 2015, we entered into agreements with SDG Group Co., SDG Non-ferrous, SDG Exploration, Jinmao Mining and Wang Zhiqiang, respectively, and pursuant to which the Company agreed to issue shares for the acquisition of (i) the exploration and mining permit of Linglong Gold Mine — Dongfeng mine area and related assets and liabilities held by SDG Group Co.; (ii) the 70.65% equity interest in Guilaizhuang Mining and 51% equity interest in Penglai Mining held by SDG Non-ferrous; (iii) the exploration permit of Sanshandao Gold Mine — Xinli mine area held by SDG Exploration; (iv) the 20% equity interest in Penglai Mining held by Jinmao Mining; and (v) the 29%

— 146 — HISTORY AND DEVELOPMENT equity interest in Penglai Mining held by Wang Zhiqiang. The total consideration for the transactions was RMB4,473,855,507, which was determined unanimously through multilateral negotiations with reference to the asset valuation estimated by an independent asset valuer as of June 30, 2014. Please see “— Major Shareholding Changes — Private Placement in 2016” for details of the transaction.

Qianchen-Shangyangjia Exploration Permit (前陳 — 上楊家探礦權)

In March 2017, Laizhou Mining entered into an agreement with the Sixth Geology Team of Shandong Geological Mine Exploration Development Bureau (Shandong No. 6 Geological Mine Exploration Institute) (山東省地質礦產勘查開發局第六地質大隊(山東省第六地質礦產勘查院)), which was an Independent Third Party, for the acquisition of exploration permit in the Qianchen-Shangyangjia mine area at the consideration of RMB892,000,000. The consideration for the transaction was determined through competitive negotiations based on the asset valuation report prepared by an independent asset valuer as of December 31, 2016. As of November 1, 2017, we have paid RMB847,400,000 and the remaining balance of RMB44,600,000 is expected to be settled upon completion of the conversion of the said exploration permit into mining permit.

Veladero Mine

On June 30, 2017, we acquired a 50% interest in the Veladero Mine from Barrick Gold, a leading global gold company, which was listed on the Toronto Stock Exchange (TSE: ABX) and the New York Stock Exchange (NYSE: ABX) in May 1983 and February 1987, respectively. Immediately before the said acquisition, Barrick Gold indirectly held 100% equity interests in MAG which operates the Veladero Mine in Argentina. The Veladero Mine is located in the high Andes Cordillera of central western Argentina. According to the F&S Report, the Veladero Mine was the largest gold mine in Argentina and in South America in terms of 2017 gold mine production volume with approximately 641.1 koz.

In April 2017, our Company and SDG Hong Kong entered into the Share Purchase Agreement with Barrick Gold and Barrick Cayman, pursuant to which, SDG Hong Kong would acquire a 50% equity interest in AGB II, the MAG Assigned Debt and a direct 2.1547% equity interest in MAG. The initial aggregate consideration for the transaction was US$960.0 million and was subsequently adjusted to US$989.8 million based on certain financial metrics pursuant to the Share Purchase Agreement. Such initial consideration (including the adjustment mechanism) was determined through negotiations based on the valuation report and investment analysis report prepared by independent investment banks with reference to the preliminary due diligence investigation result. These transactions were completed on June 30, 2017. Upon completion of these transactions, each of SDG Hong Kong and Barrick Cayman holds a 50% equity interest in AGB II. AGB II holds a 95.6906% equity interest in MAG. SDG Hong Kong holds a 2.1547% equity interest in MAG and two wholly-owned subsidiaries of Barrick Gold hold, in aggregate, a 2.1547% equity interest in MAG. Accordingly, Barrick Gold and we each indirectly hold a 50% interest in the Veladero Mine. As of November 28, 2017, the consideration of such acquisition was fully settled.

— 147 — HISTORY AND DEVELOPMENT

According to the Shareholders’ Agreement, we and Barrick Gold jointly operate the Veladero Mine through MAG and its majority equityholder, AGB II. For the specific arrangement of business operations at the Veladero Mine, please see “Business — Our Operations in Argentina — Shareholders’ Arrangement” in this Prospectus.

As of the Latest Practicable Date, we have completed all approval procedures in China and Argentina.

Jinxing Gold Mine (金興金礦)

In September 2017, our wholly-owned subsidiary, Xinhui Mining, entered into an agreement with Qingdao Pingdu Jinxing Gold Mine (青島市平度金興金礦) and the Villagers’ Committee of Dazhuangzi Village, Xinhe Town (former Huibu Town), Pingdu (平度市新河鎮(原灰埠鎮)大莊子村民 委員會), both of which are Independent Third Parties, for, among other things, the acquisition of the exploration permits in Dazhuangzi — South Sector mine area (大莊子 —南段礦區) and Dazhuangzi — Houjia mine area (大莊子 — 侯家礦區) at an aggregate consideration of RMB174,179,500.56. The consideration for the transaction was determined with reference to the asset valuation report prepared by an independent asset valuer as of April 30, 2017. As of the Latest Practicable Date, we have paid RMB105,687,227.16. The remaining balance will be paid over a term of nine years and is expected to be fully settled before January 31, 2026.

Xincheng Exploration Permit (新城探礦權)

In November 2017, our Company entered into an agreement with our Controlling Shareholder for the acquisition of the exploration permit of “the outer rim and deep part of the gold mine at Xincheng mine area in Laizhou, Shandong (exploration)” (山東省萊州市新城礦區外圍及深部金礦勘探) at the consideration of RMB569,848,000. The consideration was determined by the asset valuation report prepared by an independent asset valuer as of August 31, 2016. As of November 27, 2017, we have paid RMB398,893,600 and the remaining balance of RMB170,954,400 will be settled after obtaining the approval from the Land and Resources Department of Shandong Province (山東省國土資源廳).

Our PRC Legal Advisers confirmed that, save for the recent acquisition under “Xincheng Exploration Permit”, (i) as of the Latest Practicable Date, we had obtained necessary approvals from the relevant PRC authorities required for the above major acquisitions, and (ii) we had completed the procedures for changes in industrial and commercial registrations in the PRC in respect of the above major acquisitions.

During the Track Record Period and up to the Latest Practicable Date, save as disclosed above, we did not conduct any other major acquisitions, disposals or mergers.

— 148 — HISTORY AND DEVELOPMENT

REASONS FOR EXCLUDING SOME BUSINESSES FROM OUR GROUP

As of the Latest Practicable Date, our Controlling Shareholder, SDG Group Co., held and controlled some companies which are engaged in gold mining related business and owned certain gold mine exploration and mining permits. For reasons of not including such companies in our Group, please see “Relationship with Our Controlling Shareholder” in this Prospectus.

OUR SHAREHOLDING AND CORPORATE STRUCTURE

Our Shareholders

As of the Latest Practicable Date, all of our Shares were traded on the Shanghai Stock Exchange. Our Controlling Shareholder, SDG Group Co., directly held approximately 44.80% of our total issued Shares. SDG Exploration, SDG Non-ferrous, SDG Capital Management, Qingdao Gold and SDG Beijing held approximately 5.35%, 3.87%, 1.13%, 0.86% and 0.09% of our total issued Shares respectively as of the same date. Each of SDG Exploration, SDG Non-ferrous, SDG Capital Management, Qingdao Gold and SDG Beijing is a direct or indirect wholly-owned subsidiary of SDG Group Co. Therefore, SDG Group Co. directly and indirectly hold in aggregate approximately 56.11% of our total issued Shares, as of the same date.

Reasons for Listing

In order to implement our strategic goal to become a global leading gold company, meet our capital needs, and further enhance our corporate governance, we are seeking to list on the Hong Kong Stock Exchange, please see “Business — Business Strategy” in the Prospectus for details. We have been focused on consolidation of quality gold mine resources through mergers and acquisitions. We plan to use the proceeds from the Global Offering to repay our loans used for the Veladero Acquisition and any remaining proceeds will be applied to working capital and other general corporate purposes. Please see “Future Plans and Use of Proceeds” in this Prospectus for details.

— 149 — Immediately Before Completion of the Global Offering

The chart below sets out the shareholding structure of our Company and our subsidiaries immediately before completion of the Global Offering.

SDG Group Co.9

100%

SDG Resources DEVELOPMENT AND HISTORY Development

100% 100% 100% 100% 100%

8 SDG Capital SDG Other A Share Qingdao Gold SDG Exploration SDG Non-ferrous Management Beijing Shareholders

5 — 150 — 44.80% 0.86% 5.35% 3.87% 1.13% 0.09% 43.89%

Our Company 1

100% 100% 100% 100% 100% 100% 100% 100% 100% 90.31% 73.52% 70.65% 70% 60.43% 100% Guilaizhuang Mining Guilaizhuang SDG Hong Kong Chaihulanzi Gold Zhongbao Mining Linglong Mining Laizhou Mining Jinzhou Group Penglai Mining Penglai Xinhui Mining Jinshi Mining Yinan Mining Mining Co., Ltd. MiningCo., Fujian Yuanxin Fujian Laixi Mining Laixi SDG Smelting Shandong Gold Gold Shandong Xincheng Gold Gold Xincheng SDG S&T Mine 6 7 2 3 5 4

90% 100% 75% Shenzhen SDGPreciousMetal Qianling Mining Fuling Fuling Mining 11 10

branch company HISTORY AND DEVELOPMENT

1. Immediately before completion of the Global Offering, SDG Group Co. is our Controlling Shareholder, and directly and indirectly holds in aggregate approximately 56.11% equity interest in us. Jinzhou Group, a non-wholly-owned subsidiary of the Company, holds approximately 0.13% of our total issued Shares. 2. Fujian Yuanxin is a limited liability company established in the PRC on September 7, 2004, and was held as to approximately 90.31% by us as of the Latest Practicable Date. Its principal business is operating Fujian Yuanxin Gold Mine. As of the Latest Practicable Date, excluding us, three individuals, namely Zhong Hangsheng (鐘杭生), Lin Rongbin (林容彬) and Huang Runming (黃潤明), held approximately 4.19%, 3.00% and 2.50% equity interest of this company, respectively. Huang Runming was a director and Lin Rongbin was a supervisor of this company as of the same date. Zhong Hangsheng was an Independent Third Party. 3. Chaihulanzi Gold is a limited liability company established in the PRC on September 29, 2003, and was held as to approximately 73.52% by us as of the Latest Practicable Date. Its principal business is operating Chifengchai Gold Mine. As of the Latest Practicable Date, excluding us, two individuals, namely Ma Chunming (馬春明) and Li Jinglu (李景祿), held approximately 22.48% and 3.99% equity interest in this company, respectively. Ma Chunming was a director and Li Jinglu was a supervisor of this company as of the same date. Both Ma Chunming and Li Jinglu are participants of the Employee Shareholding Scheme of our Company. 4. Guilaizhuang Mining is a limited liability company established in the PRC on August 27, 1994, and was held as to approximately 70.65% by us as of the Latest Practicable Date. Its principal business is operating Guilaizhuang Gold Mine. As of the Latest Practicable Date, Pingyi County Finance Bureau held the remaining approximately 29.35% equity interest in this company. 5. Zhongbao Mining is a limited liability company established in the PRC on April 1, 2008, and was held as to 70% by us as of the Latest Practicable Date, Its principal business is operating Xihe Zhongbao Gold Mine. As of the Latest Practicable Date, excluding us, Tianshui Exploration Institute of Gansu Province Non-ferrous Metals Geological Exploration Bureau (an Independent Third Party) and an individual Ye Youtang (葉友堂) held 5% and 25% equity interest respectively in this company. Ye Youtang was also a director of this company as of the same date. 6. Jinzhou Group is a limited liability company established in the PRC on November 1, 1999, and was held as to 60.43% by us as of the Latest Practicable Date. Its principal business is operating Jinzhou Gold Mine and participating in the utilization of tailings. As of the Latest Practicable Date, excluding us, Rushan Guoxin Asset Operation and Management Co., Ltd. (乳山市國鑫資產經營管理有限公司) held 23.70% equity interest in Jinzhou Group, and 10 individuals who were employees of our Company also held in aggregate 15.87% equity interest in Jinzhou Group. 7. SDG Hong Kong is a company established in Hong Kong on February 27, 2017 with limited liability. SDG Hong Kong holds an indirect 50% interest in the Veladero Mine in Argentina through holding a 50% equity interest in AGB II, which holds a 95.6906% equity interest in MAG, and holding a direct 2.1547% equity interest in MAG. Two wholly-owned subsidiaries of Barrick Gold hold the remaining 2.1547% equity interest in MAG. All of the issued shares of SDG Hong Kong are pledged to China Merchants Bank Co., Ltd., New York Branch as collateral for the loan for acquisition of 50% interest in the Veladero Mine in Argentina. 8. We entered into the Profit Forecast Compensation Agreement and relevant supplementary agreements (together, the “Compensation Agreement”) with SDG Group Co. and SDG Non-ferrous when we acquired the relevant assets of Penglai Gold Mine and Guilaizhuang Gold Mine and raised ancillary capital funds in October 2016. Pursuant to the terms of the Compensation Agreement, SDG Group Co. and SDG Non-ferrous shall compensate the Company with their respective Shares held should the committed profit for the year was not achieved. As SDG Non-ferrous was affected by certain industrial safety accidents of third parties in the region and thus failed to achieve the net profit for the year committed in its undertakings in 2016, it was required to compensate 13,015,060 Shares to the Company. Pursuant to the Compensation Agreement, the Company shall repurchase and cancel such Shares at RMB1.00 upon expiry of the profit forecast period in 2019. As of the Latest Practicable Date, such Shares were being held by SDG Non-ferrous without voting power and SDG Non-ferrous shall return in full dividends from those Shares in cash to the Company until cancellation of the Shares upon approval by the Board and general meetings when the profit forecast period expires. 9. On January 23, 2017 and on September 25, 2017, SDG Group Co. pledged its 100,000,000 Shares and 160,000,000 Shares respectively to the Industrial and Commercial Bank of China, Shandong Branch (中國工商銀行山東省分行). Such pledged Shares respectively were used as the collateral for borrowing of SDG Group Co. for its own use, which accounted for approximately 14.00% of total number of our Shares. Industrial and Commercial Bank of China is an authorized institution under the meaning of the Banking Ordinance (Chapter 155 of the Laws of Hong Kong).

— 151 — HISTORY AND DEVELOPMENT

10. Shenzhen SDG Precious Metal is a limited liability company established in the PRC on August 10, 2015, and is held as to 75% by Laizhou Mining as of the Latest Practicable Date. As of the same date, Guizhou Southwest Gold Operation Center Co., Ltd. (貴州西南黃金經營中心有限公司) held the remaining 25% equity interest in this company. Guizhou Southwest Gold is held as to 92% by Chen Kaiyuan (陳開元), who was also a director of Guizhou Southwest Gold. 11. Qianling Mining is a limited liability company established in the PRC on August 9, 2001, which was held as to 90% by Jinzhou Group as of the Latest Practicable Date. As of the same date, Rushan Guoxin Asset Operation and Management Co., Ltd. (乳山市國鑫資產經營管理有限公司) held the remaining 10% equity interest in this company.

— 152 — Immediately After Completion of the Global Offering

The chart below sets out the shareholding structure of our Company and our subsidiaries immediately after completion of the Global Offering.

SDG Group Co.9

100%

SDG Resources DEVELOPMENT AND HISTORY Development

100% 100% 100% 100% 100% SDG H Share Qingdao Gold SDG Capital SDG Other A Share SDG Exploration Non-ferrous8 Management Beijing Shareholders Shareholders

38.08% 0.73% 4.55% 3.29% 0.96% 0.08% 37.31% 15% 5 — 153 —

Our Company 1

100% 100% 100% 100% 100% 100% 100% 100% 100% 90.31% 73.52% 70.65% 70% 60.43% 100% Guilaizhuang Mining Guilaizhuang Zhongbao Mining Zhongbao Chaihulanzi Gold Linglong Mining Linglong Fujian Yuanxin SDG Hong Kong Hong SDG Laizhou Mining Mining Laizhou Yinan Mining Yinan Penglai Mining Penglai Jinzhou Mining Mining Jinzhou Jinshi Mining Xinhui Mining SDG Smelting Laixi Mining Laixi Mining Co., Ltd. Mining Co., SDG S&T SDG Shandong Gold Shandong Gold Xincheng Gold Mine 2 5 6 3 7 4

90% 100% 75% Shenzhen SDGPreciousMetal Qianling Mining Qianling Fuling Mining Fuling 11 10

branch compan y HISTORY AND DEVELOPMENT

1. Immediately after completion of the Global Offering, SDG Group Co. will continue to be our Controlling Shareholder, and directly and indirectly holds in aggregate approximately 47.69% equity interest in us. Jinzhou Group, a non-wholly-owned subsidiary of the Company, will hold approximately 0.11% of our total issued Shares. 2. Fujian Yuanxin is a limited liability company established in the PRC on September 7, 2004, and was held as to approximately 90.31% by us as of the Latest Practicable Date. Its principal business is operating Fujian Yuanxin Gold Mine. As of the Latest Practicable Date, excluding us, three individuals, namely Zhong Hangsheng (鐘杭生), Lin Rongbin (林容彬) and Huang Runming (黃潤明), held approximately 4.19%, 3.00% and 2.50% equity interest of this company, respectively. Huang Runming was a director and Lin Rongbin was a supervisor of this company as of the same date. Zhong Hangsheng was an Independent Third Party. 3. Chaihulanzi Gold is a limited liability company established in the PRC on September 29, 2003, and was held as to approximately 73.52% by us as of the Latest Practicable Date. Its principal business is operating Chifengchai Gold Mine. As of the Latest Practicable Date, excluding us, two individuals, namely Ma Chunming (馬春明) and Li Jinglu (李景祿), held approximately 22.48% and 3.99% equity interest in this company, respectively. Ma Chunming was a director and Li Jinglu was a supervisor of this company as of the same date. Both Ma Chunming and Li Jinglu are participants of the Employee Shareholding Scheme of our Company. 4. Guilaizhuang Mining is a limited liability company established in the PRC on August 27, 1994, and was held as to approximately 70.65% by us as of the Latest Practicable Date. Its principal business is operating Guilaizhuang Gold Mine. As of the Latest Practicable Date, Pingyi County Finance Bureau held the remaining approximately 29.35% equity interest in this company. 5. Zhongbao Mining is a limited liability company established in the PRC on April 1, 2008, and was held as to 70% by us as of the Latest Practicable Date. Its principal business is operating Xihe Zhongbao Gold Mine. As of the Latest Practicable Date, excluding us, Tianshui Exploration Institute of Gansu Province Non-ferrous Metals Geological Exploration Bureau (an Independent Third Party) and an individual Ye Youtang (葉友堂) held 5% and 25% equity interest respectively in this company. Ye Youtang was also a director of this company as of the same date. 6. Jinzhou Group is a limited liability company established in the PRC on November 1, 1999, and was held as to 60.43% by us as of the Latest Practicable Date. Its principal business is operating Jinzhou Gold Mine and participating in the utilization of tailings. As of the Latest Practicable Date, excluding us, Rushan Guoxin Asset Operation and Management Co., Ltd. (乳山市國鑫資產經營管理有限公司) held 23.70% equity interest in Jinzhou Group, and 10 individuals who were employees of our Company also held in aggregate 15.87% equity interest in Jinzhou Group. 7. SDG Hong Kong is a company established in Hong Kong on February 27, 2017 with limited liability. SDG Hong Kong holds an indirect 50% interest in the Veladero Mine in Argentina through holding a 50% equity interest in AGB II, which holds a 95.6906% equity interest in MAG, and holding a direct 2.1547% equity interest in MAG. Two wholly-owned subsidiaries of Barrick Gold hold the remaining 2.1547% equity interest in MAG. All of the issued shares of SDG Hong Kong are pledged to China Merchants Bank Co., Ltd., New York Branch as collateral for the loan for acquisition of 50% interest in the Veladero Mine in Argentina. 8. We entered into the Profit Forecast Compensation Agreement and relevant supplementary agreements (together, the “Compensation Agreement”) with SDG Group Co. and SDG Non-ferrous when we acquired the relevant assets of Penglai Gold Mine and Guilaizhuang Gold Mine and raised ancillary capital funds in October 2016. Pursuant to the terms of the Compensation Agreement, SDG Group Co. and SDG Non-ferrous shall compensate the Company with their respective Shares held should the committed profit for the year was not achieved. As SDG Non-ferrous was affected by certain industrial safety accidents of third parties in the region and thus failed to achieve the net profit for the year committed in its undertakings in 2016, it was required to compensate 13,015,060 Shares to the Company. Pursuant to the Compensation Agreement, the Company shall repurchase and cancel such Shares at RMB1.00 upon expiry of the profit forecast period in 2019. As of the Latest Practicable Date, such Shares were being held by SDG Non-ferrous without voting power and SDG Non-ferrous shall return in full dividends from those Shares in cash to the Company until cancellation of the Shares upon approval by the Board and general meetings when the profit forecast period expires. 9. On January 23, 2017 and on September 25, 2017, SDG Group Co. pledged its 100,000,000 Shares and 160,000,000 Shares respectively to the Industrial and Commercial Bank of China, Shandong Branch (中國工商銀行山東省分行). Such pledged Shares were used as the collateral for borrowing of SDG Group Co. for its own use, which accounted for approximately 14.00% of total number of our Shares. Industrial and Commercial Bank of China is an authorized institution under the meaning of the Banking Ordinance (Chapter 155 of the Laws of Hong Kong).

— 154 — HISTORY AND DEVELOPMENT

10. Shenzhen SDG Precious Metal is a limited liability company established in the PRC on August 10, 2015, and was held as to 75% by Laizhou Mining as of the Latest Practicable Date. As of the same date, Guizhou Southwest Gold Operation Center Co., Ltd. (貴州西南黃金經營中心有限公司) held 25% equity interest in this company. Guizhou Southwest Gold is held as to 92% by Chen Kaiyuan (陳開元), who was also a director of Guizhou Southwest Gold. 11. Qianling Mining is a limited liability company established in the PRC on August 9, 2001, which was held as to 90% by Jinzhou Group as of the Latest Practicable Date. As of the same date, Rushan Guoxin Asset Operation and Management Co., Ltd. (乳山市國鑫資產經營管理有限公司) held the remaining 10% equity interest in this company.

— 155 — BUSINESS

OVERVIEW

We were the largest among gold producers listed in the PRC and/or Hong Kong that operate in the PRC with a 6.9% market share in terms of 2017 gold mine production volume in the PRC, which was 944.9 koz in 2017. We controlled and operated 12 PRC Mines as of March 31, 2018 and jointly operated the Veladero Mine with Barrick Gold on a 50-50% basis. As of March 31, 2018, our total Reserves were approximately 10,901 koz (equivalent to approximately 339.0 tonnes), according to the AAI Report and RPA Report1, among which 10,651 koz (equivalent to approximately 331.3 tonnes) were attributable to our Group. As of March 31, 2018, our total Resources were approximately 31,736 koz (equivalent to approximately 987.1 tonnes), among which 31,148 koz (equivalent to approximately 968.8 tonnes) were attributable to our Group.

Since our inception, we have operated primarily in Shandong province, the largest gold producing province in China in terms of 2017 gold mine production volume, and have gradually expanded our business into the Inner Mongolia autonomous region, Gansu province and Fujian province. Our four flagship PRC Mines ranked among the ten largest gold mines in the PRC in terms of 2017 gold mine production volume. Our Jiaojia Gold Mine, Sanshandao Gold Mine, Xincheng Gold Mine and Linglong Gold Mine ranked first, second, fifth and sixth, respectively, among gold mines in China in terms of 2017 gold mine production volume, with approximately 233.8 koz, 209.1 koz 139.7 koz and 130.6 koz, respectively. As of March 31, 2018, the Reserves and Resources of our PRC Mines were approximately 8,200 koz (equivalent to approximately 255.1 tonnes) and 27,306 koz (equivalent to approximately 849.3 tonnes), respectively, according to the AAI Report. As of the same date, the Reserves and Resources of our PRC Mines attributable to our Group were approximately 7,950 koz (equivalent to approximately 247.4 tonnes) and 26,718 koz (equivalent to approximately 831.0 tonnes), respectively. According to the AAI Report, the LOM of our four flagship PRC mines range from 4 to 13 years. Considering our track record of increasing gold reserves through exploration activities and our high-grade gold resources, AAI believes that our flagship PRC Mines have significant gold resources and strong potential for increasing gold reserves.

As the first step in our overseas expansion, on June 30, 2017 we acquired from Barrick Gold, a leading global gold company, a 50% interest in the Veladero Mine. The Veladero Mine was the largest gold mine in Argentina and in South America in terms of 2017 gold mine production volume with approximately 641.1 koz, according to the F&S Report. Through the Veladero Acquisition, we currently operate the largest overseas gold mine among PRC gold companies. Since the completion of the Veladero Acquisition and starting from July 1, 2017, we have consolidated our 50% proportionate share of the assets and liabilities of the Veladero Mine, and are entitled to 50% of the products of, and recognize 50% of the expenses incurred by, the Veladero Mine. We believe that our interest in the Veladero Mine will continue to make a substantial contribution to our gold mine production volume, Resources and Reserves. As of March 31, 2018, Reserves and Resources of the Veladero Mine attributable to us were approximately 2,701 koz (equivalent to approximately 84.0 tonnes), and 4,430

1 Total Reserves and Resources for our PRC Mines are presented on a 100% basis rather than their respective percentage of ownership by us. Total Reserves and Resources for the Veladero Mine are presented on a 50% basis unless otherwise indicated.

— 156 — BUSINESS koz (equivalent to approximately 137.8 tonnes) according to the RPA Report. Moreover, RPA believes that the Veladero Mine may continue leaching of stacked ore for an additional four years after the LOM as part of LOM improvements, and the potential total gold recoverable during this period and not included in RPA’s Reserve estimate is estimated to be approximately 500 koz.

We are an integrated gold company engaged in gold exploration, mining, processing, smelting and sales. We seek to increase our gold reserves and resources by conducting in-house exploration during our mining activities. Each of our PRC Mines is equipped with one or more processing facilities. As of March 31, 2018, we had 18 processing facilities and two smelting and refining facilities in China. We are committed to optimizing our operations to enhance production efficiency. The economic parameters of our operations (including dilution rate, mining loss rate, processing recovery rate and smelting recovery rate) are leading in the PRC gold industry according to the F&S Report, reflecting our efforts to increase the level of automation and intelligent control in our mining process, develop processing and smelting technologies in-house and invest in world-class imported processing equipment. In addition to smelting and refining gold from our PRC Mines, we also procure dore´and standard gold bullion from third parties to refine and produce gold products.

Our Controlling Shareholder, Shandong Gold Group Co, is a large, state-owned conglomerate controlled by the Shandong SASAC with over 40 years of operating experience in the gold mining industry. Such background, particularly in a province that is the largest gold producing province in China, positions us favorably against competitors when acquiring gold resources. At present, our Controlling Shareholder holds a number of quality gold resources at an early development stage. For instance, in March 2017, SDG Group Co. discovered a significant orebody more than 1,000 meters underground in the Sanshandao Xiling (西嶺) mine area with a resource gold content of approximately 12,300.2 koz. We hold the first right of refusal to acquire such resources from our Controlling Shareholder, and we believe that such resources will be a driving force for our future growth. Moreover, we believe that our Controlling Shareholder’s in-depth experience and technological expertise in gold resource exploration will provide synergies in our discovery of additional resources.

Our revenue in 2015, 2016 and 2017 and the three months ended March 31, 2017 and 2018 amounted to RMB38,774.5 million, RMB49,072.7 million, RMB51,041.3 million, RMB9,711.1 million and RMB14,166.3 million, respectively, and our gross profit amounted to RMB2,599.4 million, RMB3,505.6 million, RMB3,642.6 million, RMB860.2 million and RMB996.0 million, respectively.

COMPETITIVE STRENGTHS

We believe that we will continue to be an active industry consolidator and maintain our leading market position and continued growth through the following competitive strengths:

Largest gold company in China in terms of gold mine production volume in the PRC with significant high-grade gold resources and strong potential for growth

We were the largest among gold producers listed in the PRC and/or Hong Kong that operate in the PRC in terms of 2017 gold mine production volume in the PRC, according to the F&S Report. Our 2017 domestic gold mine production volume was approximately 944.9 koz (equivalent to

— 157 — BUSINESS approximately 29.4 tonnes). Our four flagship PRC Mines ranked among the ten largest gold mines in the PRC in terms of 2017 gold mine production volume. Our Jiaojia Gold Mine, Sanshandao Gold Mine, Xincheng Gold Mine and Linglong Gold Mine ranked first, second, fifth and sixth, respectively, among gold mines in China in terms of 2017 gold mine production volume, with approximately 233.8 koz, 209.1 koz 139.7 koz and 130.6 koz, respectively, according to the same source.

We acquired a 50% interest in Veladero Mine on June 30, 2017, which had a gold mine production volume of approximately 641.1 koz (equivalent to approximately 19.9 tonnes) in 2017, according to the RPA Report. According to the AAI Report and RPA Report, as of March 31, 2018, our total Reserves were approximately 10,901 koz (equivalent to approximately 339.0 tonnes) and our total Resources were approximately 31,736 koz (equivalent to approximately 987.1 tonnes), among which 10,651 koz (equivalent to approximately 331.3 tonnes) and 31,148 koz (equivalent to approximately 968.8 tonnes) were attributable to our Group.

We believe that our significant high-grade gold resources are the main driver for our future growth:

• PRC Mines. China has been the world’s largest gold producer since 2007, according to the F&S Report. At approximately 426.1 tonnes (equivalent to approximately 13,699.4 koz) in 2017, China had the highest gold mine production volume in the world, accounting for 13.0% of 2017 global gold mine production volume. Shandong province is the largest gold producing province in China, with gold produced from gold mines of 55.6 tonnes (equivalent to approximately 1,787.6 koz) in 2017, accounting for 14.1% of gold produced from gold mines in the PRC in 2017, according to the F&S Report. Moreover, Shandong province ranked first in China in terms of 2017 resources, representing 28.5% of total resources in China. As of March 31, 2018, we controlled and operated 12 PRC Mines, nine of which are located in Shandong province. More than 90% of our Resources in the PRC are concentrated in the Laizhou and Zhaoyuan regions, which have the richest gold deposits in Shandong province, according to the AAI Report and the F&S Report. The Reserves of our PRC Mines have a weighted average gold grade of 3.06 g/t, which is higher compared to gold producers listed in the PRC and/or Hong Kong that operate in the PRC, according to the AAI Report and the F&S Report.

• Overseas mine. We completed the Veladero Acquisition on June 30, 2017, in which we acquired a 50% interest in the Veladero Mine. The Veladero Mine was the largest gold mine in Argentina and in South America in terms of 2017 gold mine production volume, according to the F&S Report. As of March 31, 2018, Reserves and Resources of the Veladero Mine attributable to us were approximately 2,701 koz (equivalent to approximately 84.0 tonnes) and 4,430 koz (equivalent to approximately 137.8 tonnes), according to the RPA Report. Based on current levels of gold production and Reserves as of March 31, 2018, the LOM of the Veladero Mine was approximately seven years, according to the same source.

• Ability to increase reserves. During the Track Record Period, we actively carried out exploration work and achieved significant results. Considering our track record of increasing gold reserves through exploration activities and our high-grade gold resources,

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AAI believes that that our flagship PRC Mines have significant gold resources and strong potential for increasing gold reserves. Moreover, RPA believes that the Veladero Mine may continue leaching of stacked ore for an additional four years after the LOM as part of LOM improvements, and the potential total gold recoverable during this period and not included in RPA’s Reserve estimate is estimated to be approximately 500 koz.

One of the lowest operating costs in the PRC gold industry

According to the AAI Report, the operating cash cost of our PRC Mines was approximately US$682 per ounce in 2017, which is lower than the industry average total cash cost of US$715 per ounce for gold mines in China in 2017.1

We believe that our low operating costs are attributable to the following reasons:

• Resources advantages. Our four flagship PRC Mines, namely Sanshandao Gold Mine, Jiaojia Gold Mine, Xincheng Gold Mine and Linglong Gold Mine, primarily produce fragmented alteration rocks and quartz vein ores, the deposits of which are large in size and continuous with higher gold grades on average, according to the AAI Report. With respect to our overseas mine, the Veladero Mine is a large scale open pit mine with relatively low operating costs.

• Developed infrastructure. All four of our flagship PRC Mines, are located in Shandong province and 90% of our gold mine production volume during the Track Record Period were from Shandong province. Because Shandong is the largest gold producing province in China, we enjoy well-developed mining infrastructure support, including transportation, supply of electricity, water, raw materials, mining equipment and ancillary services. Such well-developed infrastructure support enhances our ability to increase production efficiency and economies of scale in our mining operations.

• Robust production capabilities. Our strengths relating to production capabilities are reflected in the following aspects:

— Mining. By refining our mining techniques and enhancing the level of automation and intelligent control in our mining process, we seek to continually enhance mining efficiency and lower dilution rates and mining loss rates. According to the AAI Report, the weighted average dilution rate and average mining loss rate of our PRC Mines was approximately 7.7% and approximately 5.6%, respectively during the Track Record Period, which were one of the lowest in the industry in China according to the F&S Report. According to the same source, the industry average dilution rate and average mining loss rate were 11.4% and 5.8% in 2017, respectively.

1 According to the F&S Report, operating cash cost is generally equivalent to total cash costs (including mining costs, processing costs and general and administrative expenses).

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— Processing. We process run-of-mine ores from our major PRC Mines using a combination of advanced and well-developed processing methods and techniques developed in-house and processing equipment from internationally-recognized manufacturers. For the year ended December 31, 2017, generally we have achieved a processing recovery rate of over 94%, which is higher than the PRC industry average of 83.1%, according to the F&S Report.

— Smelting and refining. Our Shandong Smeltery and Shenzhen Smeltery had an aggregate production volume of 128.4 tonnes (equivalent to 4,128.2 koz) in 2017. Our large production capacity has helped us achieve high economies of scale in our smelting and refining operations. As more than 84% of our gold mine production were smelted in-house during the Track Record Period, we benefit from the cost advantages derived from our vertically integrated operations. Our smelting recovery rate was generally over 99.9% and is among the highest in the industry, according to the F&S Report. We attribute this to the advanced gold smelting and refining technologies that we have developed in-house. According to the F&S Report, as of March 31, 2018, we were one of the few enterprises in China that have met both LBMA Gold and Silver Good Delivery and SGE Gold Ingots and Bars Delivery standards, evidencing the high quality standards of our smelting and refining operations.

Strong acquisition and resource consolidation capability and proven track record of successful acquisitions

Since our A Share listing on the Shanghai Stock Exchange in 2003 and up to 2017, our gold mine annual production volume increased from approximately 2.8 tonnes (equivalent to approximately 90.5 koz) to 35.9 tonnes (equivalent to approximately 1,153.6 koz), representing a CAGR of approximately 20.0%. Since our A Share listing and up to the Latest Practicable Date, we have completed 17 acquisitions, which has enabled us to become a leading gold company in China.

We believe the key driver behind our rapid growth is our ability to identify and integrate quality acquisition targets. Examples of our major acquisitions completed to date are set out below:

• Jincang Gold Mine. In January 2008, we acquired the 100% interest in SDG Jincang Mining Co., Ltd. (the predecessor company of Laizhou Mining) through two transactions. Through this acquisition, we obtained a total of five mining permits for the Xinli mine area, Cangshang mine area and Caojiabu mine area of Sanshandao Gold Mine, the Sizhuang mine area and Wangershan mine area of Jiaojia Gold Mine. According to assessments performed in accordance with PRC mining rights appraisal methods (中國礦業權評估準則), these mine areas had 58 tonnes of gold reserves in the aggregate as of June 30, 2006 and before our acquisition. Through this acquisition, we have been able to achieve economies of scale by constructing shared mining infrastructure and processing facilities for the mine areas in Sanshandao Gold Mine and Jiaojia Gold Mine. In 2017, our Sanshandao Gold Mine and Jiaojia Gold Mine were recognized as two of the top ten cost efficient gold mines in the PRC (中國黃金經濟效益十佳礦山) by China Gold Association (中國黃金協會). Moreover, our investment in mining infrastructure has allowed our Jiaojia Gold Mine and Sanshandao Gold Mine to be two of the most mechanized gold mines and the two largest gold mines in

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China in terms of 2017 gold mine production volume, according to the F&S Report. As of the Latest Practicable Date, we held four exploration permits for Sanshandao Gold Mine and two for Jiaojia Gold Mine, which represent significant potential to increase gold reserves at these mines.

• Chifengchai Gold Mine. In January 2009, we acquired a 73.52% equity interest in Chaihulanzi Gold with a consideration of RMB261.7 million, allowing us to expand our operations from Shandong province to Inner Mongolia autonomous region. Through our mine development and improvement since our acquisition, gold mine production volume at our Chifengchai Gold Mine has increased significantly from 9.7 koz in 2009 before our acquisition. In 2017, the Chifengchai Gold Mine had a total gold mine production volume of approximately 29.0 koz. Through our exploration efforts, Reserves of Chifengchai Gold Mine was approximately 150 koz as of March 31, 2018, according to the AAI Report.

• Veladero Mine. On June 30, 2017, we completed the Veladero Acquisition, which marks the first step in our overseas expansion. See “Business — Our Operations in Argentina.” With a consideration of US$989.8 million, the Veladero Acquisition was the largest cross-border acquisition by a PRC gold company as of the Latest Practicable Date, according to the F&S Report. The Veladero Mine was the largest gold mine in Argentina and in South America in terms of 2017 gold mine production volume, according to the F&S Report. Its 2017 gold mine production volume was approximately 641.1 koz. As of March 31, 2018, the Veladero Mine had approximately 2,701 koz (equivalent to approximately 84.0 tonnes) in Reserves and 4,430 koz (equivalent to approximately 137.8 tonnes) in Resources attributable to us. Based on current levels of gold production and Reserves as of March 31, 2018, the LOM of the Veladero Mine was approximately seven years, according to RPA Report. Moreover, RPA believes that the Veladero Mine may continue leaching of stacked ore for an additional four years after the LOM as part of LOM improvements, and the potential total gold recoverable during this period and not included in RPA’s Reserve estimate is estimated to be approximately 500 koz. See “— Business Strategy — Continue exploration and expansion to increase the reserves of existing mines.” We believe that our interest in the Veladero Mine will continue to make a substantial contribution to our gold mine production volume, Resources and Reserves.

In identifying suitable acquisition targets, we strategically focus on (i) those that have the potential of being successfully integrated into our operations and increasing profitability by adopting our mining techniques and technologies, and (ii) targets located in major gold mining belts with a high potential for increasing reserves. We believe that our strong integration capability, extensive acquisition experience, leading market position, and sound financial position will enable us to consolidate valuable resources, which will in turn strengthen our leading position and increase our profitability.

Sound capital structure and financial condition

We believe that a sound capital structure is critical for our sustainable growth. Our asset-liability ratio and gearing ratio were consistently low compared to major PRC gold producers, according to the F&S Report. As of December 31, 2015 and 2016, our asset-liability ratio was 52.4% and 43.2%,

— 161 — BUSINESS respectively, our gearing ratio was 33.3% and 26.4%, respectively. We financed the Veladero Acquisition through bank borrowings, and as a result, our asset-liability ratio and gearing ratio increased to 59.4% and 62.7% as of December 31, 2017, respectively. As of March 31, 2018, our asset-liability ratio and gearing ratio was 58.6% and 56.8%, respectively. We intend to apply the net proceeds from the Global Offering to repay the bank borrowings used to finance the Veladero Acquisition. Upon completion of the Global Offering, we expect our asset-liability ratio and gearing ratio to be reduced to pre-acquisition levels, which will provide us with the financial strength needed for future acquisitions.

As a large-scale gold company, we have access to gold leasing contracts for short-term financing.1 The proceeds derived from our gold leasing arrangements amounted to RMB6,676.6 million, RMB5,381.6 million, RMB6,468.0 million and RMB3,014.8 million for the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2018. Our gold leasing contracts had relatively low interest rates ranging from 2.4% to 4.85% during the Track Record Period. In addition, we also utilized bank loans to finance our operations. Interest rates of our bank borrowings ranged from 2.56% to 5.70% during the Track Record Period. The interest rates of our financing tools were generally lower than industry average, according to the F&S Report.

Upon completion of the Global Offering, we will be among a small group of gold companies dual-listed in China and Hong Kong with Renminbi and foreign currency financing capabilities. In a capital-intensive gold industry that is experiencing increasing pace of consolidation, we consider that our enhanced financing capability will provide increased flexibility for our future development.

Commitment to occupational safety and environmental sustainability

We are committed to developing and implementing the highest level of occupational safety and environmental protection standards in the industry, which we consider to be a critical factor in our sustainable and continued success as a gold company.

We have consistently adopted higher safety standards than national requirements and continually update and improve upon our internal control measures to enhance production safety in our operations. Our advanced production management system and technologies enable our flagship PRC mines to achieve a high level of mechanization, digitization and intelligent control in the gold production process. Moreover, we monitor various production and safety indicators in real-time to ensure the safety of our underground operations. We devote research resources to develop safe working methods and regularly conduct training for our staff. As a result, we have maintained a safety record with no safety accidents that had a material and adverse impact on our business during the Track Record Period. As of December 31, 2017, all of our four flagship PRC Mines have met the “Level 2 Mine Production Safety Standard” (安全生產標準化二級企業). Two of our subsidiaries were recognized as “Exemplary Enterprises in Building National Safety Culture” (全國安全文化建設示範企業)bythe State Administration of Work Safety and four of our subsidiaries were recognized as “Exemplary Enterprises in Building Safety Culture” at the provincial level.

1 Our gearing ratio would be 71.8% and 45.4% as of December 31, 2015 and 2016, respectively, if our short-term financings through gold leasing had also been included in the calculation. As a result of the Veladero Acquisition, our gearing ratio would be 95.6% and 93.2% as of December 31, 2017 and March 31, 2018 if our short-term financings through gold leasing had also been included in the calculation.

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We have also developed and implemented environmental protection measures which we believe are significantly more stringent than industry and national standards. According to the F&S Report, we were one of the first PRC gold producers to adopt ecological mining in China, which emphasizes on minimizing the impact of mining activities on the environment and ecosystem while creating value. We are committed to research and development of mining technologies and practices to achieve ecological mining. We have undertaken a number of national environmental protection technology research projects. Through our efforts, we have developed a number of environmental protection technologies such as our tailings de-cyanidation technology and underground tailings filling technology, through which we believe could improve the processes and methods of our production operations, which we believe enables us to reduce the environmental impact from our gold mining and production activities. Of the six gold mines recognized as the first batch of “National Level Pilot Green Mines” (國家級綠色礦山試點單位) in the PRC in 2011, three were our gold mines, namely SanShandao Gold Mine, Xincheng Gold Mine and Guilaizhuang Gold Mine, which were further recognized as “National Level Green Mines” (國家級綠色礦山) in the PRC in 2016. As of March 31, 2018, our Jiaojia Gold Mine, Yinan Gold Mine, Jinqingding mine area of Jinzhou Gold Mine and Xinhui mine area of Qingdao Gold Mine were also recognized as “National Level Pilot Green Mines” (國家級綠色礦山試點單位).

Management team with extensive industry experience and strong support from our Controlling Shareholder

Our historical success is in large part a result of the vision, commitment and leadership of our senior management team, and we believe that they will remain crucial to our continued success. Our Chairman, Mr. Li Guohong (李國紅), has accumulated significant management experience through his past positions as a director of a number of well-recognized large state-owned enterprises. Mr. Li served as a member of the Standing Committee of the Chinese People’s Political Consultative Conference (中國人民政治協商會議) (CPPCC Standing Committee) member of Shandong province from February 2017 to January 2018. Mr. Li has served as vice president of the Gold Association of Shandong Province (山東省黃金協會) since September 2016 and serves as the chairman of The Listed Company Association of Shandong Province (山東上市公司協會). Our executive Director, general manager and financial controller, Mr. Wang Peiyue (王培月), has over 30 years of experience in the gold mining industry. He has a background in mining engineering and extensive experience in our business operations as he has served in various capacities in Shandong Gold Group (including our Group). Other members of our senior management team are also long-serving employees of Shandong Gold Group (including our Group), with an average of 29 years’ experience in gold resource exploration and mining, as well as experience in the operation and management of mining projects in China. We believe that an experienced management team leads us to successfully execute business strategies and deliver sustainable growth in our profitability.

Our Controlling Shareholder, SDG Group Co., is a large, state-owned conglomerate with over 40 years of operating experience in the gold mining industry. At present, our Controlling Shareholder holds a number of quality gold resources at an early development stage. For instance, in March 2017, SDG Group Co. discovered a significant orebody more than 1,000 meters underground in the Sanshandao Xiling (西嶺) mine area with a resource gold content of approximately 12,300.2 koz. We hold the first right of refusal to acquire such resources from our Controlling Shareholder, and we believe that such resources will be a driving force for our future growth. Moreover, we believe that

— 163 — BUSINESS our Controlling Shareholder’s in-depth experience and technological expertise in gold resource exploration will provide synergies in our discovery of additional resources. For instance, SDG Group Co. holds the record for the deepest small-bore core drill at 4,006.2 meters underground, and such technology and know-how will support our exploration of deeper mine areas. Our Controlling Shareholder is controlled by the Shandong SASAC. Such background, particularly in a province that is the largest gold producing province in China, positions us favorably against competitors when acquiring gold resources.

Under the leadership of our senior management team and with the support of our Controlling Shareholder, we have experienced rapid growth since our inception. After the successful listing of our A Shares on the Shanghai Stock Exchange in 2003, our rapid growth was supported by effective capital operations. For the three months ended March 31, 2018, our return on average equity ratio was 8.1%, which was one of the highest among gold producers that are listed in the PRC and/or Hong Kong that operate in the PRC, according to the F&S Report. We have received numerous prestigious recognitions and awards during the Track Record Period, including the “Top 150 Golden Bulls Best Investment Value Among PRC-Listed Companies” in 2016 (中國上市公司金牛投資價值150強) and “Board of Directors Value Creation Award Among PRC-Listed Companies in China” in 2016 (中國上市公司董 事會價值創造獎). We were third in the ranking of “Top 100 Best Investment Value Among PRC-Listed Companies in China” (中國上市公司最具投資價值百強榜) in 2015. Moreover, we were selected as a constituent stock of the SSE 50 Index in 2016, and we were one of the 48 A share listed companies selected as a constituent stock of the Hang Seng China A Share Industry Top Index in September 2017. We believe that the recognition we have received from the capital markets is a reflection of our strong operating results, market position and corporate reputation.

BUSINESS STRATEGY

Our strategic goal is to become a world-class gold company ranking within the top ten gold companies in the world. To that end, we intend to implement the following business strategy.

Increase operational efficiency through technological innovation, management initiatives and continued enhancement of our mining and production capacity

We believe that technological advancement drives the quality and efficiency of our mining and production operations. As such, we plan to continue to allocate substantial resources in the following aspects of operations:

• Technological innovations. We intend to execute our strategy of technological innovation through engaging in major research and development projects of key technologies, including deep underground exploration, mine construction and mining, offshore seabed mining and extraction of gold concentrates that are difficult to process. In addition, we intend to enhance our technological capabilities by engaging in research and development of large trackless equipment, intelligent control equipment and other advanced equipment and machinery. We believe that technology innovation will fast-track our ability to develop world-class gold mines.

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• Management initiatives. We intend to continue to refine and enhance management systems through the following initiatives: (i) establish partnership relationships with world-renowned consulting agencies to enhance our overall operations and improve our operational efficiency, (ii) increase the implementation of automation and intelligent management solutions, and enhance management’s command over production and operational performance indicators and ability to more precisely analyse our business segments through building and consolidating operational systems, enhancing data collection and control and IT maintenance, among other things, and (iii) apply the management techniques gained through our joint operation experience at Veladero Mine with Barrick Gold to our PRC operations.

• Enhance mining and production capacity. With respect to mining, we plan to invest in research and development projects of our deep mining laboratory (深井開採實驗室) and in relation to deep underground mine construction in order to enhance our ability to conduct mining of deep underground mine areas. In addition, we plan to increase our investment in our cut-and-fill laboratory (充填工程實驗室) to continue to decrease ore loss rates and dilution rates, and enhance our crude ore grade through improving our mining technologies. With respect to processing, we intend to increase investment in our processing and smelting laboratory (選冶實驗室) to improve our flotation and processing methods and in turn increase our processing recovery rate.

Continue to consolidate high quality resources through domestic and cross-border mergers and acquisitions

Mergers and acquisitions have been a key contributor to our growth to date. We intend to continue to identify and execute mergers and acquisitions opportunities in the following areas:

• Controlling Shareholder. We intend to continue to assess potential high quality resources from our Controlling Shareholder and evaluate opportunities to acquire such resources, particularly resources that were recently discovered in the Sanshandao Xiling mine area, as well as resources in the Jiaojia Nanlv-Xinmu (南呂-欣木) mine area and in Henan province and Hainan province. The orebody in the Sanshandao Xiling mine area has a resource gold content of approximately 12,300.2 koz, and the Jiaojia Nanlv-Xinmu mine area has a resource gold content 4,280.5 koz, according to the respective exploration reports. We hold the first right of refusal to acquire such resources from our Controlling Shareholder, and we believe that such resources will be a driving force for our future growth.

• China. We will seek to continue to identify and acquire high quality resources (i) within Shandong province, particularly in the Laizhou and Zhaoyuan regions; and (ii) in other provinces of China, with a focus on areas with high gold grades and abundant reserves such as Henan province, the Inner Mongolia autonomous region and Fujian province.

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• Overseas. We plan to continue to obtain high quality resources overseas through acquisitions, investments and cooperation with other mining companies with a focus on resources in well-recognized gold mining belts around the world. In particular, we intend to deepen our strategic cooperation with Barrick Gold and actively explore opportunities to develop gold mines in other regions. Furthermore, leveraging on the joint operation experience with Barrick Gold, we will seek strategic cooperation opportunities with other global gold mining companies and in turn enhance our global market position. We will also seek cooperation opportunities by leveraging the “One Belt, One Road” policy.

Continue exploration and expansion to increase the reserves of existing mines

As of March 31, 2018, our Reserves and Resources were 10,900 koz and 31,736 koz, respectively, and our gold mine production volume was 1,153.7 koz in 2017. We believe that there is significant potential for us to increase reserves and production level at our current mines. Specifically, we intend to continue to increase exploration activities, such as at our Jiaojia Gold Mine (particularly in the Shangyangjia (上楊家) mine area) and Veladero Mine where we believe there is significant potential. With respect to our Linglong Gold Mine, Xincheng Gold Mine and Yinan Gold Mine, we acquired three exploration permits from our Controlling Shareholder in November 2017. We plan to continue to conduct exploration activities in these mine areas in order to increase reserves of these gold mines. Leveraging our accumulated experience and enhanced capabilities in underground exploration, we seek to enhance the reserves of our current mines by increased drilling density and depth, which will in turn increase our gold mine production volume.

Further improve the safety and environmental protection standards in our mining and production process

We intend to continue to improve our production safety measures to ensure that our employees work in a safe and healthy environment and enhance our environmental protection measures to minimize the environmental impact of our operations:

• Occupational safety. We plan to (i) increase the level of automation and intelligent control in our mining and production process to optimize our occupational health and safety management system and reduce operational risks, and (ii) improve our staff’s ability to identify and respond to workplace hazards by providing increased safety training and accident simulation drills.

• Environmental protection. We plan to (i) continue to implement new eco-friendly green mining practices in our operations, including research and development of paste backfill mining technologies, to lower our environmental footprint, (ii) develop new processes and technologies to replace the use of cyanide in our production and smelting operations, and (iii) strengthen our environmental protection policies and procedures, increase our ability to process waste and conduct land rehabilitation.

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Optimize capital structure through international and PRC capital markets

We plan to apply the net proceeds from the Global Offering to repay the bank borrowings used to finance the Veladero Acquisition, as a result of which we expect to lower our gearing ratio to pre-acquisition levels. In addition, after the completion of the Global Offering, we will have access to Hong Kong and PRC capital markets and hence foreign-currency and RMB-denominated funding, which we expect to enhance our ability to manage our capital structure. Specifically, we plan to actively explore various types of capital markets financing tools available on the Hong Kong and A share capital markets, including but not limited to corporate bonds, green bonds, convertible bonds, private placements and rights issues. We will also seek to continue to maintain a higher return on average equity ratio compared to industry competitors.

BUSINESS OVERVIEW

We are an integrated gold company engaged in gold exploration, mining, processing, smelting and sales. Since our inception, we have operated primarily in Shandong province, the largest gold producing province in China in terms of 2017 gold mine production volume, and have gradually expanded our business into the Inner Mongolia autonomous region, Gansu province and Fujian province. As the first step in our overseas expansion, we completed the Veladero Acquisition on June 30, 2017, in which we acquired a 50% interest in the Veladero Mine. The Veladero Mine was the largest gold mine in Argentina and in South America in terms of 2017 gold mine production volume, according to the F&S Report.

We engage in gold mining activities and process the gold mined into doré and/or gold concentrates. Most of the doré and gold concentrates produced from our PRC Mines are delivered to our smelteries for smelting and refining. To a lesser extent, a portion of the doré and gold concentrates are sold without undergoing smelting and refining. In addition, we also sold by-products such as silver, copper, iron and zinc. In 2015, 2016, 2017 and the three months ended March 31, 2017 and 2018, the segment revenue from gold mining comprises (i) sale of products, which primarily consist of gold concentrates and doré, which amounted to RMB7,051.7 million, RMB8,019.7 million, RMB9,791.6 million, RMB2,020.5 million and RMB2,461.4 million, respectively; and (ii) rental income from leasing of properties, which amounted to RMB20.1 million, RMB11.9 million, RMB19.7 million, RMB2.5 million and RMB2.4 million respectively.

We engage in smelting and refining of the doré and gold concentrates produced from our PRC Mines. In addition, we also conduct smelting and refining of (i) doré procured from third-party suppliers, which are produced into standard gold bullion, and (ii) standard gold bullion procured from the Shanghai Gold Exchange, which are produced into customized gold products. The segment revenue from gold refining amounted to RMB37,658.1 million, RMB48,063.3 million, RMB49,048.6 million, RMB9,623.6 million and RMB13,591.1 million, respectively. The revenue from gold mining is subject to inter-segment elimination because the gold concentrates and doré produced from our PRC Mines are sold to our smelteries for refining and sales to external customers. Such elimination amounted to RMB5,955.4 million, RMB7,022.2 million, RMB7,818.6 million, RMB1,935.5 million and RMB1,888.6 million, respectively, during the same periods.

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Under the NI 43-101 Code, Reserves are the economically mineable parts of measured and indicated Resources after a consideration of the relevant modifying factors, which include mining, metallurgical, economic, marketing, legal, environmental, social and governmental considerations. The following table sets forth our Reserves and Resources, based on the AAI Report and RPA Report, as of March 31, 2018. The inclusion of Mineral Resources estimates should not be regarded as a representation that all these amounts can be economically mined or processed.

Resources(1)(2) Reserves(3)(4)

Gold Gold Gold Gold Measured content content content content and (100% (equity (100% (equity Gold Mine Measured Indicated Indicated Inferred Total basis) basis)(5) Proven Probable Total basis) basis)(6) LOM

(Mt) (Mt) (Mt) (Mt) (Mt) (koz) (koz) (Mt) (Mt) (Mt) (koz) (koz) (year)

Sanshandao Gold Mine. . . — 29.2 29.2 40.2 69.4 6,688 6,688 — 25.9 25.9 2,290 2,290 13 Jiaojia Gold Mine ..... — 14.1 14.1 19.4 33.5 3,351 3,351 — 9.5 9.5 950 950 4 Xincheng Gold Mine.... — 30.7 30.7 44.8 75.4 7,274 7,274 — 26.1 26.1 2,630 2,630 11 Linglong Gold Mine .... — 5.9 5.9 53.3 59.2 5,440 5,440 — 5.5 5.5 550 550 4 Guilaizhuang Gold Mine . . — 0.8 0.8 1.8 2.6 320 226 — 0.3 0.3 80 60 2 Jinzhou Gold Mine .... — 1.3 1.3 1.3 2.6 244 144 — 1.1 1.1 90 50 5 Qingdao Gold Mine .... — 5.5 5.5 3.6 9.1 1,391 1,391 — 5.7 5.7 670 670 9 Penglai Gold Mine .... — 1.2 1.2 0.9 2.1 470 470 — 1.3 1.3 210 210 5 Yinan Gold Mine ..... — 4.2 4.2 14.6 18.8 660 660 — 0.2 0.2 10 10 —

Shandong Province .... — 92.9 92.9 179.9 272.7 25,838 25,644 — 75.8 75.8 7,480 7,420 —

Chifengchai Gold Mine . . — 0.9 0.9 0.4 1.3 225 166 — 0.9 0.9 150 110 3 Fujian Yuanxin Gold Mine . — 1.0 1.0 0.3 1.3 186 168 — 0.8 0.8 100 90 4 Xihe Zhongbao Gold Mine . — 6.9 6.9 7.3 14.2 1,055 739 — 5.9 5.9 450 310 20+ Other Provinces...... — 8.8 8.8 8 16.8 1,466 1,073 — 7.6 7.6 700 510 —

China sub-total ...... — 101.7 101.7 187.9 289.5 27,306 26,718 — 83.4 83.4 8,200 7,950 —

Veladero Mine ...... 18.3 162.3 180.7 33.2 213.8 8,859 4,430 15.1 95.9 111.0 5,401 2,701 7

Total ...... 18.3 264.0 282.4 221.1 503.3 36,165 31,148 15.1 179.3 193.4 13,601 10,651 —

(1) As to our PRC Mines, Resources are based on the AAI Report and the following assumptions: Resources are reported as in-place tonnes, without dilution or mining losses applied. Mineral Resources are inclusive of Mineral Reserves. (2) As to the Veladero Mine, Resources are based on the RPA Report and the following assumptions: CIM(2014) definitions were followed for Mineral Resources. Mineral Resources were estimated as of March 31, 2018 using a gold price of US$1,500 per ounce, and an exchange rate of US$1.0 : AR$20.0 Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. Mineral Resources are estimated at economic cut-off values that vary by material type and are approximately equivalent to 0.14 g/t Au for Type 1 mineralization and 0.26 g/t Au for Type 2 mineralization. Mineral Resources are constrained by a Whittle pit shell. Mineral Resources are inclusive of Mineral Reserves. Numbers may not add due to rounding.

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(3) As to our PRC Mines, Reserves are based on the AAI Report and the following assumptions: Price assumptions are US$1,231.03 per ounce and an exchange rate of US$1 : RMB6.571. Reserves in Sanshandao Gold Mine were based on a cut-off grade of 0.99 g/t. Reserves in Jiaojia Gold Mine were based on a cut-off grade of 1.24 g/t. Reserves in Linglong Gold Mine were based on a cut-off grade of 1.37 g/t. Reserves in Xincheng Gold Mine were based on a cut-off grade of 1.01 g/t. Reserves in Yinan Gold Mine were based on a cut-off grades of 1.71 g/t. Reserves in Qingdao Gold Mine were based on a cut-off grade of 1.38 g/t Reserves in Jinzhou Gold Mine were based on the following cut-off grade: 2.99 g/t for Jinqingding mine area, Hubazhuang mine area and Songjiazhuang mine area, 1.19 g/t for Yinggezhuang mine area, Xipo mine area and Yinggezhuang exploration area, and 1.31 g/t for Sanjia mine area and Sanjia exploration area. Reserves in Guilaizhuang Gold Mine were based on the cut-off grade of 2.70 g/t. Reserves in Penglai Gold Mine were based on a cut-off grade of 1.33 g/t. Reserves in Chifengchai Gold Mine were based on a cut-off grade of 1.34 g/t. Reserves in Fujian Yuanxin Gold Mine were based on a cut-off grade of 1.40 g/t. Reserves in Xihe Zhongbao Gold Mine were based on a cut-off grade of 2.15 g/t.

Mineral Resources are estimated inclusive of Mineral Reserves.

Figures in the table are rounded to reflect estimate precision; small differences generated by rounding are not material to estimates.

Reserves are estimated based on delivery to the mill stockpile.

(4) As to the Veladero Mine, Reserves are based on the RPA Report and the following assumptions: CIM(2014) definitions were followed for Mineral Reserves. Mineral Reserves are estimated as of March 31, 2018 using a gold price of US$1,200 per ounce, and an exchange rate of US$1.0 : AR$20.0 Mineral Reserves are estimated at economic cut-off values based on process cost, recovery, and profit. The cut-off values are equivalent to approximately 0.18 g/t Au for Type 1 ore and 0.32 g/t Au for Type 2 ore. Numbers may not add due to rounding.

(5) As of March 31, 2018, we owned 70.65%, 73.52%, 90.31% and 70% of Guilaizhuang Gold Mine, Chifengchai Gold Mine, Fujian Yuanxin Gold Mine and Xihe Zhongbao Gold Mine, respectively. Also includes the Resources of Jinzhou Gold Mine based on our equity interest in Jinzhou Group, Fuling Mining and Qianling Mining. Jinzhou Gold Mine consists of mining rights owned by Jinzhou Group and its 100% and 90% owned subsidiaries, Fuling Mining and Qianling Mining respectively. As of March 31, 2018, we beneficially owned 60.43% and 54.39% of Fuling Mining and Qianling Mining through our 60.43% interest in Jinzhou Group. We also owned 100% of the remaining seven PRC Mines as of the same date. (6) As of March 31, 2018, we owned 50% interest in the Veladero Mine.

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The following table sets forth our ore mined volume, ore processed volume and gold mine production volume for the period indicated.

For the three months ended For the year ended December 31, March 31,

2015 2016 2017 2018

Ore Ore Gold Ore Ore Gold Ore Ore Gold Ore Ore Gold mined processed production mined processed production mined processed production mined processed production

(Mt) (Mt) (koz) (Mt) (Mt) (koz) (Mt) (Mt) (koz) (Mt) (Mt) (koz)

China Shandong province(1). 12.6 13.7 919.4 11.3 12.6 904.9 12.7 13.2 880.1 2.9 3.2 216.3 Other provinces(1) . . 0.6 0.6 46.8 0.7 0.8 59.0 0.7 0.7 58.7 0.2 0.2 19.0

Sub-total ...... 13.2 14.3 966.2 12.0 13.4 963.9 13.4 14.0 944.9 3.1 3.4 235.3

Argentina(2) .... ——————16.37.7208.8 10.1 4.0 73.5

Total ...... 13.2 14.3 966.2 12.0 13.4 963.9 29.7 21.6 1,153.7 13.2 7.4 308.8

(1) Includes the ore mined volume ore processed volume and gold mine production volume of our PRC Mines on a 100% basis. As of March 31, 2018, we owned 70.65%, 73.52%, 90.31% and 70% of Guilaizhuang Gold Mine, Chifengchai Gold Mine, Fujian Yuanxin Gold Mine and Xihe Zhongbao Gold Mine, respectively. Jinzhou Gold Mine consists of mining rights owned by Jinzhou Group and its 100% and 90% owned subsidiaries, Fuling Mining and Qianling Mining respectively. As of March 31, 2018, we beneficially owned 60.43% and 54.39% of Fuling Mining and Qianling Mining through our 60.43% interest in Jinzhou Group. We also owned 100% of the remaining seven PRC Mines as of the same date.

(2) Includes the ore mined volume, ore processed volume and gold mine production volume of the Veladero Mine on a 50% basis for the period from July 1, 2017 (immediately after we completed the Veladero Acquisition).

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OUR OPERATIONS IN CHINA

Overview

As of March 31, 2018, we controlled and operated 12 PRC Mines, nine of which are located in Shandong province. Each of our PRC Mines is equipped with one or more processing facilities. As of the same date, we had 18 processing facilities and two smelting and refining facilities in China.

The diagram below shows the geographical locations of our PRC Mines.

Gold Mine Gold Mine Gold Mine Gold Mine Gold Mine Gold Mine Chifengchai Gold Mine

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The following table sets forth information on our Resources as of March 31, 2018 based on the AAI Report.

NI 43-101 Code Percentage of Resource Ownership grade Tonnes Gold grade Gold content Gold content

(million) (g/t Au) (koz) (kg)

Shandong province Sanshandao Gold Mine ...... 100% Measured ———— Indicated 29.2 2.9 2,718 84,530

Sub-total 29.2 2.9 2,718 84,530

Inferred 40.2 3.1 3,970 123,500

Total 69.4 — 6,688 208,030

Jiaojia Gold Mine ...... 100% Measured ———— Indicated 14.1 3.0 1,365 42,450

Sub-total 14.1 3.0 1,365 42,450

Inferred 19.4 3.2 1,986 61,780

Total 33.5 — 3,351 104,230

Xincheng Gold Mine ...... 100% Measured ———— Indicated 30.7 3.1 3,076 95,690

Sub-total 30.7 3.1 3,076 95,690

Inferred 44.7 2.9 4,198 130,570

Total 75.4 — 7,274 226,260

Linglong Gold Mine ...... 100% Measured ———— Indicated 5.9 3.3 619 19,250

Sub-total 5.9 3.3 619 19,250

Inferred 53.3 2.8 4,822 149,980

Total 59.2 — 5,440 169,220

Guilaizhuang Gold Mine ...... 70.65% Measured ———— Indicated 0.8 5.1 130 4,050

Sub-total 0.8 5.1 130 4,050

Inferred 1.8 3.2 189 5,890

Total 2.6 — 320 9,950

Jinzhou Gold Mine...... Varies(3) Measured ———— Indicated 1.3 2.9 125 3,900

Sub-total 1.3 2.9 125 3,900

Inferred 1.3 2.9 119 3,690

Total 2.6 — 244 7,590

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NI 43-101 Code Percentage of Resource Ownership grade Tonnes Gold grade Gold content Gold content

(million) (g/t Au) (koz) (kg)

Qingdao Gold Mine ...... 100% Measured ———— Indicated 5.5 4.0 706 21,960

Sub-total 5.5 4.0 706 21,960

Inferred 3.6 5.9 685 21,320

Total 9.1 — 1,391 43,270

Penglai Gold Mine...... 100% Measured ———— Indicated 1.2 5.8 227 7,050

Sub-total 1.2 5.8 227 7,050

Inferred 0.9 8.5 244 7,580

Total 2.1 — 470 14,630

Yinan Gold Mine...... 100% Measured ———— Indicated 4.2 1.3 176 5,480

Sub-total 4.2 1.3 176 5,480

Inferred 14.6 1.0 484 15,050

Total 18.8 — 660 20,530

Shandong Province ...... Measured ———— Indicated 92.8 3.1 9,142 284,350

Sub-total 92.8 3.1 9,142 284,350

Inferred 179.8 2.9 16,697 519,360

Total 272.6 — 25,839 803,710

Other provinces Chifengchai Gold Mine ...... 73.52% Measured ———— Indicated 0.9 5.8 168 5,240

Sub-total 0.9 5.8 168 5,240

Inferred 0.4 4.2 57 1,770

Total 1.3 — 225 7,000

Fujian Yuanxin Gold Mine ..... 90.31% Measured ———— Indicated 1.0 4.2 137 4,260

Sub-total 1.0 4.2 137 4,260

Inferred 0.3 5.2 49 1,510

Total 1.3 — 186 5,770

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NI 43-101 Code Percentage of Resource Ownership grade Tonnes Gold grade Gold content Gold content

(million) (g/t Au) (koz) (kg)

Xihe Zhongbao Gold Mine ..... 70% Measured ———— Indicated 6.9 2.5 544 16,920

Sub-total 6.9 2.5 544 16,920

Inferred 7.3 2.2 511 15,900

Total 14.2 — 1,055 32,820

Other Provinces ...... Measured ———— Indicated 8.8 3.0 849 26,420

Sub-total 8.8 3.0 849 26,420

Inferred 8.0 2.4 616 19,170

Total 8.0 — 1,466 45,590

Total consolidated ...... Measured ———— Indicated 101.6 3.1 9,992 310,780

Sub-total 101.6 3.1 9,992 310,780

Inferred 187.9 2.9 17,314 538,530

Total 289.5 — 27,306 849,300

Attributable to our Group(5) ... Measured ———— Indicated 98.4 3.1 9,680 301,070

Sub-total 98.4 3.1 9,680 301,070

Inferred 184.5 2.9 17,038 529,930

Total 282.9 — 26,718 831,000

(1) Resources are reported as in-place tonnes, without dilution or mining losses applied.

(2) Mineral Resources are inclusive of Mineral Reserves.

(3) Jinzhou Gold Mine consists of mining rights owned by Jinzhou Group and its 100% and 90% owned subsidiaries, Fuling Mining and Qianling Mining, respectively. As of March 31, 2018, we beneficially owned 60.43% and 54.39% of Fuling Mining and Qianling Mining through our 60.43% equity interest in Jinzhou Group. (4) Includes the Resources of each PRC Mine on a 100% basis. (5) Includes the Resources of our wholly-owned PRC Mines, namely, Sanshandao Gold Mine, Jiaojia Gold Mine, Xincheng Gold Mine, Linglong Gold Mine, Qingdao Gold Mine, Penglai Gold Mine and Yinan Gold Mine, on a 100% basis, as well as the Resources of the Guilaizhuang Gold Mine, Chifengchai Gold Mine, Fujian Yuanxin Gold Mine and Xihe Zhongbao Gold Mine on a 70.65%, 73.52%, 90.31% and 70% basis, respectively. Also includes the Resources of Jinzhou Gold Mine based on our equity interest in Jinzhou Group, Fuling Mining and Qianling Mining. See above Note (3) for details.

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The following table sets forth information on our Reserves as of March 31, 2018 based on the AAI Report.

NI 43-101 Code Percentage of Reserves Ownership grade(1)(2)(3)(4)(5) Tonnes Gold grade Gold content Gold content

(million) (g/t Au) (koz) (kg)

Shandong province Sanshandao Gold Mine ..... 100% Proven ———— Probable 25.9 2.7 2,290 71,230

Total 25.9 2.7 2,290 71,230

Jiaojia Gold Mine ...... 100% Proven ———— Probable 9.5 3.1 950 29,620

Total 9.5 3.1 950 29,620

Xincheng Gold Mine ...... 100% Proven ———— Probable 26.1 3.1 2,630 81,820

Total 26.1 3.1 2,630 81,820

Linglong Gold Mine ...... 100% Proven ———— Probable 5.5 3.1 550 17,150

Total 5.5 3.1 550 17,150

Guilaizhuang Gold Mine .... 70.65% Proven ———— Probable 0.3 7.6 80 2,430

Total 0.3 7.6 80 2,430

Jinzhou Gold Mine ...... Varies(6) Proven ———— Probable 1.1 2.6 90 2,950

Total 1.1 2.6 90 2,950

Qingdao Gold Mine ...... 100% Proven ———— Probable 5.7 3.6 670 20,910

Total 5.7 3.6 670 20,910

Penglai Gold Mine ...... 100% Proven ———— Probable 1.3 5.2 210 6,680

Total 1.3 5.2 210 6,680

Yinan Gold Mine ...... 100% Proven ———— Probable 0.2 2.3 10 400

Total 0.2 2.3 10 400

Other provinces Chifengchai Gold Mine..... 73.52% Proven ———— Probable 0.9 5.2 150 4,690

Total 0.9 5.2 150 4,690

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NI 43-101 Code Percentage of Reserves Ownership grade(1)(2)(3)(4)(5) Tonnes Gold grade Gold content Gold content

(million) (g/t Au) (koz) (kg)

Fujian Yuanxin Gold Mine. . . 90.31% Proven ———— Probable 0.8 3.8 100 3,250

Total 0.8 3.8 100 3,250

Xihe Zhongbao Gold Mine . . 70% Proven ———— Probable 5.9 2.4 450 13,910

Total 5.9 2.4 450 13,910

Total consolidated(7) ...... Proven ———— Probable 83.4 3.1 8,200 255,050

Total 83.4 3.1 8,200 255,050

Attributable to our Group(8) . Proven ———— Probable 80.4 3.1 7,950 247,350

Total 80.4 3.1 7,950 247,350

(1) Reserves in Sanshandao Gold Mine were based on a cut-off grade of 0.99 g/t.

Reserves in Jiaojia Gold Mine were based on a cut-off grade of 1.24 g/t.

Reserves in Linglong Gold Mine were based on a cut-off grade of 1.37 g/t.

Reserves in Xincheng Gold Mine were based on a cut-off grade of 1.01 g/t.

Reserves in Yinan Gold Mine were based on a cut-off grades of 1.71 g/t.

Reserves in Qingdao Gold Mine were based on a cut-off grade of 1.38 g/t

Reserves in Jinzhou Gold Mine were based on the following cut-off grade: 2.99 g/t for Jinqingding mine area, Hubazhuang mine area and Songjiazhuang mine area, 1.19 g/t for Yinggezhuang mine area, Xipo mine area and Yinggezhuang exploration area, and 1.31 g/t for Sanjia mine area and Sanjia exploration area.

Reserves in Guilaizhuang Gold Mine were based on the cut-off grade of 2.70 g/t.

Reserves in Penglai Gold Mine were based on a cut-off grade of 1.33 g/t.

Reserves in Chifengchai Gold Mine were based on a cut-off grade of 1.34 g/t.

Reserves in Fujian Yuanxin Gold Mine were based on a cut-off grade of 1.40 g/t

Reserves in Xihe Zhongbao Gold Mine were based on a cut-off grade of 2.15 g/t. (2) Price assumptions are US$1,231.03 per ounce and US$1 : RMB6.571. (3) Mineral Resources are estimated inclusive of Mineral Reserves. (4) Figures in the table are rounded to reflect estimate precision; small differences generated by rounding are not material to estimates. (5) Reserves are estimated based on delivery to the mill stockpile. (6) Jinzhou Gold Mine consists of mining rights owned by Jinzhou Group and its 100% and 90% owned subsidiaries, Fuling Mining and Qianling Mining, respectively. As of March 31, 2018, we beneficially owned 60.43% and 54.39% of Fuling Mining and Qianling Mining through our 60.43% equity interest in Jinzhou Group. (7) Includes the Reserves of each PRC Mine on a 100% basis.

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(8) Includes the Reserves of our wholly-owned PRC Mines, namely, the Sanshandao Gold Mine, Jiaojia Gold Mine, Xincheng Gold Mine, Linglong Gold Mine, Qingdao Gold Mine, Penglai Gold Mine and Yinan Gold Mine, on a 100% basis, as well as the Reserves of Guilaizhuang Gold Mine, Chifengchai Gold Mine, Fujian Yuanxin Gold Mine and Xihe Zhongbao Gold Mine on a 70.65%, 73.52%, 90.31% and 70% basis, respectively. Also includes the Reserves of Jinzhou Gold Mine based on our equity interest in Jinzhou Group, Fuling Mining and Qianling Mining. See above Note (6) for details.

As of March 31, 2018, all 12 of our PRC Mines were in production. The following table sets forth the ore mined volume, ore production volume and gold mine production volume of our PRC Mines for the period indicated.

For the three months ended For the year ended December 31, March 31, 2015 2016 2017 2018

Ore Ore Gold Ore Ore Gold Ore Ore Gold Ore Ore Gold mined processed production mined processed production mined processed production mined processed production

(Mt) (Mt) (koz) (Mt) (Mt) (koz) (Mt) (Mt) (koz) (Mt) (Mt) (koz)

Shandong province Sanshandao Gold Mine . . 3.8 4.1 254.6 3.8 4.1 270.4 3.4 3.6 209.1 0.7 0.8 42.4 Jiaojia Gold Mine .... 2.7 3.1 227.5 2.7 3.2 243.9 3.4 3.4 233.8 0.9 0.9 58.5 Xincheng Gold Mine . . . 1.9 2.0 138.5 1.8 2.0 140.3 2.0 2.0 139.7 0.3 0.5 34.7 Linglong Gold Mine . . . 1.6 1.9 129.3 1.7 2.0 135.5 1.6 2.0 130.6 0.5 0.4 34.4 Guilaizhuang Gold Mine(1) ...... 0.5 0.5 61.8 0.1 0.1 17.9 0.4 0.4 55.0 0.1 0.0 13.2 JinzhouGoldMine.... 0.4 0.4 34.1 0.3 0.4 35.0 0.4 0.4 36.6 0.1 0.1 11.6 Qingdao Gold Mine . . . 0.8 0.8 35.9 0.4 0.4 31.1 0.6 0.6 36.3 0.2 0.2 12.2 PenglaiGoldMine.... 0.5 0.4 26.9 0.2 0.2 25.9 0.3 0.3 26.7 0.1 0.1 6.4 Yinan Gold Mine(1) . . . 0.5 0.5 10.8 0.2 0.2 4.9 0.5 0.5 12.4 0.1 0.1 3.2 Other provinces Chifengchai Gold Mine. . 0.4 0.4 26.8 0.4 0.4 28.0 0.3 0.4 29.0 0.1 0.1 9.0 Fujian Yuanxin Gold Mine...... 0.2 0.3 20.0 0.3 0.3 22.5 0.3 0.2 21.4 0.1 0.1 5.8 Xihe Zhongbao Gold Mine(2) ...... — — — 0.1 0.1 8.5 0.1 0.2 14.5 0.0 0.1 4.2

Total consolidated(3). . . 13.2 14.3 966.2 12.0 13.4 963.9 13.4 14.0 944.9 3.1 3.4 235.3

Attributable to our Group(4)...... 12.7 13.8 918.2 11.7 13.0 926.5 13.0 13.5 900.2 3.0 3.3 222.8

(1) Guilaizhuang Gold Mine and Yinan Gold Mine temporarily suspended operations during the Track Record Period and resumed operations in July and June 2016, respectively. For more information, see “— Our Gold Mines in Shandong Province — Other Gold Mines in Shandong Province.” (2) Xihe Zhongbao Gold Mine underwent mine construction in 2015 and commenced production in 2016. (3) Includes the ore mined volume, ore processed volume and gold mine production volume of each PRC Mine on a 100% basis. (4) Includes 100% of the ore mined volume, ore processed volume and gold mine production volume of our wholly-owned PRC Mines, namely, the Sanshandao Gold Mine, Jiaojia Gold Mine, Xincheng Gold Mine, Linglong Gold Mine, Qingdao Gold Mine, Penglai Gold Mine and Yinan Gold Mine, as well as 70.65%, 60.43%, 73.52%, 90.31% and 70% of the ore mined volume, ore processed volume and gold production volume of Guilaizhuang Gold Mine, Jinzhou Gold Mine, Chifengchai Gold Mine, Fujian Yuanxin Gold Mine and Xihe Zhongbao Gold Mine, respectively.

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Our Gold Mines in Shandong Province

As of March 31, 2018, nine of our PRC Mines were located in Shandong province. Our four flagship PRC Mines, namely, Sanshandao Gold Mine, Jiaojia Gold Mine, Xincheng Gold Mine and Linglong Gold Mine, are concentrated in the Laizhou and Zhaoyuan regions located in the northwest Jiaodong peninsula of Shandong province. These flagship PRC Mines ranked among the ten largest gold mines in the PRC in terms of 2017 gold mine production volume, according to the F&S Report. The table below sets forth the average mining loss rate and the average dilution rate of our four flagship PRC Mines during the Track Record Period and the LOM estimated based on the current levels of gold production and Reserves as of March 31, 2018.

Average mining Average loss rate dilution rate LOM

(%) (%) (year)

Sanshandao Gold Mine ...... 8.9% 4.4% 13 Jiaojia Gold Mine ...... 4.9% 5.0% 4 Xincheng Gold Mine ...... 4.8% 4.8% 11 Linglong Gold Mine ...... 1.8% 17.0% 4

Sanshandao Gold Mine

Sanshandao Gold Mine is located in the northwest portion of the Shandong Peninsula in Laizhou, Shandong. Sanshandao Gold Mine is one of the largest underground gold mines in Asia in terms of 2017 gold mine production volume, according to the F&S Report. According to the F&S Report, Sanshandao Gold Mine is one of the most mechanised gold mines in China, and has developed technologies to use sea water instead of fresh water in gold processing and production, which we believe lowered production costs. It is divided into four mine areas, namely, the Sanshandao mine area, Xinli mine area, the Caojiabu mine area, and the Cangshang mine area. All of the orebodies in the Xinli mine area are offshore, making Xinli mine area the only offshore gold mine in production in China as of the Latest Practicable Date, according to the F&S Report.

As of March 31, 2018, Sanshandao Gold Mine had Reserves and Resources of 2,290 koz and 6,688 koz, respectively. As of the same date, the gold grade of its Reserves and measured and indicated Resources was 2.7 g/t and 2.9 g/t, respectively. Assuming that no new Reserves are identified, Reserves of approximately 2,290 koz will be sufficient for Sanshandao Gold Mine to maintain production for a further term of approximately 13 years from March 31, 2018. In respect of our Sanshandao Gold Mine, we held four valid mining permits covering an aggregate area of approximately 3.2 square kilometers and two exploration permits covering an aggregate area of approximately 0.8 square kilometers as of the Latest Practicable Date. We were also in the process of renewing two exploration permits in relation to Sanshandao Gold Mine as of the same date.

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The following map sets forth the locations of the mine areas of Sanshandao Gold Mine.

The Sanshandao mine area, Xinli mine area and Cangshang mine area are located on the coast of the Bohai Sea, while the Caojiabu mine area is located approximately 12 kilometers to the southeast of the coast. Sanshandao mine area, Xinli mine area and Cangshang mine area are located north and west of the intersection of Provincial Highway S304 and S218. The Caojiabu mine area is located approximately 12 km southeast of the three mine areas and adjacent to G206 National Highway. National Highway G18 is located approximately 10 km southeast of G206 and provides a major transportation route for Sanshandao Gold Mine. Sanshandao Gold Mine also has railway access through the Yantai railway.

As of March 31, 2018, we were conducting mining in the Sanshandao mine area , Xinli mine area and Caojiabu mine area. Except for the Cangshang mine area, which is not currently in operation, Sanshandao Gold Mine is an underground mine. As of March 31, 2018, Sanshandao Gold Mine had one processing plant with a designed processing capacity of 8,000 tonnes per day. Gold concentrates produced by this processing facility are delivered to our Shandong Smeltery for cyanide leaching and smelting. During the Track Record Period, Sanshandao Gold Mine had an average dilution rate of 4.4% and an average mining loss rate of 8.9%.

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Sanshandao Mine Area

Sanshandao mine area is located approximately 25 km north of Laizhou city and approximately 40 km west of Zhaoyuan city, near the western extent of the Wensan Highway in Shandong. The mine area covers an area of approximately 1.1 square kilometers and a depth from 6m to -600m. The mine area is about 750 m long, 10 m wide and has been tested to be about 1,400 m deep, according to AAI Report. More than 80% of the Resources and Reserves are defined in two mineralized orebodies. For the first orebody, the deposit is tabular with a strike extent of 1,500 m along strike and more than 1,500 m downdip. The first orebody has an average thickness of about 10 m and an average grade of about 3.8 g/t Au. The second orebody is located under the first orebody. The second orebody has a strike length of more than 560 m, an average thickness of approximately 5 m and an average grade of about 3.1 g/t Au.

The mining method at Sanshandao mine area is mainly overhand cut-and-fill mining executed in panels that are excavated along strike. As of March 31, 2018, the Sanshandao mine area had a network of central shafts, ramps and air shafts, as well as integrated systems including hoisting, transportation, backfilling, drainage, water supply, air supply, ventilation and power supply.

Xinli Mine Area

Xinli mine area is located in Sanshandao town, Shandong province, and is connected to Cangshang mine area in the south and Sanshandao mine area in the north. The mine area covers an area of approximately 0.7 square kilometers and a depth from -80m to -700m. The mine area is about 1,200 m long, 10 m thick and has been tested to be about 1,800 m deep. Four mineralized orebodies have been identified in the Xinli mine area. Due to the geographic proximity, we were able to jointly develop the Xinli mine area and Sanshandao mine area to improve cost efficiency.

The mining method in Xinli mine area is similar to that of Sanshandao mine area. As of March 31, 2018, the Xinli mine area had a main shaft for lifting ore, a mixed shaft for lifting ore and waste, and an auxiliary shaft for personnel and supplies.

Caojiabu Mine Area

Caojiabu mine area is located approximately 10 km northeast of Laizhou and approximately 30 km west of Zhaoyuan. The mine area covers an area of approximately 0.5 square kilometers and a depth from 10m to -180m. The Caojiabu mine area has two orebodies, one of which is the main orebody. The main orebody is about 800 m long and has a depth extent of about 500m. Thickness can vary from 0.10 to 0.80 m, averaging about 0.45 m. The other orebody is located below the main orebody and is about 60 m long, has a depth extent of about 30 m, with an average thickness of around 0.43 m. The main mining method is random room-and-pillar. It includes a pillar extraction and access is through an inclined shaft.

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Cangshang Mine Area

Cangshang mine area is a mined out open pit where the remaining underground Reserves will require new infrastructure to mine. All Mineral Resources are defined in a single mineralized orebody, which is located about 50m structurally below. The orebody is about 1,360 m long and has an average thickness of about ten meters. As of the Latest Practicable Date, no mining was taking place and no mining is planned to take place in the immediate future.

Future Plans

In order to extend the LOM of Sanshandao Gold Mine, we intend to merge the mining permits of the Sanshandao mine area and the Xinli mine area with three exploration permits into one mine area. This will allow us to expand our mining area, and increase Reserves and production volume at the Sanshandao Gold Mine. The application to merge such permits was being processed and we obtained the approval from the MLR in respect of the area and depth of the new mine area as of the Latest Practicable Date. Remaining administrative procedures for our application primarily include obtaining approval for our environmental impact report (which has passed expert panel review). Our PRC Legal Advisers do not anticipate material legal impediments in the merging process on the basis that the environmental and rehabilitation plan and the environmental impact report have been approved, and we have obtained a recommendation opinion from the provincial branch of the land and resources authority to expand the mining area, and therefore the likelihood of not obtaining the approval from relevant government authority is low. As of the Latest Practicable Date, we are not aware of any impediments in meeting such conditions and we expect to complete the merging process by the second half of 2018. According to the AAI Report, the exploration area covered by the three exploration permits had Reserves and Resources of approximately 2,211 koz and 6,322 koz as of March 31, 2018, respectively. In addition, we are also assessing the potential of high quality resources owned by our Controlling Shareholder, such as the Sanshandao Xiling (西嶺) mine area. See “— Business Strategy — Continue to consolidate high quality resources through domestic and cross-border mergers and acquisitions” and “Relationship with Our Controlling Shareholder.” In addition, we will continue to conduct mining and exploration activities with a focus on deeper mining and offshore seabed mining to increase resources and reserves of Sanshandao Gold Mine.

Jiaojia Gold Mine

Jiaojia Gold Mine is located in the northwest portion of the Shandong Peninsula in Laizhou. According to the AAI Report, the geology of the mine areas covered by the mining permits in Jiaojia Gold Mine was strongly controlled by regional faults, primarily the Jiaobei and Jiaojia faults. The highly continuous nature of the deposits make Jiaojia Gold Mine relatively easy to mine. According to the F&S Report, Jiaojia Gold Mine was one of the most mechanized gold mines in China. Moreover, according to the F&S report, in November 2017, Jiaojia Gold Mine and Linglong Gold Mine were among the few gold mines in China that have reached a cumulative gold mine production volume of 100 tonnes (equivalent to approximately 3,215.1 koz). Jiaojia Gold Mine is divided into three mine areas, namely, the Jiaojia mine area, Wangershan mine area and Sizhuang mine area.

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As of March 31, 2018, Jiaojia Gold Mine had Reserves and Resources of 950 koz and 3,351 koz, respectively. As of the same date, the gold grade of its Reserves and measured and indicated Resources was 3.1 g/t and 3.0 g/t, respectively. According to the AAI Report, assuming that no new Reserves are identified, Reserves of approximately 950 koz will be sufficient for Jiaojia Gold Mine to maintain production for a further term of approximately four years from March 31, 2018.

In respect of our Jiaojia Gold Mine, we held two mining permits covering an area of approximately 1.3 square kilometers and one exploration permit covering an area of approximately 0.5 square kilometers as of the Latest Practicable Date. We were also in the process of renewing one exploration permit in relation to Jiaojia Gold Mine as of the same date. In addition, during the Track Record Period, we leased a mining permit for our Jiaojia Gold Mine from our Controlling Shareholder, which is being transferred to us. For details, see “— Our Mining and Exploration Permits — Leased Mining Permit” and “Connected Transactions.”

The following map set forth the location of the mine areas of Jiaojia Gold Mine.

The mining and exploration areas of Jiaojia Gold Mine are centered around the intersection of the G206 National Highway and the S304 Provincial Highway, approximately 25 km northeast of Laizhou city, 25 km west of Zhaoyuan, 25 km west of Zhaoyuan, and 34 km southeast of Longkou.

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All three mine areas of Jiaojia Gold Mine are located adjacent to the east of the G206 National Highway and are bisected by the S304 Provincial Highway. The Rongwu Expressway (G18) is located approximately 10 km to the west of Jiaojia Gold Mine and is a major transportation route for Jiaojia Gold Mine.

Jiaojia Gold Mine is an underground mine. Jiaojia Gold Mine has one processing plant with a designed processing capacity of 8,000 tonnes per day. Gold concentrates produced by the processing facility are delivered to our Shandong Smeltery for cyanide leaching and smelting. During the Track Record Period, Jiaojia Gold Mine had an average dilution rate of 5.0% and an average mining loss rate of 4.9%. As of March 31, 2018, we conducted mining in all three mine areas. The main mining method for all the three mine areas is overhand cut-and-fill mining executed in panels that are excavated along strike.

Jiaojia Mine Area

Jiaojia mine area is located in the southern part of the Jiaobei fault. Jiaojia mine area has three main orebodies. The mine area covers an area of approximately 0.9 square kilometers and a depth from 36 m to -450 m. Orebody I is the largest of the three orebodies. The orebody is 1,438 m in length and inclined at a depth of 500 m, to a maximum depth of 1,120 m. Continuity is good and offset is less than one meter. Orebody II is smaller in size and Orebody III is nearly mined out above 190 m below sea level.

The Jiaojia mine area is an underground mine with two vertical shafts, one incline shaft, one man-and-materials ramp and several winzes. The total vertical shaft depth is 380m, with loading pockets for ore and waste handling at 215 m below sea level and 295 m below sea level elevations in the shaft. The incline shaft is at a 29 degree angle, which goes to 630 m below sea level. At 630 m below sea level the incline shaft is connected to both vertical shafts through level workings.

Wangershan Mine Area

Wangershan mine area is located at the east margin of the Jiaobei fault on the North China Plate. The mine area covers an area of approximately 0.9 square kilometers and a depth from 150 m to -650 m. The deposit in the Wangershan mine area is located within the fault zone of Wangershan Mountain and the hanging wall of the Jiaojia fault. The orebody at Wangershan mine area is a massive quartz near the surface, becoming more disseminated and extended at depth.

The mine area is served by two vertical shafts for ore, waste and man-and-materials handling and one shaft for ventilation and secondary escape way purposes as well as one ramp. The main vertical shaft is 565 m deep. The second vertical shaft is 210 m deep. The ramp is collared at the surface and descends to the bottom of the present workings, which are 430 m below sea level. There are four blind shafts and ramps that serve as ventilation conduits, waste rock handling facilities and routes for man and materials.

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Sizhuang Mine Area

Sizhuang mine area is located on the North China Plate, the eastern Shandong Shield, Jiaobei tectonic uplift northwest, on the eastern side of the Yishu fault. The mine area covers an area of approximately 0.5 square kilometers and a depth from0mto-450 m. There are nine orebodies in Sizhuang mine area, six of which are main orebodies. The strike is 345 to 15 degrees, dipping northwest at 29 to 55 degrees. The orebody length is 418 to 720 m with an elevation of 35 m below sea level to 450 m below sea level, which is the depth of the mining permit.

The mine area is served by two vertical shafts for ore, waste and man-and-materials handling one decline shaft for ventilation, services, small amount of waste rock lifting, and secondary escape way purposes, as well as one ramp. The declines shaft accesses the mine down to 430 m, below sea level with an ore loading pocket at 400 m below sea level. The first vertical shaft goes to 413 m below sea level with a loadout on 400 m below sea level. The second vertical shaft is rectangular and concrete lined with a total depth is 210 m. The shaft is used for waste rock hoisting.

Future Plans

In order to extend the LOM of Jiaojia Gold Mine, we plan to expand the boundary and mine production volume of Sizhuang mine area. We also plan to transform its return shaft and construct new shafts, which we expect to complete by December 2020. The expansion plan will allow us to increase mine production volume of Sizhuang mine area from 2,300 tonnes to 3,000 tonnes per day, and we are in the process of obtaining the permits that will allow us to expand our capacity. The total estimated capital expenditure for this expansion plan is approximately RMB281.1 million, which we plan to finance through cash from operations and bank borrowings. We also plan to conduct exploration activities in the Qianchen-Shangyangjia mine area, which we acquired in March 2017. According to the AAI Report, the mine area covered by this exploration permit had Resources of 1,947 koz as of March 31, 2018. We plan to convert the exploration permit into mining permits once we complete exploration activities. We are also assessing the potential of high quality resources owned by our Controlling Shareholder, such as the Jiaojia Nanlv-Xinmu (南呂-欣木) mine area. See “— Business Strategy — Continue to consolidate high quality resources through domestic and cross-border mergers and acquisitions” and “Relationship with Our Controlling Shareholder.”

Xincheng Gold Mine

Xincheng Gold Mine is located in Jincheng town, Shandong province, 35 km northeast of Laizhou, Shandong province, on the north coast of the Shandong Peninsula and on the south shore of the Bohai Sea. Xincheng Gold Mine can be accessed through G206 National Highway, Weifang and Laiyang railway stations and Longkou Port. As of the Latest Practicable Date, Xincheng Gold Mine was the only gold mine recognized as a “National Environmental Friendly Company” (國家環境友好 企業) accredited by the MEE in China. According to the AAI Report, the average cash costs of Xincheng Gold Mine is the lowest among our PRC Mines.

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As of March 31, 2018, Xincheng Gold Mine had Reserves and Resources of 2,630 koz and 7,274 koz, respectively. As of the same date, the gold grade of its Reserves and Resources was 3.1 g/t and 3.1 g/t, respectively. According to the AAI Report, assuming that no new Reserves are identified, Reserves of approximately 2,630 koz will be sufficient for Xincheng Gold Mine to maintain production for a further term of approximately 11 years from March 31, 2018.

In respect of our Xincheng Gold Mine, we held one mining permit covering an area of approximately 1.4 square kilometers and two exploration permits covering an area of approximately 15.3 square kilometres as of the Latest Practicable Date, one of which we acquired in November 2017 and is in the process of changing the registered holder for this permit. The mine area covers a depth from 26 m to -600 m.

The following map set forth the location of the mine areas of Xincheng Gold Mine.

Xincheng Gold Mine has outcrops at the ground surface while most production has been from underground mining employing overhand cut-and-fill mining methods. There is a processing facility in Xincheng Gold Mine with a designed processing capacity of 6,500 tonnes per day. Gold concentrates produced in this processing facility are delivered to our Shandong Smeltery for cyanide leaching and smelting. During the Track Record Period, Xincheng Gold Mine had an average dilution rate of 4.8% and an average mining loss rate of 4.8%.

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As of March 31, 2018, we were mining the two main orebodies. The first one was the largest ore zone exploited to date in Xincheng Gold Mine. The second one was primarily a series of closely spaced parallel quartz-pyrite veins. Both orebodies dip to the northwest between 40 to 70 degrees. Mining in the Xincheng Gold Mine is primarily conducted at 600 m below sea level. We plan to expand the mining operation to 1,130 m below sea level in the existing mine as well as two adjacent mineralized zones.

Xincheng Gold Mine utilizes one main ramp for deep mining. The main shaft is 500 m in depth. A new main shaft and at least two auxiliary shafts and a smaller internal shaft are planned to be constructed to support our expansion. The planned new shaft will be 1,328 m in depth.

Future Plans

We plan to engage in more exploration activities to increase Resources and Reserves of Xincheng Gold Mine. We entered into an agreement in November 2017 with our Controlling Shareholder to acquire an exploration permit to explore the peripheral and deeper underground areas of Xincheng Gold Mine for a consideration of approximately RMB569.8 million. According to the AAI Report, the peripheral and deeper underground areas of Xincheng Gold Mine covered by this exploration permit had Reserves and Resources of 410 koz and 1,171 koz, respectively, as of March 31, 2018. As of the Latest Practicable Date, we were in the process of changing the registered permit holder of such exploration permits to reflect our ownership with the relevant government authority. We are required to fulfill the following requirements for the transfer process: (i) the exploration permit shall have been granted for over two years, (ii) minimum exploration capital investment has been made, (iii) there are no disputes in relation to the exploration permit, and (iv) fees have been paid for the exploration permit. As of the Latest Practicable Date, we fulfilled these requirements, and were pending payment of certain fees. Local government authorities have concluded that the mine area would not be affected by the re-evaluations of the coverage of environmental protection zones. Our PRC Legal Advisers do not anticipate material legal impediments in the transfer process on the basis that such payment is made and that we submit the required application materials. We expect to complete the transfer process by the first half of 2019. For more information, see “— Our Mining and Exploration Permits — Owned Mining and Exploration Permits.” We also plan to expand our mining and processing facilities, which is expected to be completed in 2022. The expansion plan will allow us to increase the designed processing capacity of Xincheng Gold Mine from 6,500 tonnes to 8,000 tonnes per day. The total estimated capital expenditure for this expansion plan is approximately RMB1,995.9 million, which we plan to finance through cash from operations and bank borrowings.

Linglong Gold Mine

Linglong Gold Mine is one of the oldest gold mines in China and commenced modern production in 1962. According to the F&S Report, in November 2017, Jiaojia Gold Mine and Linglong Gold Mine were among the few gold mines in China that have reached a cumulative gold mine production volume of 100 tonnes (equivalent to approximately 3,215.1 koz). Linglong Gold Mine has been in continuous operation since it commenced mining operations. Linglong Gold Mine is divided into three mine areas, namely, Linglong mine area, Lingshan mine area and Dongfeng mine area. According to the AAI Report, Linglong Gold Mine located on the Zhaoye Gold Belt with highly continuous deposits.

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As of March 31, 2018, Linglong Gold Mine had Reserves and Resources of 550 koz and 5,440 koz, respectively. As of the same date, the gold grade of its Reserves and measured and indicated Resources was 3.1 g/t and 3.3 g/t, respectively. According to the AAI Report, assuming that no new Reserves are identified, Reserves of approximately 550 koz will be sufficient for Linglong Gold Mine to maintain production for a further term of approximately four years from March 31, 2018. During the Track Record Period, Linglong Gold Mine had an average dilution rate of 17.0% and an average mining loss rate of 1.8%.

In respect of our Linglong Gold Mine, we held two mining permits covering an aggregate area of approximately 7.2 square kilometers as of the Latest Practicable Date. We were also in the process of renewing one mining permit and two exploration permits as of the same date. In addition, we acquired one exploration permit in relation to Linglong Gold Mine in November 2017 from our Controlling Shareholder and was in the process of changing the registered holder for this permit as of the Latest Practicable Date.

The following map set forth the location of the mining locations of Linglong Gold Mine.

Linglong Gold Mine is located on the northwest portion of the Shandong Peninsula. The Linglong mine area and Dongfeng mine area are located 20 km north of Zhaoyuan, Shandong province. The Lingshan mine area is located approximately 25 km west of Zhaoyuan, Shandong province. The mine areas are located 20 to 60 km from the G15 and G18 National Highways, from which they can be reached using S306, S215, S213, and S209 Provincial Highway.

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The mining methods for Linglong mine area are shrinkage and shrinkage with delayed fill, the mining method for Dongfeng mine area is mechanized overhand drill-and-fill, and the mining method for Lingshan mine area is undercut-and-fill. There are two processing facilities that serve the Linglong Gold Mine. The processing facility in the Linglong mine area processes ore mined from Linglong mine area and Dongfeng mine area and has a designed processing capacity of 4,000 tonnes per day. The processing facility in the Lingshan mine area processes ore mined from the Lingshan mine area and has a designed processing capacity of 450 tonnes per day. Gold concentrates produced from the processing facilities are transported to the Shandong Smeltery for smelting.

Linglong Mine Area

Linglong mine area covers an area of approximately 9.4 square kilometers and a depth from 648 m to -800 m. Linglong mine area deposits lie within the Linglong Goldfield, which is part of the Zhao-Ye gold belt. There are eight vein groups, each of which consisted of several additional numbered veins. There are three main veins, of which the largest one is five km long and three to five m thick. The largest vein contains 13 orebodies. The other two main veins consists six orebodies each. As of March 31, 2018, we mainly conducted mining activities in the Linglong mine area.

The orebodies in Linglong mine area are accessed by vertical shafts used for personnel hoisting, and ventilation. Personnel access for these mines is by a series of vertical shafts, with the deeper levels accessed by blind shafts with underground hoistrooms. Shafts are multilevel, having lifting levels on 40 to 50 m spacings.

Dongfeng Mine Area

Dongfeng mine area is located on the regional northeast-trending Potouqing fault, which is a splay off the regional Zhaoping fault. Dongfeng mine area covers an area of approximately 2.1 square kilometers and a depth from 230 m to -660 m. Dongfeng mine area contains several distinct fault zones and individual veins and ore shoots within a likely zone of complex reverse faulting. Among these are a very large vein and the individual splays. The large orebody contains over 100 tonnes of gold and is as much as 34.2 m thick. The deposit dips approximately 30 to 45 degrees to the southeast. We commenced production at the Dongfeng mine area in 2016.

Lingshan Mine Area

Lingshan mine area covers an area of approximately 5.1 square kilometers and a depth from 110m to -510 m. Lingshan mine area deposits lie within the Linglong Goldfield, which is part of the Zhao-Ye gold belt. There are more than ten parallel northeast-trending faults in Lingshan mine area. The largest fault is the Lingbei fault, which has a strike length of over 20 km with a steep, variable dip. Another large fault strikes northeast and has a variable dip that averages about 60 degrees to the southeast. It is nearly three kilometers long and has been drilled to a depth of 900 m below sea level. There is another large fracture, which is a splay of the large fault. It also has a variable dip that averages about 60 degrees to the southeast. It is 1,200 m long and has been explored to nearly 800 m below sea level. It has a width from 1 to 22 m wide, averaging width of six meters.

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Future Plans

In order to extend the LOM, we plan to conduct deeper mining and exploration at the Linglong Gold Mine to increase Reserves. As a result of our continuous exploration activities while mining, Linglong Gold Mine has maintained mining operations for more than 50 years. In addition, we entered into an agreement in November 2017 with our Controlling Shareholder to acquire an exploration permit to explore deeper underground areas of Linglong Gold Mine for a consideration of approximately RMB79.6 million. According to the AAI Report, the deep areas of Linglong Gold Mine covered by this exploration permit had Reserves and Resources of 10 koz and 89 koz, respectively, as of March 31, 2018. As of the Latest Practicable Date, we were in the process of changing the registered permit holder of such exploration permit to reflect our ownership with the relevant government authority. We are required to fulfill the following requirements for the transfer process: (i) the exploration permit shall have been granted for over two years, (ii) minimum exploration capital investment has been made, (iii) there are no disputes in relation to the exploration permit, and (iv) fees have been paid for the exploration permit. As of the Latest Practicable Date, we fulfilled these requirements and were pending payment of certain fees. In addition, local government authorities are re-evaluating the coverage of environmental protection zones in Shandong province as a whole and have preliminarily approved the adjustment to such mine area in accordance with the re-evaluation result of the coverage of environmental protection zones, and the approval for such adjustment is currently pending from higher government authority. Our PRC Legal Advisers do not anticipate material legal impediments in the transfer process on the basis that such payment is made, that we are not affected by, or have adjusted our application pursuant to, the results of re-evaluations of the coverage of environmental protection zones, and that we submit the required application materials. We expect to complete the transfer process by the first half of 2019. For more information, see “— Our Mining and Exploration Permits — Owned Mining Permits and Exploration Permits.” We also plan to commence construction of mining structures to engage in mining at 660 m below sea level in the Dongfeng mine area. We plan to complete this construction project and start mining in 2020. The total estimated capital expenditure of these projects is approximately RMB1,215.3 million, which we plan to finance using cash from operations and bank borrowings.

Other Gold Mines in Shandong Province

As of March 31, 2018, our gold mines in Shandong province also included Guilaizhuang Gold Mine, Jinzhou Gold Mine, Qingdao Gold Mine, Penglai Gold Mine and Yinan Gold Mine. The table below sets forth the average mining loss rate and the average dilution rate of our other gold mines in Shandong province during the Track Record Period and the LOM estimated based on the current levels of gold production and Reserves as of March 31, 2018.

Average mining Average loss rate dilution rate LOM

(%) (%) (year)

Guilaizhuang Gold Mine ...... 2.9% 6.9% 2 Jinzhou Gold Mine...... 3.7% 19.3% 5 Qingdao Gold Mine ...... 4.6% 9.7% 9 Penglai Gold Mine...... 5.3% 12.8% 5 Yinan Gold Mine...... 4.2% 4.7% —

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• Guilaizhuang Gold Mine. Guilaizhuang Gold Mine was our fifth largest gold mine in terms of gold mine production volume during the period ended March 31, 2018. We acquired a 70.65% interest in Guilaizhuang Gold Mine from our Controlling Shareholder in October 2016. See “History and Development — Major Acquisitions” for details. Our Guilaizhuang Gold Mine is located around 25 km southeast of Pingyi county. For our operations in Guilaizhuang Gold Mine, we were in the process of renewing one mining permit covering an area of approximately 0.3 square kilometers as of the Latest Practicable Date. We were also in the process of renewing one exploration permit covering an area of approximately 22.2 square kilometers as of the same date. Guilaizhuang Gold Mine has 12 mineralized zones. Mining is currently being conducted in the main orebody, which is about 550 m long, ranges from 3.3 to 10.1 m in thickness, averaging 6.8 m, and has a downdip extent of about 650 m. Guilaizhuang Gold Mine has three shafts, and is mainly mined through overhand cut-and-fill mining executed in panels that are excavated along strike. Guilaizhuang Gold Mine is equipped with a processing facility. Guilaizhuang Gold Mine has relatively convenient access to transportation, including the Yanshi (Yanzhou-Shijiusuo) Railway, G1511 National Highway and National Road 327. While our Guilaizhuang Gold Mine did not experience any material safety accidents during the Track Record Period, local government authorities required gold mines in the region, including Guilaizhuang Gold Mine, to temporarily suspended operations in October 2015 due to certain industrial safety accidents of third parties in the region. Guilaizhuang Gold Mine complied with such requirement and resumed operations in July 2016. We intend to increase our exploration activities at the Guilaizhuang Gold Mine and assess the gold reserves potential of surrounding mine areas in the future.

• Jinzhou Gold Mine. Our Jinzhou Gold Mine is located in Rushan, Shandong province. Jinzhou Gold Mine consists of mining rights owned by Jinzhou Group and its 100% and 90% owned subsidiaries, Fuling Mining and Qianling Mining, respectively. As of March 31, 2018, we beneficially owned 60.43% and 54.39% of Fuling Mining and Qianling Mining through our 60.43% interest in Jinzhou Group. Jinzhou Gold Mine is divided into six mine areas, namely, the Jinqingding mine area, the Hubazhuang mine area, the Yinggezhuang mine area, the Xipo mine area, Sanjia mine area and the Songjiazhuang mine area. For our Jinzhou Gold Mine, we held four mining permits covering an aggregate area of approximately 2.5 square kilometers as of the Latest Practicable Date. In addition, as of the same date, we were also in the process of renewing two mining permits and two exploration permits in Jinzhou Gold Mine, which covered an area of 1.0 square kilometers and 14.7 square kilometers, respectively. G309 and S207 National Highway connect the properties to Rushan city, which is located 10 to 25 km to the south of the various properties. From Rushan, the S24 expressway connects to other major cities that connect to the rest of the country. The properties are close to the Xiacun station of the Taocun-Weihai local railway. Yantai Port is approximately 60 kilometers northeast. Jinzhou Gold Mine was mainly accessed and mined by vertical shafts. Depending on the thickness and dip of the quartz veins, we use different mining methods. We have used cut-and-fill at depths above 300 m in order to reduce the potential for damage and safety hazards. Jinzhou Gold Mine is equipped with three processing facilities. We intend to continue steady production at Jinzhou Gold Mine and carry out continued exploration activities in the areas covered by the exploration permit, which we believe have potential to increase our Reserves.

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• Qingdao Gold Mine. Our Qingdao Gold Mine covers two distinct locations. Xinhui mine area is located in the western most location approximately 40 kilometres northwest of Pingdu city and approximately ten kilometers from the intersection of the Rongwu Expressway (G18) and the Qingdao-Xinhe Highway (G2011). Shanhou mine area is located 34 km north of Laixi city. Shanhou mine area is located 34 kilometers north from Laixi and 30 kilometers north from Zhaoyuan. The S307 Provincial Highway from Laizhou to Laiyang is located south of the mining area, and S215 Provincial Highway from Laixi to Longkou is within 2 kilometers. For our Qingdao Gold Mine, we held two mining permits covering an aggregate area of approximately 3.8 square kilometers, as well as three exploration permits covering an aggregate area of approximately 7.9 square kilometers as of the Latest Practicable Date. Qingdao Gold Mine has two main ore bodies, 15 lesser orebodies, two contributing small orebodies and one mined out orebody. Xinhui mine area uses room-and-pillar, post-pillar and overhand cut-and-fill mining methods, while Shanhou mine area uses the overhand cut-and-fill mining method. Mining of the Qingdao Gold Mine was primarily conducted through one vertical production shaft and one man-and-materials shaft for each mine area. Each mine area is equipped with a processing facility. To expand our Reserves, we entered into an agreement in September 2017 with an Independent Third Party to acquire two exploration permits for the Dazhuangzi mine area for a total consideration of approximately RMB174.2 million. As of the Latest Practicable Date, our transfer applications with respect to these exploration permits were approved by the relevant government authority. We intend to continue steady production at Qingdao Gold Mine and carry out continued exploration activities in the areas covered by the exploration permit, which we believe have potential to increase our Reserves.

• Penglai Gold Mine. We acquired Penglai Gold Mine from our Controlling Shareholder in October 2016. See “History and Development — Major Acquisitions” for details. Penglai Gold Mine is located about 37.5 km southeast of Penglai and about 6.8 km southwest of the town of Daliuxing. It is divided into three mine areas, namely, Qijiagou mine area, Qijiagou Second Branch mine area and Huluxian mine area. Penglai Gold Mine is about 10 kilometers north of the G15 National Highway and 40 kilometers east of the Yantai Port and railway station. It is surrounded by many township-level roads and is highly accessible. For our Penglai Gold Mine, we held one mining permit covering an aggregate area of approximately 4.1 square kilometers, as well as three exploration permits covering an aggregate area of approximately 7.8 square kilometers as of the Latest Practicable Date. In addition, as of the same date, we were also in the process of renewing two mining permits covering a total area of 0.7 square kilometers and one exploration permit covering an area of 9.9 square kilometers in relation to our Penglai Gold Mine. Penglai Gold Mine has 16 shafts and mainly uses shrinkage stoping mining methods depending on the vein thickness. Penglai Gold Mine is equipped with one processing facility. We intend to continue steady production at Penglai Gold Mine and carry out continued exploration activities in the areas covered by the exploration permit, which we believe have potential to increase our Reserves.

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• Yinan Gold Mine. Our Yinan Gold Mine is located in the south-central portion of Shandong province. Yinan Gold Mine is a polymetallic mine, which produces gold, iron, copper and silver. Yinan Gold Mine is divided into three mine areas, namely, Tongjing mine area, Jinlong mine area, and Jinchang mine area. Each mine area has a corresponding mining permit covering an aggregate area of approximately 5.7 square kilometres as of the Latest Practicable Date. S229 Provincial Highway travels through the Yinan Gold Mine, with the Jinchang mine area approximately 5 kilometers west of the highway and the Tongjing mine area approximately 1.3 kilometers to its east. Major north/south access roads include the G25 National Highway, located approximately 20 kilometers to the east, and the G2 National Highway, located approximately 25 kilometers to the southwest. The main east/west access road is the Rizhao-Lankao Expressway (G1511), located approximately 25 kilometers to the south of the Yinan Gold Mine. Rizhao Port is located approximately 110 kilometers to the southeast along the highway. Each mine area has two shafts and a ramp access. The mining method for all three mine areas is random room and pillar. Each mine area is equipped with a processing facility. While our Yinan Gold Mine did not experience any material safety accidents during the Track Record Period, local government authorities required gold mines in the region, including Yinan Gold Mine, to temporarily suspend operations in October 2015 due to certain industrial safety accidents of third parties in the region. Yinan Gold Mine complied with such requirement and resumed operations in June 2016. We intend to increase our exploration activities at Yinan Gold Mine. We entered into an agreement in November 2017 with our Controlling Shareholder to acquire an exploration permit for the Tongjing Jinchang mine area for a consideration of approximately RMB5.4 million. As of the Latest Practicable Date, we have completed the transfer procedure in relation to the exploration permit, which covers an area of 18.2 square kilometers. For more information, see “— Our Mining and Exploration Permits — Owned Mining Permits and Exploration Permits.”

There are no forecast costs for our Yinan Gold Mine in 2019 and 2020 as all of the Reserves of Yinan Gold Mine are expected to be extracted in 2018. However, we believe that additional drilling may better define and allow for a portion of our Resources for this exploration permit to be designated as Reserves. With respect to the exploration permit for Tongjing Jinchang mine area, although there were no Reserves, the Resources were approximately 605.7 koz (equivalent to approximately 18.8 tonnes), according to the AAI Report. Moreover, currently available exploration data shows that the availability of by-products other than gold, such as silver, copper and iron, may improve the overall economics of the Yinan Gold Mine to justify further exploration activities.

In 2015, 2016 and 2017 and the three months ended March 31, 2018, the operating cash cost of Yinan Gold Mine amounted to US$2,235.8 per ounce gold produced, US$3,610.0 per ounce gold produced, US$1,940.5 per ounce gold produced and US$2,345.8 per ounce gold produced, respectively, which is due to the relatively low amount of gold produced from the Yinan Gold Mine of approximately 10.8 koz, 4.9 koz, 12.4 koz and 3.2 koz, respectively. Accordingly, the cost per ounce of gold produced is higher than the gold price during the Track Record Period. Nevertheless, considering that additional exploration activities will be conducted to allow Resources to be designated as Reserves, we expect that the cost per ounce of gold produced will decrease and be optimized upon the increase in gold produced from the Yinan Gold Mine.

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Despite the cost per ounce gold produced being higher than the gold price for the Yinan Gold Mine, we consider that this would not have a material financial impact on our Group, as (i) we also produce by-products other than gold, such as silver, copper and iron at Yinan Gold Mine, and (ii) during the Track Record Period, the gold mine production from Yinan Gold Mine only accounted for less than 2% of the total gold mine production of our PRC Mines.

Gold Mines in Other Provinces

As of March 31, 2018, we also had three gold mines in other provinces in China. The table below sets forth the average mining loss rate and the average dilution rate of our PRC Mines in other provinces during the Track Record Period and the LOM estimated based on the current levels of gold production and Reserves as of March 31, 2018.

Average mining Average loss rate dilution rate LOM

(%) (%) (year)

Chifengchai Gold Mine ...... 9.5% 12.9% 3 Xihe Zhongbao Gold Mine ...... 6.8% 10.7% 20+ Fujian Yuanxin Gold Mine ...... 9.4% 7.1% 4

• Chifengchai Gold Mine. We acquired approximately a 73.52% interest in the Chifengchai Gold Mine in 2008. For details of the acquisition, see “History and Development — Major Acquisitions.” Chifengchai Gold Mine is an underground mine located in the Songshan district, Chifeng city, Inner Mongolia autonomous region. Chifengchai Gold Mine involves one mine operating in the north mine area #2 vein, and the associated deep general exploration for that same property, and two additional exploration areas. For our Chifengchai Gold Mine, we held one mining permit covering an area of approximately 1.82 square kilometers, as well as three exploration permits covering an area of approximately 7.5 square kilometers as of the Latest Practicable Date. Chifengchai Gold Mine deposit is located west of Chifeng city. The Wenjiadixi exploration area is located 18 kilometers from the G111 National Highway and 20 kilometers from the Honghuagou Railway Station of Beijing-Tongliao Railway. Mineralization occurs in two northwest-trending vein systems with over 1.6 km of strike length. System I is the larger of the two vein systems and consists of a swarm of veins 1,600 m long and 50 to 200 m wide. System II veins are restricted to the northeastern part of Chifengchai Gold Mine and dip 30 to 45 degrees to the southwest. Chifengchai Gold Mine has a total of ten larger orebodies and six smaller orebodies. Chifengchai Gold Mine owns two active shafts, one inactive shaft and one developing shaft. Production has been from underground mining employing shrinkage and overhand cut-and-fill mining methods. Chifengchai Gold Mine is equipped with a processing facility. We intend to continue steady production at Chifengchai Gold Mine and carry out continued exploration activities in the areas covered by the exploration permit, which we believe have potential to increase our Reserves.

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• Xihe Zhongbao Gold Mine. We acquired a 70% interest in the Xihe Zhongbao Gold Mine in 2012. For details of the acquisition, see “History and Development — Major Acquisitions.” After the acquisition, Xihe Zhongbao Gold Mine carried out infrastructure improvement and commenced production in 2016. Xihe Zhongbao Gold Mine is an underground gold mine located in Xihe, Gansu province. Production is conducted at the Siergoumen mine area. For our Xihe Zhongbao Gold Mine, we held one mining permit covering an area of approximately 1.6 square kilometers, as well as two exploration permits covering an area of approximately 5.5 square kilometers as of the Latest Practicable Date. Xihe Zhongbao Gold Mine is located about 12 kilometers east of Xihe and about 10 kilometers north of Yeshuihe village, where the Xi-Chen Highway can be accessed (30 kilometers from Xihe). The mine area passes through Majiayuan Village and is locally accessible by a limited number of rural roads. The Tianshui Station of the Longhai Railway is 121 kilometers away. There were two orebodies ranging from 580 to 1,100 m in length, and from 28 to 570 m and 50 to 360 m in depth, respectively. As of March 31, 2018, Xihe Zhongbao Gold Mine had one shaft, which is 300 m deep, and two decline shafts. The main mining method is the overhand shrinkage stope method. Xihe Zhongbao Gold Mine is equipped with a processing facility. We intend to continue steady production at Xihe Zhongbao Gold Mine and carry out continued exploration activities in the areas covered by the exploration permit, which we believe have potential to increase our Reserves.

• Fujian Yuanxin Gold Mine. We acquired a 90.31% interest in Fujian Yuanxin Gold Mine through two acquisitions in 2012 and 2014. For details of the acquisitions, see “History and Development — Major Acquisitions.” Fujian Yuanxin Gold Mine is located in the Zhenghe county, Fujian province, seven kilometers from the Shitun township. Production is conducted at the Dongji Gold (Silver) mine area. For our Fujian Yuanxin Gold Mine, we held one mining permit covering an area of approximately 0.43 square kilometers, as well as one exploration permit covering an area of approximately 5.5 square kilometers as of the Latest Practicable Date. Fujian Yuanxin Gold Mine is serviced by provincial roads interconnecting with each other from Chengguan to Shitun town. Jixia village roads connect to the mine. The main mining method is cut-and-fill method through one production shaft and a ramp from the surface. Fujian Yuanxin Gold Mine is equipped with a processing facility. We intend to continue steady production at Fujian Yuanxin Gold Mine and carry out continued exploration activities in the areas covered by the exploration permit, which we believe have potential to increase our Reserves.

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Our Mining and Exploration Permits

Owned Mining Permits and Exploration Permits

As of the Latest Practicable Date, we held a total of 22 valid mining permits and had six mining permits being renewed in China. Our valid mining permits had a total permitted mine production volume of approximately 4.0 million tonnes per year and covered a total area of approximately 33.0 square kilometers. As of the Latest Practicable Date, we also held 17 valid exploration permits and had nine exploration permits being renewed. Our valid exploration permits covered a total area of approximately 65.2 square kilometers. 19 of our valid mining permits cover regions in Shandong province, with a permitted ore production volume of approximately 3.8 million tonnes and covering a total area of approximately 29.2 square kilometers. 11 of our valid exploration permits cover regions in Shandong province, covering a total area of approximately 46.7 square kilometers.

With respect to our mining permit and exploration permits being renewed as of the Latest Practicable Date, we did not conduct mining and exploration activities on such permits during the renewal process in accordance with relevant PRC laws and regulations. For certain of our permits under renewal, the renewal process has been lengthy primarily due to environmental protection zoning adjustments being made by relevant government authorities, or delays due to relevant government authorities’ internal processes, which are beyond our control, and not due to any legal impediment on our part. We actively and regularly liaise with these government authorities to move the renewal processes forward and do not expect any material legal impediment in the renewal process once those issues are resolved. For details of the status of each renewal process, see the tables below.

Our mining permits are generally granted with a term of up to 30 years. Our exploration permits are generally renewed every two years. We will generally renew our mining permits or exploration permits before their respective expiry dates. As advised by our PRC Legal Advisers, there are no explicit regulations limiting the number of times a mining permit or exploration permit may be renewed in the PRC.

In November 2017, we acquired three exploration permits in relation to our Xincheng Gold Mine, Linglong Gold Mine and Yinan Gold Mine that cover an aggregate area of approximately 35.2 square kilometers from our Controlling Shareholder. As of the Latest Practicable Date, we were in the process of changing the registered permit holder of two out of the three exploration permits with the relevant government authority to reflect our ownership and have completed the transfer procedure of the exploration permit in relation to Yinan Gold Mine.

If we get satisfactory and economically viable exploration results in the areas covered by our exploration permits, we will apply for mining permits covering such areas with the relevant governmental authorities. In accordance with applicable PRC laws and regulations, the holder of an exploration permit has priority in obtaining the relevant mining permits upon successful discovery of mineral Resources.

— 195 — The following table sets forth details of our mining permits that we held in the PRC as of the Latest Practicable Date.

Permitted Term of permit annual mine production Issuance Gold mine Permit name Permit holder Area volume Permit number date Expiry date Status

(square kilometers) (kt)

Sanshandao Shandong Gold Mining Co., The Company 1.0771 495 C1000002011024120106484 2008.01.31 2019.09.01 Valid Gold Mine . . Ltd. (Sanshandao Gold Mine) Shandong Gold Mining Co., The Company 0.7025 495 C1000002011024110106485 2008.01.31 2023.11.03 Valid Ltd. (Xinli Mine) Shandong Gold Mining Laizhou Mining 0.48 42 C3700002009074110029880 2016.11.11 2022.11.11 Valid (Laizhou) Co., Ltd. (Caojiabu Gold Mine area) Laizhou Mining 0.912 99 C1000002009124120048090 2014.06.01 2022.06.01 Valid BUSINESS 9 — 196 — Shandong Gold Mining (Laizhou) Co., Ltd. (Sanshandao Gold Mine, Cangshang Mine area) Jiaojia Gold Shandong Gold Mining Laizhou Mining 0.871 330 C3700002011014120105119 2016.05.25 2021.05.25 Valid Mine .....(Laizhou) Co., Ltd. (Wangershan Mine) Shandong Gold Mining Laizhou Mining 0.452 49.5 C3700002011014120105115 2016.06.21 2021.06.21 Valid (Laizhou) Co., Ltd. (Sizhuang Mine area) Xincheng Gold Shandong Gold Mining Co., The Company 1.367 412.5 C1000002011054140119485 2001.02.01 2021.02.01 Valid Mine .....Ltd. (Xincheng Gold Mine) Permitted Term of permit annual mine production Issuance Gold mine Permit name Permit holder Area volume Permit number date Expiry date Status

(square kilometers) (kt)

Linglong Gold Shandong Gold Mining Linglong 9.43 313.5 C3700002009014210032309 2016.03.02 2018.06.02 Renewal in progress. As of Mine .....(Linglong) Co., Ltd. (LinglongMining the Latest Practicable Date, Mine area) we have submitted the renewal application. Our PRC Legal Advisers do not anticipate material legal impediments in the renewal process, considering that the Zhaoyuan People’s Government has issued a

notice to the provincial land BUSINESS 9 — 197 — and resources authority that the Zhaoyuan People’s Government is adjusting the coverage of environmental protection zones and the mining area covered by our mining permit after the adjustment will not fall within any environmental or other protection zone, and have advised the provincial land and resources authority to proceed with our renewal application Shandong Gold Mining Linglong 5.1354 49.5 C3700002008124110001522 2018.05.02 2025.05.02 Valid (Linglong) Co., Ltd. (LingshanMining Mine area) Permitted Term of permit annual mine production Issuance Gold mine Permit name Permit holder Area volume Permit number date Expiry date Status

(square kilometers) (kt)

Shandong Gold Mining Co., The Company 2.0799 660 C1000002011064210113809 2016.08.29 2021.11.10 Valid Ltd. (Dongfeng Mine area) Guilaizhuang Shandong Gold Guilaizhuang Guilaizhuang 0.2901 210 C1000002011044240111677 2016.04.23 2018.04.23 Renewal in progress. We Gold Mine . . Mining Co., Ltd. Mining have submitted renewal (Guilaizhuang Gold Mine) application in March 2018, which is being reviewed by the relevant authority Qingdao Gold Shandong Gold Mining Xinhui Mining 1.3566 165 C3700002011044140110631 2017.04.24 2021.09.24 Valid Mine .....(Xinhui) Co., Ltd. (Xinhui Mine) BUSINESS

9 — 198 — Shandong Gold Mining (Laixi)Laixi Mining 2.4087 330 Ｃ3700002016114110143219 2016.11.11 2021.11.11 Valid Co., Ltd. (Shanhou Mine) Penglai Gold Shandong Gold Group Penglai Penglai Mining 4.084 90 C3700002009094110037974 2017.07.11 2022.07.11 Valid Mine .....Mining Co., Ltd. (Qijiagou Mine area) Shandong Gold Group Penglai Penglai Mining 0.2075 33 C3700002009114110044721 2016.04.07 2018.04.07 Renewal in progress. We Mining Co., Ltd. (Huluxian have submitted renewal Mine area) application in January 2018. As of the Latest Practicable Date, our renewal application has been approved by the local land and resource bureau and is pending review from Land and Resource Bureau of Yantai City. Permitted Term of permit annual mine production Issuance Gold mine Permit name Permit holder Area volume Permit number date Expiry date Status

(square kilometers) (kt)

Shandong Gold Group Penglai Penglai Mining 0.462 25.5 C3700002009044110013465 2016.04.12 2018.04.12 Renewal in progress.As of Mining Co., Ltd. (Qigou the Latest Practicable Date, Second Branch Mine) our renewal application has been approved by the local land and resource bureau and is pending review from Land and Resource Bureau of Yantai City. Yinan Gold Shandong Gold Mining (Yinan)Yinan Mining 3.1049 90 C3700002011034220108203 2016.11.11 2021.11.11 Valid Mine .....Co., Ltd. (Tongjing Branch BUSINESS

9 — 199 — Mine) Shandong Gold Mining (Yinan)Yinan Mining 0.9578 90 C3700002011034120108208 2016.11.11 2021.11.11 Valid Co., Ltd. (Jinchang Branch Mine) Shandong Gold Mining (Yinan)Yinan Mining 1.6441 90 C3700002009014110002875 2018.04.21 2025.04.21 Valid Co., Ltd. (Jinlong Mine area) Jinzhou Gold Shandong Jinzhou Mining Jinzhou Group 1.1374 99 C3700002009094110034287 2013.10.14 2018.10.14 Valid and we will submit Mine .....Group Co., Ltd. (Jinqingding renewal application within Mine area) the required timeframe Shandong Jinzhou Mining Jinzhou Group 0.2710 40 C3700002009094110034285 2016.12.14 2021.12.14 Valid Group Co., Ltd. (Hubazhuang Mine area) Shandong Jinzhou Mining Jinzhou Group 0.9460 99 C3700002017054110144419 2017.05.17 2022.05.17 Valid Group Co., Ltd. (Songjiazhuang Mine area) Permitted Term of permit annual mine production Issuance Gold mine Permit name Permit holder Area volume Permit number date Expiry date Status

(square kilometers) (kt)

Shandong Jinzhou Group Qianling 0.8466 90 C3700002010074110071810 2016.07.29 2018.07.29 Due to change of the Qianling Mining Co., Ltd. Mining coverage of environmental (Yinggezhuang Mine area) protection zones in Shandong province, the local land and resource bureau ceased to accept renewal applications until the change is completed. As of the Latest Practicable Date, we were actively communicating with

the relevant land and BUSINESS 0 — 200 — resource bureau and will submit the renewal application once the local land and resource bureau resumes to accept renewal applications. Our PRC Legal Advisers do not anticipate material legal impediments in the renewal process on the basis that we are not affected by, or have adjusted our renewal application pursuant to, the results of re-evaluations of the coverage of environmental protection zones, and we submit the required renewal application materials. Shandong Jinzhou Group Qianling 0.1674 40 C3700002010014110054315 2016.09.30 2021.09.30 Valid Qianling Mining Co., Ltd. Mining (Xipo Mine area) Permitted Term of permit annual mine production Issuance Gold mine Permit name Permit holder Area volume Permit number date Expiry date Status

(square kilometers) (kt)

Shandong Jinzhou Group Fuling Mining 0.1395 16.5 C3700002011024110107077 2016.07.05 2017.07.05 Renewal in progress. As of Fuling Mining Co., Ltd. the Latest Practicable Date, (Sanjia Mine area) we obtained most of the material approvals necessary for the renewal process, including approval of our land rehabilitation plan and mine development plan and the only outstanding approval to be obtained is our environmental impact report,

which is pending BUSINESS 0 — 201 — re-evaluations by local government authorities with regard to the coverage of environmental protection zones in Shandong province as a whole. Our PRC Legal Advisers do not anticipate material legal impediments in the renewal process on the basis that our environmental impact report is approved after the re-evaluations are completed, and that we submit other documentation required for the application process. We believe our operations will not be materially and adversely affected even if we do not complete the renewal procedure on the basis that during the Track Record Period, we did not conduct mining activities in this mine area. Permitted Term of permit annual mine production Issuance Gold mine Permit name Permit holder Area volume Permit number date Expiry date Status

(square kilometers) (kt)

Chifengchai Chifeng Chaihulanzi Gold Chaihulanzi 1.8192 60 C1500002011074120119786 2015.12.08 2025.12.08 Valid Gold Mine . . Mining Co., Ltd. (Vein No.2, Gold North Mine area) Xihe Zhongbao Xihe Zhongbao Mining Co., Zhongbao 1.5992 148.5 C6200002014044110135542 2014.04.28 2034.04.28 Valid Gold Mine . . Ltd. Xihe County (SiergoumenMining Mine) Fujian Yuanxin Fujian Zhenghe Yuanxin Fujian Yuanxin 0.4266 60 C3500002010124210102291 2011.06.02 2029.06.02 Valid Gold Mine . Mining Co., Ltd. (Dongji Gold (Silver) Mine area) BUSINESS 0 — 202 —

The following table sets forth details of our exploration permits that we held in the PRC as of Latest Practicable Date:

Term of permit

Permit Issuance Gold mine Exploration project transferee Area Permit number date Expiry date Status

(square kilometers)

Sanshandao Gold Mine . . . The gold mine of Caojiabu mineLaizhou Mining 0.68 T37120090602029714 2017.04.01 2019.03.31 Valid area, Laizhou, Shandong Province (general exploration) (山東省曹家 埠金礦區金礦詳查) The gold mine of Section 55-91 ofThe Company 0.16 T01120080402000388 2017.02.02 2019.02.02 Valid Xinli mine area, Laizhou, Shandong (exploration) (reserved) (山東省萊州市新立礦區55-91線礦 段金礦勘探)(保留) Term of permit

Permit Issuance Gold mine Exploration project transferee Area Permit number date Expiry date Status

(square kilometers)

The gold mine of peripheral The Company 0.45 T37120081102017084 2016.05.07 2018.05.06 Renewal in progress. As of geology in Sanshandao mine area, the Latest Practicable Date, Laizhou, Shandong Province we have submitted the (general exploration) (山東省萊州 renewal application. Our 市三山島金礦區外圍地質詳查) PRC Legal Advisers do not anticipate material legal impediments in the renewal process, considering that we have obtained a confirmation from local governmental authorities that the mining area covered by our BUSINESS 0 — 203 — exploration permit does not fall within any environmental or other protection zone The gold mine of Xinli Village, The Company 4.55 T01120091002035409 2016.08.29 2018.02.11 Renewal in progress. Our Laizhou, Shandong Province PRC Legal Advisers do not (exploration) (reserved)(山東省萊 anticipate material legal 州市新立村金礦勘探)(保留) impediments in the renewal process on the basis that we are not affected by, or have adjusted our renewal application pursuant to, the results of re-evaluations of the coverage of environmental protection zones Term of permit

Permit Issuance Gold mine Exploration project transferee Area Permit number date Expiry date Status

(square kilometers)

Jiaojia Gold Mine...... Thegold mine of deep areas in Laizhou Mining 0.49 T37120090202023905 2016.12.28 2018.12.27 Valid, we are in the process Sizhuang mine area, Laizhou, of applying for mining Shandong Province (general permit in relation to this prospecting) (山東省萊州市寺莊金 exploration permit. We will 礦深部普查) renew the exploration permit if the mining permit is not obtained by expiration date The gold mine of Laizhou Mining 30.64 T37120080102000612 2017.11.24 2018.06.30 Renewal in progress. As of Qianchen-Shenyang mine area, the Latest Practicable Date, Laizhou, Shandong Province we have submitted the (exploration) ( — renewal application. Our

山東省萊州市前陳 BUSINESS

0 — 204 — 上楊家礦區金礦勘探) PRC Legal Advisers do not anticipate material legal impediments in the renewal process, considering that we have obtained a confirmation from local governmental authorities that the mining area covered by our exploration permit does not fall within any environmental or other protection zone Linglong Gold Mine....Thegold mine of deep areas in Linglong 5.09 T37120081002016706 2016.08.09 2018.08.08 Renewal in progress. We Lingshangou mine area, Zhaoyuan,Mining have submitted the renewal Shandong Province (exploration) application in June 2018, (山東省招遠市靈山溝礦區深部金礦 which is being reviewed by 勘探) the relevant authority. Term of permit

Permit Issuance Gold mine Exploration project transferee Area Permit number date Expiry date Status

(square kilometers)

The gold mine of Dongfeng mine The Company 5.62 T37120081102017090 2016.09.14 2018.05.06 Renewal in progress. As of deposit in Linglong mine area, the Latest Practicable Date, Tianliijiazhuang, Zhaoyuan, we have prepared the Shandong Province (general required renewal application exploration) (山東省招遠市玲瓏金 materials, and our application 礦田李家莊東風礦床金礦詳查) is pending re-evaluations by local government authorities with regard to the coverage of environmental protection zones in Shandong province as a whole. Our PRC Legal Advisers do not anticipate material legal impediments in BUSINESS

0 — 205 — the renewal process on the basis that we are not affected by, or have adjusted our renewal application pursuant to, the results of re-evaluations of the coverage of environmental protection zones, and we submit the required renewal application materials. We believe our operations will not be materially and adversely affected even if we do not complete the renewal procedure because (i) this is an exploration permit and we did not conduct mining activities in such mine area and (ii) the Resources and Reserves contained in such mine area accounted for less than 1.0% of the total Resources and Reserves of our PRC Mines as of March 31, 2018, according to the AAI Report Term of permit

Permit Issuance Gold mine Exploration project transferee Area Permit number date Expiry date Status

(square kilometers)

Xincheng Gold Mine....Thegold mine of Qujia region, Jinshi Mining 11.4 T37120080302003818 2017.06.29 2019.06.28 Valid Laizhou, Shandong Province (exploration) (山東省萊州市曲家地 區金礦勘探) Guilaizhuang Gold Mine . . The gold mine of Yulin region, Guilaizhuang 22.19 T37120080602009892 2016.04.01 2018.03.31 Renewal in progress. We Pingyi, Shandong Province Mining have submitted renewal (exploration) (山東省平邑縣榆林地 application in February 2018, 區金礦勘探) which is being reviewed by the relevant authority Qingdao Gold Mine.....Thegold mine of Mawan region, Xinhui Mining 5.14 T37120080502007699 2017.07.01 2019.06.30 Valid Pingdu, Shandong Province

(exploration) (山東省平度市麻灣地 BUSINESS

0 — 206 — 區金礦勘探) The gold mine of Southern Xinhui Mining 0.85 T37120090602030576 2017.04.01 2019.03.31 Valid Dazhuangzi mine area, Pingdu, Shandong Province (exploration) (山東省平度市大莊子金礦床南段金 礦勘探) The gold mine of Xinhui Mining 1.89 T37120090602030580 2017.04.01 2019.03.31 Valid Dazhuangzi-Houjia mine area, Pingdu, Shandong Province (exploration) (山東省平度市大莊子 —侯家金礦勘探) Penglai Gold Mine.....Thegold mine of Heishi-Ningjia Penglai Mining 2.12 T37120080202001974 2017.04.01 2019.03.31 Valid mine area, Penglai, Shandong Province (general exploration) (山 東省蓬萊市黑石—寧家地區金礦詳 查) Term of permit

Permit Issuance Gold mine Exploration project transferee Area Permit number date Expiry date Status

(square kilometers)

The gold mine of deep and Penglai Mining 9.93 T37120080302003906 2016.01.01 2017.12.31 Renewal in progress. As of peripheral areas in Qijiagou-Hulu the Latest Practicable Date, Line mine area, Penglai, Shandong we submitted the required Province (exploration) (山東省蓬萊 renewal application materials 市齊家溝—虎路線礦區深部及外圍 to the relevant government 金礦勘探) authority, and the renewal process was only pending an approval from the people’s government of Penglai city in relation to city zoning. Our PRC Legal Advisers do not anticipate material legal impediments in the renewal BUSINESS

0 — 207 — process on the basis that we obtain such approval from the people’s government of Penglai city or adjust the mining area accordingly. We believe our operations will not be materially and adversely affected even if we do not complete the renewal procedure on the basis that during the Track Record Period, we did not conduct exploration activities in this mine area. The gold mine of Shiqiao region, Penglai Mining 2.66 T37120081202022611 2016.10.01 2018.09.30 Valid, we are considering to Penglai, Shandong Province apply for deregistration due (general exploration) (山東省蓬萊 to low levels of reserves 市石橋地區金礦詳查) The gold mine of Xushan region, Penglai Mining 3.05 T37120081002015635 2016.10.01 2018.09.30 Valid, we are considering to Penglai, Shandong Province apply for deregistration due (general exploration) (山東省蓬萊 to low levels of reserves 市徐山地區金礦詳查) Term of permit

Permit Issuance Gold mine Exploration project transferee Area Permit number date Expiry date Status

(square kilometers)

Jinzhou Gold Mine.....Thegold mine of deep and Qianling 7.48 T01120100302039561 2015.03.16 2017.03.16 Renewal in progress. As of peripheral areas in Yinggezhuang Mining the Latest Practicable Date, mine area, Rushan, Shandong we have prepared the Province (general exploration) (山 required renewal application 東省乳山市英格莊礦區深部及外圍 materials, and our application 金礦詳查) is pending re-evaluations by local government authorities with regard to the coverage of environmental protection zones in Shandong province as a whole. Our PRC Legal Advisers do not anticipate material legal impediments in BUSINESS

0 — 208 — the renewal process on the basis that we are not affected by, or have adjusted our renewal application pursuant to, the results of re-evaluations of the coverage of environmental protection zones, and we submit the required renewal application materials. We believe our operations will not be materially and adversely affected even if we do not complete the renewal procedure because (i) this is an exploration permit and we did not conduct mining activities in such mine area and (ii) the Resources and Reserves contained in such mine area accounted for less than 1.0% of the total Resources and Reserves of our PRC Mines as of March 31, 2018, according to the AAI Report. Term of permit

Permit Issuance Gold mine Exploration project transferee Area Permit number date Expiry date Status

(square kilometers)

The gold mine of deep and Fuling Mining 7.25 T37120090602030602 2015.01.01 2016.12.31 Renewal in progress. As of peripheral areas in Sanjia mine the Latest Practicable Date, area, Rushan, Shandong Province we have prepared the (general exploration) (山東省乳山 required renewal application 市三甲礦區深部及外圍金礦詳查) materials, and our application is pending re-evaluations by local government authorities with regard to the coverage of environmental protection zones in Shandong province as a whole. Our PRC Legal Advisers do not anticipate

material legal impediments in BUSINESS

0 — 209 — the renewal process on the basis that we are not affected by, or have adjusted our renewal application pursuant to, the results of re-evaluations of the coverage of environmental protection zones, and we submit the required renewal application materials. We believe our operations will not be materially and adversely affected even if we do not complete the renewal procedure because (i) this is an exploration permit and we did not conduct mining activities in such mine area and (ii) the Resources and Reserves contained in such mine area accounted for less than 1.0% of the total Resources and Reserves of our PRC Mines as of March 31, 2018, according to the AAI Report. Term of permit

Permit Issuance Gold mine Exploration project transferee Area Permit number date Expiry date Status

(square kilometers)

Yinan Gold Mine...... Thegold mine of Yinan Mining 18.23 T37120090202024820 2018.07.05 2018.09.30 Valid and we will submit Tongjing-Jinchang mine area, renewal application within Yinan, Shandong Province (general the required timeframe exploration) (山東沂南縣銅井—金 場礦區金礦詳查) Chifengchai Gold Mine. . . The gold mine of Hadagou mine Chaihulanzi 2.67 T15120080402005224 2017.02.15 2019.02.14 Valid area, Chutoulang Town, Songshan Gold District, Chifeng (geological exploration) (赤峰市松山區初頭朗 鎮哈達溝金礦地質勘探) The gold mine of West Wenjiadi Chaihulanzi 3 T15120091202037787 2016.12.15 2018.12.14 Valid and we plan to apply Gold for a mining permit in mine area, Songshan District, BUSINESS

1 — 210 — Chifeng, Inner Mongolian relation to this exploration Autonomous Region (exploration) permit within the required (內蒙古赤峰市松山區溫家地西金礦 timeframe 勘探) The gold mine of deep areas in Chaihulanzi 1.82 T15520161102053340 2016.11.02 2019.11.01 Valid Vein No.2 Northern Chaihulanzi Gold mine area, Songshan District, Inner Mongolian Autonomous Region (general prospecting) (內蒙古自治 區松山區柴胡欄子金礦北採區號脈2 深部普查) Xihe Zhongbao Gold Mine . The gold mine of Xiaodonggou Zhongbao 4.18 T62120090202028948 2018.02.12 2020.02.11 Valid mine area, Xihe, Gansu Province Mining (exploration) (甘肅省西和縣小東溝 金礦勘探) The gold mine of Yuantanzi gold Zhongbao 1.36 T62120090202028947 2017.02.13 2019.02.12 Valid lead zinc polymetallic mine area, Mining Xihe, Gansu Province (general exploration) (甘肅省西和縣元灘子 金鉛鋅多金屬礦詳查) Term of permit

Permit Issuance Gold mine Exploration project transferee Area Permit number date Expiry date Status

(square kilometers)

Fujian Yuanxin Gold Mine The gold(silver) mine of Dongji Fujian Yuanxin 5.51 T35120080902015406 2018.02.13 2020.02.13 Valid mine area, Zhenghe, Fujian Province (general exploration) (福 建省政和縣東際礦區金銀( )礦詳查)

The following table sets forth details of the exploration permits we acquired and were undergoing changes in registered owner with the relevant government authority as of the Latest Practicable Date.

Term Permit BUSINESS —211— Gold Mine Exploration project transferee Permit transferor Area Permit number Issuance date Expiry date

(square kilometers)

Xincheng Gold The gold mine of peripheral and The Company Our Controlling Shareholder 3.91 T37120090302025628 2016.10.17 2018.10.16 Mine .....deeper areas in Xincheng mine area, Laihou, Shandong Province (exploration) (山東省 萊州市新城礦區外圍及深部金礦 勘探) Linglong Gold The gold mine of deeper areas Linglong Our Controlling Shareholder 9.45 T37120080402006583 2016.04.01 2018.03.31 Mine .....in Linglong mine area, Mining Zhaoyuan, Shandong Province (exploration) (山東省招遠市玲瓏 礦區深部金礦勘探) BUSINESS

Our mining permits set forth a permitted annual mine production volume, which is usually derived from the feasibility reports that we submit at the time of applying for the mining permit. Historically, we have had a number of instances where our actual production exceeded the permitted annual mine production volume because we continued to develop our mines after obtaining mining permits, while the expansion of our mining permits generally required more time to be completed. Despite the lengthy application review process by government authorities, historically, we have been able to obtain approval for applications to expand the Permitted Volume that we made for a number of our mining permits.

According to the Provisional Measures for the Supervision and Control of Mineral Resources (礦產資源監督管理暫行辦法), if the permitted annual mine production volume is exceeded and results in the destruction or loss of resources, a mining company may be subject to fines imposed by the competent authority equal to less than 50% of the loss, and in the most serious cases, suspension or revocation of the mining permit. According to other relevant PRC laws and regulations, those engaged in production over the permitted annual mine production volume without governmental approval may be subject to administrative penalties of less than RMB30,000.

We have been advised by our PRC Legal Advisers that the competent authorities for this matter are the relevant administration of work safety, the MNR and relevant land and resources authority. We have obtained confirmations from these competent authorities that during the Track Record Period, we did not receive any penalties from them for exceeding the permitted annual mine production volume. During the Track Record Period, our mining permits have passed annual inspections and we have not been listed on the List of Enterprises with Abnormal Operations (異常名錄) of the MNR. Moreover, we have complied with regulatory requirements to submit information related to our resources and actual production volume to relevant authorities and have not been deemed to destruct or cause the loss of resources. In light of the foregoing, our Directors believe that the fact that our actual production exceeded the permitted annual mine production volume would not have any material and adverse effect on our operations, and the likelihood that we would be subject to severe penalties is remote.

As a result of the foregoing, our PRC Legal Advisers advised that there is no indication that would cause them to believe that we would be subject to material fines, suspension or revocation of permits for exceeding the permitted annual mine production volume during the Track Record Period. See “Risk Factors — Risks Relating to Our Business and Industry — We may fail to obtain, maintain or renew the government permits, licenses and approvals required for our mining and exploration activities.” As of the Latest Practicable Date, we have applied to expand the permitted annual mine production volume for relevant permits and were in the process of communicating with the relevant authority to advance such applications.

With respect to this matter, we have formalized a set of procedures to monitor our actual production volume, including:

• maintaining daily records of production volume for each of our PRC Mines, which are submitted to us via our OA system;

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• requiring each PRC Mine to prepare and submit annual production volume plans to us for approval;

• establishing a reporting system in which each PRC Mine submits monthly reports with actual production volumes to us, which is reviewed and signed-off by the relevant department heads, vice presidents and general manager;

• requiring our mineral resource and other relevant departments to regularly convene and assess the need to apply for expansion of the Permitted Volume for our mining permits; and

• designating senior-level personnel responsible for production and work safety with full knowledge of our total production volume and work safety conditions to maintain close communication with land and resources authorities and work safety authorities to understand their views and positions on this matter.

Leased Mining Permit

Since 2004, we have been leasing a mining permit (permit number: C1000002011024120106483) for our Jiaojia Gold Mine from our Controlling Shareholder. The mining permit covers an area of approximately 0.9 square kilometres and had a permitted annual mine production volume of 330,000 tonnes. In 2004, our Controlling Shareholder had applied to transfer this mining permit to us. Consideration for the transfer would be paid in the form of a capital increase to the State in accordance with the Administrative Measures for the Conversion of Consideration for Exploration Right and Mining Right into Capital Increase to the State (探礦權採礦權價款轉增國家資本管理辦法) (the “Measures”). In anticipation of the lengthy transfer process and to ensure our ability to continue operations during the transfer process, we and our Controlling Shareholder entered into a lease agreement in July 2004 pursuant to which we may use this mining permit prior to the transfer of this mining permit. The consideration we paid to the Controlling Shareholder was approximately RMB5.4 million per annum, which is calculated by dividing the RMB80.8 million (being the appraised value of this mining permit) by the remaining permit term (being 15 years at the time). Because the Measures were suspended in 2006, the MLR ceased to process transfer applications such as ours. Although the relevant provisions in the Interim Provisions for the Administration of Assignment and Transfer of Mining Right (礦業權出讓轉讓管理暫行規定) and other regulations require approval from the relevant governmental authority to legally lease mining permits, in practice, the relevant governmental authority did not establish any administrative approval procedures. As such, our Controlling Shareholder could not apply for or obtain approval for the lease. As confirmed by the competent land and resources authority for this matter, (i) we and our Controlling Shareholder did not receive any form of penalty, inquiry or investigation for leasing this mining permit during the Track Record Period, and (ii) prior to the transfer of this mining permit the competent authority would not assess any form of penalties in relation to the leasing arrangement. Our PRC Legal Advisers are of the view that the competent land and resources authority would not penalize us for this leasing arrangement prior to the transfer of this mining permit. As of the Latest Practicable Date, our Controlling Shareholder had applied for the expansion of the mining area and mine production volume of this mining permit and intends to transfer this mining permit to us upon approval. The consideration for the transfer of this mining permit to us will be paid in cash instalments instead of in the form of a capital increase to the State as originally contemplated, and as such, our PRC Legal Advisers have

— 213 — BUSINESS advised us that the transfer may be processed by the relevant authorities in accordance with procedures set out in the Implementation Rules for Transfer of Mining Permits (礦業權出讓轉讓管理暫行規定), among other regulations. The competent authority does not expect impediments in the transfer of this mining permit. We expect to commence the transfer procedure by the end of 2020.

Our Exploration Activities

During the Track Record Period, our exploration activities were mainly carried out by our in-house exploration team and third-party exploration teams. In addition, to leverage the exploration experience and synergies of our Controlling Shareholder, we also received guidance and advice from our Controlling Shareholder’s exploration team. During the Track Record Period, we mainly focused increasing our Reserves and LOM of our existing mines by conducting exploration of areas close to existing orebodies and gold deposits, where we believe the potential of identifying additional Reserves is high. Most of our exploration expenses were capitalized and amounted to RMB226.7 million, RMB187.0 million, RMB261.8 million and RMB43.1 million in 2015, 2016 and 2017 and the three months ended March 31, 2018, respectively.

In the early stages of exploration, we will search for potential resources based on our understanding of the geology and mineral distribution our existing mines. Generally, our in-house exploration team will conduct preliminary analysis. If we consider that the mine area has potential after preliminary analysis, we will apply for, or acquire, the exploration permit for the corresponding mine area. Upon obtaining the exploration permit, we will generally employ qualified third-party exploration teams to carry out more in-depth research. The work of the third-party exploration team primarily involves collecting geological samples, carrying out comprehensive analysis of the local geology and topography, identifying and determining the position, occurrence, size and grade of key minerals.

As the exploration activities advance, we will commence the design of pit infrastructure, making use of existing wells and roadways as much as possible to reduce costs. According to relevant PRC laws and regulations, mine construction design must be carried out by professional mine design company with the requisite qualifications and in accordance with the exploration report submitted to the relevant government authority. We will then commence mine shaft excavation and other pre-mining preparation work, which we may also outsource to third-parties.

In-house Exploration Team for Gold Mines

Our in-house exploration team conducts exploration activities within the areas of our mining permits with the goal of increasing our Reserves through the daily mining process. All 12 of our PRC Mines are staffed with at least one geological chief engineer (地質主任工程師) that leads our exploration activities. As of March 31, 2018, our in-house exploration team had 188 members in total, a substantial majority of which hold Bachelors’ or higher degrees in mineral exploration, geology or other related fields.

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Third-party Exploration Teams

In line with industry practice, we employ third-party exploration teams to conduct exploration in areas where we have acquired exploration permits. When selecting the third-party exploration team, we generally take into account a number of factors, including exploration methods and techniques, experience, qualification, quality and costs. Our production safety department (安全生產部)is responsible for overseeing the safety, environmental protection and quality of the activities of third-party exploration teams. Our mineral resources department (資源事業部) is responsible for supervising and managing the work of third-party exploration teams, including the progress of the project, cost, mineral consumption, among others. We require our third-party exploration teams to work in strict accordance with PRC laws and regulations related to production safety and environmental protection and our exploration plan. For more information on third-party exploration teams, see “— Contractors.”

Our Operations in China

Overview

Mining Processing Smelting and refining

Our operations can generally be divided into three steps, namely, mining, processing and smelting and refining. Our PRC Mines conduct independent mining operations. Each of our PRC Mines is equipped with processing facilities to process the ores mined into doré or gold concentrates. We then conduct centralized smelting and refining of gold concentrates and/or doré produced from our most of PRC Mines at our Shandong Smeltery. In general, the period from extracting the ores from our mining operations to production of our finished products is approximately three weeks.

Mining

The mining method we use depends on the type of ore deposit. We primarily utilize the cut-and-fill method for our PRC Mines, especially for our mines located in Shandong province. The mining stage generally takes approximately two days. Details of the cut-and-fill method are set forth below.

Planning Cutting and Stoping Extraction Filling preparation

• Planning. We conduct extensive planning before production begins, including planning the layout of chambers, pillars, ventilation shafts, ore passes and filling shafts in the mine area. We generally divide the mine area into different subsections, and use each subsection as a stoping unit.

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• Cutting and preparation. Excavate ventilation shafts, ore passes and filling shafts. Upon completion, we will begin drilling holes into the rock, charging the holes with explosive materials and blasting the rock.

• Stoping. The ore is extracted from the surrounding rock, creating a void.

• Extraction. The ore is transported above ground via shafts or inclines for processing.

• Filling. We backfill the void with various filling materials, including waste rock from the shaft cutting and blasting stage, in order to reinforce the ground. After backfilling, we will continue stoping until the stoping unit is mined out.

For our other PRC Mines, we also use the shrinkage method. Details of the shrinkage method are set forth below.

Cutting and Planning Stoping Extraction preparation

• Planning. We conduct extensive planning before production begins. We generally divide the mine area into different subsections, and use each subsection as a stoping unit.

• Cutting and preparation. We conduct extensive planning of chutes, exit passes and ventilation shafts under the stope. We start by cutting to prepare for stoping.

• Stoping. We conduct down-top hierarchical stoping. About one-third of the produced ore are drawn out and the remaining ores stay in the chamber to act as the platform for continuing mining work. We haul ores out of the mine in batches after mining in the chamber has been completed.

• Extraction. We load the ores from the stope using rock loaders, and transport them to the wellhead and raise to the surface through motor vehicles.

Our mining equipment mainly includes drilling jumbo, rock bolt jumbo, scrapper and rock drilling machine. For details of the equipment we use for mining, see “— Raw Materials and Suppliers — Machinery and Equipment.”

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Processing

Our Processing Methods

We process the gold ores mined primarily using two methods. The type of method we use for processing mainly depends on the type of ores produced from the gold mines. Most of our PRC Mines produce quartz vein, clastic altered rock and tidal rock type ores, and the main processing method used for such ores is the flotation process. Our Guilaizhuang Gold Mine mainly produces cryptoexplosive breccia ores, and the processing method used for this type of ore is the all-slime cyanidation-CIP absorption gold extraction process. The processing stage generally takes approximately seven hours. As of March 31, 2018, we process all of the gold from our PRC Mines in-house, other than the Fujian Yuanxin Gold Mine which outsources the processing work. See “— Contractors — Processing.”

Our flotation process is divided into three stages, namely, crushing, grinding flotation and tailings dewatering. The following chart sets forth the flotation process work flow for our Linglong Gold Mine, which is representative of the flotation process used on other PRC Mines.

Crushing

Grinding flotation

Tailings dewatering

• Crushing circuit. Typically, run-of-mine (ROM) from underground is crushed in two or three stages of closed-circuit crushing. The final crushed product is transferred to the fine ore bin.

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• Grinding flotation circuit. The final crushed ore is ground in a grinding circuit operated in a closed circuit with cyclone or spiral classifier for classification. The final ground product is processed in a flotation circuit; typically, the flotation circuit consists of rougher flotation, multi-stage clean flotation and scavenger flotation.

• Tailings dewatering. Gold concentrate foam is filtered and compressed to separate gold concentrate from tailings.

The main difference between the all-slime cyanidation-CIP absorption gold extraction process and the flotation process is in the grinding flotation stage. At the grinding stage of the all-slime cyanidation-CIP absorption gold extraction process, we use the semi-autogenous mill for semi-autogenous grading and grinding and then use the ball mill for secondary grading and re-grinding. Through grinding, we will absorb the ore pulp with the gold CIP through multi-cyanidation leaching. Through the absorption, the gold-loaded carbon will deliver the attachments through the self-carbonating absorption tank to the tailings dewatering stage.

Our Processing Facilities

Each of our PRC Mines is equipped with its own processing facilities to process the ores mined. Main equipment at our processing facilities include ball mills, conveyors, mixers, pressure filters, crushers and air compressors. For details, see “— Raw Materials and Suppliers — Machinery and Equipment.” The total designed processing capacity of our processing facilities amounted to 38,500 tonnes per day as of March 31, 2018. The following table sets forth the details of our processing facilities.

Designed processing Processing facility capacity Description

(t/d)

Sanshandao Gold Mine . . . 8,000 Gold concentrates are produced after processing and delivered to Shandong Smeltery. Jiaojia Gold Mine ...... 8,000 Gold concentrates are produced after processing and delivered to Shandong Smeltery. Xincheng Gold Mine .... 6,500 Gold concentrates are produced after processing and delivered to Shandong Smeltery. Linglong Gold Mine ..... 4,450 Gold concentrates are produced after processing and delivered to Shandong Smeltery. Guilaizhuang Gold Mine . . 2,000 Doré is produced after processing and delivered to Shandong Smeltery. Qingdao Gold Mine ..... 3,000 Gold concentrates are produced at the processing facility in the Shanhou mine area and doré is produced at the processing facility in the Xinhui mine area, both gold concentrates and doré are delivered to Shandong Smeltery. Penglai Gold Mine...... 1,000 Gold concentrates are produced after processing and delivered to a third-party contractor for smelting and refining. Yinan Gold Mine...... 1,550 Doré is produced after processing and delivered to Shandong Smeltery. Copper concentrates and other by-products are sold to third parties.

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Designed processing Processing facility capacity Description

(t/d)

Jinzhou Gold Mine...... 1,500 Doré is produced after processing and delivered to Shandong Smeltery. Chifengchai Gold Mine . . . 1,250 Doré is produced after processing and delivered to Shandong Smeltery. Xihe Zhongbao Gold Mine . 450 Doré is produced after processing and delivered to Shandong Smeltery. Fujian Yuanxin Gold Mine . 800 We have engaged a third party contractor to operate our processing facility at Fujian Yuanxin Gold Mine, see “— Contractors — Processing.” Gold concentrates is produced after processing and smelted and refined by third parties.

The table below sets forth the utilization rate and volume of ore processed at the processing facilities of our PRC Mines.

Fort the three months For the year ended December 31, ended March 31,

2015 2016 2017 2018

Ores Utilization Ores Utilization Ores Utilization Ores Utilization processed rate(1)(4) processed rate(1)(4) processed rate(1)(4) processed rate(1)(4)

(thousand tonnes, except percentages)

Sanshandao Gold Mine. . . 4,128.2 156.4% 4,058.3 153.7% 3,610.2 136.7% 807.5 112.2% Jiaojia Gold Mine ..... 3,088.5 117.0 3,160.4 119.7 3,380.2 128.1 888.5 123.4% Xincheng Gold Mine .... 1,968.1 91.8 1,969.6 91.8 1,970.2 91.9 486.7 83.2% Linglong Gold Mine .... 1,944.0 132.4 2,003.6 136.4 2,009.1 136.8 433.4 108.2% Guilaizhuang Gold Mine . . 485.2 73.5 138.0 20.9(2) 427.8 64.8 38.4 21.3% Qingdao Gold Mine .... 804.1 81.2 392.4 39.6(3) 588.4 59.4(3) 183.4 67.9% Penglai Gold Mine ..... 361.5 109.5 243.7 73.8 281.0 85.2 75.1 83.4% Yinan Gold Mine...... 466.0 91.1 208.1 40.7(2) 498.0 97.4 124.8 89.5% Jinzhou Gold Mine ..... 443.6 89.6 376.7 76.1 449.6 90.8 113.5 84.1% Chifengchai Gold Mine . . 361.2 87.6 389.4 94.4 369.0 89.5 116.9 103.9% Xihe Zhongbao Gold Mine. — — 116.7 78.6 167.4 112.7 49.1 121.2% Fujian Yuanxin Gold Mine . 253.4 96.0% 289.5 109.7% 202.4 76.7% 84.2 116.9%

(1) Utilisation rate is calculated by dividing volume of ore processed for each period by the designed annual processing capacity of the same period, which is calculated based on our designed processing capacity per day assuming we operate 330 days per year. (2) The decrease in utilization rates of the processing facilities of Guilaizhuang Gold Mine and Yinan Gold Mine in 2016 was primarily because Guilaizhuang Gold Mine and Yinan Gold Mine temporarily suspended operations during the Track Record Period and resumed operations in July and June 2016, respectively. For more information, see “ — Our Gold Mines in Shandong Province — Other Gold Mines in Shandong Province.” (3) The decrease in utilization rate of the processing facilities of Qingdao Gold Mine in 2016 and 2017 was primarily because we conducted certain construction works in relation to Qingdao Gold Mine in 2016 and 2017. (4) During the Track Record Period, the utilization rates of certain of our processing facilities were greater than 100% primarily because (i) the designed annual processing capacity is calculated on a 330 day per year basis whereas our processing facilities operated for over 350 days per year during the Track Record Period; and (ii) we made adjustments to the processing method in accordance with the characteristics of ores mined from each of our PRC Mines, which enabled us to process more ores

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Smelting and Refining

Our Smelting and Refining Methods

We engage in smelting and refining of the doré and gold concentrates produced from our PRC Mines. In addition, we also conduct smelting and refining of (i) doré procured from third-party suppliers, which are produced into standard gold bullion, and (ii) standard gold bullion procured from the Shanghai Gold Exchange, which are produced into customized gold products. The smelting and refining stage generally takes approximately two to three weeks. As of the Latest Practicable Date, major steps of our smelting process are summarized as follows:

• Grinding flotation. After the gold concentrates are obtained through mining and processing, we place them in a scrubber that conveys them to the ball mill. After the gold concentrates are ground in the ball mill, clear water will be added for mixing and then deliver them into the cyclone which will transfer the cyclone overflow to the flotation tank. The cyclone underflow is further ground in the vertical mill and is then transferred into the flotation tank. At the flotation stage, we will conduct multi-stage flotation to enrich gold, silver, copper, lead and zinc contained in the gold concentrates into the high-copper concentrates and sulphur into the high-sulphur concentrates and then synthesize remaining substances into the low-sulphur concentrates.

• Cyanidation smelting. We add sodium cyanide into the high-copper concentrates, high-sulphur concentrates and low-sulphur concentrates obtained through grinding flotation in the agitating tank. Through chemical reaction, the solid gold becomes liquid gold. Thereafter, we precipitate the purified liquid gold and add zinc powder to change the liquid gold into solid gold and then produce gold sludge through filter pressing. Upon recovery of gold sludge, we conduct flotation or cyanide breaking based on different composition of concentrates to produce other concentrates such as lead, zinc, copper and sulphur.

• Gold sludge wet purification. We put hydrochloric acid and sodium chlorate together with gold sludge into the reaction tank for chemical reaction through stirring to remove impurities such as copper, lead, zinc and iron. Thereafter, we put the gold sludge in which impurities have been removed into the reaction tank again and add hydrochloric acid and sodium chlorate for stirring reaction. At the same time, we separate gold from silver by controlling electric potential and smelt gold into pregnant solution and make silver chloride from silver. We then mix the pregnant solution with sodium metabisulfite in the reaction tank to reduce the pregnant solution into the high-purity gold.

We mainly use two refining methods, namely chlorination refining and electrorefining, at our smelteries. Our Shandong Smeltery has the capacity to use either method to refine doré into gold bullion. Our Shenzhen Smeltery mainly adopts the electrorefining method.

• Chlorination refining. Upon receipt of doré, we smelt it and pulverize the smelted doré using high water pressure. After the pulverized doré is put into the reaction tank, we will

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add hydrochloric acid and sodium chlorate for stirring reaction and separate gold from silver through controlling electric potential to smelt gold into pregnant solution and make silver chloride from silver. We then mix the pregnant solution with sodium metabisulfite in the reaction tank to reduce the pregnant solution into the high-purity gold.

• Electrorefining. Upon receipt of doré, we refine and pour the refined doré into the graphite gold anode mold to form gold anode plate as the anode with pure titanium plate as the cathode and chloride complex compounds hydrochloric acid solution as the electrolyte for direct current electrolysis.

Our Smelting and Refining Facilities

Our smelting and refining facilities are responsible for (i) smelting and refining the gold mined from our PRC Mines and doré procured from third-party suppliers to produce standard gold bullion, (ii) re-processing standard gold bullion procured from the Shanghai Gold Exchange into customized gold products, and (iii) providing smelting and refining services to SDG Group and third parties.

We own two smelting and refining facilities, namely, the Shandong Smeltery and Shenzhen Smeltery. Our Shandong Smeltery is located in Laizhou, Shandong province and is our main smeltery. SDG Smelting is an accredited SGE Gold Ingots and Bars Delivery refiner, which means it is eligible to provide standard gold bullion to the Shanghai Gold Exchange. SDG Smelting has also met the LBMA Gold and Silver Good Delivery standards since January 2010. Our Shenzhen Smeltery mainly provides gold processing services to third parties and also produces customized gold products, with a designed annual production capacity of 60 tonnes. The table below sets forth the designed annual production capacity of our smelteries during the Track Record Period.

For the three months For the years ended December 31, ended March 31,

2015 2016 2017 2018

Designed annual production Production Utilization Production Utilization Production Utilization Production Utilization capacity volume rate volume rate volume rate volume rate(3)

(tonnes) (tonnes) (tonnes) (tonnes) (tonnes)

Shandong Smeltery(1) ..... 104.7 72.3 69.1% 91.9 87.7% 65.0 62.1% 16.9 64.6% Shenzhen Smeltery(2) ...... 60.0 100.5 167.5% 67.5 112.6% 63.4 105.7% 27.1 180.67%

Total ...... 164.7 172.8 104.9% 159.4 96.8% 128.4 78.0% 44.0 106.9%

(1) The designed annual processing capacity of our Shandong Smeltery is calculated on a 350 day per year and 24 hours per day basis and assuming the use of a smelting and chlorination refining processing method. (2) The designed annual processing capacity of our Shenzhen Smeltery is calculated on a 330 day per year and 24 hours per day basis and assuming the use of a electrorefining processing method. (3) Annualized by multiplying production volume by 12 and divided by 3, then divided by the designated annual production.

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We allocate production volume at Shandong Smeltery and Shenzhen Smeltery primarily considering the type of products produced, and the geographic location of the gold supply and customers. The Shandong Smeltery smelts and refines most of the gold produced from our PRC Mines, as most of our PRC Mines are located in Shandong and closer to the Shandong Smeltery. Shandong Smeltery also conducts refining of gold from third-party doré for customers in the region. Shenzhen Smeltery primarily services third parties in the region that require gold processing services, and also produces customized gold products based on customer demand. In comparison to the utilization rate of the Shandong Smeltery, that of the Shenzhen Smeltery is relatively higher because the Shenzhen Smeltery primarily re-processes high purity gold, which is less time consuming than refining doré.

Utilization rates of our Shenzhen Smeltery were greater than 100% during the Track Record Period primarily because our production activities at the Shenzhen Smeltery mainly involved re-processing high purity gold, whereas the designed annual production capacity of the Shenzhen Smeltery was calculated based on the production capacity of refining doré. The production process for high purity gold reprocessing is less time consuming than the refining process, which allows us to achieve a higher production volume than the designed annual production capacity of the Shenzhen Smeltery.

Our smelteries are primarily equipped with mixing drums, pressure filter, integrated thickening and dewatering equipment, vertical mills, air compressors and loaders. For details of the equipment used in our smelting and refining, see “— Raw Materials and Suppliers — Machinery and Equipment.”

The gold produced from the refining process are grade-tested, set into gold bars or ingots of specific weights and impressed with our trademarks. Standard gold bullion are imprinted with the Taishan (泰山) trademark and a number of our customized gold bullion are imprinted with the Shandong Gold (山東黃金). Upon passing our internal quality inspection of the finished products, they will be stored in our warehouse for sale.

Entrustment Arrangement

Our Controlling Shareholder and certain of its subsidiaries also own gold mines in China. In order to mitigate competition of business between us and SDG Group Co., on November 25, 2009, July 28, 2011, June 1, 2012, January 1, 2014 and January 1, 2017, the Company and our subsidiaries entered into entrustment arrangements with SDG Group Co. and its subsidiaries respectively. Pursuant to such entrustment arrangements, we are obligated to operate, manage and maintain the entrusted subjects from the SDG Group Co. and receive entrustment fees accordingly. For details, see “Relationship with Our Controlling Shareholder” and “Connected Transactions.”

Operating Costs

Operating costs of our gold mines in the PRC include operating cash costs, depreciation and amortization costs and interest expenses. Operating cash costs mainly include workforce employment costs, consumables costs, fuel, electricity, water and other services costs and on and off-site administration costs. Depreciation and amortization costs are related to the depreciation of property, plant and equipment and amortization of intangible assets. Interest expenses are related to our bank borrowings and borrowings from our shareholders. According to the AAI Report, the operating cash

— 222 — BUSINESS costs of our gold mines in the PRC is US$681.6 per ounce of gold produced in 2017, which is lower than the industry average total cash cost of US$715 per ounce for gold mines in China in 2017. We believe our operating cash costs are lower than other comparable gold mines, which is mainly due to (i) the geological advantages of our PRC Mines, (ii) our developed infrastructure, and (iii) our advanced technologies and processes and robust production capabilities. Our operating cash costs are generally lower in the first quarter primarily due to seasonality, as certain cash cost items are only settled at year end and as a result of seasonal downtime. Please see the section headed “Industry Overview — AISC and Total Cash Costs.” For details of our total cost, please refer to “Appendix III — Competent Person’s Report — AAI Report.”

The following table is based on the AAI Report and sets forth the historical and forecasted operating cash costs of our PRC Mines for the period indicated.

Historical Forecast

PRC Mines 2015 2016 2017 2018Q1 2018E 2019E 2020E

US$ per ounce gold produced

Sanshandao Gold Mine ...... 598.8 595.8 632.0 522.5 456.6 457.3 525.8 Jiaojia Gold Mine ...... 664.4 623.5 663.7 499.0 586.3 567.0 557.4 Xincheng Gold Mine...... 548.7 531.5 554.0 451.7 800.3 841.1 562.3 Linglong Gold Mine ...... 787.6 777.7 758.2 685.5 620.8 671.3 494.0 Guilaizhuang Gold Mine ...... 664.8 1,491.8 577.6 547.0 424.3 788.3 — Qingdao Gold Mine ...... 748.1 897.9 825.2 933.7 610.3 621.1 443.5 Penglai Gold Mine ...... 645.8 534.0 518.2 495.3 366.1 281.1 318.0 Yinan Gold Mine ...... 2,235.8 3,610.0 1,940.5 2,345.8 1,250.0 — — Jinzhou Gold Mine ...... 844.7 888.3 824.4 627.7 893.0 717.3 596.3 Chifengchai Gold Mine ...... 550.2 749.4 678.1 695.4 489.9 293.5 276.8 Xihe Zhongbao Gold Mine ..... — — 979.1 820.3 877.1 944.6 921.4 Fujian Yuanxin Gold Mine ..... 562.2 702.5 771.2 519.6 346.8 482.6 492.2 PRC Mine Overall ...... 668.2 677.5 681.6 594.0 597.9 594.6 514.2

The reason for the decrease in forecasted operating cash cost is the higher average gold content of our Reserves under NI 43-101 Code versus the average gold content of the ore that we typically mine and process. Mining and processing related costs are primarily ore tonnage based, so ore with higher gold content has a lower mining and processing cost per ounce of gold. During the Track Record Period, we conducted mining and processing activities based on internal assessments of economic cut-off grade and other economic parameters. Our forecasted operating cash costs are forecasted in accordance with the NI 43-101 Code, therefore only ores with higher gold content and above the economic cut-off grade are included.

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The table below, which is extracted from the AA1 Report, sets forth the operating cash cost historical and forecast breakdown of our PRC Mines for the period indicated.

Historical Forecast

For the three For the year ended months ended December 31, March 31,

Cost item Unit 2015 2016 2017 2018 2018E 2019E 2020E

Workforce employment .....US$/ounce produced 221.6 232.8 236.1 245.5 220.2 211.5 180.4 Consumables ...... US$/ounce produced 141.0 127.6 134.3 121.3 117.3 115.1 102.6 Fuel, electricity, water and other services ...... US$/ounce produced 80.4 71.0 74.7 79.7 67.8 62.2 52.9 On and off-site administration . US$/ounce produced 148.5 179.4 178.1 124.8 141.5 146.2 124.4 Environmental protection and monitoring ...... US$/ounce produced 2.2 2.7 2.9 1.9 2.5 3.1 3.1 Transportation of workforce . . US$/ounce produced 1.0 1.4 1.4 1.3 1.2 — — Product marketing and support ...... US$/ounce produced — — — — — — — Non-income taxes, royalties and other government charges ...... US$/ounce produced 73.3 62.2 52.8 17.1 46.0 52.9 46.7 Contingencies...... US$/ounce produced 0.2 0.4 1.3 2.5 1.2 — —

Total ...... US$/ounce produced 668.2 677.5 681.6 594.0 597.9 594.6 514.2

According to the AAI Report, the operating cash costs for 2017 to 2020 are forecasted based on the historical production rates and costs and remaining Reserves. The gold price assumption was US$1,231.03 per ounce. See “Appendix III — Competent Person’s Report — AAI Report” for details of other assumptions.

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The table below sets forth the impact of increase and decrease in workforce employment costs, on and off-site administration expenses, and consumable costs on our operating expenditure and total cost for the periods indicated.

Workforce employment costs(1) On and off-site administration expenses(2) Consumable costs(3)

0% Change 3% 5% 10% 3% 5% 10% 3% 5% 10%

Amount Amount Changed Amount Changed Amount Changed Amount Changed Amount Changed Amount Changed Amount Changed Amount Changed Amount Changed (US$/gram, except percentages)

For the year ending December 31, 2017 ......

Operating expenditure 21.91 22.14 1.0% 22.29 1.7% 22.67 3.5% 22.08 0.8% 22.20 1.3% 22.49 2.6% 22.04 0.6% 22.13 1.0%BUSINESS 22.34 2.0% 2 — 225 — Total costs ...... 22.37 22.59 1.0% 22.75 1.7% 23.13 3.4% 22.54 0.8% 22.65 1.3% 22.94 2.6% 22.50 0.6% 22.58 1.0% 22.80 1.9% For the year ending December 31, 2018 (forecast).. Operating expenditure 19.22 19.43 1.1% 19.58 1.8% 19.93 3.7% 19.36 0.7% 19.45 1.2% 19.68 2.4% 19.34 0.6% 19.41 1.0% 19.60 2.0% Total costs ...... 23.56 23.77 0.9% 23.91 1.5% 24.27 3.0% 23.70 0.6% 23.79 1.0% 24.01 1.9% 23.67 0.5% 23.75 0.8% 23.94 1.6%

(1) During the Track Record Period, the average workforce employment costs in the industry increased by approximately 3% to 5% per year. In addition, no significant increase in workforce employment costs is expected in 2018. As a result, 3%, 5% and 10% of workforce employment cost increase is applied in the sensitivity analysis. (2) During the Track Record Period, the on and off-site administration expense in the industry increased by approximately 3% to 5% per year. As a result, 3%, 5% and 10% of on and off-site administration expenses increase is applied in the sensitivity analysis. (3) During the Track Record Period, the consumable costs in the industry increased by approximately 3% to 5% per year. As a result, 3%, 5%, 10% of consumable costs increase is applied in the sensitivity analysis. BUSINESS

OUR OPERATIONS IN ARGENTINA

Overview

On June 30, 2017, we completed the Veladero Acquisition. Through the Veladero Acquisition, we indirectly hold a 50% equity interest in MAG. We jointly operate the Veladero Mine with Barrick Gold through MAG and its majority equityholder, AGB II. For more details on the joint operation, see “— Shareholders’ Arrangement.”

The Veladero Mine is an open pit mine, located in the high Andes Cordillera of central western Argentina, six km east of the Chilean and Argentine border. Elevations at the Veladero Mine range from 3,800 meters above sea level to 4,800 meters above sea level. The Veladero Mine is approximately 360 km from San Juan, the provincial capital of San Juan province. Since commencing operations in 2005 and as of March 31, 2018, approximately 327 Mt of ore has been placed on the leach pad from which 8.3 Moz of gold has been recovered at the Veladero Mine. In 2015, 2016 and 2017 and the three months ended March 31, 2018, the Veladero Mine produced 601.4 koz, 544.2 koz, 641.1 koz and 146.9 koz of gold, respectively.

As of March 31, 2018, the Veladero Mine comprises two mining properties, namely, the Veladero mining group and the Filo Norte mining group, which cover an aggregate area of 119.2 square kilometers and 25.2 square kilometers, respectively.

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The following map, which is based on the RPA Report, illustrates the location of the Veladero Mine.

Veladero

N

VELADERO MINE

Tudcum Rodeo Jachal

Iglesis

San Juan

Shandong Gold Mining Co., Ltd. Veladero Mine San Juan Province, Argentina

Kilometres Location Map

November 2017 Source: Barrick Gold Corp., 2015.

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The following table, which is based on the RPA Report, sets forth information on the gold Mineral Resources (inclusive of Reserves) of the Veladero Mine on a 100% basis as of March 31, 2018.

Gold Category Tonnes Grade Contained

(thousand) (g/t) (koz)

Measured ...... 36,681 0.67 791

Indicated...... 324,623 0.69 7,146

Sub-total ...... 361,304 0.68 7,938

Inferred ...... 66,387 0.43 921

Total ...... 427,691 — 8,859

(1) CIM(2014) definitions were followed for Mineral Resources. (2) Mineral Resources are estimated as of March 31, 2018 using a gold price of US$1,500 per ounce, and an exchange rate between US$1.0 : AR$20.0 (3) Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. (4) Mineral Resources are estimated at economic cut-off values that vary by material type and are approximately equivalent to 0.14 g/t Au for Type 1 mineralization and 0.26 g/t Au for Type 2 mineralization. (5) Mineral Resources are constrained by a Whittle pit shell. (6) Mineral Resources are inclusive of Mineral Reserves. (7) Numbers may not add due to rounding.

The following table, which is based on the RPA Report, sets forth information on the gold Mineral Reserves of the Veladero Mine on a 100% basis as of March 31, 2018.

Gold Category Tonnes Grade Contained

(kt) (g/t) (koz)

Proven Open pit ...... 7,660 0.81 198 Stockpiles ...... 7,328 0.51 121 Leach inventory ...... 15,133 0.77 372

Sub-total ...... 30,121 — 691

Probable ...... 191,731 0.76 4,709

Total ...... 221,852 0.76 5,401

(1) CIM(2014) definitions were followed for Mineral Reserves. (2) Mineral Reserves are estimated as of March 31, 2018 using a gold price of US$1,200 per ounce, and an exchange rate between US$1.0 : AR$20.0 (3) Mineral Reserves are estimated at economic cut-off values based on process cost, recovery and profit. The cut-off values are equivalent to approximately 0.18 g/t Au for Type 1 ore and 0.32 g/t Au for Type 2 ore. (4) Numbers may not add due to rounding.

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History

The Veladero area was first explored in the late 1980s by Argentine government geologists. Following a competitive bidding process completed by IPEEM in 1994, a Canadian junior exploration company was awarded exploration rights to Veladero, and then formed a joint venture agreement with a mining company which was acquired by Barrick Gold soon after. In 2001, Barrick Gold acquired 100% indirect control of the Veladero Mine through a merger. In 2005, the Veladero Mine commenced production.

Mineral Resources and Mineral Reserves

The Veladero deposit is a hypogene-oxidized, high sulphidation gold-silver deposit hosted by volcaniclastic sediments, tuffs, and volcanic breccias related to a Miocene diatreme-dome complex. As of March 31, 2018, the Mineral Reserves and Mineral Resources (inclusive of Reserves) on a 100% basis was 5,401 koz and 8,859 koz, respectively. Historically, production in the Veladero Mine has come from two mine areas, namely the Veladero mine area, representing the majority of past production, and Argenta, which is located approximately six km to the southeast of the Veladero mine area. The Veladero mine area consists of two major pits, the Amable pit and the Filo Federico pit. The Argenta mine area consists of a single pit, the Argenta pit. The mineral reserves at the Amable pit were exhausted in 2013. The mineral reserves at the Argenta pit were exhausted in 2015. As of March 31, 2018, all of the remaining Mineral Reserves and Mineral Resources of the Veladero Mine are found within the Filo Federico pit in the Veladero mine area.

According to the RPA Report, a total of approximately 407 Mt of material is scheduled to be mined by 2024, with open pit mining operations to be complete in 2024. Over this period, forecast annual ore production ranges from approximately 27 Mt to 31 Mt, while total material mined is at a peak of approximately 79 Mt in 2018, steadily declining to 34 Mt in 2024. As part of continuing LOM improvements, MAG assessed the continued leaching of stacked ore for an additional four years through 2028 after the completion of ore mining in 2024. This residual leach would be designed to recover gold not yet thoroughly leached or flushed from the valley leach facility. Based on testwork and reconciliation work completed by MAG as well as independent consultants, there is potential to recover an additional approximately 500 koz of gold and 1,200 koz of silver from 2024 to 2028 from the cumulative LOM ore placed in the valley leach facility. According to the RPA Report, there is reasonable potential to achieve the production from 2024 to 2028, which was not included in the Mineral Reserve estimates in the RPA Report.

Mining Rights

As of March 31, 2018, the Veladero Mine comprised two mining properties: (i) the Veladero mining group, which consist of eight mining concessions covering an aggregate area of 119.3 square kilometers; and (ii) the Filo Norte mining group, which consist of five mining concessions covering an aggregate area of 25.2 square kilometers. The Veladero mining group concessions are owned by IPEEM, a provincial government mining entity, and operated by MAG. The Filo Norte mining group concessions are held by MAG.

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Since 1989, IPEEM has been the provincial mining entity responsible for holding title to certain mineral licenses in the San Juan province and for soliciting bids for exploration and mining rights in this province by way of concession through tender. The Veladero mining concessions are owned by IPEEM and operated by MAG pursuant to the IPEEM Agreement and applicable provincial law. Pursuant to the IPEEM Agreement, MAG has the right to conduct mining activities in the regions covered under the Veladero mining concessions for a period of 25 years. MAG has the sole discretion to renew such agreement upon expiration. Under the IPEEM Agreement, in addition to federal and provincial legislation requiring a royalty of up to 3% for the sales value of the extracted minerals less certain permitted expenses, a 0.75% royalty is payable to IPEEM for the metals produced from the Veladero Mine, including production from the Argenta deposit. In October 2011, MAG and IPEEM agreed to modify the calculation of the 0.75% royalty payable to IPEEM under the IPEEM Agreement, effectively changing the royalty calculation to 0.75% of gross sales of doré.

The following table sets forth the details of the mining concessions for the Veladero Mine.

Covered Permit holder area License License number Effective period Status

(square kilometers)

IPEEM (Granted to 119.3 Veladero mining 520-0314-M-99 Valid MAG to operate) . . group 14.9 VE II 338837-I-92 Valid 15.0 VE LII 338888-I-92 Valid 25 years since 2003 15.0 VE LX 338895-I-92 Valid (renewable for 14.3 VE X 338845-I-92 Valid another 25 years) 15.0 VE XIV 338849-I-92 Valid 15.2 VE XLIII 338878-I-92 Valid 14.9 VE XLVIII 338883-I-92 Valid 15.0 VE XVI 338851-I-92 Valid MAG...... 25.2 Filo Norte Mining 1124-M-525-2009 Valid Group 4.6 Ursulina Sur 425380-B-03 Valid 6.0 Rio 2 0676-F18-M-95 Permanent Valid 10.0 Rio 3 0675-F18-M-95 Valid 2.7 Gaby M 0764-F28-M96 Valid 2.0 Florencia I 296942-F-89 Valid

For more information on the laws and regulations relating to mining concessions in Argentina, please see “Regulatory Overview — Laws and Regulations Related to Our Argentina Operations” in this Prospectus.

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The following map, which is based on the RPA Report, illustrates the location of the mining rights on the Veladero Mine.

Metres

Truck Shop

VURSULINA SUR N

Federico Pit Amable Pit

Camp Veladero Valley Heap Leach

Legend Flo Norte Mining Group

Voladero Mining Group

Easemort 1739-F18-A-95

Easemort 425129-B-03

Easemort 19-4002-C-B1

Mine Area

IntemaSonal Border

Shandong Gold Mining Co., Ltd Veladero Mine San Juan Province, Argentina Claim Map

November 2017 Source: Barrick Gold Corp..2015

Operations at the Veladero Mine

Mining

The Veladero Mine is an open pit mine with truck and shovel operations and a heap leach facility. Current mining operations for the Veladero Mine are exclusively conducted at the Filo Federico pit. A mine model is prepared using a computer software and after analyzing the acquired data, based on which MAG will optimize the mine including adjusting access ramps. Diesel powered blast hole rigs are employed for drilling at the Veladero Mine, and hydraulic shovels are used to excavate raw ore.

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Most raw ore will be transported by a fleet of rigid frame haul trucks to the crushing facilities located approximately 1.5 km east of the Filo Federico pit rim. Since commencing mining operations in 2005 and as of March 31, 2018, approximately 327 Mt of ore has been placed on the leach pad from which 8.3 Moz of gold has been recovered at the Veladero Mine.

Processing

Gold is recovered from the ore at the Veladero Mine using run-of-mine and crushed ore cyanide heap leaching, and a Merrill-Crowe zinc cementation gold recovery plant. The following diagram illustrates the major processing stages at the Veladero Mine.

Merrill-Crowe Crushing Leaching Processing Smelting

• Crushing. The majority of raw ore will be transported to the crushing facilities located approximately 1.5 km east of the Filo Federico pit rim for crushing before leaching. Haul trucks dump the raw ore directly into 1,270 mm by 1,650 mm gyrator crushers for primary crushing. The primary crushed ore is reclaimed from the stockpile, and then conveyed to a splitter chute to feed two scalping screens. The oversize ore from the screens is discharged to standard cone crushers, after which lime is added to the recombined undersize ore and crushed oversize ore, and is conveyed to the secondary crushers. The two-stage-crushed ore is hauled by trucks to the valley-leach facility through a distance of 4.2 km.

• Leaching. At the valley-leach facility, ore is stacked lifts of 13 m height. We apply dilute cyanide leach solution using drip emitters. Pregnant solution is collected by a dam, at the toe of the leach pad, and pumped to the Merrill-Crowe recovery plant.

• Merrill-Crowe processing. The Merrill-Crowe process separates gold from the pregnant solution obtained by the cyanide leaching of gold ore. In this process, the pregnant solution is clarified in pressure leaf filters and stored in a clarified solution tank, and then pumped to a vacuum de-aeration tower which removes the dissolved oxygen from the precious metal bearing solution. Zinc dust is fed to the solution as it exits the de-aeration tower and the precious metals are removed from the solution as solid precipitate. Plate and frame filter presses are used to separate the precipitate from the solution and the barren solution is collected in a barren solution tank, where cyanide and make-up water are added to the solution, and it is re-circulated to the valley-leach facility for reuse. The zinc precipitate is collected from the filter presses and processed in retorts designed to recover mercury vapours from the precipitate as it is heated under vacuum.

• Smelting. The dried precipitate is mixed with flux and smelted in electric induction furnaces. Gold doré that is produced by the refining process is shipped off-site for further refining.

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Production Facilities

Production facilities at the Veladero Mine include crushing facilities, a valley-leach facility and a Merrill-Crowe facility. The Veladero Mine has been designed to support an operation of over 85,000 tonnes of ore per day at the valley-leach facility and 280,000 tonnes of total material mined per day. In 2015, 2016 and 2017 and the three months ended March 31, 2018, the Veladero Mine had approximately 28.4 Mt, 28.0 Mt, 28.8 Mt and 7.9 Mt of ore placed on the heap leach facility, respectively.

The production equipment used at the Veladero Mine primarily include blast hole rigs, haul trucks, crushers, screens, drip emitters, pressure leaf filters, vacuum de-aeration tower, retorts and electric induction furnaces. Routine maintenance is conducted on all production machinery in a combination of in-house repair where possible, or outsourced in the instance of more sophisticated or specialized. We outsource certain specialist functions to qualified third-party contractors. For more information, see “— Contractors.”

Purchase of Dore´and Refining

After the smelting process, unrefined doré bars produced will be purchased by SDG Hong Kong and Barrick Gold from MAG at each of their proportionate interest in the Veladero Mine. During the period from July 1, 2017 to and including March 31, 2018, all silver produced by the Veladero Mine will be sold to Barrick Gold and 50% of the gold produced will be sold to each of Barrick Gold and SDG Hong Kong. Following March 31, 2018, 50% of all gold and silver produced will be sold to each of Barrick Gold and SDG Hong Kong. SDG Hong Kong pays MAG directly for our share of the gold and silver ore based on the LBMA PM gold price and, as applicable, the LBMA silver price. Barrick Gold, on behalf of us, will arrange the logistics to transport the doré produced by the Veladero Mine to a LBMA-accredited refiner located in Canada, which is an Independent Third Party. The final product will be shipped to a designated location as requested by the parties.

Shareholders’ Arrangement

The Company and SDG Hong Kong entered into the Shareholders’ Agreement with, among others, Barrick Cayman and Barrick Gold that sets forth terms for the management and joint operation of AGB II, MAG and the Veladero Mine. The principal terms of the Shareholders’ Agreement are set forth as follows:

• Joint operations. So long as we and Barrick Gold each hold an indirect 50% interest in MAG, SDG Hong Kong and Barrick Cayman have agreed to operate the joint arrangement in respect of the Veladero Mine as if each: (i) has a 50% direct interest in all of the individual assets comprising the Veladero Mine; (ii) severally (and not jointly) responsible for funding 50% share of all funding needs and liabilities for the operations of Veladero Mine; and (iii) be apportioned the revenue and expenses of AGB II and MAG based on its proportionate interest.

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• Gold products. We and Barrick Gold are entitled to, and shall, purchase all of the gold produced at the Veladero Mine in the amount proportionate to our proportionate ownership interest in AGB II.

• AGB II board of directors. The board of directors of AGB II consists of six directors and six alternate directors, SDG Hong Kong and Barrick Cayman shall each be entitled to nominate three of such directors and three of such alternates. Notwithstanding the composition of AGB II’s board of directors, the aggregate voting power of directors nominated by each of SDG Hong Kong and Barrick Cayman shall be equal to its proportionate ownership interest in AGB II. The right to appoint the chairman of AGB II’s board of directors will rotate on an annual basis on January 1 of each year between Barrick Cayman and SDG Hong Kong for so long as each holds a 50% proportionate ownership interest in AGB II. A nominee of SDG Hong Kong will be the chairman of the AGB II board of directors until January 1, 2019. The chairman will serve as chair of any meeting of the board of directors or shareholders of AGB II, but shall not have a casting vote in addition to his or her vote as a director of AGB II. If the shareholders of AGB II hold unequal proportionate ownership interests in AGB II, then the shareholder with the largest proportionate ownership interest shall be entitled to appoint the chairman of the board.

• Authority of the AGB II board of directors. The AGB II board of directors shall advise and, as the governing body of MAG’s majority quotaholder, have the ability to direct MAG’s management committee in respect of all quotaholder decisions pertaining to the funding and conduct of operations and the conduct of the business and affairs of MAG.

• MAG management. MAG’s management shall consist of six MAG managers and six alternates. As long as SDG Hong Kong and Barrick Cayman each hold at least a 50% proportionate interest, each shall be entitled to nominate three MAG managers and three alternates. If any of SDG Hong Kong and Barrick Cayman holds less than 50% proportionate interest, then such party holding less than 50% interest would only nominate two MAG managers and two alternates while the other party would be entitled to nominate four MAG managers and four alternates. The MAG management committee is responsible for the management of the Veladero Mine and implementing quotaholder decisions, including those made by MAG’s majority quotaholder, AGB II, in accordance with applicable laws.

• MAG general manager. SDG Hong Kong and Barrick Cayman, acting through AGB II, as MAG’s majority quotaholder, have proposed and reviewed general manager candidates and have determined to jointly appoint the general manager of MAG. The general manager of MAG shall be appointed for a three-year term and will be given a performance assessment on a yearly basis. MAG general manager shall have overall management responsibility for operations of the Veladero Mine, including to direct, control and supervise all day-to-day activities of MAG and act for and on behalf of, and exercise all rights relating to the above activities. In carrying out such activities or exercising such rights, MAG general manager shall be subject to the supervision of the MAG management and, indirectly, by MAG’s quotaholders of which AGB II constitutes the majority quotaholder. In particular, the general manager shall prepare the annual budget, LOM plans, funding plans, secure the

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necessary governmental approvals, manage, direct and control all operations of the Veladero Mine, enter into contracts on behalf of MAG and in the ordinary course of business interact, discuss and negotiate with any governmental authority relating to MAG or the Veladero Mine.

• Distributable cash. Except as otherwise agreed by us and Barrick Gold, any distributable cash of MAG shall first be paid to settle the principal and interest of outstanding loans advanced by SDG Hong Kong and Barrick Gold to MAG on a pro rata basis in accordance to their proportionate ownership interests, and the amounts remaining after repayment of the loans shall be paid as dividends to holders of MAG quotas.

• Funding obligations. Each of AGB II and MAG shall fund all of its respective costs, fees and liabilities from its own cash on hand and other assets to the extent practicable. To the extent not covered by available free cash flow generated from the Veladero Mine, SDG Hong Kong and Barrick Gold shall each be required to fund AGB II for their respective proportionate interest of all expenditures, which AGB II will then fund to MAG. The general manager shall give at least 45 days, notice to SDG Hong Kong and Barrick Cayman when such funding contribution is required. If SDG Hong Kong or Barrick Cayman fails to provide the required funding in the amount, manner and time period as requested by the general manager, and the non-defaulting party has delivered a notice of default and the cure period has elapsed, the non-defaulting party shall have the right to (i) fund all or a portion of the amount not funded by the defaulting party and cause the dilution of the proportionate interest of the defaulting party, or (ii) advance all or a portion of the defaulted amount on behalf of the defaulting party as a loan to the defaulting party.

• Reports. The MAG general manager shall prepare or cause to be prepared (i) a monthly report that contains a discussion and analysis of operating and financial results, simplified financial statements, key metrics and statistics, an executive summary of the operations undertaken at the Veladero Mine, expenditures incurred and the results of such operations, information on incidents, production details, and operations issues and, (ii) a semi-annual report of Mineral Reserves and Resources to comply with applicable securities laws and stock exchange rules. In their capacity as direct or indirect equityholders in MAG, each of SDG Hong Kong and Barrick Cayman are entitled to enter upon any portion of the Veladero Mine upon reasonable advance notice to the MAG general manager and is permitted to inspect MAG’s books, records and data pertaining to the performance of the Veladero Mine and MAG’s assets.

• Bonds. If any bonds or other financial sureties are required by any governmental authority in order to secure the performance of reclamation or other obligations arising from the operations of the Veladero Mine, SDG Hong Kong and Barrick Cayman shall, to the extent such bonds may not be provided solely by AGB II or MAG, undertake obligations required to provide such financial sureties in proportion to their respective proportionate interests.

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• Deadlock. In the event of any deadlock in respect of any board or shareholder decision, the subject matter of the deadlock may be referred to the respective chairmen of Barrick Gold and the Company, who will attempt in good faith to resolve the deadlock within 21 days of the deadlock being referred to them. The Shareholders’ Agreement sets forth how certain deadlock events shall be resolved if the chairmen of Barrick Gold and the Company cannot reach a mutually acceptable resolution. For other deadlock events where a mutually acceptable resolution cannot be reached, the status quo shall remain in effect.

• Transfer. The transfer of an interest in the Veladero Mine is subject to restrictions set out in the Shareholders’ Agreement. Neither we, nor Barrick Gold shall permit the general transfer of less than all of its indirect interest in the Veladero Mine. If either we or Barrick Gold plans to transfer its entire indirect interest in the Veladero Mine to a third party, it must first give the non-selling party a preferential right to purchase its interest in accordance with the terms set out in the Shareholders’ Agreement. We and Barrick Gold may each transfer its entire indirect interest in the Veladero Mine to another wholly-owned subsidiary of ours and Barrick Gold, respectively, without complying with such preferential rights provided that the assignee agrees to become a party to the Shareholders’ Agreement, and be bound by the transfer restrictions for any subsequent transfer.

• Term and termination. The Shareholders’ Agreement shall be effective on the date of the agreement and continue in full force and effect until the earlier of (i) the date on which AGB II has only one shareholder, (ii) the date on which the Shareholders’ Agreement is terminated in writing by all of the shareholders who continue to own shares in AGB II, or (iii) the date of winding-up or dissolution of AGB II.

Operating Cash Costs

Operating cash costs mainly include workforce employment costs, consumables costs, fuel, electricity, water and other services costs and on and off-site administration costs. According to the RPA Report, the operating cash cost in 2017 is US$836 per ounce produced. In 2017, the AISC of the Veladero Mine was US$987 per ounce.

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The following table, which is extracted from the RPA Report, sets forth the historical and forecasted operating cash costs(1) of the Veladero Mine.

Historical Forecasted

For the three For the year ended months ended December 31, March 31,

Cost Item Unit 2015 2016 2017 2018 2018E 2019E 2020E

Workforce employment .....US$/ounce produced 144 180 178 165 193 264 249 Consumables ...... US$/ounce produced 283 277 284 274 244 294 253 Fuel, electricity, water and other services ...... US$/ounce produced 232 206 230 223 227 284 274 On and off-site administration . US$/ounce produced 66 51 65 64 51 43 31 Environmental protection and monitoring ...... US$/ounce produced 6 7 13 8 9 10 9 Transportation of workforce . . US$/ounce produced 5 4 6 8 9 12 11 Product marketing and support ...... US$/ounce produced 5 5 5 4 6 7 8 Non-income taxes royalties and other government charges ...... US$/ounce produced 47 53 55 55 52 57 55 Contingencies...... US$/ounce produced — — — — — — —

Total ...... US$/ounce produced 788 783 836 801 791 971 890

Note:

(1) The operating cash costs set out above are derived from the RPA Report and exclude changes in inventory and capitalized stripping costs and silver by-product credits in accordance with the requirements of Chapter 18 of the Listing Rules.

The variance between operating cash costs of our PRC Mines and the Veladero Mine is mainly due to differences in operating conditions of different mining jurisdictions, variances in mining and processing methods as well as differences in currency exchange. See “Risk Factors — Risks Relating to Our Business and Industry — We may not be able to effectively manage our growth and business expansion.”

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The assumptions following were used to define the final pit limit for the mineral reserve and are a reflection of the LOM forecast operating costs.

Parameter Units Value

Mining Parameter Mining Reference Cost ...... US$/tonnes mined 3.22 Mining Recovery Rate ...... % 100 Dilution Rate ...... % 0 Processing Parameters (Filo Federico Type1Ore) Au Recovery, Crush ...... % 0.3>=grade; =60.0 0.3<=grade<0.5; =38.4*g/t+55 0.5<=grade<1.6; =2.4*g/t+77 1.6<=grade<2.0; =10.0*g/t+65 2.0<=grade<3.0.; =2.0*g/t+81 3.0<=grade；=87.0 Au Recovery, Run-of-mine ...... % 60 Processing Cost...... US$/tonnes crush 3.63 Processing Cost...... US$/tonnes run-of-mine 1.81 Heap Leach Expansion ...... US$/tonnes processed 0.80 General and Administrative Cost ...... US$/tonnes processed 3.43 Operating Assumptions (Filo Federico Type One Ore) Crushing Rate...... Tonnes/day 75,154 Average Specific Gravity ...... Tonnes/cubic meters 2.47 Average LOM Recovery Rate, Au...... % 75.5 Au Cut-off Grade, Filo Federico Type 1 . . g/t 0.18

Sensitivity Analysis

According to the RPA Report, in the current production and operation forecast, manpower represents approximately 25% of the total unit operating cost, or approximately US$3.50 per tonne processed of the total US$13.58 per tonne processed. According to RPA Report, a 20% increase in the cost of manpower would increase the overall operating costs by approximately 5%.

According to the RPA Report, power cost is a function of diesel price. Diesel is consumed primarily for operation of mine vehicles and electrical power generation. In the current production and operation forecast, power represents approximately 15% of the total unit operating cost, or approximately US$2.20 per tonne processed of the total US$13.58 per tonne processed. According to the RPA Report, a 20% increase in the current diesel price would increase the overall operating costs by approximately 3%.

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SALES AND CUSTOMERS

Overview

During the Track Record Period, our primary product was gold bullion, which includes standard gold bullion and customized gold products. Our standard gold bullion are produced using our gold mined from our PRC Mines and doré procured from third-party suppliers. Our customized gold products are made of standard gold bullion procured from the Shanghai Gold Exchange. To a lesser extent, we also sold dore´and gold concentrates from certain of our PRC Mines and by-products such as silver, copper and zinc. Since we completed the Veladero Acquisition on June 30, 2017, our proportionate share of the gold bullion from the Veladero Mine have been sold to an international broker.

PRC Sales

Sales of Gold

Standard Gold Bullion

During the Track Record Period, we produced standard gold bullion using gold mined from our PRC Mines and doré procured from third-party suppliers. Standard gold bullion are gold bars and ingots that meet gold purity and weight standards of the Shanghai Gold Exchange, and that are printed with the logo of the Shanghai Gold Exchange and the gold bullion code of our business (“C”). Our standard gold bullion are also imprinted with the Taishan (泰山牌) trademark. Substantially all of our standard gold bullion were sold on the Shanghai Gold Exchange during the Track Record Period.

Our subsidiary, SDG Smelting is an accredited SGE Gold Ingots and Bars Delivery refiner. We are also a trading member of the Shanghai Gold Exchange qualified to conduct gold trading through the network system of the Shanghai Gold Exchange.

The Shanghai Gold Exchange is a platform for trading precious metals (such as gold, silver and platinum) to its registered participants. All gold products traded on the Shanghai Gold Exchange are of qualified standard and are produced by entities registered with the Shanghai Gold Exchange. The Shanghai Gold Exchange implements a membership system which requires a member to meet certain conditions, including amongst others, that (i) it is corporation registered in the PRC; (ii) it has net assets of no less than RMB10 million; (iii) it operates according to PRC laws and regulations and in good standing, without any recent material illegal behaviour; and (iv) it has a sound organization structure, a solid financial management system and a comprehensive internal control and risk management system. The Shanghai Gold Exchange handles all settlement and clearing procedures of gold bullion traded on its platform, and therefore the identity of the ultimate buyer or seller is not available to us.

During the Track Record Period, our standard gold bullion were sold mainly through the spot transaction function of the Shanghai Gold Exchange. During the Track Record Period, our standard gold bullion traded over the counter were primarily Au99.99 1kg and 100g bullion products as well as Au99.95 3kg bullion products at spot prices, being the gold prices quoted on the Shanghai Gold

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Exchange on the trading date. To a lesser extent, we also sold gold bullion through forward contracts in light of market conditions. See “— Hedging Transactions.” A spot transaction can proceed only if a buyer’s cash account is deposited sufficient funds to effect the transaction, while a seller’s gold account must be deposited sufficient volumes of gold contemplated by the transaction. The corresponding volume of gold bullion for each transaction will be transferred from our gold account to the buyer’s account, and the transaction amount will automatically be deducted from the buyer’s account and deposited into our account. Settlement of spot transactions is generally completed on the next working day following the day of trade. As such, we did not have significant trade receivables or credit risks arising from our sales of standard gold bullion on the Shanghai Gold Exchange during the Track Record Period. For each transaction, the Shanghai Gold Exchange charges 0.35‰ of the transaction amount as its service fees.

In 2015, 2016 and 2017 and the three months ended March 31, 2017 and 2018, our sales volume of standard gold bullion and doré in the PRC amounted to approximately 5.1 Moz, 4.7 Moz, 4.3 Moz, 0.8 Moz and 1.1 Moz, respectively. For the same periods, average selling prices for our standard gold bullion and doré in the PRC was approximately RMB7,350 per ounce, RMB8,360 per ounce, RMB8,590 per ounce, RMB8,480 per ounce and RMB8,550 per ounce, respectively.

Customized Gold Products

During the Track Record Period, we also sold customized gold products, which are Au99.99 bullion that are set at different weights compared to standard gold bullion. A number of our customized gold products are imprinted with the Shandong Gold (山東黃金) trademark. We sell customized gold products primarily to commercial bank customers, precious metals companies and other retail customers. Our sales of customized gold products increased significantly in 2016 in line with our efforts to develop our customized gold products business.

We generally sign framework sales contracts with our customized gold products customers. The key terms of our sales contracts are set forth below:

• Term. We sign with our customers contracts for a term of one year as a general matter.

• Product. The contract will stipulate specifications of gold products and contents of the subject matter.

• Pricing. Selling price is generally fixed with reference to the spot price on the Shanghai Gold Exchange. The unit sales price in a transaction will uplift based on the sales volume and assured unit selling price, or is marked up with processing fees and freight and insurance on the basis of unit selling price.

• Payment and settlement. Our payment and settlement arrangements with our customers mainly include two types below:

- Our customers generally pay in full before we deliver the products. If a customer cannot pay in full, it must pay 10-12% of the full amount as deposit before determination of the price. When the price is determined, the buyer shall make up the

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residual balance at that date. If it fails to make full payment, we shall charge a late fee on a daily basis at a percentage of the transaction amount until the balance is settled. Before that, if the SGE gold price or SGE deposit ratio is increased, the buyer shall make up such increased margin, or we have the right to liquidate positions mandatorily.

- The second depends on whether our customers fix or do not fix price upon delivery. If our customers fix price upon delivery, they shall pay us in full at the price quoted on the Shanghai Gold Exchange and order size at the date for taking delivery. If we do not fix the price upon delivery, our customers shall pay us at approximately 110% of the price quoted on the Shanghai Gold Exchange and order size at the date. Upon acceptance of delivery, our customers shall fix the price with us by stage and by batch based on the sales. If the gold price increases prior to determining of price, our customers shall make up the margin. After all orders of our customers are fixed and settled in full, we shall return to them the remaining margin and principal.

• Delivery. The destination for delivery is our Shandong Smeltery or Shenzhen Smeltery. On common occasions, we are not responsible for delivery of products. For some of our bank customers, we are responsible for delivery.

• Limit on sub-contracting. Some of our customers do not allow us to subcontract the production and processing of customized gold products to sub-contractors.

• Quality. In case of quality defect, we shall negotiate with customers and replace the relevant products to meet our customers’ requirements.

During the Track Record Period, we manufactured and sold customized gold products to a PRC commercial bank, which was one of our five largest customers in 2015 and 2016. During the same period, we repurchased customized gold products from this customer and used the purchased gold to manufacture standard gold bullion. As a result of this arrangement, this customer was also our supplier during the Track Record Period. See “— Customers and Marketing.” The major terms of our sales agreement with this customer are set forth as follows:

• Purchase of raw materials. We are responsible for the purchase of raw materials, production of finished products and logistics. Raw materials used to manufacture the customized gold products should be purchased on the Shanghai Gold Exchange.

• Product processing. We produce customized gold products using raw materials that meet the contract specifications and in accordance with the design drawings and samples provided by the customer. We are required to accept all product orders made by the customer.

• Term. Our sales agreement has a two-year term.

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• Price. The sales price for customized gold products is the sum of raw materials costs, transaction fees, logistics and other costs. Raw materials costs are determined based on the benchmark quoted price, which is the real-time quoted price of Au99.99 spot contract on the Shanghai Stock Exchange at 9:15 a.m. on the day of business sale for gold raw materials and the real-time quoted price of the Ag(T+D) deferred contract/1000 for silver raw materials.

• Payment. The customer shall settle our accounts after the close of trading in the afternoon of each trading day.

• Delivery. We arrange our own staff or engage third-party logistics service providers approved by the customer to deliver products.

• Performance guarantee. We maintain a deposit account and have deposited a performance guarantee of RMB500,000 into such account. The bank is entitled to deduct from this account at an agreed proportion based on the actual loss incurred or as stipulated in the agreement.

• Termination. The terminating party should provide written notice 15 days in advance, and the agreement may be terminated by written agreement after negotiation. The customer is entitled to terminate unilaterally with notice to us in the event of (i) quality issues, (ii) it believes there are material issues in our operations, and (iii) it believes that there is a significant reputational risk that has a material and adverse impact on its reputation.

The major terms of our repurchase agreement with this commercial bank are set forth as follows:

• Repurchased products. The commercial bank acts as our agent to repurchase gold products with a purity of 99.0% or more from its customers.

• Repurchase price. The repurchase price is calculated by multiplying the benchmark gold price by gold purity, minus floating costs, which includes corporate repurchase costs and repurchase business fees. The benchmark gold price is the real-time quoted price of Au99.99 spot contract at Shanghai Gold Exchange at 9:15 a.m. on the trading day.

• Payment. We deposit payments in full to a public settlement account of the bank. When the bank settles our accounts on the trading day on which the repurchase transactions data are sent to us, it will deduct and settle the payables from the previous trading day from our settlement account to its designated account.

• Repurchase business fees. For repurchased products (other than the commercial bank’s own branded gold products that are not off the counter or bank consignment products), the commercial bank will charge us a certain percentage as repurchase business fees. We will pay such fees to the bank on a monthly basis.

• Logistics. We are responsible for the logistics arrangement for the repurchased products.

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Argentina Sales

We sell all of our gold to an international broker with reference to the prevailing London spot market price. Since the completion of the Veladero Acquisition on June 30, 2017 and up to December 31, 2017, our proportionate share of revenue generated from the sale of gold bullion from the Veladero Mine was RMB1,728.8 million. For the three months ended March 31, 2018, our proportionate share of revenue generated from the sale of gold bullion from the Veladero mine was RMB474.6 million.

Customers and Marketing

During the Track Record Period, we mainly sold our products on the Shanghai Gold Exchange. We have accumulated extensive operating experience on the Shanghai Gold Exchange, with our brand and quality widely recognized by the market. In addition, we believe that we have established long-term and stable relationships with commercial banks, precious metals trading companies and other retail customers. We have maintained business relationships of over three years with our top five customers during the Track Record Period. In line with industry practice, we generally do not engage in marketing activities.

During the Track Record Period, a significant portion of our revenue was generated from sale of standard gold bullion produced from third-party doré and customized gold products, which had relatively low gross profit margins primarily because we generally procured raw materials based on market price and sold such products on a cost-plus basis. These products are produced at our smelteries as part of our gold refinery business. Despite the relatively low margins, we engaged in this business primarily because it allows us to build and maintain our brand and reputation and expect to continue to engage in such business in the future. Based on our assessment, although the gold refinery business had relatively low profit margins, the gold refinery business of producing standard gold bullion from third-party doré and customized gold products was not loss-making during the Track Record Period after deducting the other expenses directly attributable to such business. For more information, see “Financial Information — Description of Certain Consolidated Statement of Profit or Loss and Other Comprehensive Income Items — Gross Profit.”

In 2015, 2016 and 2017 and the three months ended March 31, 2018, our largest customer was the Shanghai Gold Exchange. For the same periods, revenue generated from sales on the Shanghai Gold Exchange amounted to RMB37,012.2 million, RMB38,487.5 million, RMB37,178.2 million and RMB9,034.1 million, respectively, accounted for 95.5%, 78.4%, 72.8% and 63.8% of our total revenue. Other than the Shanghai Gold Exchange, the rest of our five largest customers during the same periods were precious metals companies engaged in sale of customized gold products, commercial banks and a financial holding company. During the Track Record Period, all of our five largest customers procured standard gold bullion or customized gold products from us, except in 2015 when one of our five largest customers procured by-products. In 2015, 2016 and 2017 and the three months ended March 31, 2018, sales to our five largest customers amounted to RMB37,682.9 million, RMB47,651.3 million, and RMB48,114.9 million and RMB13,139.0 million, respectively, accounting for 97.2%, 97.1%, 90.5% and 92.7%, respectively, of our total revenue.

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SDG Capital Management, our connected person, was one of our five largest customers in 2015, to whom we sold customized gold products. Revenue generated from sales to this customer accounted for 0.9% of our total revenue in 2015. As of the Latest Practicable Date, SDG Capital Management held a 70% interest in SDG Jinkong (Shenzhen) Gold Investment Co., Ltd. (山金金控(深圳)黃金投資 發展有限公司), which was one of our five largest customers in 2015 and 2016. We sold customized gold products to this company. Revenue generated from our sales to this customer accounted for 0.2% and 0.4% of our total revenue in 2015 and 2016, respectively. See “Connected Transactions — Non-exempt Continuing Connected Transactions — Historical Amounts.” Other than these two customers, during the Track Record Period, none of our Directors, Supervisors, their associates or shareholders (who to the best knowledge of our Directors own more than 5% of our issued share capital) has any interest in our top five customers.

A number of our five largest customers or suppliers during the Track Record Period were also our supplier or customer during the same period:

(i) Shanghai Gold Exchange is a platform for trading metals such as gold and silver. Accordingly, we sold standard gold bullion on the Shanghai Gold Exchange and procured standard gold bullion from the Shanghai Gold Exchange as raw materials. The purchase and sale transactions on the Shanghai Gold Exchange were conducted independent of each other.

(ii) One of our largest customers in 2015 and 2016 was also one of our largest suppliers for the year ended December 31, 2017. This customer is a PRC commercial bank and an Independent Third Party. Revenue from our sales to this customer represented approximately 0.5% and 0.5% of our total revenue in 2015 and 2016, respectively. Purchases from this customer represented approximately 1.5% of our total cost of sales for the year ended December 31, 2017. See “— PRC Sales — Sales of Gold — Customized Gold Products.”

(iii) One of our five largest suppliers in 2015 was also our customer in 2015. This customer is a company and a connected person, and is primarily engaged in the business of collecting and selling of doré, which we procured. See “— Raw Materials and Suppliers — Suppliers.” From time to time, and to a lesser extent, we also sold customized gold products to such customer. Revenue from our sales to this customer represented approximately 0.1% of our total revenue in 2015. Doré procured from this customer represented approximately 16.4% of our total cost of sales in 2015. Other than in 2015, we did not sell any customized gold products to this customer during the Track Record Period.

(iv) Two of our customers during the Track Record Period were shareholders of one of our five largest suppliers for the year ended December 31, 2017. We procured doré from the supplier, and purchases from this supplier represented 1.0% of our total cost of sales for the year ended December 31, 2017. The two customers are both individuals and Independent Third Parties. We sold customized gold products to these customers. One of these individuals was our customer in 2015 and 2016, and revenue from our sales to this customer represented approximately 0.1% of our total revenue for these periods. The other individual

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was our customer in 2015 and 2016, and revenue from our sales to this customer represented approximately 0.1% of our total revenue for these periods. Other than the periods disclosed, we did not sell any customized gold products to these two customers during the Track Record Period.

Negotiations of the terms of our sales to and purchase from such customers were not inter-dependent and the sales and purchases were neither inter-connected nor inter-conditional with each other. Our Directors confirmed that the products purchased from these customers were not sold to such customers, and the terms of the transactions with such customers were in line with industry norm.

Gold Leasing

As a large-scale gold company, we have access to gold leasing for short-term financing, where we leased gold from PRC commercial banks to supplement our working capital. We generally pay leasing fees to the lessor and return physical gold to the lessor upon maturity of the lease. As part of the gold leasing arrangements, we usually enter into forward purchase contracts under which we agree to purchase the same amount of gold, at the same price and on the maturity date of the lease to repay the leased gold. These forward purchase contracts were entered into separately, or as part of the same gold leasing contracts. To a lesser extent, we repaid the gold leasing contract with physical gold that we produced. By securing the price of gold for repayment through forward contracts or repayment with gold we produce, our gold leasing arrangements are not subject to gold price fluctuation exposure. The term of our gold leasing contracts during the Track Record Period was less than one year. During the Track Record Period, the interest rates of our gold leasing contracts ranged from 2.4% to 4.85%, which is generally lower than that of bank borrowings and other financing tools available to us. Our gold leasing contracts are a financing tool and not for hedging purposes.

For the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2018, the proceeds derived from our gold leasing arrangements amounted to RMB6,676.6 million, RMB5,381.6 million, RMB6,468.0 million and RMB3,014.8 million, respectively. The fair value of our gold leasing contracts are recorded as financial liabilities at fair value through profit or loss in our consolidated statement of financial position. As of December 31, 2015, 2016 and 2017 and the three months ended March 31, 2018, our financial liabilities at fair value through profit or loss amounted to RMB4,777.4 million, RMB3,169.8 million, RMB5,751.4 million and RMB6,499.0 million, respectively. Realized and unrealized fair value losses on our gold leasing contracts and finance costs for arranging the gold leasing contracts are recorded as finance costs in our consolidated statement of profit or loss. We recorded realized and unrealized fair value losses on gold leasing contracts of RMB71.7 million, RMB42.3 million, RMB69.9 million and RMB42.7 million in 2015, 2016 and 2017 and the three months ended March 31, 2018, respectively. For the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2018, we recognized finance costs for arranging the gold leasing contracts of RMB168.4 million, RMB128.6 million, RMB134.2 million and RMB42.1 million, respectively. For more information on gold leasing, see “Financial Information — General.”

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Hedging Transactions

We entered into hedging transactions to forward sell the gold mined from our PRC Mines. In addition, we also entered into forward agreements when we procure doré from third parties and when we sell customized gold products to secure prices in view of the volatility in gold prices. Our hedging transactions were primarily through gold forward contracts with banks. To a lesser extent, we also entered into gold futures contracts on the Shanghai Futures Exchange and gold deferred settlement contracts (Au(T+D)) on the Shanghai Gold Exchange.

According to the gold forward sale contract that we enter into, we have to provide an agreed amount of gold on a specific date at an agreed forward sale price. We negotiate the price, settlement date and other contract terms depending on our outlook of the gold prices and our expected gold production volume. When the spot gold price on settlement date fell below the forward sale price, we made a gain from the forward sale contract. When the spot gold price on settlement date rose above the forward sale price, we made a loss from the forward sale contract. In general, if we expect gold prices to rise, we will increase the amount of spot transactions. In contrast, if we expect gold prices to fall, we will increase the amount of forward sales transactions.

For the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2018, we forward sold 185.0 koz, 553.4 koz, 547.5 koz and 48.2 koz of gold through gold forward and futures contracts, respectively. Most of our gold forward and futures contracts do not set out a specific term. For the year ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2018, the average size of our gold forward and futures contracts were 891.1koz, 1,130.4 koz, 953.8 koz and 24.1 koz, respectively. For the same periods, we had fair value gains on gold forward and futures contracts of RMB27.1 million, RMB1.1 million, RMB11.3 million and RMB17.1 million, respectively.

Our Hedging Policy

Our transaction department is responsible for managing our hedging activities. Our transaction department consisted of 14 people, all of which hold a bachelor’s or higher degree. On average, our transaction department personnel have over six years experience in gold trading industry. With respect to the forward sales of gold mined from our PRC Mines, we may not hold aggregate positions we that exceed our annual gold mine production volume, and the size of each hedging position should be commensurate with our production volume and capital strength at the time. The holding period for our hedging transactions should complement our gold production schedule and shall not exceed 12 months. Our transaction department is responsible for forming a proposal for hedging transactions based on the production plan for gold mined from our PRC Mines and market analysis and projections of gold prices. The proposal will be submitted to our transaction decision committee for review and approval. Our transaction decision committee consists of our Chairman, the head of our finance department and the head of our transaction department, among other members. Our transaction decision committee meets at least once a month to consider and approve the transaction proposal. Our transaction department formulates specific measures to implement the approved transaction proposal.

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In addition, our Controlling Shareholder’s audit and risk control department supervises, monitors, reviews and records our hedging transactions. Our finance department will record our hedging transactions in our accounts upon review of transaction documents. Our finance department keeps documentation relating to these transactions for a term of 10 years.

For other types of hedging activities, our transaction department is required to use established financial derivative instruments such as gold deferred contracts and gold forward contracts. Our transaction decision committee is responsible for the supervision and monitoring of such hedging activities. In the event of any significant or abnormal fluctuations in gold price that result in material losses, our transaction department shall promptly provide to the transaction decision committee an analysis of the risk of losses and a proposal of the measures that should be taken.

During the Track Record Period, we did not record the abovementioned transactions using the hedge accounting. For details, please refer to “Financial Information — General — Key Factors Affecting Our Results of Operations — Hedging” in this Prospectus.

CONTRACTORS

Our PRC Operations

In line with industry practice, we outsource a portion of our exploration, drift and shaft excavation and ore processing work to qualified contractors. As we expand our production scale, we believe that these outsourcing arrangements will enable us to meet our operational needs, reduce our operational costs and capital expenditure for equipment and machinery, and lower operating risks related to labor safety. We believe that the services provided by our contractors are common in the market, and it would not be difficult for us to find alternative contractors to provide similar services on terms comparable with those between our existing contractors and us. The table below sets forth the breakdown of the number of our contractors by type as of the date indicated.

As of As of December 31, March 31, 2015 2016 2017 2018

Exploration ...... 9 10 12 12 Ancillary drift and shaft excavation .... 47 56 59 59 Processing ...... —111 Total ...... 56 67 72 72

In general, we select contractors through public bidding or invitation to tender. Before engaging a contractor, we will assess its competence, qualification, expertise and experience. We require candidates to provide information on their previous engagement in relevant work, enabling us to evaluate their technical know-how, management competence and financial condition to determine whether they are able to perform the outsourced work. Having reviewed the candidates, we negotiate commercial terms and make a final decision. During the Track Record Period, most of our contractors were Independent Third Parties.

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We assign technical personnel to conduct daily on-site supervision of our contractors, ensuring that they operate in accordance with the technical specifications of our project and industry standards. We require our contractors to comply with applicable laws and regulations in respect of safety and environmental protection and to hold the requisite permits and licenses. To our best knowledge, contractors have obtained necessary permits and licenses under the PRC laws and regulations. We provide training programs to our contractors to familiarize them with our internal control requirements in respect of operations, safety and environmental protection. We have implemented a safety management system, which we require contractors to abide. We supervise and manage the production safety of our contractors and conduct regular safety checks. In the event we find deficiencies in our contractors’ work or safety management, we would provide rectification directives to such contractors and require them to take corrective measures. In the event we discover significant safety hazards in the safety management of our contractors, we are entitled to suspend their work and require them to pay penalties for breaching our internal control policies. In addition, we require our contractors to purchase insurance for their employees and properties and to provide physical checkups for their employees. In order to ensure the work quality of our contractors, we have also formulated a qualitative and quantitative assessment system to incentivize our contractors to complete projects in a timely manner and in accordance with our contract and relevant laws and regulations.

Exploration

As of March 31, 2018, we had 12 contractors engaging in exploration activities. We require these contractors to hold the requisite qualifications for geological exploration. We have implemented strict rules and standards to ensure the quality and safety of our contractors, including but not limited to on-site personnel responsible for inspection and monitoring. We generally enter into contracting agreements for a term in accordance with the expiration date set out on the exploration permit with such contractors, major terms of which are summarized below:

• Contract price and payment. The contract price shall be determined in accordance with the Standard Price of Geological Exploration in Shandong Province (山東省地質勘查預算標 準) or the Standard Price of Geological Exploration in China (地質勘查預算標準),asthe case may be. The payment shall be paid in two instalments. The first instalment shall be made upon signing of the agreement and the second instalment shall be made upon submission of the exploration report at the end of the project.

• Quality management. The contractor shall provide exploration services in accordance with the exploration permit, industry standards and our quality standards. The contractor shall submit an exploration report after completion of exploration.

• Risk allocation. As the owner of the exploration permit, we shall be responsible for the risks associated with the exploration activities under such exploration permit.

• Personnel arrangement. The contractor shall be responsible for the salaries, social security and cost associated with the personnel providing the exploration service.

• Restriction on subcontracting. After entering into the contracting agreement, the contractor shall not subcontract the exploration work to another third party.

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Ancillary Drift and Shaft Excavation

As of March 31, 2018, we had 59 contractors engaging in ancillary drift and shaft excavation at our PRC Mines. We require these contractors to hold the requisite production safety licenses and be qualified as a mine construction company, providing us services such as mine construction, tunneling, hoisting and transportation, among other things. We generally enter into contracting agreements for a term between one year and three years with such contractors, major terms of which are summarized below:

• Contract price and payment. The contract price is calculated based on the unit price of the work and service provided by the subcontractor, such as drilling and tunneling. If the contract doesn’t provide a specific unit price for certain type of work or service, it will be based on the PRC industrial standard published by industrial association. The contract price is paid on a monthly basis and each month we will pay contractors an amount equal to 90% of the work completed in that month, and the remaining 10% will be withheld as warranty which will be paid to the contractor after the one-year warranty period.

• Personnel arrangement. Our contractors are responsible for the wage and other fees of any personnel employed to carry out the contracting work.

• Restriction on subcontracting. A contractor shall not subcontract any works it is contracted to undertake under our contracting agreement.

• Quality management. The contracting work of the contractor must meet our quality standards and the contractor shall comply with our internal control policies. After the contracting works are completed, the contracting work must pass our inspection and any work that does not meet our standards shall be rectified.

• Warranty. The warranty period is one year starting from our acceptance of the contracting work. During the warranty period, the contractor shall be responsible for fixing quality issues that occur in its work. In the event the contractor is unable to fix the issue as requested in a timely manner, we may fix the issue and deduct the relevant expenses from the amount payable to the contractor.

• Termination. In the event the contractor is unable to continue to perform the contracting work, it has the right to terminate the agreement with a three-month prior notice to us. We have the right to terminate the contracting agreement unilaterally in the event that (i) the contractor materially violates applicable safety laws, rules and regulations that may have a significant adverse impact on us; (ii) the contractor subcontracts the project in part or in whole without our consent; (iii) the quality and safety measures of the contractor could not meet our requirements after receiving two rectification directives from us; (iv) the contractor completed less than 90% of the scheduled work set by us for three consecutive months; or (v) the contractor materially breaches the contracting agreement in any other manner.

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Processing

In 2016, 2017 and 2018, we engaged a contractor to operate our processing facility at Fujian Yuanxin Gold Mine. We entered into one-year contracting agreements with the contractor, the major terms of which are summarized below:

• Contract price and payment. The contract price is calculated based on the per tonne unit price multiplied by the amount of ore processed. We shall make payments each month for the ores processed in the previous month that passed our inspection. If the market price of the raw materials used in ore processing experiences significant fluctuations during the contracting period, parties can renegotiate the per tonne unit price. The contractor shall pay to us a performance guarantee within two months of signing the contract.

• Minimum amount of ore processed. The contract prescribes the annual processing target for the subcontractor, which shall be determined by our production department. We guarantee a minimum amount of processing work to the contractor. If we fail to provide the minimum amount of ore as prescribed in the contract, we shall indemnify the contractor based on the difference between the minimum amount and the actual amount of ore processed.

• Accident handling. If any accidents occur at the processing facility, the contractor’s manager shall report the incident to us as soon as practicable. The contractor shall implement emergency procedures and we shall oversee and monitor the accident handling process. The responsibility and liability from the accident shall be allocated in accordance with investigation results and PRC laws and regulations.

• Quality assurance. The contractor shall ensure the products shall meet the technical specifications as prescribed in the contracting agreement. If the products fail to meet the specifications for consecutive three months, we shall have the right to terminate the agreement unilaterally and deduct 30% from the performance guarantee. In addition, the contractor shall also indemnify us for losses incurred.

• Dispute resolution. If we and the contractor disagree as to the grade of the ores, both parties shall re-test the ores. If parties fail to agree after re-testing, they can apply to the Department of Metallurgy Research of Changchun Gold Research Institute for arbitration. Any dispute that cannot be settled by negotiation shall be resolved through the local courts.

• Expenses. Expenses incurred from the day-to-day maintenance of equipment shall be borne by the contractor. Expenses for the replacement of mid to large-size equipment shall be borne as to 60% by us and as to 40% by the contractor.

• Risk sharing. The contractor shall bear the risk of loss of gold products until such products are inspected, accepted and stored in our inventory.

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Our Argentina Operations

As of March 31, 2018, MAG engaged 125 contractors to provide equipment maintenance and assistance as well as site security and logistics services. MAG generally selects contractors through bidding and tendering process. The contracting agreements set forth detailed project specifications, the statement of work, delivery schedules. Contractors are required to conduct contracted work in accordance with MAG’s internal quality and operational standards. Under the contracting agreements, the contractors are responsible for the salaries, pension plans and costs associated with their employees.

During the Track Record Period, we did not encounter any material disputes with our contractors, or experience any suspension or delay in our operations as a result of misconduct of our contractors. In 2015, 2016 and 2017 and the three months ended March 31, 2017 and 2018, our contractor costs were RMB688.4 million, RMB901.6 million, RMB1,009.4 million, RMB225.2 million and RMB181.8 million, respectively.

UTILITIES

Electricity

Our PRC Operations

As of March 31, 2018, our total installed electrical capacity is 339.1 MVA. For the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2018, our total electricity consumption was approximately 926,725.7 MWH, 926,839.1 MWH, 899,856.6 MWH and 269,415.4 MWH, respectively. We mainly obtain electricity from the local state grid. For some of our PRC Mines that the local state grid cannot reach, we obtain electricity from an electricity supplier.

For the local state grid, we will generally enter into agreements with five year terms. The price of electricity is determined based on a unit price published by the PRC competent department each month.

For direct procurement, we generally procured electricity from SDG Electricity Company (山東省黃金電力公司), a connected person, or a supplier on electricity exchange center. We normally install one major line of electricity and one backup line electricity according to the relevant requirement of PRC laws and regulations. The price will be determined by the market price and the amount we procured as set out in the contract. For details of our contractual arrangement with SDG Electricity Company, please see “Connected Transactions.” During the Track Record Period and up to the Latest Practicable Date, we did not experience any significant interruptions in our operations as result of power shortages or outages.

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Our Argentina Operations

As of March 31, 2018, the Veladero Mine used diesel generators with an installed capacity of 22 MVA to supply power. For the year ended December 31, 2017 and the three months ended March 31, 2018, the power consumption of Veladero Mine was approximately 109,646,683.3 KWH and 29,131,157.0 KWH, respectively. During the Track Record Period and up to the Latest Practicable Date, MAG did not experience any significant interruptions in its operations as result of power shortage or outages.

Water

Our PRC Operations

Most of our PRC Mines are underground mines and mainly use underground water in their operations. Water for domestic use is mainly sourced from local running water companies. During the Track Record Period and up to the Latest Practicable Date, we did not experience any significant interruption in our operation as result of water shortage.

Our Argentina Operations

The water supply for industrial usage is secured from the Rio de las Taguas. Potable water is sourced from two wells. The water is treated using reverse osmosis. During the Track Record Period and up to the Latest Practicable Date, MAG did not experience any significant interruption in its operations as result of water shortage.

For details of the risks associated with the supply of utilities, please see “Risk Factors — Risks Relating to Our Business and Industry — We may not be able to maintain the provision of adequate and uninterrupted supplies of electricity, water, materials and equipment at commercially accepted prices, or at all.”

RAW MATERIALS AND SUPPLIERS

Our PRC Operations

Raw Materials

We procure a wide range of raw materials and consumables, which mainly include doré used to produce standard gold bullion and standard gold bullion used to produce customized gold products, as well as explosive materials and consumables, diesel, sodium cyanide and cement used in our mining operations. Most of our raw materials were procured from PRC suppliers during the Track Record Period. In 2015, 2016 and 2017 and the three months ended March 31, 2017 and 2018, costs of raw materials and consumables used amounted to RMB32,685.1 million, RMB41,834.7 million, RMB42,560.9 million, RMB7,876.3 million and RMB11,909.2 million, respectively, accounting for 90.4%, 91.8%, 89.8%, 89.0% and 90.4%, of our total cost of sales, respectively.

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We procured doré from third parties to produce standard gold bullion that we sold on the Shanghai Gold Exchange. A number of our suppliers of doré during the Track Record Period were individual suppliers, which is common in the industry according to the F&S Report. These individual suppliers are precious metals traders, many of whom have extensive industry experience. These individual suppliers have developed business relationships with, and source gold locally from, regional small-scale gold mines, jewelry stores, commercial bank and other companies. Many of these suppliers sell the doré collected to refiners that are qualified to sell standard gold bullion on the Shanghai Gold Exchange, such as our Shandong Smeltery. With respect to the doré we purchased, we generally required a gold content of over 80%, with a weight of less than 15 kg per piece. In addition, our supply agreements set out the acceptable amounts of other chemical substances allowed in the doré supplied. The price of doré is based on the gold content, which is determined by us based on our inspection and testing process and the spot prices published on the Shanghai Gold Exchange. The supplier shall be responsible for delivery of the outsourced gold to our smelteries. We weigh and inspect the doré before it is accepted into our inventory. If we and the supplier disagree as to the inspection results, we can appoint a government-certified third-party inspection center for resolution. In order to ensure the quality of doré we purchase, we also conduct annual evaluation of the suppliers in terms of their industrial experience, financial condition and source and quality of doré supplied by such suppliers, among others. In addition, we perform background checks to verify the creditability and suitability of our suppliers and require each supplier to provide written confirmation that their source of doré is legitimate. Generally, we are required to make payments within two business days after accepting the supply. We also procured standard gold bullion from the Shanghai Gold Exchange to produce customized gold products. We procure standard gold bullion from the Shanghai Gold Exchange through our trading account in accordance with procedures of the Shanghai Gold Exchange. Prices of standard gold bullion are based on the spot prices published on the Shanghai Gold Exchange.

We require the quality of our raw materials and consumables to meet industry and national standards. Suppliers shall deliver raw materials to our designated locations. We require our suppliers to provide warranty for a term of more than one month depending on the type of raw materials and consumables. We usually settle payments with our suppliers on a monthly basis. Procurement and handling of hazardous materials such as sodium cyanide, requires special permits under the PRC law. We procure explosive materials from government-approved suppliers.

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Machinery and Equipment

Our equipment, which we categorize as mining and processing equipment and smelting equipment, mainly includes drilling jumbos, rock bolting jumbos, ball mills, scrappers, crushers, air compressors and other ancillary equipment. The following table sets forth the net book amount of our mining and processing equipment and smelting equipment as of the date indicated.

As of As of December 31, March 31, 2015 2016 2017 2018 (Renminbi in millions)

Mining and processing equipment ...... 2,036.2 2,026.7 3,644.2 3,433.0 Smelting equipment ...... 139.8 110.5 85.0 80.0 Total ...... 2,176.0 2,137.2 3,729.2 3,513.0

We purchase and own a significant majority of the machinery and equipment used in our operations. The useful lives of our machinery and equipment range from two years to 20 years, depreciation is calculated on a straight-line method. Our equipment and machinery includes both international and domestic brands, most of which were sourced from domestic suppliers during the Track Record Period. As of March 31, 2018, the average remaining useful life of our mining and processing equipment and smelting equipment was 4.4 years and 3.5 years, respectively. We regularly clean, maintain and repair our machinery and equipment and replace parts subject to wear and tear. All of our PRC Mines are staffed with personnel responsible for the daily maintenance of operating equipment and machinery. We also conduct comprehensive monthly and annual equipment inspections and upgrades.

Our Argentina Operations

MAG procures a wide range of raw materials used in its operations and spare parts for maintenance of its equipment and machinery mainly from local suppliers in Argentina. The review and approval of qualified suppliers is conducted by the supply management department and the legal department. Extensive due diligence is performed, including background checks and risk assessments, before a supplier is deemed a qualified supplier. Qualified suppliers are reviewed every three years.

Suppliers

We generally select suppliers through a tendering process for supplies and equipment over RMB100,000. We take into consideration the supplier’s qualifications, track record, quality, service and costs, among other factors. We seek to maintain long-term business relationships with suppliers, many of whom have business relationships with us for over three years. We believe that most of the raw materials, consumables and equipment we procure are readily available from numerous suppliers and can be sourced at reasonable prices, and therefore we do not rely on any particular supplier for any particular item. During the Track Record Period, we did not encounter any material disruption to our business as a result of shortage or delay in the supply of raw materials.

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During the Track Record Period, all of our five largest suppliers were suppliers of doré or standard gold bullion. For the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2018, purchases from our five largest suppliers amounted to RMB25,099.8 million, RMB35,545.7 million, RMB46,615.8 million and RMB11,736.3 million, respectively, accounting for 69.4%, 78.0%, 98.3% and 89.9% of our cost of sales. Purchases from our largest supplier amounted to RMB7,547.7 million, RMB25,803.1 million, RMB42,948.3 million and RMB9,341.5 million, respectively, for the same periods, accounting for 20.9%, 56.6%, 90.7% and 71.6% of our cost of sales. Guizhou Southwest Gold Operations Center Co., Ltd. (貴州西南黃金經營中心有限責任公司), our connected person, was one of our largest suppliers in 2015. We procured doré from this supplier. Purchases from this supplier accounted for 16.4% of our total cost of sales in 2015. Other than this company, during the Track Record Period, none of our Directors, their associates or any Shareholder who, to the knowledge of our Directors, owned more than 5% of our issued share capital, had any interest in any of our five largest suppliers.

The table below sets forth the background information of our five largest suppliers for the period indicated.

Amount Percentage of Length of Supplier Products purchased purchased Cost of Sales relationship Background

(Renminbi in millions)

For the year ended December 31, 2015 Individual A...... Doré 7,547.7 20.9% 2012 to 2016 Precious metals trader Guizhou Southwest Gold Operations Center Doré 5,937.1 16.4% 2013 to 2016 Our connected person Co., Ltd...... and a company engaged in purchase and sale of gold, silver as well as other precious metals Individual B...... Doré 4,726.4 13.1% 2015 to 2016 Precious metals trader Shanghai Gold Exchange ...... Standard gold bullion 4,008.3 11.1% Since 2002 — Individual C...... Doré 2,880.3 8.0% 2012 to 2016 Precious metals trader

For the year ended December 31, 2016 Shanghai Gold Exchange ...... Standard gold bullion 25,803.1 56.5% Since 2002 — Individual D ...... Doré 3,746.9 8.2% 2016 to 2016 Precious metals trader Individual A...... Doré 2,759.1 6.1% 2012 to 2016 Precious metals trader Individual E...... Doré 1,826.3 4.0% Since 2016 Precious metals trader Individual F ...... Doré 1,410.4 3.1% 2016 to 2016 Precious metals trader

For the year ended December 31, 2017 Shanghai Gold Exchange ...... Standard gold bullion 42,998.3 90.7% Since 2002 — Individual G ...... Doré 1,287.4 2.7% Since 2017 Precious metals trader Individual H ...... Doré 1,142.5 2.4% Since 2016 Precious metals trader Company A ...... Doré 702.3 1.5% Since 2015 A PRC commercial bank Company B ...... Doré 485.3 1.0% Since 2009 A gold smelting company

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Amount Percentage of Length of Supplier Products purchased purchased Cost of Sales relationship Background

(Renminbi in millions)

For the three months ended March 31, 2018 Shanghai Gold Exchange ...... Standard gold bullion 9,341.5 70.9% Since 2002 — Individual I ...... Doré 1,026.3 7.8% Since 2017 Precious metals trader Individual J ...... Doré 529.2 4.0% Since 2017 Precious metals trader Individual H ...... Doré 454.5 3.5% Since 2016 Precious metals trader Individual K ...... Doré 384.9 2.9% Since 2017 Precious metals trader

LOGISTICS

Our PRC Operations

We have a transportation fleet that is responsible for (i) transporting gold concentrates or doré to our Shandong Smeltery, and (ii) transporting gold products to the Shanghai Gold Exchange and certain of our customers. Our transportation fleet is equipped with security personnel and GPS positioning systems that allow us to monitor the location of our fleet and personnel that guard our shipments. In addition, we install video monitors and safes on our transportation fleet. We also engage large and reliable third-party logistics service providers to deliver products to certain customers. We maintain full insurance for all of our product shipments. Depending on the terms of our contracts with customers, we are not responsible for product delivery for some of our retail customers, who will make pick up arrangements from our smelteries. During the Track Record Period and up to the Latest Practicable Date, we did not experience any shortage of transportation capacity.

Our Argentina Operations

For our Argentina operations, logistics service providers are responsible for the transportation of doré. Depending on the terms of the agreement, suppliers or logistics service providers are responsible for the transportation of raw materials. The logistics service providers and suppliers bear the risks and maintain insurance associated with the transportation. During the Track Record Period and up to the Latest Practicable Date, MAG did not experience any shortage of transportation capacity.

INVENTORY

Our PRC Operations

Our inventories mainly include raw materials, work in process, finished products of gold bullion and by-products. We mainly manage our inventory levels based on expected demand and production plans. Our production personnel are responsible for managing the inventory of raw materials. Upon smelting and refining, our dore´are inspected by personnel at our smelteries and assigned with a unique product code before entering inventory. Personnel of our smelteries, our marketing department and finance department are jointly responsible for managing the inventory of finished products. Personnel at our smelteries conduct audits on finished products inventory on a monthly basis. We require all personnel entering our smelteries to undergo security checks. Moreover, we have a video monitoring

— 256 — BUSINESS and alarm system for our warehouses. Finished products undergo final inspection and require approval and signatures from our finance department, marketing department, security department, finance manager and general manager of the smeltery before such products are shipped to customers. We have insurance coverage on all of our gold inventories.

We have also established strict inventory management policies for hazardous chemicals such as cyanide. Our safety department and security department are responsible for the management of hazardous chemicals, including monitoring the logistics providers of hazardous chemicals upon their entering our premises and ensuring that the chemicals are safely unloaded and stored. We store such chemicals in a separate warehouse that is double locked and guarded by our personnel.

Our Argentina Operations

MAG has implemented a set of supply, production and bullion inventory guidelines that set forth the internal policies with respect to inventory plans, safety, supply management, among other things. With respect to raw material supplies, personnel at MAG inspects each shipment of supply to ensure conformity of the items, specifications, quality and volume. Upon passing inspection, a shipment code is created for each shipment and information relating to the shipment is inputted in an inventory management system. Supplies that do not pass inspection are not accepted into inventory. With respect to supplies of hazardous materials, MAG engages a third party specializing in hazardous materials to manage the inventory. With respect to gold and silver bullion, personnel at MAG is responsible for recording such products as they enter the inventory. Each piece of gold and silver bullion has its own product code, which contains information about its weight, gold/silver content, among other things. Inventory personnel, the finance department and safety management department at MAG are jointly responsible for bullion inventory. Gold and silver bullion are stored in locked safes in a warehouse with video monitoring and are guarded 24 hours a day.

QUALITY CONTROL

Quality control is crucial to our operations. We have established a stringent quality control system to ensure the quality of our products throughout the mining, processing and smelting stages. During the Track Record Period, we did not receive any material complaints due to quality issues of our products.

With respect to mining and processing, we implement a comprehensive quality control system to monitor the quality at each key stage of mining and processing. We establish specific guidelines for the size of ore mined and the mining process to manage the quality of ores mined. Ores mined from each of our PRC Mines are sample-tested at our laboratories to monitor the grade of the ore. With respect to doré that we procure from third parties, we inspect each shipment to ensure that the quality meets our internal requirements before accepting such supplies into inventory.

With respect to smelting and refining, we measure and analyze key quality and production efficiency indicators regularly to ensure that our products meet internal quality standards and our production operations are conducted efficiently. Our standard gold bullion are required to meet the SGEB1-2002 standards for gold ingots and SGEB2-2004 standards for gold bars of the Shanghai Gold Exchange. We maintain records of quality inspections conducted at each stage of our operations. Our

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SDG Smelting has obtained the ISO 9001 certificate since November 2014. Our ISO 9001 certificate was renewed in November 2017 is valid for three years. In addition, our SDG Smelting was qualified as a LBMA-accredited refiner in accordance with LBMA Gold and Silver Good Delivery standards since January 2010.

We provide quality and technical specifications to suppliers and generally require suppliers to provide warranty for the supplies we procure. We inspect each shipment of raw materials before accepting the shipments into our inventory. For our third-party contractors, we require them to meet our qualification requirements and conduct their operations in accordance with our internal standards, industry standards and relevant PRC laws and regulations. We regularly inspect their work and we conduct full quality inspections when they have completed the project before we accept their work.

Similarly for our Argentina operations, MAG has implemented a comprehensive monitoring system in its operations to check that its products meet quality standards. MAG also has supplier management policies to monitor the quality of raw materials. Doré produced by MAG is refined by a LBMA-accredited refiner in accordance with LBMA Gold and Silver Good Delivery standards.

COMPETITION

The gold industry in China is relatively fragmented. The top ten PRC or HK-listed gold companies by domestic gold mine production volume collectively accounted for 27.3% of total gold mine production volume in China in 2017, according to the F&S Report. Our major competitors are large international and PRC gold producers. We primarily compete based on our ability to obtain more gold resources and reserves, which is dependent on our financial conditions, technical ability, equipment and machinery and management experience. The gold industry is a capital-intensive industry that requires significant technical, exploration and management experience. Moreover, gold mining is subject to extensive regulations and requires a number of licenses and permits to operate. These factors are the main barriers to enter the gold industry.

RESEARCH AND DEVELOPMENT

We engage in in-house research and development projects as well as collaborative projects with third-party institutions. We have a science and information technology department that manages our research and development projects. Our science and information technology department consisted of 15 people as of the Latest Practicable Date, all of whom hold a bachelor’s or higher degree. On average, our science and information technology personnel have over 13 years of experience in gold mining related industries. We also have over 700 employees at our PRC Mines carrying out research and development work on-site. We have established a cut-and-fill laboratory (充填工程實驗室), deep mining laboratory (深井開採實驗室), and processing and smelting laboratory (選冶實驗室) to conduct in-house research and development projects. These laboratories focus on developing and improving technologies and processes used in our operations to improve production efficiency. Our three laboratories consisted of 26 people in total as of the Latest Practicable Date, a substantial majority of whom hold a bachelor’s or higher degree in mining or engineering.

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During the Track Record Period, our research and development projects mainly focused on deep underground exploration and mining, offshore seabed exploration and mining and environmentally-friendly mining methods and technologies. For example, we engaged in a project to develop intelligent deep underground mining, which included developing intelligent machinery that can accurately conduct underground cutting and drilling, control systems that can monitor and automatically adjust underground mining operations, and information systems that can collect data and mining performance metrics for mining activities conducted deep underground. We also developed GPS systems that can accurately locate and guide our mining personnel and equipment underground. In addition, our deep sea mining research and development project focuses on developing intelligent technologies that can generate 3-D simulations of the mining structure and ore bodies, as well as developing optimized extraction and filling processes that enhance efficiency and improve safety conditions. With respect to environmentally-friendly mining, we engaged in research and development projects to produce gold from lower-grade pillars in our mined out structures, which allows us to maximize utilization of our resources. Moreover, through our in-house research and development efforts, we have developed processes and technologies to lower our environmental footprint, including our tailings de-cyanidation technology, and underground tailings filling technology.

We engaged in a number of collaborative projects during the Track Record Period. Generally, our collaborators were universities and research institutions with a research focus on mining and metallurgy technologies. Our research topics mainly focused on deep underground mining technology research, offshore seabed intelligent mining research and geological research related to mining. Through our collaborative projects, we have developed processes and technologies that have been applied to our own mining operations. Moreover, we have participated in the development of a number of industry standards in relation to mining methods. Based on the terms of the relevant agreement, the intellectual property resulting from the research collaboration will be owned solely by us or jointly by us and our collaborators. The research and development cost allocations for collaborative projects differ based on the terms of the relevant agreements. During the Track Record Period, we did not have any intellectual property disputes with our collaborators.

We may apply for patent protection for certain of the processes and technologies we develop. As of the Latest Practicable Date, we had 208 registered patents and 70 pending patent applications in the PRC. In 2015, 2016 and 2017 and the three months ended March 31, 2018, our research and development costs were RMB153.8 million, RMB265.3 million, RMB273.6 million and RMB22.1 million, respectively. Our research and development costs are charged to our statements of profit and loss as incurred.

INTELLECTUAL PROPERTY RIGHTS

Intellectual property rights are of vital importance to our operations. We rely on a number of patents and know-how in our operations. We have developed patented technologies in relation to our offshore seabed mining and smelting which we consider are significant for our operations. As of the Latest Practicable Date, we also had 208 patents in the PRC, including 54 invention patents, 148 utility patents and six design patents. As of the same date, we had 70 pending patent applications in the PRC.

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Our standard gold bullion sold on the Shanghai Gold Exchange are imprinted with the “泰山” trademark and some of our customized gold products are imprinted with the “山東黃金” trademark. In December 2017, we entered into agreements with our Controlling Shareholder to use seven trademarks registered in the PRC and one trademark registered in Hong Kong, including the “SD-Gold”, “泰山” and “山東黃金”, for a total consideration of RMB700,000 per annum for a ten year term. For more information on the license arrangement, see “Connected Transactions.” For more information on our intellectual property rights, please see “Appendix VIII — Statutory and General Information — Further Information about Our Business — Our Intellectual Property Rights” in this Prospectus. For our Argentina operations, according to the records of the database of the Argentine Trademark Office (INPC), MAG had 110 pending trademarks applications in Argentina as of the Latest Practicable Date.

During the Track Record Period and up to the Latest Practicable Date, we were not involved in any intellectual property rights disputes or legal proceedings to be threatened or pending by or against us that would have a material and adverse effect on our business.

EMPLOYEES

Our PRC Operations

We believe that our employees are critical to our success. Our human resources department is responsible for recruiting, managing and training our employees. As of the Latest Practicable Date, we had 16,270 full-time employees in total. Other than our seven employees in Argentina and eight employees in Hong Kong, all of our employees are based in the PRC.

The table below sets forth a breakdown of our employees by function as of the Latest Practicable Date.

Number of Function Employees

Mining and processing ...... 9,343 Management and administrative ...... 2,253 Logistics service ...... 1,781 Engineering ...... 639 Smelting and refining...... 375 Finance ...... 93 Others ...... 1,786 Total ...... 16,270

In general, we recruit employees through recruitment websites, and on-campus recruitment. We conduct training for new staff every year and have periodic training for our on-duty employees. Generally, our training focuses on developing the skills of management personnel and technical personnel relevant to their work.

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The remuneration package for our employees generally includes salary and bonuses. We determine employee remuneration based on factors such as qualifications and years of experience. Employees also receive welfare benefits, including medical care, retirement benefits, occupational injury insurance and other miscellaneous items. We make contributions to mandatory social security funds for our employees to provide for retirement, medical, work-related injury, maternity and unemployment benefits. Our PRC Legal Advisers are of view that, during the Track Record Period and up to the Latest Practicable Date, we have complied with the applicable PRC labor laws and regulations in all material respects. Our employees participated in labor unions in the PRC to protect their rights, help us achieve our economic goals and encourage employees to participate in our management decisions.

In addition to full-time employees, we had approximately 130 dispatched workers employed by third-party labor dispatching agencies as of the Latest Practicable Date. These dispatched workers generally engage in mining and ancillary work and do not hold management positions with us. These dispatched workers enter into labor contracts with third-party labor dispatching agencies, which are responsible for their salaries and contributing to their social security funds. We do not enter into any labor contracts with these dispatched workers and are not obliged to contribute social security funds for them. We enter into contracts with the labor dispatching agencies and pay the agencies for their services on a monthly basis.

We believe we generally have a good relationship with our employees. Our Directors confirm that save as disclosed above, there are no material labor disputes or strikes that would have material and adverse effect on our business, financial condition or results of operations during the Track Record Period and up to the Latest Practicable Date.

Our Argentina Operations

MAG has a comprehensive human resources internal control system to manage recruitment, employee development, salary and compensation, among other things. MAG makes contributions to mandatory social security funds for its employees and provides employee benefits such as medical and accident insurance. Our Argentina Legal Advisers are of view that, during the Track Record Period and up to the Latest Practicable Date, MAG has complied with the applicable Argentine labor law and regulations in all material respects. All of MAG’s employees have joined a labor union to protect their rights.

On May 28, 2017, before the Veladero Acquisition, the Veladero Mine experienced a labor strike by members of the Asociación Obrera Minera Argentina (AOMA) labor union, a labor union representing mining industry labor in Argentina. AOMA’s primary request in the labor strike was to transfer certain employees of the contractors engaged to provide services for the Veladero Mine from other labor unions to be represented by AOMA. The labor strike lasted for approximately one day and employees resumed work when MAG commenced negotiations with AOMA. As of the Latest Practicable Date, MAG was operating regularly.

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OCCUPATIONAL HEALTH AND SAFETY

We operate in a responsible manner to ensure the health and safety of our employees, third-party contractors and the communities in which we operate. For our PRC operations, we are subject to laws and regulations in China in respect of occupational health and safety. As advised by our PRC Legal Advisers, during the Track Record Period, we had been in compliance with applicable PRC laws and regulations in respect of occupational health and safety in all material respects. During the Track Record Period and up to the Latest Practicable Date, we did not encounter any material production safety incidents or occupational safety incidents.

We have consistently adopted higher safety standards than national requirements and continually update and improve upon our internal control measures to enhance production safety in our operations. We have implemented a comprehensive occupational health and safety system, which includes operational manuals with respect to our mining and production safety operations, procedures for handling hazardous chemicals and explosive materials, emergency plans, reporting and accident handling, among other things. We provide safety equipment for our personnel and organize regular and annual training for new employees and on-duty staff to enhance their awareness and understanding of safety procedures and accident prevention. Moreover, we require our staff to hold the necessary licenses and qualifications to engage in certain operations, such as the operation of certain mining machinery. We evaluate our facilities, machinery and equipment on a regular basis to ensure that they are in good conditions and may be operated safely.

We seek to continually update our production processes and technologies to enable our flagship PRC mines to achieve a high level of mechanization, digitization and intelligent control in the gold production process. Moreover, we monitor various production and safety indicators in real-time to ensure the safety of our underground operations. We plan to continue to devote research resources to increase the level of automation and intelligent control in our mining and production process and increase safety training in our effort to further improve the safety of our mines.

As of March 31, 2018, most of our PRC Mines have met the “Level 2 Mine Production Safety Standard” (安全生產標準化二級企業). In recognition of our efforts, two of our subsidiaries were recognized as “Exemplary Enterprises in Building National Safety Culture” (全國安全文化建設示範 企業) by the State Administration of Work Safety and four of our subsidiaries were recognized as “Exemplary Enterprises in Building Safety Culture” at the provincial level. We have also obtained the OHSAS 18001 certificate for our SDG Smelting and Linglong Mining in November 2014 and October 2011, respectively. The OHSAS 18001 qualification will expire for our SDG Smelting and Linglong Mining in November 2020 and May 2018, respectively.

Similarly for our Argentina operations, MAG is subject to Argentina laws and regulations in respect of occupational health and safety. MAG has in place a safety and health management system to ensure its compliance with the relevant laws and regulations and ensure the safety of its operations. As advised by our Argentina Legal Advisers, MAG was in compliance with applicable laws and regulations in relation to occupational health and safety in all material respects and there were no significant or recurrent health or safety accidents during the Track Record Period.

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ENVIRONMENTAL PROTECTION

Our operations are subject to various PRC and Argentine laws and regulations with respect to environmental protection. For more details, see “Regulatory Overview — Laws and Regulations Related to Our PRC Operations — Laws and Regulations Relating to Environmental Protection” and “Regulatory Overview — Laws and Regulations Related to Our Argentina Operations — Major Laws and Regulations on Environmental Protection in Connection with Mining.”

In 2015 and 2016, our expenses in relation to environmental protection in the PRC were RMB43.2 million and RMB54.8 million, respectively. Our expenses in relation to environmental protection in the PRC increased to RMB127.4 million for the year ended December 31, 2017 because we invested in a research and development project in relation to tailings treatment. For the three months ended March 31, 2018, our expenses in relation to environmental protection in the PRC was RMB20.6 million. We expect our environmental protection costs to remain at similar levels for our PRC operations. For our Argentina operations, the sustaining capital budget within the current LOM plan includes plans for environmental upgrades. Moreover, we have jointly developed a plan to invest and upgrade the environmental system at Veladero Mine with Barrick Gold. See “— Our Argentina Operations.”

Our PRC Operations

We are committed to environmental sustainability. According to the F&S Report, we were one of the first PRC gold producers to adopt ecological mining in China, which emphasizes on minimizing the impact of mining, processing and smelting activities on the environment and ecosystem while creating value. Of the six gold mines recognized as the first batch of “National Level Pilot Green Mines” (國家級綠色礦山試點單位) in the PRC in 2011, three were our gold mines, namely SanShandao Gold Mine, Xincheng Gold Mine and Guilaizhuang Gold Mine, which were further recognized as “National Level Green Mines” (國家級綠色礦山) in 2016. As of March 31, 2018, our Jiaojia Gold Mine, Yinan Gold Mine, Jinqingding mine area of Jinzhou Gold Mine and Xinhui mine area of Qingdao Gold Mine were also recognized as “National Level Pilot Green Mines” (國家級綠 色礦山試點單位). Our SDG Smelting has maintained the ISO14001 certification since 2014 and has been renewed to November 2020. Our PRC Legal Advisers are of view that, during the Track Record Period, we did not have any material incidents of non-compliance with PRC environmental laws and regulations at our PRC Mines that resulted in material penalties. AAI is of the opinion that there are no environmental issues that directly affect Mineral Reserves or Mineral Resources.

Our environmental protection department is responsible for supervising the environmental protection of our PRC Mines, as well as conducting research and development jointly with other departments to improve our environmental protection technologies and measures. We have undertaken a number of national environmental protection technology research projects. Through our efforts, we have developed a number of environmentally-friendly technologies (such as our tailings de-cyanidation technology and underground tailings filling technology), and processes (such as our reuse of waste rock and tailings), which we believe enable us to reduce the environmental impact from our gold mining and production activities.

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We have developed detailed environmental protection policies and procedures that cover the major aspects of our operations, which are summarized below:

• Prevention of soil and groundwater pollution. We fortify the groundwork our industrial sites, transport raw materials in fully-enclosed vehicles and store raw materials in our facilities in a manner that prevents leakage of hazardous materials into the soil. In addition, we carry out anti-seepage treatment to the tailings dam to prevent groundwater pollution.

• Prevention of air pollution. We install dust collectors for equipment and machinery that produced dust particles during operation to ensure that our workplace and operations meet emission requirements. We will also apply covers on top of our waste rock to reduce dust.

• Wastewater treatment. We have constructed underground drainage and water recycling systems for all of our PRC Mines, where wastewater is recycled and reused after certain substances in the water are precipitated and removed. Wastewater generated during the tailing and dewatering stages and domestic use of our operations are recycled through the tailings backwater systems installed in most of our PRC Mines.

• Noise control. We take various measures to reduce the noise generated in our operations, such as selecting low-noise equipment and machinery, installing silencers, noise and vibration damping and adsorption materials, as well as noise isolation and elimination equipment.

• Solid waste. Most of our waste rock from mining and processing are used for filling. The remaining waste rock are used as construction materials.

Pursuant to the relevant PRC laws and regulations, we are responsible for the rehabilitation of the land in relation to our mining activities and are required to submit a land rehabilitation plan to the MNR or the local land and resources branch for examination when applying for or renewing the mining permit. Before commencing mining activities, we are required to deposit a land rehabilitation fund. We shall deposit the 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 land rehabilitation and environment restoration activities in the future, and the use of these funds is under continuous supervision of the local land and resources branch.

During the Track Record Period and up to the Latest Practicable Date, we are committed to strictly performing the approved rehabilitation plan, which includes measures such as using garden soil to cover tailings and planting vegetation and greenery to the mine area. For the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2018, our costs associated with land rehabilitation amounted to RMB0.1 million, RMB2.8 million, RMB10.2 million and RMB3.1 million, respectively.

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Our Argentina Operations

Operations at the Veladero Mine are managed by a comprehensive environmental management plan that is certified under ISO 14001 standards. Through the environmental management system, the Veladero Mine seeks to fully comply with applicable environmental laws and regulations, apply management practices to mitigate pollution and environmental impact and improve its environmental system and performance. The environmental management system covers all major aspects of Veladero Mine’s operations, including biodiversity management, water conservation, heap leach management, and accident reporting and record procedures. Our Argentina Legal Advisers are of view that, during the Track Record Period and up to the Latest Practicable Date, other than the environmental incidents in 2015, 2016 and 2017, the Veladero Mine complied with applicable Argentine environmental laws and regulations in all material respects. RPA is of the opinion that there are no environmental issues that directly affect Mineral Reserves or Mineral Resources. The Veladero Mine is subject to environmental risks relating to its geographical location, glacier laws and environmental incidents. See “Risk Factors — Risks Relating to Our Argentina Operations — The Veladero Mine is subject to risks related to its geographical location” and “Risk Factors — Risks Relating to Our Argentina Operations — The Veladero Mine experienced environmental incidents during the Track Record Period.”

Environmental Incidents at the Veladero Mine

Background of the Incidents

During the Track Record Period and before the Veladero Acquisition, there were three material environmental incidents at the Veladero Mine. In September, 2015, a valve on a leach pad pipeline at the Veladero Mine failed, resulting in a release of cyanide-bearing process solution into a nearby waterway through a diversion channel gate that was open at the time of the incident (the “2015 Incident”). MAG notified regulatory authorities of the release. Environmental monitoring was conducted by MAG and third parties following the incident. MAG believes this monitoring demonstrates that the incident posed no risk to human health at downstream communities from the Veladero Mine. A temporary restriction on the addition of new cyanide to the Veladero Mine’s processing circuit was lifted on September 24, 2015, and mine operations returned to normal. Monitoring and inspection of the mine site will continue in accordance with a court order. On April 14, 2016, in accordance with local requirements, MAG paid an administrative fine of approximately US$10 million (at the then-applicable Argentine Peso to US$ exchange rate) in connection with the 2015 Incident. As of the Latest Practicable Date, MAG was in the process of challenging certain aspects of administrative decision in relation to the 2015 Incident. Our Argentina Legal Adviser is of the view that, if MAG is successful in the challenge, the administrative fine paid by MAG with respect to the 2015 Incident may be reduced. MAG has implemented a remedial action plan at the Veladero Mine in response to the 2015 Incident which was required and accepted by the San Juan provincial mining authority. The primary changes and improvements made were applying hydraulic barriers in the Potrerillos river, constructing a dam, removing the contaminated sediments deposited in the Potrerillos water and flood plain, evaluating a vega revegetation and further risk assessment and evaluation in relation to hydraulic barriers.

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On September 8, 2016, ice rolling down the slope of the leach pad damaged a pipe carrying process solution, caused some material to leave the leach pad. (the “2016 Incident”). This material, primarily crushed ore saturated with process solution, was contained on the mine site and returned to the leach pad. Extensive water monitoring in the area conducted by MAG confirmed that the incident did not result in any environmental impacts. A temporary suspension of operations at the Veladero Mine was ordered by the San Juan provincial mining authority and a provincial court on September 15, 2016 and September 22, 2016, respectively, as a result of this incident. With respect to this incident, primary changes and improvements made were controlling and correcting deteriorated membranes throughout the perimeter of the leach valley, raising the height of berms at seven critical points, verifying pipe connections in the leach valley, cleaning the south and north canals and the access to them, and maintaining the service road in the perimeter of the valley leach system. On October 4, 2016, following, among other matters, the completion of certain urgent works required and accepted by the San Juan provincial mining authority and a judicial inspection of the mine, the San Juan provincial court lifted the suspension of operations and ordered that mining activities be resumed.

On March 28, 2017, the monitoring system at the Veladero Mine detected a rupture of a pipe carrying gold-bearing process solution on the leach pad (the “2017 Incident”). This solution was contained within the operating site; no solution reached any diversion channels or watercourses. All affected soil was promptly excavated and placed on the leach pad. MAG notified regulatory authorities of the situation, and San Juan provincial authorities inspected the site on March 29, 2017. On March 29, 2017, the San Juan provincial mining authority issued a violation notice against MAG in connection with this incident and ordered a temporary restriction on the addition of new cyanide to the leach pad until corrective actions on the system were completed. With respect to this incident, primary changes and improvements made were correcting the primary perimeter of the leach valley in the area of the strangulation with former Canal Porta Tubería Sur, relocating towards the leach valley center of Canal Porta Tubería Sur (Camino Argenta — Sentina 430), eliminating steep slopes in that area, transforming former Porta Tubería Sur (between Camino Argenta and Sentina 430) into a contingency canal in the leach valley in order to collect any potential leaks of rich solution towards the sump, waterproofing the contingency and service roads of the south waste water pipe as a third protective barrier, and forming a closed circuit with the leach valley system. The mining authority lifted the suspension on June 15, 2017 following inspection and acceptance of corrective actions, upon which mining activities resumed.

In relation to the 2016 Incident and the 2017 Incident, on December 22, 2017, the Ministry of Mining of San Juan Province imposed an administrative fine on MAG of AR$104.4 million (equivalent to approximately US$5.9 million at the then-applicable Argentine Peso to US$ exchange rate) for both incidents and filed a request for reconsideration, which was rejected by the San Juan provincial mining authority. This decision may be subject to administrative appeal and judicial review.

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Administrative and Other Proceedings

In relation to the abovementioned environmental incidents, a number of legal proceedings brought against MAG were ongoing as of the Latest Practicable Date. Details of these legal proceedings are set forth in the following table.

Environmental incident Background Amount claimed Current status Opinion of legal counsel

2015 Incident . . . The Secretariat of N/A. The MAG has appealed in San As advised by our Environmental Condition administrative Juan courts in September Argentina Legal Advisers, and Sustainable investigation did not 2017 and the case was the risk that the case will Development has initiated specify an amount pending as of the Latest be ruled against MAG is an administrative claimed. Practicable Date. low and the likelihood investigation on the that such case will have a cyanide spill of the 2015 material and adverse Incident. impact on Veladero Mine’s operations is very low, considering that the Ministry of Mining of San Juan Province has already imposed a fine for the same incident and therefore the “non bis in idem” principle used by MAG in its defense should be accepted by the courts.

2015 Incident Eight current and former N/A. The indictments These individuals, none As advised by our MAG employees were did not specify an of which hold senior Argentina Legal Advisers, indicted (out of a total of amount claimed. management positions in these criminal charges nine current and former MAG, have appealed the will not have a material MAG employees indictments to the San and adverse impact on originally indicted) for Juan Supreme Court. The MAG’s operations, criminal charges based on case will proceed in the considering that these alleged negligence in San Juan provincial court employees are not senior connection with the 2015 while this appeal is management of MAG and Incident. The indictments pending. As of the Latest MAG will not be held were confirmed by the Practicable Date, MAG responsible for any San Juan Court of was not a party to the liability (if imposed by Appeals. provincial action. court) on such individuals.

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Environmental incident Background Amount claimed Current status Opinion of legal counsel

2016 Incident . . . An individual filed a N/A. The action did As of the Latest As advised by our preventative action for not specify an amount Practicable Date, MAG Argentina Legal Advisers, environmental damage claimed. has answered the the risk that the case will against MAG requesting complaint and proceeding be ruled against MAG is discontinuation of the was ongoing. low and even if leach method, successful, the possibility replacement of the of suspending operations production method and of MAG is very low, implementation of a considering that courts closure, mitigation and generally do not take any remediation plan in the remedial action when the valley-leach facility. matter has already been assessed and judged by administrative authorities.

2017 Incident . . . Individuals filed an N/A. The action did As of the Latest As advised by our amparo protection action not specify the amount Practicable Date, the San Argentina Legal Advisers, before San Juan courts. claimed. Juan courts resolved that the risk that the case will The individuals requested the suspension of be ruled against MAG is that MAG pay a fine, operations be lifted and low, considering that the close the Veladero Mine had not assessed any Ministry of Mining of indefinitely, suspend fines on MAG. Following San Juan Province has activities, supply bottled the resumption of the already imposed a fine water to local people and addition of cyanide, MAG for the same incident, and provide detailed has implemented that the relevant court, information about the modifications to the leach when deciding on MAG’s rupture of pipe in 2017, pad under the work plan request to have the among other things. The agreed with San Juan suspension of the leach National Ministry of provincial authorities. As process lifted, considered Environment of Argentina of the Latest Practicable that the works required also brought an amparo Date, MAG has petitioned by the enforcement protection action against to transfer the federal authority for safe MAG in federal court case to the provincial operations in the leach seeking to order MAG to court of San Juan and valley had been put in place an this petition was pending performed. improvement program for decision by the National its valley-leach facility. Supreme Court.

Remediation Measures

MAG carried out corrective measures and repairs following each of the three incidents described above to resolve the damage to the pipelines, and following inspection by governmental authorities, MAG was permitted to recommence operations. The sustaining capital budget within the current LOM plan includes plans for environmental upgrades. We were aware of the abovementioned environmental incidents before the Veladero Acquisition. To limit our exposure to the risks associated with these environmental incidents. Barrick Cayman will indemnify SDG Hong Kong from and against any losses suffered or incurred by us as a result of a final non-appealable decision against MAG in respect of a proceeding commenced by a third party (including any governmental authority) against MAG with respect to the environmental incidents in 2015, 2016 and 2017. Barrick Cayman’s indemnity

— 268 — BUSINESS obligation is subject to SDG Hong Kong providing to Barrick Cayman a notice of claim with respect to the indemnification claim no later than June 30, 2019. Subject to appropriate notice being provided and no other limitations on liability being applicable, the maximum aggregate liability of Barrick Cayman with respect to the indemnity for the environmental incidents will not exceed the purchase price paid by us for the Veladero Acquisition (as adjusted based on certain financial metrics). We believe that our exposure to the risks associated with these environmental incidents is low, considering that (i) an administrative fine of approximately US$10 million has already been assessed against, and paid by, MAG in connection with the 2015 Incident prior to the Veladero Acquisition, (ii) an administrative fine of approximately US$5.9 million has already been assessed against MAG in connection with the 2016 and 2017 Incident, and we will be indemnified for 50% of the after tax amount of such fine, (iii) with respect to the ongoing administrative and other proceedings set forth above, our Argentina Legal Advisers have advised us that the risk of the cases being ruled against MAG is low, (iv) we will be indemnified for any final non-appealable decisions rendered against MAG with respect to these environmental incidents under the indemnity provision of the Share Purchase Agreement, and (v) even if final non-appealable decisions are rendered against MAG with respect to these environmental incidents after the indemnification period and not eligible for indemnification from Barrick Cayman, the amounts claimed in the ongoing administrative and other proceedings are relatively low or there are no amounts claimed in such proceedings, and would not have a material adverse impact on MAG’s or our financial performance.

Following the environmental incidents, we and Barrick Gold are implementing a plan to invest in and upgrade the environmental system at the Veladero Mine, which is the sustaining capital expenditure of the Veladero Mine. Key features of the plan include but are not limited to: (i) as of the Latest Practicable Date, we have completed arrangements for the entire south and surrounding collector, including installation of an additional tunnel, (ii) arrangements for the northern sector of the valley (for example, completion of the new north channel) and other pending and ongoing arrangements since the 2015 Incident, (iii) optimization of the berms system of the leaching valley, (iv) plans to recover Veladero Mine’s social license through the generation of training centers in communities, infrastructure works of different types for communities and reinforcement of sustainable development programs, (v) setting up an integrated remote operations center which has enabled MAG to conduct certain mining processes and monitor and collect operating data on a real-time basis as of the Latest Practicable Date, and (vi) strengthening institutional relationships. This plan is voluntary and not a requirement by any Argentine government authority as a result of the environmental incidents, the estimated sustaining capital expenditure required at the Veladero Mine, calculated based on the current LOM plan, was approximately US$279 million. The sustaining capital expenditure is funded by MAG with its own cash flows, which have been shared as to 50:50 by Barrick Group and us indirectly through our respective ownership in MAG since July 1, 2017.

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INSURANCE

We maintain insurance policies that are required under PRC laws and regulations as well as based on our assessment of our operational needs and industry practice. We maintain social insurance for our PRC employees, which includes work accident insurance. We maintain additional accident insurance for our employees engaged in mining activities and life insurance for our employees handling gold products. We also maintain insurance for our inventory and equipment and machinery. In line with industry practice in the PRC, we have elected not to maintain certain types of insurances, such as business interruption insurance or key man insurance. Our Directors consider that our existing insurance coverage is sufficient for our present operations and in line with the industry practice in the PRC. In Argentina, MAG maintains insurance in accordance with Argentine laws and regulations including but not limited to all environmental liability insurance required thereunder.

PROPERTIES

Our headquarters are located in Jinan city, Shandong province. As of March 31, 2018, our PRC Mines were located in Shandong, Gansu and Fujian provinces and Inner Mongolia autonomous region. As of the same date, we also held a 50% interest in the Veladero Mine, which is located in Argentina.

Pursuant to section 6(2) of the Companies (Exemption of Companies and Prospectuses from Compliance with Provisions) Notice, this Prospectus is exempted from compliance with the requirements of section 342(1)(b) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance in relation to paragraph 34(2) of the Third Schedule to the Companies (Winding Up and Miscellaneous Provisions) Ordinance, which requires a valuation report with respect to all of our Group’s interests in land or buildings, for the reason that, as of March 31, 2018, none of our properties had a carrying amount of 15% or more of our total assets.

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PRC Properties

As of the Latest Practicable Date, certain of the land and buildings we owned or leased were subject to title defects. The table below sets forth the usage purpose of premises of our properties that had title defects.

% of total Type of Premises GFA GFA square meter Owned Buildings No defects ...... 297,567.7 33.6% With defects Mining and production ...... 204,019.2 23.1% Offices ...... 104,992.8 11.9% Non-operational...... 278,131.8 31.4% Total...... 884,711.5 100.0% Owned Land No defects ...... 3,294,305.1 89.9% With defects Mining and production ...... 359,634.8 9.8% Offices ...... 8,260.0 0.2% Non-operational...... 2,771.0 0.1% Total...... 3,664,970.9 100.0% Leased Buildings No defects ...... 5,621.9 51.3% With defects Mining and production ...... 2,160.0 19.7% Non-operational...... 3,175.5 29.9% Total...... 10,957.4 100.0% Leased Land No defects ...... 2,187,337.9 38.5% With defects Mining and production ...... 1,590,812.4 28.0% Tailing dams ...... 1,224,112.9 21.5% Non-operational purposes ...... 682,630.2 12.0%

Total...... 5,684,893.4 100.0%

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Owned Properties

Buildings

As of the Latest Practicable Date, we owned and occupied 1,715 properties with an aggregate GFA of approximately 884,711.5 square meters in the PRC. These properties were mainly used as our premises for mining and production operations and offices. Of these properties, 66.4%, or 1,139 properties with an aggregate GFA of approximately 587,143.8 square meters, had title defects, of which (i) an aggregate GFA of approximately 204,019.2 square meters were premises for mining and production operations, (ii) an aggregate GFA of approximately 104,992.8 square meters were premises for offices, and (iii) an aggregate GFA of approximately 278,131.8 square meters were premises for non-operational purposes.

Although title defects will prevent the relevant properties from being sold or pledged as security as advised by our PRC Legal Advisers, our Directors believe that the lack of building ownership certificates for such properties, individually or collectively, would not have a material and adverse effect on our business, considering that:

(a) 43.3%, or properties with an aggregate GFA of approximately 383,124.6 square meters, were premises with title defects used for office or non-production purposes, which we believe are not crucial to our business and may be relocated at insubstantial costs;

(b) 18.8%, or properties with an aggregate GFA of approximately 166,081.2 square meters, were primarily premises with title defects used for production that were (i) mainly held by our Controlling Shareholder and pending transfer to us, or (ii) built on land held by us or our Controlling Shareholder, and we believe that the likelihood that we would be required to relocate is very low;

(c) 4.3%, or properties with an aggregate GFA of approximately 37,938 square meters, were premises with title defects used for production for which we have not commenced the process for, obtaining building ownership certificates primarily because we did not obtain the relevant land use right certificate. As of the Latest Practicable Date, we were actively communicating with the relevant government authority to obtain the land use right certificate. We plan to commence the process for obtaining building ownership certificates once we have received the land use right certificate and other required documentation from relevant government authorities. We believe that the likelihood that we would be required to relocate is very low and therefore these title defects would not have a material and adverse impact on our operations because (i) during our use or occupation, we have not received any notice from competent authorities requiring us to relocate, and (ii) these properties accounted for a very low percentage of our total owned properties;

(d) since our listing on the Shanghai Stock Exchange in 2003 and up to the Latest Practicable Date, we have not received any material penalty, objection, inquiry or investigation from competent authorities with respect to title defects on these properties;

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(e) we have used or occupied all of such properties for many years, and during all the years of its use and occupation and up to the Latest Practicable Date, we have not received any claim of right from third parties or been involved in any disputes with third parties; and

(f) we have not received any notice from competent authorities requiring us to relocate or demolish the relevant properties as a result of the title defects as of the Latest Practicable Date.

The following sets forth details of our properties by title status.

• No defects. We have obtained building ownership certificates for 576 properties with a total GFA of approximately 297,567.7 square meters. Our PRC Legal Advisers are of the view that we have legal title to these properties and that we have the right to legally occupy and use such properties.

• Auctions and asset acquisitions. We have acquired 159 properties with a total GFA of approximately 95,771.5 square meters through property auctions, asset acquisitions and other methods. Due to historical reasons, the properties were registered in the name of the previous owners. Among these properties:

(i) 133 properties with a total GFA of 86,248.5 square meters were acquired through asset acquisitions from our Controlling Shareholder, and our Controlling Shareholder has confirmed and undertaken (a) that we have paid the consideration into for these properties and these properties have been transferred to us, and (b) not to assert any claim against us on such properties; and

(ii) 26 properties with a total GFA of approximately 9,523.1 square meters were acquired through property auctions and such acquisitions are supported by auction documents, among which nine properties with a total GFA of approximately 4,275.5 square meters are staff dormitories, garages and other properties not used for production, and our operations would not be materially and adversely affected in the event such properties could no longer be used due to claim of rights by third parties.

With respect to the abovementioned properties, our Controlling Shareholder has undertaken that (a) it would use best efforts to assist us in the title registration of such properties under our name, and (b) if building ownership certificates cannot be transferred to us for such properties for any reason and our use of such properties is affected or if we incur any direct or indirect losses as a result, our Controlling Shareholder shall compensate us in full for any direct or indirect loss that we suffer.

Our PRC Legal Advisers are of the view that the inconsistency between property occupant and title holder would not materially impede us to use and occupy such properties, considering that:

(i) we have received a confirmation from our Controlling Shareholder that the 133 properties were transferred to us and we have paid the consideration in full for the 26

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properties acquired through auctions, and according to searches performed by our PRC Legal Advisers on the National Enterprise Credit Information Publicity System, the owners listed on the relevant building ownership certificates have been deregistered, therefore it is unlikely that such owners would claim a right to such properties; and

(ii) we have obtained a valid and legal undertaking from our Controlling Shareholder to compensate us for any direct and indirect loss that we suffer in the event that we do not obtain the building ownership certificates.

Considering the above, our Directors are of the view that the lack of building ownership certificates for such properties, individually or collectively, would not have a material and adverse effect on our business. As of the Latest Practicable Date, our Directors are of the view that such properties with defective titles are generally in good condition and are safe for us to use.

• Ongoing third party application. We occupy and use one property with a GFA of 38,969 square meters for which we have not obtained the building ownership certificate. The construction contractor that we have engaged is in the process of obtaining the building ownership certificate. Based on the confirmation letter issued by the relevant governmental authority, our PRC Legal Advisers are of the view that the application of building ownership certificate is in progress and there is no material legal impediment to occupy and use such properties and we would not receive penalty from abovementioned government authority for occupying and using such property. Considering the above, our Directors are of the view that the lack of building ownership certificates for such property, individually or collectively with other properties with title defects, would not have a material and adverse effect on our operations. As of the Latest Practicable Date, our Directors are of the view that such properties with defective titles are generally in good condition and are safe for us to use.

• Ongoing application. We occupy and use 79 properties with a total GFA of 40,050.2 square meters, and are in the process of applying for the building ownership certificates. Such properties were constructed on land owned by us and we did not receive any penalty, objection, inquiry or investigation from competent authorities or third parties with respect to such properties during the Track Record Period.

According to relevant PRC laws and regulations, we are required to submit the following documents for an application for building ownership certificate: (i) ownership certificate for fixed assets or land ownership documentation, (ii) zoning compliance documentation for construction works, (iii) completion of construction documentation, (iv) real estate survey reports, and (v) proof of tax payment, among others. With respect to these properties, we were in various stages of obtaining such documentation required for the application as of the Latest Practicable Date and have not encountered any material legal impediment in the process.

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Our PRC Legal Advisers have advised us that if we do not perform the application procedures as required under the PRC Law on Urban and Rural Planning (中華人民共和國 城鄉規劃法), we may be ordered to complete the remedial procedures and pay a penalty between 5% to 10% of the project construction price, and if the remedial measures are impracticable, we may be ordered to demolish such properties and pay a penalty of up to 10% of the project construction price. Our PRC Legal Advisers have further advised us that we may be ordered to pay a penalty between 1% to 2% of the construction contract price for properties that have commenced construction without construction permits or reports under the PRC Law on Construction (中華人民共和國建築法) and related laws and regulations.

Our Controlling Shareholder has undertaken that (a) it would use best efforts to assist us in the title registration of such properties under our name, and (b) if building ownership certificates cannot be obtained by us for such properties for any reason and our use of such properties is affected or if we incur any direct or indirect losses as a result, our Controlling Shareholder shall compensate us in full for any direct or indirect loss that we suffer.

Our PRC Legal Advisers are of the view that there are currently no material impediments for us to occupy and use such properties and there are no material legal impediments for us to obtain the building ownership certificates on the basis that:

(i) with respect to the 21 properties with an aggregate GFA of 8,898.0 square meters, we obtain the construction completion approval and submit the required application materials;

(ii) with respect to the 58 properties with an aggregate GFA of 31,152.2 square meters, we obtain, construction building permits, construction plan approval and other documentation approving the building construction plan, obtain the construction completion approval and submit the required application materials, considering that (a) such properties are constructed on land owned by us and it is unlikely that any third party would claim a right to such properties, (b) we are in the process of applying for the building ownership certificates and we have not received any penalty, objection, inquiry or investigation from competent authorities; and

(iii) we have obtained a valid and legal undertaking from our Controlling Shareholder to compensate us for any direct and indirect loss that we suffer in the event that we do not obtain the building ownership certificates.

Accordingly, our Directors are of the view that the failure to obtain the building right certificates for such properties, individually or collectively, would not have a material adverse impact on our operations. As of the Latest Practicable Date, our Directors are of the view that such properties with defective titles are generally in good condition and are safe for us to use. We expect to obtain the building ownership certificates for 95 of such properties by the end of 2018 and the remaining 21 by the second half of 2019.

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• Shandong Smeltery. We occupy and use 37 properties with a total GFA of 59,831.9 square meters for our Shandong Smeltery, and are in the process of applying for the building ownership certificates for such properties. Such properties were constructed on land owned by us and we did not receive any penalty, objection, inquiry or investigation from competent authorities or third parties with respect to such properties during the Track Record Period. As of the Latest Practicable Date, we have obtained all of the requisite documents for our building ownership certificate application, other than a construction mapping report and proof of tax payment.

Our Controlling Shareholder has undertaken that (a) it would use best efforts to assist us in the title registration of such properties under our name, and (b) if building ownership certificates cannot be obtained by us for such properties for any reason and our use of such properties is affected or if we incur any direct or indirect losses as a result, our Controlling Shareholder shall compensate us in full for any direct or indirect loss that we suffer.

Our PRC Legal Advisers are of the view that there are currently no material impediments for us to occupy and use such properties and there are no material legal impediments for us to obtain the building ownership certificates on the basis that we obtain the construction mapping report and proof of tax payment.

Our Directors believe that the title defect with respect to our Shandong Smeltery would not have a material and adverse effect on our operations, considering the advice of our PRC Legal Advisers, and the fact that such properties are constructed on land owned by us and it is unlikely that any third party would claim a right to such properties, and we have not received any penalty, objection, inquiry or investigation from competent authorities. Moreover, our Shandong Smeltery has passed the construction safety inspection, and as such, our Directors are of the view that the Shandong Smeltery remains in good and safe conditions for our use.

• Non-production use and vacant properties. We occupy and use 402 properties with a total GFA of approximately 219,212.7 square meters for which we have not received building ownership certificates. Among these properties:

(i) 309 properties with a total GFA of approximately 201,937.6 square meters are staff dormitories, restrooms, and other properties not used for production;

(ii) 62 properties with a total GFA of approximately 14,039.9 square meters are temporary structures;

(iii) 31 properties with a total GFA of approximately 3,235.2 square meters are vacant or intended for demolition.

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Our Controlling Shareholder has undertaken that (a) it would use best efforts to assist us in the title registration of such properties under our name, and (b) if building ownership certificates cannot be transferred to us for such properties for any reason and our use of such properties is affected or if we incur any direct or indirect losses as a result, our Controlling Shareholder shall compensate us in full for any direct or indirect loss that we suffer.

Our PRC Legal Advisers are of the view that there is no material and adverse impact on us if we could not occupy or use such properties, considering that:

(i) even though under the PRC Law on Urban and Rural Planning (中華人民共和國城鄉 規劃法), we may be ordered to (a) demolish the 62 temporary properties mentioned above and pay a penalty of up to one times the project construction price, and (b) complete the remedial procedures for the 340 properties not used for production or vacant and pay a penalty between 5% to 10% of the project construction price, and if the remedial measures are still impracticable, we may be ordered to demolish such properties and pay a penalty of up to 10% of the project construction price, and we may be ordered to pay a penalty between 1% to 2% of the construction contract price for properties that have commenced construction without construction permits or reports under the PRC Law on Construction (中華人民共和國建築法) and related laws and regulations, the total amount of potential penalty only accounts for a minimal portion of our total net assets as of March 31, 2018;

(ii) we have obtained a legal and valid undertaking from our Controlling Shareholder to compensate us for any direct and indirect loss that we suffer in the event that we do not obtain the building ownership certificates; and

(iii) those properties are temporary structures, non-production-related or vacant and intended for demolition.

Our Directors are of the view that the title defects of such properties, individually or collectively, would not have a material and adverse effect on our operations. As of the Latest Practicable Date, our Directors are of the view that such properties with defective titles are generally in good condition and are safe for us to use.

• Others. We occupy and use 461 properties with a GFA of approximately 133,308.5 square meters for which we have not obtained the building ownership certificates, primarily because we have not yet obtained the land use rights certificates or construction- related certificates. We have not received any penalty, objection, inquiry or investigation from competent authorities or third parties with respect to such properties during the Track Record Period.

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According to relevant PRC laws and regulations, we are required to submit the following documents for an application for building ownership certificate: (i) ownership certificate for fixed assets or land ownership documentation, (ii) zoning compliance documentation for construction works, (iii) completion of construction documentation, (iv) real estate survey reports, and (v) proof of tax payment, among others.

Our PRC Legal Advisers have advised us that if we do not perform the application procedures as required under the PRC Law on Urban and Rural Planning (中華人民共和國 城鄉規劃法), we may be ordered to complete the remedial procedures and pay a penalty between 5% to 10% of the project construction price, and if the remedial measures are impracticable, we may be ordered to demolish such properties and pay a penalty of up to 10% of the project construction price. Our PRC Legal Advisers have further advised us that we may be ordered to pay a penalty between 1% to 2% of the construction contract price for properties that have commenced construction without construction permits or reports under the PRC Law on Construction (中華人民共和國建築法) and related laws and regulations.

Our Controlling Shareholder has undertaken that (a) it would use best efforts to assist us in the title registration of such properties under our name, and (b) if we cannot obtain the building ownership certificates for such properties for any reason and our use of such properties is affected or if we incur any direct or indirect losses as a result, our Controlling Shareholder shall compensate us in full for any direct or indirect loss that we suffer.

Our PRC Legal Advisers are of the view that:

(i) there are no material legal impediments in obtaining the building ownership certificate as long as we can meet the requirements set out in this section; and

(ii) we have obtained a legal and valid undertaking from our Controlling Shareholder to compensate us for any direct and indirect loss that we suffer in the event that we do not obtain such building ownership certificate.

As confirmed by our PRC Legal Advisers, during the Track Record Period, there were no incidents that had a material and adverse impact on our actual occupation and use of such properties. Accordingly, our Directors are of the view that the failure to obtain such building ownership certificates for such properties, individually or collectively, would not have a material adverse impact on our operations. As of the Latest Practicable Date, our Directors are of the view that such properties with defective titles are generally in good condition and are safe for us to use.

With respect to our owned properties title defects, we estimate our maximum potential penalties to be up to approximately RMB47.8 million in the aggregate pursuant to the PRC Law on Urban and Rural Planning and PRC Law on Construction.

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Land

As of the Latest Practicable Date, we occupied 110 parcels of land with a total area of approximately 3,664,970.9 square meters. Of these parcels of land, 10.1%, or 20 parcels of land a total area of approximately 370,665.8 square meters had title defects, of which (i) a total area of approximately 359,634.8 square meters were premises for mining and production operations, (ii) one parcel of land with an area of approximately 8,260 square meters was the premise of an office, and (iii) one parcel of land with an area of approximately 2,771 square meters was a parcel of idle land.

Although title defects will prevent the relevant properties from being sold or pledged as security as advised by our PRC Legal Advisers, our Directors believe that the lack of land use rights certificates for such properties, individually or collectively would not have a material and adverse effect on our business, considering that:

(a) 6.4%, or a total area of approximately 235,374 square meters, were parcels of land with title defects used for production that were (i) held by our Controlling Shareholder and pending transfer to us, (ii) previously held by us and under renewal, and we believe that the likelihood that we would be required to relocate is very low, or (iii) obtained through judicial auction and with a portion of the land transfer fees paid;

(b) 0.3%, or a total area of approximately 11,031.0 square meters, were parcels of land with title defects used for office or non-production purposes, which we believe are not crucial to our business and may be relocated at insubstantial costs;

(c) 3.4%, or a total area of approximately 124,260.8 square meters, were parcels of land with title defects used for production for which we are in the process of, or has not commenced the process for, obtaining land use rights certificates. We believe that the likelihood that we would be required to relocate is very low and therefore these title defects would not have a material and adverse impact on our operations because (i) during our use or occupation, we have not received any notice from competent authorities requiring us to relocate, and (ii) these parcels of land accounted for a very low percentage of our total owned land;

(d) since our listing on the Shanghai Stock Exchange in 2003 and up to the Latest Practicable Date, we have not received any material penalty, objection, inquiry or investigation from competent authorities with respect to title defects on these properties;

(e) we have used or occupied all of such properties for many years, and during all the years of our use and occupation and up to the Latest Practicable Date, we have not received any claim of right from third parties or been involved in any disputes with third parties; and

(f) we have not received any notice from competent authorities requiring us to relocate or demolish the relevant properties as a result of the title defects as of the Latest Practicable Date.

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As of the Latest Practicable Date, in respect of the parcels of land that we have not commenced the process for obtaining land use rights certificate, we have either (i) commenced preparation of the required documentation for obtaining the land use rights certificates or (ii) actively communicated with the relevant government authority to obtain the relevant land use right certificates.

The following sets forth details of our properties by title status.

• No defects. We acquired 89 parcels of land with a total area of approximately 2,986,581.1 square meters through transfer by sale. Our PRC Legal Advisers are of the view that we have the right to legally occupy, use, transfer, lease, pledge, or otherwise dispose of the land use rights of such land within the permitted use period.

• Allocated land. We obtained the land use rights for one parcel of land with an area of approximately 307,724 square meters by way of allocation. Our PRC Legal Advisers are of the view that we have the right to legally occupy and use this parcel of land considering that we hold the land use right certificate by allocation, and may transfer, lease, pledge or otherwise dispose of the land use rights of such land parcel after obtaining the land use rights certificates through transfer.

• Auctioned land. We obtained one parcel of land with an area of approximately 25,000 square meters through a judicial property auction. Such acquisition is supported by auction documents but due to historical reasons, the parcel of land is registered in the name of the previous owner. We have not received any penalty, objection, inquiry or investigation from competent authorities or third parties with respect to such properties during the Track Record Period. Moreover, we believe our operations would not be materially and adversely affected by such land considering its relatively small area.

Our Controlling Shareholder has undertaken that (a) it would use best efforts to assist us in the title registration of such property under our name, and (b) if land use rights certificates cannot be transferred to us for such property for any reason and our use of such property is affected or if we incur any direct or indirect losses as a result, our Controlling Shareholder shall compensate us in full for any direct or indirect loss that we suffer.

According to relevant PRC laws and regulations, we are required to meet the following requirements to obtain the land use right certificate: (i) the user of such land must be a company, corporation, other economic entity or individual, (ii) obtain the state-owned land use right certificate (國有土地使用證), (iii) obtain the required building or asset ownership certificate, and (iv) enter into the land use right transfer agreement and paid the relevant fees to the local government. As of the Latest Practicable Date, we have actively communicated with the relevant government authority to prepare the required documentation for obtaining land use rights certificates.

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Our PRC Legal Advisers are of the view that the failure to obtain such land use right certificates will not have a material and adverse impact on our operations, considering that:

(i) there are no material impediments for us to obtain the land use rights certificates so long as we meet the requirements set out in this section and receive the approval from the land governing authorities of the relevant county or city government;

(ii) we have obtained a legal and valid undertaking from our Controlling Shareholder to compensate us for any direct and indirect loss that we suffer in the event that we do not obtain such building ownership certificates; and

(iii) the total area of this parcel of land is relatively small and as confirmed by the Company, there is no material and adverse effect on us if we could not occupy and use such property.

Accordingly, our Directors are of the view that the failure to obtain the land use rights certificates for such property, individually or collectively with other properties with title defects, would not have a material and adverse impact on our operations.

• Ongoing renewal application. We occupy and use one parcel of land with a total area of approximately 183,780.0 square meters in which the land use rights certificate has expired and is undergoing renewal process. According to the relevant PRC laws and regulations, renewal of the land use rights certificates requires us to enter into new land transfer agreements and pay the relevant transfer fees. We have entered into the Land Use Rights Transfer Contract for State-owned Land for Construction with the relevant local authority and have paid the consideration for such parcel of land and the relevant authorities were in the process of issuing the new land use right certificate to us and we expect to complete this process in the second half of 2018. We do not expect any material legal impediment and expect to complete this renewal process in the second half of 2018. Considering this, our PRC Legal Advisers are of the view that (i) there are no material legal impediments in obtaining the land use rights certificates, and (ii) as we are in the process of renewal, there are no material legal impediments for us to occupy and use of such land. Accordingly, our Directors are of the view that failure to obtain the land use rights certificates for such property, individually or collectively with other defective properties, would not have a material and adverse impact on our operations.

• Ongoing transfer application. Our Controlling Shareholder acquired two parcels of land with a total area of approximately 20,077 square meters through land auction, and have obtained the land use rights certificates. Based on the asset transfer agreement entered into between the Controlling Shareholder and us, our Controlling Shareholder has agreed to transfer the land use rights certificates to us once obtained. According to the relevant PRC laws and regulations, the transfer process requires submission of (i) fixed asset ownership certificate, (ii) land transfer or sales agreement, (iii) approval from the people’s government or competent authorities, and (iv) proof of tax payments, among others. As of the Latest Practicable Date, we have commenced the transfer process and we expect to complete the process in 2019. Our PRC Legal Advisers are of the view that (i) we have the

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right to require our Controlling Shareholder to transfer such parcels of land to us, based on the asset transfer agreement entered into between the Controlling Shareholder and us, and (ii) there are no material legal impediments in obtaining the land use right certificates on the basis that we obtain the project approval for the property from competent authorities.

Accordingly, our Directors are of the view that the failure to obtain such land use rights certificates for such properties, individually or collectively, would not have a material and adverse impact on our operations.

• Ongoing new application. We occupy and use 15 parcels of land with a total area of approximately 114,708.8 square meters which we have not obtained the land use rights certificates. According to relevant PRC laws and regulations, we are required to submit the following documents to obtain the land use right certificate: (i) documentation for origin of land use, (ii) land use right questionnaire, land parcel map and indices, and (iii) proof of land transfer payments, lease payments and tax payments, among others. Among these properties:

(i) there is no material impediment in obtaining the land use rights certificates for five parcels of land with a total area of approximately 23,695.8 square meters, based on the confirmation letters issued by the competent authorities, and we expect to obtain land use rights certificates for two of such parcels of land by the end of 2018 and the remaining three by the end of 2020;

(ii) we have entered into a land transfer agreement with local government authorities and have paid the land transfer fees for one parcel of land with an area of approximately 2,771 square meters, which we currently do not use for our operations and believe that the lack of land use right certificate would not have a material and adverse effect on our operations;

(iii) we are actively cooperating to adjust the land use indices for six parcels of land with a total area of approximately 81,261 square meters, which is pending re-evaluations by local government authorities with regard to the coverage of environmental protection zones in Shandong province as a whole. We plan to apply for land use rights certificates after the re-evaluation, which we expect to obtain by the second half of 2020;

(iv) we are in the process of obtaining land use rights for one parcel of land with an area of approximately 6,517 square meters, and have paid a portion of the land transfer payments and obtained the land parcel border map. We intend to enter into the land transfer agreement and obtain other required documentation as the next step and expect to obtain the land use rights by the end of 2018; and

(v) we are in the process of obtaining forestry usage approval for two parcels of land with a total area of approximately 464 square meters, and do not expect any material legal

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impediment in this process based on confirmation letters issued by the competent authorities. We plan to apply for the land use rights certificates after obtaining the forestry usage approval and land use approval, and we expect to obtain the land use rights certificate by the end of 2018.

With respect to these properties, our Controlling Shareholder has undertaken that (a) it would use best efforts to assist us in the title registration of such property under our name, and (b) if land use rights certificates cannot be transferred to us for such property for any reason and our use of such property is affected or if we incur any direct or indirect losses as a result, our Controlling Shareholder shall compensate us in full for any direct or indirect loss that we suffer.

Our PRC Legal Advisers are of the view that considering that we have obtained confirmation letters from the competent authorities for five parcels of land with a total area of approximately 23,659.8 square meters, and on the basis that:

(i) with respect to the parcel of land with an area of approximately 6,517 square meters, we entered into the land transfer agreement and obtained the project approval for the property from competent authorities and other documentation required for the application;

(ii) with respect to the six parcels of land with a total area of approximately 81,261 square meters, (a) we are not affected by, or have adjusted our application pursuant to, the results of re-evaluations by local government authorities of the coverage of environmental protection zones in Shandong province as a whole, (b) we obtained the land construction quota and the project approval for the property from competent authorities, and (c) we submitted the required application materials;

(iii) with respect to the two parcels of land with a total area of approximately 464 square meters, we obtained the land construction quota; and

(iv) we have obtained a legal and valid undertaking from our Controlling Shareholder to compensate us for any direct and indirect loss that we suffer in the event that we do not obtain such land use rights certificates.

As confirmed by our PRC Legal Advisers, during the Track Record Period, there were no incidents that had a material and adverse impact on our actual occupation and use of such properties. Accordingly, our Directors are of the view that the failure to obtain such land use rights certificates for such properties, individually or collectively, would not have a material and adverse impact on our operations.

• Bankruptcy auction. We occupy and use one parcel of land with an area of approximately 27,100 square meters, which we obtained through bankruptcy auction. According to the relevant PRC laws and regulations, we are required to submit the original land use right certificate and auction documents, among other materials, to transfer the land use rights certificate to us. The auction documents are no longer available, but we have not received

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any penalty, objection, inquiry or investigation from competent authorities or third parties with respect to such properties during the Track Record Period. As of the Latest Practicable Date, we have actively communicated with the relevant government authority to obtain the relevant land use right certificate with regard to this parcel of land.

Our Controlling Shareholder has undertaken that (a) it would use best efforts to assist us in the title registration of such properties under our name, and (b) if we are unable to obtain land use rights for such properties for any reason and our use of such properties is affected or if we incur any direct or indirect losses as a result, our Controlling Shareholder shall compensate us in full for any direct or indirect loss that we suffer.

Our PRC Legal Advisers are of the view that the failure to obtain such land use right certificate will not have a material and adverse impact on our operations, considering that:

(i) there are no material legal impediments in obtaining the land use rights certificate as long as we meet requirements set out in this section and receive the approval from the land governing authorities of the relevant county or city government;

(ii) we have obtained a legal and valid undertaking from our Controlling Shareholder to compensate us for any direct and indirect loss that we suffer in the event that we do not obtain such building ownership certificates;

(iii) during the Track Record Period, there were no incidents that had a material and adverse impact on our occupation and use of such lands; and

(iv) the total site area of this land only accounts for minimal proportion of the total site area of the land occupied and used by us, and we confirm that there is no material and adverse effect on us if we could not occupy and use this parcel of land.

Accordingly, our Directors are of the view that the failure to obtain such land use rights certificate for such property, individually or collectively with other properties with title defects, would not have a material and adverse impact on our operations.

With respect to our owned land with title defects, according to our PRC Legal Advisers, we may be subject to a fine of up to RMB30 per square meter, the maximum potential liability of which is estimated to be up to approximately RMB3.2 million in the aggregate.

For the abovementioned properties with title defects, we are actively negotiating with the competent authorities and applying for the relevant building ownership certificates and land use rights. As of the Latest Practicable Date, we had not experienced any material adverse effect on our business operations as a result of the aforementioned properties with title defects. There were no such situations in which we were required to cease using the aforementioned properties or were subject to penalties or compensations by the relevant government authorities or any third parties. In addition, our Directors are of the view that such properties with defective titles are generally in good condition and are safe for us to use.

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Leased Properties

Buildings

As of the Latest Practicable Date, we leased four properties with an aggregate GFA of approximately 10,957.4 square meters in the PRC. Of these properties, two with an aggregate GFA of approximately 5,335.5 square meters had title defects, of which (i) one property with a GFA of approximately 2,160 square meters (only accounting for 0.2% of our total properties by GFA) was a premise for mining and production operations, and (ii) one property with a GFA of approximately 3,175.5 square meters was a premise for non-operational purposes. See below for details of our leased properties.

• No defects. Lessors of two leased properties (with an aggregate GFA of approximately 5,621.9 square meters) had valid title certificates or relevant authorization documents from owners of these properties evidencing their rights to sublet or lease such properties. Our PRC Legal Advisers are of the view that the lessors are entitled to lease these properties and the leasing agreements are legal and valid.

• Confirmations. Lessors of two leased properties (with an aggregate GFA of approximately 5,335.5 square meters) have not provided valid title certificates or relevant authorization documents evidencing their rights to lease the properties. Among these properties, (i) the lessors of one property (with a GFA of approximately 3,175.5 square meters) have provided a written undertaking to confirm that they have legitimate leasing rights and undertake to compensate us for all losses if there are defective rights for the leased property, and (ii) the lessors of one property (with a GFA of approximately 2,160 square meters) have provided a confirmation confirming that our leasing arrangement is legitimate and effective under relevant laws and regulations. There were no claim of rights by any third parties in relation to these properties during the Track Record Period. Our PRC Legal Advisers are of the view that our operations would not be materially and adversely affected by the leased properties defects because (i) although our lease may be affected if the title or the lessor’s right to lease is challenged by a third party, we may still raise a claim against the lessors based on the written undertaking and confirmation provided by the lessor, (ii) we also have obtained a legal and valid undertaking from our Controlling Shareholder to compensate us for any direct and indirect loss that we suffer as a result of title defects of these properties, and (iii) such properties accounted for a relatively small proportion of the properties we used and as confirmed by our Company, there would be no actual impacts on the production and operation of our Company if we could not continue to rent such properties. Considering the above, our Directors are of the view that such defective leased properties, individually or collectively, would not have a material and adverse impact on our operations.

As of the Latest Practicable Date, the abovementioned leasing agreements have not completed lease registration. Our PRC Legal Advisers are of the view that the non-registration of lease agreements will not affect the validity of the lease agreements, but the relevant local housing administrative authorities can require us to complete registrations within a specified timeframe and we may be subject to a fine of between RMB1,000 and RMB10,000 for any delay in making these registrations, the maximum potential liability of which is estimated to be up to approximately

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RMB40,000 in aggregate. Therefore, we have the right to use such properties in accordance with the leasing agreement but we may be subject to the risks of fines if the lease registration is not completed as required by the relevant local housing administrative authorities. Our PRC Legal Advisers are of the view that it is unlikely that our operations would be materially and adversely affected if we fail to complete the registration procedure, considering that (i) during the Track Record Period, we were not subject to administrative penalties by the relevant housing administrative authorities for non-registration of lease agreements, and (ii) the amount of potential penalties accounts for a minimal portion of our total net assets as of March 31, 2018.

Land

As of the Latest Practicable Date, we leased 268 parcels of land with a total area of approximately 5,684,893.4 square meters in the PRC. Of these parcels of land, 184 with a total area of approximately 3,497,555.5 square meters had title defects, of which (i) a total area of approximately 1,590,812.4 square meters were premises for mining and production operations, (ii) a total area of approximately 1,224,112.9 square meters were premises for tailings dams, and (iii) a total area of approximately 682,630.2 square meters were premises for non-operational purposes.

Our Directors believe that title defects for such properties, individually or collectively, would not have a material and adverse effect on our business, considering that:

(a) 33.5%, or a total area of approximately 1,906,743.1 square meters, were parcels of land with title defects used as tailings dams or for non-production purposes, which we believe are not crucial to our business and may be relocated at insubstantial costs;

(b) 28.0% of our total leased land or 16.7% of our total land, (being a total area of approximately 1,590,812.4 square meters), were parcels of land with title defects used for production, and believe that the likelihood that we would be required to relocate is very low and that these title defects would not have material and adverse impact on our operations because (i) during our use or occupation, we have not received any notice from competent authorities requiring us to relocate, and (ii) these parcels of land accounted for a relatively low percentage of our total land;

(c) since our listing on the Shanghai Stock Exchange in 2003 and up to the Latest Practicable Date, we have not received any material penalty, objection, inquiry or investigation from competent authorities with respect to title defects on these properties;

(d) we have used or occupied all of such properties for many years, and during all the years of our use and occupation and up to the Latest Practicable Date, we have not received any claim of right from third parties or been involved in any disputes with third parties; and

(e) we have not received any notice from competent authorities requiring us to relocate or demolish the relevant properties as a result of the title defects as of the Latest Practicable Date.

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The following sets forth details of our leased land by title status.

• No defects. Lessors of 84 parcels of land (with a total area of approximately 2,187,337.9 square meters) were the local land and resources bureau or had valid title certificates or relevant authorization documents evidencing their rights to sublet or lease such properties. Our PRC Legal Advisers are of the view that the lessors are entitled to lease these parcels of land and the leases are legal and valid.

• Allocated land. We lease 24 parcels of land (with a total area of approximately 595,508.1 square meters) from our Controlling Shareholder, which obtained such properties through transfer by allocation. Our PRC Legal Advisers are of the view that (i) our Controlling Shareholder may be required to return proceeds generated from any unauthorized leasing of allocated land, pay penalties and complete the relevant transfer procedures, however, we have not received any penalty, objection inquiry or investigation from competent authorities or third parties with respect to such properties during the Track Record Period, and (ii) we have obtained a legal and valid undertaking from our Controlling Shareholder to compensate us for any direct and indirect loss that we suffer as a result of title defects of these properties. As confirmed by our PRC Legal Advisers, during the Track Record Period, there were no incidents that had a material and adverse impact on our actual occupation and use of such parcels of land. Our Directors are of the view that such defective leased parcels of land, individually or collectively, would not have a material and adverse impact on our operations.

• No title certificates. We lease four parcels of land (with a total area of approximately 430,432 square meters) from our Controlling Shareholder, and our Controlling Shareholder has not obtained the land use rights certificates for these parcels of land. Our PRC Legal Advisers are of the view that (i) the leased parcels of land may be subject to claim of rights from third parties or reclaimed by governmental authorities, which may affect our ability to continue to lease such land, (ii) we have obtained a legal and valid undertaking from our Controlling Shareholder to compensate us for any direct and indirect loss that we suffer as a result of title defects of these parcels of land. As confirmed by our PRC Legal Advisers, during the Track Record Period, there were no incidents that had a material and adverse impact on our actual occupation and use of such parcels of land. Considering the above, our Directors are of the view that such defective leased properties, individually or collectively, would not have a material and adverse impact on our operations.

• Collective farm land. We lease 155 parcels of land (with a total area of approximately 2,458,842.9 square meters) that are collective farm land. Our PRC Legal Advisers are of the view that (i) although the properties and other structures on such land may be demolished for restoration to the original state and subject to penalties if such cases are inconsistent with the land use plan; or may be reclaimed and subject to penalties if such leased properties are consistent with the land use plan, as confirmed by the Company, we did not receive any penalty, objection, inquiry or investigation from competent authorities or third party with respect to occupying and using such land during the Track Record Period, and (ii) we have obtained a legal and valid undertaking our Controlling Shareholder to compensate us for any direct and indirect loss that we suffer as a result of title defects of

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these parcels of land. As confirmed by our PRC Legal Advisers, during the Track Record Period there were no incidents that had a material and adverse impact on our actual occupation and use of such parcels of land. Our Directors are of the view that such defective leased properties, individually or collectively, would not have a material and adverse impact on our operations.

• Renewal process ongoing. Our lease agreement for one parcel of land with a total area of approximately 12,772.6 square meters has expired and we are in the process of renewing such lease agreement with the lessor. We do not expect any material impediment in renewing such lease. Our Directors are of the view that this defective leased parcel of land would, individually or collectively with other properties with title defects, not have a material and adverse impact on our operations.

With respect to our leased land with title defects, according to our PRC Legal Advisers, we may be subject to a fine of up to RMB30 per square meter, the maximum potential liability of which is estimated to be up to approximately RMB73.8 million in the aggregate, accounting for only 0.14% of our 2017 revenue. We believe that there would not be any material change in our rental costs for the abovementioned leased properties and land with defective titles if such properties and land did not have title defects.

Properties Located in Argentina

Owned Properties

As advised by our Argentina Legal Advisers, MAG owned eight properties in San Juan province, Argentina, with a total GFA of approximately 24,261.5 square meters as of the Latest Practicable Date. The properties were primarily offices and logistics facilities. Our Argentina Legal Advisers have further advised us that, as of the Latest Practicable Date, the certificates of ownership of these properties were complete and valid and there was no dispute and, to their knowledge, no potential dispute regarding the title or right of the properties that may impact MAG.

Leased Properties

As advised by our Argentina Legal Advisers, MAG leases two for offices, one in San Juan province and other in the city of Buenos Aires. The lease of San Juan expires in January 31, 2020. The lease in the city of Buenos Aires expires on February 29, 2020. In addition, MAG also leases the mining camp known as “Los Amarillos” in San Juan Province in order to provide its personnel with accommodation. The lease of Los Amarillos Camp expires on March 30, 2022.

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LICENSES AND PERMITS

We are required to obtain various licenses, permits and certifications for our PRC operations. As advised by our PRC Legal Advisers, during the Track Record Period and as of the Latest Practicable Date, other than the mining permits and exploration permits being renewed, we have obtained the requisite licenses, permits and certificates required by PRC laws and regulations for our current operations in material aspects.

MAG is required to obtain various licenses, permits and certifications for the operations at the Veladero Mine. Following the 2015 Incident, MAG was required by provincial governmental authorities to implement certain changes and improvements in its operations, which primarily relate to the valley-leach facility. Such changes and improvements required MAG to obtain additional licenses and permits. Our Argentina Legal Advisers have advised us that MAG has obtained all such additional licenses and permits, as well as substantially all (including all major) licenses, permits and certificates required by Argentine laws and regulations for the operations of the Veladero Mine as of the Latest Practicable Date. MAG promptly complied with such requirements and completed all of the requested changes and improvements, after which the temporary suspensions on MAG were lifted. MAG has made timely submission of an update of the environmental impact report on February 9, 2018. As of the Latest Practicable Date, the report was under review by the relevant authorities. As advised by our Argentina Legal Advisers, the Veladero Mine may conduct operations during the review period. Our Argentina Legal Advisers have further advised us that there are no foreseeable impediments in renewing the environmental impact approval and there will not be any significant risk of receiving any penalties from the government or any other party in this respect, based on (i) searches of judicial claims in the relevant jurisdictions, (ii) interviews with relevant Argentine government authorities and management of MAG, and (iii) review of MAG’s corporate records. Our Argentina Legal Advisers advised us that as of the Latest Practicable Date, we have received all material approvals and permits required for the Veladero Acquisition.

LEGAL PROCEEDINGS AND NON-COMPLIANCES

We may involve legal proceedings in ordinary course of business from time to time. During the Track Record Period, none of us or our Directors have involved in any litigation, arbitration or administrative proceedings which could have a material adverse impact on our financial condition or results of operations. As of the Latest Practicable Date, we are not aware of, so far as we know, any pending or threatened litigation, arbitration or administrative proceedings which we or any of our subsidiaries involved in and may have material adverse impacts on our financial condition or results of operation.

Our Directors confirmed that, with the support of the legal opinion of our PRC Legal Advisers, during the Track Record Period and as of the Latest Practicable Date, we have complied with the relevant PRC laws and regulations in all material respects. Moreover, our Argentina Legal Advisers have advised us that MAG has complied with the relevant Argentine laws and regulations in all material respects.

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RISK MANAGEMENT AND INTERNAL CONTROL MEASURES

We are subject to various risks during our operations, please see “Risk Factors” in this Prospectus for details. We have established a risk management system and relevant policies and procedures which we consider suitable for our business operation. Our policies and procedures are aimed at managing our mining, production and sale as well as monitoring our business performance.

To monitor the continuous implementation of risk management policies and corporate governance measures after the Listing, we have adopted or will continue to adopt, amongst other things, the following risk management measures:

• Establish an audit committee to review and supervise our financial reporting process and internal control system. Our audit committee consists of five members, namely Mr. Lu Bing, chairman of the committee, Ms. Hui Wing, Mr. Gao Yongtao, Mr. Li Guohong and Ms. Wang Xiaoling. For the qualifications and experiences of these members, see “Directors, Supervisors and Senior Management;”

• Adopt various policies to ensure the compliance with the Listing Rules, including but not limited to policies in respect of risk management, connected transactions and information disclosure;

• Provide regular anti-corruption and anti-bribery compliance trainings for senior management and employees in order to enhance their knowledge and compliance of applicable laws and regulations; and

• Adopt various policies to ensure security of mineral resources and products, including but not limited to the following:

(i) vehicles and personnel must be registered to enter our mine areas and processing facilities and inspected by security;

(ii) our security teams conduct regular patrol of the mine areas;

(iii) we maintain a video monitoring and alarm system for our warehouses;

(iv) finished products shall undergo final inspection and require approval and signatures from our finance department, marketing department, security department, finance manager and general manager of the smeltery before such products are shipped to customers; and

(v) we have insurance coverage on all of our gold inventories.

• Arrange our Directors and senior management to attend training seminars on Listing Rules requirements and the responsibilities as a director of a Hong Kong-listed company.

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We have appointed an internal control consultant to review the effectiveness of our internal control measures related to our major business processes, to identify the deficiencies for improvement, advise on the rectification measures and review the implementation of such measures. The internal control consultant did not identify any material deficiencies in its review. We have adopted corresponding internal control measures to make improvement on certain ordinary internal control issues identified in relation to our IT system development and upgrade. As of the Latest Practicable Date, our internal control consultant has completed the follow-up procedures on our internal control system with regard to those actions in relation to our IT system development and did not identify any material deficiencies in our internal control system. We cannot guarantee that our internal control measures will be effective in protecting us against various risks in our business. See “Risk Factors — Risks Relating to Our Business and Industry — We may not be able to detect and prevent fraud, bribery or other misconduct committed by our employees, customers or other third parties” and “Risk Factors — Risks Relating to Our Business and Industry — Our risk management and internal control systems may not fully protect us against various risks inherent in our business.”

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OVERVIEW

Our Company was established by our promoters with approval from the Shandong Economic System Reform Committee (山東省經濟體制改革委員會) and the People’s Government of Shandong Province (山東省人民政府) in January 2000. As of the Latest Practicable Date, SDG Group Co. directly and indirectly holds approximately 56.11% of our total issued share capital. Immediately after completion of the Global Offering, assuming the Over-allotment Option is not exercised, SDG Group Co. will directly and indirectly hold approximately 47.69% of our total issued share capital. If the Over-allotment Option is fully exercised, SDG Group Co. will directly and indirectly hold approximately 46.64% of our total issued share capital. Upon completion of the Global Offering, SDG Group Co. will remain as our Controlling Shareholder.

BUSINESS DELINEATION AND COMPETITION

Our principal business focuses on gold exploration, mining, processing, smelting and sales. We also sell other metals extracted during the gold ore smelting process, such as silver, copper, iron, lead and zinc. The revenue generated from sales of gold accounted for above 99% of our total revenue during the Track Record Period. In light of the above, we consider that the sale of other metals is only ancillary to our gold mining operation and does not form part of our principal business.

Our Controlling Shareholder, SDG Group Co. (Shandong Province Gold Industry Company (山 東省黃金工業總公司) being its predecessor), was established in July 1996. As at the Latest Practicable Date, the registered capital of SDG Group Co. was RMB1,272,618,000. SDG Group is a large-scale state-owned conglomerate which was ranked 203rd among the Top 500 Enterprises in the PRC by the China Enterprise Confederation (中國企業聯合會) and China Enterprise Directors Association (中國企業家協會) in 2017. As of December 31, 2017, the consolidated total assets of SDG Group (including our Group) amounted to RMB103.6 billion based on PRC GAAP. During the three years ended December 31, 2015, 2016, 2017 and the three months ended March 31, 2018, the total revenue generated from sales of gold of SDG Group (excluding our Group) were approximately RMB2.35 billion, RMB 2.32 billion, RMB2.32 billion and RMB0.61 billion, respectively, and the net profit generated from sales of gold of which in the same periods were approximately RMB0.02 billion, RMB0.15 billion, RMB0.17 billion and RMB0.04 billion, respectively, based on PRC GAAP.Note

SDG Group (excluding our Group) engages in gold mining related operations, including geological exploration and mining of gold, gold processing, gold smelting and technical services, and production and sales of specialized equipment and supplies and construction materials for gold mines. The gold resources of SDG Group (excluding our Group) are mainly located in the PRC. As of the Latest Practicable Date, it owned 33 exploration permits with an aggregate of approximately 676.81 tonnes of gold resources and 16 mining permits with an aggregate of approximately 60.93 tonnes of gold resources (excluding one mining permit already leased to us) in the PRC, measured with reference to PRC mining appraisal methods and filed with relevant authorities, representing approximately 69.6 % of total gold resources held by our Group. All the exploration and mining permits owned by SDG Group (excluding our Group), except for a few exploration permits under

Note: The revenue of SDG Group (excluding our Group) generated from sales of gold during the Track Record Period included approximately RMB0.19 billion, RMB0.20 billion, RMB0.05 billion and RMB0.05 billion of gold purchased externally.

— 292 — RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDER which the gold mines are either with insignificant resources detected or subject to government approval for consolidation, have been under entrustment arrangement pursuant to the Equity Entrustment Framework Agreement to be entered into between our Company and SGD Group Co. The Company will disclose the status of the transfer of the exploration and mining permits in its interim and annual reports after the Listing, including but not limited to, any change in the list of entrusted targets, whether the relevant rights granted to the Company under the Non-competition Undertaking have been exercised, the status of boundary and capacity expansion (if applicable). Transfer of the exploration and mining permits from SDG Group to our Group is expected to commence by end of 2020 in general, however due to insignificant resources detected in certain gold mines, decision on whether to transfer the corresponding permits attached to such gold mines is expected to be made by the end of 2023 based on the then exploration results. Please see paragraph headed “Business Delineation and Competition — Exploration and Mining Permits Held by SDG Group (Excluding Our Group) in the PRC as of the Latest Practicable Date” in this section for details of such permits owned by SDG Group. In addition, SDG Group holds a controlling interest in Focus Minerals Limited (an Australian listed company principally engaged in gold exploration and production, stock code: FML) through SDG International. Focus Minerals Limited is owned as to approximately 49.53% by SDG International, and SDG International is owned as to approximately 65% by SDG Group Co.

Apart from the aforesaid gold mining related business (the “Retained Businesses”) that has not been included in our Group, SDG Group (excluding our Group) is also engaged in the following business:-

(a) other metals and non-ferrous metal mining businesses in the PRC and Mongolia;

(b) finance-related services;

(c) real estate development;

(d) general services, including electricity supply, office support, operation and management of properties, transportation, resort and ancillary recreation facilities; and

(e) investment holding in other businesses.

Notwithstanding that SDG Group engages in gold mining, which is to a certain extent overlapped with our principal business, we consider that the competition between our Group and the SDG Group is limited primarily due to the following reasons:-

(a) Certain Retained Businesses are not included into our Group due to, among other things, uncertain or limited resources and relevant regulatory matters, and it is currently not an opportune moment to include such Retained Businesses in our Group.

(b) We are in control of the core operation of the gold mining business of our Group and the SDG Group notwithstanding that we have overlapping gold mining related operations.

(c) The unique characteristics of gold as precious metal with monetary, finance and commodity attributes effectively limit the extent of competition between us and the SDG Group.

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(d) We have taken adequate measures and adopted effective mechanism so as to further delineate the business and minimize the competition between our Group and SDG Group, including entrustment arrangements and options to acquire the Retained Businesses.

As of March 31, 2018, SDG Group (excluding our Group) had over 100 subsidiaries. Set forth below are its key subsidiaries engaging in gold mining related business and certain information on their ownership of gold exploration and mining permits.

For details of the exploration and mining permits held by SDG Group (excluding our Group) in the PRC as of the Latest Practicable Date, please refer to the table headed “Exploration and Mining Permits Held by SDG Group (Excluding our Group) in the PRC” in this section.

SDG Non-ferrous

SDG Non-ferrous was established in the PRC in August 2008 with a registered capital of RMB1.15 billion and owned as to 95.65% by SDG Group Co and 4.35% as to Jinan Jinsui Jincai Investment LLP (濟南金穗金財投資合夥企業(有限合夥)). It is principally engaged in geological exploration, mining and beneficiations. Set out below are details of its key subsidiaries engaging in gold mining related business, as well as exploration and mining permits of gold mines held by them:

Hainan Shanjin Mining Co., Ltd. (海南山金礦業有限公司) was established in the PRC in May 2000 with a registered capital of approximately RMB60 million and is held as to 63% by SDG Non-ferrous. It is principally engaged in exploration of gold mines and gold processing. As of the Latest Practicable Date, it owned one exploration permit and one mining permit. The SDG Group intends to transfer the said mining permit to the Group once the relevant application for the expansion of boundary and capacity are approved by the authorities.

Hulunbuir Shanjin Mining Co., Ltd. (呼倫貝爾山金礦業有限公司) was established in the PRC in August 2001 with a registered capital of approximately RMB110 million and is held as to 75% by SDG Non-ferrous. It is principally engaged in exploration, processing and sales of mineral resources. As of the Latest Practicable Date, it owned one exploration permit, the resources of the gold mine under which are currently uncertain.

Songxian Shanjin Mining Co., Ltd. (嵩縣山金礦業有限公司) was established in the PRC in December 2008 with a registered capital of approximately RMB144 million and is held as to 70% by SDG Non-ferrous. It is principally engaged in mining, processing and sales of mining resources. As of the Latest Practicable Date, it owned one mining permit, which the SDG Group intends to transfer to the Group once the relevant application for the expansion of boundary and capacity are approved by the authorities.

SDG Resources Development

SDG Resources Development was established in December 2007 with a registered capital of RMB375 million and is a wholly-owned subsidiary of SDG Group Co. It is principally engaged in construction engineering, geological engineering and environmental geological surveys. Set forth below are particulars of its gold mining related subsidiaries:

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Qinghai Shanjin Mining Co., Ltd. (青海山金礦業有限公司) was established in the PRC in December 2009 with a registered capital of RMB180 million and is held as to 52% by SDG Resources Development. It is principally engaged in exploration, mining, processing and sales of gold mineral resources. As of the Latest Practicable Date, it owned one mining permit, the remaining resources of the gold mine under which is relatively limited. It also owns five exploration permits and the exploration process of gold mines under which has not yet been completed.

Shandong Gold Geological Mine Exploration Co., Ltd. (山東黃金地質礦產勘查有限公司) was established in the PRC in January 2003 with a registered capital of RMB50 million and is a wholly-owned subsidiary of SDG Resources Development. It is mainly engaged in exploration of solid minerals, geological drilling exploration and engineering surveying. As of the Latest Practicable Date, it owned a total of five exploration permits in Laizhou, Shandong Province. Among which the remaining gold mine exploration permit, namely “Xiling Village gold mine in Laizhou City, Shandong Province (exploration)” (山東省萊州市西嶺村金礦勘探) has relatively large measured resources, and it is expected that such exploration permit will be transferred to our Group subject to completion of the exploration process, evaluation on measured resources and approvals from relevant authorities.

Shanjin Western Geological and Minerals Exploration Co., Ltd. (山金西部地質礦產勘查有限公 司) was established in the PRC in June 1998 with a registered capital of RMB60 million and is a wholly-owned subsidiary of SDG Resources Development. It is principally engaged in geological surveying, development and operation of non-ferrous metals and other solid minerals. As of the Latest Practicable Date, it owned two exploration permits, the resources of gold mines under which are currently uncertain.

Shandong Jindi Mining Co., Ltd. (山東金地礦業有限公司) was established in the PRC in January 2006 with a registered capital of RMB5.88 million and is a wholly-owned subsidiary of SDG Resources Development. As of the Latest Practicable Date, it held one exploration permit and the resources of the gold mine under which are currently uncertain.

Qinghai Kunlun Gold Co., Ltd. (青海昆侖黃金有限公司) was established in December 2012 with a registered capital of RMB200 million. It is held as to 46% by SDG Resources Development and principally engaged in smelting and sales of gold. As of the Latest Practicable Date, it owned a smeltery in Qinghai Province (Qinghai Kunlun Smeltery) engaged in gold smelting business. For the difference of business conducted by Qinghai Kunlun Smeltery and Shandong Smeltery, please see paragraphs below in this section.

Qingdao Gold

Qingdao Gold was established in the PRC in February 2001 with a registered capital of approximately RMB120 million and is a wholly-owned subsidiary of SDG Group Co. It is principally engaged in exploration of mineral resources and operation and management of mining enterprises. One of its subsidiaries, Qingdao Jinxing Mining Co., Ltd. (青島金星礦業股份有限公司), is also engaged in gold mining related business.

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Qingdao Jinxing Mining Co., Ltd. was established in the PRC in July 1997 with a registered capital of approximately RMB32 million, and is held as to approximately 62.8% by Qingdao Gold. As of the Latest Practicable Date, it owned one mining permit and the revenue of the gold mine under such mining permit is relatively limited. The operating revenue of Qingdao Jinxing Mining Co., Ltd. for the three years ended December 31, 2015, 2016, 2017 and the three months ended March 31, 2018 were approximately RMB80.2 million, RMB115.9 million, RMB132.0 million and RMB34.42 million, respectively, based on PRC GAAP, representing less than 1% of our Group’s revenue in the corresponding period.

Jinchuang Group

Jinchuang Group was established in the PRC in March 1987 with a registered capital of RMB478 million. It has become a subsidiary of SDG Group Co. since 2012, and is held as to 65% by SDG Group Co. and as to 35% by Penglai State-owned Assets Administration Bureau. It is principally engaged in floating beneficiation of ores, gold smelting and underground mining of gold mine. As of the Latest Practicable Date, it owned three exploration permits and two mining permits. The SDG Group intends to transfer the said mining permits to the Group once the relevant applications for the expansion of boundary and capacity are approved by the authorities. Set forth below are the particulars of its gold mining related subsidiaries:

Shandong Jinchuang Co., Ltd. (山東金創股份有限公司)(“Jinchuang”) was established in the PRC in November 1993 with a registered capital of approximately RMB96 million, and is held as to approximately 79.12% by Jinchuang Group. It is principally engaged in mining and beneficiation of gold and silver. As of the Latest Practicable Date, it held six exploration permits and four mining permits. The SDG Group intends to transfer the said mining permits to the Group once the relevant applications for the expansion of boundary and capacity are approved by the authorities.

Fujian Province Zhenghe Hongkun Mining Co., Ltd. (福建省政和縣宏坤礦業有限公司) was established in May 2005 with a registered capital of RMB11.9 million, and it was an indirect wholly-owned subsidiary of Jinchuang Group and principally engaged in mining and sales of metals. As of the Latest Practicable Date, it owned two exploration permits and one mining permit. In addition, another indirect wholly-owned subsidiary of Jinchuang Group, Fujian Zhenghe Xiangluping Mining Co., Ltd. (福建省政和縣香爐坪礦業有限公司), owned one exploration permit as of the same date.

Shandong Jinchuang Gold and Silver Smelting Co., Ltd. (山東金創金銀冶煉有限公司) was established in March 2006 with a registered capital of RMB300 million. It is wholly owned by Jinchuang and principally engaged in smelting and processing of metals. As of the Latest Practicable Date, it owned a smeltery in Shandong Province (Penglai Smeltery) engaged in gold smelting business. For the difference of business conducted by Penglai Smeltery and Shandong Smeltery, please see paragraphs below in this section.

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Shandong Tiancheng Mining Co., Ltd. (山東天承礦業有限公司)

Shandong Tiancheng Mining Co., Ltd. was established in the PRC in August 1989 with a registered capital of RMB16.18 million and became a wholly-owned subsidiary of SDG Group Co. in 2012. It is principally engaged in mining and beneficiation of gold. As of the Latest Practicable Date, it owned two exploration permits and two mining permits.

Shandong Shengda Mining Co., Ltd. (山東盛大礦業有限公司) (“Shengda Mining”)

Shandong Shengda Mining Co., Ltd. was established in the PRC in May 2003 with a registered capital of RMB190 million and is a wholly-owned subsidiary of SDG Group Co. It is principally engaged in mining and beneficiation of gold and iron, and the majority of its assets is located in Laizhou, Shandong Province. As SDG Group Co. has decided to strategically withdraw from Shengda Mining and relevant withdrawal procedures are being reviewed by relevant authorities which is expected to be completed by end of 2018, thus Shengda Mining is not included in the entrustment arrangement between SDG Group Co. and us. As of the Latest Practicable Date, it owned two gold mine mining permits, both of which are currently in the process of being transferred to Shandong Tiancheng Mining Co., Ltd., another subsidiary of SDG Group, as these two mining permits are located in the same mine area with that of Shandong Tiancheng Mining Co., Ltd. The SDG Group intends to regroup the relevant mining permits and transfer to our Group thereafter.

Shandong Gold Laizhou Ludi Gold Mine Co., Ltd. (山東萊州魯地金礦有限公司)

Shandong Gold Laizhou Ludi Gold Mine Co., Ltd. was established in the PRC in July 2005 with a registered capital of RMB30 million and is a wholly-owned subsidiary of SDG Group Co. It is principally engaged in geological exploration of mineral resources. As of the Latest Practicable Date, it owned one exploration permit of “the gold mine at Nanlv — Xinmu District in Laizhou City, Shandong Province (exploration)” (山東省萊州市南呂—欣木地區金礦勘探), and the preliminary measured resources of the gold mine under which amount to 133.14 tonnes with reference to PRC mining appraisal methods, which is considered to be relatively large. It is anticipated that such exploration permit will be transferred to our Group subject to assessment and approval from relevant authorities upon completion of the exploration process.

Laizhou Xinyuan Mining Investment and Development Co., Ltd. (萊州鑫源礦業投資開發有限公 司)

Laizhou Xinyuan Mining Investment and Development Co., Ltd. was established in the PRC in October 2010 with a registered capital of RMB90.5 million and is wholly owned by SDG Group Co. Laizhou Ludi Mining Investment and Development Co., Ltd. (萊州魯地礦業投資開發有限公司)isa subsidiary owned as to 55% by Laizhou Xinyuan Mining Investment and Development Co., Ltd. and is principally engaged in exploration and development of mineral resources. As of the Latest Practicable Date, Laizhou Ludi Mining Investment and Development Co., Ltd. owned one exploration permit.

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SDG International

SDG International was incorporated in Hong Kong in November 1994 with a registered capital of RMB200 million. It is held as to 65% by SDG Group Co. and 35% by Shandong Province State-owned Assets Investment Holdings Co., Ltd. (山東省國有資產投資控股有限公司). It is principally engaged in import and export trading and consulting services. As of the Latest Practicable Date, SDG International held approximately 49.53% equity interests in Focus Minerals Limited. Focus Minerals Limited is a listed company on the Australian Securities Exchange (ASX) (stock code: FML) and was established in August 1978. Focus Minerals Limited is headquartered in the city of Perth in Australia and it is principally engaged in gold exploration and production. The majority of its assets are located in Coolgardie and Laverton in west Australia. SDG International does not directly hold any gold mine exploration permit or mining permit, and Focus Minerals Limited only conducts business within Australia currently. During the three years ended December 31, 2015, 2016 and 2017, the revenue of Focus Mineral Limited were AUD2.50 million, AUD2.06 million and AUD1.59 million, respectively, and the net loss of it were AUD(2.83 million), AUD(3.18 million) and AUD(4.81 million), respectively.

SDG Capital Management

SDG Capital Management was established in the PRC in November 2012 with a registered capital of RMB1.5 billion and is a wholly-owned subsidiary of SDG Group Co. It is principally engaged in asset management, sales and repurchase of precious metals, sales of non-ferrous metals and mineral resources.

We have close collaboration with SDG Capital Management in sales of self-produced gold. The research department of SDG Capital Management monitors trend of gold price, and it communicates regularly and makes trading plan for self-produced gold with the trading department of our Company. The finance departments of our Company and SDG Capital Management work together on the financing and supervision of hedging transactions of self-produced gold. Different with the treatment of self-produced gold of our Group that all goes to Shandong Smelting, most of the self-produced gold of SDG Group (excluding our Group) was first purchased by SDG Capital Management and then delegated to the trading department of our Company for centralised trading management since August 2016 according to the Administrative Measures for Sales of Self-produced Gold of SDG Group Co., Ltd. (Trial Implementation)《山東黃金集團有限公司自產黃金銷售管理辦法（試行） ( 》)(“Trial Measures”), which are internal measures adopted by SDG Group Co. for management on sales of gold. The trading department of our Company is in charge of making instructions and conducting specific transactions for sales of self-produced gold of SDG Group (excluding our Group) within an approximate range of sales volume authorized by the trading decision committee of SDG Group Co. in advance based on the prevailing and estimated gold prices. Such trading management service provided by our Group to SDG Group Co. was part of the Equity Entrustment Framework Agreement with no separate charge. Please refer to “Connected Transactions — Exempt Continuing Connected Transactions — 2. Equity Entrustment Framework Agreement” for details of the entrustment arrangement. The amounts of SDG Group’s self-produced gold traded by the Company during the three

— 298 — RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDER years ended December 31, 2015, 2016, 2017 and the three months ended March 31, 2018 were nil, approximately 0.96 tonnes, approximately 5.85 tonnes and approximately 0.71 tonnes, respectively. From January 1, 2018 to the Latest Practicable Date, the amount of SDG Group’s self-produced gold traded by the Company was approximately 3.462 tonnesNote.

SDG Capital Management has two major subsidiaries which are engaged in sales of gold, being SDG (Shenzhen) Gold Investment Development Co., Ltd. (山金金控（深圳）黃金投資發展有限公司) (“SDG Shenzhen”) and SDG (Shanghai) Precious Metals Investment Co., Ltd. (山金金控（上海）貴金 屬投資有限公司)(“SDG Shanghai”). The revenue of SDG Shanghai for the three years ended December 31, 2015, 2016, 2017 and the three months ended March 31, 2018 were approximately RMB27.59 million, RMB28.63 million, RMB78.91 million and RMB7.01 million, respectively, and the net profit of SDG Shanghai were RMB2.40 million, RMB1.88 million, RMB5.92 million and RMB0.42 million, respectively, in the same period based on PRC GAAP. SDG Shenzhen is principally engaged in gold investment, equity investment, and sales of artwares and jewelries, while SDG Shanghai is mainly engaged in investment and sales of precious metals. The revenue of SDG Shenzhen for the three years ended December 31, 2015, 2016, 2017 and the three months ended March 31, 2018 were approximately RMB689 million, RMB599 million, RMB131 million and RMB13.88 million, respectively, and the net profit of SDG Shenzhen were approximately RMB117,000, RMB(4 million) (net loss), RMB92,000 and RMB14,200, respectively, in the same period based on PRC GAAP.

As of the Latest Practicable Date, one of the subsidiaries of SDG Capital Management, Jinchuang Gold (Shanghai) Co., Ltd. (金創黃金(上海)有限公司) maintained a trading seat at the Shanghai Gold Exchange for providing brokerage services to other third parties for sale of gold. Jinchuang Gold (Shanghai) Co., Ltd. was established in the PRC in September 2010 with a registered capital of RMB30 million and is principally engaged in provision of brokerage services for sales of metals. The operating revenue of Jinchuang Gold (Shanghai) Co., Ltd. for the three years ended December 31, 2015, 2016, 2017 and the three months ended March 31, 2018 were approximately RMB35.9 million, RMB58.0 million, RMB62.4 million and RMB10.4 million, respectively, based on PRC GAAP, representing less than 1% of our Group’s revenue in the same period.

Saved as disclosed above, as of the Latest Practicable Date, SDG Group Co. also directly owned two exploration permits. As to the mining permit of Jiaojia Gold Mine, which is leased to us and the revenue of which has been being consolidated into our Group, is also owned by SDG Group Co. According to the unaudited management financial statement of Shandong Gold Mining (Laizhou) Co., Ltd. Jiaojia Gold Mine, the revenue of Jiaojia Gold Mine for the three years ended December 31, 2015, 2016, 2017 and the three months ended March 31, 2018 were approximately RMB1.75 billion, RMB2.04 billion, RMB2.03 billion and RMB0.51 billion, accounting for approximately 4.51%, 4.17%, 3.97% and 3.58% of our total revenue, respectively. It is currently in the process of consolidation with the exploration permit in its deeper level and outer rim and applying for a new mining permit in relation to boundary and capacity expansion. The SDG Group intends to transfer the

Note: Gold produced by Songxian Shanjin Mining Co., Ltd., were traded by itself during the Track Record Period taking into account the high transportation cost for centralised trading management due to its remote location. Other than this, all of SDG Group’s self-produced gold were traded by the Company during the relevant time in the Track Record Period after implementation of the Trial Measures.

— 299 — RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDER mining permit of Jiaojia Gold Mine to the Group once the relevant consolidation and applications for the expansion of boundary and capacity are approved by the authorities. The transfer process of such mining permit to us is anticipated to commence in 2020. For the details of the mining permit of Jiaojia Gold Mine, please see “Business” and “— Independence From SDG Group — Operational Independence” in this Prospectus.

The estimated timing for the relevant exploration permits and mining permits to be transferred from SDG Group to our Group is determined taking into account the following circumstances:

(1) for exploration permits under which the mine areas have been found to have large mineral resources, such as Xiling mine area and Nanlv-Xinmu mine area, such exploration permits will be transferred to our Group upon completion of the exploration process, evaluation on measured resources and approvals from relevant authorities;

(2) for mining permits that mine areas under which are undergoing boundary and capacity expansion, the SDG Group intends to transfer such mining permits to the Group once the relevant application for the expansion of boundary and capacity are approved by the authorities; and

(3) for permits that mine areas under which are found to have insignificant resources based on the latest assessment, decisions on whether to transfer such permits are expected to be made by the end of 2023 based on the then exploration results of the relevant gold mines.

As to the method of transfer, the Group intends to have the relevant permits transferred from the SDG Group mainly by way of material assets restructuring or private placement. For mining and exploration permits that are expected to be transferred to us by 2020, it is expected that the transfer will take place through exercise of relevant rights entitled to us, such as call option and pre-emptive rights, pursuant to the Non-competition Undertaking between our Group and SDG Group. For details, please see “Non-competition Agreement and Undertakings” below in this section.

Pursuant to relevant regulatory provisions on state-owned assets management, including transfer of exploration and mining permits to listed companies, the transfer price shall be determined with reference to evaluation results conducted by independent third-party valuers and in accordance with legal procedures.

The major source of funding of the Company to purchase relevant exploration and mining permits from the SDG Group will be mainly from, including but not limited to, its own funds, banking facilities, bonds issued or to be issued and equity private placement.

Notwithstanding that the above-mentioned factors will be taken into account for transfer of relevant mining and exploration permits to us, our Group keep the right of refusal in all circumstances with respect to whether to accept the transfer in our own discretion. In case that conditions of transfer have been fulfilled and we decide to purchase the relevant mining and exploration permits from SDG Group Co. after Listing, we will comply with the relevant requirements for connected transactions in accordance with Chapter 14A of the Listing Rules.

— 300 — Exploration and Mining Permits Held by SDG Group (Excluding Our Group) in The PRC as of The Latest Practicable Date

Mining Permits SHAREHOLDER CONTROLLING OUR WITH RELATIONSHIP

Mineral resources Whether (gold content) under the based on the Equity Status of the latest Entrustment boundary and Name of assessment Status of mine Framework Estimated time of capacity No. mining permit Permit holder date Location development Agreement transfer to the Group expansion

Note 1 (after Expected to ן SDG Group Co. SDG Group Co. Please refer to Please refer to In commercial . . . .1 Jiaojia gold mine (山 Appendix III : Appendix III : production stage. (leased to the completion of the obtain a new 東黃金集團有限公司 Competent Competent Person’s Please refer to Group) boundary and capacity mining permit 焦家金礦) Person’s Report Report — AAI Report Appendix III : expansion and by end of 2018*

0 — 301 — — AAI Report Site 2 of this Competent Person’s consolidation with the Site 2 of this Prospectus Report — AAI Report exploration permit in Prospectus Site 2 of this item 17) Prospectus for details 2. . . . Shandong Tiancheng Shandong Total resources Jincheng Town, In commercial ߛ Note 1 N/A Mining Co., Ltd. Tiancheng and reserves: Laizhou, Shandong production stage. The Hongbu mine area Mining Co., 1.632 tonnes Province annual resources (山東天承礦業有限公 Ltd. reserves report has 司紅布礦區) been submitted to the Land and Resources Bureau of Laizhou City in January 2018

* Pursuant to the transfer agreement in respect of the mining permit of Jiaojia Gold Mine entered into between SDG Group Co. and our Company in May 2000, and a supplementary agreement in July 2004, SDG Group Co. agreed to transfer Jiaojia Gold Mine to us, including all of the assets, liabilities and personnel attached thereto at the time of transfer. The consideration of such transfer was set at RMB196,809,000, based on the appraised value of Jiaojia Gold Mine’s net asset as of April 30, 2004. To ensure our ability to continue to operate Jiaojia Gold Mine before the conditions of transfer to be fulfilled, we entered into a lease agreement with SDG Group Co. to lease the mining permit from SDG Group Co. for a term of 15 years (being the remaining permit term at the time of the lease agreement) in July 2004. For details of the transfer and its background information, please see section headed “Business — Our operations in China — Our Mining and Exploration Permit — Leased Mining Permit”. It is expected that such mining permit will be transferred to us in conjunction with material assets restructuring or private placement together with other assets of SDG Group Co. by the end of 2020. Mineral resources Whether (gold content) under the

based on the Equity Status of the SHAREHOLDER CONTROLLING OUR WITH RELATIONSHIP latest Entrustment boundary and Name of assessment Status of mine Framework Estimated time of capacity No. mining permit Permit holder date Location development Agreement transfer to the Group expansion

3. . . . Shandong Tiancheng Shandong Total resources Jincheng Town, In commercial ߛ Note 1 N/A Mining Co., Ltd. Tiancheng and reserves: Laizhou, Shandong production stage. The Dongji mine area (山 Mining Co., 1.495 tonnes Province annual resources 東天承礦業有限公司 Ltd. reserves report has 東季礦區) been submitted to the Land and Resources Bureau of Laizhou City in January 2018 4. . . . Shandong Shengda Shandong Total reserves Jincheng Town, In commercial ߛ Note 1 (after the N/A 0 — 302 — Mining Co., Ltd. Shengda Mining and resources: Laizhou, Shandong production stage. The consolidation with the Matang mine area Co., Ltd. 0.885 tonnes Province annual resources exploration permit in (山東盛大礦業有限公 reserves report has item 21) 司馬塘礦區) been submitted to the Land and Resources Bureau of Laizhou City in January 2018 5. . . . Shandong Shengda Shandong Total reserves Jincheng Town, In commercial ߛ Note 1 (after the N/A Mining Co., Ltd. Shengda Mining and resources: Laizhou, Shandong production stage. The consolidation with the Matang II mine area Co., Ltd. 1.039 tonnes Province annual resources exploration permit in (山東盛大礦業有限公 reserves report has item 21) 司馬塘二礦區) been submitted to the Land and Resources Bureau of Laizhou City in January 2018 Mineral resources Whether (gold content) under the

based on the Equity Status of the SHAREHOLDER CONTROLLING OUR WITH RELATIONSHIP latest Entrustment boundary and Name of assessment Status of mine Framework Estimated time of capacity No. mining permit Permit holder date Location development Agreement transfer to the Group expansion

6. . . . Shandong Gold Jinchuang Total reserves Yanshan area, In commercial ߛ Note 1* In the Jinchuang Group Group and resources: Daliuhang Town, production stage. The reconstruction Co., Ltd. Yanshan 4.640 tonnes Penglai, Shandong annual resources and expansion mine area (山東黃金 Province reserves report has process, to 金創集團有限公司燕 been submitted to the apply for the 山礦區) Land and Resources safety Bureau of Penglai City production in December 2017 license upon acceptance check by

0 — 303 — authorities

* The gold mine under such mining permit is in construction process and has not commenced production. The transfer of such mining permit can only be made after at least one year from production commencement. Mineral resources Whether (gold content) under the

based on the Equity Status of the SHAREHOLDER CONTROLLING OUR WITH RELATIONSHIP latest Entrustment boundary and Name of assessment Status of mine Framework Estimated time of capacity No. mining permit Permit holder date Location development Agreement transfer to the Group expansion

7. . . . Shandong Gold Jinchuang Total resources Yankou area, In commercial ߛ Note 1* In the Jinchuang Group Group and reserves: Daliuhang Town, production stage. The reconstruction Co., Ltd. Yankou 6.315 tonnes Penglai, Shandong annual resources and expansion mine area (山東黃金 Province reserves report has process, to 金創集團有限公司奄 been submitted to the apply for the 口礦區) Land and Resources safety Bureau of Yantai City production in December, 2017 license upon acceptance check by

0 — 304 — authorities 8. . . . Shandong Jinchuang Jinchuang Total resources Daxindian Town, In commercial ߛ Note 1 In the Co., Ltd. and reserves: Penglai, Shandong production stage. The reconstruction Shangkouwangli gold 3.939 tonnes Province annual reserves report and expansion mine area (山東金創 has been submitted to process, to 股份有限公司上口王 the Land and apply for the 李金礦區) Resources Bureau of safety Penglai City in production December, 2017 license upon acceptance check by authorities

* The gold mine under such mining permit is in construction process and has not commenced production. The transfer of such mining permit can only be made after at least one year from production commencement. Mineral resources Whether (gold content) under the

based on the Equity Status of the SHAREHOLDER CONTROLLING OUR WITH RELATIONSHIP latest Entrustment boundary and Name of assessment Status of mine Framework Estimated time of capacity No. mining permit Permit holder date Location development Agreement transfer to the Group expansion

9. . . . Shandong Jinchuang Jinchuang Total resources Daxindian Town, In commercial ߛ Note 1 In the Co., Ltd. Heijinding and reserves: Penglai, Shandong production stage. The reconstruction mine area (山東金創 1.712 tonnes Province annual resources and expansion 股份有限公司黑金頂 reserves report has process, to 礦區) been submitted to the apply for the Land and Resources safety Bureau of Penglai City production in December, 2017 license upon acceptance check by

0 — 305 — authorities 10. . . Shandong Jinchuang Jinchuang Total resources Daxindian Town, In commercial ߛ Note 1 N/A Co., Ltd. Heilangou and reserves: Penglai, Shandong production stage. The mine area (山東金創 8.300 tonnes Province annual resources 股份有限公司黑嵐溝 reserves report has 礦區) been submitted to the Land and Resources Bureau of Yantai City in December, 2017 11. . . Shandong Jinchuang Jinchuang Total resources Daliuhang Town, In commercial ߛ Note 1 Expected to Co., Ltd. Qigouyifen and reserves: Penglai, Shandong production stage. The obtain a new mine area (山東金創 2.500 tonnes Province resources reserves mining permit 股份有限公司齊溝一 report has been in 2019 分礦區) submitted to the Land and Resources Bureau of Penglai City in December, 2017 Mineral resources Whether (gold content) under the

based on the Equity Status of the SHAREHOLDER CONTROLLING OUR WITH RELATIONSHIP latest Entrustment boundary and Name of assessment Status of mine Framework Estimated time of capacity No. mining permit Permit holder date Location development Agreement transfer to the Group expansion

12. . . Qingdao Jinxing Qingdao Jinxing Total resources Jiudian Town, Pingdu, In commercial ߛ Note 1 In application Mining Co., Ltd. (青 Mining Co., and reserves: Shandong Province production stage. for a new safety 島金星礦業股份有限 Ltd. 5.718 tonnes production 公司) license in relation to capacity expansion 13. . . Hainan Shanjin Hainan Shanjin Total resources Ledong County, In commercial ߛ Note 1 In the process Mining Co., Ltd. Mining Co., and reserves: Hainan province production stage. The of boundary and Baolun gold mine in Ltd. 7.330 tonnes annual reserves report capacity 0 — 306 — Ledong County (海南 has been submitted to expansion 山金礦業有限公司樂 the Land and 東縣抱倫金礦) Resources Bureau of Ledong County, Hainan Province in January 2018 14. . . Songxian Shanjin Songxian Total resources Shuigou Village, In commercial ߛ Note 1 In application Mining Co., Ltd. (嵩 Shanjin Mining and reserves: Dazhang Town, Song production stage. The for a new safety 縣山金礦業有限公司) Co., Ltd. 11.239 tonnes County, Luoyang, dynamic reserves production Henan Province monitoring report has license in been approved by the relation to Land and Resources capacity Bureau of Luoyang expansion City, Henan Province in March 2017 Mineral resources Whether (gold content) under the

based on the Equity Status of the SHAREHOLDER CONTROLLING OUR WITH RELATIONSHIP latest Entrustment boundary and Name of assessment Status of mine Framework Estimated time of capacity No. mining permit Permit holder date Location development Agreement transfer to the Group expansion

15. . . Fujian Province Fujian Province Total resources Dayaokeng Village, In commercial ߛ Note 1 N/A Zhenghe Hongkun Zhenghe and reserves: Xingxi Town, Zhenghe production stage. The Mining Co., Ltd. Hongkun 1.740 tonnes County, Fujian reserves report has Dayaokeng gold Mining Co., Province been submitted to the mine (福建省政和縣 Ltd. Land and Resources 宏坤礦業有限公司大 Bureau of Zhenghe 藥坑金礦) County, Fujian Province in January 2018 16. . . Qinghai Shanjin Qinghai Shanjin Total resources Gouli Town, Dulan In commercial ߛ Note 2 N/A 0 — 307 — Mining Co., Ltd. Mining Co., and reserves: County, Qinghai production stage. The Guoluolongwa gold Ltd. 2.445 tonnes Province reserves report has mine in Dulan been submitted to the County (青海山金礦 Land and Resources 業有限公司都蘭縣果 Bureau of Haixi State, 洛龍窪金礦) Qinghai Province, in December 2017

Note 1: Expected to commence the transfer process in 2020. Note 2: Due to insignificant resources detected based on the latest assessment, decision on whether to transfer such permits is expected to be made by the end of 2023 based on the then exploration results. Exploration Permits

Mineral

resources Whether SHAREHOLDER CONTROLLING OUR WITH RELATIONSHIP (gold content) under the based on the Equity Status of the latest Entrustment boundary and Name of assessment Status of mine Framework Estimated time of capacity No. exploration permit Permit holder date Location development Agreement transfer to the Group expansion

Note 1 (after Expected to ן The gold mine at SDG Group Co. Resources: Laizhou, Shandong The exploration permit . . .17 outer rim and deep 15.19 tonnes Province has been applied for (under completion of the complete by end level of Jiaojia mine reservation. Relevant consolidation boundary and capacity of 2018* area in Laizhou, materials for boundary with the mining expansion and Shandong Province and capacity permit in item consolidation with the (exploration) (山東省 expansion have been 1) mining permit in item

0 — 308 — 萊州市焦家礦區深部 submitted to the 1.) 及外圍金礦勘探) authorities Note 2 N/A ן The outer rim of SDG Group Co. Not detected yet Sanshandao, Laizhou, The general . . .18 western Sanshandao Shandong Province exploration report has (lack of gold mine area in been submitted in resources) Laizhou, Shandong January 2015 Province (general exploration) (山東省 萊州市三山島金礦區 西部外圍勘探) 19. . . The gold mine at Laizhou Ludi Resources: Jincheng Town, Relevant environment ߛ (will be To decide on whether N/A Dongji - Nanlv Mining 85.54 tonnes Laizhou, Shandong reports have been included in to transfer by the end District in Laizhou, Investment and Province completed and are 2018 before the of 2023 after receipt Shandong Province Development pending review Listing) of the mining permit (general prospecting) Co., Ltd. and other licenses (山東省萊州市東季- 南呂地區金礦普查)

* It is expected that, after completion of consolidation with the mining permit of Jiaojia Gold Mine, such exploration permit will be transferred to us in conjunction with material assets restructuring or private placement together with other assets of SDG Group Co. by the end of 2020. Mineral resources Whether (gold content) under the

based on the Equity Status of the SHAREHOLDER CONTROLLING OUR WITH RELATIONSHIP latest Entrustment boundary and Name of assessment Status of mine Framework Estimated time of capacity No. exploration permit Permit holder date Location development Agreement transfer to the Group expansion

20. . . The gold mine at the Shandong Resources: East of Hongbu In the process of ߛ Note 1 N/A deep level and outer Tiancheng 19.37 tonnes Village in Jincheng exploration rim of Hongbu mine Mining Co., Town, Laizhou, area in Laizhou, Ltd. Shandong Province Shandong Province (exploration) (山東省 萊州市紅布礦區深部 及外圍金礦勘探)

0 — 309 — 21. . . The gold mine at the Shandong Not detected yet East of Matang The general ߛ Note 1 N/A deep level and outer Tiancheng Village in Jincheng prospecting report has rim of the Matang II Mining Co., Town, Laizhou, been submitted in mine area in Ltd. Shandong Province April 2013 Laizhou, Shandong Province (exploration) (山東省 萊州市馬塘二礦區深 部及外圍金礦勘探) 22. . . The gold mine at Shandong Gold Resources: Sanshandao, Laizhou, The geological ߛ Note 2 N/A Cangshang-Panjiawuzi Geological 1.01 tonnes Shandong Province exploration summary District in Laizhou, Mine reports have been Shandong Province Exploration Co., submitted in (exploration) (山東省 Ltd. September 2004 and 萊州市倉上-潘家屋子 October 2017 地區金礦勘探) respectively Mineral resources Whether (gold content) under the

based on the Equity Status of the SHAREHOLDER CONTROLLING OUR WITH RELATIONSHIP latest Entrustment boundary and Name of assessment Status of mine Framework Estimated time of capacity No. exploration permit Permit holder date Location development Agreement transfer to the Group expansion

23. . . The middle and deep Shandong Gold Resources: Hutouya Town, The resources reserves ߛ Note 2 N/A level of Liucun gold Geological 2.00 tonnes Laizhou, Shandong report has been mine at Laizhou, Mine Province submitted in April Shandong Province Exploration Co., 2016 (general exploration) Ltd. (山東省萊州市留村金 礦中深部詳查) 24. . . Zhaojia gold mine in Shandong Gold Not detected yet Pinglidian Town, The exploration ߛ Note 2 N/A

1 — 310 — Laizhou, Shandong Geological Laizhou, Shandong summary report has Province (general Mine Province been submitted in exploration) (山東省 Exploration Co., October 2016 萊州市趙家金礦詳查) Ltd. 25. . . Shangmajia gold Shandong Gold Note 3 Zhacun Town, The general ߛ Note 2 N/A mine in Laizhou, Geological Laizhou, Shandong prospecting report has Shandong Province Mine Province been submitted in (general exploration) Exploration Co., November 2017 (山東省萊州市上馬家 Ltd. 金礦詳查) 26. . . Xiling Village gold Shandong Gold Resources: Sanshandao, Laizhou, The general ߛ Note 1 N/A mine in Laizhou Geological 382.58 tonnes Shandong Province exploration report has City, Shandong Mine been submitted in Province Exploration Co., December 2016 (exploration) (山東省 Ltd. 萊州市西嶺村金礦勘 探) Mineral resources Whether (gold content) under the

based on the Equity Status of the SHAREHOLDER CONTROLLING OUR WITH RELATIONSHIP latest Entrustment boundary and Name of assessment Status of mine Framework Estimated time of capacity No. exploration permit Permit holder date Location development Agreement transfer to the Group expansion

27. . . The gold mine at Shandong Gold Resources: Jincheng Town, The exploration report ߛ Note 1 N/A Nanlv — Xinmu Laizhou Ludi 133.14 tonnes Zhuqiao Town, has been submitted in District in Laizhou Gold Mine Co., Laizhou, Shandong October, 2017 City, Shandong Ltd. Province Province (exploration) (山東省 萊州市南呂-欣木地區 金礦勘探)

—311— 28. . . The gold mine at Shandong Jindi Not detected yet Pinglidian Town, The exploration ߛ Note 2 N/A Dayinjia mine area Mining Co., Zhuqiao Town, summary report has in Laizhou City, Ltd. Laizhou, Shandong been submitted in Shandong Province Province November 2016 (general exploration) (山東省萊州市大尹家 礦區金礦詳查) 29. . . The gold mine at Jinchuang Not detected yet East Tuwu Village, The general ߛ Note 1 N/A Cishan mine area in Group Daliuhang Town, exploration report has Penglai, Shandong Penglai, Shandong been submitted in July Province province 2017 (exploration) (山東省 蓬萊市磁山礦區金礦 勘探) Mineral resources Whether (gold content) under the

based on the Equity Status of the SHAREHOLDER CONTROLLING OUR WITH RELATIONSHIP latest Entrustment boundary and Name of assessment Status of mine Framework Estimated time of capacity No. exploration permit Permit holder date Location development Agreement transfer to the Group expansion

30. . . The gold mine at Jinchuang Resources: 5.25 Yanzikuang Village, The general ߛ Note 1 N/A Shanglanzi mine area Group tonnes Daliuhang Town, exploration report has in Penglai, Shandong Penglai, Shandong been submitted in Province. (general Province January 2015 exploration) (山東省 蓬萊市上嵐子礦區金 礦詳查) 31. . . The gold mine at the Jinchuang Note 3 West Tuwu Villing, The general ߛ Note 1 N/A

1 — 312 — deep level of Tuwu Group Penglai, Shandong exploration report has gold mine area in Province been submitted in Penglai, Shandong April 2013 Province (general exploration) (山東省 蓬萊市土屋金礦區深 部金礦詳查) 32. . . Daningjia gold mine Jinchuang Not detected yet Xiaomenjia Town, The exploration ߛ Note 2 N/A in Penglai City, Penglai, Shandong summary report is Shandong Province Province expected to be (general exploration) submitted in July 2018 (山東省蓬萊市大寧家 金礦詳查) 33. . . The gold mine at Jinchuang Not detected yet Nanwang Street, The exploration ߛ Note 2 N/A Xinglvjia District in Penglai, Shandong summary report is Penglai City, Province expected to be Shandong Province submitted in July 2018 (general exploration) (山東省蓬萊市杏呂家 地區金礦詳查) Mineral resources Whether (gold content) under the

based on the Equity Status of the SHAREHOLDER CONTROLLING OUR WITH RELATIONSHIP latest Entrustment boundary and Name of assessment Status of mine Framework Estimated time of capacity No. exploration permit Permit holder date Location development Agreement transfer to the Group expansion

34. . . The gold mine at Jinchuang Not detected yet Xiaomenjia Town, The exploration ߛ Note 2 N/A Suijiajiao District in Penglai, Shandong summary report is Penglai City, Province expected to be Shandong Province submitted in July 2018 (general exploration) (山東省蓬萊市隋家窖 地區金礦詳查) 35. . . The Sunjiagou gold Jinchuang Not detected yet Daxindian Town, The exploration ߛ Note 2 N/A

1 — 313 — mine in Penglai City, Penglai, Shandong summary report is Shandong Province Province expected to be (general exploration) submitted in July 2018 (山東省蓬萊市孫家溝 金礦詳查) 36. . . The gold mine at the Jinchuang Note 3 Xiaomenjia Town, The resources reserves ߛ Note 2 In the process outer rim and deep Penglai, Shandong report has been of consolidation level of Qigouyifen Province submitted in May with the mining mine area in Penglai 2016 permit in item City, Shandong 11. The new Province mining permit (exploration) (山東省 is expected to 蓬萊市齊溝一分礦區 be issued in 深部及外圍金礦勘探) 2019. 37. . . The outer rim and Jinchuang Not detected yet Daxindian Town, In preparation of the ߛ Note 1 N/A deep level of Penglai, Shandong genera exploration Heilangou gold mine Province report in Penglai City, Shandong Province (general exploration) (山東省蓬萊市黑嵐溝 金礦深部及外圍詳查) Mineral resources Whether (gold content) under the

based on the Equity Status of the SHAREHOLDER CONTROLLING OUR WITH RELATIONSHIP latest Entrustment boundary and Name of assessment Status of mine Framework Estimated time of capacity No. exploration permit Permit holder date Location development Agreement transfer to the Group expansion

38. . . Baolun gold mine in Hainan Shanjin Resources: Haogangling, Baoyou The general ߛ Note 1 In the process Ledong County, Mining Co., 10.04 tonnes Town, Ledong County, exploration report has of consolidation Hainan Province Ltd. Hainan Province been submitted in with the mining (general exploration) March 2017 permit in item (reserved) (海南省樂 13. The new 東縣抱倫金礦詳查(保 mining permit 留)) is expected to be issued by the end of 2018 39. . . Yishan Forest Farm Hulunbuir Not detected yet Alihe Town , Oroqen The general ߛ Note 2* N/A 1 — 314 — gold mine in Oroqen Shanjin Mining Autonomous Banner, prospecting report has Autonomous Banner, Co., Ltd. Hulunbuir, Inner been submitted in Hulunbuir, Inner Mongolia December 2013 Mongolia (general exploration) (內蒙古 呼倫貝爾鄂倫春自治 旗伊山林場金礦詳查)

* The gold mine under such exploration permit has not been in operation for more than four years. Application for new exploration permit has been made as the old permit has already expired. The conditions for transfer of such exploration permit is subject to (1) obtaining renewed exploration permit, (2) submission of the latest exploration report to the authorities, (3) payment for relevant exploration and mining permits fees and completion of minimum exploration expenditure with supporting materials,and (4) submission of evaluation report relating to the exploration permit and confirmation from authorities on the evaluation results...... Mineral resources Whether (gold content) under the

based on the Equity Status of the SHAREHOLDER CONTROLLING OUR WITH RELATIONSHIP latest Entrustment boundary and Name of assessment Status of mine Framework Estimated time of capacity No. exploration permit Permit holder date Location development Agreement transfer to the Group expansion

40. . . The silver (gold) Fujian Zhenghe Note 3 Chengyuan Village, The general ߛ Note 2 N/A mine in Xiangluping Xiangluping Chengyuan Town, exploration report has mine area, Zhenghe, Mining Co., Zhenghe County, been submitted in July Fujian Province Ltd. Fujian Province 2013 (general exploration) (福建省政和縣香爐坪 礦區銀(金)礦詳查) 41. . . The gold mine at the Fujian Province Not detected yet Dayaokeng Village, N/A ߛ Note 1 N/A outer rim of Zhenghe Xingxi Town, Zhenghe Dayaokeng mine area Hongkun County, Fujian 1 — 315 — in Zhenghe County, Mining Co., Province Fujian Province Ltd. (general exploration) (福建省政和縣大藥坑 礦區金礦外圍地質詳 查) 42. . . The gold mine at the Fujian Province Not detected yet Dayaokeng Village, N/A ߛ Note 1 N/A deep level of Zhenghe Xingxi Town, Zhenghe Dayaokeng mine area Hongkun County, Fujian in Zhenghe County, Mining Co., Province Fujian Province Ltd. (general exploration) (福建省政和縣大藥坑 礦區金礦深部詳查) 43. . . The gold mine at Qinghai Shanjin Resources: 2.27 Gouli Town, Dulan The general ߛ Note 2 N/A Asiha (kere) District Mining Co., tonnes County, Qinghai prospecting report has in Dulan County, Ltd. Province been submitted in Qinghai Province December 2017 (general prospecting) (青海省都蘭縣阿斯哈 (可熱)地區金礦普查) Mineral resources Whether (gold content) under the

based on the Equity Status of the SHAREHOLDER CONTROLLING OUR WITH RELATIONSHIP latest Entrustment boundary and Name of assessment Status of mine Framework Estimated time of capacity No. exploration permit Permit holder date Location development Agreement transfer to the Group expansion

44. . . Walega gold mine in Qinghai Shanjin Resources: 2.78 Gouli Town, Dulan The general ߛ Note 2 N/A Dulan County, Mining Co., tonnes County, Qinghai prospecting report has Qinghai Province Ltd. Province been submitted in (general prospecting) December 2017 (青海省都蘭縣瓦勒尕 金礦普查) 45. . . The gold mine at Qinghai Shanjin Not detected yet Gouli Town, Dulan The general ߛ Note 2 N/A Daligigetang District Mining Co., County, Qinghai prospecting report has in Dulan County, Ltd. Province been submitted in Qinghai Province August 2017 1 — 316 — (general prospecting) (青海省都蘭縣達裡吉 格塘地區金礦普查) 46. . . Guoluolongwa gold Qinghai Shanjin Resources: Gouli Town, Dulan The general ߛ Note 2 N/A mine in Dulan Mining Co., 12.94 tonnes County, Qinghai exploration report has County, Qinghai Ltd. Province been submitted in Province (general March 2010 exploration) (青海省 都蘭縣果洛龍窪金礦 詳查) 47. . . Annage gold mine in Qinghai Shanjin Resources: Gouli Town, Dulan The general ߛ Note 2 N/A Dulan County, Mining Co., 1.67 tonnes County, Qinghai prospecting report has Qinghai Province Ltd. Province been submitted in (general prospecting) December 2017 (青海省都蘭縣按納格 金礦普查) 48. . . Dachaidan Hangwei Shanjin Western Note 3 Dachaidan Hangwei, The general ߛ Note 2 N/A Shengligou gold Geological and Haixi Prefecture, prospecting report has mine in Qinghai Minerals Qinghai Province been submitted in Province (general Exploration Co., December 2012 exploration) (青海省 Ltd. 大柴旦行委勝利溝金 礦詳查) Mineral resources Whether (gold content) under the

based on the Equity Status of the SHAREHOLDER CONTROLLING OUR WITH RELATIONSHIP latest Entrustment boundary and Name of assessment Status of mine Framework Estimated time of capacity No. exploration permit Permit holder date Location development Agreement transfer to the Group expansion

49. . . Dachaidan Hangwei Shanjin Western Not detected yet Dachaidan Hangwei, The general ߛ Note 2 N/A Hongdenggou west Geological and Haixi Prefecture, prospecting report has gold mine in Qinghai Minerals Qinghai Province been submitted in Province (general Exploration Co., September 2017 prospecting) (青海省 Ltd. 大柴旦行委紅燈溝西 金礦普查)

Note 1: Expected to commence the transfer process in 2020. 1 — 317 — Note 2: Due to insignificant resources detected based on the latest assessment, decision on whether to transfer such permits is expected to be made by the end of 2023 based on the then exploration results.

Note 3: The resources detected or reported based on the latest practicable assessment is equal to or less than 1 tonne. RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDER

We are of the view that the competition between our Group and the SDG Group is limited primarily due to the following:-

(1) Certain Retained Businesses are not included into our Group due to, among other things, uncertain or limited resources and regulatory matters, and it is currently not an opportune moment to include such Retained Businesses in our Group.

We believe that it may not be an opportune moment to include certain Retained Businesses into our Group having regard to the following:-

• certain gold mines under the exploration permits held by the SDG Group (excluding our Group) are still in the exploration process, and the gold resources of gold mines under these exploration permits are either uncertain or limited;

• the remaining resources of certain gold mines under the mining permits held by the SDG Group (excluding our Group) are limited;

• it is in the process of applying for the expansion of boundary and capacity with respect to certain exploration and mining permits, which are not available for transfer until updated certificate has been issued by the relevant authorities;

• from regulatory perspective in the PRC, the Measures for Administration of the Material Assets Restructuring of Listed Companies (2016 Revision)《上市公司重大資產重組管理 ( 辦法(2016修訂)》) promulgated by CSRC in 2016 stipulates that, among other things, PRC listed companies shall take into account the fair value and legal title of the assets and whether there is any legal obstacles in transferring or delivery of assets in the course of material assets restructuring. As certain exploration and mining permits held by the SDG Group (excluding our Group) are pending to be granted and/or acquisition of such exploration and mining permits is not in the economic interests in our Group, it may not be suitable for us to acquire such exploration and mining permits at this stage;

• Focus Minerals Limited has ceased production and has been at loss since 2013, and we currently do not intend to expand our operation to Australia; and

• SDG International, a subsidiary of SDG Group Co., may hold direct or indirect equity interests in some companies outside of the PRC, which are engaged in gold mining business. Except for interests in Focus Minerals Limited, all such investments are passive minority investments, nor SDG Group Co. and/or its subsidiaries will participate in the operation and management of such companies.

(2) We are in control of the core operation of the gold mining business of our Group and the SDG Group notwithstanding that we have overlapping gold mining related operations.

We are in control of the core operation of the gold mining business of our Group and the SDG Group, and do not rely on SDG Group in our gold mining operation.

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• Smelting and Refining: Both our Group and SDG Group possess smelting capacity, while only our Group possesses refining capacity. SDG Group has its own smelteries in Shandong Province (“Penglai Smeltery”) and Qinghai Province (“Qinghai Kunlun Smeltery”) and they mainly provide smelting services to external customers. Our subsidiary, SDG Smelting, being the only qualified smeltery of the SDG Group (including our Group) supplying standard gold bullion to the Shanghai Gold Exchange, renders smelting services and standard gold bullion refining services to both our Group and SDG Group. The existing smelting and refining capacity of Shandong Smeltery is sufficient to meet the business needs of our Group and the SDG Group, and in case if there is any shortage, Shandong Smeltery will satisfy the business needs of our Group with priority.

• Sales of gold: The trading department of our Company is in charge of making instructions and conducting specific transactions for sales of self-produced gold of SDG Group (excluding our Group) subject to final approval from the trading decision committee of SDG Group Co. Since August 2016, most of the self-produced gold of SDG Group (excluding our Group) was first purchased by SDG Capital Management and then delegated to the trading department of our Company for centralised trading management. Notwithstanding that SDG Shenzhen and SDG Shanghai, both being subsidiary of SDG Capital Management, are also engaged in sales of customized gold bullion and other investment gold products, their customers do not overlap with the major customers of our Group.

(3) The unique characteristics of gold as precious metal with monetary, finance and commodity attributes effectively limit the extent of competition between us and the SDG Group.

Gold is the common product of our business and that of SDG Group, with unique characteristics as precious metal with monetary, finance and commodity attributes. According to the F&S Report, gold demand in China is strong and domestic gold mine production is far from adequate to satisfy the total gold demand of consumers. For the year of 2017, the gold mine production in China was 426.1 tonnes while the gold consumption demand was 1,089.1 tonnes in China. Therefore, the competition between China gold producing and sales enterprises is not fierce as the market demand far exceeds supply.

In terms of target customers, Shanghai Gold Exchange has been our largest customer throughout the Track Record Period, and the revenue generated from sales on the Shanghai Gold Exchange accounts for approximately 95.5%, 78.4%, 72.8% and 64.6% of our total sales of gold for the years ended 2015, 2016, 2017 and for the three months ended March 31, 2018. Both our Group and the SDG Group have trading seats at the Shanghai Gold Exchange, while due to the scarcity and high liquidity of gold trading, we have not experienced any difficulties in sale of our gold products to the Shanghai Stock Exchange or other customers. During the three years ended December 31, 2015, 2016, 2017 and the three months ended March 31, 2018, the amounts of gold sold by SDG Group Co. to the Shanghai

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Gold Exchange were 7.54 tonnes, 7.70 tonnes, 8.83 tonnes and 2.01 tonnes, respectively, compared with 155.75 tonnes, 142.47 tonnes, 134.67 tonnes and 32.83 tonnes of gold sold by our Group to the Shanghai Gold Exchange, respectively. Given the total amounts of gold traded on the Shanghai Gold Exchange during the same periods, being approximately 7.32 kilotonnes, 5.20 kilotonnes, 3.83 kilotonnes and 1.04 kilotonnes, were far exceeding the amount sold by SDG Group Co. and us, we therefore believe that we do not compete with the SDG Group in sales of gold.

In terms of pricing, for standard gold bullions sold to the Shanghai Gold Exchange, they are also traded at an open market platform operated by the Shanghai Gold Exchange, according to prevailing market gold price. Other gold products are traded with reference to the prevailing gold prices. According to the F&S Report, gold prices in China have closely followed global gold prices, which are affected by a series of factors, including but not limited to global and political environment. The Company believes that it is difficult for market players to predict, and let alone to control, the prices of gold products sold to other market players or the Shanghai Gold Exchange.

(4) We have taken adequate measures and adopted effective mechanism so as to further delineate the business and minimize the competition between our Group and SDG Group, including entrustment arrangements and options to acquire the Retained Businesses.

In order to further delineate the business and minimize the competition between our Group and the SDG Group, we have adopted the following measures:-

• Historically, we have entered into various entrustment agreements with SDG Group Co. and some of its subsidiaries. We will enter into an equity entrustment framework agreement with SDG Group Co. and pursuant to which, SDG Group Co. will entrust us with the management and operation of certain of its PRC subsidiaries, which are, or through their subsidiaries, principally engaged in gold mining, non-ferrous mining or other mining related operations by way of equity entrustment. For details of the entrustment arrangements, please see “Connected Transactions” in this Prospectus. By entering into the aforesaid entrustment agreements, the management and operation of most of the Retained Businesses will be entrusted to us.

• In order to consolidate the control of our mining business and better manage the entrusted targets, we have established Qilu Mining Business Department (齊魯礦業事業部), China Mining Business Department (中華礦業事業部) and Resources Exploration Business Department (資源勘查事業部) in 2016. Qilu Mining Business Department is mainly responsible for the management of the mining operation of us and SDG Group in Shandong Province, China Mining Business Department is mainly responsible for the management of those businesses located outside of Shandong Province in the PRC, and Resources Exploration Business Department is mainly responsible for management of companies within SDG Group (including our Group) that are mainly engaged in geological exploration business.

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• Qilu Mining Business Department, China Mining Business Department and Resources Exploration Business Department conduct comprehensive operation management over entrusted targets, mainly including:

(a) making plans on annual production and operation, capital expenditure and major construction projects;

(b) conducting comprehensive management and assessment over production and operation performance on a monthly basis, monitoring and evaluating the implementation of annual plans;

(c) formulating annual and monthly purchase and sale plans and managing key procedures during purchase and sale process; and

(d) advising on the appointment of key personnel of the core operation and management team of the entrusted targets.

• SDG Group Co. and/or its subsidiaries have provided various non-competition undertakings to our Company in August 2002, February 2007 and November 2014, respectively. In order to further regulate the business delineation between our Group and SDG Group after listing of H Shares, SDG Group Co. will enter into a Non-competition Undertaking in favor of us. For details, please see “Non-competition Agreement and Undertakings” below.

COMPETING INTEREST OF DIRECTORS

As at the Latest Practicable Date, save for some of our Directors holding certain directorships and/or other senior management positions in SDG Group as detailed in “Management Independence” in this section, none of our Directors had any interests in any business, which competes or is likely to compete, either directly or indirectly with our principal business.

NON-COMPETITION AGREEMENT AND UNDERTAKINGS

SDG Group Co. and/or its subsidiaries has provided non-competition undertaking to our Company in August 2002, February 2007 and November 2014, respectively. In order to further regulate the business delineation between the Company and SDG Group after listing of H Shares, SDG Group Co. will enter into a Non-competition Undertaking in favor of us. Pursuant to the Non-competition Undertaking, save for the Retained Businesses and subject to the provisions under the Non-competition Undertaking, SDG Group Co. undertakes that:-

(a) none of SDG Group Co. and any entity in which it holds an interests as a controlling shareholder (as defined in the Hong Kong Listing Rules) (excluding any member of our Group) (the “Controlled Entities”) currently engage or will engage in gold mining business;

(b) SDG Group Co. will not compete with our Company, directly and indirectly, in gold mining business;

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(c) SDG Group Co. will procure all Controlled Entities not to compete with our Company, directly or indirectly, in gold mining business; and

(d) SDG Group Co. will not, and will procure any Controlled Entity not to, invest in a business opportunity that is primarily related to gold mining business and in which SDG Group Co. or a Controlled Entity has an actual or potential opportunity to invest or otherwise acquire an interest (the “Competing Business Opportunities”), or otherwise acquire an interest in a person or asset that as a material part of its business operates or holds assets in gold mining business.

Option for Competing Business Opportunities

SDG Group Co. has undertaken in the Non-competition Undertaking that:

(a) If SDG Group Co. or any Controlled Entity (as the case may be) identifies a Competing Business Opportunity, SDG Group Co. or any Controlled Entity (as the case may be) must notify the Company in writing prior to securing any definitive rights or interest in such Competing Business Opportunity and provide the Company with all information which is necessary for the Company to consider whether or not to acquire such Competing Business Opportunity. Upon receipt of such notice and all relevant information, the Company is entitled to pursue the Competing Business Opportunity for its own benefit, and the decision on whether or not to pursue such opportunity shall be made by our Independent Directors (as defined below) within 30 business days. In the event that the Company decides not to pursue the Competing Business Opportunity or otherwise fails to respond to the notice, SDG Group Co. or any Controlled Entity (as the case may be) may proceed to pursue the Competing Business Opportunity. SDG Group Co. is obliged to use its best efforts to procure that such opportunity is first offered to us on terms that are fair and reasonable; and

(b) SDG Group Co. shall procure any Controlled Entity to first offer to us any Competing Business Opportunities.

Call Option

SDG Group Co. has undertaken in the Non-competition Undertaking that it will grant the Company a call option to purchase any Competing Business Opportunity not taken up by us, and continue to be held by SDG Group Co. or any Controlled Entity (the “Relevant Interests”) and Retained Businesses, in whole or any part of which, at a fair, reasonable and mutually agreed price, subject to all applicable laws, and any shareholders’ agreement and articles of association of the Relevant Interests and the Retained Businesses.

The Company also has the right to purchase the relevant exploration and mining rights from SDG Group Co. and/or the Controlled Entities. SDG Group Co. shall and/or shall procure the Controlled Entities to, diligently address the licence issues of the mines in certain Retained Businesses (including but not limited to exploration rights, mining rights and property), and the Company shall carry out valuation on such interests after having determined to exercise the option to purchase, and negotiate the transfer price and other conditions of transfer.

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Pre-emptive Rights

In the event that SDG Group Co. or the Controlled Entity (as the case may be) intends to sell the whole or any part of the Relevant Interests and the Retained Businesses to any party which has made an offer or proposes to purchase such interests, subject to all applicable laws, and any shareholders’ agreement and articles of association of the Relevant Interests and the Retained Businesses:

(a) SDG Group Co. shall or shall procure the Controlled Entity (as the case may be) to first give written notice (the “Pre-emptive Notice”);

(b) the Pre-emptive Notice shall specify the offer price or proposed purchase price (the “Offer Price”), provide all other material terms proposed by the independent third party (which in the Company’s reasonable opinion are or may be necessary for the Company to make an informed decision) for the Relevant Interests and the Retained Businesses and all information which is reasonably necessary for the Company to consider whether or not to acquire the Relevant Interests and the Retained Businesses; and

(c) the Company shall have the right to acquire the Relevant Interests or the Retained Businesses at the Offer Price by giving written notice to SDG Group or the Controlled Entity (as the case may be) (the “Purchase Notice”) of the exercise of such right within 21 business days from the date of giving of the Pre-emptive Notice (the “Pre-emptive Period”). Subject to the compliance with any applicable laws, upon giving of a Pre-emptive Notice, SDG Group Co. or the Controlled Entity (as the case may be) shall be bound to sell or procure the sale of, and the Company shall be bound to purchase or shall procure that a member of the Group shall purchase, the Relevant Interests and the Retained Businesses as soon as practicable.

In the event that the Company decides not to purchase the Relevant Interests or the Retained Businesses or otherwise fails to give a Purchase Notice within the Pre-emptive Period, SDG Group Co. or the Controlled Entity (as the case may be) may proceed to sell such Relevant Interests or the Retained Businesses concerned to the independent third party specified in the Pre-emptive Notice provided that such sale shall be completed within eighty business days of the expiration of the Pre-emptive Period and the terms of such sale, including the price, must not be more favorable than the terms stated in the Pre-emptive Notice. If there is any material adjustment to the status of transaction after the signing of the agreement (including but not limited to adjustment to the consideration of the transfer), SDG Group Co. or the Controlled Entity (as the case may be) shall seek approval from the Company again.

Through the arrangements contemplated under the equity entrustment framework agreement, details of which are set out in the section headed “Connected Transactions — Exempted Continuing Connected Transactions — 2. Equity Entrustment Framework Agreement” in this Prospectus, we will be able to closely monitor the performance of the Retained Businesses and therefore will be in a better position to determine whether we should acquire such gold mining related business or ascertain SDG Group’s intention to dispose of its interest in such business.

— 323 — RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDER

Our Directors (other than those Directors who are also directors and senior management of SDG Group) (the “Independent Directors”) will be responsible for reviewing and considering whether or not to exercise the above rights to acquire the Relevant Interests, Retained Businesses or Competing Business Opportunities. As of the Latest Practicable Date, there were five Independent Directors, namely Mr. Wang Peiyue, Mr. Tang Qi, Mr. Gao Yongtao, Ms. Hui Wing and Mr. Lu Bin.

Notwithstanding the undertakings provided by SDG Group Co. to the Company, pursuant to the terms of the Non-competition Undertaking:

(a) SDG Group Co. may retain the Retained Businesses currently operated or invested by it; and

(b) SDG Group Co. or its Controlled Entity may:

(i) hold and/or be interested in any shares or other securities in any company which engages or is involved in gold mining business, provided that such shares or securities are listed on a recognized stock exchange and the total shareholdings of SDG Group Co. and any of its Controlled Entity in such company does not exceed five percent of such listed company’s issued share capital and provided further that at all times there is a shareholder holding more shares in such listed company than the aggregate shareholdings of SDG Group Co. and any of its Controlled Entity;

(ii) hold shares or other securities in our Group; and/or

(iii) acquire and hold the Competing Business Opportunities pursuant to the Non-Competition Undertaking.

Pursuant to the Non-Competition Undertaking, SDG Group Co. is allowed to retain the Retained Businesses, and at the same time, SDG Group Co. has undertaken, among other things, not to compete and will procure all Controlled Entities not to compete with our Company, directly or indirectly, in gold mining business. The Company believes that SDG Group Co., in its capacity as the single largest controlling shareholder of Focus Materials Limited, through exercising voting rights in the directors’ meetings and/or shareholders’ meetings of Focus Mineral Limited, as appropriate, will use its best endeavours to procure Focus Minerals Limited not to engage in gold mining business in the regions where the Group operates its gold mining business, so as to avoid competition with the Group.

Further Undertakings of SDG Group Co.

SDG Group Co. has also further undertaken that:-

(a) upon a request by a committee formed by the Independent Directors, SDG Group Co. shall provide, and procure the Controlled Entities (if required by the Company) to provide, all required information to the Independent Directors to review whether SDG Group Co.’s or the Controlled Entity’s compliance with and enforcement of the Non-competition Undertaking and the performance of gold mining business held by SDG Group Co. or any of its Controlled Entity;

— 324 — RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDER

(b) SDG Group Co. shall provide, and procure the Controlled Entity (if required by the Company) to provide the Company all information in respect of its compliance with and enforcement of the Non-competition Undertaking necessary for the Company to disclose the decision made by the aforementioned committee in the Company’s continuous disclosure, or by way of announcement; and

(c) SDG Group Co. shall make and shall procure the Controlled Entity (if required by the Company) to make a declaration to confirm to the Company and the Independent Directors on the compliance of SDG Group Co. or the Controlled Entities (as the case may be) with the Non-competition Undertaking in the Company’s annual report including SDG Group Co. or the Controlled Entity (as the case may be) has offered priority to the Group in selecting any Competing Business Opportunity.

Termination

Pursuant to the Non-competition Undertaking, the non-competition period shall commence on date of listing of our H Shares on the Stock Exchange until its termination upon the occurrence of any of the following events (whichever is the earlier):

(a) the date on which the Controlling Shareholder and its subsidiaries, directly or indirectly, ceases to be a “controlling shareholder” of the Company within the meaning of the Hong Kong Listing Rules; or

(b) the date on which our H Shares cease to be listed on the Stock Exchange.

Taking into account (i) SDG Group Co. has entrusted us with management and operation of most of the Retained Businesses, (ii) SDG Group Co. has undertaken legally binding obligations under the Non-competition Undertaking, and has granted call option and pre-emptive rights to the Company in respect of the Retained Business, Relevant Interests and Competing Business Opportunities, and (iii) the detailed mechanism in place to monitor the compliance of the Non-competition Undertaking by SDG Group Co., all Directors (including the independent non-executive Directors) are of the view that (i) the Company has adopted appropriate and adequate measures to minimize the competition between our Group and the SDG Group; (ii) even in the worst case scenario that some of the exploration and mining permits set out from Page 253d to Page 253t are not transferred to our Group by 2020, the competition between our Group and the SDG Group will not be extreme as the gold mines under such permits will be properly managed by us.

INDEPENDENCE FROM SDG GROUP

We believe we can operate our business independently from SDG Group based on the following factors.

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Operational Independence

We have sufficient capital, assets, equipment, technology and human resources required for operating our business independently. Save for the lease of a mining permit of Jiaojia Gold Mine from SDG Group Co., we have obtained or are in the process of obtaining all necessary certificates and licenses required for existing business operations. For details of our certificate and licence status, please refer to the “Business” section.

We have the ownership of or the right to use all patents which are significant to our existing business operations. On December 8, 2017, we have entered into two trademark licensing agreements with SDG Group Co. and pursuant to which, SDG Group shall grant certain PRC trademarks at an aggregate consideration of RMB600,000 per annum and one logo which was under trademark application process in Hong Kong to us at a consideration of RMB100,000 per annum for a period of ten years. The trademark application in Hong Kong in relation to the aforesaid logo has been completed. For specific information on the patents and the licensed trademarks, please see “Statutory and General Information” in this Prospectus.

During the Track Record Period, as a reliable and stable supplier of our Group, SDG Group provides raw materials and relevant services to our Group at reasonable prices in accordance with terms not less favorable than those provided by independent third parties of product and service suppliers, pursuant to which we have entered into several purchase framework agreements with SDG Group Co. The Company and SDG Group Co. will enter into the Procurement and Sale Framework Agreement to govern the relevant transactions. For historical amounts of such transactions, please see “Connected Transactions” in this Prospectus. Except for some products and services with specific requirement for the geographic location or qualification of suppliers, such as power supply service, we can easily find third-party suppliers of products and services in the market to provide the products and services currently offered by SDG Group to us. Since most of our mining areas are located in remote regions, and the provision of electricity supply service requires national license, SDG Electricity Company (山東黃金電力公司), a wholly-owned subsidiary of SDG Group Co., is a holder of such license and it has laid a comprehensive power supply network in some mining areas operated by us. Therefore, we purchase electricity supply service for the Zhaolai Area, Shandong Province from SDG Group based on fair market price in our production process. Our Directors believe that purchasing electricity supply service from SDG Group is in our best interest, and so far there is no circumstances suggesting that SDG Group may unilaterally cease to provide service for us in future.

In conclusion, our Directors are of the view that we can operate our business independently from SDG Group.

Financial Independence

We have established a finance department independent of SDG Group Co., comprising independent financial personnel, to be responsible for performing the functions of financial control, accounting, reporting, group credit and internal control of the Company. We are able to make financial decisions independently according to our own business needs. We have also established an independent auditing system, a standardized financial accounting system and a comprehensive financial management system. Moreover, we open and manage bank accounts independently, and we

— 326 — RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDER have never shared any bank account with SDG Group Co. We have independent taxation registration according to the relevant laws, and make our tax payments independently according to the relevant PRC taxation laws and regulations, and we have never made any tax payment jointly with SDG Group Co. or any other entities controlled by it.

The Company has issued a five-year corporate bond for an amount of approximately RMB1,300 million on March 30, 2015. The net proceeds of the bond issuance were designated for repayment of bank loans and replenishment of liquidity of our Company. SDG Group Co. has provided unconditional and irrevocable joint liability guarantee on the bond issuance. We believe that an early discharge of the said guarantee would not be cost-effective.

In addition, we have established a PRC finance company (SDG Group Finance) with SDG Group Co., which is owned as to 70% by SDG Group Co. and 30% by our Company. The major source of funding of the SDG Group Finance comes from the registered capital upon incorporation and deposits taking. All deposits are sourced from members of the SDG Group (including our Group). Depending on the capital flow situation, SDG Group Finance would also utilize low-cost and short term financing (such as rediscount and inter-finance company lending) to replenish the liquidity. As of the Latest Practicable Date, SDG Group Financial provided a range of financial services to us as set out in “Connected Transactions”. Among which, we had 10 outstanding loans in an aggregate amount of RMB112.6 million with SDG Group Finance, and the details are set forth as follow:

Guarantee Loan Interest Loan Purpose Date of Loan Borrower Lender method amount rate tenure of loan (RMB million)

September 28, 2017 . Zhongbao SDG Group Credit 20 4.35% 1 year Working Mining Finance capital January 22, 2018 . . . Chaihulanzi SDG Group Credit 9.8 4.35% 1 year Working Gold Finance capital January 24, 2018 . . . Chaihulanzi SDG Group Credit 4.2 4.35% 1 year Working Gold Finance capital January 29, 2018 . . . Chaihulanzi SDG Group Credit 4.2 4.35% 1 year Working Gold Finance capital February 1, 2018 . . . Chaihulanzi SDG Group Credit 9.6 4.35% 1 year Working Gold Finance capital February 2, 2018 . . . Chaihulanzi SDG Group Credit 9.8 4.35% 1 year Working Gold Finance capital February 26, 2018 . . Chaihulanzi SDG Group Credit 3 4.35% 1 year Working Gold Finance capital May 15, 2018 ..... Xinhui SDG Group Credit 30 4.35% 1 year Working Mining Finance Capital June 4, 2018 ...... Xinhui SDG Group Credit 16 4.35% 1 year Working Mining Finance Capital June 11, 2018 ..... Chaihulanzi SDG Group Credit 6 4.35% 1 year Working Gold Finance capital

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Our Directors considered that the interest rate charged by SDG Group Finance on the loans provided to us was lower than the market interest rate for similar maturity, the amount of borrowings was relatively small and with short maturity. Therefore, keeping such short-term financial services will be more conducive to our production operations and will not affect the financial independence of our Company. As of the Latest Practicable Date, save as otherwise disclosed in this Prospectus, there was no other outstanding borrowings between our Group and SDG Group.

We have sufficient funds to operate our business independently, and we are able to obtain financing from third parties without relying on SDG Group or other connected persons to provide guarantee or security. In particular, we obtained two credit facilities with a total amount of RMB1.1 billion from commercial banks without relying on any assistance, guarantee or security from SDG Group during the Track Record Period. As at the Latest Practicable Date, the unutilized independent credit facilities of the Group is sufficient to cover the guarantees provided by SDG Group on the Company’s corporate bond and the outstanding loans from SDG Group Finance as mentioned above. Please see “Financial Information — General — Liquidity and Capital Resources” in this Prospectus. Specifically, we have established long-term business relationship with relevant commercial banks in the PRC, and we can obtain bank credit facilities from such commercial banks on competitive terms to finance our business and development needs.

We believe we are able to obtain new financing facilities and extend existing financing facilities from commercial banks on similar terms after the Listing, without provision of guarantee and security from SDG Group. Therefore, our Directors are of the view that the provision of financial services to us by SDG Group during the Track Record Period did not affect our financial independence from SDG Group, and our operations are financially independent from SDG Group.

Management Independence

The table below sets forth a summary of the major positions held by our Directors, supervisors and senior management in both our Company and SDG Group as of the Latest Practicable Date.

Positions held in Name our Company Positions held in SDG Group

Mr. Li Guohong (李國紅) Chairman, non-executive General manager of SDG Group Director Co.

Chairman of SDG Capital Management

Chairman of SDG International Capital Management Co., Ltd. (山金國際資產管理有限公司)

Chairman of SDG Futures Co., Ltd.

— 328 — RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDER

Positions held in Name our Company Positions held in SDG Group

Chairman of SDG Financial Holdings Group (HongKong) Co., Limited (山東黃金金控集 團（香港）有限公司)

Mr. Wang Peiyue (王培月) Executive Director, general Nil manager, financial controller

Mr. Tang Qi (湯琦) Executive Director, secretary Nil to the Board

Mr. Chen Daojiang (陳道江) Non-executive Director Director and general counsel of SDG Group Co.

Chairman of SDG Beijing

Chairman of SDG Venture Capital Co., Ltd.

Mr. Wang Lijun (王立君) Non-executive Director Director of SDG Group Co.

Chairman of Qingdao Gold Training Centre Co., Ltd. (青島 黃金培訓中心有限公司)

Ms. Wang Xiaoling (汪曉玲) Non-executive Director Deputy general manager, deputy chief accountant and manager of the finance department of SDG Group Co.

Chairwoman of SDG Group Finance

Mr. Li Xiaoping (李小平) Supervisor Member of standing committee of the Party Committee of SDG Group Co.

Mr. Liu Rujun (劉汝軍) Supervisor Nil

Ms. Duan Huijie (段慧潔) Supervisor Director of SDG Group Co.

Mr. Li Tao (李濤) Senior management Chairman of Jinchuang Group

Mr. He Jiping (何吉平) Senior management Director of SDG Beijing

— 329 — RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDER

Our Company and SDG Group have different management teams to be responsible for their respective daily affairs and management. All the Board members of our Company have sufficient experience in management and in the industry, and are capable to ensure the Board to perform its functions properly. We believe our Directors, supervisors and senior management members are capable of performing their duties in our Company, and the operational management of our Company can maintain independence from SDG Group for the following reasons:

(a) Mr. Wang Peiyue, an executive Director, general manager and financial controller of our Company, and Mr. Tang Qi, an executive Director, secretary to the Board and a joint company secretary, do not hold any position in SDG Group, and are capable to contribute sufficient time and efforts to manage the daily operations of our Group. The Chairman of our Company, Mr. Li Guohong, also the general manager of SDG Group Co., performs a non-executive capacity in our Company and mainly participates in the decisions on significant events, such as the overall development strategies of our Company and the formulation of corporate operation strategies as a Board member, and will not participate in the daily management of our Company;

(b) our Company is an A share listed company, we had formulated a comprehensive corporate internal control and management system in compliance with the requirements of the rules of the Shanghai Stock Exchange. The connected transaction system as set out in the Articles of Association has also made relevant provisions to avoid conflict of interest, including but not limited to the provisions that in the event of occurrence of conflict of interest, such as in considering resolutions relating to transactions with SDG Group, the Directors who have connected relationship with the SDG Group shall abstain from voting and their attendance will not be counted as quorum of the meeting;

(c) the Rules of Procedures of our Board contains provision in relation to avoidance of conflict of interests in the decision-making process, which includes (a) if the Board considers that the Director(s) has a material conflict of interests in the matter to be considered by the Board, the matter shall be resolved by way of a Board meeting (instead of by way of written resolutions), and the independent non-executive Directors (including their associates) not having a material interests in the transaction should attend the relevant Board meeting; and (b) the Director(s) shall abstain to vote in the circumstances where the listing rules applicable to the Company require;

(d) the Directors who held positions in SDG Group are our non-executive Directors who participate in the decisions on major issues such as the overall and strategic development of our Company and the formulation of corporate operation strategies in the capacity of a Board member. These non-executive Directors, as well as our supervisors, will not participate in the daily operational management of our Company. The officers responsible for the daily operation of our Company comprise the executive Directors and a group of senior management members who have extensive experience and long-term service with our Group;

— 330 — RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDER

(e) none of the Directors, supervisors and senior management members of our Company holds any equity interest in the shares of SDG Group; and

(f) each of the Directors understands his fiduciary duty as a director that requires him/her, among other things, to act in the best interest of the Company.

In light of the above, the Directors are of the view that our Company has our own management team which is capable of maintaining the independence of our Company from SDG Group, and supporting the independent operation of our Group.

— 331 — CONNECTED TRANSACTIONS

OVERVIEW

Upon completion of the Global Offering, SDG Group Co. will directly and indirectly hold approximately 47.69% of our total share capital (assuming the Over-allotment Option is not exercised). Therefore, SDG Group Co. is and will continue to be our Controlling Shareholder upon Listing. We have in the past conducted certain transactions with SDG Group Co. and its associates that will be our connected persons (as defined under Chapter 14A of the Hong Kong Listing Rules) upon Listing. Such transactions will continue after the Listing and will therefore constitute connected transactions or continuing connected transactions under the Hong Kong Listing Rules.

As our A Shares are listed on the Shanghai Stock Exchange, we will continue to be subject to and regulated by the SSE Listing Rules and other applicable laws and regulations in the PRC insofar as our A Shares remain listed. The requirements of the Hong Kong Listing Rules in relation to connected transactions are different from those of the SSE Listing Rules. In particular, the definition of connected person under the Hong Kong Listing Rules is different from the definition of related party under the SSE Listing Rules. Therefore, a connected transaction under the Hong Kong Listing Rules may or may not constitute a related party transaction under the SSE Listing Rules, and vice versa.

EXISTING ONE-OFF CONNECTED TRANSACTION

The following transaction were entered into between our Group and SDG Group prior to, but will be completed after the Global Offering.

Exploration Permit Transfer Agreement

On November 1, 2017, each of the Company, Linglong Mining and Yinan Mining entered into an exploration permit transfer agreement with SDG Group Co. respectively, pursuant to which SDG Group Co. agreed to transfer three exploration permits, namely “the gold mine exploration in deeper and peripheral areas of Xincheng Mine Area, Laizhou, Shandong Province (exploration)” (山東省萊 州市新城礦區外圍及深部金礦勘探), “the gold mine at the deep level of Linglong Mining Area, Zhaoyuan, Shandong Province (exploration)” (山東省招遠市玲瓏礦區深部金礦勘探) and “the gold mine at Tongjing Jinchang Mine Area, Yinan, Shandong Province (general exploration)” (山東省沂南 縣銅井—金場礦區金礦詳查) to the Company, Linglong Gold Mine and Yinan Gold Mine, for a consideration of RMB569,848,000, RMB79,637,200 and RMB5,397,700, respectively (the “Consideration”). Both Linglong Mining and Yinan Mining are wholly-owned subsidiaries of the Company.

As at the Latest Practicable Date, the Company, Linglong Mining and Yinan Mining has paid RMB398,893,600, RMB56,000,000 and RMB3,778,390, respectively, representing approximately 70% of the Consideration. It is anticipated that, by the first half of 2019, the remaining 30% of the Consideration will be paid by internal funding and the transfer will be completed. As the transfer of the exploration permits, being the last milestone for the Company to pay the Consideration pursuant to the abovementioned transfer agreement, has not yet been completed, the remaining 30% of the Consideration is not treated as payables by the Company to the related parties in the Track Record Period.

— 332 — CONNECTED TRANSACTIONS

CONTINUING CONNECTED TRANSACTIONS

Summary of Our Continuing Connected Transactions

Applicable Hong Kong Nature of transactions Listing Rules Waiver sought Exempt continuing connected transactions • Trademark License Agreements 14A.76(1)(a) N/A • Equity Entrustment Framework Agreement 14A.76(1)(a) N/A • Property Leasing Framework Agreement 14A.76(1)(a) N/A • Processing Contracting Agreement 14A.76(1)(a) N/A • Mining Right Leasing Agreement 14A.76(1)(a) N/A • Guarantee from SDG Group Co. 14A.90 N/A Partially-exempt continuing connected transaction • Gold External Purchase Agreement 14A.101 announcement requirement Non-exempt continuing connected transactions • Procurement and Sale Framework Agreement N/A announcement and independent Shareholders approval requirement • Financial Services Framework Agreement N/A announcement and independent Shareholders approval requirement

EXEMPT CONTINUING CONNECTED TRANSACTIONS

Set forth below are details of various continuing connected transactions between us and our connected persons. These transactions are entered into on normal commercial terms (or commercial terms that are better to us) in the ordinary and usual course of our business. Our Directors currently expect that the highest applicable percentage ratio calculated for the purpose of Chapter 14A of the Hong Kong Listing Rules will not exceed 0.1% on an annual basis. Under Rule 14A.76(1)(a) of the Hong Kong Listing Rules, the following transactions will be exempt from the reporting, announcement, annual review and independent shareholders’ approval requirements under Chapter 14A of the Hong Kong Listing Rules.

— 333 — CONNECTED TRANSACTIONS

1. Trademark License Agreements

Parties:

SDG Group Co. and the Company

Principal terms:

In anticipation of the licensing of trademarks between our Company and SDG Group upon Listing, the Company entered into a PRC trademark license agreement (the “PRC Trademark License Agreement”) and a Hong Kong trademark license agreement (the “Hong Kong Trademark License Agreement”) with SDG Group Co. on December 8, 2017, pursuant to which, SDG Group Co. granted to our Company the rights to use certain trademarks/logo at an aggregate consideration of RMB600,000 per annum and RMB100,000 per annum respectively. Pursuant to Rule 14A.81 of the Hong Kong Listing Rules, the aggregate amount of license fees payable under the PRC Trademark License Agreement and the Hong Kong Trademark License Agreement for the years ending December 31, 2018, 2019, 2020 are expected to be RMB700,000, RMB700,000 and RMB700,000 respectively.

The terms of the trademark license agreements are both ten years commencing from the date of the agreements and will be renewable upon its expiration by mutual consent and negotiation between parties. The agreements are of a duration longer than three years as otherwise normally permitted for the connected transactions under the Hong Kong Listing Rules. Our Directors consider the term of the PRC Trademark License Agreement and the Hong Kong Trademark License Agreement to be consistent with normal commercial terms and can secure long-term trademark use rights for us, thus avoiding unnecessary disruptions to our business and enabling us to ensure stable business relationship with our major customers and continuity of our operations. As such, the Joint Sponsors are also of the view that it is consistent with normal business practice for us to enter into the PRC Trademark License Agreement and the Hong Kong Trademark License Agreement with a term of longer than three years.

For details of the licensed trademarks, please see “Statutory and General Information — Further Information About Our Business — B. Our Intellectual Property Rights — (a) Trademarks” in Appendix VIII in this Prospectus.

Reasons for the transaction:

During the Track Record Period, we had been using certain trademarks owned by SDG Group Co. in the normal and ordinary course of our business. We will continue using them after the Listing to maintain the consistency and continuity of the corporate image of our Group.

Historical amounts:

The transactions amounts in 2015, 2016, 2017 and the three months ended March 31, 2018 were nil, nil, nil and RMB0.18 million, respectively.

— 334 — CONNECTED TRANSACTIONS

2. Equity Entrustment Framework Agreement

Parties:

SDG Group Co. and the Company

Principal terms:

The Company has entered into an equity entrustment framework agreement with SDG Group Co. (the “Equity Entrustment Framework Agreement”), pursuant to which SDG Group Co. will entrust us with the management and operation of certain of its PRC subsidiaries, which are, or through their subsidiaries principally engaged in gold mining, non-ferrous mining, other mining related operations by way of equity entrustment. Such management and operation services, depending on different types of business conducted by each entrusted target, primarily include setting up management policies and operation guidelines, and centralizing the supervision and management under specific departments. Pursuant to the Equity Entrustment Framework Agreement, our Company will receive an annual service fee not less than RMB200,000 for each entrusted target in general, and would not share any profits generated or loss derived from the entrusted targets. The consideration of the centralized trading management service under the Equity Entrustment Framework Agreement will be included in the annual service fee with no separate charge.

Set out below are the entrusted PRC subsidiaries of SDG Group Co. under the Equity Entrustment Framework Agreement:

• Shandong Gold Resources Development Co., Ltd. (山東黃金資源開發有限公司)

• Shandong Gold Jinchuang Group Co., Ltd. (山東黃金金創集團有限公司)

• Shandong Tiancheng Mining Co., Ltd. (山東天承礦業有限公司)

• Shandong Gold Laizhou Ludi Gold Mine Co., Ltd. (山東萊州魯地金礦有限公司)

• SDG Electricity Company (山東黃金電力公司)

• SDG Group Yantai Design and Research Engineering Co., Ltd. (山東黃金集團煙臺設計研 究工程有限公司)

• SDG (Shanghai) Precious Metals Investment Co., Ltd. (山金金控（上海）貴金屬投資有限公 司)

• SDG (Shenzhen) Precious Metals Investment Co., Ltd. (山金金控（深圳）貴金屬投資有限 公司)

• Jinchuang Gold (Shanghai) Co., Ltd. (金創黃金(上海)有限公司)

— 335 — CONNECTED TRANSACTIONS

• Laizhou Ludi Mining Investment and Development Co., Ltd. (萊州魯地礦業投資開發有限 公司)

• Shandong Gold Senior Technical School (山東黃金高級技工學校)

• Hainan Shanjin Mining Co., Ltd. (海南山金礦業有限公司)

• Songxian Shanjin Mining Co., Ltd. (嵩縣山金礦業有限公司)

• XilinGol League Shanjin Aerhada Mining Co., Ltd. (錫林郭勒盟山金阿爾哈達礦業有限公 司)

• Chifeng Shanjin Hongling Non-ferrous Mining Co., Ltd. (赤峰山金紅嶺有色礦業有限責任 公司)

• Chifeng Shanjin Gold Silver Lead Co., Ltd. (赤峰山金銀鉛有限公司)

• Hulunbuir Shanjin Mining Co., Ltd. (呼倫貝爾山金礦業有限公司)

• XilinGol League Shanjin Baiyin Hubu Mining Co., Ltd. (錫林郭勒盟山金白音呼布礦業有 限公司)

• Qingdao Jinxing Mining Co., Ltd. (青島金星礦業股份有限公司)

• Qingdao Gold Lead and Zinc Development Co., Ltd. (青島黃金鉛鋅開發有限公司)

• Qingdao Gold Geological Exploration Co., Ltd. (青島黃金地質勘查有限公司)

The Equity Entrustment Framework Agreement will be valid for a term of three years from the Listing Date and will be renewable upon its expiration by mutual consent and negotiation between parties. Relevant associates of SDG Group Co. have entered into or will enter into separate entrustment agreement with our Company which will set out specific terms and conditions according to the principles and conditions provided in the Equity Entrustment Framework Agreement.

Pricing basis:

The fee for such entrustment services under the Equity Entrustment Framework Agreement will be determined based on the estimated human input considering the number and scale of the entrusted targets, and shall not be less than RMB200,000 per year for each entrusted target in general. For certain companies with subsidiaries engaged in gold mining business, relevant fees for the entrustment services to be provided have been adjusted up based on arm’s length negotiation between parties.

— 336 — CONNECTED TRANSACTIONS

Rights and powers of the Group:

Pursuant to the Equity Entrustment Framework Agreement, the Company has the right to conduct operation management to the entrusted targets and protect their orderly management. In performing its role, the Company is entitled to obtain true and complete information in relation to the entrusted targets, and exercise SDG Group member’s right as owner and shareholder of the entrusted targets (except punitive right and right to profit-sharing).

Reasons for the transaction:

SDG Group (including the entrusted targets but excluding our Group) retains certain gold mining businesses and related operations. For details, please see “Relationship with our Controlling Shareholder” in this Prospectus. In order to avoid potential competition from SDG Group and safeguard the interests of our Group and Shareholders, our Group would be placed in a better position to monitor the operation and management of the entrusted targets through the entrustment services and the exercise of rights and powers associated therewith. In addition, our Group has been granted pre-emptive rights over certain entrusted targets. Therefore, our Directors are of the view that the entrustment arrangement would provide our Group with a sound opportunity to integrate the businesses of the entrusted targets and our Group, and facilitate a smooth transfer of SDG Group Co.’s equity interests in the entrusted targets to our Group when an appropriate opportunity emerges.

In determining whether to exercise its pre-emptive rights under the Non-Competition Undertaking to acquire the entrusted targets, the Company would take into account, among other things, the progress of exploration, amount of reserves and resources, completeness of title certificates and profitability of the entrusted targets.

The Company will apply similar consideration in determining whether to terminate the relevant entrustment agreements. In the event that the Company chooses not to exercise its pre-emptive rights under the Non-Competition Undertaking and the SDG Group proceeds to cancel the mining permits, terminate the operation of the entrusted target or dispose it to third party, we will terminate the relevant entrustment agreement with that entrusted target.

Historical amounts:

The amounts of the transactions carried out in 2015, 2016, 2017 and in the three months ended March 31, 2018 were approximately RMB1.6 million, RMB0.8 million, RMB3.8 million and RMB0.9 million, respectively. The decrease in 2016 was primarily because we acquired Penglai Gold Mine and Guilaizhuang Gold Mine in October 2016 from SDG Group, and the increase in 2017 was primarily because of the expansion of scope under the entrustment arrangements.

— 337 — CONNECTED TRANSACTIONS

Annual caps and basis of caps:

The proposed annual caps for the transactions contemplated under the Equity Entrustment Framework Agreement for the three years ending December 31, 2020 are as follows.

Annual caps (RMB million) For the year ending December 31, 2018 2019 2020

Total ...... 5.0 5.0 5.0

In determining the proposed caps for the transactions contemplated under the Equity Entrustment Framework Agreement, we have taken into account the expansion of scope under the entrustment arrangements.

3. Property Leasing Framework Agreement

Parties:

SDG Group Co. and the Company

Existing leases:

We have in the past entered into several property leasing agreements with SDG Group, set forth below are leases that are expected to take effect or continue after the Listing.

Rent per year Size (RMB Effective Date Landlord Tenant (sq.m.) Use Term thousand)

September 2, 2010 . the Company SDG Group Co. 6,790.00 office 10 years 4,956.7

January 1, 2014 . . . SDG Group Co. Shandong Gold Mining 2,703.50 accommodation, annually 595.2 Co., Ltd. warehouse and renewable Xincheng Gold Mine others

November 30, 2015 . SDG Group Co. Shandong Gold Mining 319,196.93 business operation 3 years 1,950.3 (Laizhou) Co., Ltd. Jiaojia Gold Mine

November 2, 2015. . SDG Group Co. Shandong Gold Mining 266,794.28 industry, residence 3 years 1,776.3 Co., Ltd. Xincheng Gold Mine

November 28, 2016 . the Company SDG Group Finance 2,000.00 office 3 years 1,314.0

January 1, 2017 . . . the Company Shandong Gold Venture Capital 320.00 office annually 210.0 Co., Ltd. renewable

— 338 — CONNECTED TRANSACTIONS

Rent per year Size (RMB Effective Date Landlord Tenant (sq.m.) Use Term thousand)

December 18, 2017 . SDG Group Co. Yinan Mining 243,016.88 office, business approximately 597.0 operation 3 years

December 18, 2017 . SDG Group Co. Linglong Mining approximately office, business approximately 2,678.6 400,000.00 operation 3 years

December 18, 2017 . SDG Group Co. Shandong Gold Mining 301,732.91 office, business approximately 3,868.8 (Laizhou) Co., Ltd. operation 3 years Sanshandao Gold Mine

December 18, 2017 . SDG Group Co. Shandong Gold Mining 179,012.95 office, business approximately 1,808.7 (Laizhou) Co., Ltd. operation 3 years Jiaojia Gold Mine

Principal terms:

The Company has entered into a property leasing framework agreement with SDG Group Co. (the “Property Leasing Framework Agreement”), pursuant to which, certain members of SDG Group (except for our Group) and our Group will lease properties from each other.

The Property Leasing Framework Agreement will be valid for a term of three years upon the Listing Date and will be renewable upon its expiration. Relevant associates of both parties will enter into separate leases which will set out specific terms and conditions according to the principles and conditions provided in the Property Leasing Framework Agreement.

Pricing Basis:

The price for leases of properties under the Property Leasing Framework Agreement shall be determined based on appraised value made by independent appraisal agencies, or through arm’s length negotiations if no such appraised value is available.

Reasons for the transaction:

On one hand, during historical acquisitions of business or assets, the relevant leased properties that we have been occupying were not injected into our Group and remained under ownership of SDG Group Co. or its associates. Since the relocation of adjacent properties of our mines to other premises would result in unnecessary costs, we believe entering into the above transaction is more cost-effective and to the benefit of our business operation. On the other hand, SDG Group Co. and its associates also lease from us on certain properties that have already been purchased or acquired by our Group for the purpose of saving cost.

Historical amounts:

The amounts of property rental expenses incurred in 2015, 2016, 2017 and in the three months ended March 31, 2018 were approximately RMB4.3 million, RMB4.1 million, RMB4.2 million and RMB3.3 million, respectively.

— 339 — CONNECTED TRANSACTIONS

The amounts of property rental income generated in 2015, 2016, 2017 and in the three months ended March 31, 2018 were approximately RMB7.8 million, RMB7.0 million, RMB7.2 million and RMB1.8 million, respectively.

Annual caps and basis of caps:

The proposed annual caps for the transactions contemplated under the Property Leasing Framework Agreement for the three years ending December 31, 2020 are as follows.

Annual caps (RMB million) For the year ending December 31, 2018 2019 2020 Property Rental Expenses ...... 16.0 19.0 23.0 Property Rental Income...... 9.5 11.4 13.7 Total ...... 25.5 30.4 36.7

In determining the proposed caps for the transactions contemplated under the Property Leasing Framework Agreement, we have taken into account the existing leases that are expected to take effect or continue after the Listing. The estimated increase in the property rental expenses from 2017 to 2018 is primarily due to the four new property leasing agreements dated December 18, 2017 entered into between SDG Group Co. and certain subsidiaries of the Company.

4. Processing Contracting Agreement

Parties:

Guizhou Southwest Gold and SDG Smelting

Principal terms:

SDG Smelting has entered into a processing contracting agreement (the “Processing Contracting Agreement”) and pursuant to which, SDG Smelting is rendering processing services to Guizhou Southwest Gold.

The Processing Contracting Agreement is valid for a term of one year and is renewable upon its expiration. The Processing Contracting Agreement currently in effect was entered into between Guizhou Southwest Gold and SDG Smelting on January 1, 2018 and will expire on December 31, 2018.

Pricing basis:

The processing fees under the Processing Contracting Agreement is determined with reference to the weight of raw materials and specification of final products.

— 340 — CONNECTED TRANSACTIONS

Reasons for the transactions:

SDG Smelting possesses the requisite qualification of gold processing and its products have been accredited by the Shanghai Gold Exchange. The processing services rendered under the Processing Contracting Agreement are in its ordinary course of business.

Historical amounts:

Set out below are the historical amounts of the processing fees received by SDG Smelting during the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2018.

Historical figures (RMB) For the three months ended For the year ended December 31, March 31, 2015 2016 2017 2018

Processing Fees...... 5,400.00 25,349.65 126,996.90 36,544.60

Proposed cap and basis of cap:

The proposed cap for the transactions contemplated under the Processing Contracting Agreement for the year ending December 31, 2018 is RMB150,000.

In determining the proposed cap for the transactions contemplated under the Processing Contracting Agreement, we have taken into account the transaction amount for the year ended December 31, 2017 and the three months ended March 31, 2018, and the trend of increased demands throughout the Track Record Period.

5. Mining Right Leasing Agreement

We entered into a mining right leasing agreement with SDG Group Co. on July 27, 2004, pursuant to which, SDG Group Co. leased a mining permit of Jiaojia Gold Mine to us at a consideration of approximately RMB5.4 million each year (the “Mining Right Leasing Agreement”). For detailed reasons for the transaction, please see “Business” in this Prospectus. The Mining Right Leasing Agreement took effect from the date of the agreement until successful transfer of such mining right from SDG Group Co. to us, which is expected to start in 2020. Having considered the facts and circumstances in relation to the entering into of this mining right leasing agreement, especially the revenue contributions of Jiaojia Gold Mine to the Group during the Track Record Period and its estimated mining capacity in the future, our Directors are of the opinion that it is necessary for such agreement to be of a longer term than three years, and our Directors and the Joint Sponsors are also of the view that it is not uncommon business practice for this type of mining right leasing agreement to be of a duration of more than three years. The annual mining right leasing fee was determined based on appraised value, which is made by independent appraisers and confirmed by the MLR, divided by the estimated LOM.

— 341 — CONNECTED TRANSACTIONS

6. Guarantee from SDG Group Co.

The Company has issued a five-year corporate bond for an amount of approximately RMB1,300 million on March 30, 2015. The coupon rate for the corporate bond is 4.8%. The net proceeds of the bond issuance were designated for repayment of bank loans and replenishment of liquidity of our Company. SDG Group Co. has provided unconditional and irrevocable joint liability guarantee on the bond issuance. No commission is payable by us and no security has been provided over the assets of any member of our Group in relation to the guarantee.

The bond issuance has provided us with a separate financing channel and we do not intend to discharge the aforementioned guarantee prior to full redemption or repayment of the bonds. Further, it would be unduly burdensome or commercially undesirable to amend the terms of the bond documents. We have sufficient funds to operate our business independently, and we are able to obtain other financing from third parties without relying on SDG Group or other connected persons to provide guarantee or security.

Our Directors are of the view that the aforementioned guarantee, being a form of financial arrangement (as defined in the Hong Kong Listing Rules) provided by SDG Group Co. for our benefit, has been conducted on normal commercial terms or better where no security over our assets was granted in respect of such financial arrangement provided by SDG Group Co. Accordingly, such guarantee is fully exempt from the reporting, announcement and independent shareholders’ approval requirements pursuant to Rule 14A.90 of the Hong Kong Listing Rules.

PARTIALLY EXEMPT CONTINUING CONNECTED TRANSACTION

The following transaction has been entered into with connected person at the subsidiary level during the ordinary course of our business on normal commercial terms where our Directors have approved the transactions and our independent non-executive Directors have confirmed that the terms of the transactions are fair and reasonable, the transaction is on normal commercial terms and in the interests of our Company and our Shareholders as a whole. Under Rule 14A.101 of the Hong Kong Listing Rules, the transaction will be subject to the reporting, annual review and announcement requirements but exempt from the independent shareholders’ approval requirement.

Gold External Purchase Agreement

Parties:

Chen Kaiyuan (陳開元) and SDG Smelting.

Chen Kaiyuan owns 92% equity interests in Guizhou Southwest Gold Operation Center Co., Ltd. (貴州西南黃金經營中心有限公司)(“Guizhou Southwest Gold”), and in turn holds 25% of our subsidiary, Shenzhen SDG Precious Metal. Chen Kaiyuan is also a director of Shenzhen SDG Precious Metal.

Principal terms:

SDG Smelting has entered into gold purchase and sale agreements with Chen Kaiyuan and his associate, Guizhou Southwest Gold in relation to purchase and sale of gold on an annual basis (the “Gold External Purchase Agreement”), pursuant to which, SDG Smelting is purchasing gold (other than standard gold bullion and other gold products restricted by the PRC) from Chen Kaiyuan.

— 342 — CONNECTED TRANSACTIONS

The Gold External Purchase Agreement is valid for a term of one year and is renewable upon its expiration. The Gold External Purchase Agreement currently in effect was entered into between Chen Kaiyuan and SDG Smelting on January 22, 2018 and will expire on December 31, 2018.

Pricing basis:

The pricing of gold is quoted by SDG Smelting with reference to the latest purchase price and quantity of the corresponding products traded at Shanghai Gold Exchange, and to be confirmed by Chen Kaiyuan.

Reasons for the transactions:

SDG Smelting possesses the requisite qualification of gold processing and its products have been accredited by the Shanghai Gold Exchange. The purchase of gold contemplated under the Gold External Purchase Agreement is in its ordinary course of business.

Historical amounts:

Set out below are the historical amounts of the purchase of gold by SDG Smelting from Chen Kaiyuan and/or Guizhou Southwest Gold during the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2018.

Historical figures (RMB million) For the three months ended For the year ended December 31, March 31, 2015 2016 2017 2018

Purchase of gold ...... 5,936.22 110.89 106.64 Nil

Proposed cap and basis of cap:

The proposed cap for the transactions contemplated under the Gold External Purchase Agreement for the year ending December 31, 2018 is RMB150 million.

In determining the proposed cap for the transactions contemplated under the Gold External Purchase Agreement, we have taken into account the transaction amounts for the years ended December 31, 2016 and 2017 and the three months ended March 31, 2018, together with a buffer for certain sizable one-off gold purchase.

— 343 — CONNECTED TRANSACTIONS

NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS

1. Procurement and Sale Framework Agreement

Parties:

SDG Group Co. and the Company

Principal terms:

The Company has entered into a framework agreement for procurement and sale of supplies, products and services with SDG Group Co. (the “Procurement and Sale Framework Agreement”), pursuant to which, our Group may from time to time purchase from and sell to SDG Group Co. and/or its associates various types of supplies, products and services.

The Procurement and Sale Framework Agreement will be valid for a term of three years commencing from the Listing Date and will be renewable upon its expiration by mutual consent and negotiation between parties.

Relevant associates of both parties will enter into separate agreements which will set out the specific terms and conditions according to the principles and conditions provided in the Procurement and Sale Framework Agreement.

Pricing basis:

If government-prescribed/government guided price is applicable to any particular suppliers, products or services, such as electricity, gold and certain metals, such supplies, products or services shall be supplied at the applicable government-prescribed/government guided price. Where such price standard is not available, the price shall be determined based on public bidding price. If there is no government-prescribed/government guided price or public bidding price, the price shall be determined taking into account then prevailing market prices of the same or similar products or services. If there is no above-mentioned references available, the price shall be negotiated through arm’s length negotiations by the parties on normal commercial terms.

Reasons for the transaction:

Our business covers a broad range of gold exploration, mining, processing, smelting and sales. We therefore need various supplies, products as well as relevant services to support our business, some of which are supplied by SDG Group Co. and/or its associates in their ordinary and usual course of business. When we procure such supplies, products and services in our ordinary and usual course of business, we select suppliers and determine the relevant terms of procurements through negotiations based on the categories and scales of the procurement. We select the most suitable one among the suppliers available for selection, which comprise connected persons and Independent Third Parties,

— 344 — CONNECTED TRANSACTIONS taking into account their prices, quality of the supplies, payment terms, time required for provision of the products or services and other factors. We had selected SDG Group Co. and/or its associates as our suppliers during the Track Record Period in light of the suitability of the supplies, products or services they offered.

We have supplied various products and services to SDG Group Co. and/or its associates during the Track Record Period, and we are familiar with the specification and quality of such products and services required by them due to long-term cooperation. It helps our Group to effectively control the transaction risk and communication costs during the sales process and is beneficial to the business development of our Group. As our Shandong Smeltery is eligible to supply standard gold bullion to the Shanghai Gold Exchange, we from time to time provided SDG Group Co. and/or its associates with processing services to smelt and refine gold and silver. In addition, we also sold gold products and other metals extracted through gold smelting and refining process to SDG Group Co. and/or its associates, as well as relevant ancillary services or goods in the same period. The above-mentioned connected transactions are expected to be continuing after the Listing.

Historical amounts:

Set out below are the historical amounts of the relevant procurements by our Group from SDG Group Co. and its associates for the supplies, products and services for the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2018.

Historical figures (RMB million) For the three months ended For the year ended December 31, March 31, 2015 2016 2017 2018 Procurement of electricity from SDG Electricity Company . . 367.73 368.86 367.94 60.03 Procurement of construction services for our PRC gold mines ...... 131.52 125.87 103.94 14.83 Procurement of processing services from smelteries of SDG Group...... 2.50 6.90 3.16 0.31 Procurement of gold (mainly including gold concentrate and dore´)...... 729.89 283.25 48.60 4.45 Others (including training fees, property management fees, etc.) ...... 18.64 11.62 29.57 1.98 Total ...... 1,250.28 796.50 553.21 81.60

— 345 — CONNECTED TRANSACTIONS

Set out below are the historical amounts of the relevant sales from our Group to SDG Group Co. and its associates for the supplies, products and services for the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2018.

Historical figures (RMB million) For the three months ended For the year ended December 31, March 31, 2015 2016 2017 2018 Provision of processing services by SDG Smelting . . 1.24 0.01 0.74 0.00 Sales of gold (mainly including standard gold bullion) ...... 550.29 692.91 136.19 21.15 Sales of other metals (including silver, lead and zinc)...... 1.29 59.38 23.01 0.67 Others (including utilities charge, outsourcing fees and disposal charge, etc.) ...... 2.50 1.65 4.43 1.08 Total ...... 555.32 753.95 164.37 22.90

Annual caps and basis of caps:

The proposed annual caps for the transactions contemplated under the Procurement and Sale Framework Agreement for the three years ending December 31, 2020 are as follows.

Annual caps (RMB million) For the year ending December 31, 2018 2019 2020

Procurement of electricity from SDG Electricity Company ...... 400.0 450.0 500.0 Procurement of construction services for our PRC gold mines ...... 140.0 140.0 140.0 Procurement of processing services from smelteries of SDG Group ...... 10.0 10.0 10.0 Procurement of gold (mainly including gold concentrate and doré) ...... 650.0 650.0 650.0 Others (including training fees, property management fees, etc.) ...... 50.0 50.0 50.0 Total Procurement of Supplies, Products and Services ...... 1,250.0 1,300.0 1,350.0

— 346 — CONNECTED TRANSACTIONS

Annual caps (RMB million) For the year ending December 31, 2018 2019 2020

Provision of Processing Services by SDG Smelting ...... 5.0 5.0 5.0 Sale of gold (mainly including standard gold bullion) ...... 675.0 725.0 775.0 Sale of other metals (including silver, lead and zinc)...... 60.0 60.0 60.0 Others (including utilities charge, outsourcing fees and disposal charge, etc.) ...... 10.0 10.0 10.0 Total Sale of Supplies, Products and Services. 750.0 800.0 850.0

In determining the proposed annual caps for the transactions contemplated under the Procurement and Sale Framework Agreement, we have considered, among other things, the following key factors:

• historical amounts, especially the maximum amounts during the Track Record Period, of the procurement and sale of supplies, products and services between members of our Group and SDG Group Co. and/or its associates;

• due to the volatility and uncertainties of market conditions and gold prices, the maximum historical amounts of procurement and sales of gold during the Track Record Period were taken into account when we determine the relevant annual caps for 2018 to 2020;

• the expected increase in our demand for the relevant supplies, products and services as we expand our business;

• the demand for the relevant supplies, products and services will depend on various factors including changes in the macro-economic environment and market condition;

• the expected increase in the average market price of the supplies, products and services in the three years ending December 31, 2020.

2. Financial Services Framework Agreement

Parties:

SDG Group Finance and the Company

— 347 — CONNECTED TRANSACTIONS

Principal terms:

The Company has entered into a financial services framework agreement with SDG Group Finance (the “Financial Services Framework Agreement”), pursuant to which SDG Group Finance will provide our Company and/or our associates with financial services, among others, (i) deposits and related services (the “Deposit Services”), (ii) loan and related financing services (the “Loan and Other Financing Services”), (iii) overdraft services, and (iv) other financial services.

Pursuant to the Financial Services Framework Agreement, SDG Group Finance will provide Deposit Services, Loan and Other Financing Services to our Group on the following principal terms:

(i) SDG Group Finance may absorb deposits from members of our Group, and the total sum of daily balance deposited by members of our Group shall be no more than RMB1 billion;

(ii) SDG Group Finance may grant members of our Group within an aggregate amount of RMB4 billion general credit; and

(iii) SDG Group Finance may provide us with settlement, guarantee, entrustment loans, corporate account overdraft service and other financial services.

The Financial Services Framework Agreement will be valid for a term from Listing Date to the Company’s 2018 annual general meeting and that the renewal of which will be subject to independent Shareholders’ approval. We will enter into separate financial services agreements with SDG Group Finance, which will set out the specific terms and conditions according to the principles and conditions provided in the Finance Services Framework Agreement.

Reasons for the transaction:

The benefits to the Company from relevant financial services provided by SDG Group Finance are as follows:

• the rates on loans and deposits offered by SDG Group Finance to the Company and its subsidiaries will be equal to or more favourable than those offered by PRC commercial banks;

• SDG Group Finance is regulated by the PBOC and China Banking Regulatory Commission (the “CBRC”) and provides its services in accordance with and in satisfaction of the rules and operational requirements of these regulatory authorities;

• the Group is expected to benefit from SDG Group Finance’s better understanding of operations of the Group which should allow expedient and efficient service provision. For instance, it is expected that loans from SDG Group Finance may be approved quicker than a commercial bank;

— 348 — CONNECTED TRANSACTIONS

• pursuant to the relevant regulations of the PBOC and the CBRC, the customers of SDG Group Finance are limited to entities within SDG Group (including our Group), thereby reducing the credit and operational risks that SDG Group Finance may otherwise be exposed to if its customers included other entities unrelated to SDG Group.

SDG Group Finance is a non-banking financial institution incorporated in the PRC in July 2013 and is subject to the Administrative Measures on Finance Companies within Group Enterprises《企 ( 業集團財務公司管理辦法》) and other relevant regulations promulgated by the PBOC and the CBRC. SDG Group Finance is 70% owned by SDG Group Co. and 30% owned by our Company. As of June 30, 2018, SDG Group Finance had total assets of approximately RMB6.58 billion, registered capital of RMB1 billion and with a capital adequacy ratio of 25.2%, and it is principally engaged in carrying on business approved by the CBRC pursuant to relevant applicable laws and regulations.

Basis of interest rates and handling fees

The Financial Services Framework Agreement provides that the interest rates applicable to the Deposit Services provided by SDG Group Finance to us shall be (i) on normal commercial terms; (ii) no less than benchmark interest rates for the same period published by the PBOC or interest rates for comparable deposit for the same period provided by other major domestic commercial banks; and (iii) no less than interest rates for comparable deposit for the same period applicable to other members of SDG Group provided by SDG Group Finance.

The interest rates for the Loan and Other Financing Services provided by SDG Group Finance to us under the Financial Services Framework Agreement shall be (i) on normal commercial terms and in compliance with applicable laws, rules and regulations; (ii) no higher than interest rates for comparable loans for the same period published by the PBOC; and (iii) no higher than rates for comparable loans for the same period obtained by members of the Group from other domestic financial institutions. No security over the assets of the Group will be granted in respect of the financial arrangement given by SDG Group Finance.

The handling fees for other financial services under the Financial Services Framework Agreement shall be (i) charged based on the relevant rates or standards published by the PBOC or the CBRC; or (ii) no higher than handling fees for similar financial services provided by other commercial banks to members of our Group, if there are no official rates or standards applicable.

Taking into account the no less favorable interest rates and other commercial benefits to our Group, we consider that the preservation of such financial arrangement with SDG Group Finance is beneficial to our Shareholders as a whole.

— 349 — CONNECTED TRANSACTIONS

Historical amounts:

Set out below are the historical amounts of the relevant financial services provided by the SDG Group Finance for the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2018.

Historical figures (RMB million) For the three months ended For the year ended December 31, March 31, 2015 2016 2017 2018

Maximum Daily Balance of 507.87 510.86 1,265.45 1,008.48 Deposit Services ...... Interest Income from Deposit 1.21 2.33 6.62 1.74 Services on an actual basis . Maximum Daily Balance of 190.00 283.42 374.09 334.20 Loan and Other Financing Services ...... Interest Expenses for Loan 6.64 2.02 5.39 2.33 and Other Financing Services on an actual basis Maximum Daily Balance of 200.00 230.00 300.00 420.00 Overdraft Services ...... Handling Fees and Other 0.45 0.22 0.44 0.04 Financial Services ......

— 350 — CONNECTED TRANSACTIONS

Proposed caps and basis of caps:

The proposed caps for the transactions contemplated under the Financial Services Framework Agreement for the year ending December 31, 2018 and the period from January 1, 2019 to the expiration date of the Financial Services Framework Agreement are as follows.

Proposed caps (RMB million) Period from Listing Date to the Company’s 2018 annual general meeting

Daily Balance of Deposit Services ...... 1,300 Interest Income from Deposit Services ...... 8.5 Daily Balance of Loan and Other Financing Services...... 420 Interest Expenses for Loan and Other Financing Services ...... 11 Balance of Overdraft Services ...... 600 Handling Fees and Other Financial Services...... 50

In determining the proposed annual caps for the transactions contemplated under the Financial Services Framework Agreement, we have considered, among others, the following key factors:

For proposed caps of the Deposit Services, we have considered various key factors including the maximum monthly-end balance of deposits and the cap set in the financial services framework agreements entered into with SDG Group Finance during the Track Record Period. In light of the Group’s overall development plan, mine merger and acquisition plan and steady year-by-year expansion of development scale, the scale of our Group’s funds is expected to show an increasing trend and the caps for deposits for the relevant period are determined on a year-by-year increase of approximately 20% based on the cap set in the Financial Services Framework Agreement.

For the proposed caps of the Loan and Other Financing Services, we have considered various key factors including the maximum monthly-end balance of loans and other financing during the Track Record Period as well as the favorable loan interest rates provided by SDG Group Finance to our Group. With the expected expansion of our Group’s operation and development scale in the future and with reference to the growth scale of loans from 2016 to 2017 (including the aggregated loans secured from SDG Group Finance and commercial banks), the caps for loans for the relevant period are determined on a year-by-year increase of approximately 30%.

For the proposed caps of the overdraft services, they are based on the expected overdraft credit line granted to us. As the overdraft credit line granted was RMB500 million in aggregate, comprising RMB300 million to our Company and RMB200 million to our subsidiary SDG Smelting, during the

— 351 — CONNECTED TRANSACTIONS

Track Record Period and is expected to be increased to RMB600 million, among which the overdraft credit line granted to SDG Smelting will be increased to RMB300 million in the first half of 2018, therefore the proposed caps of overdraft services in the relevant period are set at a total of RMB600 million.

Pursuant to the Financial Services Framework Agreement, SDG Group Finance also provides or will provide other financial services to our Group, of which financial services that were not yet carried out during the Track Record Period include insurance agent, entrusted loan, finance lease and etc. For insurance agent service, SDG Group Finance has obtained qualification to act as agent of insurance companies therefore it may provide the Company with insurance related services, such as purchase of insurance products, collection and payment of premium and assistance in claim settlement. For entrusted loan service, SDG Group Finance may offer, monitor and collect loans on behalf of the Company according to the instructions from the Company on entrusted loan object, purpose, amount, term and interest rate etc. For finance lease service, the Company as lessee may sell equipment to SDG Group Finance first and then lease from it for financing purpose. Taking into account of lower risks and efficiency of service provision from SDG Group Finance, it will be more favorable to our Company to procure such financial services from SDG Group Finance to meet our business needs in future. The proposed caps of other financial services for the relevant period are determined, with reference to the cash flow expected to be generated from other financial services which may be carried out in the relevant period.

With a view to safeguard the interests of our independent Shareholders, our Company will require SDG Group Finance to provide us with periodic reports on its liquidity in order for us to determine the suitability of engaging SDG Group Finance for the transactions contemplated under the Financial Services Framework Agreement from time to time.

WAIVER APPLICATION FOR PARTIALLY EXEMPT AND NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS

The Directors, including the independent non-executive Directors, consider that disclosure and approval of the partially exempt and non-exempt continuing connected transactions described above in full compliance with the Hong Kong Listing Rules would be impracticable and, in particular, would add unnecessary administrative costs to our Company. In addition, the Directors, including the independent non-executive Directors, believe that it is in the interest of our Company to continue to enter into these transactions with its connected persons described above after the Listing.

As a result, pursuant to Rule 14A.105 of the Hong Kong Listing Rules, we have applied for, and the Stock Exchange has granted, a waiver from strict compliance with the announcement requirement under Rule 14A.35 (in respect of the partially exempt and non-exempt continuing connected transactions) and the independent shareholders’ approval requirement under Rule 14A.36 of the Hong Kong Listing Rules (in respect of the non-exempt continuing connected transactions), subject to the condition that the annual transaction values shall not exceed their respective estimated annual caps (as stated above).

— 352 — CONNECTED TRANSACTIONS

In addition, the Directors confirm that our Company will comply with the applicable requirements under Chapter 14A of the Hong Kong Listing Rules and will immediately inform the Hong Kong Stock Exchange if any of the proposed annual caps set out above are exceeded, or when there is a material change in the terms of the transactions. Save for the continuing connected transactions for which a waiver has been granted, the Directors confirm that our Company will comply with the applicable requirements under Chapter 14A of the Hong Kong Listing Rules.

CONFIRMATIONS

Directors’ Confirmation

Our Directors (including our independent non-executive Directors) are of the view that (1) the partially exempt and non-exempt continuing connected transactions disclosed above have been and will be entered into in our ordinary and usual course of business, on normal commercial terms or better; (2) such partially exempt and non-exempt continuing connected transactions are fair and reasonable and in the interests of our Shareholders as a whole; and (3) the proposed annual caps in respect of such continuing connected transactions are fair and reasonable and in the interests of our Shareholders as a whole.

Joint Sponsors’ Confirmation

The Joint Sponsors are of the view that the partially exempt and non-exempt continuing connected transactions disclosed above for which a waiver is sought have been and will be entered into in our ordinary and usual course of business and is based on normal commercial terms or better that are fair and reasonable and in the interests of our Shareholders as a whole, and the proposed annual caps for the partially exempt and non-exempt continuing connected transactions are fair and reasonable and in the interests of our Shareholders as a whole.

— 353 — DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

DIRECTORS

The Board of Directors comprises 9 Directors, including 2 executive Directors, 4 non-executive Directors and 3 independent non-executive Directors. The following table sets out certain information relating to the Directors of the Company.

Date of Date of Appointment as Joining the Name Age Position Director Company Major Responsibilities

Li Guohong 47 Chairman, May 16, 2016 May 2016 Overseeing the overall (李國紅)...... non-executive and strategic Director development and investment planning

Wang Peiyue 56 Executive May 16, 2016 March 2009 Responsible for daily (王培月)...... Director production and operation management, administration, financial management, financing, budgeting, internal control and legal affairs

Chen Daojiang 47 Non-executive February 27, 2015 February 2015 Participating in (陳道江)...... Director decision making in respect of major issues of the Company

Wang Lijun 49 Non-executive May 20, 2014 January 2014 Participating in (王立君)...... Director decision making in respect of major issues of the Company

Wang Xiaoling 54 Non-executive May 16, 2016 July 2000 Participating in (汪曉玲)...... Director decision making in respect of major issues of the Company

— 354 — DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

Date of Date of Appointment as Joining the Name Age Position Director Company Major Responsibilities

Tang Qi 41 Executive December 8, 2017 July 2000 Responsible for the (湯琦) ...... Director daily work of the Board, the normative operation of the Company, capital operation, information disclosure and investor relations management

Gao Yongtao 55 Independent October 15, 2013 October 2013 Participating in (高永濤)...... non-executive decision making in Director respect of major issues of the Company and advising on the Company’s corporate governance, connected transactions, audit and remuneration of Directors and senior management

Hui Wing 42 Independent December 8, 2017 December 2017 Participating in (許穎) ...... non-executive decision making in Director respect of major issues of the Company and advising on the Company’s corporate governance, connected transactions, audit and remuneration of Directors and senior management

— 355 — DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

Date of Date of Appointment as Joining the Name Age Position Director Company Major Responsibilities

Lu Bin 41 Independent December 8, 2017 December 2017 Participating in (盧斌) ...... non-executive decision making in Director respect of major issues of the Company and advising on the Company’s corporate governance, connected transactions, audit and remuneration of Directors and senior management

EXECUTIVE AND NON-EXECUTIVE DIRECTORS

Mr. Li Guohong (李國紅), aged 47, was appointed as the chairman of the Board in May 2016 and was subsequently redesignated as a non-executive Director in December 2017. He is mainly responsible for the overall and strategic development, investment planning and human resources allocation. Mr. Li has more than nine years of experience in the gold mining industry.

Mr. Li served as a deputy general manager of SDG Group Co. from December 2008 to October 2015, the chairman of Shanghai Shengju Asset Operation and Management Co., Ltd. (上海盛鉅資產 經營管理有限公司) from July 2012 to March 2014, the chairman of SDG Group Finance from December 2012 to February 2015, the chairman of SDG (Shanghai) Precious Metals Investment Co., Ltd. from March 2013 to March 2014 and the general manager of SDG Capital Management from November 2012 to February 2016.

Mr. Li also holds the following positions within SDG Group (excluding our Group):

• general manager of SDG Group Co. (since February 2016);

• chairman of SDG Capital Management (since November 2012);

• chairman of SDG International Capital Management Co., Ltd. (山金國際資產管理有限公 司) (since July 2014);

• chairman of SDG Futures Co., Ltd. (山金期貨有限公司) (since August 2014); and

• chairman of Shandong Gold Financial Holdings Group (HongKong) Co., Limited (山東黃 金金控集團(香港)有限公司) (since July 2015).

— 356 — DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

Prior to joining SDG Group, Mr. Li served as the financial controller of Anhui Bengbu Cigarette Logistics Company (安徽省蚌埠煙草物流公司) from November 2002 to April 2005, in the financial and auditing department of Anhui Huangshan Cigarette General Factory (安徽黃山捲煙總廠) from April 2005 to July 2007 and the chief financial officer of China Tobacco Anhui Industrial Co., Ltd. Hefei Cigarette Factory (安徽中煙工業有限責任公司合肥捲煙廠). He also served as the chairman of the board of supervisors and a director of Shandong International Trust Co., Ltd. (山東省國際信託有 限公司) (currently known as Shandong International Trust Co., Ltd. (山東省國際信託股份有限公司), the H Shares of which were subsequently listed on the Hong Kong Stock Exchange (stock code: 1697)) from March 2010 to June 2012 and from August 2012 to May 2015 respectively, and a vice general manager of China Securities Inter-agency Quotation Systems Co., Ltd. (中証機構間報價系統股份有 限公司) from April 2015 to April 2016.

In addition, Mr. Li has served as a member of the CPPCC Standing Committee of Shandong Province from February 2017 to January 2018. Mr. Li has served as a vice president of Gold Association of Shandong Province (山東省黃金協會) since September 2016 and he is now the chairman of the committee of the Listed Company Association of Shandong Province (山東上市公司 協會). He was awarded the First Prize of Shandong Enterprise Management Modernization Innovation Results (山東省企業管理現代化創新成果一等獎) issued by Shandong Enterprise Management Modernization Innovation Results Review Committee (山東省企業管理現代化創新成果評審委員會) for two consecutive years in November 2009 and November 2010, awarded China Chief Financial Officers of the Year (中國總會計師年度人物獎) by the China Association of Chief Financial Officers (中國總會計師協會) in December 2010, recognized as Shanghai Leading Gold Talent (上海領軍金才) jointly granted by Shanghai Municipal Organization Department (上海市委組織部), the CPC Shanghai Financial Work Committee (中共上海市金融工作委員會), Shanghai Financial Services Office (上海市 金融服務辦公室), Shanghai Human Resources and Social Security Bureau (上海市人力資源和社會保 障局) and Shanghai Finance Bureau (上海市財政局) in December 2016, and granted the title of “2016 Golden Bull Fortune Leader of Chinese Listed Companies”「 ( 2016年度中國上市公司金牛創富領袖」) by China Securities Journal in August 2017. In April 2018, Mr. Li was awarded as “the Model Worker of Shandong Province” (山東省勞動模範) by CPC Shandong Provincial Committee and the People’s Government of Shandong Province.

Mr. Li graduated from University of Science and Technology of China in June 2001 majoring in business administration, and obtained a master’s degree in business administration in December of the same year and obtained a doctorate degree in accounting from Tianjin University in China in January 2015. He was recognized by Anhui Evaluation Committee of Senior Technical Positions in Account (安徽省會計專業高級技術職務評審委員會) as senior accountant in April 2008 and obtained the qualification of certified public accountant issued by Anhui Institute of Certified Public Accountants (安徽省註冊會計師協會) in December 2016 and recognized by Shandong Human Resources and Social Security Bureau (山東省人力資源和社會保障廳) as senior accountant (principal) in January 2018.

Mr. Wang Peiyue (王培月), aged 56, was appointed as a Director, the general manager and the financial controller of the Company in May 2016 and was subsequently redesignated as an executive Director in December 2017, mainly responsible for daily production and operation management, administration, financial management, financing, budgeting, internal control and legal affairs. Mr. Wang has more than 30 years of experience in the gold mining industry. In particular, he has very extensive working experience in the fields relating to exploration and exploitation.

— 357 — DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

Mr. Wang served as a deputy general manager of the Company from March 2009 to March 2011, mainly responsible for major project management, the general planner of the Company from December 2013 to May 2016, mainly responsible for formulation of strategic plans of the Company and the chairman of the board of supervisors of the Company from February 2015 to May 2016. He also served as a mine manager of Linglong Mining from September 1998 to July 2004.

Mr. Wang successively held various positions in SDG Group. In SDG Group Co., he successively served as an associate chief officer of production department from January 1987 to October 1990, a vice department head of the planning department from October 1990 to October 1997, the head of the production department from October 1997 to September 1998, a deputy chief engineer and director of the industry information development center from July 2004 to June 2006, a manager of the science and information technology department from June 2006 to September 2006, a deputy chief engineer from March 2011 to December 2012, the chief planner from December 2012 to September 2013 and an assistant to general manager and a manager of the strategic planning department from September 2013 to December 2013. Mr. Wang also served as an executive deputy general manager of SDG Real Estate Co., Ltd (山東黃金置業有限公司) from September 2006 to May 2008, and the chairman of SDG Real Estate Tourism Group Co., Ltd. (山東黃金地產旅遊集團有限公司) from May 2008 to March 2009.

Mr. Wang was the legal representative of SDG Facility Service Center (山東黃金設備服務公司), the business license of which was revoked in November 2009. (Note 1)

Mr. Wang was awarded the First Prize of Shandong Science and Technology Advancement (山 東省科技進步一等獎) issued by Shandong Science and Technology Advancement Award Review Committee (山東省科技進步獎評審委員會) in September 2001 and was recognized as Young and Middle-aged Expert with Outstanding Contributions in Shandong (山東省有突出貢獻中青年專家)by the People’s Government of Shandong Province in April 2004, and enjoyed State Council Special Allowance (國務院特殊津貼) since October 2004.

Mr. Wang graduated from Xi’an Institute of Metallurgical Construction (西安冶金建築學院)in China in July 1982 majoring in mining engineering with a bachelor’s degree, and graduated from Northeast China Engineering Institute (東北工學院) (currently known as Northeastern University (東北大學)) in China in January 1987 majoring in mining engineering, and received his master’s degree in March 1987. He obtained his doctorate degree in mining engineering from University of Science and Technology Beijing in China in January 2010. He received the title of engineering technology application researcher issued by Shandong Provincial Personnel Office (山東省人事廳)in January 2002.

Mr. Chen Daojiang (陳道江), aged 47, was appointed as a Director in February 2015 and was subsequently redesignated as a non-executive Director in December 2017. He mainly participates in decision making in respect of major issues of the Company. Mr. Chen has more than 20 years of experience in finance and investment area.

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Mr. Chen has been serving as a director and the general counsel of SDG Group Co. since June 2013 and January 2014, respectively. He has also served as the chairman of SDG (Beijing) Industry Investment Co., Ltd. (山東黃金 (北京) 產業投資有限公司), a subsidiary of SDG Group Co., since December 2015 and the chairman of SDG Venture Capital Co., Ltd. since August 2015.

Prior to joining SDG Group, Mr. Chen served as a cashier, a bookkeeper and an accountant in charge of the financial accounting department of Shandong Commerce and Foreign Trade Company (山東省商業外經公司) from August 1993 to June 1995, successively. He also served as an officer of the investment division and office of the Department of Commerce of Shandong Province (山東省商 業廳) from June 1995 to October 1996, a staff member, a deputy principal staff member and a principal staff member of the secretariat of the Chamber of Commerce of Shandong Province (山東省商會), from October 1996 to September 2001, successively, a financial analyst of Tiantong Securities Co., Ltd. (天同證券有限責任公司) from June 2004 to September 2004, a deputy director-general of the Finance Bureau of Binzhou (濱州市財政局) from September 2004 to March 2007, a deputy director of Binzhou Economic Development and Investment Service Centre (濱州市經濟開發投資服務中心) and a deputy manager of Binzhou Economic Development and Investment Co., Ltd. (濱州市經濟開發 投資公司) (currently known as Binzhou Finance Investment Group Co., Ltd. (濱州市財金投資集團有 限公司)) from August 2005 to March 2007, a secretary to the Party Committee of the Finance Bureau of Binzhou, a director of Binzhou Economic Development and Investment Service Centre (濱州市經 濟開發投資服務中心) and a manager of Binzhou Economic Development and Investment Company (濱州市經濟開發投資公司) (currently known as Binzhou Finance Investment Group Co., Ltd. (濱州 市財金投資集團有限公司)) from March 2007 to December 2008, a deputy general manager of Shandong Luxin Investment Holdings Group Co., Ltd. (山東省魯信投資控股集團有限公司) from December 2008 to December 2011, during which, he was also the chairman of Luxin Venture Capital Group Co., Ltd. (魯信創業投資集團股份有限公司) (Stock code: 600783.SH) from March 2010 to January 2012. Mr. Chen also served as a deputy mayor of Laiwu, Shandong Province from December 2011 to June 2013 as well as a member of the standing committee of Laiwu municipal Party Committee.

Mr. Chen graduated from Shandong Agricultural University in China in July 1993 majoring in management of agricultural economy, with a bachelor’s degree in economics, obtained his master’s degree in economics from Shandong University in China in June 2002 majoring in political economy, and graduated from the School of Economics of Zhejiang University in China in June 2004, with a doctorate in political economy. He received the registered accountant qualification issued by Shandong Institute of Certified Public Accountants (山東省註冊會計師協會) in December 2009, the senior accountant qualification issued by Shandong Senior Evaluation Committee of Qualification in Account (山東省會計專業資格高級評審委員會) in January 2003, and the (professor-level) senior political official qualification issued by Senior Professional Evaluation Committee of Shandong Enterprises’ Ideological and Political Personnel (山東省企業思想政治工作人員專業職務高級評審委 員會) in September 2016.

Mr. Wang Lijun (王立君), aged 49, was appointed as Director in May 2014 and served as the chairman of the Company from February 2015 to May 2016. He was subsequently redesignated as a non-executive Director in December 2017. He mainly participates in decision making in respect of major issues of the Company. Mr. Wang also served as the general manager and a vice-chairman of the Company from January 2014 and May 2014 to February 2015, respectively. Mr. Wang has more than 27 years of experience in the gold mining industry.

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Mr. Wang also successively held various positions in subsidiaries of the Company and has extensive industry experience. He successively served as an assistant mining engineer, a deputy director and a director of the mining workshop, an assistant to mine manager, a deputy mine manager and a mine manager of Xin Cheng Gold Mine from July 1990 to April 2009.

Mr. Wang has been serving as a director of SDG Group Co. since October 2015 and as the chairman of Qingdao Gold Training Centre Co., Ltd. (青島黃金培訓中心有限公司), which is an indirect subsidiary of SDG Group Co., since March 2014. He also successively served as the general manager and the chairman of SDG Non-ferrous from April 2009 to January 2014.

Mr. Wang graduated from Shenyang Gold Institute in China in July 1990 majoring in mining engineering, and graduated from Northeastern University in China in July 1997 majoring in management engineering. He also graduated from Northeastern University in July 2012 majoring in mining engineering, with a doctorate. In March 2014, he was recognized as engineering technology application researcher by the Department of Human Resources and Social Security of Shandong Province (山東省人力資源和社會保障廳).

Ms. Wang Xiaoling (汪曉玲), aged 54, was appointed as a Director in May 2016 and was subsequently redesignated as a non-executive Director in December 2017. She mainly participates in decision making in respect of major issues of the Company. Ms. Wang has more than 30 years of experience in the gold mining industry.

Ms. Wang successively held various positions in the Company. She successively served as the chief accountant of the finance department, a deputy head of the finance department, the acting chief financial officer, a manager of the finance department and the chief financial officer and a manager of the finance department of the Company from July 2000 to January 2014. Ms. Wang also worked in Shandong Gold Mining (Laizhou) Co., Ltd. Jiaojia Gold Mine, a subsidiary of our Company and its predecessor, for many years and has tremendous industry experience, as she served, among others, as its accountant and a deputy director of the finance division from August 1982 to July 2000.

Ms. Wang also has been serving as manager of the finance department, the deputy chief accountant and a deputy general manager of SDG Group Co. since January 2014, July 2016 and April 2018, respectively, and has been serving as the chairwoman of SDG Group Finance since February 2015.

Prior to joining SDG Group Co., Ms. Wang served at Zhaoyuan Agricultural Bank of Shandong Province (山東省招遠縣農業銀行).

Ms. Wang was awarded the title of Shandong Provincial Assets and Capital Verification Pioneering Individual (全省清產核資工作先進個人) by Shandong Provincial Personnel Department and Shandong Province Finance Bureau in December 1994, the honorary title of Shandong Province Pioneering Accounting Practitioner (全省先進會計工作者) by Shandong Municipal Propaganda Department (山東省委宣傳部), Shandong Province General Labor Union (山東省總工會) and Shandong Province Finance Bureau (山東省財政廳) in October 2005, the honorary title of Corporate Finance Accounting Work Pioneering Individual (企業財務會計工作先進個人) by Finance Bureau of Lixia District, Jinan (濟南市歷下區財政局), Lixia District Office of Jinan, Shandong Province, SAT

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(山東省濟南市歷下國家稅務局) and Lixia District Office of Jinan Local Taxation Bureau (濟南市地 方稅務局歷下分局) in February 2010 and the honorary title of Shandong Provincial Corporate Finance Express Work Pioneering Individual (全省企業財務快報工作先進個人) by Shandong Province Finance Bureau in January 2015.

Ms. Wang graduated from Shenyang College of Technology (瀋陽工業學院) in China in July 1998 majoring in accounting, and graduated from Hong Kong Baptist University in November 2009 majoring in science in applied accounting and finance, with a master’s degree in science. She obtained the senior economist qualification issued by Shandong Provincial Personnel Department in December 1999, the international registered senior accountant qualification issued by International Accreditation and Registration Institute in January 2007 and the senior gold investment analyst qualification issued by Occupational Skill Testing Authority of Ministry of Human Resources and Social Security (人力 資源和社會保障部職業技能鑒定中心) in March 2011. Ms. Wang was recognized by Shandong Human Resources and Social Security Bureau (山東省人力資源和社會保障廳) as senior accountant (principal) in January 2018.

Mr. Tang Qi (湯琦), aged 41, was appointed as a Director, secretary to the Board and the director of the Board office in December 2017 and November 2017, respectively, and was subsequently redesignated as an executive Director in December 2017, mainly responsible for the daily work of the Board, the normative operation of the Company, capital operation, information disclosure and investor relations management. Mr. Tang has more than 17 years of professional experience in corporate governance.

Mr. Tang has successively served as a secretary, the head of secretary, a deputy director and a director of the Board office of the Company from July 2000 to August 2015. He also served as the securities affairs representative of the Board from June 2003 to October 2013, during which, he participated in mine management of Laizhou Production Base (萊州生產基地) of the Company from August 2008 to June 2013, and accumulated extensive industry experience. From August 2015 to November 2017, he has successively served as an assistant to general manager as well as the department head of the research and development department, and a vice general manager as well as the department head of research and development department of SDG Venture Capital Co., Ltd.

Mr. Tang graduated from Shandong Normal University in China in July 2000 majoring in educational technology, with a bachelor’s degree, and graduated from Shandong University in China in December 2010 majoring in economics, with a master’s degree of economics. Mr. Tang received the senior political official qualification issued by the Appraisal Committee for Senior Enterprise Ideological and Political Professionals of Shandong Province (山東省企業思想政治工作人員專業職 務高級評審委員會) in September 2013, the qualification of registered gold investment analyst issued by the Occupational Skill Testing Authority of Ministry of Human Resources and Social Security (人力資源和社會保障部職業技能鑑定中心) in April 2010, and the qualification of secretary to board of listed companies issued by the Shanghai Stock Exchange in April 2004.

As of the Latest Practicable Date, Mr. Tang was interested in 152,098 Shares under the Employee Shareholding Scheme, representing approximately 0.0082% of our total share capital.

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INDEPENDENT NON-EXECUTIVE DIRECTORS

Mr. Gao Yongtao (高永濤), aged 55, was appointed as an independent non-executive Director of the Company in October 2013. He has successively served as a teaching assistant as well as a lecturer, an associate professor and a PhD supervisor of University of Science and Technology Beijing since July 1985. Mr. Gao served as the chairman of Beijing Anke Technology Co., Ltd. (北京安科興 業科技股份有限公司) since August 2010. He served as a professor and a PhD supervisor of School of Civil and Resources Engineering of University of Science and Technology Beijing (北京科技大學土 木與資源工程學院) since July 1998. Mr. Gao is currently a lifetime professor of mining in University of Science and Technology Beijing.

In addition, Mr. Gao served as a member of the First Council of Chinese Sub-society for Soft Rock Engineering & Deep disaster Control of the Chinese Society for Rock Mechanics & Engineering (中國岩石力學與工程學會軟岩工程與深部災害控制分會) from September 2009 to September 2013, and the chairman of the underground mining committee of Sub-society for Mining of the Chinese Society for Metals (中國金屬學會採礦分會) since December 2011. He has been serving as a member of National Work Safety Expert Group (國家安全生產專家組) since November 2014.

Mr. Gao was awarded the First Class Award of Science and Technology Progress of Ministry of Metallurgical Industry (冶金工業部科學技術進步一等獎) issued by the Ministry of Metallurgical Industry of the PRC in December 1992. He was awarded the First Class Award of Science and Technology Progress (科學技術進步一等獎) issued by the State Bureau of Metallurgical Industry in December 1999. He was awarded the Second Class Award of Gold Science and Technology Progress (黃金科學技術進步二等獎) issued by the State Economic and Trade Commission of the PRC (中華人 民共和國經濟貿易委員會) in March 2000. He was awarded the Second Class Award of Science and Technology Progress in Tianjin (天津市科學技術進步二等獎) issued by the People’s Government of Tianjin Municipality in November 2001. He was awarded the Science and Technology Progress Award in Shandong (山東省科技進步獎) issued by the People’s Government of Shandong in September 2002. He received the title of “the Outstanding Individual Award in Production Academic and Research” (產學研工作先進個人) jointly issued by the Beijing Municipal Education Commission (北京市教育委 員會), the Beijing Municipal Economy Commission (北京市經濟委員會) and the Beijing Municipal Science & Technology Commission (北京市科學技術委員會) in December 2002. He was awarded the First Class Award of Science and Technology Progress in Shandong (山東省科技進步一等獎) issued by the Department of Transportation of Shandong Province in July 2002. He was granted the Third Class Award of Jin Qiao Award Individual (金橋獎個人三等獎) issued by the Beijing Technology Market Management Office (北京市技術市場管理辦公室) in December 2002. He was granted the First Class Award of Safety Production Science and Technology Result (安全生產科學技術成果一等獎) jointly issued by the State Administration of Work Safety (國家安全生產監督管理局) and the State Administration of Coal Mine Safety (國家煤礦安全監察局) in February 2003. He was recognized the title of “the Outstanding Teacher in Beijing (北京市優秀教師)” jointly issued by the Education Committee of Beijing Municipal Committee of the CPC Party (中共北京市委教育工作委員會), the Beijing Municipal Education Commission, the Beijing Municipal Personnel Bureau, the Beijing Municipal Finance Bureau, the Beijing Municipal Labor and Social Security Bureau (北京市勞動和社 會保障局) and the Trade Union on Education of China, Beijing Committee (中國教育工會北京市委員 會) in April 2004. He was awarded the China Youth Science and Technology Award (中國青年科技獎) jointly issued by the Organization Department of the Communist Party of China, the Department of

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Personnel of the PRC and the China Association for Science and Technology in June 2004. He was recognized as a national candidate for the New Century Hundred-Thousand-Ten Thousand Talents Project (新世紀百千萬人才工程國家級人選) by the Department of Personnel of the PRC in September 2006. He was awarded the Second Class Award of Science and Technology in Beijing (北京市科學技 術二等獎) issued by the People’s Government of Beijing Municipality in February 2011. He obtained the Second Class Award of National Science and Technology Progress (國家科技進步二等獎) issued by the State Council for two times in January 2004 and December 2012, respectively. He was awarded the title of “Zhongguancun High-end Leading Talent (中關村高端領軍人才)” issued by the Office of Leading Group of Zhongguancun Science Park (中關村國家自主創新示範區領導小組辦公室). In addition, Mr. Gao has been entitled to State Council Government Allowance (國務院政府津貼) since June 2001.

Mr. Gao graduated from Beijing Steel College (北京鋼鐵學院) in China in May 1985 and obtained a master’s degree in mining engineering in June 1985. He also obtained a doctoral degree in engineering mechanics from University of Science and Technology Beijing in China in March 2003.

Ms. Hui Wing (許穎), aged 42, was appointed as an independent non-executive Director of the Company in December 2017. She has intensive knowledge and experience in accounting. She served in Bank of Communications Hong Kong Branch from September 2005 to June 2010, including as an audit officer from February 2006 to June 2010. She served as a senior audit associate of Hong Kong Mortgage Corporation Limited from June 2010 to November 2012. She served in CTBC Bank Co., Ltd., Hong Kong Branch from November 2012 to August 2014, including as a manager of its internal audit department. She served as an audit manager of China Merchants Bank Hong Kong Branch from October 2014 to October 2015. She also served as the assistant to the general manager of the audit department of Industrial Bank Hong Kong Branch since November 2015.

Ms. Hui obtained a bachelor’s degree in arts in English major from Guangdong University of Foreign Studies in China in December 2000. She graduated from the department of accountancy and information systems of City University of Hong Kong in November 2005, with a master’s degree in arts. She was issued the qualification of registered accountant by Hong Kong Institute of Certified Public Accountants in March 2009. She was issued the qualification of certified internal auditor by Institute of Internal Auditors in January 2012. She was issued the qualification of certified information systems auditor by the Information Systems Audit and Control Association in March 2014.

Mr.LuBin(盧斌), aged 41, was appointed as an independent non-executive Director of the Company in December 2017. From December 2004 to June 2012, he has successively served as a teacher and an associate professor of School of Finance of Nanjing University of Finance & Economics (南京財經大學金融學院). He served as a vice general manager of Nanjing University of Finance & Economics Science Park Co., Ltd. (南京財經大學科技園有限公司) from June 2012 to April 2013, and he has successively served as an assistant to director of the management committee and a director of the economic development bureau of Kunshan Huaqiao Economic Development Zone from April 2013 to March 2016, respectively. He also served as a teacher of the Institute of Economics and Finance of Nanjing Audit University (南京審計大學) from March 2016 to October 2016 and served as an associate dean of Training and Education School and the School of Finance since October 2016 and from January 2018 to July 2018, respectively, and he has been serving as the deputy head of the Research Department since July 2018.

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Mr. Lu was included in the third-batch of industry professors in Jiangsu province jointly issued by the Office of Leading Group for Talented Individuals in Jiangsu Province (江蘇省人才工作領導小 組辦公室), the Department of Education of Jiangsu Province, the Department of Science and Technology of Jiangsu Province (江蘇省科學技術廳), the Department of Human Resources and Social Security of Jiangsu Province (江蘇省人力資源和社會保障廳) and the Finance Bureau of Jiangsu Province in September 2015 and served as a director of Jiangsu Capital Market Research Association (江蘇資本市場研究會) since June 2011. Mr. Lu has long been engaged in research on financial management and corporate finance, and has published dozens of research reports in international and domestic journals such as “Quantitative Finance” and “Economic Research Journal”, and published writings such as Research on Dynamic Adjustment in Capital Structure of Listed Companies in the PRC《中國上市公司資本結構動態調整研究》 ( ).

Mr. Lu graduated from Anhui Normal University in China in July 1998, with a bachelor’s degree of science in mathematics, and graduated from Southeast University in China in May 2001, with a master’s degree of science in probability theory and mathematics statistics, and graduated from the Chinese University of Hong Kong in December 2005, with a doctor’s degree of philosophy in statistics.

SUPERVISORS

The Supervisory Committee comprises 3 supervisors. The following table sets out certain information relating to the supervisors of the Company.

Date of Date of Appointment Joining the Name Age Position Supervisor Company Main Responsibilities

Li Xiaoping 54 Chairman of May 16, 2016 May 2016 Overseeing the Company’s (李小平) the board of operations and financial supervisors, situation supervisor

Liu Rujun 50 Supervisor October 15, October 2013 Overseeing the Company’s (劉汝軍) 2013 operations and financial situation

Duan Huijie 47 Supervisor May 13, 2016 May 2016 Overseeing the Company’s (段慧潔) operations and financial situation

Mr. Li Xiaoping (李小平), aged 54, has been the chairman of the board of supervisors of the Company since May 2016. Mr. Li has also been a standing committee member of the Party Committee of SDG Group Co. since October 2015.

Mr. Li successively served as a clerk, an officer, an associate chief officer, the chief officer, a deputy director as well as a deputy director and a researcher of the Business and Trade Office of the Planning Commission of Shandong Province (山東省計委經貿處) from August 1984 to January 2003.

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He also served as a deputy secretary and a secretary to the district committee of the CPC of Dongchangfu District of Liaocheng from January 2003 to October 2015 successively, during which, he also served as the chief officer of the government of Dongchangfu District from January 2003 to February 2008.

Mr. Li graduated from Jiangxi College of Finance and Economics (江西財經學院) (currently known as Jiangxi University of Finance and Economics (江西財經大學)) in China in July 1984 with a bachelor’s degree in economics. He also graduated from the Party School of the Provincial Committee of Shandong (山東省委黨校) in China in June 2003 majoring in economic management.

Mr. Liu Rujun (劉汝軍), aged 50, has been a supervisor since October 2013. He served as the chief administrative and supervisory officer since July 2016, and has been a secretary to the commission for discipline inspection, the general manager of auditing and risk control department and the head of discipline inspection and surveillance department of the Company since April 2016.

Mr. Liu served as an officer and an assistant engineer of the department of geodetic survey of Shandong Province Gold Industry Company from October 1991 to October 1993 and an associate chief officer of the cadre department of SDG Group Co. and its predecessor from October 1993 to October 1997, both of which are predecessors of SDG Group. In SDG Group Co., he served successively as the section chief of the Party’s affairs department of SDG Group Co. from October 1997 to July 2004, a deputy department head, a deputy manager and a manager of the human resources department from July 2004 to December 2011, a manager of the legal affairs department from December 2011 to September 2013, a manager of the auditing and surveillance department from September 2013 to April 2016, and a director of the discipline inspection and surveillance office of SDG Group Co. from September 2013 to April 2016.

Mr. Liu graduated from the department of coalfield geology of Shandong Mining Institute in China in July 1990, with a bachelor’s degree in mining survey, and obtained a master’s degree in business administration from Tianjin University of Finance and Economics in China in December 2004, and received the senior engineer qualification from Shandong Provincial Personnel Office (山東省人事廳) in September 2000.

Ms. Duan Huijie (段慧潔), aged 47, was appointed as a supervisor in May 2016, and was appointed as the deputy general counsel and the general manager of legal affairs department of the Company in June 2016.

Ms. Duan has served as a deputy general manager of Shandong Province Shisheng Real Estate Co., Ltd. (山東省世盛房地產有限公司) from December 2006 to July 2007, a deputy general manager of Jinan Wufengshan Tourism Development Co., Ltd. (濟南五峰山旅遊開發有限公司) from July 2007 to March 2010, the chairman of the board of Shiwan Holiday Resort Co., Ltd. (仕灣度假村有限公司) from October 2007 to January 2010, the chairman of the board and the general manager of Shandong Jinling Services Co., Ltd. (山東金陵服務有限公司) from June 2009 to October 2014, the director of legal affairs center of auditing and risk management department of SDG Group Co. from March 2010 to February 2012, a senior manager of legal affairs department of SDG Group Co. from February 2012 to September 2013, a deputy manager of strategic planning department of SDG Group Co, from

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September 2013 to June 2016, and a deputy general counsel of SDG Group Co. from January 2014 to June 2016, an executive director of Shandong Province Guang’an Fire Services Technical Service Co., Ltd. (山東省廣安消防技術服務有限公司) from September 2016 to April 2017, respectively. Since December 2015, she has been serving as a director of SDG Group Co.

Before joining SDG Group, Ms. Duan was a teacher in the legal education and research office of the Marx and Lenin Education and Research Department of Inner Mongolia Normal University (內 蒙古師範大學) from July 1993 to August 1997, and a director of the general affairs department of Shandong Province Yingtai Real Estate Development Co., Ltd. (山東省英泰房地產開發有限公司) (formerly known as Zhongnongxin Real Estate Co., Ltd. (中農信房地產公司)) from August 1997 to December 2006.

Ms. Duan graduated from Inner Mongolia University in China in July 1993 with a bachelor’s degree in law, and received the lawyer qualification from the Ministry of Justice of the People’s Republic of China (中華人民共和國司法部) in September 1995.

SENIOR MANAGEMENT

The following table sets out certain information about the senior management of the Company.

Date of Appointment as Senior Date of Joining Name Age Position Management the Company Main Responsibilities

Wang Peiyue 56 General May 2016 March 2009 Responsible for daily (王培月) manager and production and financial operation management, controller administration, financial management, financing, budgeting, internal control and legal affairs

Tang Qi 41 Secretary to November 2017 July 2000 Responsible for the (湯琦) the Board daily work of the Board, the normative operation of the Company, information disclosure and investor relations management

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Date of Appointment as Senior Date of Joining Name Age Position Management the Company Main Responsibilities

Li Tao 57 Deputy general March 2013 April 2011 Responsible for the (李濤) manager and operation and president of management of Qilu Qilu Mining Mining Business Business Department Department

He Jiping 55 Deputy general April 2011 February 2010 Responsible for (何吉平) manager acquisition and consolidation of mineral resources

Song Zengchun 53 Deputy general May 2016 September 2013 Responsible for (宋增春) manager and corporate management, manager of performance appraisal Enterprise and large-scale project Management management Department

Wang Deyu 52 Deputy general October 2013 October 2013 Responsible for mining (王德煜) manager technology management, scientific and technological innovation and informatization

Mr. Wang Peiyue (王培月) — for biographical details of Mr. Wang Peiyue, please see “— Directors — Executive and Non-executive Directors”.

Mr. Tang Qi (湯琦) — for biographical details of Mr. Tang Qi, please see “— Directors — Executive and Non-executive Directors”.

Mr. Li Tao (李濤), aged 57, was appointed as a deputy general manager of the Company in March 2013, mainly responsible for the operation and management of Qilu Mining Business Department of the Company. He served as an assistant to general manager of the Company from April 2011 to March 2013 and as the president of Qilu Mining Business Department of the Company since April 2016.

Mr. Li has served in various positions in the subsidiaries of the Company. From September 1981 to December 2008, he has served various positions in Jinzhou Group, including among others, as a mining technician and a director of the main well workshop and a deputy section chief and then the

— 367 — DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT section chief of the expansion department of Jinzhou Group, he has also served as an assistant to mine manager, a deputy mine manager, a deputy chief engineer and a deputy general manager from May 1992 to December 2008 successively, and as the head of the leadership team for preliminary work of projects, a vice-chairman of the board and the general manager of Chaihulanzi Gold from December 2008 to January 2009 and from January 2009 to January 2012, respectively. Mr. Li has also been serving as the chairman of Guilaizhuang Mining since November 2016 and a director of Laizhou Mining since November 2016.

Mr. Li has been serving as the chairman of Jinchuang Group, since February 2015, which is a subsidiary of SDG Group Co.

Mr. Li graduated from Southern Institute of Metallurgy (南方冶金學院) in China majoring in mining in July 1990, and was recognized as a senior engineer by Shandong Provincial Personnel Department in February 2001.

As of the Latest Practicable Date, Mr. Li was interested in 131,818 Shares under the Employee Shareholding Scheme, representing approximately 0.0071% of our total share capital.

Mr. He Jiping (何吉平), aged 55, has been a deputy general manager of the Company since April 2011, mainly responsible for acquisition and consolidation of mineral resources. He served as an assistant to general manager of the Company from February 2010 to April 2011.

Mr. He successively served as a mining technician of the technology department, a deputy leader of the 3rd Team, a deputy director of mining workshop, a plant manager of Gaoshui Plant, a director of depth mining office and an assistant to mine manager of Laizhou Mining Jiaojia Gold Mine and its predecessor from March 1984 to June 2003. He served as a secretary to Party sub-branch at the gold refinery of SDG Group Co. from June 2003 to July 2005. He served as a deputy mine manager, a mine manager and secretary to the Party Committee from July 2005 to December 2006, from December 2006 to August 2009, and from December 2006 to February 2010 successively at Laizhou Mining Jiaojia Gold Mine and its predecessor. Mr. He was a mine manager at Laizhou Mining Sanshandao Gold Mine from February 2010 to April 2011. Since August 2016, he has been serving as a director of SDG Beijing.

Mr. He was the legal representative of Laizhou Jiaojin Operation Co., Ltd. (萊州焦金經營有限 公司), the business license of which was revoked in November 2009. (Note 1)

Mr. He graduated from Shenyang Gold School (瀋陽黃金專科學校) in China in July 1983 majoring in mining engineering, graduated from Northeastern University in China in July 1999 majoring in management engineering, obtained his master’s degree in mining engineering from University of Science and Technology Beijing in China in March 2004, and received the engineering technology application researcher qualification from Shandong Provincial Department of Human Resources and Social Security in January 2016.

As of the Latest Practicable Date, Mr. He was interested in 121,678 Shares under the Employee Shareholding Scheme, representing approximately 0.0066% of our total share capital.

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Mr. Song Zengchun (宋增春), aged 53, has been a deputy general manager and a manager of corporate management department of the Company since May 2016, mainly responsible for corporate management, performance appraisal and large-scale project management. He also served as a deputy general manager of the Company from September 2013 to December 2015, he was mainly responsible for daily operation and management of Xin Cheng Gold Mine.

Mr. Song has served in the mining areas operated by subsidiaries of the Company for many years. He was a deputy mine manager of the predecessor of Laizhou Mining Jiaojia Gold Mine from December 2006 to October 2007 and a mine manager of Shandong Gold Mining Co., Ltd. Xincheng Gold Mine (山東黃金礦業股份有限公司新城金礦) from September 2013 to December 2015.

Mr. Song successively served as a technician, an assistant to mine manager and the department head of administrative management department as well as a vice mine manager of Cangshang gold mine in Laizhou, Shandong from July 1988 to August 1997. He served as a manager and a secretary to CPC Committee of an internal combustion machine overhead travelling cranes factory from September 1997 to August 1998. He served as a mine manager of Cangshang gold mine of Shandong Province Laizhou Jincang Mining Co., Ltd. (山東省萊州金倉礦業有限公司) from August 1998 to May 2003. He then served as the general manager and an executive deputy general manager of Shandong Province Laizhou Jincang Mining Co., Ltd. from May 2003 to December 2006 successively, an executive deputy general manager of Laizhou Jincang from December 2004 to May 2006, an executive deputy general manager of SDG Group Laizhou Mining Co., Ltd. (山東黃金集團萊州礦業有限公司) from May 2006 to December 2006, the general manager of SDG Group Changyi Mining Co., Ltd. (山 東黃金集團昌邑礦業有限公司) from October 2007 to September 2013, a deputy general manager of SDG Non-ferrous from January 2012 to September 2013, and a manager of operation management department of SDG Group Co. from December 2015 to May 2016.

Mr. Song was the legal representative of Laizhou Jincang Mining Co., Ltd. Cangshang Gold Mine Liquefied Gas Station (萊州金倉礦業有限公司倉上金礦液化氣站), a director of Laizhou Jincang Non-metal Mining Co., Ltd. (萊州金倉非金屬礦業有限公司) and a director of Laizhou Yunfeng Education Development and Investment Co., Ltd. (萊州市雲峰教育發展投資有限責任公司), the business license of which were revoked in July 2003, November 2006 and November 2006, respectively. (Note 1)

Note 1: According to the relevant PRC regulations, a PRC company is required to undergo annual inspection. Failing to undergo annual inspection or inspection within the specified deadline, its business license will be revoked by the Administration of Industry and Commerce (“AIC”). SDG Facility Service Center did not have any business activities since 2006. Laizhou Jiaojin Operation Co., Ltd. and Laizhou Jincang Mining Co., Ltd. Cangshang Gold Mine Liquefied Gas Station ceased operation because of strategic exit due to change of market conditions. Laizhou Jincang Non-metal Mining Co., Ltd. and Laizhou Yunfeng Education Development and Investment Co., Ltd. did not have any business since their incorporation. All of the companies maintained a non-operation status before the revoke, hence they failed to designate relevant staff to go through the formalities of annual inspection. To the best knowledge of our Directors, the failure of such companies to undergo annual inspection was not due to any default of the relevant Director and senior management.

— 369 — DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

Mr. Song graduated from China Coal Economic College (中國煤炭經濟學院) with a bachelor’s degree in economics in July 1988 and graduated from Northeastern University in China in September 2003 with a master’s degree in mining engineering, and received the senior economist qualification from Shandong Provincial Personnel Office in December 2000.

As of the Latest Practicable Date, Mr. Song was interested in 162,238 Shares under the Employee Shareholding Scheme, representing approximately 0.0087% of our total share capital.

Mr. Wang Deyu (王德煜), aged 52, has served as a deputy general manager of the Company since October 2013, mainly responsible for mining technology management, scientific and technological innovation and informatization.

Mr. Wang has served in many positions successively in subsidiaries of the Company with extensive industry experience and management experience. He has served, among others, as a technician and a deputy director of beneficiation and smelting plant, a director of tailings development office, a director of beneficiation and smelting plant and a deputy mine manager of Laizhou Mining Jiaojia Gold Mine and its predecessor successively from September 1987 to December 2006 respectively. During such period, he also served as the head of the Jiaojia refinery plant from June 2003 to December 2006. Mr. Wang served as a manager of the refinery plant of Laizhou Mining and its predecessor from December 2006 to April 2016 and served as the chairman of the board of SDG S&T, our subsidiary, since December 2016.

Moreover, Mr. Wang served as the chairman and the general manager of Qinghai Kunlun Gold Co., Ltd. (青海昆侖黃金有限公司) from June 2013 to December 2016, a director of SDG Capital Management from April 2014 to February 2015, both companies are subsidiaries of SDG Group Co..

Mr. Wang graduated from Jilin Metallurgy Industry School (吉林冶金工業學校) in China in August 1987 majoring in processing, graduated from Party School of the Provincial Committee of Shandong in China in June 2000 majoring in economy management, graduated from University of Science and Technology Beijing in China in July 2007 with a master’s degree in environmental engineering, and received the senior engineer qualification from Shandong Provincial Personnel Office in October 2003.

As of the Latest Practicable Date, Mr. Wang was interested in 121,678 Shares under the Employee Shareholding Scheme, representing approximately 0.0066% of the total share capital.

Save as disclosed above, none of our Directors, Supervisors and senior management held any directorship in any public companies the shares of which are listed in Hong Kong or overseas stock markets during the three years prior to the date of this prospectus.

To the best of the Board’s knowledge, information and belief, our Directors, Supervisors and senior management do not have any relationship amongst them.

To the best of our Directors’ knowledge, information and belief, and having made all reasonable enquiries, save as disclosed herein, there is no additional matter with respect to the appointment of

— 370 — DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT the Directors and Supervisors that needs to be brought to the attention of the Shareholders, and there is no additional information relating to the Directors and Supervisors that is required to be disclosed pursuant to Rules 13.51(2)(h) to (v) of the Hong Kong Listing Rules as of the Latest Practicable Date.

JOINT COMPANY SECRETARIES

Mr. Tang Qi (湯琦) is one of the joint company secretaries of the Company and was appointed in December 2017 with his appointment to take effect on the Listing Date of our H Shares. For biographical details of Mr. Tang Qi, please see the section “— Directors — Executive and Non-executive Directors”.

Ms. Ng Sau Mei (伍秀薇) is one of the joint company secretaries of the Company and was appointed in December 2017 with her appointment to take effect on the Listing Date of our H shares. She is a manager of TMF Hong Kong Limited and is responsible for provision of corporate secretarial and compliance services to listed company clients. Ms. Ng has over 16 years of experience in the company secretarial field and has extensive knowledge and experience in dealing with corporate governance, regulatory and compliance affairs of listed companies. She currently serves as the company secretary or joint company secretary of several companies listed on the Hong Kong Stock Exchange.

Ms. Ng obtained a bachelor’s degree in laws from City University of Hong Kong in November 2001 and was qualified as an associate member of the Hong Kong Institute of Chartered Secretaries and the Institute of Chartered Secretaries and Administrators in United Kingdom in September 2007.

BOARD COMMITTEES

The Company has established four committees under the Board pursuant to relevant laws and regulations of the PRC and corporate governance practice requirements under the Hong Kong Listing Rules, including the Audit Committee, Remuneration and Appraisal Committee, Nomination Committee and Strategy Committee.

Audit Committee

The Audit Committee is composed of five directors, including Mr. Lu Bin, Ms. Hui Wing, Mr. Gao Yongtao, Mr. Li Guohong and Ms. Wang Xiaoling, and Mr. Lu Bin has been appointed as the chairman of the Audit Committee. The primary duties of the Audit Committee comprise of communication, supervision and verification work for internal and external auditing and internal control of the Company, including:

(1) to propose the appointment, re-appointment or replacement of external audit institution, to provide advice to the Board, to approve the remuneration and engagement terms of external audit institution;

— 371 — DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

(2) to review and monitor external audit institution to see if it is independent and objective and whether its auditing process is effective, to discuss the nature, scope and method of auditing and the relevant reporting responsibilities with the audit institution prior to the commencement of audit work, to formulate and implement policies for engaging external audit institutions to provide non-audit services;

(3) to supervise the internal audit system of the Company and its implementation, to review financial information and its disclosure of the Company;

(4) to be responsible for communication between internal auditors and external auditors;

(5) to review the financial control, internal control and risk management systems of the Company and conduct audits on material connected transactions; and

(6) to perform other responsibilities required by laws, regulations, rules, regulatory documents, articles of association and assigned by the Board.

Remuneration and Appraisal Committee

The Remuneration and Appraisal Committee of the Company is composed of five directors, including Ms. Hui Wing, Mr. Lu Bin, Mr. Gao Yongtao, Ms. Wang Xiaoling and Mr. Tang Qi, and Ms. Hui Wing has been appointed as the chairman of the Remuneration and Appraisal Committee. The primary duties of the Remuneration and Appraisal Committee are to formulate appraisal standards and conduct appraisals for directors and managers of the Company, and to formulate and review the remuneration policies and proposals for directors and senior management of the Company. The details are as follows:

(1) to make proposals and recommendations to the Board on remuneration plans or proposals and establishment of formal and transparent procedures for the formulation of the above remuneration plans or proposals according to the primary scope, responsibilities, importance of the management positions of directors and senior management members and the remuneration standards of relevant positions in other relevant enterprises;

(2) to formulate the specific remuneration packages for all executive directors and senior management members, and to make recommendation to the Board on remuneration of non-executive directors;

(3) to review the performance of duties of directors (non-independent directors) and senior management members of the Company and to conduct annual performance appraisals on them; and

(4) to perform other responsibilities required by laws, regulations, rules, regulatory documents, articles of association and assigned by the Board.

— 372 — DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

Nomination Committee

The Nomination Committee of the Company is composed of five directors, including Mr. Gao Yongtao, Mr. Lu Bin, Ms. Hui Wing, Mr. Wang Lijun and Mr. Wang Peiyue, and Mr. Gao Yongtao has been appointed as the chairman of the Nomination Committee. The primary duties of the Nomination Committee of the Company comprise the selection and recommendation of candidates, election criteria and procedures for appointments of directors and senior management members of the Company. The details are as follows:

(1) to make recommendation to the Board about the size and the composition of the Board according to operating activities, size of assets and shareholding structure of the Company;

(2) to conduct research on the selection criteria, procedure and methods for directors and senior management members and submit to the Board for consideration;

(3) to screen the candidates for directors and senior management and make recommendations;

(4) to conduct comprehensive assessment on skills, knowledge and experience of directors and senior management members, and to review the independence of independent non-executive directors; and

(5) to perform other responsibilities required by laws, regulations, rules, regulatory documents, articles of association and assigned by the Board.

Strategy Committee

The Strategy Committee of the Company is composed of five directors, including Mr. Li Guohong, Mr. Chen Daojiang, Mr. Wang Peiyue, Mr. Gao Yongtao and Mr. Lu Bin, and Mr. Li Guohong has been appointed as the chairman of the Strategy Committee. The primary duties of the Strategy Committee of the Company comprise conducting research and making recommendations on significant decisions and strategic planning of the Company. The details are as follows:

(1) to conduct research and make recommendation on strategic planning for long-term development of the Company;

(2) to conduct research and make recommendation on significant investment and financing proposals;

(3) to conduct research and make recommendation on significant capital operations and asset operation projects;

(4) to conduct research and make recommendation on significant matters affecting the development of the Company; and

(5) to perform other responsibilities required by laws, regulations, rules, regulatory documents, articles of association and assigned by the Board.

— 373 — DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

THE PARTY COMMITTEE

In accordance with the Constitution of the Communist Party of China and other relevant rules, the Company has established the Committee of Communist Party of China of Shandong Gold Mining Co., Ltd. (the “Party Committee”) in May 2008, which plays a core leadership and political role in the Company. The Party Committee is responsible for ensuring the development of the Company is in line with the policies of the Communist Party of China (“Party”). The Party Committee mainly assumes the following duties and responsibilities:

• implementing the Party’s theories, lines, guidelines, and policies to ensure the correct direction of reform and development;

• insisting on collective leadership, promoting scientific decision-making and promoting the full observance of their economic responsibilities, political responsibilities and social responsibilities;

• strengthening the team building of leaders and talents in the enterprise, leading the mass organization and enabling its role, and dedicated to promoting the fulfillment of all tasks;

• strengthening daily education and management of Party members, enabling in full the battle fortress role of a grassroots Party organization and the exemplary role of Party members, and earnestly pushing forward the construction of the Party work style and the clean government;

• examining the nominated senior management candidates and deliberately put forward their opinions; and

• studying and discussing material issues regarding the Company’s reform and stable development as well as major issues relating to the Company’s operation, management and staff’s benefits, and proposing opinions and suggestions thereon. When making decisions on significant matters of the Company, the Board should seek advice from the Party organization.

REMUNERATION OF DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

For details on the service contracts and appointment letters signed between the Company and our directors and supervisors, please see the section “Statutory and General Information — Further Information About Our Directors, Supervisors and Substantial Shareholders — A. Directors and Supervisors — Particulars of Service Contracts” in Appendix VIII to this Prospectus.

For the years ended December 31, 2015, 2016 and 2017, the total remuneration paid to our Directors were approximately RMB2.8 million, RMB5.3 million and RMB4.8 million, respectively.

For the years ended December 31, 2015, 2016 and 2017, the total remuneration paid to our Supervisors were approximately RMB1.3 million, RMB2.4 million and RMB2.1 million, respectively.

— 374 — DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

For the years ended December 31, 2015, 2016 and 2017, the total remuneration paid to our senior management were approximately RMB4.7 million, RMB5.3 million and RMB5.7 million, respectively.

According to existing effective arrangements, the total amount of remuneration (excluding any possible payment of discretionary bonus) shall be paid by us to Directors and the Supervisors for the financial year ending December 31, 2018 is expected to be approximately RMB6.1 million.

The remuneration of Directors, Supervisors and senior management has been determined with reference to the salaries of comparable companies and their experience, duties and performance.

For the years ended December 31, 2015, 2016 and 2017, the five highest remuneration individuals of our Company included 0, 3 and 2 Directors respectively, their remunerations were included in the total amount paid by us for the emoluments, salaries, allowances, discretionary bonus, defined contribution retirement plans and other benefits in kind (if applicable) of the relevant directors. For the financial years ended December 31, 2015, 2016 and 2017, the total amount of remuneration and benefits in kind (if applicable) paid by us to the five highest remuneration individuals were approximately RMB3.3 million, RMB4.3 million and RMB4.4 million, respectively.

Our Company has also adopted Employee Shareholding Scheme. For more details, please see “Statutory and General Information — Further Information about Our Directors, Supervisors and Substantial Shareholders — A. Directors and Supervisors — (i) Disclosure of Interest” in Appendix VIII to this Prospectus.

During the Track Record Period, no remuneration was paid by us nor receivable by Directors, Supervisors or the five highest remuneration individuals as incentives for joining or as rewards upon joining our Company. During the Track Record Period, no remuneration was paid by us nor receivable by Directors, past Directors, Supervisors, past Supervisors or the five highest remuneration individuals as compensation for leaving positions relating to management affairs in any subsidiary of the Company.

During the Track Record Period, none of our Directors or Supervisors have waived any remuneration. Save as disclosed above, during the Track Record Period, no other amounts shall be paid or payable by us or any of our subsidiaries to the Directors, Supervisors or the five highest remuneration individuals.

Save as disclosed above, no director is entitled to receive other special benefits from the Company.

COMPLIANCE ADVISER

We have appointed China Securities (International) Corporate Finance Company Limited as our Compliance Adviser after the Listing in compliance with the requirements of Rules 3A.19 and 19A.05 of the Hong Kong Listing Rules. According to Rule 3A.23 of the Hong Kong Listing Rules, the Compliance Adviser shall provide advice to us in the following circumstances:

(a) before the publication of any regulatory announcement, circular or financial report;

— 375 — DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

(b) when we contemplate to conduct a transaction that constitutes a notifiable transaction or connected transaction under the Hong Kong Listing Rules (including share issue and share repurchase);

(c) when we intend to use proceeds from the Global Offering in a manner different from the description as detailed in the Prospectus, or when the business activities, development or operating results of the Group have deviated from any forecasts, estimates or other information contained in the Prospectus;

(d) when the Hong Kong Stock Exchange of Hong Kong makes enquiries on the Company pursuant to Rule 13.10 of the Hong Kong Listing Rules.

The term of the Compliance Adviser shall commence from the Listing Date and is expected to end on the date when we announce the financial results of the first complete financial year from the Listing Date in compliance with Rule 13.46 of the Hong Kong Listing Rules.

CORPORATE GOVERNANCE CODE

The Company is committed to achieving a high standard of corporate governance (which is of critical importance to our development) to protect the interest of shareholders. To realize this objective, we intend to comply with the Corporate Governance Code and Corporate Governance Report set out in Appendix 14 to the Hong Kong Listing Rules after Listing.

— 376 — SHARE CAPITAL

This section presents certain information regarding the share capital of our Company.

BEFORE THE GLOBAL OFFERING

As of the Latest Practicable Date, our registered and issued share capital was RMB1,857,118,809, comprising 1,857,118,809 A Shares at the nominal value of RMB1.00 each, all of which are listed on the Shanghai Stock Exchange.

Percentage of registered Description of Shares Number of shares share capital

A Shares in issue ...... 1,857,118,809 100% Total Share Capital ...... 1,857,118,809 100%

UPON COMPLETION OF THE GLOBAL OFFERING

Immediately following the completion of the Global Offering, assuming that the Over-allotment Option is not exercised, our registered and issued share capital would be as follows.

Approximate percentage of the enlarged registered Description of Shares Number of shares share capital

A Shares in issue ...... 1,857,118,809 85% H Shares to be issued pursuant to the Global Offering. . . 327,730,000 15% Total Share Capital ...... 2,184,848,809 100%

Immediately following the completion of the Global Offering, assuming that the Over-allotment Option is fully exercised, our registered and issued share capital would be as follows.

Approximate percentage of the enlarged registered Description of Shares Number of shares share capital

A Shares in issue ...... 1,857,118,809 83.13% H Shares to be issued pursuant to the Global Offering. . . 376,889,500 16.87% Total Share Capital ...... 2,234,008,309 100%

— 377 — SHARE CAPITAL

OUR SHARES

The H Shares and A Shares in issue upon completion of the Global Offering will be ordinary Shares in our share capital. Upon the launch of the pilot program of Shanghai-Hong Kong Stock Interconnection (“Shanghai-Hong Kong Stock Connect” or “Pilot Program”) on November 17, 2014, cross-border trading of shares between China and Hong Kong is allowed. The A Shares of our Company are eligible securities approved to be traded by Hong Kong and overseas investors in accordance with the rules and regulations as prescribed under the Pilot Program subject to a maximum amount. A Shares can also be subscribed for and traded by legal or natural persons of the PRC, QFIIs or qualified foreign strategic investors in Renminbi. It is expected that H Shares of our Company will be eligible securities approved to be subscribed for and traded by legal or natural persons of the PRC in accordance with the rules and regulations as prescribed under the Pilot Program subject to a maximum amount. H Shares can also be subscribed for and traded by QDIIs. All dividends in respect of H Shares are to be paid in Hong Kong dollars whereas dividends in respect of A Shares are to be paid in Renminbi.

In addition, A Shares and H Shares are regarded as different classes of Shares under our Articles of Association. The differences between the two classes of Shares, provisions on class rights, dispatch of notices and financial reports to Shareholders, dispute resolution, registration of Shares, the method of Share transfer and appointment of dividend receiving agents are set out in our Articles of Association and summarized in “Appendix VII — Summary of the Articles of Association” to this Prospectus. Furthermore, any change or abrogation of the rights of class Shareholders shall be approved by way of a special resolution of the general meeting of Shareholders and by a class shareholders meeting of class Shareholders convened by the affected class of Shareholders. See “Appendix VII — Summary of the Articles of Association” for the circumstances under which a general meeting and a class meeting are required. However, the procedures of approval by class of Shareholders is not required in the following circumstances:

(i) issue of A Shares and H Shares of not more than 20% of existing A Shares and H Shares respectively, either separately or concurrently in a period of 12 months, pursuant to an approval by a special resolution of the general meeting;

(ii) proposal of the issue of A Shares and H Shares of the Company upon its establishment pursuant to approval of the securities regulatory authority under the State Council, provided that the A Shares and H Shares shall be issued within 15 months after such approval; or

(iii) transfer of A Shares of the Company by its holders to foreign investors for listing on overseas stock exchange pursuant to and approved by the securities regulatory authority under the State Council. See “— Conversion of A Shares into H Shares for Listing and Trading on Hong Kong Stock Exchange” for details.

A Shares and H Shares will rank pari passu with each other in all other respects and, in particular, will rank equally for all dividends or distributions declared, paid or made.

— 378 — SHARE CAPITAL

CONVERSION OF A SHARES INTO H SHARES FOR LISTING AND TRADING ON THE HONG KONG STOCK EXCHANGE

A Shares and H Shares are generally neither interchangeable nor fungible, and the market prices of our A Shares and H Shares may be different after the Global Offering. If any holder of our A Shares wishes to transfer its A Shares to overseas investors for listing and trading on the Hong Kong Stock Exchange, it must obtain the approval of the relevant PRC regulatory authorities, including the CSRC for the transfer and conversion of the A Shares and the approval of the Hong Kong Stock Exchange for the listing and trading of the converted H shares, as well as follow the procedures set forth below:

i. The holder of A Shares is to obtain the requisite approval of the CSRC or the authorized securities approval authorities of the State Council for the transfer of all or part of its A Shares into H Shares.

ii. We may apply for the listing of all or any portion of our A Shares on the Hong Kong Stock Exchange as H Shares in advance of any proposed conversion and we must obtain prior approval from the Hong Kong Stock Exchange before the converted H Shares can be listed and traded on the Hong Kong Stock Exchange.

iii. The holder of A Shares must request that we remove its A Shares from the A Share register, attaching the relevant documents of title together with the request.

iv. Subject to obtaining the approval of the Board and the Hong Kong Stock Exchange, we would then issue a notice to the H Share Registrar with instructions that, with effect from a specified date, our H Share Registrar is to issue the relevant holder with H Share certificates for such specified number of H Shares.

v. The specified number of A Shares to be converted to H Shares are then re-registered on the H Share register maintained in Hong Kong on the conditions that:

(i) our H Share Registrar lodges with the Hong Kong Stock Exchange a letter confirming the proper entry of the relevant H Shares on the H Share register and the due dispatch of H Share certificate; and

(ii) the admission of the H Shares (converted from A Shares) to trade in Hong Kong will comply with the Hong Kong Listing Rules and the General Rules of CCASS and the CCASS Operational Procedures in force from time to time.

vi. Upon completion of the transfer and conversion, the shareholding of the relevant holder of A Shares in our A Share register will be reduced by such number of A Shares transferred and the number of H Shares in our H Share register will correspondingly be increased by the same number of H Shares.

vii. We will comply with the Hong Kong Listing Rules to inform our Shareholders and the public by way of an announcement of such fact prior to the proposed effective date.

— 379 — SHARE CAPITAL

Approvals from holders of A Shares and H Shares as separate classes are not required for the listing and trading of the converted H Shares. As of the Latest Practicable Date, the Directors were not aware of any intention of any holder of A Shares to convert all or part of its A Shares into H Shares.

APPROVAL FROM HOLDERS OF A SHARES REGARDING THE GLOBAL OFFERING

We have obtained approval from our holders of A Shares to issue H Shares and seek the listing of H Shares on the Hong Kong Stock Exchange. Such approval was obtained at the general meetings of our Company held on November 6, 2017 upon, among other things, the following major terms:

(1) Size of the offer

The proposed number of H Shares to be offered initially shall not exceed 15% of the total issued number of shares as enlarged by the H Shares to be issued pursuant to the Global Offering. The number of H Shares to be issued pursuant to the exercise of the Over-allotment Option shall not exceed 15% of the total number of H Shares to be offered initially pursuant to the Global Offering.

(2) Method of offering

The method of offering shall be by way of a public offer for subscription in Hong Kong and an international offering to institutional and professional investors.

(3) Target investors

The H Shares shall be issued to overseas professional organizations, institutions individual investors and other eligible investors.

(4) Price determination basis

The issue price of the H Shares will be determined after due consideration of the interests of existing Shareholders, the acceptance of investors and issuance risks and in accordance with international practices through the demands for orders and book building process, subject to the domestic and overseas capital market conditions and by reference to the valuation level of comparable companies in domestic and overseas markets.

(5) Validity period

The issue of H Shares and listing of H Shares on the Hong Kong Stock Exchange shall be completed within 18 months from the date when the Shareholders’ meeting was held on November 6, 2017.

There is no other approved offering plans for any other shares except for the Global Offering.

— 380 — SUBSTANTIAL SHAREHOLDERS

As of the date of this Prospectus, the following persons directly or indirectly control, or are entitled to exercise the control of, 5% or more of our A Shares.

Number of Approximate Shares directly percentage of or indirectly shareholding Shareholders Nature of interest Class held (%)

SDG Group Co...... Beneficial owner(1) A Shares 831,933,836 44.80

Interest held by A Shares 210,052,107 11.31 controlled corporations(2)

SDG Exploration ...... Beneficial owner A Shares 99,424,515 5.35

SDG Resources Development Interest held by a A Shares 99,424,515 5.35 controlled corporation(3)

(1) On January 23, 2017 and on September 25, 2017, SDG Group Co. pledged its 100,000,000 Shares and 160,000,000 Shares to the Industrial and Commercial Bank of China, Shandong Branch (中國工商銀行山東省分行). Such pledged Shares were used as the security for borrowing of SDG Group Co. for its own use, which accounted for approximately 14.00% of total number of our Shares. Industrial and Commercial Bank of China is an authorized institution under the meaning of the Banking Ordinance (Chapter 155 of the Laws of Hong Kong).

(2) These 210,052,107 A Shares comprise 99,424,515 A Shares held by SDG Exploration, 71,932,142 A Shares held by SDG Non-ferrous, 20,979,020 A Shares held by SDG Capital Management, 16,054,672 A Shares held by Qingdao Gold and 1,661,758 A Shares held by SDG Beijing. SDG Exploration is wholly-owned by SDG Resources Development. Each of SDG Resources Development, SDG Non-ferrous, SDG Capital Management, Qingdao Gold and SDG Beijing is wholly-owned by SDG Group Co. As such, SDG Group Co. is deemed to be interested in all the Shares held by SDG Exploration, SDG Non-ferrous, SDG Capital Management, Qingdao Gold and SDG Beijing for the purpose of the SFO.

(3) SDG Exploration is wholly-owned by SDG Resources Development, and therefore SDG Resources Development is deemed to be interested in all the Shares held by SDG Exploration for the purpose of the SFO.

Immediately following the completion of the Global Offering, and assuming the Over-allotment Option is not exercised, our share capital will comprise 1,857,118,809 A Shares and 327,730,000 H Shares, representing approximately 85% and 15% of the total share capital of our Company, respectively.

— 381 — SUBSTANTIAL SHAREHOLDERS

So far as our Directors are aware, the following persons will have an interest or short position in our Shares or underlying Shares which would be required to be disclosed to us and the Hong Kong 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, immediately following the completion of the Global Offering, assuming the Over-allotment Option is not exercised.

Approximate Approximate percentage of percentage of Number of shareholding shareholding Shares directly in the relevant in the total issued or indirectly class of Shares share capital Shareholders Nature of interest Class held (%) (%)

SDG Group Co...... Beneficial owner(1) A Shares 831,933,836 44.80 38.08 Interest held by A Shares 210,052,107 11.31 9.61 controlled corporations(2)

SDG Exploration ...... Beneficial owner A Shares 99,424,515 5.35 4.55

SDG Resources Interest held by a A Shares 99,424,515 5.35 4.55 Development ...... controlled corporation(3)

China Structural Reform Beneficial owner(4) H Shares 71,178,250* 21.72 3.26 Fund Corporation Limited (中國國有企業 結構調整基金股份有限 公司) ......

CCT China Merchant Beneficial owner(5) H Shares 33,366,750* 10.18 1.53 Buyout Fund (深圳國調 招商併購股權投資基金合 夥企業(有限合夥))....

ICBC Asset Management Investment manager(6) H Shares 46,200,000* 14.10 2.11 Scheme Nominee (中國工商銀行股份有限 公司理財計劃代理人)...

* Calculated based on the mid-point of the indicative Offer Price range. (1) On January 23, 2017 and on September 25, 2017, SDG Group Co. pledged its 100,000,000 Shares and 160,000,000 Shares to the Industrial and Commercial Bank of China, Shandong Branch (中國工商銀行山東省分行). Such pledged Shares were used as the security for borrowing of SDG Group Co. for its own use, which accounted for approximately 11.90% of total number of our Shares. Industrial and Commercial Bank of China is an authorized institution under the meaning of the Banking Ordinance (Chapter 155 of the Laws of Hong Kong). (2) These 210,052,107 A Shares comprise 99,424,515 A Shares held by SDG Exploration, 71,932,142 A Shares held by SDG Non-ferrous Metal, 20,979,020 A Shares held by SDG Capital Management, 16,054,672 A Shares held by Qingdao Gold and 1,661,758 A Shares held by SDG Beijing. SDG Exploration is wholly-owned by SDG Resources Development. Each of SDG Resources Development, SDG Non-ferrous, SDG Capital Management, Qingdao Gold and SDG Beijing is wholly-owned by SDG Group Co. As such, SDG Group Co. is deemed to be interested in all the Shares held by SDG Exploration, SDG Non-ferrous, SDG Capital Management, Qingdao Gold and SDG Beijing for the purpose of the SFO. (3) SDG Exploration is wholly-owned by SDG Resources Development, and therefore SDG Resources Development is deemed to be interested in all the Shares held by SDG Exploration for the purpose of the SFO.

— 382 — SUBSTANTIAL SHAREHOLDERS

(4) Each of Jianxin (Beijing) Investment Fund Management Co., Ltd. (建信(北京)投資基金管理有限責任公司, the largest shareholder of China Structural Reform Fund Corporation Limited held as to 38.2% as of the Latest Practicable Date), Jianxin Trust Co., Ltd. (建信信託有限責任公司, sole shareholder of Jianxin (Beijing) Investment Fund Management Co., Ltd. as of the Latest Practicable Date), China Construction Bank Co., Ltd. (中國建設銀行股份有限公司, held as to 67% of Jianxin Trust Co., Ltd. as of the Latest Practicable Date), Central Huijin Investment Ltd. (中央匯金投資有限責任公司, held as to 57.1% of China Construction Bank Co., Ltd. as of the Latest Practicable Date) and China Investment Corporation (中國投資有限責任公司, sole shareholder of Central Huijin Investment Ltd.) is deemed to be interested in the Shares held by China Structural Reform Fund Corporation Limited for the propose of the SFO. The remaining approximately 58.0% of shares of China Structural Reform Fund Corporation Limited were ultimately controlled by SASAC as of the Latest Practicable Date.

(5) Each of Shenzhen China Merchant Huihe Equity Investment Fund Management Co., Ltd. (深圳市招商慧合股權投資基 金管理有限公司, as the general partner of CCT China Merchant Buyout Fund (深圳國調招商併購股權投資基金合夥企 業(有限合夥))) and China Structural Reform Fund Corporation Limited (as a limited partner held as to 75.8% as of the Latest Practicable Date) is deemed to be interested in the Shares held by CCT China Merchant Buyout Fund for the purpose of the SFO. (6) ICBC Asset Management Scheme Nominee is the asset management arm of Industrial and Commercial Bank of China Limited, which is a Chinese multinational banking company listed on both the Shanghai Stock Exchange (stock code: 601398) and the Stock Exchange (stock code: 1398).

Save as disclosed in this Prospectus, our Directors are not aware of any person who will, immediately following the completion of the Global Offering (and the offering of any additional H Shares which may be offered pursuant to the Over-allotment Option), have an interest or short position in the Shares or underlying shares of our Company which would be required to be disclosed to our Company and the Hong Kong Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO or will, directly or indirectly, be interested in 10% or more of the nominal value of any class of our share capital carrying the rights to vote in all circumstances at general meetings of our Company.

— 383 — FINANCIAL INFORMATION — GENERAL

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements included in “Appendix I — Accountant’s Report” to this Prospectus, together with the accompanying notes. In April 2017, we entered into the Share Purchase Agreement to acquire a 50% equity interest in AGB II, subscribe for the newly issued 2.1547% equity interest in MAG and acquire the MAG Assigned Debt (the “Veladero Acquisition”). The Veladero Acquisition was completed on June 30, 2017. Through this acquisition, we directly and indirectly hold a 50% equity interest in MAG, the entity that operates the Veladero Mine. Upon completion of the Veladero Acquisition, we have consolidated our 50% proportionate share of (i) the assets and liabilities of the Veladero Mine, and (ii) the production of, and expenses incurred by, the Veladero Mine into our financial statements. Given the substantial assets, liabilities and operations of the Veladero Mine, our results of operations for the year ended December 31, 2017 and the three months ended March 31, 2018 and financial position as of December 31, 2017 and March 31, 2018 differ substantially from, and may not be comparable with, previous respective periods and dates. For a discussion of the Veladero Mine’s financial information during the Track Record Period prior to our acquisition, see “Financial Information — Veladero Mine.”

Our consolidated financial information has been prepared in accordance with IFRS, which may differ in material aspects from generally accepted accounting principles in other jurisdictions. The publicly available financial information of our Group may not be directly comparable to the financial information contained in this Prospectus. Prospective investors in our H Shares should rely only on the financial, operating and other information included in this Prospectus in making investment decisions to purchase our H Shares. The following discussion contains certain forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements due to various factors, including those set forth in the sections headed “Risk Factors” and “Business” in this Prospectus.

OVERVIEW

We were the largest among gold producers listed in the PRC and/or Hong Kong that operate in the PRC with a 6.9% market share in terms of 2017 gold mine production volume in the PRC, which was 944.9 koz in 2017. We controlled and operated 12 PRC Mines as of March 31, 2018 and jointly operated the Veladero Mine with Barrick Gold on a 50-50% basis. As of March 31, 2018, our total Reserves were approximately 10,901 koz (equivalent to approximately 339.0 tonnes), according to the AAI Report and RPA Report1, among which 10,651 koz (equivalent to approximately 331.3 tonnes) were attributable to our Group. As of March 31, 2018, our total Resources were approximately 31,736 koz (equivalent to approximately 987.1 tonnes), among which 31,148 koz (equivalent to approximately 968.8 tonnes) were attributable to our Group.

1 Total Reserves and Resources for our PRC Mines are presented on a 100% basis rather than their respective percentage of ownership by us. Total Reserves and Resources for the Veladero Mine are presented on a 50% basis unless otherwise indicated.

— 384 — FINANCIAL INFORMATION — GENERAL

Since our inception, we have operated primarily in Shandong province, the largest gold producing province in China in terms of 2017 gold mine production volume, and have gradually expanded our business into the Inner Mongolia autonomous region, Gansu province and Fujian province. Our four flagship PRC Mines ranked among the ten largest gold mines in the PRC in terms of 2017 gold mine production volume. Our Jiaojia Gold Mine, Sanshandao Gold Mine, Xincheng Gold Mine and Linglong Gold Mine ranked first, second, fifth and sixth, respectively, among gold mines in China in terms of 2017 gold mine production volume, with approximately 233.8 koz, 209.1 koz, 139.7 koz and 130.6 koz, respectively. As of March 31, 2018, the Reserves and Resources of our PRC Mines were approximately 8,200 koz (equivalent to approximately 255.1 tonnes) and 27,306 koz (equivalent to approximately 849.3 tonnes), respectively, according to the AAI Report. As of the same date, the Reserves and Resources of our PRC Mines attributable to our Group were approximately 7,950 koz (equivalent to approximately 247.4 tonnes) and 26,718 koz (equivalent to approximately 831.0 tonnes), respectively. According to the AAI Report, the LOM of our four flagship PRC mines range from 4 to 13 years. Considering our track record of increasing gold reserves through exploration activities and our high-grade gold resources, AAI believes that our flagship PRC Mines have significant gold resources and strong potential for increasing gold reserves.

As the first step in our overseas expansion, on June 30, 2017 we acquired from Barrick Gold, a leading global gold company, a 50% interest in the Veladero Mine. The Veladero Mine was the largest gold mine in Argentina and in South America in terms of 2017 gold mine production volume with approximately 641.1 koz, according to the F&S Report. Through the Veladero Acquisition, we currently operate the largest overseas gold mine among PRC gold companies. Since the completion of the Veladero Acquisition and starting July 1, 2017, we have consolidated our 50% proportionate share of the assets and liabilities of the Veladero Mine, and are entitled to 50% of the products of, and recognize 50% of the expenses incurred by, the Veladero Mine. We believe that our interest in the Veladero Mine will continue to make a substantial contribution to our gold mine production volume, Resources and Reserves. As of March 31, 2018, Reserves and Resources of the Veladero Mine attributable to us were approximately 2,701 koz (equivalent to approximately 84.0 tonnes) and 4,430 koz (equivalent to approximately 137.8 tonnes), according to the RPA Report. According to the RPA Report, the LOM of Veladero Mine was approximately seven years. Moreover, RPA believes that the Veladero Mine may continue leaching of stacked ore for an additional four years after the LOM as part of LOM improvements, and the potential total gold recoverable during this period and not included in RPA’s Reserve estimate is estimated to be approximately 500 koz.

Our revenue in 2015, 2016 and 2017 and the three months ended March 31, 2017 and 2018 amounted to RMB38,774.5 million, RMB49,072.7 million, RMB51,041.3 million, RMB9,711.1 million and RMB14,166.3 million, respectively, and our gross profit amounted to RMB2,599.4 million, RMB3,505.6 million, RMB3,642.6 million, RMB860.2 million and RMB996.0 million, respectively. Our financial results for the year ended December 31, 2017 and the three months ended March 31, 2018 reflect the consolidation of Veladero Mine’s results since our acquisition on June 30, 2017.

— 385 — FINANCIAL INFORMATION — GENERAL

KEY FACTORS AFFECTING OUR RESULTS OF OPERATIONS

We believe that key factors affecting our results of operations, financial position and cash flow include the following:

Gold Price

Our revenue is primarily derived from sale of gold, which accounted for substantially all of our revenue during the Track Record Period. To a lesser extent, we generated revenue from sale of silver and other metal by-products. As such, fluctuations in metal prices directly affect our results of operations. In China, we primarily sell standard gold bullion on the Shanghai Gold Exchange, which were sold at the spot price, and we sell customized gold products to banks and other retail customers, the prices of which move in line with the spot price on the Shanghai Gold Exchange. In 2015, 2016 and 2017 and the three months ended March 31, 2017 and 2018, our sales volume of standard gold bullion and doré in the PRC amounted to approximately 5.1 Moz, 4.7 Moz, 4.3 Moz, 0.8 Moz and 1.1 Moz, respectively. For the same periods, average selling prices for our standard gold bullion and doré in the PRC was approximately RMB7,350 per ounce, RMB8,360 per ounce, RMB8,590 per ounce, RMB8,480 per ounce and RMB8,550 per ounce, respectively. Since completing the Veladero Acquisition on June 30, 2017, our share of the gold bullion from the Veladero Mine has been sold to an international broker with reference to the prevailing London spot market price.

The spot price of gold on the Shanghai Gold Exchange follows international gold prices closely. Historically, international gold prices have experienced significant fluctuations. See “Industry Overview — Gold Price.” The international price of gold is affected by numerous factors over which we have no control, such as general supply of and demand for gold, gold sales and purchases by central banks, macroeconomic factors such as inflation and interest rates, geopolitical conflicts and speculative trading activity. Moreover, the price of gold in China and in Argentina are affected by the Renminbi to U.S. dollar and Argentine Peso to U.S. dollar exchange rates, respectively. For more information on the Argentine Peso to U.S. dollar exchange rate, see “Financial Information — Veladero Mine — Key Factors Affecting Veladero Mine’s Results of Operations — Exchange Rate Fluctuations.”

Production and Sales Volume

Our results of operations are dependent on our gold sales volume. A significant portion of our standard gold bullion and all of our customized gold products are produced using gold procured from third parties. As a result, our production and sales volume also depend on our ability to secure gold supply at acceptable prices and quality. During the Track Record Period, the sales volume of standard gold bullion produced from doré we procured from third parties decreased steadily primarily due to the decreased availability of such gold supplies in line with gold price volatility and the tightening in PRC environmental laws and regulations. In recent years, we have also developed our customized gold products business.

— 386 — FINANCIAL INFORMATION — GENERAL

We sell standard gold bullion using gold produced from our gold mines. As such, our gold sales volume is also in part dependent on the Reserves at our gold mines and our production volume and schedule. As of March 31, 2018, the Reserves at our PRC Mines amounted to 8,200 koz, according to the AAI Report. Since the completion of the Veladero Acquisition and starting July 1, 2017, we have consolidated our 50% proportionate share of the assets and liabilities of the Veladero Mine, and are entitled to 50% of the products of, and recognize 50% of the expenses incurred by, the Veladero Mine. We believe that our interest in the Veladero Mine will continue to have, a material effect on our total sales volume. As of March 31, 2018, the Reserves at the Veladero Mine on a 100% basis amounted to 5,401 koz and the Reserves at the Veladero Mine are estimated to produce an average of approximately 592 koz of gold per annum for approximately seven years, according to the RPA Report.

Our production volume is affected by the speed and scale of our mining activities, the capacity and efficiency of our processing, smelting and refining operations, and the capacity and efficiency of labor and third-party contractors. Moreover, actual production volume may vary from estimates for a variety of reasons, including actual gold ore mined varying from estimates in grade, tonnage, and metallurgical and other characteristics, actual gold recovery rate in formal production lower than estimates, decreases in gold prices which may cause reserves that are currently economical to become uneconomical, and natural phenomena such as weather conditions, floods, droughts and rock falls, many of which are beyond our control.

Production Costs

For the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2017 and 2018, our cost of sales was RMB36,175.1 million, RMB45,567.1 million, RMB47,398.7 million, RMB8,850.9 million and RMB13,170.3 million, respectively. Our cost of sales primarily consists of raw materials and consumables used, depreciation and amortization and staff costs. Raw materials and consumables used primarily consist of doré and gold bullion procured from third parties, as well as explosive materials, diesel and other materials used in our operations. Staff costs refers to the salaries and benefits paid to personnel involved in our production activities. Depreciation and amortization costs are related to the depreciation of property, plant and equipment and amortization of intangible assets. Certain major components of our operating cash costs, such as mining and processing related costs, directly relate to our mining and production volume, and increases in our mining and production volume will lead to increases in such costs. Additional capital expenditure will increase our depreciation and amortization costs, which will in turn also increase our cost of sales.

A significant portion of our gold sold is produced from gold procured from third parties. Our cost of gold purchased externally, which generally changes in line with the market prices of gold, is typically higher than our cost of producing gold from our own mines. As a result, our cost per unit tends to be higher for products produced from gold purchased from third parties than products produced from our own mines. As such, the average cost per unit of our total production generally increases if we increase our purchase of gold from third parties in relation to gold from our own mines, which may have an adverse impact on our gross profit.

— 387 — FINANCIAL INFORMATION — GENERAL

Finance Costs

Our operations are highly capital intensive. During the Track Record Period, we primarily utilized bank and other loans, gold leasing contracts and proceeds from bond issuances to fund the development of our gold mines, acquire mining rights and the Veladero Acquisition, among other things. As of December 31, 2015, 2016 and 2017 and March 31, 2018, our total indebtedness amounted to RMB4,137.5 million, RMB4,407.1 million, RMB10,974.9 million and RMB10,127.2 million, respectively. We also had short-term financings through gold leasing in the amount of RMB4,777.4 million, RMB3,169.8 million, RMB5,751.4 million and RMB6,499.0 million as of December 31, 2015, 2016 and 2017 and March 31, 2018, respectively. For the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2017 and 2018, the proceeds derived from our gold leasing arrangements were RMB6,676.6 million, RMB5,381.6 million, RMB6,468.0 million, RMB2,054.8 million and RMB3,014.8 million, respectively. Our finance costs amounted to RMB451.0 million, RMB375.6 million, RMB593.5 million, RMB112.2 million and RMB209.5 million for the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2017 and 2018, respectively. We plan to continue to use these financing tools in our operations. The financing tools that we use and the different interest rates of such financing tools will continue to have an impact on our finance costs.

Hedging

During the Track Record Period, we entered into hedging transactions, such as gold forward sales contracts, to secure our revenue in view of the volatility in gold price. We recorded fair value gains on gold forward and future contracts as other gains in our consolidated statement of profit or loss. For the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2018, fair value gains on gold forward and futures contracts amounted to RMB27.2 million, RMB1.1 million, RMB11.3 million and RMB17.1 million, respectively. The fair value gains on our forward sales contracts and gold future contracts were calculated as the forward sales price of gold set forth in the forward sales contract or gold futures contracts less the prevailing market forward price of the gold we were to purchase. The effectiveness of such contracts depends on the prevailing market price and forward purchase price, among other things. When the prevailing market forward price was lower than the forward purchase price, we recorded a fair value gain on the forward sales contract or gold futures contract. As a result, the percentage of forward sales as part of our total sales, as well as the price of our forward and future contracts, will continue to have an impact on our results of operations.

Acquisitions

Since our A Share listing on the Shanghai Stock Exchange and up to the Latest Practicable Date, we completed 17 acquisitions. For more information on the major acquisitions we completed, see “History and Development.” We believe that our ability to successfully execute our acquisition strategies and integrate the operations of our acquisition targets with our existing operations have contributed to our business and results of operations. Going forward, we intend to continue to engage in strategic acquisitions. Our ability to identify quality acquisition targets, negotiate favorable terms, and integrate and add value to the acquisition target will continue to impact our business, financial condition and results of operations.

— 388 — FINANCIAL INFORMATION — GENERAL

Our Acquisition of the Veladero Mine

On June 30, 2017, we completed the Veladero Acquisition for a consideration of US$960.0 million (which was adjusted on November 30, 2017 to US$989.8 million pursuant to our Share Purchase Agreement based on certain financial metrics), through which we directly and indirectly hold a 50% equity interest in MAG, the entity that operates the Veladero Mine. For more details on our acquisition, see “History and Development — Major Acquisitions — Veladero Mine.”

To finance the Veladero Acquisition, we used the following sources of funds: (i) a US$740 million drawdown of the Syndicated Term Loan, and (ii) a US$300 million drawdown of the CDB Term Loan. The interest rate for the Syndicated Term Loan is LIBOR plus 1.25% while the interest rate of the CDB Term Loan is LIBOR plus 1.23%. As of December 31, 2017, our gearing ratio was 62.7% (or 95.6% if short-term financings through gold leasing were taken into account), which was affected significantly by the financing for the Veladero Acquisition. We intend to apply the net proceeds from the Global Offering to repay such indebtedness.

Since the completion of the Veladero Acquisition and starting July 1, 2017, we have consolidated our 50% proportionate share of the assets and liabilities of the Veladero Mine, and are entitled to 50% of the products of, and recognize 50% of the expenses incurred by, the Veladero Mine. As a result, the Veladero Acquisition has had an impact on our results of operations and financial condition. Revenue from our interest in the Veladero Mine was RMB1,728.8 million from July 1, 2017 to December 31, 2017, accounting for 3.4% of our total revenue for the year ended December 31, 2017. Cost of sales attributable to our interest in the Veladero Mine amounted to RMB1,364.4 million for the year ended December 31, 2017. For the same period, gross profit and gross profit margin in relation to our interest in the Veladero Mine was RMB364.5 million and 21.1%. Our interest expenses increased by RMB90.3 million mainly from bank borrowings for the Veladero Acquisition and we incurred a RMB64.9 million guarantee and arrangement fee for a syndicated borrowing in relation to the Veladero Acquisition.

As of December 31, 2017, we consolidated 50% of the property, plant and equipment of the Veladero Mine in the amount of RMB6,398.4 million as a result of the Veladero Acquisition. Our goodwill increased by RMB1,043.0 million in relation to the Veladero Acquisition. Our total inventories increased by RMB1,732.3 million, of which RMB1,552.6 million was attributable to our consolidation of 50% of the inventories in relation to the Veladero Mine. Primarily as a result of the Veladero Acquisition, our average inventory turnover days in 2017 increased from 8.3 days to 17.2 days. We had RMB520.2 million in restricted bank deposits in security deposits for our overseas bank loans in relation to the Veladero Acquisition and our cash and cash equivalents increased by RMB1,243.0 million mainly in relation to bank borrowings we obtained to pay for the additional consideration of the Veladero Acquisition as a result of adjustments. For more information on the effect of the Veladero Acquisition on our results of operations and financial condition, see “Results of Operations — Year Ended December 31, 2017 Compared to Year Ended December 31, 2016” and “Description of Certain Consolidated Statement of Financial Position Items”, respectively. For more information on the financial results and key factors affecting the financial results of the Veladero Mine, see “Financial Information — Veladero Mine.”

— 389 — FINANCIAL INFORMATION — GENERAL

BASIS OF PRESENTATION

Our consolidated financial statements have been prepared in accordance with IFRS and requirements of the Companies Ordinance. The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets, and financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss and investment properties, which are carried at fair value.

ADOPTION OF IFRS 9 AND IFRS 15

Effective for annual periods beginning on or after January 1, 2018, IFRS 9 “Financial Instruments” replaced the previous standard IAS 39 “Financial Instruments” and IFRS 15 “Revenue from contracts with customers” replaced the previous revenue standards IAS 18 “Revenue” and IAS 11 “Construction Contracts” and related interpretations. We have applied IFRS 9 and IFRS 15 to our financial statements beginning January 1, 2018. The impact of the adoption of IFRS 9 and IFRS 15 on our financial statements is as follows:

• Classification of financial assets. Upon the adoption of IFRS 9, we have re-classified our financial instruments from available-for-sale financial assets into the appropriate IFRS 9 categories, which are those to be measured subsequently at fair value (either through other comprehensive income (“FVOCI”), based on our assessment of the business models and the contractual terms of the cash flows apply to the financial assets held by us at the date of initial application of IFRS 9 on January 1, 2018. Other than this, the adoption of IFRS 9 did not result in any impact on the amounts reported in our consolidated financial information.

• Revenue recognition. IFRS 15 requires that revenue from contracts with customers be recognised upon the transfer of control over goods or services to the customer. As such, upon adoption, this requirement under IFRS 15 resulted in no impact to our consolidated financial information as the timing of revenue recognition on our sale of goods is unchanged.

Taking into account the above, we consider that the adoption of IFRS 9 and IFRS 15 did not have a significant impact on our financial position and performance.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our significant accounting policies, which are important for an understanding of our financial condition and results of operations, are set forth in details in Notes 2 and 4 to the Accountant’s Report in Appendix I. Critical accounting policies are those that are most important to the portrayal of our financial conditions and results of operations and require our management’s most difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.

— 390 — FINANCIAL INFORMATION — GENERAL

We continually evaluate these estimates based on our own historical experience, knowledge and assessment of current business and other conditions, our expectations regarding the future based on available information and our best assumptions, which together form our basis for making judgments about matters that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, our actual results could differ from those estimates and expectations. Some of our accounting policies require a higher degree of judgment than others in their application. We believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation of our financial statements.

Estimated Impairment of Goodwill

We test annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in Note 2.10(b) of the Accountant’s Report in Appendix I. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates stated in Note 19 of the Accountant’s Report in Appendix I.

Business Combination

The recognition of business combinations requires the excess of the purchase price of acquisitions over the net book value of assets acquired to be allocated to the assets and liabilities of the acquired entity. We make judgements and estimates in relation to the fair value allocation of the purchase price. If any unallocated portion is positive it is recognized as goodwill and if negative, it is recognized in the consolidated statement of comprehensive income.

Income Taxes

We are subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. We recognize liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made.

Impairment of Non-current Assets

Non-current assets, including property, plant and equipment, investment properties, land use rights, mining and exploration rights and intangible assets, are carried at cost less accumulated depreciation/amortization. These carrying amounts are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. In estimating the recoverable amounts of assets, various assumptions, including future cash flows to be associated with the non-current assets and discount rates, are made. If future events do not correspond to such assumptions, the recoverable amounts will need to be revised, and this may have an impact on our results of operations and financial position.

— 391 — FINANCIAL INFORMATION — GENERAL

Useful Lives of Property, Plant and Equipment

Our management determines the estimated useful lives and related depreciation charges for its property, plant and equipment. This estimate is based on the historical experience of the actual useful lives of property, plant and equipment of similar nature and functions. It could change significantly as a result of technical innovations and competitor actions in response to severe industry cycles. Management will increase the depreciation charges where useful lives are less than previously estimated lives, or it will write-off or write-down technically obsolete or non-strategic assets that have been abandoned or sold.

Proved and Probable Mineral Reserves and Resources

Proved and probable mineral reserves and resources are estimated based on professional knowledge, experience and industrial practice. Most of the time, the estimation basis on probing and estimation may not be very accurate. The estimation is updated in accordance with new technologies and new information. Any changes in estimation will have impacts on amounts of mining assets’ depreciation and mining rights’ amortization using the unit-of-production method. That may result in changes of or impacts on our development and operation program, and our operation and operating results.

Estimation of Asset Retirement Obligations (“ARO”)

Provisions are recognized for the future decommissioning and restoration of mines. The amounts of the provision recognized are the present values of the estimated future expenditures that we are expected to incur. The estimation of the future expenditures is based on current local conditions and requirements, including legal requirements, technology, price level, among other things. In addition to these factors, the present values of these estimated future expenditures are also impacted by the estimation of the economic lives of mining properties. Changes in any of these estimates will impact our operating results and financial position over the remaining economic lives of the mining properties.

Joint Operation — Investment in AGB II

We have determined that AGB II is jointly controlled by SDG Hong Kong, a wholly-owned subsidiary of the Company, and Barrick Cayman, and each of the parties has rights to the assets and obligations for the liabilities of AGB II, and is eligible to AGB II’s products and recognizes expenses incurred in the proportion of 50% each. Therefore, we defined our investment in AGB II as an investment in a joint operation.

— 392 — FINANCIAL INFORMATION — GENERAL

DESCRIPTION OF CERTAIN CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ITEMS

Our consolidated statements of profit or loss and other comprehensive income for the year ended December 31, 2017 and the three months ended March 31, 2018 includes the revenue from sales of gold bullion produced using the Veladero Mine, and expenses incurred by the Veladero Mine as to 50% since July 1, 2017 after completion of the Veladero Acquisition. As a result, our results of operations for the year ended December 31, 2017 and the three months ended March 31, 2018 differ substantially from, and may not be comparable with, previous respective periods.

The following table sets forth a summary of our consolidated statements of profit or loss and other comprehensive income for the period indicated. Our historical results presented below are not necessarily indicative of the results that may be expected for any future period.

For the year ended December 31, For the three months ended March 31,

2015 2016 2017 2017 2018

%of %of %of %of %of Amount revenue Amount revenue Amount revenue Amount revenue Amount revenue

(Renminbi in millions, except percentages) (unaudited)

Revenue ...... 38,774.5 100.0% 49,072.7 100.0% 51,041.3 100.0% 9,711.1 100.0% 14,166.3 100.0% Cost of sales...... (36,175.1) (93.3) (45,567.1) (92.9) (47,398.7) (92.9) (8,850.9) (91.1) (13,170.3) (93.0)

Gross profit ...... 2,599.4 6.7 3,505.6 7.1 3,642.6 7.1 860.2 8.9 996.0 7.0

Selling expenses ...... (34.8) (0.1) (34.4) (0.1) (31.2) (0.1) (7.4) (0.1) (8.3) (0.1) General and administrative expenses ...... (1,090.5) (2.5) (1,225.7) (2.5) (1,214.3) (2.4) (279.1) (2.9) (297.7) (2.1) Research and development costs . . (153.8) (0.3) (265.3) (0.5) (273.6) (0.5) (34.8) (0.4) (22.1) (0.1) Other income ...... 8.5 0.0 14.8 0.0 16.0 0.0 0.3 0.0 0.7 0.0 Other gains/(losses), net...... 68.6 0.2 40.0 0.1 (13.1) 0.0 (22.4) (0.2) 12.3 0.1

Profit from operations ...... 1,397.5 3.6 2,034.9 4.1 2,126.5 4.2 516.8 5.3 680.9 4.8

Finance income ...... 12.4 0.0 11.0 0.0 37.4 0.1 5.2 0.1 9.2 0.1 Finance costs ...... (451.0) (1.1) (375.6) (0.8) (593.5) (1.3) (112.2) (1.2) (209.5) (1.5) Share of profit of an associate . . . 22.9 0.1 27.7 0.1 34.0 0.1 8.0 0.1 9.0 0.1

Profit before income tax ...... 981.7 2.5 1,698.0 3.5 1,604.4 3.1 417.8 4.3 489.6 3.5

Income tax expenses...... (268.5) (0.7) (385.2) (0.8) (431.5) (0.8) (89.3) (0.9) (136.0) (1.0)

Profit for the year/period ..... 713.3 1.8 1,312.8 2.7 1,173.0 2.3 328.5 3.4 353.6 2.5

Profit attributable to: Equity shareholders of the Company ...... 647.9 1.7 1,286.6 2.7 1,118.9 2.2 317.9 3.3 327.9 2.3 Non-controlling interests..... 65.3 0.1 26.1 0.0 54.1 0.1 10.5 0.1 25.7 0.2

713.3 1.8% 1,312.8 2.7% 1,173.0 2.3% 328.5 3.4% 353.6 2.5%

— 393 — FINANCIAL INFORMATION — GENERAL

Revenue

We generate revenue primarily from our sales of gold bullion. We sell standard gold bullion on the Shanghai Gold Exchange, which are produced using (i) gold produced at our PRC Mines, and (ii) doré purchased from third parties and refined at our smelteries. We also produce and sell customized gold products using standard gold bullion purchased from the Shanghai Gold Exchange. To a lesser extent, we also sell doré and gold concentrates produced from certain of our PRC Mines without undergoing smelting and refining. In addition, we sell by-products such as silver, copper, iron and zinc. Our revenue for the year ended December 31, 2017 and the three months ended March 31, 2018 also includes the revenue generated from sales of gold bullion produced using gold from the Veladero Mine for the six months ended December 31, 2017 and the three months ended March 31, 2018. Our revenue amounted to RMB38,774.5 million, RMB49,072.7 million, RMB51,041.3 million, RMB9,711.1 million and RMB14,166.3 million in 2015, 2016 and 2017 and the three months ended March 31, 2017 and 2018, respectively. In 2015, 2016 and 2017 and the three months ended March 31, 2017 and 2018, our sales volume of standard gold bullion and doré in the PRC amounted to approximately 5.1 Moz, 4.7 Moz, 4.3 Moz, 0.8 Moz and 1.1 Moz, respectively. For the same periods, average selling prices for our standard gold bullion and doré in the PRC was approximately RMB7,350 per ounce, RMB8,360 per ounce, RMB8,590 per ounce, RMB8,480 per ounce and RMB8,550 per ounce, respectively. The following table sets forth the breakdown of our revenue by product and geographic region for the period indicated.

For the year ended December 31, For the three months ended March 31,

2015 2016 2017 2017 2018

(Renminbi in millions, except for percentages) (unaudited)

PRC Gold Standard gold bullion PRC Mines(1).... 7,007.6 18.1% 8,321.6 17.0% 8,028.9 15.7% 2,023.0 20.8% 1,994.4 14.1% Third-party doré . . 30,743.9 79.3 30,820.9 62.8 29,262.7 57.3 5,081.4 52.3 7,110.5 50.2

Subtotal...... 37,751.5 97.4 39,142.4 79.8 37,291.6 73.1 7,104.4 73.1 9,104.9 64.3

Customized gold products ...... 629.8 1.6 9,614.0 19.6 11,656.9 22.8 2,520.5 26.0 4,512.4 31.8

Subtotal ...... 38,381.3 99.0 48,756.4 99.4 48,948.5 95.9 9,624.9 99.1 13,617.3 96.1

By-products...... 316.2 0.8 248.4 0.5 263.4 0.5 68.2 0.7 45.7 0.3 Others ...... 77.0 0.2 67.8 0.1 100.6 0.2 18.0 0.2 28.8 0.2

Total PRC sales ..... 38,774.5 100.0 49,072.7 100.0 49,312.5 96.6 9,711.1 100.0 13,691.7 96.6

Argentina Gold bullion ...... — — — — 1,728.8 3.4 — — 474.6 3.4

Total ...... 38,774.5 100.0%49,072.7 100.0%51,041.3 100.0% 9,711.1 100.0%14,166.3 100.0%

(1) Includes revenue from sales of doré and other products produced from our PRC Mines.

— 394 — FINANCIAL INFORMATION — GENERAL

The table below sets forth the sales volume of our key products for the period indicated.

For the three months ended For the year ended December 31, March 31,

2015 2016 2017 2017 2018

(koz)

PRC Standard gold bullion PRC Mines ...... 955.7 1,000.8 937.4 238.7 234.3 Third-party doré ...... 4,180.2 3,679.6 3,405.7 598.9 830.3

Subtotal ...... 5,135.9 4,680.4 4,343.1 837.6 1.064.6

Customized gold products ...... 104.4 1,383.0 1,589.7 351.4 617.8

Argentina Gold bullion ...... — — 202.9 — 55.8

Cost of Sales

For the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2017 and 2018, our cost of sales was RMB36,175.1 million, RMB45,567.1 million, RMB47,398.7 million, RMB8,850.9 million and RMB13,170.3 million, respectively. Our cost of sales primarily consists of raw materials and consumables used, staff costs and depreciation of property, plant and equipment and amortization of intangible assets. Raw materials and consumables used primarily consist of doré and gold bullion procured from third parties, and to a lesser extent, explosive materials, diesel and other materials used in our operations. Staff costs refer to the salaries and benefits paid to personnel involved in our production activities. Mineral resource tax and mineral

— 395 — FINANCIAL INFORMATION — GENERAL resource compensation fees represent amounts paid to government authorities in relation to mining activities. The following table sets forth the components of our cost of sales and their respective percentages for the period indicated.

For the three months ended For the year ended December 31, March 31,

2015 2016 2017 2017 2018

(Renminbi in millions, except percentages) (unaudited)

Raw materials and consumables used Doré and standard gold bullion ...... 31,345.3 86.6% 40,267.8 88.4% 40,982.4 86.5% 7,560.1 85.4% 11,598.3 88.1% Others ...... 1,339.8 3.7% 1,567.0 3.4% 1,578.5 3.3% 316.2 3.6% 310.9 2.4% Subtotal ...... 32,685.1 90.4% 41,834.7 91.8% 42,560.9 89.8% 7,876.3 89.0% 11,909.2 90.4% Depreciation and amortization . . 1,357.4 3.8 1,396.7 3.1 2,093.9 4.4 379.2 4.4 619.7 4.7 Staff costs...... 968.1 2.7 980.3 2.2 1,167.6 2.5 254.0 2.9 299.4 2.3 Contractor costs(1) ...... 688.4 1.9 901.6 2.0 1,009.4 2.1 225.2 2.5 153.9 1.2 Mining resource tax ...... 103.5 0.3 149.2 0.3 189.2 0.4 44.0 0.5 49.2 0.4 Mineral resource compensation fee...... 153.8 0.4 84.8 0.2 85.7 0.2 — — 16.4 0.1 Others(2)...... 218.7 0.6 219.9 0.5 292.0 0.6 72.3 0.8 122.5 0.9

Total cost of sales ...... 36,175.1 100.0% 45,567.1 100.0% 47,398.7 100.0% 8,850.9 100.0% 13,170.3 100.0%

(1) Represents the costs of contractors we engage for excavation, exploration and processing activities. See “Business — Contractors.”

(2) Represents safety-related costs, transportation costs and other miscellaneous costs.

Gross Profit

For the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2017 and 2018, our gross profit was RMB2,599.4 million, RMB3,505.6 million, RMB3,642.6 million, RMB860.2 million and RMB996.0 million, respectively. For the same periods, our gross profit margin was 6.7%, 7.1%, 7.1%, 8.9% and 7.0%, respectively. During the Track Record Period, standard gold bullion produced using gold from our PRC Mines had significantly higher gross profit margins compared to standard gold bullion produced using gold procured from third parties and customized gold products. This is primarily because we are able to source gold mined and processed from our PRC Mines at a significantly lower cost to achieve a healthy profit margin, whereas we procure gold from third parties, at or with reference to relevant gold price, to produce standard gold bullion and customized gold products, and thus our gross profit margin from such sales is relatively low.

— 396 — FINANCIAL INFORMATION — GENERAL

The following table sets forth the breakdown of our gross profit and gross profit margin by product type for the period indicated.

For the three months For the year ended December 31, ended March 31,

2015 2016 2017 2017 2018

(Renminbi in millions, except for percentages) (unaudited)

PRC Gold Standard gold bullion PRC Mines(1) ...... 2,427.3 34.6% 3,350.4 40.3% 2,989.5 37.2% 772.2 38.2% 810.0 40.6% Third-party doré .... 30.7 0.1 15.4 0.1 98.7 0.3 43.5 0.9 31.3 0.4

Subtotal ...... 2,458.0 6.5 3,365.8 8.6 3,088.2 8.3 815.8 11.5 841.3 9.2

Customized gold products ...... 0.6 0.1 4.8 0.1 14.1 0.1 1.7 0.1 3.1 0.1 Subtotal...... 2,458.6 6.4 3,370.6 6.9 3,102.3 6.3 817.5 8.5 844.4 6.2 By-products ...... 140.8 44.5 130.5 52.5 138.0 52.4 41.5 60.9 27.8 61.0 Others ...... 0.0 0.0 4.5 0.0 37.8 37.6 1.2 6.6 1.4 4.9

Total PRC sales ...... 2,599.4 6.7 3,505.6 7.1 3,278.1 6.7 860.2 8.9 873.6 6.4

Argentina Gold bullion...... — — — — 364.5 21.1 — — 122.4 25.8

Total ...... 2,599.4 6.7% 3,505.6 7.1% 3,642.6 7.1% 860.2 8.9% 996.0 7.0%

(1) Includes gross profit from sales of dore´and other products produced from our PRC Mines.

Despite the relatively low margins, we engage in the gold refinery business of producing standard gold bullion from third-party doré and customized gold products primarily because the refinery business allows us to build and maintain our brand and reputation. As an accredited SGE Gold Ingots and Bars Delivery refiner and a trading member of the Shanghai Gold Exchange, we conduct high volume transactions of standard gold bullion branded with the Group’s Taishan (泰山牌) trademark on the Shanghai Gold Exchange. We also refine third-party doré into Taishan-branded standard gold bullion to increase the circulation of branded products on the market, thereby gaining market share and strengthening brand recognition. According to the F&S Report, such business practice is the industry norm in the gold mining industry.

The gross profit margin of our Argentina operations decreased from approximately 32% in 2016 and the six months ended June 30, 2017 (prior to the Veladero Acquisition) to 21.1% in the six months ended December 31, 2017, primarily because there was additional depreciation and amortization of the plant, property and equipment due to the revaluation conducted during the Veladero Acquisition. For financial information of the Veladero Mine prior to the Veladero Acquisition, see “Financial Information — Veladero Mine.” For the three months ended March 31, 2018, the gross profit margin of our Argentina operations increased to 25.8%, primarily because a larger proportion of the costs for the Veladero Mine were capitalized instead of expensed due to the increased proportion of mine development costs during the period.

— 397 — FINANCIAL INFORMATION — GENERAL

Selling Expenses

Our selling expenses mainly included service fees paid to the Shanghai Gold Exchange and transportation insurance fees. Our selling expenses were RMB34.8 million, RMB34.4 million, RMB31.2 million, RMB7.4 million and RMB8.3 million for the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2017 and 2018, respectively.

General and Administrative Expenses

Our general and administrative expenses primarily comprise staff costs, amortization and depreciation and repairs and maintenance costs. Staff costs represent the salaries and benefits of our management and administrative staff. Amortization and depreciation relate to that of office equipment and other equipment not related to production. The following table sets forth the components of our general and administrative expenses for the period indicated.

For the three months ended For the year ended December 31, March 31,

2015 2016 2017 2017 2018

(Renminbi in millions, except for percentages) (unaudited)

Staff cost ...... 654.0 60.0% 716.1 58.4% 739.1 60.9% 162.2 58.2% 178.3 59.9% Amortization and depreciation . . 129.3 11.9 172.1 14.0 162.1 13.3 36.6 13.1 37.0 12.4 Repairs and maintenance costs . . 76.3 7.0 89.5 7.3 98.8 8.2 17.1 6.1 19.2 6.4 Others(1)...... 230.8 21.2 247.9 20.2 214.3 17.6 63.2 22.6 63.2 21.3

Total ...... 1,090.5 100.0% 1,225.7 100.0% 1,214.3 100.0% 279.1 100.0% 297.7 100.0%

(1) Primarily relate to logistics expenses, insurance and business development costs.

Research and Development Costs

During the Track Record Period, we continued to invest in research and development of mining and exploration technologies and methods. For the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2017 and 2018, our research and development costs were RMB153.8 million, RMB265.3 million, RMB273.6 million, RMB34.8 million and RMB22.1 million, respectively.

Other Income

Our other income represents government subsidies, which were mainly related to our research and development projects and mining activities. For the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2017 and 2018, our other income were RMB8.5 million, RMB14.8 million, RMB16.0 million, RMB0.3 million and RMB0.7 million, respectively.

— 398 — FINANCIAL INFORMATION — GENERAL

Other Gains/(Losses), net

Our other gains/(losses) primarily included (i) fair value gains on gold forward contracts and future contracts we entered into, (ii) gains from disposal of available-for-sale financial assets, (iii) gains from disposal of subsidiaries, and (iv) net losses from disposal or write-off of property plant and equipment, land use rights and intangible assets. For the years ended December 31, 2015 and 2016 and the three months ended March 31, 2018, our other net gains were RMB68.6 million, RMB40.0 million and RMB12.3 million, respectively. For the year ended December 31, 2017 and the three months ended March 31, 2017, our other net losses were RMB13.1 million and RMB22.4 million, respectively. We entered into gold forward contracts and future contracts during the Track Record Period and recorded fair value gains on such contracts. For more information on such contracts, please see “Business — Sales and Customers” and “— Description of Certain Consolidated Statement of Financial Position Items — Financial Liabilities at Fair Value Through Profit or Loss” in this Prospectus.

Gains on disposal of available-for-sale financial assets primarily represents the interest held by one of our subsidiaries in Sdic Zhonglu Fruit Juice Co., Ltd. (SHA: 600962). We invested in this company in 2003 in support of local businesses as encouraged by the local government, and we have progressively disposed of our interest in this company, which has been loss-making in recent years. As of December 31, 2016, we no longer held any interest in Sdic Zhonglu Fruit Juice Co., Ltd. Net gains on disposal of subsidiaries represents gains from the disposal of our then-subsidiaries, Xinyi Company and Jinbo Company.

The following table sets forth a breakdown of our other gains/(losses), net for the period indicated.

For the three months ended For the year ended December 31, March 31,

2015 2016 2017 2017 2018

(Renminbi in millions) (unaudited)

Fair value gains on gold future/forward contracts ...... 27.2 1.1 11.3 (18.1) 17.1 Gains from disposal of available-for-sale financial assets . . 53.8 2.5 — — — Gains from disposal of subsidiaries . . — 58.3 — — — Net losses on disposal/write-off of property, plant and equipment, land use rights and intangible assets . . . (13.7) (22.0) (22.3) (2.7) (1.0) Others ...... 1.3 0.2 (2.1) (1.6) (3.8)

Total ...... 68.6 40.0 (13.1) (22.4) 12.3

— 399 — FINANCIAL INFORMATION — GENERAL

Finance Income

Our finance income mainly represents interest income on bank deposits, which amounted to RMB12.4 million, RMB11.0 million, RMB37.4 million, RMB5.2 million and RMB9.2 million for the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2017 and 2018, respectively.

Finance Costs

Our finance costs primarily represent interest expenses from bank borrowings, corporate bonds, realized and unrealized fair value losses on gold leasing contracts and finance costs for arranging the gold leasing contracts. We entered into gold leasing contracts during the Track Record Period and recorded realized and unrealized fair value gains or losses on such contracts. Finance costs for arranging the gold leasing contracts represent leasing fees we paid in relation to gold leasing contracts. For the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2017 and 2018, our finance costs amounted to RMB451.0 million, RMB375.6 million, RMB593.5 million, RMB112.2 million and RMB209.5 million, respectively. See “— Indebtedness” for more information on our borrowings and corporate bonds.

The following table sets forth a breakdown of our finance costs for the period indicated.

For the three months For the year ended December 31, ended March 31,

2015 2016 2017 2017 2018

(Renminbi in millions) (unaudited) Interest expenses: Bank borrowings ...... 42.5 59.7 131.8 6.8 60.0 Borrowings from related parties ...... 37.5 5.8 9.9 1.5 2.3 Borrowings from a third party ...... 24.7———— Corporate bonds ...... 153.4 169.5 169.7 42.4 42.4 Provisions: unwinding of discount from asset retirement obligations ...... — 0.9 5.0 0.3 2.3 Finance costs for arranging the gold leasing contracts . . . 168.4 128.6 134.2 22.4 42.1 Realized and unrealized fair value losses on gold leasing contracts ...... 71.7 42.3 69.9 39.0 42.7 Guarantee and arrangement fee for a syndicated borrowing ...... — — 64.9 — — Net foreign exchange losses/(gains) ...... — (0.8) 17.5 0.0 18.8

Subtotal ...... 498.2 405.9 602.9 112.4 210.5 Less: amounts capitalized on qualifying assets ...... (47.2) (30.3) (9.4) (0.2) (1.0)

Finance costs...... 451.0 375.6 593.5 112.2 209.5

Share of Profit of an Associate

Our share of profit of an associate during the Track Record Period represents our share of the profit of SDG Group Finance, in which we hold 30% equity interest. SDG Group Finance is engaged

— 400 — FINANCIAL INFORMATION — GENERAL in provision of financial services, including loans, bills, guarantee, settlement and advisory services. We recorded a profit from our investment in SDG Group Finance in the amount of RMB22.9 million, RMB27.7 million, RMB34.0 million, RMB8.0 million and RMB9.0 million for the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2017 and 2018, respectively.

Income Tax Expenses

For the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2017 and 2018, our income tax expenses were RMB268.5 million, RMB385.2 million, RMB431.5 million, RMB89.3 million and RMB136.0 million, respectively. During the Track Record Period, we were generally subject to a uniform income tax rate of 25%. Since the Veladero Acquisition, the estimated tax assessable profit of our Argentina operations is taxed at a statutory income tax rate of 35% in accordance with Argentine income tax laws. The Company and Guilaizhuang Mining were accredited as High and New Technology Enterprises during the Track Record Period and enjoyed a lower tax rate of 15% during this period. The High and New Technology Enterprise accreditation for the Company and Guilaizhuang Mining was renewed for the period from 2015 to 2017 and 2016 to 2018, respectively. Our subsidiaries, Chaihulanzi Gold and Yinan Mining, were also accredited as a High and New Technology Enterprise for a three-year period from 2016 to 2018 and 2017 to 2019, respectively and enjoyed a lower tax rate of 15% commencing 2016 and 2017.

In addition to the applicable enterprise income tax rate, our effective income tax rates may be affected by amounts relating to income not subject to taxation, expenses not deductible for taxation purposes and utilization of previously unrecognized tax losses, among other things. Our income not subject to taxation primarily relates to proceeds from the disposal of our interest in our then-subsidiaries, Xinyi Company and Jinbo Company, and our investment in an associate, SDG Group Finance. Our expenses not deductible for taxation purposes primarily relate to business development costs that exceeded the allowed amount and provisions for production safety expenses that were not utilized. Our weighted average applicable tax rate was approximately 27%, 23%, 27%, 21% and 28% for the years ended December 31, 2015, 2016 and 2017 and for the three months ended March 31, 2017 and 2018, respectively. As of the Latest Practicable Date, we fulfilled all of our tax obligations and we are not aware of any outstanding or potential disputes with relevant tax authorities.

Non-controlling Interests

Non-controlling interests primarily represent minority interests in certain of our subsidiaries, namely, Jinzhou Group, Zhongbao Mining, Penglai Mining, Fujian Yuanxin and Guilaizhuang Mining, which own and operate our Jinzhou Gold Mine, Xihe Zhongbao Gold Mine, Penglai Gold Mine, Fujian Yuanxin Gold Mine and Guilaizhuang Gold Mine, respectively. See “History and Development — Major Acquisitions.” For the years ended December 31, 2015, 2016 and 2017 and for the three months ended March 31, 2017 and 2018, profits attributable to our non-controlling interests amounted to RMB65.3 million, RMB26.1 million, RMB54.1 million, RMB10.5 million and RMB25.7 million, respectively.

— 401 — FINANCIAL INFORMATION — GENERAL

RESULTS OF OPERATIONS

Three Months Ended March 31, 2018 Compared to Three Months Ended March 31, 2017

Revenue

Our revenue increased by 45.9% from RMB9,711.1 million for the three months ended March 31, 2017 to RMB14,166.3 million for the three months ended March 31, 2018, primarily because of (i) an increase in revenue from our customized gold products and standard gold bullion produced using doré procured from third parties, and (ii) for the three months ended March 31, 2018, our revenue included the revenue from sale of gold bullion produced using gold from the Veladero Mine.

PRC

Revenue generated from our PRC operations increased from RMB9,711.1 million for the three months ended March 31, 2017 to RMB13,529.5 million for the three months ended March 31, 2018, primarily because (i) an increase in sales of customized gold products and standard gold bullion produced using doré procured from third parties, and (ii) an increase in average selling prices in line with the overall increase in gold prices during this period, partially offset by a decrease in sales of standard gold bullion produced from our PRC Mines.

Overseas

Revenue generated from our Argentina operations was RMB636.8 million for the three months ended March 31, 2018, which reflects the revenue from sale of gold bullion.

Cost of Sales

Our cost of sales increased by 48.8% from RMB8,850.9 million for the three months ended March 31, 2017 to RMB13,170.3 million for the three months ended March 31, 2018, primarily because (i) our raw materials and consumables cost increased in line with the increase in sales of customized gold products and standard gold bullion produced using doré procured from third parties and the overall increase in gold prices during this period, and (ii) for the three months ended March 31, 2018, we consolidated 50% of the cost of sales attributable to the Veladero Mine, which amounted to RMB352.2 million.

Gross Profit and Gross Profit Margin

Our gross profit increased by 15.8% from RMB860.2 million for the three months ended March 31, 2017 to RMB996.0 million for the three months ended March 31, 2018. The increase in gross profit was primarily because our gross profit for the three months ended March 31, 2018 includes RMB122.4 million in gross profit from sales of gold bullion produced using gold from the Veladero Mine. Moreover, our gross profit from PRC operations increased reflecting the increase in sales of customized gold products and standard gold bullion produced using doré procured from third parties.

— 402 — FINANCIAL INFORMATION — GENERAL

Our gross profit margin decreased from 8.9% for the three months ended March 31, 2017 to 7.0% for the three months ended March 31, 2018 primarily because our sales of customized gold products and standard gold bullion produced using doré procured from third parties accounted for a larger portion of our total revenue, and such products have relatively lower gross profit margins.

Selling Expenses

Our selling expenses increased by 12.2% from RMB7.4 million for the three months ended March 31, 2017 to RMB8.3 million for the three months ended March 31, 2018, primarily due to an increase in transportation expenses in line with the overall increase in product sales.

General and Administrative Expenses

Our general and administrative expenses increased by 6.8% from RMB279.1 million for the three months ended March 31, 2017 to RMB297.7 million for the three months ended March 31, 2018, primarily due to an increase in staff costs as a result of (i) an rise in salary levels in part due to our decision to increase base salary levels instead of certain award payables and (ii) we consolidated 50% of the general and administrative expenses of MAG for the three months ended March 31, 2018. For details, see “— Description of Certain Consolidated Statement of Financial Position Items — Trade and Other Payables — Salaries and Staff Welfare Payable.”

Research and Development Costs

Our research and development costs decreased by 36.5% from RMB34.8 million for the three months ended March 31, 2017 to RMB22.1 million for the three months ended March 31, 2018, primarily because certain research and development projects conducted in 2017 were completed by the first quarter of 2018.

Other Income

Our other income were relatively low at RMB0.3 million for the three months ended March 31, 2017 and RMB0.7 million for the three months ended March 31, 2018.

Other Gains/(Losses), Net

Our other losses for the three months ended March 31, 2017 was RMB22.4 million, primarily reflecting the fair value losses on gold future and forward contracts during the period. Our other gains for the three months ended March 31, 2018 was RMB12.3 million, primarily reflecting the fair value gains on gold future and forward contracts.

Finance Income

Our finance income increased by 76.9% from RMB5.2 million for the three months ended March 31, 2017 to RMB9.2 million for the three months ended March 31, 2018, primarily due to an increase in finance income generated from an increase in bank deposits.

— 403 — FINANCIAL INFORMATION — GENERAL

Finance Costs

Our finance costs increased by 86.7% from RMB112.2 million for the three months ended March 31, 2017 to RMB209.5 million for the three months ended March 31, 2018, primarily due to a RMB53.2 million increase in interest expenses from bank borrowings for the Veladero Acquisition and a RMB19.7 million increase in finance costs for arranging gold leasing contracts.

Share of Profit of an Associate

Our share of profit of an associate increased by 12.5% from RMB8.0 million for the three months ended March 31, 2017 to RMB9.0 million for the three months ended March 31, 2018, primarily because the profit of our associate, SDG Group Finance, increased during the period.

Income Tax Expenses

Our income tax expenses increased by 52.3% from RMB89.3 million for the three months ended March 31, 2017 to RMB136.0 million for the three months ended March 31, 2018, and our weighted average applicable tax rate increased from 21% for the three months ended March 31, 2017 to 28% for the three months ended March 31, 2018 primarily reflecting a RMB71.8 million increase in profit before tax, as well as (i) a RMB9.5 million increase in expenses not deductible for taxation purposes, and (ii) a RMB7.4 million increase in tax losses for which no deferred income tax asset has been recognized.

Profit for the Period

For the reasons described above, our profit for the period increased by 7.6% from RMB328.5 million for the three months ended March 31, 2017 to RMB353.6 million for the three months ended March 31, 2018.

Non-controlling Interests

Our non-controlling interests increased from RMB10.5 million for the three months ended March 31, 2017 to RMB25.7 million for the three months ended March 31, 2018, primarily due to the overall increase in profits of the relevant subsidiaries.

Year Ended December 31, 2017 Compared to Year Ended December 31, 2016

Revenue

Our revenue increased by 4.0% from RMB49,072.7 million for the year ended December 31, 2016 to RMB51,041.3 million for the year ended December 31, 2017, primarily because of an increase in revenue from our customized gold products and for the six months ended December 31, 2017, our revenue included the revenue from sale of gold bullion produced using gold from the Veladero Mine.

— 404 — FINANCIAL INFORMATION — GENERAL

PRC

Revenue generated from our PRC operations remained relatively stable at RMB49,072.7 million for the year ended December 31, 2016 and RMB49,312.5 million for the year ended December 31, 2017, primarily due to (i) an increase in sales of customized gold products, and (ii) an increase in average selling prices in line with the overall increase in gold prices during this period, partially offset by a decrease in sales of standard gold bullion produced from our PRC Mines and dore´procured from third parties.

Overseas

Revenue generated from our Argentina operations was RMB1,728.8 million for the six months ended December 31, 2017, which reflects the revenue from sale of gold bullion.

Cost of Sales

Our cost of sales increased by 4.0% from RMB45,567.1 million for the year ended December 31, 2016 to RMB47,398.7 million for the year ended December 31, 2017, primarily because (i) our raw materials and consumables cost increased in line with the increase in sales of customized gold products and the overall increase in gold prices during this period, (ii) for the six months ended December 31, 2017, we consolidated 50% of the cost of sales attributable to the Veladero Mine, which amounted to RMB1,364.4 million, and (iii) we had a RMB697.2 million increase in depreciation and amortization primarily because the amount of our depreciable fixed assets increased.

Gross Profit and Gross Profit Margin

Our gross profit increased by 3.9% from RMB3,505.6 million for the year ended December 31, 2016 to RMB3,642.6 million for the year ended December 31, 2017. Our gross profit margin remained steady at 7.1%. The increase in gross profit was primarily because our gross profit for the year ended December 31, 2017 includes RMB364.5 million in gross profit from sales of gold bullion produced using gold from the Veladero Mine.

Selling Expenses

Our selling expenses decreased by 9.3% from RMB34.4 million for the year ended December 31, 2016 to RMB31.2 million for the year ended December 31, 2017, primarily due to a decrease in transportation insurance fees.

General and Administrative Expenses

Our general and administrative expenses remained relatively stable at RMB1,225.7 million for the year ended December 31, 2016 and RMB1,214.3 million for the year ended December 31, 2017.

— 405 — FINANCIAL INFORMATION — GENERAL

Research and Development Costs

Our research and development costs increased by 3.1% from RMB265.3 million for the year ended December 31, 2016 to RMB273.6 million for the year ended December 31, 2017, primarily because of our increased investment in research and development of intelligent and automated mining, among other things.

Other Income

Our other income increased by 8.1% from RMB14.8 million for the year ended December 31, 2016 to RMB16.0 million for the year ended December 31, 2017, primarily because we received one-off government grants relating to intelligent mining research and development in 2017.

Other Gains/(Losses), Net

We had other net gains of RMB40.0 million in 2016, which primarily represented RMB58.3 million in gains from disposal of our then-subsidiaries, Xinyi Company and Jinbo Company, in 2016, offset by RMB22.0 million in net losses on disposal or write-off of property, plant and equipment, land use rights and intangible assets. We had other net losses of RMB13.1 million in 2017, which primarily represented RMB22.3 million in net losses on disposal or write-off of property, plant and equipment, land use rights and intangible assets, offset by RMB11.3 million in fair value gains on gold futures and forward contracts.

Finance Income

Our finance income increased significantly from RMB11.0 million for the year ended December 31, 2016 to RMB37.4 million for the year ended December 31, 2017, primarily because of the significant increase in finance income generated from an increase in bank deposits.

Finance Costs

Our finance costs increased by 58.0% from RMB375.6 million for the year ended December 31, 2016 to RMB593.5 million for the year ended December 31, 2017, primarily because of a RMB90.3 million increase in interest expense mainly from bank borrowings for the Veladero Acquisition and a RMB64.9 million guarantee and arrangement fee for a syndicated borrowing in relation to the Veladero Acquisition.

Share of Profit of an Associate

Our share of profit of an associate increased by 22.7% from RMB27.7 million for the year ended December 31, 2016 to RMB34.0 million for the year ended December 31, 2017, primarily because the profit of our associate, SDG Group Finance, increased during the periods.

— 406 — FINANCIAL INFORMATION — GENERAL

Income Tax Expenses

Our income tax expenses increased by 12.0% from RMB385.2 million for the year ended December 31, 2016 to RMB431.5 million for the year ended December 31, 2017 and our weighted average applicable tax rate increased from 23% in 2016 to 27% in 2017 primarily due to (i) a RMB33.3 million increase as a result of the difference in overseas tax rates of our overseas entities involved in our Argentina operations and in tax rates of certain subsidiaries, (ii) a RMB12.3 million increase in expenses not deductible for taxation purposes, and (iii) a RMB10.5 million increase in tax losses for which no deferred income tax asset has been recognized.

Profit for the Year

For the reasons described above, our profit for the year decreased by 10.6% from RMB1,312.8 million for the year ended December 31, 2016 to RMB1,173.0 million for the year ended December 31, 2017.

Non-controlling Interests

Profits attributable to non-controlling interests increased significantly from RMB26.1 million for the year ended December 31, 2016 to RMB54.1 million for the year ended December 31, 2017, primarily due to the overall increase in profits of the relevant subsidiaries.

Year Ended December 31, 2016 Compared to Year Ended December 31, 2015

Revenue

Our revenue increased by 26.6% from RMB38,774.5 million for the year ended December 31, 2015 to RMB49,072.7 million for the year ended December 31, 2016, primarily due to (i) an increase in sales of customized gold products as we developed more customer demand for customized gold products, and (ii) the average selling price for standard gold bullion and customized gold products increased from 2015 to 2016 in line with the increase in gold prices during this period, partially offset by a decrease in revenue from sales of by-products, particularly iron.

Cost of Sales

Our cost of sales increased by 26.0% from RMB36,175.1 million for the year ended December 31, 2015 to RMB45,567.1 million for the year ended December 31, 2016, primarily due to (i) a RMB9,149.6 million increase in costs of raw materials and consumables used in line with the increase in gold prices and increased procurement of standard gold bullion to produce customized gold products in order to meet our customers’ increased demand, and (ii) a RMB213.2 million increase in contractor costs in line with the increase in production volume, partially offset by a RMB69.0 million decrease in mineral resource compensation fees as such fees were replaced in part by mineral resource taxes due to changes in relevant laws and regulations.

— 407 — FINANCIAL INFORMATION — GENERAL

Gross Profit and Gross Profit Margin

Our gross profit increased by 34.9% from RMB2,599.4 million for the year ended December 31, 2015 to RMB3,505.6 million for the year ended December 31, 2016. The increase in gross profit primarily reflects an increase in sales of our standard gold bullion produced using gold from our PRC Mines. Our gross profit margin increased from 6.7% in 2015 to 7.1% in 2016 primarily because gross profit margins of our standard gold bullion produced using gold from our PRC Mines increased in line with the increase in gold price during this period.

Selling Expenses

Our selling expenses remained relatively stable at RMB34.8 million in 2015 and RMB34.4 million in 2016.

General and Administrative Expenses

Our general and administrative expenses increased by 12.4% from RMB1,090.5 million for the year ended December 31, 2015 to RMB1,225.7 million for the year ended December 31, 2016, primarily because of (i) a RMB62.0 million increase in staff costs due to an increase in headcount as we expanded our business operations, and (ii) a RMB42.8 million increase in amortization and depreciation because the amount of our depreciable fixed assets increased.

Research and Development Costs

Our research and development costs increased by 72.5% from RMB153.8 million for the year ended December 31, 2015 to RMB265.3 million for the year ended December 31, 2016, primarily because of our increased investment in research and development of deep underground and deep-sea mining, among other things.

Other Income

Our other income increased by 74.1% from RMB8.5 million for the year ended December 31, 2015 to RMB14.8 million for the year ended December 31, 2016, primarily because we received a one-off government grant relating to intelligent mining research and development in 2016.

Other Gains/(Losses), Net

Our other gains decreased from RMB68.6 million in 2015 to RMB40.0 million in 2016, primarily because we recorded (i) a RMB51.3 million decrease in gains from the disposal of available-for-sale financial assets, and (ii) a RMB26.1 million decrease in fair value gains on our gold forward and futures contracts, partially offset by the RMB58.3 million in gains from disposal of our then-subsidiaries, Xinyi Company and Jinbo Company, in 2016.

— 408 — FINANCIAL INFORMATION — GENERAL

Finance Income

Our finance income decreased by 11.3% from RMB12.4 million for the year ended December 31, 2015 to RMB11.0 million for the year ended December 31, 2016, primarily because our cash at bank decreased during this period.

Finance Costs

Our finance costs decreased by 16.7% from RMB451.0 million for the year ended December 31, 2015 to RMB375.6 million for the year ended December 31, 2016 due to (i) a RMB39.9 million decrease in finance costs for arranging gold leasing contracts, (ii) a RMB31.7 million decrease in interest expenses in relation to bank borrowings from related parties, (iii) a RMB29.4 million decrease in realized and unrealized fair value losses on gold leasing contracts, and (iv) we incurred interest expenses related to borrowings from a third party of RMB24.7 million in 2015, which we did not incur in 2016 because we repaid such borrowings in 2015, partially offset by a RMB16.1 million increase in interest expenses from corporate bonds as we issued RMB1,300.0 million in corporate bonds on March 30, 2015. See “— Indebtedness — Corporate Bonds.”

Share of Profit of an Associate

Our share of profit of an associate increased by 21.0% from RMB22.9 million for the year ended December 31, 2015 to RMB27.7 million for the year ended December 31, 2016, primarily because profits of our associate, SDG Group Finance, increased during this period.

Income Tax Expenses

Our income tax expenses increased by 43.5% from RMB268.5 million for the year ended December 31, 2015 to RMB385.2 million for the year ended December 31, 2016 primarily due to a RMB716.3 million increase in our profit before income tax. Our weighted average applicable tax rate decreased from approximately 27% in 2015 to 23% in 2016 primarily due to (i) a RMB20.6 million decrease in tax losses for which no deferred income tax asset has been recognized, (ii) a RMB13.8 million increase in additional expenses allowable for tax deduction, and (iii) the lower tax rate of 15% that our subsidiary Chaihulanzi Gold enjoyed as it was recognized as a High and New Technology Enterprise in 2016.

Profit for the Year

For the reasons discussed above, our profit for the year increased by 84.1% from RMB713.3 million for the year ended December 31, 2015 to RMB1,312.8 million for the year ended December 31, 2016.

— 409 — FINANCIAL INFORMATION — GENERAL

Non-controlling Interests

Profits attributable to non-controlling interests decreased from RMB65.3 million for the year ended December 31, 2015 to RMB26.1 million for the year ended December 31, 2016 primarily because we acquired an additional 49% of the equity shares of Penglai Mining in September 2016 that resulted in our 100% ownership in Penglai Mining.

DESCRIPTION OF CERTAIN CONSOLIDATED STATEMENT OF FINANCIAL POSITION ITEMS

Our consolidated statement of financial position as of December 31, 2017 and March 31, 2018 includes our 50% proportionate share of the assets and liabilities of the Veladero Mine as of the same date. As a result, our financial position as of December 31, 2017 and March 31, 2018 differs substantially from, and may not be comparable with, previous respective dates.

The following table sets forth a summary of our consolidated statement of financial position as of the date indicated.

As of As of December 31, March 31, 2015 2016 2017 2018 (Renminbi in millions)

Non-current assets Property, plant and equipment . 12,911.8 13,512.9 21,110.9 21,108.3 Investment properties...... 207.9 234.5 226.7 224.6 Land use rights ...... 244.6 305.1 339.8 343.4 Intangible assets ...... 9,282.2 11,117.9 12,014.8 11,871.6 Goodwill ...... 120.7 120.7 1,126.7 1,088.8 Investment in an associate .... 343.7 371.5 399.2 408.2 Available-for-sale financial assets ...... 4.2 2.0 2.0 — Financial assets at fair value through other comprehensive income ...... — — — 2.0 Inventories...... — — 143.9 141.2 Deferred income tax assets.... 167.2 161.7 152.4 165.0 Restricted bank deposits ..... — — 520.2 — Other non-current assets...... 1,001.4 494.3 832.0 924.0 Total non-current assets..... 24,283.7 26,320.5 36,868.7 36,277.0

— 410 — FINANCIAL INFORMATION — GENERAL

As of As of December 31, March 31, 2015 2016 2017 2018 (Renminbi in millions)

Current assets Inventories...... 691.5 1,370.0 2,958.4 3,355.3 Trade and other receivables . . . 483.7 333.4 720.8 789.7 Prepaid income tax ...... 30.8 38.9 31.2 23.1 Restricted bank deposits...... 109.5 143.9 149.7 147.0 Cash and cash equivalents .... 497.3 1,159.8 2,402.8 2,473.7 Total current assets ...... 1,812.7 3,045.9 6,263.0 6,788.8

Current liabilities Trade and other payables ..... 2,560.6 2,994.9 3,927.4 3,731.1 Current income tax liabilities. . 81.8 47.1 177.2 225.7 Borrowings ...... 731.0 1,028.7 2,883.1 3,329.5 Current portion of other non-current liabilities ...... — — 13.0 8.5 Financial liabilities at fair value through profit or loss . 4,777.4 3,169.8 5,751.4 6,499.0 Total current liabilities ..... 8,150.8 7,240.4 12,752.2 13,793.9

Net current liabilities ...... 6,338.1 4,194.5 6,489.2 7,005.0 Total assets less current liabilities ...... 17,945.6 22,126.0 30,379.5 29,271.9 Non-current liabilities Borrowings ...... 3,406.5 3,378.4 8,091.8 6,797.7 Deferred income tax liabilities . 2,069.0 1,992.8 4,135.4 3,997.3 Deferred revenue ...... 21.6 16.1 17.5 17.3 Provisions for asset retirement obligation ...... — 30.0 570.6 547.4 Other non-current liabilities . . . 26.7 19.1 70.4 69.3 Total non-current liabilities .. 5,523.8 5,436.3 12,885.8 11,429.0

Property, Plant and Equipment

Our property, plant and equipment consist of land and buildings, construction in progress, plant, machinery and equipment and mining structures. As of December 31, 2015, 2016 and 2017 and March 31, 2018, we had property, plant and equipment of RMB12,911.8 million, RMB13,512.9 million, RMB21,110.9 million and RMB21,108.3 million, respectively. The increase in our property, plant and equipment from December 31, 2015 to December 31, 2016 was primarily due to increases in construction in progress as we expanded our mining operations during this period. As of December 31,

—411— FINANCIAL INFORMATION — GENERAL

2017, our property, plant and equipment increased significantly primarily because we consolidated 50% of the property, plant and equipment of the Veladero Mine as a result of the Veladero Acquisition in the amount of RMB6,398.4 million and we had additional construction in progress for our PRC operations in the amount of RMB2,109.3 million.

Investment Properties

Our investment properties primarily consist of the our headquarters building, an office space we own in Beijing and other properties owned by certain of our subsidiaries. As of December 31, 2015, we had investment properties in the amount of RMB207.9 million. Our investment properties increased to RMB234.5 million as of December 31, 2016 primarily because property, plant and equipment of RMB32.0 million were transferred to investment properties as such properties were being leased to third parties instead of being used for our own operations. Our investment properties decreased to RMB226.7 million as of December 31, 2017 primarily due to depreciation charges of RMB11.0 million. Our investment properties decreased to RMB224.6 million as of March 31, 2018 primarily due to depreciation charges of RMB2.1 million.

Land Use Rights

Our land use rights primarily represent prepaid operating lease payments for leasehold land in China. As of December 31, 2015, we had land use rights in the amount of RMB244.6 million. Our land use rights increased to RMB305.1 million as of December 31, 2016 primarily due to additions of land use rights of RMB87.2 million in relation to the acquisition of equity interests in Guilaizhuang Mining and Penglai Mining, which held land use rights. Our land use rights increased to RMB339.8 million as of December 31, 2017 primarily due to a RMB45.2 million increase in land use rights in relation to Xihe Zhongbao Gold Mine and Wangershan mine area of Jiaojia Gold Mine. Our land use rights increased to RMB343.4 million as of March 31, 2018 primarily due to a RMB6.5 million increase in land use rights in relation to amounts paid to extend the effective period of land use rights for certain properties of Linglong Gold Mine.

Intangible Assets

Our intangible assets primarily include mining and exploration rights, as well as intellectual property rights, including patent rights, software licenses and trademarks. Mining rights are stated at cost less accumulated amortization and impairment losses and are amortized based on the units of production method whereby the denominator is the proven and probable reserves and, where appropriate, the portion of mineral resources considered to be probable of economic extraction. Exploration rights are stated at cost less impairment losses. Cost of the exploration rights are transferred to mining rights upon the government’s approval of the mining permit.

— 412 — FINANCIAL INFORMATION — GENERAL

Our intangible assets increased from RMB9,282.2 million as of December 31, 2015 to RMB11,117.9 million as of December 31, 2016 primarily due to additions of RMB2,418.7 million in mining and exploration rights in relation to our Jiaojia Gold Mine and Sanshandao Gold Mine and mining and exploration rights held by Guilaizhuang Mining and Penglai Mining through our acquisition of certain equity interests in these subsidiaries, partially offset by amortization charges of RMB586.4 million. Our intangible assets increased to RMB12,014.8 million as of December 31, 2017, primarily due to additions of RMB1,507.9 million in relation to the exploration rights we acquired in relation to our Qingdao Gold Mine, Xinli mine area of Sanshandao Gold Mine, Qianchen-Shangyangjia mine area of Jiaojia Gold Mine, partially offset by amortization charges of RMB615.3 million. Our intangible assets decreased to RMB11,871.6 million as of March 31, 2018 primarily due to amortization charges of RMB153.2 million.

Goodwill

Our goodwill of RMB120.7 million as of December 31, 2015, 2016 and 2017 was in relation to our acquisition of equity interest in Chaihulanzi Gold and Guilaizhuang Mining. As of December 31, 2017, our goodwill of RMB1,006.0 million was in relation to the Veladero Acquisition, which decreased to RMB968.1 million as of March 31, 2018 due to exchange rate fluctuations. See “History and Development — Major Acquisitions” for details. The goodwill on the Veladero Acquisition was determined based on a purchase price allocation (the “PPA”) as performed by an independent valuer. The key assumptions used in the PPA valuation included the expected life of mine of 12 years, gold prices ranging from US$1,307/oz to US$1,332/oz over the span of the life of mine and a discount rate of 6.5%. Our Directors revisited the assumptions used in the PPA valuation and concluded that there were no indicators of impairment on the aforesaid goodwill.

The recoverable amount of US$1,151.5 million (approximately RMB7,800.7 million at the then applicable exchange rate) has been determined based on its estimated FVLCD, which has been determined to be greater than the carrying amounts by US$114.0 million (approximately RMB772.3 million at the then applicable exchange rate), which amounted to US$1,037.5 million (approximately RMB7,028.4 million at the then applicable exchange rate). The key assumption and estimates used in determining the FVLCD are related to commodity prices, discount rates, net asset value multiple for gold assets, operating costs, exchange rates, capital expenditure, the LOM production profile and continued license to operate. In addition, assumptions are related to observable market evaluation metrics, including identification of comparable entities, and associated market values per ounce and per pound of reserves and/or resource as well as the valuation of resources beyond what is included in LOM plans. A 2.5 percentage points increase in estimated discount rate, a 5% decrease in estimated gold prices or a decrease of 3.3 years in LOM will cause the recoverable amount to exceed the carrying amount.

— 413 — FINANCIAL INFORMATION — GENERAL

The following table sets forth the impact of reasonable possible changes in each of the key assumptions, with all other variables held constant, of goodwill impairment testing of Veladero Mine as of the dates indicated.

Recoverable amount of the cash-generating unit Possible changes of key assumptions exceeding its carrying amount As of December 31, 2017 As of March 31, 2018 (Renminbi in thousands)

Pre-tax discount rate increase by one percentage point 429,631 286,982 Pre-tax discount rate increase by two percentage points 135,219 8,648 Life of mine decrease by 1 year 710,129 547,659 Life of mine decrease by 2 years 463,952 308,834 Gold price decrease by 1% 598,017 448,256 Gold price decrease by 3% 303,046 173,177

Reasonably possible changes in key assumptions would not lead to impairment as of December 31, 2017 and March 31, 2018, respectively.

Investment in an Associate

During the Track Record Period, we held a 30% equity interest in SDG Group Finance. Our investment in SDG Group Finance represents our share of net assets of SDG Group Finance, which increased from RMB343.7 million as of December 31, 2015 to RMB371.5 million as of December 31, 2016 and further to RMB399.2 million as of December 31, 2017 and further to RMB408.2 million as of March 31, 2018.

Available-for-sale Financial Assets

Available-for-sale financial assets was RMB4.2 million, RMB2.0 million and RMB2.0 million as of December 31, 2015, 2016 and 2017. As of December 31, 2015, we held RMB2.1 million in equity securities in Sdic Zhonglu Fruit Juice Co., Ltd. We invested in this company in 2003 in support of local businesses as encouraged by the local government. Our interest in this company decreased to nil as of December 31, 2016 due to our disposal of our interest and fair value changes in our interest. Our available-for-sale financial assets were reclassified to financial assets at fair value through other comprehensive income as a result of the adoption of IFRS 9 beginning January 1, 2018.

Financial Assets at Fair Value Through Other Comprehensive Income

Our available-for-sale financial assets were reclassified to financial assets at fair value through other comprehensive income as a result of the adoption of IFRS 9 beginning January 1, 2018.

— 414 — FINANCIAL INFORMATION — GENERAL

Other Non-current Assets

Our other non-current assets during the Track Record Period primarily consist of prepayments for construction in progress and equipment and prepayments for mining and exploration rights. Prepayments for mining and exploration rights are recorded as other non-current assets while legal procedures in relation to the procurement of such rights are in process. Our other non-current assets decreased from RMB1,001.4 million as of December 31, 2015 to RMB494.3 million as of December 31, 2016 primarily due to a RMB467.9 million decrease in prepayments for mining and exploration rights. Our other non-current assets increased significantly to RMB832.0 million as of December 31, 2017 primarily due to a RMB444.6 million increase in prepayments for mining and exploration rights. Our other non-current assets increased to RMB924.0 million primarily due to an increase in prepayments for construction in progress and equipment purchases.

Inventories

Our inventories consist of (i) raw materials used in our mining, processing and smelting operations, (ii) work in progress, which primarily are gold concentrates and doré which have not undergone smelting and refining, (iii) finished goods, which are primarily gold bullion, and (iv) others, which represents mining supplies related to the operation of the Veladero Mine and certain trees owned by Jinzhou Group for a gold mine park project that was later terminated. The following table sets forth the components of our inventories as of the date indicated and the average inventory turnover days for the period indicated.

As of As of December 31, March 31, 2015 2016 2017 2018 (Renminbi in millions)

Raw materials ...... 128.3 1,238.6 1,817.9 2,274.5 Work in progress ...... 399.2 8.2 37.5 198.4 Finished goods...... 132.3 91.5 1,216.8 993.4 Others ...... 31.8 31.6 30.1 30.2 Total ...... 691.5 1,370.0 3,102.3 3,496.5 Less: non-current portion ...... — — (143.9)(2) (141.2)(2) 691.5 1,370.0 2,958.4 3,355.3 Average inventory turnover days (1) ..... 6.8 8.3 17.2 22.5

(1) Average inventories equal inventories at the beginning of the period plus inventories at the end of the period, divided by two. Average inventory turnover days equal average inventories divided by cost of sales and multiplied by the number of days in the period. (2) The non-current portion of inventories represent ore that we do not expect to process in the next 12 months.

— 415 — FINANCIAL INFORMATION — GENERAL

Our inventories increased significantly from RMB691.5 million as of December 31, 2015 to RMB1,370.0 million as of December 31, 2016 primarily due to a RMB1,110.3 million increase in raw materials because we increased our production plans in anticipation of increased demand in early 2017, partially offset by a RMB391.0 million decrease in work in progress. Our average inventory turnover days remained relatively stable at 6.8 and 8.3 days in 2015 and 2016. Our inventories increased significantly to RMB3,102.3 million as of December 31, 2017 primarily due to the consolidation of RMB1,552.6 million in inventories in relation to the Veladero Mine as a result of the Veladero Acquisition. Primarily as a result of our consolidation of inventories in relation to the Veladero Mine, our average inventory turnover days for the year ended December 31, 2017 increased to 17.2 days. Our inventories further increased to RMB3,496.5 million as of March 31, 2018 and our inventory turnover days increased to 22.5 days for the three months ended March 31, 2018 primarily due to an increase in raw materials in anticipation of increased demand and sales of our products, offset by a decrease in finished goods as we paid back certain leased gold and made more gold sales during this period when gold prices increased.

As of July 31, 2018, RMB3,119.9 million, or 89.2% of our inventories as of March 31, 2018 were subsequently consumed.

Trade and Other Receivables

Our trade and other receivables primarily represents (i) trade receivables, which related to our sale of by-products, such as silver, copper or zinc, (ii) prepayments to third parties and related parties, which are primarily prepayments made for the procurement of equipment and machinery, (iii) deposits, which are primarily guarantees we paid for our futures and forward contracts, (iv) amounts due from related parties, which primarily represent lease payments due to us from related parties, and (v) payments on behalf of third parties, which primarily represented electricity payments we made on behalf of local villages in the vicinity of certain of our PRC Mines prior to the Track Record Period. The amounts due from related parties are non-trade in nature and will continue to be incurred after Listing. Details of the relevant transactions are disclosed in “Connected Transactions.”

— 416 — FINANCIAL INFORMATION — GENERAL

The following table sets forth the components of our trade and other receivables as of the date indicated.

As of As of December 31, March 31, 2015 2016 2017 2018 (Renminbi in millions)

Trade receivables Related parties ...... 5.6 7.6 5.7 16.3 Third parties ...... 24.9 19.8 116.4 148.1 Sub-total ...... 30.4 27.3 122.1 164.4 Less: provision for impairment of trade receivables...... (5.5) (6.1) (5.7) (5.7) Net trade receivables ...... 24.9 21.2 116.4 158.7 Notes receivables ...... 7.9 4.1 19.1 3.7 Prepayments to related parties ...... 2.8 3.0 2.2 3.4 Prepayments to third parties...... 307.3 113.0 173.1 191.8 Net prepayments...... 310.0 116.0 175.3 195.2 Amounts due from related parties .... 50.0 61.9 65.4 14.2 Deposits...... 69.9 97.0 78.3 79.2 Payment on behalf of third parties .... 52.3 41.2 37.1 40.9 Advances to staff ...... 3.7 8.4 9.1 4.2 Others ...... 59.1 50.0 74.9 96.0 Sub-total ...... 235.0 258.6 264.8 234.5 Less: provision for impairment of other receivables...... (107.0) (97.4) (89.4) (88.0) Net other receivables ...... 127.9 161.2 175.4 146.5 VAT recoverable...... 13.0 30.9 228.5 279.4 Dividends receivable from the associate...... — — 6.2 6.2 Total ...... 483.7 333.4 720.8 789.7

Trade Receivables

Our trade receivables primarily relate to our sale of by-products, such as silver, copper and zinc, and dore´and other products. We settle payments with certain customers of by-products on a monthly basis. Our trade receivable levels were relatively low during the Track Record Period because we sold a significant majority of our gold bullion on the Shanghai Gold Exchange spot market. Payment for our products are made on the day of the sale and the Shanghai Gold Exchange usually settles our accounts in the following day. We also sold gold bullion products to banks and other companies and retail customers, where we typically require payment prior to delivery of goods.

— 417 — FINANCIAL INFORMATION — GENERAL

Our trade receivables remained relatively stable at RMB30.4 million as of December 31, 2015 and RMB27.3 million as of December 31, 2016. As of December 31, 2017, our trade receivables increased substantially to RMB122.1 million mainly because there was a timing difference between our sale of gold bullion from the Veladero Mine and receipt of payment for such sales in our bank accounts, which resulted in trade receivables of RMB108.0 million that was subsequently settled in full in January 2018. As of March 31, 2018, our trade receivables increased to RMB164.4 million primarily reflecting a RMB31.7 million increase in trade receivables from third parties in relation to customers for doré and other products produced from our PRC Mines. Our average trade receivable turnover days remained consistently low at 0.6, 0.2, 0.5 days and 0.9 days in 2015, 2016 and 2017 and the three months ended March 31, 2018.

The following table sets forth the aging analysis and turnover days of our trade receivables as of the date indicated.

As of As of December 31, March 31, 2015 2016 2017 2018 (Renminbi in millions)

Within one year ...... 21.9 14.8 114.8 156.9 One to two years ...... 1.2 5.1 0.1 0.5 Two to three years ...... 1.5 1.1 0.1 0.0 Over three years ...... 5.9 6.4 7.2 7.0 Total ...... 30.4 27.3 122.1 164.4

Average trade receivables turnover days(1) ...... 0.6 0.2 0.5 0.9

(1) Average trade receivables equal trade receivables at the beginning of the period plus trade receivables at the end of the period, divided by two. Average trade receivables turnover days equals average trade receivables divided by revenue and then multiplied by the number of days in the period.

We have implemented a customer credit assessment system to evaluate the creditworthiness and financial condition of our customers. We may require customers to provide us with bank credit scores and historical financial statements, and we may conduct in-person evaluations of our customers’ operations as necessary. We review our trade receivables balance on a quarterly basis and follow up with customers with past due trade receivables. We recognize trade receivables as impaired in the event that the counterparty is bankrupt, deceased or if we believe that the recoverability of such amounts is low. Impairment of trade receivables are reviewed by our finance department and submitted to our head accountant, general manager and Board for approval.

— 418 — FINANCIAL INFORMATION — GENERAL

We did not have trade receivables that were past due but not impaired as of December 31, 2015, 2016 and 2017 and March 31, 2018. Our trade receivables that were past due and impaired amounted to RMB22.2 million, RMB26.8 million, RMB14.1 million and RMB14.5 million as of December 31, 2015, 2016 and 2017 and March 31, 2018, respectively. The past due and impaired trade receivables mainly relate to customers of by-products which were in unexpectedly difficult economic situations. We record provisions for impaired receivables based on an aging schedule for such receivables. Our Directors consider that a portion of such impaired receivables are not expected to be recovered and thus we recorded provisions of RMB5.5 million, RMB6.1 million, RMB5.7 million and RMB5.7 million as of December 31, 2015, 2016 and 2017 and March 31, 2018, respectively.

As of July 31, 2018, RMB139.9 million, or 85.1% of our trade receivables as of March 31, 2018 were subsequently settled.

Net Prepayments

Our net prepayments primarily relate to (i) prepayments we made to third parties, which were mainly suppliers for the procurement of equipment and machinery and contractors, and (ii) prepayments we made to related parties for the procurement of electricity. Our prepayments to third parties decreased from RMB307.3 million as of December 31, 2015 to RMB113.0 million as of December 31, 2016 because we increasingly procured from domestic suppliers that generally have less prepayment requirements. Our prepayments to third parties increased to RMB173.1 million as of December 31, 2017 primarily because we had RMB31.8 million in prepayments for procurement of raw materials in relation to the Veladero Mine and RMB23.2 million in prepayments for professional parties’ fees in relation to the Listing. Our prepayment to third parties increased to RMB191.8 million as of March 31, 2018 reflecting the increase in raw material procurement and prepayments for professional parties’ fees in relation to the Listing. Our prepayments to related parties remained relatively stable at RMB2.8 million and RMB3.0 million as of December 31, 2015 and 2016 and decreased to RMB2.2 million as of December 31, 2017 and increased to RMB3.4 million as of March 31, 2018 primarily reflecting the increase in raw material procurement from related parties.

Net Other Receivables

Our net other receivables increased from RMB127.9 million as of December 31, 2015 to RMB161.2 million as of December 31, 2016 primarily due to (i) a RMB27.1 million increase in deposits reflecting the balance of gold forward and futures contracts we held at the time, and (ii) a RMB11.9 million increase in amounts due from related parties, partially offset by a RMB11.1 million decrease in payments on behalf of third parties. Our net other receivables remained relatively stable at RMB175.4 million as of December 31, 2017. Our net other receivables decreased to RMB146.5 million as of March 31, 2018 as we received certain leasing fees and deposits from our related parties.

— 419 — FINANCIAL INFORMATION — GENERAL

We recorded provisions for impairment of other receivables of RMB107.0 million, RMB97.4 million, RMB89.4 million and RMB88.0 million as of December 31, 2015, 2016 and 2017 and March 31, 2018, respectively. The impairment we recorded primarily relate to (i) the electricity payments we made on behalf of local villages in the vicinity of certain of our PRC Mines prior to the Track Record Period, and (ii) certain loans we provided to third party companies prior to the Track Record Period, both of which have not been recovered. We did not provide any loans to third party companies during the Track Record Period.

VAT Recoverable

Our VAT recoverable was RMB13.0 million, RMB30.9 million, RMB228.5 million and RMB279.4 million as of December 31, 2015, 2016 and 2017 and March 31, 2018, respectively. The increase in our VAT recoverable from RMB30.9 million as of December 31, 2016 to RMB228.5 million as of December 31, 2017 was primarily attributable to (i) a RMB43.1 million increase in VAT recoverables related to our PRC operations, and (ii) the consolidation of RMB154.5 million in VAT recoverables of the Veladero Mine. The Directors consider that such amounts of our VAT in China are recoverable because they are credits that can be used against future VAT payables and supported by special VAT invoices. Moreover, the Directors consider that the VAT of the Veladero Mine, which primarily represent VAT paid to export gold, are recoverable as such VAT may be claimed by way of cash or netted against other tax payables when the sale is completed.

Restricted Bank Deposits

Our restricted bank deposits primarily consist of security deposits set aside for our environmental restoration and governance fund, issuance of notes and a syndicated bank borrowings. As of December 31, 2015, 2016 and 2017 and March 31, 2018, our restricted bank deposits (current and non-current) amounted to RMB109.5 million, RMB143.9 million, RMB669.9 million and RMB147.0 million, respectively. The significant increase in our restricted bank deposits as of December 31, 2017 was primarily because we had RMB520.2 million in security deposits for our overseas bank loans in relation to the Veladero Acquisition. Our restricted bank deposits decreased to RMB147.0 million as of March 31, 2018 primarily because our security deposits for such bank loans were refunded to us as we made partial repayment of such loans.

— 420 — FINANCIAL INFORMATION — GENERAL

Cash and Cash Equivalents

Our cash and cash equivalents consist of short-term deposits with banks and other financial institutions and cash on hand. The following table sets forth the components of our cash and cash equivalents as of the date indicated.

As of As of December 31, March 31, 2015 2016 2017 2018 (Renminbi in millions)

Short-term deposits with banks ...... 367.3 1,026.0 1,803.8 1,719.6 Short-term deposits with a financial institution ...... 129.6 133.4 598.5 753.7 Cash on hand ...... 0.4 0.4 0.5 0.4 Total ...... 497.3 1,159.8 2,402.8 2,473.7

Our cash and cash equivalents increased significantly from RMB497.3 million as of December 31, 2015 to RMB1,159.8 million mainly due to unutilized proceeds at bank from our 2016 private placement. The significant increase to RMB2,402.8 million as of December 31, 2017 was primarily because we had bank deposits from payment of sales of gold bullion from the Veladero Mine at year end and to repay certain loans that will mature in early 2018. Our cash and cash equivalents remained relatively stable at RMB2,473.7 million as of March 31, 2018.

Trade and Other Payables

Our trade and other payables primarily represents (i) trade payables, which relate to payables to raw materials and equipment suppliers and contractors, (ii) notes payable, which relate to notes provided to our suppliers of equipment and machinery and raw materials, (iii) amounts due to related parties, which primarily represent payables for the purchase of property, plant and equipment and mining rights, (iv) deposits received from contractors, which primarily represent warranty fees that we withhold from contractors during the warranty period, (v) purchase consideration payable relating to our acquisition of Xihe Zhongbao Gold Mine, (vi) customer deposits and receipts in advance, which primarily represent to advance payments from customers that purchase customized gold products, and (vii) interest payable, which primarily represent the accrued interest for bonds we issued.

— 421 — FINANCIAL INFORMATION — GENERAL

The following table sets forth the components of our trade and other payables as of the date indicated for the period indicated.

As of As of December 31, March 31, 2015 2016 2017 2018 (Renminbi in millions)

Trade payables Third parties...... 413.0 398.1 949.4 925.8 Related parties ...... 37.0 25.8 12.7 25.0 Subtotal ...... 450.0 423.9 962.1 950.8 Payable for purchase of property, plant and equipment and mining rights . . . 720.3 570.3 800.1 685.1 Notes payable ...... 440.4 515.9 388.9 436.9 Amounts due to related parties...... 83.1 503.4 517.1 512.5 Deposits received from contractors . . . 206.5 260.3 267.6 259.1 Purchase consideration payable ...... 191.8 191.8 191.8 191.8 Dividends payable ...... 39.3 34.5 188.9 117.6 Salaries and staff welfare payable .... 69.1 95.9 149.4 99.0 Customer deposits and receipts in advance ...... 135.7 171.4 127.2 — Contract liabilities ...... — — — 230.5 Interest payable ...... 104.8 100.3 110.6 95.0 Other taxes payable ...... 46.7 72.8 135.6 71.1 Others ...... 72.7 54.2 88.1 81.7 Total ...... 2,560.6 2,994.9 3,927.4 3,731.1

Trade Payables

Our trade payables amounted to RMB450.0 million, RMB423.9 million, RMB962.1 million and RMB950.8 million as of December 31, 2015, 2016 and 2017 and March 31, 2018, respectively. We generally settle balances with our suppliers and certain of our contractors on a monthly basis. During the Track Record Period, our trade payables remained relatively stable at RMB450.0 million as of December 31, 2015 and RMB423.9 million as of December 31, 2016. As of December 31, 2017, our trade payables increased to RMB962.1 million, primarily because payables for transactions with third parties increased to RMB949.4 million from RMB398.1 million as of December 31, 2016 due to longer settlement periods as we strengthened management of cash flows. Our trade payables as of March 31, 2018 remained relatively stable at RMB950.8 million. Our average trade payable turnover days relatively stable at 5.2 days, 3.5 days, 5.3 days and 6.5 days in 2015, 2016 and 2017 and the three months ended March 31, 2018.

— 422 — FINANCIAL INFORMATION — GENERAL

The following table sets forth the aging analysis and turnover days of our trade payables as of the date indicated.

As of March As of December 31, 31, 2015 2016 2017 2018 (Renminbi in millions)

Less than one year ...... 420.5 399.3 942.3 916.8 One to two years ...... 14.2 13.7 8.4 20.0 Two to three years ...... 9.8 2.0 1.7 3.9 Over three years ...... 5.6 9.0 9.7 10.1 Total ...... 450.0 423.9 962.1 950.8

Average trade payable turnover days (1) . . 5.2 3.5 5.3 6.5

(1) Average trade payables equal trade payables at the beginning of the period plus trade payables at the end of the period, divided by two. Average trade payable turnover days equals average trade payables divided by cost of sales and then multiplied by the number of days in the period.

As of July 31, 2018, RMB518.1 million, 54.5% of our trade payables as of March 31, 2018 have been subsequently settled.

Notes Payable

Our notes payables primarily relate to notes provided to our suppliers of equipment and machinery, raw materials and construction services. Our notes payables increased from RMB440.4 million as of December 31, 2015 to RMB515.9 million as of December 31, 2016, and decreased to RMB388.9 million as of December 31, 2017 mainly depending on the levels of procurement at the time. Our notes payable increased to RMB436.9 million as of March 31, 2018 primarily because we had increased notes payable to suppliers of construction services to manage our cash flow.

Amounts Due to Related Parties

Our amounts due to related parties are non-trade in nature, primarily representing payables for purchase of property, plant and equipment and mining rights. Amounts due to related parties increased from RMB83.1 million as of December 31, 2015 to RMB503.4 million as of December 31, 2016 primarily in relation to our acquisition of the Dongfeng mine area of Linglong Gold Mine from our Controlling Shareholder and acquisition of the Xinli mine area of Sanshandao Gold Mine. Our amounts due to related parties increased slightly to RMB517.1 million as of December 31, 2017. Our amount due to related parties remained relatively stable at RMB512.5 million as of March 31, 2018. The amounts due to related parties will continue to be incurred after Listing. Details of the relevant transactions are disclosed in “Connected Transactions.”

— 423 — FINANCIAL INFORMATION — GENERAL

Salaries and Staff Welfare Payable

Our salaries and staff welfare payable amounted to RMB69.1 million, RMB95.9 million, RMB149.4 million and RMB99.0 million as of December 31, 2015, 2016 and 2017 and March 31, 2018, respectively. The increase in salaries and staff welfare payable from 2015 to 2016 reflected a growth in our headcount and business scale. The increase to RMB149.4 million as of December 31, 2017 was mainly because we consolidated RMB94.7 million in salaries and staff welfare payable of the Veladero Mine pursuant to the Veladero Acquisition, offset by a RMB41.2 million decrease in salaries and staff welfare payable of our PRC operations which was primarily because there was a RMB30.0 million reversal of staff payables recorded in relation to awards payable for an employee performance competition in 2015 to incentivize gold production and sales. We made the decision to provide for such staff payables in March 2015, as reflected in our financial statements at year end in 2015. The amount of RMB30.0 million was determined as a percentage of our employees’ performance-based salary. Due to the strong performance of our employees and as we had the discretion to terminate payment of such awards, we decided not to pay out such one-off awards in 2016 and instead increased the base salary levels of our employees in 2017 as a long-term and recurring incentive. In addition, the decrease in salaries and staff welfare payable was in part because Guilaizhuang Gold Mine recorded a one-off salaries and staff welfare payable as of year-end in 2016 as a result of temporary suspension of its operations, and such staff cost payables were later paid in 2017. Our salaries and staff welfare payable decreased to RMB99.0 million as of March 31, 2018 primarily because certain bonuses of the Veladero Mine that were payable at year end in 2017 were paid in the first quarter of 2018.

Dividends Payable

Our dividends payable remained relatively stable at RMB39.3 million and RMB34.5 million as of December 31, 2015 and 2016, respectively. Our dividends payable increased significantly to RMB188.9 million as of December 31, 2017 primarily because we declared dividends in 2017 which have not been paid by year-end. Our dividends payable decreased to RMB117.6 million as of March 31, 2018 because we paid RMB71.2 million in dividends to the shareholders during the three months ended March 31, 2018.

Customer Deposits and Receipts in Advance

Our customer deposits and receipts in advance primarily represent advance payments from customers that purchase customized gold products. Customer deposits and receipts in advance increased from RMB135.7 million as of December 31, 2015 to RMB171.4 million as of December 31, 2016 in line with the growth of our customized gold products business during the Track Record Period. Customer deposits and receipts in advance were RMB127.2 million as of December 31, 2017, reflecting a lower level of customer deposits at the time. Our customer deposits and receipts in advance were reclassified to contract liabilities as a result of the adoption of IFRS 15 beginning January 1, 2018.

— 424 — FINANCIAL INFORMATION — GENERAL

Contract Liabilities

Our customer deposits and receipts in advance were reclassified to contract liabilities as a result of the adoption of IFRS 9 beginning January 1, 2018. Our customer deposits and receipts in advance increased from RMB127.2 million as of December 31, 2017 to contract liabilities of RMB230.5 million, primarily reflecting an increase in deposits we received from customers for products for which we have not yet delivered goods.

Financial Liabilities at Fair Value Through Profit or Loss

Financial liabilities at fair value through profit or loss primarily represents the fair value of our gold leasing contracts, gold forward contracts and futures contracts. During the Track Record Period, we leased gold from PRC commercial banks to supplement our working capital. The fair value of the leased gold is based on their current ask prices on the market. As part of the gold leasing arrangements, we usually enter into forward purchase contracts under which we agree to purchase the same amount of gold, at the same price and on the maturity date of the lease to repay the leased gold. In addition, we entered into hedging transactions to forward sell the gold mined from our PRC Mines. We also entered into forward agreements when we procure doré from third parties and when we sell customized gold products to secure prices in view of the volatility in gold prices. The fair value of such contracts are marked to market. For more information, see “Business — Sales and Customers — Hedging Transactions.” As of December 31, 2015, 2016 and 2017 and March 31, 2018, the fair value of our financial liabilities at fair value through profit or loss was RMB4,777.4 million, RMB3,169.8 million, RMB5,751.4 million and RMB6,499.0 million, respectively.

Other Non-current Liabilities

Our other non-current liabilities was RMB26.7 million, RMB19.1 million, RMB70.4 million and RMB69.3 million as of December 31, 2015, 2016 and 2017 and March 31, 2018, respectively. Our other non-current liabilities in 2015 and 2016 primarily consisted of payable for mining rights. In 2017, we had RMB61.4 million consideration payable for the acquisition of Jinxing Mine. See “History and Development — Major Acquisitions — Jinxing Gold Mine (金興金礦).”

LIQUIDITY AND CAPITAL RESOURCES

To date, we have financed our operations primarily through cash from our operations, corporate bonds, bank and other borrowings and gold leasing. Our cash requirements primarily relate to our mining, processing, smelting and refining activities, business and asset acquisition and capital expenditures. Our cash and cash equivalents consist of deposits with banks and a financial institution and cash on hand, which amounted to RMB2,473.7 million as of March 31, 2018.

— 425 — FINANCIAL INFORMATION — GENERAL

Cash Flows

The following table sets forth a summary of our consolidated cash flow statement for the period indicated.

For the three months For the year ended December 31, ended March 31, 2015 2016 2017 2017 2018 (unaudited) (Renminbi in millions)

Net cash generated from operating activities ...... 2,422.5 2,808.4 3,850.5 786.9 673.7 Net cash used in investing activities ...... (1,615.5) (1,851.6) (11,135.3) (672.9) (455.9) Net cash (used in)/generated from financing activities...... (776.2) (295.1) 8,498.4 484.7 (120.2) Net increase in cash and cash equivalents...... 30.8 661.8 1,213.5 598.6 97.6 Cash and cash equivalents at the beginning of the year/period . . . 466.5 497.3 1,159.8 1,159.8 2,402.8 Exchange gains/(losses) on cash and cash equivalents ...... — 0.8 29.5 (0.0) (26.7) Cash and cash equivalents at the end of the year/period ...... 497.3 1,159.8 2,402.8 1,758.3 2,473.7

Net Cash Generated From Operating Activities

Our net cash generated from operating activities for the three months ended March 31, 2018 was RMB673.7 million, reflecting cash generated from operations of RMB812.1 million, income tax paid of RMB147.6 million and interest received of RMB9.2 million. The RMB812.1 million cash generated from operations reflected profit before income tax of RMB489.6 million, as adjusted for depreciation of property, plant and equipment and investment properties of RMB498.0 million, finance costs of RMB190.7 million, and amortization of RMB158.8 million, partially offset by fair value gains on gold future and forward contracts of RMB17.1 million. Net cash from operating activities also reflected (i) a RMB448.7 million increase in inventories primarily due to an increase in raw materials reflecting the increased demand and sales of our products, and (ii) a RMB80.2 million increase in trade and other receivables primarily reflecting the increase in trade receivables from third parties in relation to customers for doré and other products produced from our PRC Mines.

Our net cash generated from operating activities for the year ended December 31, 2017 was RMB3,850.5 million, reflecting cash generated from operations of RMB4,230.5 million, income tax paid of RMB417.5 million and interest received of RMB37.4 million. The RMB4,230.5 million cash generated from operations reflected profit before income tax of RMB1,604.4 million, as adjusted for

— 426 — FINANCIAL INFORMATION — GENERAL depreciation of property, plant and equipment and investment properties of RMB1,607.3 million, amortization of RMB648.7 million and finance costs of RMB576.0 million, partially offset by finance income of RMB37.4 million and share of profit of an associate of RMB34.0 million. Net cash from operating activities also reflected a RMB348.8 million increase in trade and other receivables mainly due to (i) an increase in trade receivables mainly because there was a timing difference between our sale of gold bullion from the Veladero Mine and receipt of payment for such sales in our bank accounts, and (ii) other receivable items mainly representing export tax rebates we received from Argentine authorities in relation to our Argentina operations, partially offset by a RMB182.6 million increase in trade and other payables primarily due to an increase in trade payables due to longer settlement periods as we strengthened management of cash flows.

Our net cash generated from operating activities for the year ended December 31, 2016 was RMB2,808.4 million, reflecting cash generated from operations of RMB3,295.8 million, income tax paid of RMB498.4 million and interest received of RMB11.0 million. The RMB3,295.8 million cash generated from operations reflected profit before income tax of RMB1,698.0 million, as adjusted for depreciation of property, plant and equipment and investment properties of RMB949.5 million, amortization of RMB619.5 million and finance costs of RMB376.4 million, partially offset by net gains on disposal of subsidiaries of RMB58.3 million and share of profit of an associate of RMB27.7 million. Net cash from operating activities also reflected (i) a RMB299.1 million increase in trade and other payables primarily due to an increase in trade payables for transactions with related parties in relation to prepayments related to transfer of mining rights, and (ii) a RMB136.9 million decrease in trade and other receivables primarily due to a decrease in prepayments to third parties because we increasingly procured from domestic suppliers that generally have less prepayment requirements, partially offset by a RMB678.5 million increase in inventories as our raw materials increased significantly because we increased our production plans in anticipation of increased demand in early 2017.

Our net cash generated from operating activities for the year ended December 31, 2015 was RMB2,422.5 million, reflecting cash generated from operations of RMB2,788.9 million, income tax paid of RMB378.9 million and interest received of RMB12.4 million. The RMB2,788.9 million cash generated from operations reflected profit before income tax of RMB981.7 million, as adjusted for depreciation of property, plant and equipment and investment properties of RMB854.7 million, amortization of RMB632.0 million and finance costs of RMB451.0 million, partially offset by net gains on disposal of available-for-sale investment of RMB53.8 million. Net cash from operating activities also reflected a RMB240.6 million decrease in trade and other payables primarily due to a decrease in trade payables for transactions with third parties because we settled certain of such trade payables, partially offset by a RMB242.0 million decrease in trade and other receivables primarily due to a decrease in trade receivables from third parties due to our increased efforts in trade receivable collection.

Net Cash Used in Investing Activities

Our net cash used in investing activities for the three months ended March 31, 2018 was RMB455.9 million, primarily representing RMB970.1 million in purchases of property, plant and equipment, partially offset by a RMB523.0 million decrease in restricted bank deposits primarily because our security deposits for overseas bank loans relating to the Veladero Acquisition were refunded to us as we made partial repayment of such loans.

— 427 — FINANCIAL INFORMATION — GENERAL

Our net cash used in investing activities for the year ended December 31, 2017 was RMB11,135.3 million, primarily representing (i) RMB6,704.6 million in payment for the Veladero Acquisition, (ii) RMB2,269.5 million in purchases of property, plant and equipment due to the increases in construction in progress as we expanded our mining operations, (iii) RMB1,620.6 million in purchases of intangible assets, and (iv) a RMB526.1 million increase in restricted bank deposits primarily because we maintained bank deposits in our PRC bank accounts as security for our overseas bank loans in relation to the Veladero Acquisition.

Our net cash used in investing activities for the year ended December 31, 2016 was RMB1,851.6 million, primarily representing (i) RMB1,791.1 million in purchases of property, plant and equipment due to the increases in construction in progress as we expanded our mining operations, and (ii) RMB94.5 million in purchase of land use rights in relation to our acquisition of equity interests in Guilaizhuang Mining and Penglai Mining, which held land use rights.

Our net cash used in investing activities for the year ended December 31, 2015 was RMB1,615.5 million, primarily representing RMB1,612.1 million in purchases of property, plant and equipment due to the increases in construction in progress as we expanded our mining operations, partially offset by RMB60.6 million in proceeds from disposal of available-for-sale financial assets, which represented the equity securities in Sdic Zhonglu Fruit Juice Co., Ltd.

Net Cash (Used in)/Generated From Financing Activities

Our net cash used in financing activities for the three months ended March 31, 2018 was RMB120.2 million, primarily representing RMB2,309.9 million in settlement of gold leasing arrangements, RMB611.0 million in partial redemption of the corporate bond issued on March 30, 2015, and RMB522.4 million in repayments of bank borrowings, partially offset by RMB3,014.8 million in proceeds derived from gold leasing arrangements and RMB735.1 million in proceeds from bank borrowings.

Our net cash generated from financing activities for the year ended December 31, 2017 was RMB8,498.4 million, primarily representing (i) RMB10,015.9 million of proceeds from bank borrowings, which primarily represent bank borrowings for the Veladero Acquisition, and (ii) RMB6,468.0 million in proceeds derived from gold leasing arrangements, partially offset by (i) RMB3,956.2 million in settlement of gold leasing arrangements, (ii) RMB3,090.7 million in repayments of bank borrowings, and (iii) RMB1,410.0 million in repayments of borrowings from related parties.

Our net cash used in financing activities for the year ended December 31, 2016 was RMB295.1 million, primarily representing (i) RMB7,031.5 million in settlement of gold leasing arrangements, (ii) RMB1,255.5 million in repayments of borrowings from related parties, including SDG Group Finance, partially offset by (i) RMB5,381.6 million in proceeds derived from gold leasing arrangements, (ii) RMB1,637.6 million in capital injections from our Controlling Shareholder, and (iii) RMB1,130.0 million in borrowings from related parties, including SDG Group Finance.

— 428 — FINANCIAL INFORMATION — GENERAL

Our net cash used in financing activities for the year ended December 31, 2015 was RMB776.2 million, primarily representing (i) RMB6,692.8 million in settlement of gold leasing arrangements, (ii) RMB1,521.8 million in repayments of bank borrowings, (iii) RMB1,150.0 million in repayments of borrowings from related parties, including SDG Group Finance, and (iv) RMB1,000.0 million in settlement of borrowings from a third party, which represents repayment of an equity financing transaction we engaged in with ICBC Credit Suisse Investment Management Co., Ltd. in 2014, partially offset by (i) RMB6,676.6 million in proceeds derived from gold leasing arrangements, (ii) RMB1,300.0 million in proceeds from issuance of corporate bonds, and (iii) RMB1,256.8 million in proceeds from bank borrowings.

Working Capital and Net Current Liabilities

We recorded net current liabilities of RMB6,338.1 million, RMB4,194.5 million, RMB6,489.2 million and RMB7,005.0 million as of December 31, 2015, 2016 and 2017 and March 31, 2018, respectively. Our net current liabilities position is primarily because we obtain long-term and short-term financing, such as gold leasing, to finance our acquisition of long-term assets, such as mining and exploration rights and property, plant and equipment for our mining and production operations. As a gold company, we have been able to obtain gold leasing contracts with relatively low interest rates, ranging from 2.4% to 4.85% compared to bank borrowings during the Track Record Period. Similar to a number of other PRC and Hong Kong listed gold companies, we have significant long-term assets and believe a net current liabilities position is common in our industry due to the nature of our business. During the Track Record Period, there has not been any change in our cost structure.

Our standard gold bullion are primarily sold on the spot market and settled immediately and we require customers of customized gold products to make payments prior to delivery. We generally maintain low trade receivables as a result. On the other hand, we generally settle balances with our suppliers and certain of our contractors on a monthly basis and record trade payables. As a result, we have a highly liquid operating position with strong cash flow from operations. We believe our net current liabilities position has not adversely affect our liquidity because (i) we have been able to roll over our short-term financing, and (ii) we have significant amounts of unutilized banking facilities to satisfy our working capital needs. As of July 31, 2018, we had banking facilities of RMB16,246.3 million, of which RMB10,645.0 million are unutilized. See “Risk Factors — Risks Relating to Our Business and Industry — We had net current liabilities as of December 31, 2015, 2016 and 2017 and March 31, 2018.”

— 429 — FINANCIAL INFORMATION — GENERAL

The following table sets forth the details of our current assets and current liabilities as of the date indicated.

As of As of As of December 31, March 31, July 31, 2015 2016 2017 2018 2018 (unaudited) (Renminbi in millions)

Current assets Inventories ...... 691.5 1,370.0 2,958.4 3,355.3 3,107.7 Trade and other receivables...... 483.7 333.4 720.8 789.7 728.6 Prepaid income tax ...... 30.8 38.9 31.2 23.1 27.5 Restricted bank deposits ...... 109.5 143.9 149.7 147.0 139.1 Cash and cash equivalents...... 497.3 1,159.8 2,402.8 2,473.7 2,949.1 Total current assets ...... 1,812.7 3,045.9 6,263.0 6,788.8 6,952.1 Current liabilities Trade and other payables...... 2,560.6 2,994.9 3,927.4 3,731.1 3,452.2 Current income tax liabilities .... 81.8 47.1 177.2 225.7 23.8 Borrowings ...... 731.0 1,028.7 2,883.1 3,329.5 4,644.2 Current portion of non-current liabilities ...... — — 13.0 8.5 — Financial liabilities at fair value through profit or loss...... 4,777.4 3,169.8 5,751.4 6,499.0 6,068.3 Total current liabilities ...... 8,150.8 7,240.4 12,752.2 13,793.8 14,188.4 Net current liabilities ...... 6,338.1 4,194.5 6,489.2 7,005.0 7,236.4

Our net current liabilities decreased from RMB6,338.1 million as of December 31, 2015 to RMB4,194.5 million as of December 31, 2016 primarily due to (i) a RMB1,607.6 million decrease in financial liabilities at fair value through profit or loss, primarily reflecting the change in fair value of our gold leasing, forward and futures contracts, (ii) a RMB678.5 million increase in inventories as our raw materials increased significantly because we increased our production plans in anticipation of increased demand in early 2017, (iii) a RMB662.5 million increase in cash and cash equivalents, partially offset by (i) a RMB434.3 million increase in trade and other payables due to a RMB420.4 million increase in amounts due to related parties, (ii) a RMB297.7 million increase in borrowings primarily reflecting the RMB400.0 million corporate bonds we issued in 2016, and (iii) a RMB150.3 million decrease in trade and other receivables as a result of due to a decrease in prepayments to third parties because we increasingly purchased equipment and machinery from domestic suppliers that generally have less prepayment requirements.

Our net current liabilities increased from RMB4,194.5 million as of December 31, 2016 to RMB6,489.2 million as of December 31, 2017 primarily due to (i) a RMB2,581.6 million increase in financial liabilities at fair value through profit or loss, primarily reflecting the change in fair value of our gold leasing contracts, (ii) a RMB1,854.4 million increase in borrowings primarily in relation to our corporate bonds issued in September 2013 becoming due within one year, and (iii) a RMB932.5

— 430 — FINANCIAL INFORMATION — GENERAL million increase in trade and other payables primarily due to an increase in trade payables to third parties as we had longer settlement periods as we strengthened our management of cash flows partially offset by (i) a RMB1,588.4 million increase in inventories primarily due to the consolidation of RMB1,552.6 million in inventories in relation to the Veladero Mine as a result of the Veladero Acquisition, and (ii) a RMB1,243.0 million increase in cash and cash equivalents primarily because we had bank deposits from payment of sales of gold bullion from the Veladero Mine at year end and to repay certain loans that will mature in early 2018.

Our net current liabilities increased from RMB6,489.2 million as of December 31, 2017 to RMB7,005.0 million as of March 31, 2018 primarily due to (i) a RMB747.6 million increase in financial liabilities at fair value through profit or loss, primarily reflecting the change in fair value of our gold leasing contracts, (ii) a RMB446.4 million increase in borrowings, partially offset by (i) a RMB396.9 million increase in inventories primarily due to an increase in raw materials reflecting the anticipated increased demand and sales of our products, and (ii) a RMB196.3 million decrease in trade and other payables mainly due to a decrease in payable for purchase of property, plant and equipment and mining rights, and a decrease in salaries and staff welfare payables.

Our net current liabilities increased from RMB7,005.0 million as of March 31, 2018 to RMB7,236.4 million as of July 31, 2018, primarily due to (i) a RMB1,314.7 million increase in borrowings, primarily due to an increase in short-term borrowings to supplement our working capital, and (ii) a RMB247.6 million decrease in inventories, primarily due to a decrease in raw materials inventory reflecting our increased production and sales during this period, partially offset by a RMB430.7 million decrease in financial liabilities at fair value through profit or loss, reflecting the fair value of gold leasing contracts we held at the time.

Going forward, we expect to satisfy our liquidity requirements by using funds from a combination of cash flows from operations, bank loans, gold leasing and net proceeds from the Global Offering. As of July 31, 2018, being the latest date for determining our indebtedness, we had RMB16,246.3 million available bank facilities, of which RMB10,645.0 million were unutilized and unrestricted. In addition to bank loans and loans from other financial institutions that we may obtain, we are considering to issue new corporate bonds to repay the RMB1,300 million corporate bonds we issued in March 30, 2015, and to supplement our working capital. On August 13, 2018, our shareholders approved our proposal to issue green bonds in accordance with the relevant CSRC laws and regulations. The maximum amount of the green bond is RMB1 billion and the maximum term is five years. The interest rate of the green bond is expected to range from 4.8% to 5.3%. We expect to issue the green bond by the end of this year provided our proposal is approved by the CSRC.

Taking into account the net proceeds of the Global Offering, net cash from our operating activities, our ability to supplement working capital through gold leasing and bank facilities available to us, our Directors believe that we have sufficient available working capital for 125% of our present and future cash requirements for at least the next 12 months from the date of publication of this Prospectus.

— 431 — FINANCIAL INFORMATION — GENERAL

INDEBTEDNESS

The following table sets forth the components of our indebtedness as of the date indicated.

As of As of As of December 31, March 31, July 31, 2015 2016 2017 2018 2018 (unaudited) (Renminbi in millions)

Non-current Corporate bonds ...... 3,286.5 3,290.4 3,294.5 2,684.5 2,685.7 Long-term bank borrowings Secured ...... — — 4,835.3 4,225.6 4,580.7 Unsecured ...... 120.0 110.0 1,960.3 1,886.4 2,045.0 Less: borrowings due within one year ...... — (22.0) (1,998.2) (1,998.9) (1,999.8) Total non-current borrowings .... 3,406.5 3,378.4 8,091.8 6,797.6 7,311.6 Current Short-term bank borrowings.... 440.0 490.0 598.0 1,238.2 2,524.2 Borrowings from related party . . 291.0 116.7 286.9 92.5 120.2 Corporate bonds...... — 400.0 1,998.2 1,998.9 1,999.8 Bank borrowings due within one year ...... — 22.0 — — — Total current borrowings ...... 731.0 1,028.7 2,883.1 3,329.6 4,644.2 Total...... 4,137.5 4,407.1 10,974.9 10,127.2 11,955.8

In addition to the borrowings as shown above, we also had short-term financings through gold leasing which were classified as “financial liabilities at fair value through profit or loss” on our consolidated balance sheets, which amounted to RMB4,777.4 million, RMB3,169.8 million, RMB5,751.4 million, RMB6,499.0 million and RMB5,980.5 million as of December 31, 2015, 2016 and 2017, March 31 and July 31, 2018, respectively.

— 432 — FINANCIAL INFORMATION — GENERAL

Bank Borrowings

The following table sets forth the components of our borrowings as of the date indicated.

As of December 31, As of March 31,

2015 2016 2017 2018

Interest Interest Interest Interest Year of rate Year of rate Year of rate Year of rate Amount maturity range Amount maturity range Amount maturity range Amount maturity range (Renminbi (Renminbi (Renminbi (Renminbi in millions) in millions) in millions) in millions)

Non-current bank borrowings . . 120.0 2020 4.75% 110.0 2020 4.75% 6,795.6 2020 2.56-4.75% 6,112.0 2020 2.87-3.52% Current bank 3.80- borrowings . . 440.0 2016 3.85-5.70% 490.0 2017 5.70% 598.0 2018 3.80-5.70% 1,238.2 2019 3.45-4.75%

Total ...... 560.0 600.0 7,393.6 7,350.2

Other than the Syndicated Term Loan and the CDB Term Loan, as of December 31, 2015, 2016 and 2017 and March 31, 2018, all of our bank borrowings were unsecured loans.

Our bank loan agreements contain standard terms, conditions and covenants that are customary for commercial bank loans. Such covenants primarily include requirements for us to obtain the lending bank’s prior consent for certain transactions, such as disposal of material assets, merger or consolidation, and liquidation or winding-up, or for us to meet certain financial ratio requirements. In December 2015, our subsidiary Zhongbao Mining entered into a banking facility agreement with China Construction Bank Co., Ltd. Longnan Branch (“CCB Loan”). The CCB Loan was a RMB120 million five-year facility, which will expire in December 2020. The interest rate was the benchmark interest rate with an adjustment mechanism every twelve months. The CCB Loan contains financial covenants requiring Zhongbao Mining to maintain (i) a total liabilities to total assets ratio not exceeding 0.65:1, and (ii) a current ratio not less than 0.5, among others. Zhongbao Mining had a total liabilities to total assets ratio of 0.70, 0.69 and 0.66 as of December 31, 2015, 2016 and 2017, respectively, and a current ratio of 0.12, 0.09 and 0.05 as of December 31, 2015, 2016 and 2017, respectively, and therefore did not meet certain of these financial covenants during the Track Record Period. Zhongbao Mining has obtained verbal confirmation from the bank confirming that (i) this was not considered an event of default, (ii) it will not accelerate the payment, and (iii) the borrower may continue to utilize the banking facilities. Although it was not commercially feasible for the bank to waive the relevant financial covenants, we believe that the risk related to our historical breach is relatively low based on the bank’s verbal confirmation, and we have sufficient unutilized banking facilities to finance any accelerated repayment of this loan. Our Directors confirm that we did not have material defaults in the repayment of loans during the Track Record Period. Given our credit history and relationship with our principal lenders and our current credit status, we believe that we will not encounter any major difficulties in obtaining additional bank and other borrowings in the future.

— 433 — FINANCIAL INFORMATION — GENERAL

As of December 31, 2017, our bank loans significantly increased to RMB7,393.6 million, mainly to finance the Veladero Acquisition, we used the following sources of funds: (i) a US$740 million drawdown of the Syndicated Term Loan, and (ii) a US$300 million drawdown of the CDB Term Loan. The Syndicated Term Loan is secured on (i) a bank deposit of approximately RMB1,071.4 million in our PRC bank account in China Merchants Bank Co., Ltd., Jinan Branch, (ii) a bank deposit of approximately RMB1,126.9 million in our PRC bank account in Bank of China Limited, Shandong Branch, (iii) a charge on the 2.1547% equity interest in MAG held by SDG Hong Kong and dividends paid by MAG in favor of China Merchants Bank Co., Ltd., New York Branch, and (iv) a charge on all ordinary shares in AGB II held by SDG Hong Kong in favor of China Merchants Bank Co., Ltd., New York Branch. The Company has also provided a guarantee for (i) up to approximately US$347.3 million to the Bank of China Limited, Shandong Branch, (ii) US$129.0 million to China Merchants Bank Co., Ltd., New York Branch, (iii) US$100.0 million to China Merchants Bank Co., Ltd., Hong Kong Branch, and (iv) US$100.0 million to China Merchants Bank Offshore Banking Center. Our Syndicated Term Loan contains affirmative and negative covenants that, among other things, limit or restrict SDG Hong Kong’s ability to create liens and encumbrances, incur debt, dispose of or transfer assets, provide guarantees and indemnities, engage in acquisitions or investments, enter into or invest in joint ventures and change business, subject to certain qualifications and exceptions. The Syndicated Term Loan also contains financial covenants requiring the Company to maintain (i) a total liabilities to total assets ratio not exceeding 0.75:1, (ii) a consolidated total net debt to net assets ratio not exceeding 1.5:1, and (iii) an EBITDA of over US$250.0 million for any financial year. The Syndicated Term Loan will mature on the earlier of (i) 10 business days prior to the expiry date of any of the financing documents in relation to this Syndicated Term Loan, and (ii) three years from the date of the loan.

The Company has provided a guarantee to secure the CDB Term Loan. The CDB Term Loan contains affirmative and negative covenants that, among other things, limit or restrict SDG Hong Kong’s ability to create liens and encumbrances, dispose of any assets, enter into any amalgamation, demerger, merger or reconstruction, make any acquisitions or change of business, subject to certain qualifications and exceptions. The CDB Term Loan also contains financial covenants requiring the Company to maintain a total liabilities to total assets ratio of not exceeding 0.75:1. The CDB Term Loan will mature three years from the date of the loan.

See “Risk Factors — Risks Relating to Our Business and Industry — Our indebtedness and the conditions and restrictive covenants imposed on us by our financing agreements could materially and adversely affect our business, financial condition and results of operations.”

Corporate Bonds

As of December 31, 2015, 2016 and 2017 and March 31, 2018, we had current and non-current corporate bonds amounting to RMB3,286.5 million, RMB3,690.4 million, RMB3,294.5 million and RMB2,684.5 million, respectively, in relation to the following bond issuances:

• On September 3, 2013, we issued 20,000,000 corporate bonds with a par value of RMB100.0 each and generated gross proceeds of RMB2,000 million. These corporate bonds carry a coupon rate of 5.16% per annum and the interest charge will be paid on September 3rd annually in each of the following five years. The effective interest rate is 5.30% per

— 434 — FINANCIAL INFORMATION — GENERAL

annum. The bonds have been fully repaid as of the Latest Practicable Date. We settled the underwriting commission for the issuance of these bonds, which amounted to RMB12.0 million.

• On March 30, 2015, we issued 13,000,000 corporate bonds with a par value of RMB100.0 each and generated gross proceeds of RMB1,300 million. These corporate bonds carry a coupon rate of 4.80% per annum and the interest charge will be paid on March 30th in each of the following five years. The effective interest rate is 4.94% per annum. The bonds are fully repayable on March 30, 2020 when they become due. We settled the underwriting commission for the issuance of these bonds, which amounted to RMB7.8 million. Our Controlling Shareholder has provided a guarantee to secure these bonds, which will be released upon our full repayment of such bonds when they become due. In the first quarter of 2018, we exercised the right to early partial redeem of such corporate bonds in the amount of RMB611.0 million.

• On April 8, 2016, we issued 4,000,000 corporate bonds with a par value of RMB100.0 each and generated gross proceeds of RMB400 million. These corporate bonds carry a coupon rate of 2.82% per annum and the bonds were fully repaid on April 8, 2017 when they became due.

Borrowings from Related Party

Borrowings from other financial institutions represented borrowings from SDG Group Finance. See “— Related Party Transactions” for details.

Statement of Indebtedness

Save as disclosed in this section of the Prospectus, since March 31, 2018, being the date of our latest audited financial statements, and up to the date of this Prospectus, there has been no material change to our indebtedness. As of July 31, 2018 the latest practicable date for determining our indebtedness, except as otherwise disclosed in this Prospectus, we did not have any outstanding mortgages, charges, debentures, other issued debt capital, bank overdrafts, borrowings, liabilities under acceptance or other similar indebtedness, any guarantees or other material contingent liabilities.

COMMITMENTS

Capital Commitments

Our capital commitments contracted but not yet incurred during the Track Record Period primarily related to our purchase of property, plant and equipment and mining and exploration rights. As of December 31, 2015, 2016 and 2017 and March 31, 2018, our capital commitments amounted to RMB202.5 million, RMB160.0 million, RMB722.2 million and RMB853.9 million, respectively. The increase as of December 31, 2017 primarily represented RMB366.5 million in relation to exploration

— 435 — FINANCIAL INFORMATION — GENERAL rights for Xincheng Gold Mine, Linglong Gold Mine, Sanshandao Gold Mine and Yinan Gold Mine. The increase in our capital commitments to RMB853.9 million as of March 31, 2018 was primarily due to a RMB131.7 million increase in commitments in relation to the purchase of equipment for our Xincheng Gold Mine and Veladero Mine.

Operating Lease Commitments

We lease land and buildings, and to a lesser extent, certain machinery, under cancellable operating lease agreements. Our commitments to make future minimum lease payments under non-cancellable operating leases are set forth below.

As of As of December 31, March 31, 2015 2016 2017 2018 (RMB in millions)

Land and buildings: Within one year ...... 7.4 7.4 14.6 14.3 From one to five years ...... 16.1 14.2 31.3 31.4 Over five years...... 88.7 91.6 91.0 90.9 112.2 113.3 136.9 136.6

Machinery: Within one year ...... 0.9 1.0 14.4 9.7 From one to five years ...... 3.2 2.3 19.0 16.4 Over five years...... 0.3 0.2 — — 4.4 3.5 33.4 26.1 Other: Within one year ...... 0.9 1.3 2.7 1.8 From one to five years ...... 0.2 0.1 0.6 0.8 1.1 1.4 3.3 2.6 Total ...... 117.7 118.2 173.6 165.3

CONTINGENT LIABILITIES

We did not have any outstanding loan capital issued or agreed to be issued, debt securities, debentures, bank overdrafts, liabilities under acceptances or acceptance credits or hire purchase commitments as of the Latest Practicable Date. As of the same date, we had not guaranteed the indebtedness of any Independent Third Parties.

— 436 — FINANCIAL INFORMATION — GENERAL

CAPITAL EXPENDITURES

Our capital expenditures during the Track Record Period primarily related to our purchases of mining and exploration rights, property, plant and equipment, land use rights and intangible assets and investment properties. The following table sets forth our capital expenditures for the period indicated.

For the three months ended For the year ended December 31, March 31, 2015 2016 2017 2018 (Renminbi in millions)

Intangible assets ...... 31.1 2,422.1 1,512.2 9.9 Property, plant and equipment ...... 1,890.9 1,758.6 2,503.5 761.6 Land use rights...... 4.8 87.2 45.2 6.5 Investment properties ...... 0.7 1.0 0.3 — Total ...... 1,959.5 4,268.9 4,061.2 778.0

We will continue to incur capital expenditures following the completion of the Global Offering. The following table sets forth our major capital expenditure plans and the amount expected to be incurred for the period indicated.

After For the year ending December 31, December 2018 2019 2020 31, 2020 (Renminbi in millions)

Jiaojia Gold Mine expansion project .... 93.7 103.1 85.0 — Xincheng Gold Mine expansion project . . 137.6 151.4 166.5 1,177.8 Linglong Gold Mine construction project . 52.2 57.4 63.2 987.0 Total ...... 283.5 311.9 314.7 2,164.8

We plan to finance the abovementioned capital expenditures mainly through net cash from operating activities and bank borrowings.

— 437 — FINANCIAL INFORMATION — GENERAL

KEY FINANCIAL RATIOS

The table below sets forth certain of our key financial ratios for the period indicated.

For the three months ended/As of For the year ended/as of December 31, March 31, 2015 2016 2017 2018

Return on average equity (1)...... 5.9% 9.0% 6.9% 8.1%(5) Return on average assets (2) ...... 2.7% 4.7% 3.2% 3.3%(5) Current ratio (3) ...... 0.22 0.42 0.49 0.49 Quick ratio (4) ...... 0.14 0.23 0.26 0.25

(1) Calculated as profit/(loss) for the year/period divided by average equity, then multiplied by 100%. (2) Calculated as profit/(loss) for the year/period divided by average assets as of the end of the year/period, then multiplied by 100%. (3) Calculated as current assets divided by current liabilities. (4) Calculated as current assets less inventories divided by current liabilities. (5) These ratios are annualized by dividing profit for the three months ended March 31, 2018 by 90 and multiplied by 365, then divided by average assets or average equity, as applicable.

Return on Average Equity

Our return on average equity ratio increased from 5.9% in 2015 to 9.0% in 2016 because our profit for the year increased at a higher rate than our average equity for the year. Our profit for the year increased by 84.1% from 2015 to 2016, while our average equity increased primarily due to the increase in our reserves and retained earnings.

Our return on average equity ratio decreased from 9.0% in 2016 to 6.9% for the year ended December 31, 2017, primarily due to a decrease in our profit for the year ended December 31, 2017 and an increase in our average equity.

Our return on average equity ratio increased to 8.1% for the three months ended March 31, 2018 on an annualized basis, primarily due to an increase in our profit for the period for the three months ended March 31, 2018 on an annualized basis.

Return on Average Assets

Our return on average assets ratio increased from 2.7% in 2015 to 4.7% in 2016 primarily because our profit for the year increased at a higher rate than our average assets. Our profit for the year increased by 84.1%, while our average assets increased by 6.5% primarily due to a RMB1,835.7 million increase in our intangible assets and a RMB678.5 million increase in inventories in 2016.

— 438 — FINANCIAL INFORMATION — GENERAL

Our return on average assets ratio decreased from 4.7% in 2016 to 3.2% for the year ended December 31, 2017, primarily due to a decrease in our profit for the year ended December 31, 2017 and an increase in total assets as of December 31, 2017 as a result of the Veladero Acquisition.

Our return on average assets ratio increased slightly to 3.3% for the three months ended March 31, 2018 on an annualized basis, primarily due to an increase in our profit for the period for the three months ended March 31, 2018 on an annualized basis, offset by an increase in total assets from December 31, 2017 to March 31, 2018.

Current Ratio

Our current ratio increased from 0.22 in 2015 to 0.42 in 2016 primarily due to a RMB1,233.2 million increase in our current assets and a RMB910.4 million decrease in our current liabilities. Our current assets increased by RMB1,233.2 million primarily due to a RMB662.5 million increase in cash and cash equivalents and a RMB678.5 million increase in our current inventories. Our current liabilities decreased by RMB910.4 million primarily due to a RMB1,607.6 million decrease in our financial liabilities at fair value through profit or loss, partially offset by a RMB297.7 million increase in current borrowings.

Our current ratio increased from 0.42 in 2016 to 0.49 in 2017 primarily because our current assets increased at a higher rate than our current liabilities. Our current assets increased by RMB3,217.1 million primarily due to (i) a RMB1,588.4 million increase in our current inventories as a result of the consolidation of RMB1,552.6 million in inventories in relation to the Veladero Mine as a result of the Veladero Acquisition, (ii) a RMB1,243.0 million increase in cash and cash equivalents primarily because we had bank deposits from payment of sales of gold bullion from the Veladero Mine at year end and to repay certain loans that will mature in early 2018, and (iii) a RMB387.5 million increase in our trade and other receivables mainly as a result of (a) an increase in trade receivables mainly because there was a timing difference between our sale of gold bullion from the Veladero Mine and receipt of payment for such sales in our bank accounts, and (b) other receivable items mainly representing export tax rebates we received from Argentine authorities in relation to our Argentina operations. Our current liabilities increased by RMB5,511.8 million primarily due to a RMB1,854.4 million increase in our current borrowings and a RMB2,581.6 million increase in our financial liabilities at fair value through profit or loss, reflecting our gold leasing contracts and gold forward and futures contracts.

Our current ratio remained stable at 0.49 as of March 31, 2018.

Quick Ratio

Our quick ratio increased from 0.14 in 2015 to 0.23 in 2016 primarily due to our RMB662.5 million increase in cash and cash equivalents and a RMB910.4 million decrease in our current liabilities. Our current liabilities decreased by RMB910.4 million primarily due to a RMB1,607.6 million decrease in our financial liabilities at fair value through profit or loss, partially offset by a RMB297.7 million increase in current borrowings.

— 439 — FINANCIAL INFORMATION — GENERAL

Our quick ratio increased to 0.26 in 2017 as compared to 0.23 in 2016 primarily because of (i) a RMB1,243.0 million increase in cash and cash equivalents primarily because we had bank deposits from payment of sales of gold bullion from the Veladero Mine at year end and to repay certain loans that will mature in early 2018, and (ii) a RMB387.5 million increase in our trade and other receivables mainly as a result of (a) an increase in trade receivables mainly because there was a timing difference between our sale of gold bullion from the Veladero Mine and receipt of payment for such sales in our bank accounts, and (b) other receivable items mainly representing export tax rebates we received from Argentine authorities in relation to our Argentina operations. Our current liabilities increased by RMB5,511.8 million primarily due to a RMB1,854.4 million increase in our current borrowings and a RMB2,581.6 million increase in our financial liabilities at fair value through profit or loss, reflecting at our gold leasing contracts and gold forward and futures contracts.

Our quick ratio remained stable at 0.25 as of March 31, 2018.

RELATED PARTY TRANSACTIONS

During the Track Record Period, we entered into a number of transactions with our Controlling Shareholder and related parties. The following table sets forth the amounts of our related party transactions during the period indicated.

For the three months ended For the year ended December 31, March 31, 2015 2016 2017 2018 (Renminbi in millions)

Purchase of goods and services Electricity ...... 367.7 368.9 367.9 60.0 Engineering and construction services . 131.6 125.9 103.9 14.8 Gold ...... 729.9 283.3 48.6 4.5 Procurement of mining and exploration rights ...... 125.4 5.4 464.1 — Others ...... 21.1 18.4 32.8 2.3 Total ...... 1,375.7 801.9 1,017.3 81.6

Sale of goods and services Gold ...... 550.3 692.9 136.2 21.2 By-products ...... 1.3 59.4 23.0 0.7 Entrustment arrangement ...... 1.6 0.8 3.6 0.9 Engineering and construction services . 0.1 — — — Others ...... 2.0 0.8 1.6 0.1 Total ...... 555.3 753.9 164.4 22.9

Property leasing Rental fees paid ...... 4.3 4.1 4.2 3.3 Rental fees received...... 7.8 7.0 7.2 1.8

— 440 — FINANCIAL INFORMATION — GENERAL

As of As of December 31, March 31, 2015 2016 2017 2018 (Renminbi in millions)

Loans obtained from: Controlling Shareholder and fellow subsidiary At the beginning of the year...... 155.5 261.0 76.6 7.6 Drawdown during the year ...... 74.0 30.0 20.0 — Loan repayments paid...... — (165.5) (90.0) — Interest charged ...... 31.5 3.1 1.6 — Interest paid ...... — (52.0) (0.7) — At the end of the year ...... 261.0 76.7 7.6 7.6 SDG Group Finance At the beginning of the year...... 310.0 30.0 40.0 279.3 Drawdown during the year ...... 870.0 1,100.0 1,559.3 450.6 Loan repayments paid...... (1,150.0) (1,090.0) (1,320.0) (645.0) Interest charged ...... 6.0 2.6 8.3 2.3 Interest paid ...... (6.0) (2.6) (8.3) (2.3) At the end of the year ...... 30.0 40.0 279.3 84.9

Purchase of Goods and Services from Our Related Parties

During the Track Record Period, we procured goods and services from our related parties in the ordinary course of our business, amounting to RMB1,375.7 million, RMB801.9 million, RMB1,017.3 million, RMB81.6 million in 2015, 2016 and 2017 and the three months ended March 31, 2018, respectively. We procured electricity from SDG Electricity Company for certain of our PRC Mines. We also procured doré and gold concentrates from several related parties for our production of standard gold bullion. The dore´and gold concentrates that we procured included small amounts of by-products (such as silver, lead and zinc concentrates). We procured engineering and construction services from several related parties that are engaged in construction engineering and engineering design. In addition, we procured services in relation to processing, marketing and business development, training and property management, among other things. In 2015, we acquired an exploration permit in relation to Guilaizhuang Gold Mine. In 2017, we acquired exploration permits in relation to Xincheng Gold Mine, Linglong Gold Mine and Yinan Gold Mine.

— 441 — FINANCIAL INFORMATION — GENERAL

Sale of Goods and Services to Our Related Parties

During the Track Record Period, we sold gold products to our related parties in the ordinary course of our business, amounting to RMB550.3 million, RMB692.9 million, RMB136.2 million and RMB21.2 million in 2015, 2016 and 2017 and three months ended March 31, 2018, respectively. We sold customized gold products and gold concentrates to several related parties. In particular, we sold customized gold products to SDG Jinkong (Shenzhen) Gold Investment Co., Ltd. (山金金控(深圳)黃 金投資發展有限公司), one of our five largest customers in 2015 and 2016. Revenue generated from our sales to this customer accounted for 0.2% and 0.4% of our total revenue in 2015 and 2016, respectively. SDG Capital Management, our connected person, was one of our five largest customers in 2015, to whom we sold customized gold products. Revenue generated from sales to this customer accounted for 0.9% of our total revenue in 2015. As of the Latest Practicable Date, SDG Capital Management held a 70% interest in SDG Jinkong (Shenzhen) Gold Investment Co., Ltd. For details, see “Business — Sales and Customers — Customers and Marketing” and “Connected Transactions — Non-exempt Continuing Connected Transactions — Historical Amounts.” To a lesser extent, we also sold by-products and provided entrustment services and engineering and construction services. For details on the entrustment arrangement, see “Relationship with Our Controlling Shareholder.”

Property Leasing

During the Track Record Period, we leased buildings and land owned by our Controlling Shareholder at the Sanshandao Gold Mine and Jiaojia Gold Mine. We incurred rental fees to our Controlling Shareholder in the amounts of RMB4.3 million, RMB4.1 million, RMB4.2 million and RMB3.3 million for such leases for the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2018, respectively. We also leased our office buildings to our Controlling Shareholder and fellow subsidiaries and received rental fees of RMB7.8 million, RMB7.0 million, RMB7.2 million and RMB1.8 million for the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2018, respectively.

Loans Obtained from Related Parties

For the years ended December 31, 2015, 2016 and 2017, Penglai Mining, which was held by our Controlling Shareholder until our acquisition of Penglai Mining in 2016, obtained loans from our Controlling Shareholder and a fellow subsidiary in the amounts of RMB74.0 million, RMB30.0 million and RMB20.0 million, respectively. Such loans were recorded as our related party transaction due to the adoption of merger accounting. The terms of such loans ranged from one to three years and had interest rates ranging from 4.35% to 6.00%. The loans were primarily used to supplement our working capital.

For the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2018, we obtained loans from SDG Group Finance in the amounts of RMB870.0 million, RMB1,100.0 million, RMB1,559.3 million and RMB450.6 million, respectively. The terms of such loans ranged from a few days to one year and had average interest rates of 5.41%, 4.86%, 4.42% and 4.43% in 2015, 2016 and 2017 and the three months ended March 31, 2018. The loans were primarily used to supplement our working capital.

— 442 — FINANCIAL INFORMATION — GENERAL

With respect to the related party transactions discussed above and set out in Note 40 to the Accountant’s Report in Appendix I to this Prospectus, our Directors believe that such transactions were conducted on an arm’s length basis on normal commercial terms. Our Directors further believe that these related party transactions do not distort our results of operations during the Track Record Period nor make our historical results not reflective of our future performance.

QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK

Our activities expose us to a variety of financial risks: market risk (including currency risk, fair value interest rate risk and cash flow interest rate risk), credit risk and liquidity risk. Our overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on our financial performance. We use derivative financial instruments to hedge certain risk exposures.

Risk management is carried out by a central treasury department under policies approved by the Board of Directors. The central treasury department identifies, evaluates and hedges financial risks in close co-operation with our operating units. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity. See Note 3.1 of the Accountant’s Report in Appendix I.

Market Risk

Foreign Exchange Risk

Our operations (such as export sales, imports of machinery and equipment, foreign currency deposits, trade and other receivables) expose it to foreign exchange risk arising from various currency exposures primarily with respect to the U.S. dollar. In addition, the Renminbi is not freely convertible into other foreign currencies and conversion of the Renminbi into foreign currencies is subject to rules and regulations of foreign exchange control promulgated by the PRC government.

Our management has set up a policy to require our Group to manage its foreign exchange risk against their functional currency. Our Group is required to hedge its entire foreign exchange risk exposure with the Group’s treasury. To manage our foreign exchange risk arising from future commercial transactions and recognized assets and liabilities, we use forward contracts, transacted with our central treasury department. Foreign exchange risk arises when future commercial transactions or recognized assets or liabilities are denominated in a currency that is not the entity’s functional currency.

We historically did not used any derivative instruments to hedge exchange rate of the U.S. dollar and currently does not have a fixed policy to do so in the foreseeable future. We mainly operate in the PRC with most of the transactions settled in Renminbi, which is also our functional currency. In 2017, we set up SDG Hong Kong, whereby together with our newly acquired joint operation, the Veladero

— 443 — FINANCIAL INFORMATION — GENERAL

Mine, has its functional currency in US$. Foreign exchange rate risk arises when recognized assets and liabilities are denominated in a currency that is not the entity’s functional currency. As of December 31, 2015, 2016 and 2017 and March 31, 2018, our assets and liabilities were primarily denominated in their functional currencies.

We will constantly review the economic situation and our foreign exchange risk profile, and will consider appropriate hedging measures in the future, as may be necessary.

Cash Flow and Fair Value Interest Rate Risk

Our exposure to cash flow interest rate risks arises from our interest bearing bank deposits, bank borrowings and long-term bonds, whose interest rates may subject to adjustments by the PRC Government. Borrowings at variable rates expose us to cash flow interest-rate risk while borrowings and long-term bonds at fixed rates expose us to fair value interest-rate risk. We historically have not used any financial instruments to hedge potential fluctuations in interest rates.

Other than those mentioned above, our income and operating cash flows are substantially independent of changes in the market interest rates.

If interest rates on Renminbi-denominated borrowings at variable rates had been 50 basis point higher/lower with all other variables held constant, our profit for the year or period for the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2018 would have been lower/higher by approximately RMB0.45 million, RMB0.3 million, RMB25.8 million and RMB23.5 million, respectively.

Price Risk

We are exposed to equity securities price risk because of investments held by us and classified on the consolidated balance sheet as available-for-sale financial assets. To manage the price risk arising from investments in equity securities, we diversify our portfolio. Diversification of the portfolio is done in accordance with the limits set by us.

We engage in gold mining and refining operations and are exposed to commodity price risk related to price volatility of gold products. The fluctuations in prices of gold products could have significant impact on us. We use derivative financial instruments, including commodity futures and swaps, to manage a portion of this risk.

Credit Risk

Credit risk is managed at our Group level. Credit risk mainly arises from cash and cash equivalents, restricted bank deposits, trade and other receivables and other non-current assets.

We expect that there is no significant credit risk associated with cash at bank since they are deposited at state-owned banks and other medium or large size listed banks. Management does not expect that there will be any significant losses from non-performance by these counterparties.

— 444 — FINANCIAL INFORMATION — GENERAL

In addition, we have policies to limit the credit exposure on trade and other receivables and other non-current assets. We assess the credit quality of and sets credit limits on our customers by taking into account their financial position, their credit history and other factors such as current market conditions. We regularly monitor the credit history of our customers. In respect of customers with a poor credit history, we will use written payment reminders, or shorten or cancel credit periods, to ensure our overall credit risk is limited to a controllable extent.

Liquidity Risk

Prudent liquidity risk management implies maintaining sufficient cash and cash equivalents and the availability of funding through an adequate amount of borrowing facilities. Due to the dynamic nature of the underlying businesses, we maintain a reasonable level of cash and cash equivalents, and further supplement this by keeping committed credit lines available.

Our primary cash requirements have been for purchases of materials, machinery and equipment and payment of related debts. We finance our working capital requirements through a combination of funds generated from operations, bank loans, short-term and long-term bonds and, after the Global Offering, the net proceeds from the Global Offering.

Our management monitors rolling forecasts of our liquidity reserve (which comprises undrawn borrowing facilities and cash and cash equivalents) on the basis of expected cash flow.

The table below analyzes the undiscounted cash outflow relating to our financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date.

Between Between Less than one and two and Over five one year two years five years years Total (Renminbi in millions)

As of March 31, 2018 Borrowings ...... 3,525.9 907.4 6,239.3 — 10,672.6 Trade and other payables ...... 3,330.5 — — — 3,330.5 Other non-current liabilities ...... 8.5 21.9 19.4 28.0 77.8 Financial liabilities at fair value through profit or loss ...... 6,499.0 — — — 6,499.0 Total ...... 13,363.9 929.3 6,258.7 28.0 20,579.9

— 445 — FINANCIAL INFORMATION — GENERAL

Between Between Less than one and two and Over five one year two years five years years Total (Renminbi in millions)

As of December 31, 2017 Borrowings ...... 3,144.3 270.3 8,274.8 — 11,689.4 Trade and other payables ...... 3,515.3 — — — 3,515.3 Other non-current liabilities ...... 12.9 23.0 19.5 28.0 83.4 Financial liabilities at fair value through profit or loss ...... 5,751.4 — — — 5,751.4 Total...... 12,423.9 293.3 8,294.3 28.0 21,039.5 As of December 31, 2016 Borrowings ...... 1,265.6 2,191.4 1,418.2 — 4,875.2 Trade and other payables ...... 2,654.7 — — — 2,654.7 Other non-current liabilities ...... 2.2 13.0 2.5 1.4 19.1 Financial liabilities at fair value through profit or loss ...... 3,169.8 — — — 3,169.8 Total...... 7,092.3 2,204.4 1,420.7 1.4 10,718.8 As of December 31, 2015 Borrowings ...... 926.4 193.3 3,614.2 — 4,733.9 Trade and other payables ...... 2,309.1 — — — 2,309.1 Other non-current liabilities ...... 2.2 18.4 4.7 1.4 26.7 Financial liabilities at fair value through profit or loss ...... 4,777.4 — — — 4,777.4 Total...... 8,015.1 211.7 3,618.9 1.4 11,847.1

Capital Management

Our objectives when managing capital are to safeguard our ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. We may take various measures to manage our capital and liquidity through raising capital by issuing new shares and debt securities, when the need arise.

Consistent with others in our industry, we monitor capital through the ratio of our net debt divided by total capital. Net debt is calculated as total borrowings (including current and non-current borrowings as shown in the consolidated balance sheet) less restricted bank deposits and cash and cash equivalents. Total capital is calculated as equity plus net debt.

— 446 — FINANCIAL INFORMATION — GENERAL

As of December 31, 2015, 2016 and 2017 and March 31, 2018, our net debt to total capital were as follows.

As of As of December 31, March 31, 2015 2016 2017 2018 (Renminbi in millions)

Total borrowings and bonds ...... 4,137.5 4,407.1 10,974.9 10,127.2 Less: Cash and cash equivalents ...... (497.3) (1,159.8) (2,402.8) (2,473.7) Restricted bank deposits...... (109.5) (143.9) (669.9) (147.0) Net debt ...... 3,530.8 3,103.4 7,902.2 7,506.5 Total equity ...... 12,421.8 16,689.7 17,493.8 17,842.9 Total capital ...... 15,952.5 19,793.2 25,395.9 25,349.4 Net debt to total capital(1) ...... 22% 16% 31% 30%

(1) If our short-term financings through gold leasing had been included, our net debt would have been RMB8,308.1 million, RMB6,273.2 million, RMB13,653.6 million and RMB14,005.6 million as of December 31, 2015, 2016 and 2017 and March 31, 2018, respectively. Our adjusted net debt to total capital ratio would have been 40.1%, 27.3%, 43.8% and 44.2% as of the same dates, respectively.

SENSITIVITY ANALYSIS

Our results of operations is principally affected by gold price and sales volume. The tables below set forth the impact of fluctuation of gold price on our results of operations for the period indicated.

For the year ended December 31, 2015 (Renminbi in millions, except for percentages)

Hypothetical fluctuation of gold price ...... -20% -15% -10% -5% 5% 10% 15% 20% Change in gross profit...... (1,430) (1,073) (715) (358) 358 715 1,073 1,430 Change in gross profit margin...... -3.7% -2.8% -1.8% -0.9% 0.9% 1.8% 2.8% 3.7% Change in profit from operation ...... (1,430) (1,073) (715) (358) 358 715 1,073 1,430 Change in operating margin. . -4.0% -2.8% -1.8% -0.8% 0.8% 1.4% 2.1% 2.7%

— 447 — FINANCIAL INFORMATION — GENERAL

For the year ended December 31, 2016 (Renminbi in millions, except for percentages)

Hypothetical fluctuation of gold price ...... -20% -15% -10% -5% 5% 10% 15% 20% Change in gross profit...... (1,636) (1,227) (818) (409) 409 818 1,227 1,636 Change in gross profit margin...... -3.3% -2.5% -1.7% -0.8% 0.8% 1.7% 2.5% 3.3% Change in profit from operation ...... (1,636) (1,227) (818) (409) 409 818 1,227 1,636 Change in operating margin. . -3.3% -2.3% -1.5% -0.7% 0.6% 1.2% 1.7% 2.2%

For the year ended December 31, 2017 (Renminbi in millions, except for percentages)

Hypothetical fluctuation of gold price ...... -20% -15% -10% -5% 5% 10% 15% 20% Change in gross profit...... (2,009) (1,507) (1,004) (502) 502 1,004 1,507 2,009 Change in gross profit margin ...... -4.0% -3.0% -2.0% -1.0% 0.9% 1.9% 2.9% 3.9% Change in profit from operation ...... (2,009) (1,507) (1,004) (502) 502 1,004 1,507 2,009 Change in operating margin . -4.1% -2.9% -1.8% -0.9% 0.8% 1.5% 2.2% 2.8%

For the three months ended March 31, 2018 (Renminbi in millions, except for percentages)

Hypothetical fluctuation of gold price ...... -20% -15% -10% -5% 5% 10% 15% 20% Change in gross profit...... (505) (378) (252) (126) 126 252 378 505 Change in gross profit margin ...... -3.6% -2.7% -1.8% -0.9% 0.9% 1.8% 2.7% 3.6% Change in profit from operation ...... (505) (378) (252) (126) 126 252 378 505 Change in operating margin . -3.6% -2.5% -1.6% -0.8% 0.7% 1.3% 1.9% 2.4%

— 448 — FINANCIAL INFORMATION — GENERAL

The tables below set forth the impact of fluctuation of sales volume on our results of operations for the period indicated.

For the year ended December 31, 2015 (Renminbi in millions, except for percentages)

Hypothetical fluctuation of gold production and sales volume...... -20% -15% -10% -5% 5% 10% 15% 20% Change in gross profit...... (1,019) (764) (510) (255) 255 510 764 1,019 Change in gross profit margin...... -2.5% -1.8% -1.2% -0.6% 0.6% 1.2% 1.7% 2.3% Change in profit from operation ...... (1,019) (764) (510) (255) 255 510 764 1,019 Change in operating margin . -2.6% -2.0% -1.3% -0.6% 0.6% 1.2% 1.9% 2.4%

For the year ended December 31, 2016 (Renminbi in millions, except for percentages)

Hypothetical fluctuation of gold production and sales volume ...... -20% -15% -10% -5% 5% 10% 15% 20% Change in gross profit...... (1,193) (895) (597) (298) 298 597 895 1,193 Change in gross profit margin...... -2.3% -1.7% -1.1% -0.6% 0.5% 1.1% 1.6% 2.1% Change in profit from operation ...... (1,193) (895) (597) (298) 298 597 895 1,193 Change in operating margin . -2.4% -1.8% -1.2% -0.6% 0.6% 1.1% 1.7% 2.2%

For the year ended December 31, 2017 (Renminbi in millions, except for percentages)

Hypothetical fluctuation of gold production and sales volume ...... -20% -15% -10% -5% 5% 10% 15% 20% Change in gross profit...... (1,229) (922) (615) (307) 307 615 922 1,229 Change in gross profit margin...... -2.2% -1.7% -1.1% -0.5% 0.5% 1.1% 1.6% 2.1% Change in profit from operation ...... (1,229) (922) (615) (307) 307 615 922 1,229 Change in operating margin . -2.4% -1.8% -1.2% -0.6% 0.6% 1.1% 1.7% 2.2%

— 449 — FINANCIAL INFORMATION — GENERAL

For the three months ended March 31, 2018 (Renminbi in millions, except for percentages)

Hypothetical fluctuation of gold production and sales volume ...... -20% -15% -10% -5% 5% 10% 15% 20% Change in gross profit...... (319) (239) (159) (80) 80 159 239 319 Change in gross profit margin...... -2.1% -1.5% -1.0% -0.5% 0.5% 1.0% 1.5% 2.0% Change in profit from operation ...... (319) (239) (159) (80) 80 159 239 319 Change in operating margin . -2.2% -1.6% -1.1% -0.5% 0.5% 1.0% 1.6% 2.1%

OFF-BALANCE SHEET ARRANGEMENTS

We did not have any financial guarantees or other commitments to guarantee the payment obligations of any third parties during the Track Record Period and as of the Latest Practicable Date. As of the Latest Practicable Date, we have not entered into any derivative contracts that are indexed to our Shares and classified as shareholder’s equity, or that are not reflected in our consolidated financial information. As of the Latest Practicable Date, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. As of the Latest Practicable Date, we did not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

DISTRIBUTABLE RESERVES

As of March 31, 2018, the Company had distributable reserves (which represented retained earnings) of RMB4,178.6 million.

DIVIDEND POLICY

We may distribute dividends by way of cash, shares or a combination of cash and shares. Any proposed distribution of dividends shall be determined by our Board and will be subject to our shareholder’s approval. A decision to declare or to pay dividends, and the amount of any dividends, will depend on a number of factors, including our results of operation, cash flow, financial condition, payments by our subsidiaries of cash dividends to us, future prospects and other factors that our Directors may consider appropriate. All of our Shareholders have equal rights to dividends and other distributions proportionate to their shareholding.

According to PRC law and our Articles of Association, we will pay dividends out of profit after tax only after we have made the following allocations:

• recovery of accumulated loss from previous years, if any

— 450 — FINANCIAL INFORMATION — GENERAL

• allocations to the statutory common reserve fund equivalent to 10% of our after-tax profit as determined under PRC GAAP until the amount in the statutory reserve fund reach 50% of our registered capital; and

• allocations that are approved by the shareholders in a shareholders’ meeting to any common reserve fund, if any.

We generally pay dividends out of our distributable profits, which are equal to our net profit as determined under PRC GAAP or IFRS, whichever is lower, less allocation to the statutory and discretionary reserve funds. Pursuant to the Articles of Association, we shall distribute cash dividends at least once in any consecutive three years. The total amount of the cash dividend distributed in the latest three years shall be at least 30% of our average annual distributable profits in the same period. The Company may distribute the cash dividend provided that there are no expected significant investment plans or significant cash expenditures in the following twelve months (excluding fund-raising projects). Upon satisfaction of the cash dividend payout ratios, we may distribute stock dividends if our operating revenue and net profit increase rapidly and our Directors consider that our equity scale and shareholding structure are reasonable. In addition, we may declare interim dividends based on our financial performance and working capital requirements. If our management do not propose a cash dividend distribution plan when we have distributable profits, our management shall provide reasons for non-distribution of cash dividend and the use of the retained funds to our Board, and our independent non-executive Directors shall provide their opinions on the profit distribution proposal, which shall be publicly disclosed. We will continue to evaluate and adjust our dividend policy in light of our operating environment and financial position.

For the years ended December 31, 2015, 2016 and 2017 and the three months ended March 31, 2018, we paid dividends to shareholders in the amounts of RMB142.1 million, RMB142.1 million, RMB184.2 million and RMB71.2 million, respectively. For the same periods, we paid dividends to non-controlling interests in the amounts of RMB81.1 million, RMB33.7 million, RMB16.4 million and nil, respectively. Dividends paid in prior periods may not be indicative of future dividend payments. We cannot guarantee when, if and in what form or size dividends will be paid in the future. Our Board of Directors is responsible for submitting proposals in respect of dividend payments, if any, to the shareholders’ general meeting of our Company for approval. The determination of whether to pay dividends and the amount of such dividends is based on our results of operations, cash flows, financial condition, cash requirements, future business prospects and other factors that our Board of Directors considers relevant.

DISCLOSURE PURSUANT TO RULES 13.13 TO 13.19 OF THE HONG KONG LISTING RULES

Except as otherwise disclosed in this Prospectus, we confirm that, as of the Latest Practicable Date, we were not aware of any circumstances that would give rise to a disclosure requirement under Rules 13.13 to Rules 13.19 of the Hong Kong Listing Rules.

As a company listed on the Shanghai Stock Exchange, we are required to publish our quarterly (for the first and third quarters of each year), interim (for the first six months of each year) and annual reports with respect to our A Shares under the SSE Listing Rules. These reports will be prepared in

— 451 — FINANCIAL INFORMATION — GENERAL conformity with PRC GAAP. Our quarterly financial information in both English and Chinese will also be released in Hong Kong simultaneously pursuant to Rule 13.10B of the Hong Kong Listing Rules subsequent to our Listing on the Hong Kong Stock Exchange. We will publish annual and semi-annual financial information under IFRS for H Share disclosure purpose and annual, semi-annual and quarterly financial information under PRC GAAP for A Share disclosure purpose simultaneously.

LISTING EXPENSES

Our total listing expenses (including underwriting commission) are estimated to be approximately RMB160.6 million, assuming that the Over-allotment Option is not exercised. As only newly issued H Shares will be listed and traded on the Stock Exchange, substantially all of our listing expenses are incremental costs directly attributable to the issuance of the H Shares and should be accounted for as a deduction from equity pursuant to IAS 32. As of March 31, 2018, we incurred listing expenses of RMB40.7 million, of which RMB39.5 million were capitalized as deferred listing expenses and RMB1.2 million were recognized as administrative expenses. These expenses are expected to be charged against equity upon successful listing under the relevant accounting standards. We expect to incur further listing expenses of approximately RMB119.9 million, of which RMB4.9 million will be recognized as administrative expenses and RMB115.0 million is expected to be recognized as a deduction in equity. We do not believe the remaining listing expenses will have a material adverse impact on our results of operations for the year ending December 31, 2018.

DIRECTORS’ CONFIRMATION ON NO MATERIAL ADVERSE CHANGE

Our Directors confirm that they have performed sufficient due diligence on our Company to ensure that, up to the date of this Prospectus, there has been no material adverse change in our financial or trading position and the financial or trading position of MAG since March 31, 2018 (being the date of the Group’s latest consolidated audited financial results), and there have been no events since March 31, 2018 which would materially affect the information shown in the Accountant’s Report set out in Appendix I to this Prospectus.

UNAUDITED PRO FORMA ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS

The following statement of our unaudited pro forma adjusted consolidated net tangible assets is prepared in accordance with Rule 4.29 of the Listing Rules and is set out below to illustrate the effect of the Global Offering on our consolidated net tangible assets as of March 31, 2018 as if the Global Offering had taken place on that date.

Our unaudited pro forma adjusted consolidated net tangible assets has been prepared for illustrative purposes only and because of its hypothetical nature, it may not give a true picture of our consolidated net tangible assets as of March 31, 2018 or at any future dates following the Global Offering. It is prepared based on our audited consolidated net tangible assets as of March 31, 2018 as

— 452 — FINANCIAL INFORMATION — GENERAL set out in the Accountant’s Report in Appendix I to this Prospectus, and adjusted as described below. No adjustment has been made to reflect any trading result or other transactions of our Group entered into subsequent to March 31, 2018.

Audited consolidated Unaudited Unaudited net tangible pro forma pro forma assets of our adjusted adjusted Group consolidated consolidated net attributable net tangible tangible assets of to equity Estimated assets our Group holders of net proceeds attributable attributable to the Company from the to the owners owners of the as of March Global of the Company per 31, 2018(1) Offering(2) Company Share(3)(4) RMB’000 RMB’000 RMB’000 RMB HK$

Based on the Offer Price of HK$18.38 per Share ...... 15,668,835 5,075,009 20,743,844 9.49 10.92 Based on the Offer Price of HK$14.70 per Share ...... 15,668,835 4,035,374 19,704,209 9.02 10.37

(1) The audited consolidated net tangible assets attributable to the owners of the Company as of March 31, 2018 is extracted from the Accountant’s Report set out in Appendix I to this Prospectus, which is based on the audited consolidated net assets of the Group attributable to the owners of the Company as of March 31, 2018 of RMB16,790,968,000 with an adjustment for the goodwill and intangible assets (except for mining and exploration rights) as of March 31, 2018 of RMB1,122,133,000.

(2) The estimated net proceeds from the Global Offering are based on the indicative Offer Price of HK$18.38 and HK$14.70 per Share, being the higher and lower end of the indicative Offer Price range respectively, after deduction of the underwriting fees and other related expenses payable by the Company.

(3) The unaudited pro forma net tangible assets per Share is arrived at after the adjustments referred to in the preceding paragraphs and on the basis that 2,184,848,809 Shares were in issue immediately upon completion of the Global Offering, which is assumed to be on March 31, 2018 for the purpose of this unaudited pro forma financial information, and assuming the Over-allotment Option is not exercised. (4) For the purpose of this unaudited pro forma adjusted consolidated net tangible assets, the balance stated in Renminbi are converted into Hong Kong dollars at a rate of RMB0.86974 to HK$1.00 set by the PBOC prevailing on September 5, 2018. No representation is made that any amount in Renminbi or U.S. dollars can be or could have been at the relevant dates converted at the above rates or any other rates or at all. (5) No adjustment has been made to the unaudited pro forma adjusted consolidated net tangible assets to reflect any trading results or other transactions of the Group entered into subsequent to March 31, 2018. In particular, the unaudited pro forma net adjusted tangible assets of the Group has not taken into account the cash dividend of approximately RMB73,764,000 pursuant to the distribution notice dated 18 May 2018. The unaudited pro forma net tangible assets per Share would have been HK$10.88 and HK$10.33 per Share based on the Offer Price of HK$18.38 and HK$14.70, respectively.

— 453 — FINANCIAL INFORMATION — VELADERO MINE

On June 30, 2017, we completed the Veladero Acquisition. Through this acquisition, we directly and indirectly hold a 50% equity interest in MAG, the entity that operates the Veladero Mine. You should read the following discussion and analysis of the financial condition and results of operations of AGB II and MAG together with the carve out financial statements included in Section III Additional Financial Information of AGBII of the Accountant’s Report in Appendix I of this Prospectus. The carve out financial statements of AGB II and MAG exclude MAG’s 16.3% investment in Barrick Exploraciones Argentina S.A. and the activities of MAG’s wholly-owned subsidiary, Minera Rio Frio S.A., which we did not acquire as part of the Veladero Acquisition. Since the completion of the Veladero Acquisition and starting July 1, 2017, we have consolidated our 50% proportionate share of the assets and liabilities of the Veladero Mine, and are entitled to 50% of the products of, and recognize 50% of the expenses incurred by, the Veladero Mine.

The following section is an analysis of the carve out income statement, balance sheet and cash flow of AGB II and MAG from the beginning of the Track Record Period on January 1, 2015 until the completion of the Veladero Acquisition on June 30, 2017 on a 100% basis without any pro rata treatment based on our 50% interest in the Veladero Mine. We believe the inclusion of the pre-acquisition historical financial condition and results of operations of AGB II and MAG would be helpful to the investors.

The carve out financial statements have been prepared in accordance with IFRS, which may differ in material aspects from generally accepted accounting principles in other jurisdictions. Potential investors should read the whole of the financial statements set forth in Section III Additional Financial Information of AGBII of the Accountant’s Report in Appendix I of this Prospectus and not rely merely on the information contained in this section. The following discussion contains certain forward-looking statements that involve risks and uncertainties. Actual results of AGB II and MAG could differ materially from those anticipated in these forward-looking statements due to various factors, including those set forth in the sections headed “Risk Factors” and “Business” in this Prospectus.

ACQUISITION BY THE GROUP

On April 6, 2017, we entered into the Share Purchase Agreement to acquire a 50% equity interest in AGB II, subscribe for the newly issued 2.1547% equity interest in MAG and acquire the MAG Assigned Debt, through which we directly and indirectly hold a 50% equity interest in MAG, the entity that operates the Veladero Mine. The Veladero Acquisition was completed on June 30, 2017. Since the completion of the Veladero Acquisition, we have jointly operated the Veladero Mine with Barrick Gold. In November 2017, our total consideration was adjusted to US$989.8 million pursuant to our Share Purchase Agreement based on certain financial metrics.

The Veladero Acquisition was accounted for as a joint operation and the proportionate share of assets and liabilities have been recognized as at June 30, 2017.

BASIS OF PRESENTATION

The carve out financial statements set forth in Section III — Additional Financial Information of AGB II of the Accountant’s Report in Appendix I of this Prospectus have been prepared to include

— 454 — FINANCIAL INFORMATION — VELADERO MINE the accounts of AGB II and its 97.8% owned subsidiary MAG. MAG’s 16.3% investment in Barrick Exploraciones Argentina S.A. (BEASA) and the activities of MAG’s wholly-owned subsidiary, Minera Rio Frio S.A. have been excluded in the preparation of these financial statements.

KEY FACTORS AFFECTING VELADERO MINE’S RESULTS OF OPERATIONS

The following are some of the key factors applicable specifically to Veladero Mine because of its history and location in Argentina. For a discussion of more general factors affecting our results of operations, financial position and cash flow, see “Financial Information — General — Key Factors Affecting Our Results of Operations.”

Exchange Rate Fluctuations

The functional currency of AGB II and MAG is the U.S. dollar and revenue generated by AGB II and MAG is denominated in U.S. dollars. Operating and capital costs for the Veladero Mine are mostly denominated in Argentine Peso. As a result, fluctuations of the exchange rate between Argentine Peso and the U.S. dollar have affected and will continue to affect MAG’s results of operations. Historically, the Argentine Peso has experienced significant fluctuations. During the Track Record Period, the Argentine Peso has steadily depreciated against the U.S. dollar. Under the administration of President Fernandez de Kirchner from 2007 to late 2015, currency controls were imposed that put the Argentine Peso on a mostly fixed exchange rate. The Argentine Peso to U.S. dollar exchange rate was 8.018:1 at month end in January 2014, and rose to 9.688:1 at month end in November 2015. After the newly-elected President Macri removed currency controls in December 2015, the Argentine Peso devalued rapidly to an exchange rate of 13.904:1 at month end in January 2016. By March 31, 2018 , the Argentine Peso to U.S. dollar exchange rate was 20.143:1. As the cost of sales of Veladero Mine is primarily incurred in Argentine Peso and gold sales are made in U.S. dollars, the depreciation of the Argentine Peso has had a limited impact on the results of operations of MAG. Nevertheless, MAG recognized VAT recoverables for VAT incurred on certain domestic business purchases which are denominated in Argentine Peso and recognized loss on currency translation of US$52.4 million, US$19.1 million, US$12.2 million and US$5.2 million in 2015 and 2016 and the six months ended June 30, 2016 and 2017. Future fluctuations in exchange rates may affect the results of operations of the Veladero Mine.

Economic and Regulatory Environment in Argentina

The business and operations of Veladero Mine are affected by changes in the economic and regulatory environment in Argentina. Over the past decade, the Argentine economy has experienced high inflation, declines in foreign investment and increasing trade deficit. Since the election of President Macri in 2015, reforms have been implemented to encourage a free-market economy. The short term and long-term effects that these reforms have on the Argentine political climate and economy will continue to affect the results of operations and financial conditions of the Veladero Mine. Moreover, changes in Argentine laws and regulations applicable to the mining industry may also affect the operations of the Veladero Mine.

— 455 — FINANCIAL INFORMATION — VELADERO MINE

Historical Environmental Incidents

During the Track Record Period and before the Veladero Acquisition, the Veladero Mine experienced three environmental incidents in September 2015, September 2016 and March 2017. As a result of the September 2015 environmental incident, MAG paid approximately US$10 million in administrative fines in April 2016, which was recorded in the line item cost of sales. As a result of the September 2016 environmental incident, MAG was ordered by the San Juan Provincial mining authority and a San Juan Provincial court to temporarily suspend operations pending completion of certain urgent works. Operations were suspended for approximately three weeks to complete such works. As a result of the March 2017 environmental incident, the San Juan Provincial mining authority and the Argentine Jachal First Instance Court ordered MAG to cease adding cyanide to the Veladero Mine leach pad until corrective actions on the system were completed. Such restrictions were lifted on June 15, 2017 following inspection of the completed corrective actions. In relation to the 2016 incident and the 2017 incident, on December 22, 2017, the Ministry of Mining of San Juan Province imposed an administrative fine on MAG of AR$104.4 million (equivalent to approximately US$5.9 million at the then-applicable Argentine Peso to US$ exchange rate) for both incidents. Any material fines assessed on MAG in relation to these environmental incidents may have an adverse impact on MAG’s net income.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Many of the amounts included in the carve out balance sheet require judgments and/or estimates to be made. These judgments and estimates are continuously evaluated and are based on experience and knowledge of the relevant facts and circumstances. Actual results may differ from the estimates. Information about such judgments and estimates is contained in the description of the accounting policies and/or other notes to the financial statements. The key areas where judgments, estimates and assumptions have been made are summarized below.

LOM Plan and Reserves and Resources

Estimates of the quantities of proven and probable mineral reserves and mineral resources form the basis for LOM plan, which are used for a number of important business and accounting purposes, including: the calculation of depreciation expense; the capitalization of production phase stripping costs; and forecasting the timing of the payments related to the environmental rehabilitation provision. In addition, the underlying LOM plan are used in the impairment tests for non-current assets. In certain cases, LOM plan have made assumptions about the ability to obtain the necessary permits required to complete the planned activities. Ore reserves and mineral resources are estimated based on information compiled by qualified persons as defined in accordance with NI 43-101 Code requirements. As of December 31, 2016, a per ounce gold price of US$1,000 short-term and US$1,200 long-term was used to calculate our gold reserves, consistent with what was used as of December 31, 2015.

Inventory

The measurement of inventory including the determination of its net realizable value, especially as it relates to ore in stockpiles, involves the use of estimates. Estimation is required in determining

— 456 — FINANCIAL INFORMATION — VELADERO MINE the tonnage, recoverable gold contained therein, and in determining the remaining costs of completion to bring inventory into its saleable form. Judgment also exists in determining whether to recognize a provision for obsolescence on mine operating supplies, and estimates are required to determine salvage or scrap value of supplies.

Estimates of recoverable gold on the leach pads are calculated from the quantities of ore placed on the leach pads (measured tons added to the leach pads), the grade of ore placed on the leach pads (based on assay data) and a recovery percentage (based on ore type).

Impairment and Reversal of Impairment for Non-current Assets

Non-current assets are tested for impairment if there is an indicator of impairment or reversal of impairment. Both external and internal sources of information are considered for indications that non-current assets are impaired. External sources of information considered include changes in the market, economic and legal environment in which the cash generating unit (“CGU”) operates that are not within its control and affect the recoverable amount of mining interests. Internal sources of information considered include the manner in which mining properties and plant and equipment are being used or are expected to be used and indications of economic performance of the assets. Calculating the fair value less costs of disposal of CGUs for non-current asset impairment tests requires estimates and assumptions to be made with respect to future production levels, operating and capital costs in the LOM plan, future metal prices, foreign exchange rates, net asset value (“NAV”) multiples, value of reserves outside the LOM plan in relation to the assumptions related to comparable entities and the market values per ounce and per pound and discount rates. Changes in any of the assumptions or estimates used in determining the fair values could impact the impairment analysis.

Provisions for Environmental Rehabilitation

The provision for environmental rehabilitation is assessed on an annual basis or when new information becomes available. This assessment includes the estimation of the future rehabilitation costs, the timing of these expenditures, and the impact of changes in discount rates and foreign exchange rates. The actual future expenditures may differ from the amounts currently provided if the estimates made are significantly different than actual results or if there are significant changes in environmental and/or regulatory requirements in the future.

Taxes

Estimations are required to be made regarding the tax basis of assets and liabilities and related deferred income tax assets and liabilities, amounts recorded for uncertain tax positions, the measurement of income tax expenses and indirect taxes, and estimates of the timing of repatriation of earnings, which would impact the recognition of withholding taxes and taxes related to the outside basis on subsidiaries/associates. A number of these estimates require estimates of future taxable profit, as well as the recoverability of indirect taxes, and if actual results are significantly different than estimates, the ability to realize the deferred tax assets and indirect tax receivables recorded on the balance sheet could be impacted.

— 457 — FINANCIAL INFORMATION — VELADERO MINE

Contingencies

Contingencies can be either possible assets or possible liabilities arising from past events which, by their nature, will only be resolved when one or more future events not wholly within control occurs or fails to occur. The assessment of such contingencies inherently involves the exercise of significant judgment and estimates of the outcome of future events. In assessing loss contingencies related to legal proceedings that are pending or unasserted claims that may result in such proceedings or regulatory or government actions that may negatively impact business or operations, the perceived merits of any legal proceedings or unasserted claims or actions as well as the perceived merits of the nature and amount of relief sought or expected to be sought are evaluated, when determining the amount, if any, to recognize as a contingent liability or assessing the impact on the carrying value of assets. Contingent assets are not recognized in the carve out financial statements.

DESCRIPTION OF CERTAIN CARVE OUT STATEMENTS OF INCOME AND COMPREHENSIVE INCOME ITEMS

The following table sets forth selected financial data of AGB II and MAG derived from the carve out financial statements of income and comprehensive income for the period indicated (which are presented on a 100% basis), the details of which are set forth in Section III — Additional Financial Information of AGB II of the Accountant’s Report.

For the year ended For the six months ended December 31, June 30, 2015 2016 2016 2017 (US$ in thousands) (Unaudited)

Revenue ...... 706,251 683,258 309,192 320,188 Cost of sales ...... (494,978) (467,011) (202,070) (217,764) Gross profit ...... 211,273 216,247 107,122 102,424 General and administrative expenses .... (1,339) 893 300 (2,208) Exploration, evaluation and project expenses ...... (2,262) (910) (302) (2,645) Impairment reversals ...... — 275,200 — — Loss on currency translation ...... (52,443) (19,054) (12,236) (5,216) Other (expense)/income ...... (1,648) 1,025 1,434 46 Profit from operations ...... 153,581 473,401 96,318 92,401 Finance costs, net ...... (20,731) (18,262) (9,659) (7,743) Profit before income tax ...... 132,850 455,139 86,659 84,658 Income tax expenses ...... (62,624) (168,320) (33,305) (33,989) Profit for the year/period ...... 70,226 286,819 53,354 50,669

— 458 — FINANCIAL INFORMATION — VELADERO MINE

Revenue

Revenue primarily includes spot market sales. Spot market sales represents sale of doré. For the years ended December 31, 2015 and 2016 and the six months ended June 30, 2017, doré produced at the Veladero Mine is sold to Barrick Gold and the sales price is fixed on the date of sale based on the gold spot price. Generally, revenue for spot market sales is recorded at the time of physical delivery. Other sales represents sale of by-products from the Veladero Mine. The following table sets forth the components of revenue for the period indicated.

For the year ended For the six months ended December 31, June 30, 2015 2016 2016 2017 (US$ in thousands) (Unaudited)

Spot market sales ...... 688,194 660,891 295,738 309,416 Other sales ...... 18,057 22,367 13,454 10,772 Total ...... 706,251 683,258 309,192 320,188

Sales volume of spot market sales from the Veladero Mine amounted to approximately 620.7 koz, 533.1 koz, 243.0 koz and 254.5 koz for the years ended December 31, 2015 and 2016 and the six months ended June 30, 2016 and 2017, respectively.

Cost of Sales

Cost of sales consists of direct mining costs, depreciation, royalty expenses and community relations expenses. Direct mining costs include ores in stock, contractor costs, fuel costs and employee costs. Royalty expenses represents the amounts paid to the government and to the IPEEM to use the Veladero mining concessions. Community relations expenses represent expenditures incurred to engage with the local communities and share the benefits of the Veladero Mine. The following table sets forth the components of cost of sales for the period indicated.

For the year ended For the six months ended December 31, June 30 2015 2016 2016 2017 (US$ in thousands) (Unaudited)

Direct mining costs ...... 358,704 320,014 139,166 140,794 Depreciation ...... 109,506 120,081 51,540 63,558 Royalty expenses ...... 25,278 24,399 10,615 11,983 Community relations expenses ...... 1,490 2,517 749 1,429 Total ...... 494,978 467,011 202,070 217,764

— 459 — FINANCIAL INFORMATION — VELADERO MINE

Gross Profit

Gross profit represents revenue less cost of sales.

General and Administrative Expenses

General and administrative expenses primarily consist of corporate and regional administration expenses and share-based payments.

Exploration, Evaluation and Project Expenses

Exploration, evaluation and project expenses primarily consist of exploration and evaluation expenses at the Veladero Mine.

Impairment Reversals

In 2016, an impairment reversal of US$275.2 million was recorded based on review in the fourth quarter of 2016 of the updated LOM plan for the Veladero Mine. Improvements had been made in the cost structure at the Veladero Mine primarily in relation to (i) the implementation of cost reduction and working capital improvement initiatives (Best in Class program), (ii) devaluation of the Argentine Peso against the US dollar, and (iii) elimination of export duty in Argentina. As a result, the open pit and leach pad were expanded in the LOM plan, resulting in an increase in the expected production and the number of years in the LOM plan. These changes increased Veladero Mine’s fair value less costs of disposal (FVLCD). FVLCD is calculated using the net present value (NPV) of the future cash flows expected to be generated by mines and projects. Key assumptions and estimates used included gold prices (US$1,050 per oz for 2017 and US$1,200 per oz for 2018), weighted average cost of capital (5.5%), NAV multiples for gold assets (1.15x), and LOM (13 years). The improvements in cost structure increased the Veladero Mine’s NPV, which in turn increased its FVLCD, which was determined be US$1.6 billion at the time of MAG’s review in 2016.

In conducting impairment testing, the recoverable amount of an asset is compared to its book value. If the recoverable amount is lower than book value, there may be an indicator for impairment. If the recoverable amount is greater than book value, there may be an indicator for impairment reversal. The recoverable amount is equal to the higher of FVLCD and value in use. In MAG’s impairment testing, the US$1.6 billion FVLCD was greater than the VIU amount and thus was determined to be the recoverable amount. The recoverable amount of US$1.6 billion was greater than book value at the time of review, resulting in a full reversal of a non-current asset impairment loss recorded in 2013.

Loss on Currency Translation

Loss on currency translation primarily relate to VAT receivables that are denominated in the Argentine Peso.

— 460 — FINANCIAL INFORMATION — VELADERO MINE

Other (Expense)/Income

Other expense primarily represents turnover taxes, bank charges, insurance and other immaterial expenses. Other income primarily represents gain or loss on sale of non-current assets. Other income in 2016 includes a US$3.1 million reversal of provision related to goods received but not invoiced.

Profit From Operations

Profit from operations primarily represents Veladero Mine’s gross profit, net of general and administrative expenses, exploration, evaluation and project expenses, impairment reversals, loss on currency translation and other expenses or income.

Finance Costs, Net

Finance costs primarily represent interest paid on loans from related parties and accretion on provision for environmental rehabilitation (PER). As of December 31, 2015, 2016 and 2017, MAG’s PER amounted to US$59.2 million, US$59.7 million and US$111.8 million, respectively. MAG’s PER increased significantly in 2017 because when management of the Veladero mine conducted re-assessments in 2017, as it does on an annual basis or when new information becomes available, it increased the total PER to US$110 million as of June 30, 2017 based on the assessment and advice from a third-party expert. The expert advised that the road should be maintained according to a higher quality standard considering how frequently this road is used in Veladero Mine’s operations, which would result in higher estimated maintenance costs. Finance income represents interest earned from bank deposits and loans to related parties.

Profit Before Income Tax

Profit before income taxes represents Veladero Mine’s income before finance costs and income taxes, net of finance costs.

Income Tax Expenses

Income tax expenses represents the sum of tax currently payable and deferred tax. The statutory tax rate for income tax in Argentina is 35%.

Profit for the Year/Period

Profit for the year or period represents income before income taxes, net of income tax expenses.

— 461 — FINANCIAL INFORMATION — VELADERO MINE

RESULTS OF OPERATIONS — VELADERO MINE

Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016

Revenue

Revenue increased by 3.6% from US$309.2 million for the six months ended June 30, 2016 to US$320.2 million for the six months ended June 30, 2017, primarily due to higher sales volumes and average selling prices, which is in line with the overall increase in gold prices in the first half of 2017.

Cost of Sales

Cost of sales increased by 7.8% from US$202.1 million for the six months ended June 30, 2016 to US$217.8 million for the six months ended June 30, 2017, primarily due to an increase in depreciation due to the impairment reversal of non-current assets in 2016 and an increase in investment in 2017 for the leach pad and environmental upgrades at the Veladero Mine.

Gross Profit and Gross Profit Margin

Gross profit decreased by 4.4% from US$107.1 million for the six months ended June 30, 2016 to US$102.4 million for the six months ended June 30, 2017 and gross profit margin decreased from 34.6% to 32.0%, primarily because cost of sales increased at a higher rate than the increase in revenue for the reasons discussed above.

General and Administrative Expenses

General and administrative expenses for the six months ended June 30, 2016 were negative primarily due to mark-to-market on share-based payments. General and administrative expenses were US$2.2 million for the six months ended June 30, 2017.

Exploration, Evaluation and Project Expenses

Exploration, evaluation and project expenses increased significantly from US$0.3 million for the six months ended June 30, 2016 to US$2.6 million for the six months ended June 30, 2017, primarily due to an increase in drilling.

Impairment Reversals

No impairment reversals were recognized for the six months ended June 30, 2016 and 2017.

— 462 — FINANCIAL INFORMATION — VELADERO MINE

Loss on Currency Translation

Loss on currency translation decreased by 57.4% from US$12.2 million for the six months ended June 30, 2016 to US$5.2 million for the six months ended June 30, 2017, primarily due to lower unrealized foreign currency translation losses relating to the Argentine Peso, which had a higher rate of devaluation in the six months ended June 30, 2016.

Other (Expense)/Income

Other expense decreased by 96.8% from US$1.4 million for the six months ended June 30, 2016 to approximately US$46,000 for the six months ended June 30, 2017, primarily due to a decrease in other miscellaneous expenses.

Profit From Operations

For the reasons described above, profit from operations decreased by 4.1% from US$96.3 million for the six months ended June 30, 2016 to US$92.4 million for the six months ended June 30, 2017.

Finance Costs, Net

Net finance costs decreased by 19.8% from US$9.7 million for the six months ended June 30, 2016 to US$7.7 million for the six months ended June 30, 2017, primarily due to a US$3.5 million decrease in interest paid in relation to loans from related parties, offset by a US$1.5 million decrease in finance income due to changes in cash and tax planning activities.

Profit Before Income Tax

For the reasons described above, profit before income tax decreased by 2.3% from US$86.7 million for the six months ended June 30, 2016 to US$84.7 million for the six months ended June 30, 2017.

Income Tax Expenses

Income tax expenses remained relatively stable at US$33.3 million for the six months ended June 30, 2016 and US$34.0 million for the six months ended June 30, 2017.

Profit for the Period

For the reasons described above, profit for the period decreased by 5.0% from US$53.4 million for the six months ended June 30, 2016 to US$50.7 million for the six months ended June 30, 2017.

— 463 — FINANCIAL INFORMATION — VELADERO MINE

Year Ended December 31, 2016 Compared to Year Ended December 31, 2015

Revenue

Revenue decreased by 3.3% from US$706.3 million for the year ended December 31, 2015 to US$683.3 million for the year ended December 31, 2016, due to a US$27.3 million decrease in spot market sales as a result of a decrease in sales volume of spot market sales from 620.7 koz in 2015 to 533.1 koz in 2016 mainly reflecting a decrease in production volume due to (i) lower grade tonnes placed on the leach pad in efforts to manage water balances in the leach pad, (ii) temporary suspensions of operations as a result of the September 2016 environmental incident, and (iii) unexpected severe winter weather conditions in 2016. The decrease in revenue was offset by an increase in average selling price of spot market sales reflecting the increase in market prices for gold.

Cost of Sales

Cost of sales decreased by 5.7% from US$495.0 million for the year ended December 31, 2015 to US$467.0 million for the year ended December 31, 2016, primarily due to a US$38.7 million decrease in direct mining cost as a result of lower tonnes mined due to severe weather conditions and the temporary suspension of operations in 2016, combined with cost saving initiatives such as optimizing consumables usage, improving efficiencies in mine operations and lower contractor costs.

Gross Profit and Gross Profit Margin

Gross profit increased by 2.4% from US$211.3 million for the year ended December 31, 2015 to US$216.2 million for the year ended December 31, 2016. Gross profit margin increased from 29.9% to 31.6%. The increases were primarily because cost of sales decreased at a higher rate than the decrease in revenue for the reasons discussed above.

General and Administrative Expenses

General and administrative expenses were US$1.3 million for the year ended December 31, 2015. In 2016, general and administrative expenses were negative primarily due to mark-to-market on share-based payments.

Exploration, Evaluation and Project Expenses

Exploration, evaluation and project expenses decreased by 59.8% from US$2.3 million for the year ended December 31, 2015 to US$0.9 million for the year ended December 31, 2016, primarily as a result of lower activity in drilling.

Impairment Reversals

Impairment reversals of US$275.2 million were recognized for the year ended December 31, 2016 due to a change of mine plan, whereas in 2015 no impairment reversals were recognized.

— 464 — FINANCIAL INFORMATION — VELADERO MINE

Loss on Currency Translation

Loss on currency translation decreased by 63.7% from US$52.4 million for the year ended December 31, 2015 to US$19.1 million for the year ended December 31, 2016, primarily because a large loss was recorded in 2015 due to devaluation of the Argentine Peso.

Other (Expense)/Income

Other expense of US$1.6 million was recognized for the year ended December 31, 2015 whereas other income of US$1.0 million was recognized for the year ended December 31, 2016, primarily because in 2016, US$3.1 million in other income was recognized in relation to the reversal of a provision related to goods received but not invoiced.

Profit From Operations

For the reasons described above, profit from operations increased by 208.2% from US$153.6 million for the year ended December 31, 2015 to US$473.4 million for the year ended December 31, 2016.

Finance Costs, Net

Net finance costs decreased by 11.9% from US$20.7 million for the year ended December 31, 2015 to US$18.3 million for the year ended December 31, 2016, primarily due to a US$5.0 million decrease in interest paid in relation to loans from related parties, offset by a US$2.7 million decrease in finance income due to changes in cash and tax planning activities.

Profit Before Income Tax

For the reasons described above, profit before income tax increased by 242.6% from US$132.9 million for the year ended December 31, 2015 to US$455.1 million for the year ended December 31, 2016.

Income Tax Expenses

Income tax expenses increased by 168.8% from US$62.6 million for the year ended December 31, 2015 to US$168.3 million for the year ended December 31, 2016 in line with the growth of income before income taxes from 2015 to 2016.

Profit for the Year

For the reasons described above, profit for the year increased by 308.4% from US$70.2 million for the year ended December 31, 2015 to US$286.8 million for the year ended December 31, 2016.

— 465 — FINANCIAL INFORMATION — VELADERO MINE

DESCRIPTION OF CERTAIN CONSOLIDATED STATEMENT OF FINANCIAL POSITION ITEMS

Inventories

Inventories consist of (i) raw materials, comprising ore in stockpiles prior to processing and ore on leach pads prior to cyanidation, (ii) mine operating supplies, (iii) work in process, which are semi-finished gold products that are being processed after cyanidation, (iv) finished products. The following table sets forth the components of Veladero Mine’s inventories as of the date indicated and the average inventory turnover days for the period indicated.

As of As of December 31, June 30, 2015 2016 2017 (US$ in thousands)

Current portion Raw materials Ore in stockpiles ...... 34,436 38,446 42,576 Ore on leach pads...... 136,095 171,818 265,780 Mine operating supplies ...... 132,092 120,184 124,327 Work in process ...... 17,099 17,134 5,825 Finished products...... — 7,715 — Non-current portion ...... Ore in stockpiles ...... (34,436) (38,446) (42,576) Total ...... 285,286 316,851 395,932

Inventory impairment charges ...... 15,848 — —

Average inventory turnover days (1) ...... 220.1 235.3 294.6

(1) Average inventories equal inventories at the beginning of the period plus inventories at the end of the period, divided by two. Average inventory turnover days equal average inventories divided by cost of sales and multiplied by the number of days in the period.

Inventories increased from US$285.3 million as of December 31, 2015 to US$316.9 million as of December 31, 2016 primarily because ore on leach pads increased by US$35.7 million due to due to differences in production plans at the time, partially offset by a US$11.9 million decrease in mine operating supplies which reflected policies to reduce supplies inventory at the time. Inventories further increased to US$395.9 million as of June 30, 2017 primarily because ore on leach pads increased by US$94.0 million mainly as a result of the 2017 environmental incident, Veladero Mine was restricted from adding cyanide to the leach pad, leading to suspension of leaching activities and an increase in ore on leach pads.

— 466 — FINANCIAL INFORMATION — VELADERO MINE

Average inventory turnover days increased from 220.1 to 235.3 and further to 294.6 days in 2015 and 2016, and the six months ended June 30, 2017 generally in line with the level of inventory we held.

Inventory impairment charges of US$15.8 million as of December 31, 2015 represents a one-time initiative to write-down obsolete supplies inventory in 2015.

Trade Receivables

Considering that trade receivables in relation to sales of dore´to Barrick Gold we are recorded as receivables with Barrick Gold, trade receivables for the Veladero Mine represented miscellaneous receivables and were minimal at US$1.4 million and US$1.7 million as of December 31, 2015 and 2016. Trade receivables due from Barrick Gold were US$42.1 million and US$171.5 million as of December 31, 2015 and 2016, respectively. There were no miscellaneous trade receivables or trade receivables due from Barrick Gold as of June 30, 2017. Average trade receivables turnover days were 32.3, 57.9 and 48.7 days in 2015 and 2016 and the six months ended June 30, 2017.

Other Current Assets

Other current assets represent (i) goods and services taxes recoverable, which primarily includes VAT recoverables, and (ii) prepaid expenses, mainly in relation to prepayments for construction contracts. The fluctuation in other current assets from US$112.9 million as of December 31, 2015 to US$67.1 million as of December 31, 2016 and US$90.7 million as of September 30, 2017 was primarily due to fluctuations in VAT recoverables in Argentina.

Trade Payables and Accruals

Trade payables and accruals represent trade payables and accruals mainly in relation to purchase of supplies, acquisition of assets, staff bonus and vacation pay. The following table sets forth the components of Veladero Mine’s trade payables and accruals as of the date indicated and the average trade payables turnover days for the period indicated.

As of As of December 31, June 30, 2015 2016 2017 (US$ in thousands)

Trade payables...... 18,930 30,066 31,408 Accruals ...... 92,365 71,884 68,942 Total ...... 111,295 101,950 100,350

Average trade payables turnover days (1) ...... 28.5 19.1 25.4

(1) Average trade payables equal trade payables at the beginning of the period plus trade payables at the end of the period, divided by two. Average trade payables turnover days equals average trade payables divided by cost of sales and then multiplied by the number of days in the period.

— 467 — FINANCIAL INFORMATION — VELADERO MINE

Trade payables and accruals decreased from US$111.3 million as of December 31, 2015 to US$102.0 million as of December 31, 2016 and US$100.4 million as of June 30, 2017, reflecting changes in the level of our supply procurement as of those dates.

Average trade payables turnover days decreased from 28.5 days in 2015 to 19.1 days in 2016 primarily because trade payables as of December 31, 2014 was significant compared to 2015 and 2016. Average trade payables turnover days increased to 25.4 for the six months ended June 30, 2017 primarily because trade payables increased significantly by US$11.1 million from December 31, 2015 to December 31, 2016.

NET CURRENT ASSETS

The following table sets forth the details of AGB II and MAG’s current assets and current liabilities as of the date indicated.

As of As of December 31, June 30, 2015 2016 2017 (US$ in thousands)

Current assets Cash and equivalents ...... 23,738 95,952 47,632 Trade receivables ...... 1,363 1,739 — Inventories...... 285,286 316,851 395,932 Receivables due from related parties ...... 8,492 175,273 14 Current loans receivable due from related parties...... 29,028 427,512 — Other current assets ...... 112,896 67,063 90,713 Total current assets ...... 460,803 1,084,390 534,291 Current liabilities Trade payables and accruals...... 111,295 101,950 100,350 Current income tax liabilities...... — — 629 Payables due to related parties...... 2,946 68,368 2,305 Current loans due to related parties ...... 50,391 358,391 25,368 Other current liabilities ...... 738 1,360 541 Total current liabilities ...... 165,370 530,069 129,193 Net current assets...... 295,433 554,321 405,098

Net current assets increased from US$295.4 million as of December 31, 2015 to US$554.3 million as of December 31, 2016 primarily due to (i) a US$398.5 million increase in current loans receivable due from related parties as loans were granted to BIBC during this period, (ii) a US$166.8 million increase in receivables due from related parties primarily due to an increase in receivables due from Barrick Gold during this period, and (iii) a US$72.2 million increase in cash and equivalents because of an increase in cash deposits, partially offset by a US$308.0 million increase in current loans due to related parties as loans were granted by Barrick Gold during this period.

— 468 — FINANCIAL INFORMATION — VELADERO MINE

Net current assets decreased from US$554.3 million as of December 31, 2016 to US$405.1 million as of June 30, 2017 primarily due to (i) a US$427.5 million decrease in current loans receivable due from related parties as loans granted to BIBC were repaid during this period, and (ii) a US$175.3 million decrease in receivables due from related parties as receivables due from Barrick Gold and BIBC were settled during this period, partially offset by (i) a US$333.0 million decrease in current loans due to related parties as certain loan payables due to Barrick Gold and BGI were re-classified as non-current loan payables during the period, and (ii) a US$79.1 million increase in inventories due to an increase of ore on leach pads.

LIQUIDITY AND CAPITAL RESOURCES

Cash requirements at the Veladero Mine primarily consists of cash used for its operations, including the purchase of raw materials, purchase of property, plant and equipment, payments to contractors. Primary sources of liquidity of the Veladero Mine are cash from operations and loans from related parties.

Cash Flows

The following table sets forth a summary of AGB II and MAG’s carve out statements of cash flow for the period indicated.

For the year ended For the six months ended December 31, June 30, 2015 2016 2016 2017 (US$ in thousands) (unaudited)

Net cash provided by/(used in) operating activities...... 273,880 178,026 32,472 (1,032) Net cash used in investing activities .... (223,000) (106,000) (40,878) (112,420) Net cash provided by/(used in) financing activities...... (31,200) — — 65,368 Effect of exchange rate changes on cash and equivalents...... (1,007) 188 (112) (236) Net increase/(decrease) in cash and equivalents ...... 18,673 72,214 (8,518) (48,320) Cash and cash equivalents at the beginning of the year ...... 5,065 23,738 23,738 95,952 Cash and cash equivalents at the end of the year ...... 23,738 95,952 15,220 47,632

— 469 — FINANCIAL INFORMATION — VELADERO MINE

Net Cash Provided By/(Used In) Operating Activities

Net cash used in operating activities for the six months ended June 30, 2017 was US$1.0 million, primarily reflecting profit for the period of US$50.7 million adjusted for US$63.6 million in depreciation and US$34.0 million in income tax expenses. Net cash used in operating activities also reflected (i) increase in other operating activities of US$45.3 million represented a change in other assets and liabilities, and (ii) increase in working capital of US$107.5 million primarily consisted of a US$83.2 million increase in inventory and a US$23.6 million increase in other current assets.

Net cash provided by operating activities for the year ended December 31, 2016 was US$178.0 million, primarily reflecting profit for the period of US$286.8 million adjusted for US$120.1 million in depreciation, US$275.2 million in impairment reversals, US$168.3 million in income tax expenses and US$19.1 million in net currency translation losses. Net cash from operating activities also reflected (i) increase in other operating activities of US$97.9 million primarily consisted of a US$98.8 million change in other assets and liabilities in relation to movements in current receivables and loan receivables due from, and current payables due to, related parties, and (ii) increase in working capital of US$49.8 million primarily consisted of a US$21.8 million increase in inventory, a US$16.4 million decrease in trade payable as certain payables were settled during this period and a US$11.0 million increase in other current assets.

Net cash provided by operating activities for the year ended December 31, 2015 was US$273.9 million, primarily reflecting profit for the year of US$70.2 million adjusted for US$109.5 million in depreciation, US$62.6 million in income tax expenses and US$52.4 million in net currency translation losses. Net cash from operating activities also reflected (i) decrease in other operating activities of US$8.7 million consisted of a US$15.8 million adjustment for inventory impairment charges in relation to a one-time initiative to write-down obsolete supplies inventory, partially offset by US$7.1 million change in other assets and liabilities, and (ii) increases in working capital of US$22.4 million primarily consisted of a US$32.8 million decrease in trade payable as certain payables were settled during this period, partially offset by a US$6.0 million decrease in other current assets and a US$3.7 million decrease in inventory.

Net Cash Used in Investing Activities

Net cash used in investing activities for the six months ended June 30, 2017 was US$112.4 million, representing capital expenditures for property, plant and equipment.

Net cash used in investing activities for the year ended December 31, 2016 was US$106.0 million, representing capital expenditures for property, plant and equipment.

Net cash used in investing activities for the year ended December 31, 2015 was US$223.0 million, representing capital expenditures for property, plant and equipment.

— 470 — FINANCIAL INFORMATION — VELADERO MINE

Net Cash Provided By/(Used In) Financing Activities

Net cash provided by financing activities for the six months ended June 30, 2017 was US$65.4 million, primarily reflecting (i) US$40.0 million in funding from non-controlling interests, which represents the subscription price for the 2.1547% interest in MAG subscribed by SDG Hong Kong in relation to the Veladero Acquisition, (ii) US$25.4 million in proceeds in relation to the loan agreement that MAG entered into with Barrick Gold for a total amount of 1,540,000 ounces of silver.

No cash was used in financing activities for the year ended December 31, 2016.

Net cash used in financing activities for the year ended December 31, 2015 was US$31.2 million, reflecting repayment of debt to related parties.

INDEBTEDNESS

The following table sets forth the components of AGB II and MAG’s indebtedness as of the date indicated.

As of As of December 31, June 30, 2015 2016 2017 (US$ in thousands)

Non-current Loans due to related parties ...... 400,000 92,000 282,850 Current Loans due to related parties ...... 50,391 358,391 25,368 Total ...... 450,391 450,391 308,218

For more information on the loans due to related parties, see “— Related Party Transactions.”

CAPITAL COMMITMENTS AND OPERATING LEASES

AGB II and MAG had capital commitments of US$10.0 million, US$15.0 million and US$8.0 million as of December 31, 2015 and 2016 and June 30, 2017, respectively, for construction activities at the Veladero Mine. In addition, AGB II and MAG had operating lease commitments of US$1.5 million, US$0.4 million and US$14.0 million as of December 31, 2015 and 2016 and June 30, 2017, respectively.

— 471 — FINANCIAL INFORMATION — VELADERO MINE

CAPITAL EXPENDITURES

AGB II and MAG’s capital expenditures amounted to US$223.0 million, US$106.0 million, US$40.8 million and US$112.4 million in 2015 and 2016 and the six months ended June 30, 2016 and 2017, respectively, and primarily related to mine site sustaining and development costs. The decrease in capital expenditures from 2015 to 2016 was primarily due to lower capitalized stripping costs and leach pad expansions combined with higher capitalized infrastructure improvement costs in 2015 as a result of the environmental incident in 2015. The increase in capital expenditures for the six months ended June 30, 2016 to the six months ended June 30, 2017 was primarily due to higher mine site sustaining capital expenditures relating to leach pad expansions and improvement and equipment purchases combined with higher capitalized stripping costs.

RELATED PARTY TRANSACTIONS

In 2015 and 2016 and the six months ended June 30, 2017, AGB II and MAG received loans from its related parties to supplement its working capital. AGB II and MAG also had receivables due from related parties, which primarily were in relation to the sale of dore´to Barrick Gold. AGB II and MAG also had payables due to related parties in relation to services received. In addition, AGB II and MAG had loan receivables for, and loan payables to, its related parties. The following table sets forth the balance of AGB II and MAG’s related party transactions as of the date indicated.

For the year ended December 31, For the six months 2015 2016 ended June 30, 2017 Balance Interest Balance Interest Balance Interest (US$ in thousands)

Current portion Receivables Due from Barrick Gold .... 7,506 — 171,454 — — — Due from BIBC ...... — — 3,501 — — — Due from BEASA ...... 986 — (228) — 14 — Due from others...... — — 546 — — — Receivables subtotal...... 8,492 — 175,273 — 14 — Loan receivables Due from BIBC ...... — — 427,512 3,501 — — Due from BEASA...... 26,189 (5,328) — (1,432) — — Due from Minera del Carmen ...... 2,839 (264) — (1,510) — — Loan receivables subtotal. . . 29,028 (5,592) 427,512 559 — —

— 472 — FINANCIAL INFORMATION — VELADERO MINE

For the year ended December 31, For the six months 2015 2016 ended June 30, 2017 Balance Interest Balance Interest Balance Interest (US$ in thousands)

Payables DuetoIBC...... — — (38,426) — — — Due to Barrick Gold ..... (2,564) — (29,771) — (2,305) — Due to others ...... (382) — (171) — — — Payables subtotal...... (2,946) — (68,368) — (2,305) — Loan payables Due to Barrick Gold ..... — — (308,000) 24,973 (25,000) (368) DuetoBGI...... (50,391) — (50,391) — — — Loan payables subtotal .... (50,391) — (358,391) 24,973 (25,000) (368) Non-current portion Receivables Due from Barrick Gold. . . 34,657 — — — — — Due from BIBC ...... 2,555 — 1,583 — — — Due from others ...... 295 — — — — — Receivables subtotal...... 37,507 — 1,583 — — — Loan receivables due from BIBC ...... 649,163 2,555 221,651 1,583 — — Payables DuetoIBC...... (36,883) — — — — — Due to Barrick Gold ..... (11,563) — — — — — Due to others ...... (95) — (55) — — — Payables subtotal...... (48,541) — (55) — — — Loan payables Due to Barrick Gold ..... (400,000) 29,977 (92,000) — (141,425) — Due to SDG Hong Kong . — — — — (141,425) — Loan payables subtotal .... (400,000) 29,977 (92,000) — (282,850) — Other ...... — (109) — 28 — — Total ...... 222,312 26,831 307,205 27,143 (310,141) (368)

— 473 — CORNERSTONE INVESTORS

THE CORNERSTONE PLACING

We have entered into cornerstone investment agreements with cornerstone investors (the “Cornerstone Investors”, and each a “Cornerstone Investor”), pursuant to which the Cornerstone Investors have agreed to subscribe, or cause their designated entities to subscribe, at the Offer Price for certain number of our Offer Shares (the “Cornerstone Placing”).

Based on the Offer Price of HK$14.70 per Offer Share, being the low-end of the indicative Offer Price range set out in this Prospectus, the total number of H Shares to be subscribed for by the Cornerstone Investors would be 214,553,000, representing, assuming that the Over-allotment Option is not exercised, approximately (i) 65.47% of the H Shares in issue upon completion of the Global Offering; and (ii) 9.82% of the Shares in issue upon completion of the Global Offering.

Based on the Offer Price of HK$16.54 per Offer Share, being the mid-point of the indicative Offer Price range set out in this Prospectus, the total number of H Shares to be subscribed for by the Cornerstone Investors would be 195,824,500, representing, assuming that the Over-allotment Option is not exercised, approximately (i) 59.75% of the H Shares in issue upon completion of the Global Offering; and (ii) 8.96% of the Shares in issue upon completion of the Global Offering.

Based on the Offer Price of HK$18.38 per Offer Share, being the high-end of the indicative Offer Price range set out in this Prospectus, the total number of H Shares to be subscribed for by the Cornerstone Investors would be 180,845,750, representing, assuming that the Over-allotment Option is not exercised, approximately (i) 55.18% of the H Shares in issue upon completion of the Global Offering; and (ii) 8.28% of the Shares in issue upon completion of the Global Offering.

The Cornerstone Placing will form part of the International Offering and none of such Cornerstone Investors will subscribe for any Offer Share under the Global Offering other than and pursuant to their respective cornerstone investment agreements. The Offer Shares to be subscribed for by the Cornerstone Investors will rank pari passu in all respects with the fully paid H Shares in issue. Immediately following the completion of the Global Offering, none of the Cornerstone Investors will have any board representation in the Company. Save as disclosed in the section headed “Substantial Shareholders”, none of the Cornerstone Investors will become a substantial shareholder of the Company (as defined under the Hong Kong Listing Rules).

The Offer Shares to be subscribed for by the Cornerstone Investors will not be affected by any reallocation of the Offer Shares between the International Offering and the Hong Kong Public Offering in the event of over-subscription under the Hong Kong Public Offering as described in “Structure of the Global Offering—The Hong Kong Public Offering” in this Prospectus.

Each of the Cornerstone Investors is an Independent Third Party and not a connected person or existing shareholder or close associate of the Company.

— 474 — CORNERSTONE INVESTORS

The information about the Cornerstone Investors set forth below has been provided by the Cornerstone Investors in connection with the Cornerstone Placing:

Based on the Offer Price of HK$14.70, being the low-end of the indicative Offer Price range

Approximate percentage of theApproximate percentage of theApproximate H percentage of the H Shares in issue immediately Shares in issue immediately Shares to be offered in the following the completion of thefollowing the completion of theInternational Offering (assuming Global Offering Global Offering no relocation) ONRTN INVESTORS CORNERSTONE Assuming that Assuming that Assuming that Assuming that Assuming that Assuming that the the Over- the Over- the Over- the Over- the Over- Hong Kong Over-allotment Allotment allotment allotment allotment allotment Investment Dollar Option is not Option is fully Option is not Option is fully Option is not Option is fully Cornerstone Investor Amount Equivalent exercised exercised exercised exercised exercised exercised 7 — 475 —

China Structural Reform Fund Corporation Limited* (中國國有企業結構調整基金股份有限公司) US$150 million HK$1,177 million 3.666%3.585% 24.437% 21.250% 27.152% 23.273% CCT China Merchant Buyout Fund* (深圳國調招商併購股權投資基金合夥企業有限合夥( )) RMB480 million HK$552 million 1.718%1.681% 11.456% 9.961% 12.728% 10.910% ICBC Asset Management Scheme Nominee* (中國工商銀行股份有限公司理財計劃代理人- ) HK$679 million HK$679 million 2.115%2.068% 14.097% 12.258% 15.663% 13.426% China National Gold Group Asset Management Ltd.* (中國黃金集團資產管理有限公司) US$45 million HK$353 million 1.100%1.075% 7.331% 6.375% 8.146% 6.982% Sparky International Company Limited* (斯派柯國際有限公司) US$50 million HK$392 million 1.222%1.195% 8.146% 7.083% 9.051% 7.758%

Note:* exclusive of 1% brokerage, 0.0027% SFC transaction levy and 0.005% Hong Kong Stock Exchange trading fee. Based on the Offer Price of HK$16.54, being the mid-point of the indicative Offer Price range

Approximate percentage of theApproximate percentage of theApproximate H percentage of the H Shares in issue immediately Shares in issue immediately Shares to be offered in the following the completion of thefollowing the completion of theInternational Offering (assuming Global Offering Global Offering no relocation)

Assuming that Assuming that Assuming that Assuming that Assuming that Assuming that the the Over- the Over- the Over- the Over- the Over- Hong Kong Over-allotment Allotment allotment allotment allotment allotment Investment Dollar Option is not Option is fully Option is not Option is fully Option is not Option is fully Cornerstone Investor Amount Equivalent exercised exercised exercised exercised exercised exercised ONRTN INVESTORS CORNERSTONE

China Structural Reform Fund Corporation Limited* (中國國有企業結構調整基金股份有限公司) US$150 million HK$1,177 million 3.258%3.186% 21.719% 18.886% 24.132% 20.684% CCT China Merchant Buyout Fund* (深圳國調招商併購股權投資基金合夥企業有限合夥( )) RMB480 million HK$552 million 1.527%1.494% 10.181% 8.853% 11.312% 9.696%

7 — 476 — ICBC Asset Management Scheme Nominee* (中國工商銀行股份有限公司理財計劃代理人- ) HK$764 million HK$764 million 2.115%2.068% 14.097% 12.258% 15.663% 13.426% China National Gold Group Asset Management Ltd.* (中國黃金集團資產管理有限公司) US$45 million HK$353 million 0.977%0.956% 6.516% 5.666% 7.240% 6.205% Sparky International Company Limited* (斯派柯國際有限公司) US$50 million HK$392 million 1.086%1.062% 7.239% 6.295% 8.044% 6.895%

Note: * exclusive of 1% brokerage, 0.0027% SFC transaction levy and 0.005% Hong Kong Stock Exchange trading. Based on the Offer Price of HK$18.38, being the high-end of the indicative Offer Price range

Approximate percentage of theApproximate percentage of theApproximate H percentage of the H Shares in issue immediately Shares in issue immediately Shares to be offered in the following the completion of thefollowing the completion of theInternational Offering (assuming Global Offering Global Offering no relocation)

Assuming that Assuming that Assuming that Assuming that Assuming that Assuming that the the Over- the Over- the Over- the Over- the Over- Hong Kong Over-allotment Allotment allotment allotment allotment allotment Investment Dollar Option is not Option is fully Option is not Option is fully Option is not Option is fully Cornerstone Investor Amount Equivalent exercised exercised exercised exercised exercised exercised ONRTN INVESTORS CORNERSTONE

China Structural Reform Fund Corporation Limited* (中國國有企業結構調整基金股份有限公司) US$150 million HK$1,177 million 2.932%2.867% 19.544% 16.995% 21.716% 18.614% CCT China Merchant Buyout Fund* (深圳國調招商併購股權投資基金合夥企業有限合夥( )) RMB480 million HK$552 million 1.374%1.344% 9.162% 7.967% 10.180% 8.726%

7 — 477 — ICBC Asset Management Scheme Nominee* (中國工商銀行股份有限公司理財計劃代理人- ) HK$849 million HK$849 million 2.115%2.068% 14.097% 12.258% 15.663% 13.426% China National Gold Group Asset Management Ltd.* (中國黃金集團資產管理有限公司) US$45 million HK$353 million 0.880%0.860% 5.863% 5.099% 6.515% 5.584% Sparky International Company Limited* (斯派柯國際有限公司) US$50 million HK$392 million 0.977%0.956% 6.515% 5.665% 7.239% 6.205%

Note: * exclusive of 1% brokerage, 0.0027% SFC transaction levy and 0.005% Hong Kong Stock Exchange trading. CORNERSTONE INVESTORS

China Structural Reform Fund Corporation Limited

China Structural Reform Fund Corporation Limited (中國國有企業結構調整基金股份有限公司) (“China Structural Reform Fund”) has agreed to subscribe for such number of the Offer Shares (rounded down to the nearest whole board lot of 250 H Shares) which may be purchased with an aggregate amount of US$150 million at the Offer Price (Approximately equal to HK$1,177 million). Based on the Offer Price of HK$14.70 per Offer Share, being the low-end of the range of the Offer Price set out in this Prospectus, China Structural Reform Fund will subscribe for 80,087,750 H Shares, representing, assuming that the Over-allotment Option is not exercised, approximately (i) 24.44% of the H Shares in issue upon the completion of the Global Offering, and (ii) 3.67% of the Shares in issue upon the completion of the Global Offering. Based on the Offer Price of HK$16.54 per Offer Share, being the mid-point of the range of the Offer Price set out in this Prospectus, China Structural Reform Fund will subscribe for 71,178,250 H Shares, representing, assuming that the Over-allotment Option is not exercised, approximately (i) 21.72% of the H Shares in issue upon the completion of the Global Offering, and (ii) 3.26% of the Shares in issue upon the completion of the Global Offering. Based on the Offer Price of HK$18.38 per Offer Share, being the high-end of the range of the Offer Price set out in this Prospectus, China Structural Reform Fund will subscribe for 64,052,750 H Shares, representing, assuming that the Over-allotment Option is not exercised, approximately (i) 19.54% of the H Shares in issue upon the completion of the Global Offering, and (ii) 2.93% of the Shares in issue upon the completion of the Global Offering.

China Structural Reform Fund is a company incorporated in the PRC in which the State-owned Assets Supervision and Administration Commission of the State Council (國務院國有資產監督管理委 員會), via a number of state-owe ed enterprises, indirectly holds approximately 58% of its equity interest. The remaining shareholding of China Structural Reform Fund is mainly held by certain other state-owned enterprises. China Structural Reform Fund is mainly engaged in business including private fund-raising, equity investment, investment consulting, project investment, asset management and business management consulting.

For the purpose of this cornerstone investment, China Structural Reform Fund has engaged GF Securities Asset Management Guangdong Co., Ltd., an asset manager that is qualified domestic institutional investor as approved by the relevant PRC authority, in the name of CEB-GFAM-China Structural Reform Fund Asset Management Account No. 1 to subscribe for and hold such Offer Shares on a discretionary basis on behalf of the China Structural Reform Fund.

CCT China Merchant Buyout Fund

CCT China Merchant Buyout Fund (深圳國調招商併購股權投資基金合夥企業(有限合夥)) (“CCT Merchant Buyout”) has agreed to subscribe for such number of the Offer Shares (rounded down to the nearest whole board lot of 250 H Shares) which may be purchased with an aggregate amount of RMB480 million at the Offer Price (Approximately equal to HK$552 million). Based on the Offer Price of HK$14.70 per Offer Share, being the low-end of the range of the Offer Price set out in this Prospectus, CCT Merchant Buyout will subscribe for 37,543,250 H Shares, representing, assuming that the Over-allotment Option is not exercised, approximately (i) 11.46% of the H Shares in issue upon the completion of the Global Offering, and (ii) 1.72% of the Shares in issue upon the completion of the Global Offering. Based on the Offer Price of HK$16.54 per Offer Share, being the

— 478 — CORNERSTONE INVESTORS mid-point of the range of the Offer Price set out in this Prospectus, CCT Merchant Buyout will subscribe for 33,366,750 H Shares, representing, assuming that the Over-allotment Option is not exercised, approximately (i) 10.18% of the H Shares in issue upon the completion of the Global Offering, and (ii) 1.53% of the Shares in issue upon the completion of the Global Offering. Based on the Offer Price of HK$18.38 per Offer Share, being the high-end of the range of the Offer Price set out in this Prospectus, CCT Merchant Buyout will subscribe for 30,026,500 H Shares, representing, assuming that the Over-allotment Option is not exercised, approximately (i) 9.16% of the H Shares in issue upon the completion of the Global Offering, and (ii) 1.37% of the Shares in issue upon the completion of the Global Offering.

CCT Merchant Buyout was established in Shenzhen, Guangdong Province by China Merchant Huihe of China Merchant Capital Investment Co., Ltd., China Structural Reform Fund, China Merchant Capital Investment Co., Ltd. (招商局資本控股有限公司), Shenzhen Guidance Fund Investment Ltd. (深圳市引導基金投資有限公司), Shenzhen Yantian District State-owned Asset Investment and Management Ltd. (深圳市鹽田區國有資本投資管理有限公司) and other promoters. CCT Merchant Buyout is managed by China Merchant Huihe. CCT Merchant Buyout focuses on equity investment and asset management.

For the purpose of this cornerstone investment, CCT Merchant Buyout has engaged Harvest Fund Management Co., Ltd., an asset manager that is qualified domestic institutional investor as approved by the relevant PRC authority, in the name of Harvest Fund-CCT Merchant Overseas Strategic Asset Management Scheme to subscribe for and hold such Offer Shares on a discretionary basis on behalf of the CCT Merchant Buyout.

ICBC Asset Management Scheme Nominee

ICBC Asset Management Scheme Nominee (中國工商銀行股份有限公司-理財計劃代理人) (“ICBC AM”) has agreed to subscribe for 46,200,000 of the Offer Shares at the Offer Price. Based on the Offer Price of HK$14.7 per Offer Share, being the low-end of the range of the Offer Price set out in this Prospectus, ICBC AM will subscribe for 46,200,000 H Shares, assuming that the Over-allotment Option is not exercised, approximately (i) 14.10% of the H Shares in issue upon the completion of the Global Offering, and (ii) 2.11% of the Shares in issue upon the completion of the Global Offering. Based on the Offer Price of HK$16.54 per Offer Share, being the mid-point of the range of the Offer Price set out in this Prospectus, ICBC AM will subscribe for 46,200,000 H Shares, representing, assuming that the Over-allotment Option is not exercised, approximately (i) 14.10% of the H Shares in issue upon the completion of the Global Offering, and (ii) 2.11% of the Shares in issue upon the completion of the Global Offering. Based on the Offer Price of HK$18.38 per Offer Share, being the high-end of the range of the Offer Price set out in this Prospectus, ICBC AM will subscribe for 46,200,000 H Shares, representing, assuming that the Over-allotment Option is not exercised, approximately (i) 14.10% of the H Shares in issue upon the completion of the Global Offering, and (ii) 2.11% of the Shares in issue upon the completion of the Global Offering.

— 479 — CORNERSTONE INVESTORS

For the purpose of this cornerstone investment, ICBC AM will act as a discretionary fund and will hold the H Shares of the Company for the benefit of independent third parties. ICBC AM has engaged GF Fund Management Co., Ltd. and Great Wall Fund Management Co., Ltd., which are asset managers that are qualified domestic institutional investor as approved by the relevant PRC authority, to subscribe for and hold such Offer Shares on behalf of the ICBC AM.

ICBC AM is the asset management arm of Industrial and Commercial Bank of China Limited, the parent company of ICBC International Capital Limited (“ICBCI Capital”) and ICBC International Securities Limited (“ICBCI Securities”). ICBC AM offers comprehensive asset management services to different types of clients, including individuals, corporate clients, private banking clients and institutions in the PRC.

ICBC AM is a connected client of ICBCI Capital and ICBCI Securities. ICBCI Capital has been appointed by the Company as one of the Joint Global Coordinators and the Joint Bookrunners of the Global Offering, while ICBCI Securities has been appointed by the Company as one of the Joint Lead Managers and Underwriters of the Global Offering.

We have applied to the Hong Kong Stock Exchange for, and the Hong Kong Stock Exchange has granted to us, its consent under paragraph 5(1) of Appendix 6 to the Hong Kong Listing Rules to permit ICBC AM to participate in the Global Offering as a cornerstone investor subject to certain conditions. See “Waivers from Strict Compliance with the Hong Kong Listing Rules — Proposed H Share Subscription by ICBC AM” for details.

China National Gold Group Asset Management Ltd.

China National Gold Group Asset Management Ltd. (中國黃金集團資產管理有限公司) (“China Gold Asset”) has agreed to subscribe for such number of the Offer Shares (rounded down to the nearest whole board lot of 250 H Shares) which may be purchased with an aggregate amount of US$45 million at the Offer Price (Approximately equal to HK$353 million). Based on the Offer Price of HK$14.70 per Offer Share, being the low-end of the range of the Offer Price set out in this Prospectus, China Gold Asset will subscribe for 24,026,250 H Shares, representing, assuming that the Over-allotment Option is not exercised, approximately (i) 7.33% of the H Shares in issue upon the completion of the Global Offering, and (ii) 1.10% of the Shares in issue upon the completion of the Global Offering. Based on the Offer Price of HK$16.54 per Offer Share, being the mid-point of the range of the Offer Price set out in this Prospectus, China Gold Asset will subscribe for 21,353,500 H Shares, representing, assuming that the Over-allotment Option is not exercised, approximately (i) 6.52% of the H Shares in issue upon the completion of the Global Offering, and (ii) 0.98% of the Shares in issue upon the completion of the Global Offering. Based on the Offer Price of HK$18.38 per Offer Share, being the high-end of the range of the Offer Price set out in this Prospectus, China Gold Asset will subscribe for 19,215,750 H Shares, representing, assuming that the Over-allotment Option is not exercised, approximately (i) 5.86% of the H Shares in issue upon the completion of the Global Offering, and (ii) 0.88% of the Shares in issue upon the completion of the Global Offering.

— 480 — CORNERSTONE INVESTORS

China Gold Asset is established by China National Gold Group Co., Ltd (中國黃金集團 有限公司) in May 23, 2008 with a registered capital of RMB10 million. China Gold Asset is a wholly-owned subsidiary of China National Gold Group Co., Ltd. It is primarily engaged in overseas investment, investment management, asset management, equity fund and economic information consulting.

For the purpose of this cornerstone investment, China Gold Asset has engaged China Asset Management Co., Ltd., an asset manager that is qualified domestic institutional investor as approved by the relevant PRC authority, to subscribe for and hold such Offer Shares on a discretionary basis on behalf of the China Gold Asset.

Sparky International Company Limited

Sparky International Company Limited (斯派柯國際有限公司)(“Sparky”) has agreed to subscribe for such number of the Offer Shares (rounded down to the nearest whole board lot of 250 H Shares) which may be purchased with an aggregate amount of US$50 million at the Offer Price (Approximately equal to HK$392 million). Based on the Offer Price of HK$14.70 per Offer Share, being the low-end of the range of the Offer Price set out in this Prospectus, Sparky will subscribe for 26,695,750 H Shares, representing, assuming that the Over-allotment Option is not exercised, approximately (i) 8.15% of the H Shares in issue upon the completion of the Global Offering, and (ii) 1.22% of the Shares in issue upon the completion of the Global Offering. Based on the Offer Price of HK$16.54 per Offer Share, being the mid-point of the range of the Offer Price set out in this Prospectus, Sparky will subscribe for 23,726,000 H Shares, representing, assuming that the Over-allotment Option is not exercised, approximately (i) 7.24% of the H Shares in issue upon the completion of the Global Offering, and (ii) 1.09% of the Shares in issue upon the completion of the Global Offering. Based on the Offer Price of HK$18.38 per Offer Share, being the high-end of the range of the Offer Price set out in this Prospectus, Sparky will subscribe for 21,350,750 H Shares, representing, assuming that the Over-allotment Option is not exercised, approximately (i) 6.51% of the H Shares in issue upon the completion of the Global Offering, and (ii) 0.98% of the Shares in issue upon the completion of the Global Offering.

Sparky is a company incorporated in Hong Kong and is ultimately controlled by Zhaojin Mining Industry Company Limited (招金礦業股份有限公司), a company listed on the Hong Kong Stock Exchange (stock code: 1818) (“Zhaojin Mining”). Zhaojin Mining is a company established in the PRC and is primarily engaged in exploration, mining, processing and smelting of gold.

CONDITIONS PRECEDENT

The subscription of each Cornerstone Investor is subject to, among other things, the following conditions precedent:

(i) the underwriting agreements for the Hong Kong Public Offering and the International Offering being entered into and having become effective and unconditional (in accordance with their respective original terms or as subsequently waived or varied by agreement of the parties thereto) by no later than the time and date as specified in these underwriting agreements, and neither of the aforesaid underwriting agreements having been terminated;

— 481 — CORNERSTONE INVESTORS

(ii) the Offer Price having been agreed upon between the Company and the Joint Representatives (on behalf of the underwriters of the Global Offering);

(iii) the Listing Committee of the Stock Exchange having granted the listing of, and permission to deal in, the H Shares (including the H Shares to be subscribed by the Cornerstone Investors) as well as other applicable waivers and approvals and such approval, permission or waiver having not been revoked prior to the commencement of dealings in the H Shares on the Stock Exchange;

(iv) no laws shall have been enacted or promulgated by any governmental authority which prohibits the consummation of the transactions contemplated in the Global Offering or in the respective cornerstone investment agreement and there shall be no orders or injunctions from a court of competent jurisdiction in effect precluding or prohibiting consummation of such transactions; and

(v) the respective representations, warranties, undertakings and confirmations of the Cornerstone Investors under the relevant cornerstone investment agreements are accurate and true in all material respects and not misleading and that there is no breach of the relevant cornerstone investment agreements on the part of the Cornerstone Investors.

RESTRICTIONS ON DISPOSALS BY THE CORNERSTONE INVESTORS

Each of the Cornerstone Investors has agreed, covenanted with and undertaken to the Company, the Joint Global Coordinators that, among other things, the Investor will not, whether directly or indirectly, at any time during the period of six months from the Listing Date (the “Lock-up Period”), directly or indirectly, dispose of, in any way, any H Shares to be subscribed by the Cornerstone Investors pursuant to the respective cornerstone investment agreement (the “Relevant Shares”) or any interest in any company or entity holding any Relevant Shares; or enter into any transactions directly or indirectly with the same economic effect as any aforesaid transaction.

— 482 — FUTURE PLANS AND USE OF PROCEEDS

FUTURE PLANS

For a detailed description of our future plans, see the section headed “Business — Business Strategy” in this Prospectus.

USE OF PROCEEDS

We estimate that we will receive net proceeds from the Global Offering of approximately HK$5,236.0 million (equivalent to approximately US$667.1 million), after deducting the underwriting fees and expenses payable by us in the Global Offering, and assuming an Offer Price of HK$16.54 per Offer Share, being the mid-point of the Offer Price range stated in this Prospectus. If the Offer Price is HK$18.38 per Offer Share, being the high-end of the Offer Price range stated in this Prospectus, the aforementioned net proceeds will be approximately HK$5,833.7 million (equivalent to approximately US$743.3 million). If the Offer Price is HK$14.70 per Offer Share, being the low-end of the Offer Price range stated in this Prospectus, the aforementioned net proceeds will be approximately HK$4,638.4 million (equivalent to approximately US$591.0 million). Assuming an Offer Price of HK$16.54 per Offer Share (being the mid-point of the Offer Price range stated in this Prospectus), we intend to use our net proceeds from the Global Offering for the repayment of the three-year Syndicated Term Loan with outstanding principal of US$672.0 million maturing on June 8, 2020 and an interest rate of LIBOR plus 1.25%, which was used to finance the Veladero Acquisition. Assuming that the Offer Price is set above the mid-point of the Offer Price range and there are any remaining net proceeds after the full repayment of the Syndicated Term Loan, such net proceeds will be used for the repayment of the three-year CDB Term Loan with an outstanding principal of US$300.0 million maturing on June 26, 2020 and an interest rate of LIBOR plus 1.23%, which was used to finance the Veladero Acquisition.

Except for the funds to be retained for working capital and other general corporate purposes, we currently intend to apply the net proceeds to the above purposes as soon as practicable following the completion of the Global Offering. If we do not repay the Syndicated Term Loan and/or CDB Term Loan in full, we intend to repay the remaining balance with funds from a variety of sources, including cash generated from operations and bank financing.

If the Over-allotment Option is exercised in full, the net proceeds that we will receive will be approximately HK$6,041.9 million, assuming an Offer Price of HK$16.54 per Offer Share (being the mid-point of the indicative Offer Price range).

— 483 — UNDERWRITING

HONG KONG UNDERWRITERS

CCB International Capital Limited China Securities (International) Corporate Finance Company Limited ICBC International Securities Limited Morgan Stanley Asia Limited ABCI Securities Company Limited BOCOM International Securities Limited BNP Paribas Securities (Asia) Limited CMB International Capital Limited China Everbright Securities (HK) Limited Guotai Junan Securities (Hong Kong) Limited Haitong International Securities Company Limited Long Asia Securities Limited SDG Securities (HK) Limited China Galaxy International Securities (Hong Kong) Co., Ltd Midas Securities Limited China Industrial Securities International Capital Limited Zhongtai International Securities Limited Head & Shoulders Securities Limited

UNDERWRITING ARRANGEMENTS AND EXPENSES

Hong Kong Public Offering

Hong Kong Underwriting Agreement

The Hong Kong Underwriting Agreement was entered into on September 13, 2018. As described in the Hong Kong Underwriting Agreement, we are offering the Hong Kong Offer Shares for subscription on and subject to the terms and conditions of this Prospectus and the Application Forms at the Offer Price. Subject to the Listing Committee granting the listing of, and permission to deal in, our H Shares in issue and to be issued pursuant to the Global Offering as mentioned herein (including any additional H Shares which may be issued pursuant to the exercise of the Over-allotment Option) and to certain other conditions set out in the Hong Kong Underwriting Agreement, the Hong Kong Underwriters have agreed severally and not jointly to subscribe or procure subscribers for their respective applicable proportions of the Hong Kong Offer Shares which are now being offered but are not taken up under the Hong Kong Public Offering on and subject to the terms and conditions of this Prospectus, the Application Forms and the Hong Kong Underwriting Agreement.

The Hong Kong Underwriting Agreement is conditional upon and subject to, among other things, the International Underwriting Agreement having been signed and becoming unconditional and not having been terminated in accordance with its terms.

— 484 — UNDERWRITING

Grounds for Termination

The Joint Global Coordinators (jointly for themselves and on behalf of the Hong Kong Underwriters) shall be entitled, in their sole and absolute discretion, by written notice to the Company, to terminate the Hong Kong Underwriting Agreement with immediate effect (except in the event of clause (ix)(c) below, the Joint Global Coordinators shall consult with the Company prior to exercising the termination right under this clause) if, at any time at or prior to 8:00 a.m. on the Listing Date, there shall develop, occur, exist or come into effect:

(i) any statement contained in this Prospectus and/or the Application Forms and/or any offering document in relation to the International Offering (together, the “Offering Documents”) is, or has become, or has been discovered to be untrue or incorrect in any material respect or misleading in any respect; or, the issue by the Company of any supplement or amendment to this Prospectus (or to any other documents used in connection with the Global Offering) pursuant to the Companies Ordinance, the Companies (Winding Up and Miscellaneous Provisions) Ordinance or the Hong Kong Listing Rules, or any requirement or request of the Hong Kong Stock Exchange and /or the SFC according to the above;

(ii) the investment commitments by the majority of the cornerstone investors after signing of the cornerstone investment agreements with such cornerstone investors have been withdrawn, terminated or cancelled;

(iii) either (i) there has been a material breach of any of the representations, warranties, undertakings or provisions of either the Hong Kong Underwriting Agreement or the International Underwriting Agreement by the Company or (ii) any of the representations, warranties and undertakings given by the Company in the Hong Kong Underwriting Agreement or the International Underwriting Agreement, as applicable, is (or would when repeated be) untrue, incorrect, incomplete or misleading in any material respect;

(iv) any prohibition by any competent governmental authority on the Company for whatever reason from offering, issuing or selling any of the Offer Shares pursuant to the terms of the Global Offering;

(v) any non-compliance of the Prospectus (or any other documents used in connection with the Global Offering) or any aspect of the Global Offering with the Hong Kong Listing Rules or any other applicable laws;

(vi) approval from the Hong Kong Stock Exchange granting the listing of, and permission to deal in, the H Shares on the Main Board of the Hong Kong Stock Exchange being withdrawn or revoked;

— 485 — UNDERWRITING

(vii) any person (other than the Joint Global Coordinators) has withdrawn its consent to be named in any of the Offering Documents or to the issue of any of the Offering Documents;

(viii)withdrawal of the Prospectus by the Company; and

(ix) any of the following:

(a) any change or development in or affecting the business, management, prospects, assets and liabilities, shareholders’ equity, profits or losses, results of operations, financial position of the Company and its subsidiaries as a whole;

(b) any moratorium, suspension or material limitation in or on trading in securities generally on the Hong Kong Stock Exchange, the Singapore Stock Exchange, the Shanghai Stock Exchange, the Shenzhen Stock Exchange, the New York Stock Exchange, the NASDAQ Global Market, the Tokyo Stock Exchange, Toronto Stock Exchange or the London Stock Exchange;

(c) any change or development in local, national, international, financial, economic, legal, political, military, industrial, fiscal, regulatory, currency or market conditions (including, without limitation, any general moratorium on commercial banking activities or material disruption in commercial banking, foreign exchange trading, securities settlement or clearance services) in or affecting Hong Kong, United States, United Kingdom, the PRC, the Argentine Republic, Canada, the European Union (or any member thereof), the Cayman Islands or Bermuda (together, the “Relevant Jurisdictions”);

(d) any change or development in or affecting any taxation, exchange controls, currency exchange rates or foreign exchange regulations (including, without limitation, a material devaluation of the United States dollar or Renminbi against any foreign currencies and any disruptions in the monetary, trading or securities settlement or clearance services, procedures or matters), or the implementation of any exchange control in any Relevant Jurisdiction (other than the PRC);

(e) any new laws or any change or development in or affecting existing laws or the interpretation or application of existing laws by any court or other competent authority in any Relevant Jurisdiction;

— 486 — UNDERWRITING

(f) any Director being convicted with any offence by any competent court of any Relevant Jurisdiction;

(g) any acts of government authority or orders of any competent courts, strikes, calamity, crisis, lock-outs, fire, explosion, flooding, civil commotion, acts of war, outbreak or escalation of hostilities, acts of God, acts of terrorism, aviation accidents or disaster, declaration of a national or international emergency, riot, public disorder, outbreaks of diseases, pandemics or epidemics;

(h) any litigation or claim being announced against any member of the Group, AGB II, MAG or any director of members of the Group that has or will have a material adverse effect on the Group;

(i) any Director being charged with an indictable offence or prohibited by operation of law or otherwise disqualified from taking part in the management of a company;

(j) any order or petition for the winding up of any member of the Group or AGB II and MAG; any composition or arrangement being made by any member of the Group or MAG with its creditors; any resolution for the winding up of any member of the Group or MAG being entered into, or the appointment of a provisional liquidator, receiver or manager over all or part of the material assets or undertaking of any member of the Group or MAG, or anything analogous thereto occurring in respect of any member of the Group or MAG;

(k) any non-compliance of the Prospectus (or any other documents used in connection with the Global Offering) or any aspect of the Global Offering with the Hong Kong Listing Rules or any other applicable law; which, individually or in aggregate, in the sole and absolute opinion of the Joint Global Coordinators (for themselves and on behalf of the Hong Kong Underwriters):

A. has resulted in, or will or may result in, a material adverse effect on the business, financial positions or trading condition of the Group taken as a whole;

B. has a material adverse effect on the success of the Global Offering or the level of applications under the Hong Kong Public Offering or the level of interest under the International Offering;

C. makes it impossible, impracticable, inexpedient or inadvisable for the Global Offering to proceed or to market the Global Offering; or

— 487 — UNDERWRITING

D. has or will or may have the effect of making any part of the Hong Kong Underwriting Agreement (including underwriting) incapable of performance in any material respect in accordance with its terms or preventing or delaying the processing of applications and/or payments pursuant to the Global Offering or pursuant to the underwriting thereof.

Undertakings to the Hong Kong Stock Exchange Pursuant to the Hong Kong Listing Rules

Undertakings by the Company

Pursuant to Rule 10.08 of the Hong Kong Listing Rules, the Company has undertaken to the Hong Kong Stock Exchange that we will not issue any shares or other securities convertible into equity securities (whether or not of a class already listed) of the Company or enter into any agreement or arrangement to issue such shares or securities at any time within six months from the Listing Date (whether or not such issue of shares or securities will be completed within six months from the Listing Date), except pursuant to the Global Offering, the Over-allotment Option or any of the circumstances prescribed by Rule 10.08 of the Hong Kong Listing Rules.

Undertakings by the Controlling Shareholder

Pursuant to Rule 10.07 of the Hong Kong Listing Rules, the Controlling Shareholder has undertaken to us and to the Hong Kong Stock Exchange, except pursuant to the Global Offering (including pursuant to the Over-allotment Option, the reduction of state-owned Shares or, if applicable, the stock borrowing arrangement that may be entered into with the Stabilising Manager or any of its associates or any person acting for it), that it will not, and shall procure that any other registered holder(s) (if any) will not, without the prior written consent of the Hong Kong Stock Exchange or unless otherwise in compliance with applicable requirements of the Hong Kong Listing Rules:

(a) in the period commencing on the date of this Prospectus and ending on the date which is six months from the Listing Date (the “First six-month Period”), dispose of, or enter into any agreement to dispose of any Shares in respect of which it is shown by this Prospectus the Controlling Shareholder to be the beneficial owner (as defined in Rule 10.07(2) of the Hong Kong Listing Rules) or otherwise create any options, rights, interests or encumbrances in respect of such Shares; and

(b) in the period of six months immediately following the expiry of the First six-month Period (the “Second six-month Period”), dispose of, nor enter into any agreement to dispose of or otherwise create any options, rights, interests or encumbrances in respect of, any of the Shares referred to in paragraph (a) above if, immediately following such disposal or upon the exercise or enforcement of such options, rights, interests or encumbrances, it would cease to be a Controlling Shareholder of the Company, in each case, save as permitted under the under the Hong Kong Listing Rules.

— 488 — UNDERWRITING

Further, pursuant to Note (3) to Rule 10.07(2) of the Hong Kong Listing Rules, the Controlling Shareholder has undertaken to us and to the Hong Kong Stock Exchange that, during the First six-month Period and the Second six-month Period, it will:

(a) except as disclosed in “History and Development” and “Substantial Shareholder” sections of this Prospectus, if it pledges or charges any of our securities beneficially owned by it in favour of an authorised institution (as defined in the Banking Ordinance, Chapter 155 of the Laws of Hong Kong) for a bona fide commercial loan, immediately inform us of such pledge or charge together with the number of securities so pledged or charged; and

(b) if it receives indications, either verbal or written, from the pledgee or chargee that any of our pledged or charged securities will be disposed of, immediately inform us of such indications.

We will also inform the Hong Kong Stock Exchange as soon as we have been informed of the above matters, if any, by the Controlling Shareholder and disclose such matters in accordance with the publication requirements under Rule 2.07C of the Hong Kong Listing Rules as soon as possible after being so informed.

Undertakings Pursuant to the Hong Kong Underwriting Agreement

Undertakings by the Company

The Company has undertaken to the Joint Sponsors, the Joint Global Coordinators, the Joint Lead Managers, the Joint Bookrunners, the Hong Kong Underwriters and each of them that it shall not to (except for the offer and issue of the Offer Shares pursuant to the Global Offering, including pursuant to any exercise of the Over-Allotment Option), and to procure that each of the Group Companies shall not, at any time during the period commencing on the date of the Hong Kong Underwriting Agreement and ending on the First six-month Period, without the prior written consent of the Joint Global Coordinators (on behalf of the Hong Kong Underwriters) and unless in compliance with the requirements of the Listing Rules:

(i) issue, sell, accept subscription for, offer to issue or sell, contract or agree to issue or sell, mortgage, charge, pledge, hypothecate, hedge, lend, grant or sell any option, warrant, contract or right to subscribe for or purchase, grant or purchase any option, warrant, contract or right to issue or sell, or otherwise transfer or dispose of or create an encumbrance over, or contract or agree to transfer or dispose of or create an encumbrance over, either directly or indirectly, conditionally or unconditionally, any Shares or any other securities of the Company or any interest in any of the foregoing (including any securities convertible into or exchangeable or exercisable for or that represent the right to receive, or any warrants or other rights to subscribe for or purchase, any Shares or any other equity securities of the Company);

— 489 — UNDERWRITING

(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 any other equity securities of the Company or any interest in any of the foregoing (including any securities convertible into or exchangeable or exercisable for or that represent the right to receive, or any warrants or other rights to subscribe for or purchase, any Shares or any other equity securities of the Company);

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

(iv) offer to or agree to or announce any intention to effect any transaction specified in paragraphs (i), (ii) or (iii) above,

in each case, whether the transaction specified in paragraphs (i), (ii) or (iii) above is to be settled by delivery of Shares or such other securities of the Company or in cash or otherwise (whether or not the issue of Shares or such other securities of the Company will be completed within the First six-month Period).

In the event that, at any time during the Second six-month Period, the Company enters into any of the transactions specified in paragraphs (i), (ii) or (iii) above or offers to or agrees to or announces any intention to effect any such transaction, the Company shall take all reasonable steps to ensure that any such transaction, offer, agreement or announcement will not create a disorderly or false market in the Shares or any other securities of the Company.

The International Offering

In connection with the International Offering, it is expected that the Company will enter into the International Underwriting Agreement with the Joint Global Coordinators and the International Underwriters. Under the International Underwriting Agreement, the International Underwriters would, subject to certain conditions set out therein, severally and not jointly agree to purchase the International Offer Shares being offered pursuant to the International Offering or procure subscribers or purchasers for such International Offer Shares.

The Company is expected to grant the Over-allotment Option to the International Underwriters, exercisable by the Joint Global Coordinators (for themselves and on behalf of the International Underwriters) at any time from the date of the International Underwriting Agreement until October 20, 2018, being the 30th day from the last day for lodging applications under the Hong Kong Public Offering, to require the Company to issue up to an aggregate of 49,159,500 additional Offer Shares, representing approximately 15% of the number of Offer Shares initially being offered under the Global Offering, at the Offer Price to solely cover over-allocations in the International Offering, if any.

— 490 — UNDERWRITING

Commission and Expenses

Under the terms and conditions of the Underwriting Agreements, the Hong Kong Underwriters will receive a gross underwriting commission of 0.88% on the aggregate Offer Price payable for the Hong Kong Offer Shares initially offered under the Hong Kong Public Offering, out of which they will pay any sub-underwriting commission (if any). For unsubscribed Hong Kong Offer Shares reallocated to the International Offering, we will pay an underwriting commission at the rate applicable to the International Offering and such commission will be paid to the Joint Global Coordinators and the relevant International Underwriters (but not the Hong Kong Underwriters).

Assuming the Over-allotment Option is not exercised at all, and based on an Offer Price of HK$16.54 per H Share (being the mid-point of the indicative Offer Price range of HK$14.70 to HK$18.38 per H Share), the aggregate commissions and fees (including the maximum discretionary incentive fee), together with the Hong Kong Stock Exchange listing fees, the SFC transaction levy, the Hong Kong Stock Exchange trading fee, legal and other professional fees and printing and other expenses relating to the Global Offering to be borne by the Company (collectively the “Commission and Fee”) are estimated to amount to approximately RMB160.6 million in aggregate.

Indemnity

We have agreed to indemnify the Hong Kong Underwriters for certain losses which they may suffer, including losses incurred arising from their performance of their obligations under the Hong Kong Underwriting Agreement and any breach by us of the Hong Kong Underwriting Agreement.

Hong Kong Underwriters’ Interests in the Company

Save for their respective obligations under the Hong Kong Underwriting Agreement or as otherwise disclosed in this Prospectus, none of the Hong Kong Underwriters is interested legally or beneficially in any shares of any of our members or has any right or option (whether legally enforceable or not) to subscribe for or purchase or to nominate persons to subscribe for or purchase securities in any of our members in the Global Offering.

Following the completion of the Global Offering, the Hong Kong Underwriters and their affiliated companies may hold a certain portion of the Shares as a result of fulfilling their obligations under the Hong Kong Underwriting Agreement.

Joint Sponsors’ Fee

A total amount of RMB950,000 is payable by the Company as sponsor fees to the Joint Sponsors.

— 491 — UNDERWRITING

Independence of Joint Sponsors

As of the Latest Practicable Date, each of the Joint Sponsors satisfy the independence criteria applicable to sponsors set out in Rule 3A.07 of the Hong Kong Listing Rules.

ACTIVITIES BY SYNDICATE MEMBERS

The underwriters of the Hong Kong Public Offering and the International Offering (together, the “Syndicate Members”) and their affiliates may each individually undertake a variety of activities (as further described below) which do not form part of the underwriting or stabilising process.

The Syndicate Members and their affiliates are diversified financial institutions with relationships in countries around the world. These entities engage in a wide range of commercial and investment banking, brokerage, fund management, trading, hedging, investing and other activities for their own account and for the account of others. In relation to the H Shares, those activities could include acting as agent for buyers and sellers of the H Shares, entering into transactions with those buyers and sellers in a principal capacity, securities investment and trading in the H Shares, and entering into over the counter or listed derivative transactions or listed and unlisted securities transactions (including issuing securities such as derivative warrants listed on a stock exchange) which have as their underlying assets, assets including the H Shares. Those activities may require hedging activity by those entities involving, directly or indirectly, the buying and selling of the H Shares. All such activity could occur in Hong Kong and elsewhere in the world and may result in the Syndicate Members and their affiliates holding long and/or short positions in the H Shares, in baskets of securities or indices including the H Shares, in units of funds that may purchase the H Shares, or in derivatives related to any of the foregoing.

In relation to issues by Syndicate Members or their affiliates of any listed securities having the H Shares as their underlying securities, whether on the Hong Kong Stock Exchange or on any other stock exchange, the rules of the Hong Kong Stock Exchange may require the issuer of those securities (or one of its affiliates or agents) to act as a market maker or liquidity provider in the security, and this will also result in hedging activity in the H Shares in most cases.

All such activities may occur both during and after the end of the stabilising period described in the section headed “Structure of the Global Offering”. Such activities may affect the market price or value of the H Shares, the liquidity or trading volume in the H Shares and the volatility of the price of the H Shares, and the extent to which this occurs from day to day cannot be estimated.

— 492 — UNDERWRITING

It should be noted that when engaging in any of these activities, the Syndicate Members will be subject to certain restrictions, including the followings:

(a) the Syndicate Members (other than the Stabilising Manager or any person acting for it) must not, in connection with the distribution of the Offer Shares, effect any transactions (including issuing or entering into any option or other derivative transactions relating to the Offer Shares), whether in the open market or otherwise, with a view to Stabilising or maintaining the market price of any of the Offer Shares at levels other than those which might otherwise prevail in the open market; and

(b) the Syndicate Members must comply with all applicable laws and regulations, including the market misconduct provisions of the SFO, including the provisions prohibiting insider dealing, false trading, price rigging and stock market manipulation.

Certain of the Syndicate Members or their respective affiliates have provided from time to time, and expect to provide in the future, investment banking and other services to the Company and each of their affiliates for which such Syndicate Members or their respective affiliates have received or will receive customary fees and commissions.

In addition, the Syndicate Members or their respective affiliates may provide financing to investors to finance their subscriptions of Offer Shares in the Global Offering.

— 493 — STRUCTURE OF THE GLOBAL OFFERING

THE GLOBAL OFFERING

This Prospectus is published in connection with the Hong Kong Public Offering as part of the Global Offering. The Global Offering comprises:

(a) the Hong Kong Public Offering of 32,773,000 H Shares (subject to adjustment as mentioned below) in Hong Kong as described below in the section headed “The Hong Kong Public Offering”; and

(b) the International Offering of an aggregate of 294,957,000 H Shares, subject to adjustment and the Over-allotment Option as mentioned below) outside the United States in offshore transactions in accordance with Regulation S and inside the United States only to QIBs in reliance on Rule 144A or any other exemption from registration under the U.S. Securities Act.

Investors may apply for Hong Kong Offer Shares under the Hong Kong Public Offering or apply for or indicate an interest for International Offer Shares under the International Offering, but may not do both.

The Offer Shares will represent approximately 15% of the enlarged issued share capital of the Company immediately after completion of the Global Offering, assuming the Over-allotment Option is not exercised.

References in this Prospectus to applications, Application Forms, application monies or the procedure for application relate solely to the Hong Kong Public Offering.

THE HONG KONG PUBLIC OFFERING

Number of Offer Shares Initially Offered

We are initially offering 32,773,000 H Shares for subscription by the public in Hong Kong at the Offer Price, representing 10% of the total number of Offer Shares initially available under the Global Offering. Subject to the reallocation of Offer Shares between the International Offering and the Hong Kong Public Offering, the Hong Kong Offer Shares will represent approximately 1.5% of the Company’s enlarged issued share capital immediately after completion of the Global Offering (assuming that the Over-allotment Option is not exercised).

The Hong Kong Public Offering is open to members of the public in Hong Kong as well as to institutional and professional investors. Professional investors generally include brokers, dealers, companies (including fund managers) whose ordinary business involves dealing in shares and other securities and corporate entities which regularly invest in shares and other securities.

Completion of the Hong Kong Public Offering is subject to the conditions as set out in the section headed “— Conditions of the Hong Kong Public Offering” below.

— 494 — STRUCTURE OF THE GLOBAL OFFERING

Applications

Each applicant under the Hong Kong Public Offering will also be required to give an undertaking and confirmation in the application submitted by him that he and any person(s) for whose benefit he is making the application has not applied for or taken up, or indicated an interest for, and will not apply for or take up, or indicate an interest for, any International Offer Shares under the International Offering, and such applicant’s application is liable to be rejected if the said undertaking and/or confirmation is breached and/or untrue (as the case may be) or it has been or will be placed or allocated Offer Shares under the International Offering.

The listing of the H Shares on the Hong Kong Stock Exchange is sponsored by the Joint Sponsors. Applicants under the Hong Kong Public Offering are required to pay, on application, the maximum Offer Price of HK$18.38 per Hong Kong Offer Share in addition to the brokerage, the SFC transaction levy and the Hong Kong Stock Exchange trading fee payable on each Hong Kong Offer Share. If the Offer Price, as finally determined in the manner described in the section headed “— Pricing and Allocation” below, is less than the maximum Offer Price of HK$18.38 per Offer Share, appropriate refund payments (including the brokerage, the SFC transaction levy and the Hong Kong Stock Exchange trading fee attributable to the surplus application monies) will be made to successful applicants, without interest. Further details are set out below in the section headed “How to Apply for Hong Kong Offer Shares” in this Prospectus.

Conditions of the Hong Kong Public Offering

Acceptance of all applications for Offer Shares pursuant to the Hong Kong Public Offering will be conditional on:

(a) the Listing Committee granting approval for the listing of, and permission to deal in, the H Shares to be issued pursuant to the Global Offering (including H Shares that may be issued pursuant to the exercise of the Over-allotment Option) and the approval for such listing and permission not subsequently having been revoked prior to the Listing Date;

(b) the Offer Price being duly agreed between the Joint Global Coordinators (for themselves and on behalf of the Underwriters), the Company on or before the Price Determination Date;

(c) the execution and delivery of the International Underwriting Agreement on or before the Price Determination Date; and

(d) the obligations of the Hong Kong Underwriters under the Hong Kong Underwriting Agreement and the obligations of the International Underwriters under the International Underwriting Agreement becoming and remaining unconditional and not having been terminated in accordance with the terms of the respective agreements,

— 495 — STRUCTURE OF THE GLOBAL OFFERING in each case on or before the dates and times specified in the Hong Kong Underwriting Agreement or the International Underwriting Agreement (unless and to the extent such conditions are validly waived on or before such dates and times) and in any event not later than 8:00 a.m. on Friday, September 28, 2018.

If, for any reason, the Offer Price is not agreed between the Joint Global Coordinators (for themselves and on behalf of the Underwriters) and the Company on or before Friday, September 21, 2018, the Global Offering will not proceed and will lapse.

The consummation of each of the Hong Kong Public Offering and the International Offering is conditional upon, among other things, the other offering becoming unconditional and not having been terminated in accordance with their respective terms.

If the above conditions are not fulfilled or waived prior to the times and dates specified, the Global Offering will lapse and the Hong Kong Stock Exchange will be notified immediately. Notice of the lapse of the Hong Kong Public Offering will be published by the Company in the South China Morning Post (in English) and the Hong Kong Economic Times (in Chinese) and on the website of the Company (www.sdhjgf.com.cn) and the website of the Hong Kong Stock Exchange (www.hkexnews.hk) on the next day following such lapse. In such eventuality, all application monies will be returned, without interest, on the terms set out in the section headed “How to Apply for Hong Kong Offer Shares — 14. Despatch/Collection of Share Certificates and Refund Monies” in this Prospectus. In the meantime, all application monies will be held in separate bank account(s) with the receiving banks or other bank(s) in Hong Kong licensed under the Banking Ordinance (Chapter 155 of the Laws of Hong Kong) (as amended).

THE INTERNATIONAL OFFERING

The International Offering will consist of an initial offering of 294,957,000 Offer Shares, representing 90% of the total number of Offer Shares initially available under the Global Offering and approximately 13.5% of the Company’s enlarged issued share capital immediately after completion of the Global Offering (assuming that the Over-allotment Option is not exercised).

The Stabilising Manager or its affiliates or any person acting for it may over-allocate up to and not more than an aggregate of 49,159,500 additional Offer Shares, which is approximately 15% of the Offer Shares initially available under the Global Offering, and cover such over-allocations by (among other methods) exercising the Over-allotment Option in full or in part or by using Shares purchased by the Stabilising Manager, its affiliates or any person acting for it in the secondary market at prices that do not exceed the Offer Price or through stock borrowing arrangement (as detailed below) or a combination of these means.

— 496 — STRUCTURE OF THE GLOBAL OFFERING

The Joint Global Coordinators (for themselves and on behalf of the Underwriters) may require any investor who has been offered Offer Shares under the International Offering and who has made an application under the Hong Kong Public Offering, to provide sufficient information to the Joint Global Coordinators so as to allow them to identify the relevant applications under the Hong Kong Public Offering and to ensure that they are excluded from any application of Offer Shares under the Hong Kong Public Offering.

OVER-ALLOTMENT OPTION

In connection with the Global Offering, the Company is expected to grant the Over-allotment Option to the International Underwriters, exercisable by the Joint Global Coordinators on behalf of the International Underwriters.

Pursuant to the Over-allotment Option, the International Underwriters have the right, exercisable by the Joint Global Coordinators (for themselves and on behalf of the International Underwriters) at any time from the date of the International Underwriting Agreement until 30 days after the last day for lodging applications under the Hong Kong Public Offering, to require the Company to issue up to an aggregate of 49,159,500 additional Offer Shares, representing approximately 15% of the Offer Shares initially available under the Global Offering, at the Offer Price under the International Offering, to solely cover over-allocations in the International Offering, if any.

If the Over-allotment Option is exercised in full, the additional Offer Shares will represent approximately 2.2% of our enlarged issued share capital immediately following the completion of the Global Offering and the exercise of the Over-allotment Option. In the event that the Over-allotment Option is exercised, an announcement will be made.

STABILISATION

Stabilization is a practice used by underwriters in some markets to facilitate the distribution of securities. To stabilise, the underwriters may bid for, or purchase, the newly issued securities in the secondary market, during a specified period of time, to retard and, if possible, prevent a decline in the market price of the securities below the offer price. Such transactions may be effected in all jurisdictions where it is permissible to do so, in each case in compliance with all applicable laws and regulatory requirements, including those of Hong Kong. In Hong Kong, the price at which stabilization is effected is not permitted to exceed the offer price.

In connection with the Global Offering, the Stabilising Manager, its affiliates or any person acting for it, on behalf of the Underwriters, may over-allocate or effect transactions with a view to stabilizing or supporting the market price of our H Shares at a level higher than that which might otherwise prevail for a limited period after the Listing Date. Any market purchases of our H Shares will be effected in compliance with all applicable laws and regulatory requirements. However, the Stabilising Manager has been or will be appointed as stabilizing manager for the purposes of the Global Offering in accordance with the Securities and Futures (Price Stabilising) Rules, as amended, under the SFO and hence, there is no obligation on the Stabilising Manager, its affiliates or any

— 497 — STRUCTURE OF THE GLOBAL OFFERING persons acting for it, to conduct any such stabilizing action. Such stabilizing action, if commenced, will be conducted at the absolute discretion of the Stabilising Manager, its affiliates or any person acting for it and may be discontinued at any time, and is required to be brought to an end after a limited period.

Stabilization actions permitted in Hong Kong pursuant to the Securities and Futures (Price Stabilising) Rules, as amended, include (i) over-allocating for the purpose of preventing or minimizing any reduction in the market price of our H Shares, (ii) selling or agreeing to sell our H Shares so as to establish a short position in them for the purpose of preventing or minimizing any reduction in the market price of our H Shares, (iii) purchasing or subscribing for, or agreeing to purchase or subscribe for, our H Shares pursuant to the Over-allotment Option in order to close out any position established under (i) or (ii) above, (iv) purchasing, or agreeing to purchase, any of our Offer Shares for the sole purpose of preventing or minimizing any reduction in the market price of our H Shares, (v) selling or agreeing to sell any H Shares in order to liquidate any position established as a result of those purchases and (vi) offering or attempting to do anything as described in (ii), (iii), (iv) or (v).

Specifically, prospective applicants for and investors in the Offer Shares should note that:

• the Stabilising Manager, its affiliates or any person acting for it, may, in connection with the stabilising action, maintain a long position in our H Shares;

• there is no certainty as to the extent to which and the time or period for which the Stabilising Manager, its affiliates or any person acting for it, will maintain such a long position;

• liquidation of any such long position by the Stabilising Manager, its affiliates or any person acting for it and selling in the open market, may have an adverse impact on the market price of our H Shares;

• no stabilising action can be taken to support the price of our H Shares for longer than the stabilisation period which will begin on the Listing Date, and is expected to expire on October 20, 2018, being the 30th day after the last date for lodging applications under the Hong Kong Public Offering. After this date, when no further stabilising action may be taken, demand for our H Shares, and therefore the price of our H Shares, could fall;

• the price of our H Shares cannot be assured to stay at or above the Offer Price by the taking of any stabilising action; and

• stabilising bids or transactions effected in the course of the stabilising action may be made at any price at or below the Offer Price and can, therefore, be done at a price below the price paid by applicants for, or investors in, acquiring the Offer Shares.

— 498 — STRUCTURE OF THE GLOBAL OFFERING

The Company will ensure or procure that an announcement in compliance with the Securities and Futures (Price Stabilising) Rules will be made within seven days of the expiration of the stabilization period. Following any over-allocation of Offer Shares in connection with the Global Offering, the Joint Global Coordinators, their affiliates or any person acting on their behalf may cover such over-allocation by, among other methods, using H Shares purchased by Stabilising Manager, its affiliates or any person acting for it in the secondary market, exercising the Over-allotment Option in full or in part, or by a combination of these means. Any such purchases will be made in accordance with the laws, rules and regulations in place in Hong Kong, including in relation to stabilization, the Securities and Futures (Price Stabilising) Rules, as amended, made under the SFO. The number of Offer Shares which can be over-allocated will not exceed the number of Offer Shares which may be sold pursuant to the exercise in full of the Over-allotment Option, being 49,159,500 Offer Shares, representing no more than 15% of the Offer Shares initially available under the Global Offering.

PRICING AND ALLOCATION

Pricing

The International Underwriters will be soliciting from prospective investors indications of interest in acquiring Offer Shares in the International Offering. Prospective professional and institutional investors will be required to specify the number of Offer Shares under the International Offering they would be prepared to acquire either at different prices or at a particular price. This process, known as “book-building”, is expected to continue up to, and to cease on or around, the last day for lodging applications under the Hong Kong Public Offering.

Pricing for the Offer Shares for the purpose of the various offerings under the Global Offering will be fixed on the Price Determination Date, which is expected to be on or around Thursday, September 20, 2018 (Hong Kong time) and in any event on or before Friday, September 21, 2018 (Hong Kong time), by agreement between the Joint Global Coordinators (for themselves and on behalf of the Underwriters) and the Company and the number of Offer Shares to be allocated under the various offerings will be determined shortly thereafter.

The Offer Price per Hong Kong Offer Share under the Hong Kong Public Offering will be identical to the Offer Price per International Offer Share under the International Offering based on the Hong Kong dollar price per International Offer Share under the International Offering, as determined by the Joint Global Coordinators (for themselves and on behalf of the Underwriters) and the Company. The Offer Price per Hong Kong Offer Share under the Hong Kong Public Offering will be fixed at the Hong Kong dollar amount which, when increased by the 1.0% brokerage, 0.0027% SFC transaction levy and 0.005% Stock Exchange trading fee payable thereon, is (subject to any necessary rounding) effectively equivalent to the Hong Kong dollar price per International Offer Share under the International Offering. The SFC transaction levy and the Hong Kong Stock Exchange trading fee otherwise payable by investors in the International Offering on International Offer Shares purchased by them will be paid by us.

— 499 — STRUCTURE OF THE GLOBAL OFFERING

The Offer Price will not be more than HK$18.38 per Offer Share and is expected to be not less than HK$14.70 per Offer Share unless otherwise announced, as further explained below, not later than the morning of the last day for lodging applications under the Hong Kong Public Offering. Prospective investors should be aware that the Offer Price to be determined on the Price Determination Date may be, but is not expected to be, lower than the indicative offer price range stated in this Prospectus.

The Joint Global Coordinators (for themselves and on behalf of the Underwriters) may, where considered appropriate, based on the level of interest expressed by prospective professional, institutional and other investors during the book-building process, and with the consent of the Company, reduce the number of Offer Shares or the indicative Offer Price range below that stated in this Prospectus at any time on or prior to the morning of the last day for lodging applications under the Hong Kong Public Offering. In such a case, the Company will, as soon as practicable following the decision to make such reduction, and in any event not later than the morning of the last day for lodging applications under the Hong Kong Public Offering, cause there to be published in the South China Morning Post (in English) and the Hong Kong Economic Times (in Chinese) and on the website of the Company (www.sdhjgf.com.cn) and the website of the Hong Kong Stock Exchange (www.hkexnews.hk) notices of the reduction in the number of Offer Shares or the indicative offer price range. Upon issue of such a notice, the revised Offer Price range will be final and conclusive and the Offer Price, if agreed upon by the Joint Global Coordinators (for themselves and on behalf of the Underwriters) and the Company, will be fixed within such revised offer price range.

Supplemental listing documents will also be issued by the Company in the event of a reduction in the number of Offer Shares or the Offer Price. Such supplemental listing documents will also include confirmation or revision, as appropriate, of the working capital statement and the Global Offering statistics as currently set out in this Prospectus, and any other financial information which may change as a result of any such reduction. In the absence of any such notice so published, the number of Offer Shares and/or the Offer Price will not be reduced.

If the number of Offer Shares being offered under the Global Offering or the indicative Offer Price range is so reduced, applicants who have already submitted an application will be notified that they are required to confirm their applications. All applicants who have already submitted an application need to confirm their applications in accordance with the procedures set out in the announcement and all unconfirmed applications will not be valid.

Before submitting applications for the Hong Kong Offer Shares, applicants should have regard to the possibility that any announcement of a reduction in the number of Offer Shares or the indicative offer price range may not be made until the day which is the last day for lodging applications under the Hong Kong Public Offering. Such notice will also include such information as agreed with the Hong Kong Stock Exchange which may change materially as a result of any such reduction. In the absence of any such notice of reduction published as described in this paragraph, the number of Offer Shares will not be reduced and/or the Offer Price, if agreed upon with the Company and the Joint Global Coordinators (for themselves and on behalf of the Underwriters), will under no circumstances be set outside the offer price range as stated in this Prospectus.

— 500 — STRUCTURE OF THE GLOBAL OFFERING

In the event of a reduction in the number of Offer Shares, the Joint Global Coordinators may, at their discretion, reallocate the number of Offer Shares to be offered in the Hong Kong Public Offering and the International Offering, provided that the number of Hong Kong Offer Shares comprised in the Hong Kong Public Offering shall not be less than 10% of the total number of Offer Shares available under the Global Offering (assuming the Over-allotment Option is not exercised).

The Offer Price for H Shares under the Global Offering is expected to be announced on Thursday, September 27, 2018. The level of indications of interest in the Global Offering, the level of applications and the basis of allotment of Hong Kong Offer Shares available under the Hong Kong Public Offering, are expected to be announced on Thursday, September 27, 2018 in the South China Morning Post (in English) and the Hong Kong Economic Times (in Chinese) and on the website of the Company (www.sdhjgf.com.cn) and the website of the Hong Kong Stock Exchange (www.hkexnews.hk).

Allocation

Allocation Under the Hong Kong Public Offering

Allocation of Hong Kong Offer Shares to investors under the Hong Kong Public Offering will be based solely on the level of valid applications received under the Hong Kong Public Offering. The basis of allocation may vary, depending on the number of Hong Kong Offer Shares validly applied for by applicants. Such allocation could, where appropriate, consist of balloting, which would mean that some applicants may receive a higher allocation than others who have applied for the same number of Hong Kong Offer Shares, and those applicants who are not successful in the ballot may not receive any Hong Kong Offer Shares.

The total number of Hong Kong Offer Shares available under the Hong Kong Public Offering (subject to the reallocation of the Offer Shares between the Hong Kong Public Offering and the International Offering referred to below) is to be divided into two pools for allocation purposes: pool A and pool B. The Hong Kong Offer Shares in pool A will consist of 16,386,500 Hong Kong Offer Shares and will be allocated on an equitable basis to applicants who have applied for Hong Kong Offer Shares with an aggregate price of HK$5 million (excluding the brokerage, the SFC transaction levy and the Hong Kong Stock Exchange trading fee payable) or less. The Hong Kong Offer Shares in pool B will consist of 16,386,500 Hong Kong Offer Shares and will be allocated on an equitable basis to applicants who have applied for Hong Kong Offer Shares with an aggregate price of more than HK$5 million (excluding the brokerage, the SFC transaction levy and the Hong Kong Stock Exchange trading fee payable) and up to the total value of pool B.

Investors should be aware that applications in pool A and applications in pool B may receive different allocation ratios. If Hong Kong Offer Shares in one (but not both) of the pools are under-subscribed, the surplus Hong Kong Offer Shares will be transferred to the other pool to satisfy demand in that other pool and be allocated accordingly. For the purpose of this paragraph only, the “price” for Hong Kong Offer Shares means the price payable on application therefor (without regard to the Offer Price as finally determined). Applicants can only receive an allocation of Hong Kong

— 501 — STRUCTURE OF THE GLOBAL OFFERING

Offer Shares from either pool A or pool B but not from both pools. Multiple or suspected multiple applications and any application for more than 16,386,500 Offer Shares, being the number of Hong Kong Offer Shares initially allocated to each pool and representing 50% of the 32,773,000 Hong Kong Offer Shares initially available under the Hong Kong Public Offering, are to be rejected.

Allocation Under the International Offering

The International Offering will include selective marketing of International Offer Shares in the United States only to QIBs in reliance on Rule 144A, or pursuant to another exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act, as well as institutional and professional investors and other investors anticipated to have a sizeable demand for such International Offer Shares in Hong Kong and other jurisdictions outside the United States in offshore transactions in reliance on Regulation S. Professional investors generally include brokers, dealers, companies (including fund managers) whose ordinary business involves dealing in shares and other securities and corporate entities which regularly invest in shares and other securities. Allocation of International Offer Shares pursuant to the International Offering will be effected in accordance with the “book-building” process described in the section headed “— Pricing and Allocation” below and based on a number of factors, including the level and timing of demand, the total size of the relevant investor’s invested assets or equity assets in the relevant sector and whether or not it is expected that the relevant investor is likely to hold or sell its H Shares, after the listing of our H Shares on the Hong Kong Stock Exchange. Such allocation is intended to result in a distribution of our H Shares on a basis which would lead to the establishment of a solid professional and institutional shareholder base for the benefit of the Company and its shareholders as a whole.

The Joint Global Coordinators (for themselves and on behalf of the Underwriters) may require any investor who has been offered International Offer Shares under the International Offering, and who has made an application under the Hong Kong Public Offering to provide sufficient information to the Joint Global Coordinators so as to allow them to identify the relevant application under the Hong Kong Public Offering and to ensure that it is excluded from any application of Hong Kong Offer Shares under the Hong Kong Public Offering.

Reallocation

The allocation of the Offer Shares between the Hong Kong Public Offering and the International Offering is subject to adjustment. Paragraph 4.2 of Practice Note 18 of the Hong Kong Listing Rules and the Guidance Letter HKEX-GL-91-18 require a clawback mechanism to be put in place which would have the effect of increasing the number of Hong Kong Offer Shares to certain percentages of the total number of Offer Shares offered in the Global Offering under certain circumstances.

— 502 — STRUCTURE OF THE GLOBAL OFFERING

The initial allocation of Offer Shares under the Hong Kong Public Offering shall not be less than 10% of the Global Offering. In the event of full or over-subscription in both the Hong Kong Public Offering and the International Offering, the Joint Global Coordinators shall apply a clawback mechanism following the closing of application lists on the following basis:

(a) If the number of Offer Shares validly applied for under the Hong Kong Public Offering represents less than 15 times the number of Offer Shares initially available for subscription under the Hong Kong Public Offering, the Joint Global Coordinators, in their absolute discretion, may (but shall not be obliged to) reallocate up to 32,773,000 Offer Shares from the International Offering to the Hong Kong Public Offering, so that the total number of the Offer Shares available under the Hong Kong Public Offering will be 65,546,000 Offer Shares, representing 20% of the Offer Shares initially available under the Global Offering (before any exercise of the Over-allotment Option), and the final Offer Price shall be fixed at HK$14.70 per Offer Share (being the low-end of the Offer Price range stated in this prospectus);

(b) If the number of Offer Shares validly applied for under the Hong Kong Public Offering represents 15 times or more but less than 50 times the number of Offer Shares initially available for subscription under the Hong Kong Public Offering, then Offer Shares will be reallocated to the Hong Kong Public Offering from the International Offering so that the total number of Offer Shares available under the Hong Kong Public Offering will be 98,319,000 Offer Shares, representing 30% of the Offer Shares initially available under the Global Offering;

(c) If the number of Offer Shares validly applied for under the Hong Kong Public Offering represents 50 times or more but less than 100 times the number of Offer Shares initially available for subscription under the Hong Kong Public Offering, then the number of Offer Shares to be reallocated to the Hong Kong Public Offering from the International Offering will be increased so that the total number of Offer Shares available under the Hong Kong Public Offering will be 131,092,000 Offer Shares, representing 40% of the Offer Shares initially available under the Global Offering; and

(d) If the number of Offer Shares validly applied for under the Hong Kong Public Offering represents 100 times or more than the number of Offer Shares initially available for subscription under the Hong Kong Public Offering, then the number of Offer Shares to be reallocated to the Hong Kong Public Offering from the International Offering will be increased so that the total number of Offer Shares available under the Hong Kong Public Offering will be 163,865,000 Offer Shares, representing 50% of the Offer Shares initially available under the Global Offering.

In the event of undersubscription in the International Offering but full or over-subscription in the Hong Kong Public Offering, the Joint Global Coordinators, in their absolute discretion, may (but shall not be obliged to) reallocate up to 32,773,000 Offer Shares from the International Offering to the Hong Kong Public Offering, so that the total number of the Offer Shares available under the Hong

— 503 — STRUCTURE OF THE GLOBAL OFFERING

Kong Public Offering will be 65,546,000 Offer Shares, representing 20% of the Offer Shares initially available under the Global Offering (before any exercise of the Over-allotment Option), and the final Offer Price shall be fixed at HK$14.70 per Offer Share (being the low-end of the Offer Price range stated in this prospectus).

In each case, the additional Offer Shares reallocated to the Hong Kong Public Offering will be allocated between pool A and pool B and the number of Offer Shares allocated to the International Offering will be correspondingly reduced in such manner as the Joint Global Coordinators deem appropriate.

If the Hong Kong Public Offering is not fully subscribed, the Joint Global Coordinators have the authority to reallocate all or any unsubscribed Hong Kong Offer Shares to the International Offering, in such proportions as the Joint Global Coordinators deem appropriate. However, if neither the Hong Kong Public Offering nor the International Offering is fully subscribed, the Global Offering will not proceed unless the Underwriters would subscribe or procure subscribers for respective applicable proportions of the Offer Shares being offered which are not taken up under the Global Offering on the terms and conditions of this prospectus, the Application Forms and the Underwriting Agreements.

DEALING ARRANGEMENT

Assuming that the Hong Kong Public Offering becomes unconditional at or before 8:00 a.m. in Hong Kong on Friday, September 28, 2018, it is expected that dealings in our H Shares on the Hong Kong Stock Exchange will commence at 9:00 a.m. on Friday, September 28, 2018. Our H Shares will be traded in board lots of 250 H Shares each. The stock code of the H Shares is 1787.

H Share certificates issued in respect of the Offer Shares will only become valid certificates of title at 8:00 a.m. on Friday, September 28, 2018 provided that (i) the Global Offering has become unconditional in all respects and (ii) the right of termination as described in the section headed “Underwriting — Underwriting Arrangements and Expenses — Hong Kong Public Offering — Grounds for Termination” in this Prospectus has not been exercised. Investors who trade H Shares prior to the receipt of H Share certificates or prior to the H Share certificates becoming valid certificates of title do so entirely at their own risk.

— 504 — HOW TO APPLY FOR HONG KONG OFFER SHARES

1. HOW TO APPLY

If you apply for Hong Kong Offer Shares, then you may not apply for or indicate an interest for International Offer Shares.

To apply for Hong Kong Offer Shares, you may:

• use a WHITE or YELLOW Application Form;

• apply online via the White Form eIPO service at www.eipo.com.hk;or

• electronically cause HKSCC Nominees to apply on your behalf.

None of you or your joint applicant(s) may make more than one application, except where you are a nominee and provide the required information in your application.

The Company, the Joint Global Coordinators, the White Form eIPO Service Provider and their respective agents may reject or accept any application in full or in part for any reason at their discretion.

2. WHO CAN APPLY

You can apply for Hong Kong Offer Shares on a WHITE or YELLOW Application Form if you or the person(s) for whose benefit you are applying:

• are 18 years of age or older;

• have a Hong Kong address;

• are outside the United States and not a U.S. person (within the meaning of Regulation S under the U.S. Securities Act) or are a person described in paragraph h(3) of Rule 902 of Regulation S; and

• are not a legal or natural person of the PRC.

If you apply online through the White Form eIPO, in addition to the above, you must also:

• have a valid Hong Kong identity card number; and

• provide a valid e-mail address and a contact telephone number.

If you are a firm, the application must be in the individual members’ names. If you are a body corporate, the Application Form must be signed by a duly authorized officer, who must state his representative capacity, and stamped with your corporation’s chop.

— 505 — HOW TO APPLY FOR HONG KONG OFFER SHARES

If an application is made by a person under a power of attorney, the Joint Global Coordinators may accept it at their discretion and on any conditions they think fit, including evidence of the attorney’s authority.

The number of joint applicants may not exceed four and they may not apply by means of White Form eIPO for the Hong Kong Offer Shares.

Unless permitted by the Hong Kong Listing Rules or any relevant waivers that have been granted by the Hong Kong Stock Exchange, you cannot apply for any Hong Kong Offer Shares if you are:

• an existing beneficial owner of Shares in the Company and/or any its subsidiaries;

• a Director, a supervisor or chief executive officer of the Company and/or any of its subsidiaries;

• a close associate (as defined in the Hong Kong Listing Rules) of any of the above;

• a core connected person (as defined in the Hong Kong Listing Rules) of the Company or will become a core connected person of the Company immediately upon completion of the Global Offering; and

• have been allocated or have applied for any International Offer Shares or otherwise participate in the International Offering.

3. APPLYING FOR HONG KONG OFFER SHARES

Which Application Channel to Use

For Hong Kong Offer Shares to be issued in your own name, use a WHITE Application Form or apply online through www.eipo.com.hk.

For Hong Kong Offer Shares to be issued in the name of HKSCC Nominees and deposited directly into CCASS to be credited to your or a designated CCASS Participant’s stock account, use a YELLOW Application Form or electronically instruct HKSCC via CCASS to cause HKSCC Nominees to apply for you.

Where to Collect the Application Forms

You can collect a WHITE Application Form and a Prospectus during normal business hours from 9:00 a.m. on Friday, September 14, 2018 until 12:00 noon on Thursday, September 20, 2018 from:

any of the following offices of certain Hong Kong Underwriters:

CCB International Capital Limited 12/F., CCB Tower, 3 Connaught Road Central, Central, Hong Kong

— 506 — HOW TO APPLY FOR HONG KONG OFFER SHARES

China Securities (International) Corporate Finance Company Limited 18/F, Two Exchange Square, 8 Connaught Place, Central, Hong Kong

ICBC International Securities Limited 37/F, ICBC Tower, 3 Garden Road, Hong Kong

Morgan Stanley Asia Limited 46/F, International Commerce Centre, 1 Austin Road West, Kowloon, Hong Kong

ABCI Securities Company Limited 10/F, Agricultural Bank of China Tower, 50 Connaught Road Central, Hong Kong

BOCOM International Securities Limited 9th Floor, Man Yee Building, 68 Des Voeux Road Central, Hong Kong

BNP Paribas Securities (Asia) Limited 59/F to 63/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong

CMB International Capital Limited 45/F, Champion Tower, 3 Garden Road, Central, Hong Kong

China Everbright Securities (HK) Limited 24/F Lee Garden One, 33 Hysan Avenue, Causeway Bay, Hong Kong

Guotai Junan Securities (Hong Kong) Limited 27/F, Low Block, Grand Millennium Plaza, 181 Queen’s Road Central, Hong Kong

Haitong International Securities Company Limited 22/F, Li Po Chun Chambers, 189 Des Voeux Road Central, Hong Kong

Long Asia Securities Limited Unit A, 23/F, The Wellington, 198 Wellington Street, Sheung Wan, Hong Kong

SDG Securities (HK) Limited Suites 5806-5807, 58/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong

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

Midas Securities Limited 25/F Jubilee Centre, 18 Fenwick Street, Wan Chai, Hong Kong

— 507 — HOW TO APPLY FOR HONG KONG OFFER SHARES

China Industrial Securities International Capital Limited 7/F, Three Exchange Square, 8 Connaught Place, Central, Hong Kong

Zhongtai International Securities Limited 19/F Li Po Chun Chambers, 189 Des Voeux Road Central, Hong Kong

Head & Shoulders Securities Limited Room 2511, 25/F, Cosco Tower, 183 Queen’s Road Central, Hong Kong

or any of the branches of the following receiving banks:

(i) Wing Lung Bank Limited

District Branch Name Address

Hong Kong Island . . Head Office 45 Des Voeux Road Central Johnston Road Branch 118 Johnston Road North Point Branch 361 King’s Road

Kowloon ...... Mongkok Branch B/F Wing Lung Bank Centre, 636 Nathan Road Tsim Sha Tsui Branch 4 Carnarvon Road Sham Shui Po Branch 111 Tai Po Road

New Territories .... Tsuen Wan Branch 251 Sha Tsui Road

(ii) Industrial and Commercial Bank of China (Asia) Limited

District Branch Name Address

Hong Kong Island . . Sheung Wan Branch Shop F, G/F, Kai Tak Commercial Building, 317-319 Des Voeux Road Central, Sheung Wan, Hong Kong Wanchai Branch 117-123 Hennessy Road, Wanchai, Hong Kong

Kowloon ...... TsimShaTsuiBranch Shop 1&2, G/F, No. 35-37 Hankow Road, Tsimshatsui, Kowloon Telford Branch Shop Units P19-P20, Telford Plaza, Kowloon Bay, Kowloon

New Territories .... TaiHing Branch Shop 21-23 Tai Hing Commercial Complex, Tai Hing Estate, Tuen Mun, New Territories

— 508 — HOW TO APPLY FOR HONG KONG OFFER SHARES

You can collect a YELLOW Application Form and a Prospectus during normal business hours from 9:00 a.m. on Friday, September 14, 2018 until 12:00 noon on Thursday, September 20, 2018 from:

• the Depository Counter of HKSCC at 1/F, One & Two Exchange Square, 8 Connaught Place, Central, Hong Kong; or

• your stockbroker.

Time for Lodging Application Forms

Your completed WHITE or YELLOW Application Form, together with a cheque or a banker’s cashier order attached and marked payable to “Wing Lung Bank (Nominees) Limited — SHANDONG GOLD MINING Public Offer” for the payment, should be deposited in the special collection boxes provided at any of the branches of the receiving banks listed above, at the following times:

Friday, September 14, 2018 — 9:00 a.m. to 5:00 p.m. Saturday, September 15, 2018 — 9:00 a.m. to 1:00 p.m. Monday, September 17, 2018 — 9:00 a.m. to 5:00 p.m. Tuesday, September 18, 2018 — 9:00 a.m. to 5:00 p.m. Wednesday, September 19, 2018 — 9:00 a.m. to 5:00 p.m. Thursday, September 20, 2018 — 9:00 a.m. to 12:00 noon

The application lists will be open from 11:45 a.m. to 12:00 noon on Thursday, September 20, 2018, the last application day or such later time as described in the section headed “— 10. Effect of Bad Weather on the Opening of the Application Lists” in this section.

4. TERMS AND CONDITIONS OF AN APPLICATION

Follow the detailed instructions in the Application Form carefully; otherwise, your application may be rejected.

By submitting an Application Form or applying through the White Form eIPO service, among other things, you:

(a) undertake to execute all relevant documents and instruct and authorise the Company and/ or the Joint Global Coordinators (or their agents or nominees), as agents of the Company, to execute any documents for you and to do on your behalf all things necessary to register any Hong Kong Offer Shares allocated to you in your name or in the name of HKSCC Nominees as required by the Articles of Association;

(b) agree to comply with the Companies Ordinance, the Companies (Winding Up and Miscellaneous Provisions) Ordinance, the PRC Company Law, the Special Regulations and the Articles of Association;

— 509 — HOW TO APPLY FOR HONG KONG OFFER SHARES

(c) confirm that you have read the terms and conditions and application procedures set out in this Prospectus and in the Application Form and agree to be bound by them;

(d) confirm that you have received and read this Prospectus and have only relied on the information and representations contained in this Prospectus in making your application and will not rely on any other information or representations except those in any supplement to this Prospectus;

(e) confirm that you are aware of the restrictions on the Global Offering in this Prospectus;

(f) agree that none of the Company, the Joint Global Coordinators, the Joint Sponsors, the Joint Bookrunners, the Joint Lead Managers, the Underwriters, their respective directors, officers, employees, partners, agents, advisers and any other parties involved in the Global Offering is or will be liable for any information and representations not in this Prospectus (and any supplement to it);

(g) undertake and confirm that you or the person(s) for whose benefit you have made the application have not applied for or taken up, or indicated an interest for, and will not apply for or take up, or indicate an interest for, any Offer Shares under the International Offering nor participated in the International Offering;

(h) agree to disclose to the Company, our H Share Registrar, the receiving banks, the Joint Global Coordinators, the Joint Sponsors, the Joint Bookrunners, the Joint Lead Managers, the Underwriters and/or their respective advisers and agents any personal data which they may require about you and the person(s) for whose benefit you have made the application;

(i) if the laws of any place outside Hong Kong apply to your application, agree and warrant that you have complied with all such laws and none of the Company, the Joint Global Coordinators, the Joint Sponsors, the Joint Bookrunners, the Joint Lead Managers and the Underwriters nor any of their respective officers or advisers will breach any law outside Hong Kong as a result of the acceptance of your offer to purchase, or any action arising from your rights and obligations under the terms and conditions contained in this Prospectus and the Application Form;

(j) agree that once your application has been accepted, you may not rescind it because of an innocent misrepresentation;

(k) agree that your application will be governed by the laws of Hong Kong;

(l) represent, warrant and undertake that (i) you understand that the Hong Kong Offer Shares have not been and will not be registered under the U.S. Securities Act; and (ii) you and any person for whose benefit you are applying for the Hong Kong Offer Shares are outside the United States and not a U.S. person (as defined in Regulation S) or are a person described in paragraph h(3) of Rule 902 of Regulation S;

(m) warrant that the information you have provided is true and accurate;

— 510 — HOW TO APPLY FOR HONG KONG OFFER SHARES

(n) agree to accept the Hong Kong Offer Shares applied for, or any lesser number allocated to you under the application;

(o) authorise the Company to place your name(s) or the name of the HKSCC Nominees, on the Company’s register of members as the holder(s) of any Hong Kong Offer Shares allocated to you, and the Company and/or its agents to send any H Share certificate(s) and/or any e-Refund payment instructions and/or any refund cheque(s) to you or the first-named applicant for joint application by ordinary post at your own risk to the address stated on the application, unless you have fulfilled the criteria mentioned in “Personal Collection” section in this Prospectus to collect the H Share certificate(s) and/or refund cheque(s) in person;

(p) declare and represent that this is the only application made and the only application intended by you to be made to benefit you or the person for whose benefit you are applying;

(q) understand that the Company and the Joint Global Coordinators will rely on your declarations and representations in deciding whether or not to make any allotment of any of the Hong Kong Offer Shares to you and that you may be prosecuted for making a false declaration;

(r) (if the application is made for your own benefit) warrant that no other application has been or will be made for your benefit on a WHITE or YELLOW Application Form or by giving electronic application instructions to HKSCC or to the White Form eIPO Service Provider by you or by anyone as your agent or by any other person; and

(s) (if you are making the application as an agent for the benefit of another person) warrant that (i) no other application has been or will be made by you as agent for or for the benefit of that person or by that person or by any other person as agent for that person on a WHITE or YELLOW Application Form or by giving electronic application instructions to HKSCC; and (ii) you have due authority to sign the Application Form or give electronic application instructions on behalf of that other person as their agent.

Additional Instructions for YELLOW Application Form

You may refer to the YELLOW Application Form for details.

5. APPLYING THROUGH WHITE FORM eIPO SERVICE

General

Individuals who meet the criteria in the section headed “— 2. Who can apply” above may apply through the White Form eIPO for the Offer Shares to be allotted and registered in their own names through the designated website at www.eipo.com.hk.

—511— HOW TO APPLY FOR HONG KONG OFFER SHARES

Detailed instructions for application through the White Form eIPO are on the designated website. If you do not follow the instructions, your application may be rejected and may not be submitted to the Company. If you apply through the designated website, you authorize the White Form eIPO Service Provider to apply on the terms and conditions in this Prospectus, as supplemented and amended by the terms and conditions of the White Form eIPO.

Time for Submitting Applications under the White Form eIPO

You may submit your application to the White Form eIPO Service Provider at www.eipo.com.hk (24 hours daily, except on the last application day) from 9:00 a.m. on Friday, September 14, 2018 until 11:30 a.m. on Thursday, September 20, 2018 and the latest time for completing full payment of application monies in respect of such applications will be 12:00 noon on Thursday, September 20, 2018 or such later time under the section headed “— 10. Effect of Bad Weather on the Opening of the Application Lists” below.

No Multiple Applications

If you apply by means of White Form eIPO, once you complete payment in respect of any electronic application instruction given by you or for your benefit through the White Form eIPO to make an application for Hong Kong Offer Shares, an actual application shall be deemed to have been made. For the avoidance of doubt, giving an electronic application instruction under White Form eIPO more than once and obtaining different application reference numbers without effecting full payment in respect of a particular reference number will not constitute an actual application.

If you are suspected of submitting more than one application through the White Form eIPO service or by any other means, all of your applications are liable to be rejected.

Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance

For the avoidance of doubt, the Company and all other parties involved in the preparation of this Prospectus acknowledge that each applicant who gives or causes to give electronic application instructions is a person who may be entitled to compensation under Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (as applied by Section 342E of the Companies (Winding Up and Miscellaneous Provisions) Ordinance).

Environmental Protection

The obvious advantage of White Form eIPO is to save the use of papers via the self-serviced and electronic application process. Computershare Hong Kong Investor Services Limited, being the designated White Form eIPO Service Provider, will contribute HK$2 for each “SHANDONG GOLD MINING CO., LTD.” White Form eIPO application submitted via the www.eipo.com.hk to support the funding of “Dongjiang River Source Tree Planting” project initiated by Friends of the Earth (HK).

— 512 — HOW TO APPLY FOR HONG KONG OFFER SHARES

6. APPLYING BY GIVING ELECTRONIC APPLICATION INSTRUCTIONS TO HKSCC VIA CCASS

General

CCASS Participants may give electronic application instructions to apply for the Hong Kong Offer Shares and to arrange payment of the money due on application and payment of refunds under their participant agreements with HKSCC and the General Rules of CCASS and the CCASS Operational Procedures.

If you are a CCASS Investor Participant, you may give these electronic application instructions through the CCASS phone system by calling 2979 7888 or through the CCASS Internet system (https://ip.ccass.com) (using the procedures in HKSCC’s “An Operating Guide for Investor Participants” in effect from time to time).

HKSCC can also input electronic application instructions for you if you go to:

Hong Kong Securities Clearing Company Limited Customer Service Centre 1/F, One & Two Exchange Square 8 Connaught Place, Central Hong Kong and complete an input request form.

You can also collect a Prospectus from this address.

If you are not a CCASS Investor Participant, you may instruct your broker or custodian who is a CCASS Clearing Participant or a CCASS Custodian Participant to give electronic application instructions via CCASS terminals to apply for the Hong Kong Offer Shares on your behalf.

You will be deemed to have authorized HKSCC and/or HKSCC Nominees to transfer the details of your application to the Company, the Joint Global Coordinators and our H Share Registrar.

Giving Electronic Application Instructions to HKSCC via CCASS

Where you have given electronic application instructions to apply for the Hong Kong Offer Shares and a WHITE Application Form is signed by HKSCC Nominees on your behalf:

(a) HKSCC Nominees will only be acting as a nominee for you and is not liable for any breach of the terms and conditions of the WHITE Application Form or this Prospectus;

(b) HKSCC Nominees will do the following things on your behalf:

• agree that the Hong Kong Offer Shares to be allotted shall be issued in the name of HKSCC Nominees and deposited directly into CCASS for the credit of the CCASS Participant’s stock account on your behalf or your CCASS Investor Participant’s stock account;

— 513 — HOW TO APPLY FOR HONG KONG OFFER SHARES

• agree to accept the Hong Kong Offer Shares applied for or any lesser number allocated;

• undertake and confirm that you have not applied for or taken up, will not apply for or take up, or indicate an interest for, any Offer Shares under the International Offering;

• (if the electronic application instructions are given for your benefit) declare that only one set of electronic application instructions has been given for your benefit;

• (if you are an agent for another person) declare that you have only given one set of electronic application instructions for the other person’s benefit and are duly authorised to give those instructions as their agent;

• confirm that you understand that the Company, the Directors and the Joint Global Coordinators will rely on your declarations and representations in deciding whether or not to make any allotment of any of the Hong Kong Offer Shares to you and that you may be prosecuted if you make a false declaration;

• authorise the Company to place HKSCC Nominees’ name on the Company’s register of members as the holder of the Hong Kong Offer Shares allocated to you and to send H Share certificate(s) and/or refund monies under the arrangements separately agreed between us and HKSCC;

• confirm that you have read the terms and conditions and application procedures set out in this Prospectus and agree to be bound by them;

• confirm that you have received and/or read a copy of this Prospectus and have relied only on the information and representations in this Prospectus in causing the application to be made, save as set out in any supplement to this Prospectus;

• agree that none of the Company, the Joint Global Coordinators, the Joint Sponsors, the Joint Bookrunners, the Joint Lead Managers, the Underwriters, their respective directors, officers, employees, partners, agents, advisers and any other parties involved in the Global Offering, is or will be liable for any information and representations not contained in this Prospectus (and any supplement to it);

• agree to disclose your personal data to the Company, our H Share Registrar, the receiving banks, the Joint Global Coordinators, the Joint Sponsors, the Joint Bookrunners, the Joint Lead Managers, the Underwriters and/or its respective advisers and agents;

• agree (without prejudice to any other rights which you may have) that once HKSCC Nominees’ application has been accepted, it cannot be rescinded for innocent misrepresentation;

— 514 — HOW TO APPLY FOR HONG KONG OFFER SHARES

• agree that any application made by HKSCC Nominees on your behalf is irrevocable before the fifth day after the time of the opening of the application lists (excluding any day which is Saturday, Sunday or public holiday in Hong Kong), such agreement to take effect as a collateral contract with us and to become binding when you give the instructions and such collateral contract to be in consideration of the Company agreeing that it will not offer any Hong Kong Offer Shares to any person before the fifth day after the time of the opening of the application lists (excluding any day which is Saturday, Sunday or public holiday in Hong Kong), except by means of one of the procedures referred to in this Prospectus. However, HKSCC Nominees may revoke the application before the fifth day after the time of the opening of the application lists (excluding for this purpose any day which is a Saturday, Sunday or public holiday in Hong Kong) if a person responsible for this Prospectus under Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance gives a public notice under that section which excludes or limits that person’s responsibility for this Prospectus;

• agree that once HKSCC Nominees’ application is accepted, neither that application nor your electronic application instructions can be revoked, and that acceptance of that application will be evidenced by the Company’s announcement of the Hong Kong Public Offering results;

• agree to the arrangements, undertakings and warranties under the participant agreement between you and HKSCC, read with the General Rules of CCASS and the CCASS Operational Procedures, for the giving of electronic application instructions to apply for Hong Kong Offer Shares;

• agree with the Company, for itself and for the benefit of each Shareholder (and so that the Company will be deemed by its acceptance in whole or in part of the application by HKSCC Nominees to have agreed, for itself and on behalf of each of the Shareholders, with each CCASS Participant giving electronic application instructions) to observe and comply with the Companies Ordinance, the Companies (Winding Up and Miscellaneous Provisions) Ordinance, the PRC Company Law, the Special Regulation and the Articles of Association;

• agree with the Company, for itself and for the benefit of each shareholder of the Company and each director, supervisor, manager and other senior officer of the Company (and so that the Company will be deemed by its acceptance in whole or in part of this application to have agreed, for itself and on behalf of each shareholder of the Company and each director, supervisor, manager and other senior officer of the Company, with each CCASS Participant giving electronic application instructions):

(a) to refer all differences and claims arising from the Articles of Association of the Company or any rights or obligations conferred or imposed by the Company Law or other relevant laws and administrative regulations concerning the affairs of the Company to arbitration in accordance with the Articles of Association of the Company;

— 515 — HOW TO APPLY FOR HONG KONG OFFER SHARES

(b) that any award made in such arbitration shall be final and conclusive; and

(c) that the arbitration tribunal may conduct hearings in open sessions and publish its award;

• agree with the Company (for the Company itself and for the benefit of each shareholder of the Company) that H shares in the Company are freely transferable by their holders;

• authorise the Company to enter into a contract on its behalf with each director and officer of the Company whereby each such director and officer undertakes to observe and comply with his obligations to shareholders stipulated in the Articles of Association of the Company; and

• agree that your application, any acceptance of it and the resulting contract will be governed by the laws of Hong Kong.

Effect of Giving Electronic Application Instructions to HKSCC via CCASS

By giving electronic application instructions to HKSCC or instructing your broker or custodian who is a CCASS Clearing Participant or a CCASS Custodian Participant to give such instructions to HKSCC, you (and, if you are joint applicants, each of you jointly and severally) are deemed to have done the following things. Neither HKSCC nor HKSCC Nominees shall be liable to the Company or any other person in respect of the things mentioned below:

• instructed and authorised HKSCC to cause HKSCC Nominees (acting as nominee for the relevant CCASS Participants) to apply for the Hong Kong Offer Shares on your behalf;

• instructed and authorised HKSCC to arrange payment of the maximum Offer Price, brokerage, SFC transaction levy and the Hong Kong Stock Exchange trading fee by debiting your designated bank account and, in the case of a wholly or partially unsuccessful application and/or if the Offer Price is less than the maximum Offer Price per Offer Share initially paid on application, refund of the application monies (including brokerage, SFC transaction levy and the Hong Kong Stock Exchange trading fee) by crediting your designated bank account; and

• instructed and authorised HKSCC to cause HKSCC Nominees to do on your behalf all the things stated in the WHITE Application Form and in this Prospectus.

Minimum Purchase Amount and Permitted Numbers

You may give or cause your broker or custodian who is a CCASS Clearing Participant or a CCASS Custodian Participant to give electronic application instructions for a minimum of 250 Hong Kong Offer Shares. Instructions for more than 250 Hong Kong Offer Shares must be in one of the numbers set out in the table in the Application Forms. No application for any other number of Hong Kong Offer Shares will be considered and any such application is liable to be rejected.

— 516 — HOW TO APPLY FOR HONG KONG OFFER SHARES

Time for Inputting Electronic Application Instructions(1)

CCASS Clearing/Custodian Participants can input electronic application instructions at the following times on the following dates:

Friday, September 14, 2018 — 9:00 a.m. to 8:30 p.m. Saturday, September 15, 2018 — 8:00 a.m. to 1:00 p.m. Monday, September 17, 2018 — 8:00 a.m. to 8:30 p.m. Tuesday, September 18, 2018 — 8:00 a.m. to 8:30 p.m. Wednesday, September 19, 2018 — 8:00 a.m. to 8:30 p.m. Thursday, September 20, 2018 — 8:00 a.m. to 12:00 noon

CCASS Investor Participants can input electronic application instructions from 9:00 a.m. on Friday, September 14, 2018 until 12:00 noon on Thursday, September 20, 2018 (24 hours daily, except on September 20, 2018, the last application day).

The latest time for inputting your electronic application instructions will be 12:00 noon on Thursday, September 20, 2018, the last application day or such later time as described in the section headed “— 10. Effect of Bad Weather on the Opening of the Application Lists” below.

(1) The times in this sub-section are subject to change as HKSCC may determine from time to time with prior notification to CCASS Clearing/Custodian Participants and/or CCASS Investor Participants.

No Multiple Applications

If you are suspected of having made multiple applications or if more than one application is made for your benefit, the number of Hong Kong Offer Shares applied for by HKSCC Nominees will be automatically reduced by the number of Hong Kong Offer Shares for which you have given such instructions and/or for which such instructions have been given for your benefit. Any electronic application instructions to make an application for the Hong Kong Offer Shares given by you or for your benefit to HKSCC shall be deemed to be an actual application for the purposes of considering whether multiple applications have been made.

Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance

For the avoidance of doubt, the Company and all other parties involved in the preparation of this Prospectus acknowledge that each CCASS Participant who gives or causes to give electronic application instructions is a person who may be entitled to compensation under Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (as applied by Section 342E of the Companies (Winding Up and Miscellaneous Provisions) Ordinance).

Personal Data

The section of the Application Form headed “Personal Data” applies to any personal data held by the Company, the H Share Registrar, the receiving banks, the Joint Global Coordinators, the Joint Sponsors, the Joint Bookrunners, the Joint Lead Managers, the Underwriters and any of their respective advisers and agents about you in the same way as it applies to personal data about applicants other than HKSCC Nominees.

— 517 — HOW TO APPLY FOR HONG KONG OFFER SHARES

7. WARNING FOR ELECTRONIC APPLICATIONS

The subscription of the Hong Kong Offer Shares by giving electronic application instructions to HKSCC is only a facility provided to CCASS Participants. Similarly, the application for Hong Kong Offer Shares through the White Form eIPO service is also only a facility provided by the White Form eIPO Service Provider to public investors. Such facilities are subject to capacity limitations and potential service interruptions and you are advised not to wait until the last application day in making your electronic applications. The Company, the Directors, the Joint Global Coordinators, the Joint Sponsors, the Joint Bookrunners, the Joint Lead Managers and the Underwriters take no responsibility for such applications and provide no assurance that any CCASS Participant or person applying through the White Form eIPO service will be allotted any Hong Kong Offer Shares.

To ensure that CCASS Investor Participants can give their electronic application instructions, they are advised not to wait until the last minute to input their instructions to the systems. In the event that CCASS Investor Participants have problems in the connection to CCASS phone system/ CCASS Internet system for submission of electronic application instructions, they should either (i) submit a WHITE or YELLOW Application Form, or (ii) go to HKSCC’s Customer Service Centre to complete an input request form for electronic application instructions before 12:00 noon on Thursday, September 20, 2018.

8. HOW MANY APPLICATIONS CAN YOU MAKE

Multiple applications for the Hong Kong Offer Shares are not allowed except by nominees. If you are a nominee, in the box on the Application Form marked “For nominees” you must include:

• an account number; or

• some other identification code, for each beneficial owner or, in the case of joint beneficial owners, for each joint beneficial owner. If you do not include this information, the application will be treated as being made for your benefit.

All of your applications will be rejected if more than one application on a WHITE or YELLOW Application Form or by giving electronic application instructions to HKSCC or through White Form eIPO service, is made for your benefit (including the part of the application made by HKSCC Nominees acting on electronic application instructions). If an application is made by an unlisted company and:

• the principal business of that company is dealing in securities; and

• you exercise statutory control over that company, then the application will be treated as being for your benefit.

“Unlisted company” means a company with no equity securities listed on the Hong Kong Stock Exchange.

— 518 — HOW TO APPLY FOR HONG KONG OFFER SHARES

“Statutory control” means you:

• control the composition of the board of directors of the company;

• control more than half of the voting power of the company; or

• hold more than half of the issued share capital of the company (not counting any part of it which carries no right to participate beyond a specified amount in a distribution of either profits or capital).

9. HOW MUCH ARE THE HONG KONG OFFER SHARES

The WHITE and YELLOW Application Forms have tables showing the exact amount payable for the Hong Kong Offer Shares.

You must pay the maximum Offer Price, brokerage, SFC transaction levy and the Hong Kong Stock Exchange trading fee in full upon application for Hong Kong Offer Shares under the terms set out in the Application Forms.

You may submit an application using a WHITE or YELLOW Application Form or through the White Form eIPO service in respect of a minimum of 250 Hong Kong Offer Shares. Each application or electronic application instruction in respect of more than 250 Hong Kong Offer Shares must be in one of the numbers set out in the table in the Application Form, or as otherwise specified on the designated website at www.eipo.com.hk.

If your application is successful, brokerage will be paid to the Exchange Participants (as defined in the Hong Kong Listing Rules), and the SFC transaction levy and the Hong Kong Stock Exchange trading fee are paid to the Hong Kong Stock Exchange (in the case of the SFC transaction levy, collected by the Hong Kong Stock Exchange on behalf of the SFC).

For further details on the Offer Price, see the section headed “Structure of the Global Offering — Pricing and Allocation”.

10. EFFECT OF BAD WEATHER ON THE OPENING OF THE APPLICATION LISTS

The application lists will not open if there is:

• a tropical cyclone warning signal number 8 or above; or

• a “black” rainstorm warning, in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Thursday, September 20, 2018. Instead they will open between 11:45 a.m. and 12:00 noon on the next Business Day which does not have either of those warnings in Hong Kong in force at any time between 9:00 a.m. and 12:00 noon.

— 519 — HOW TO APPLY FOR HONG KONG OFFER SHARES

If the application lists do not open and close on Thursday, September 20, 2018 or if there is a tropical cyclone warning signal number 8 or above or a “black” rainstorm warning signal in force in Hong Kong that may affect the dates mentioned in the section headed “Expected Timetable”, an announcement will be made in such event.

11. PUBLICATION OF RESULTS

The Company expects to announce the final Offer Price, the level of indication of interest in the International Offering, the level of applications in the Hong Kong Public Offering and the basis of allocation of the Hong Kong Offer Shares on Thursday, September 27, 2018 in South China Morning Post (in English) and Hong Kong Economic Times (in Chinese) and on the Company’s website at www.sdhjgf.com.cn and the website of the Hong Kong Stock Exchange at www.hkexnews.hk.

The results of allocations and the Hong Kong identity card/passport/Hong Kong business registration numbers of successful applicants under the Hong Kong Public Offering will be available at the times and dates and in the manner specified below:

• in the announcement to be posted on the Company’s website at www.sdhjgf.com.cn and the Hong Kong Stock Exchange’s website at www.hkexnews.hk by no later than 9:00 a.m. on Thursday, September 27, 2018;

• from the designated results of allocations website at www.iporesults.com.hk (alternatively: English https://www.eipo.com.hk/en/Allotment; Chinese https://www.eipo.com.hk/zh-hk/Allotment) with a “search by ID” function on a 24-hour basis from 8:00 a.m. on Thursday, September 27, 2018 to 12:00 midnight on Wednesday, October 3 2018;

• by telephone enquiry line by calling 2862 8669 between 9:00 a.m. and 10:00 p.m. from Thursday, September 27, 2018 to Sunday, September 30 2018;

• in the special allocation results booklets which will be available for inspection during opening hours from Thursday, September 27, 2018 to Saturday, September 29 2018 at all the receiving banks’ designated branches and sub-branches.

If the Company accepts your offer to purchase (in whole or in part), which it may do by announcing the basis of allocations and/or making available the results of allocations publicly, there will be a binding contract under which you will be required to purchase the Hong Kong Offer Shares if the conditions of the Global Offering are satisfied and the Global Offering is not otherwise terminated. Further details are contained in the section headed “Structure of the Global Offering”.

You will not be entitled to exercise any remedy of rescission for innocent misrepresentation at any time after acceptance of your application. This does not affect any other right you may have.

— 520 — HOW TO APPLY FOR HONG KONG OFFER SHARES

12. CIRCUMSTANCES IN WHICH YOU WILL NOT BE ALLOTTED HONG KONG OFFER SHARES

You should note the following situations in which the Hong Kong Offer Shares will not be allotted to you:

If your application is revoked:

By completing and submitting an Application Form or giving electronic application instructions to HKSCC or to the White Form eIPO Service Provider, you agree that your application or the application made by HKSCC Nominees on your behalf cannot be revoked on or before the fifth day after the time of the opening of the application lists (excluding for this purpose any day which is Saturday, Sunday or public holiday in Hong Kong). This agreement will take effect as a collateral contract with the Company.

Your application or the application made by HKSCC Nominees on your behalf may only be revoked on or before such fifth day if a person responsible for this Prospectus under Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (as applied by Section 342E of the Companies (Winding Up and Miscellaneous Provisions) Ordinance) gives a public notice under that section which excludes or limits that person’s responsibility for this Prospectus.

If any supplement to this Prospectus is issued, applicants who have already submitted an application will be notified that they are required to confirm their applications. If applicants have been so notified but have not confirmed their applications in accordance with the procedure to be notified, all unconfirmed applications will be deemed revoked.

If your application or the application made by HKSCC Nominees on your behalf has been accepted, it cannot be revoked. For this purpose, acceptance of applications which are not rejected will be constituted by notification in the press of the results of allocation, and where such basis of allocation is subject to certain conditions or provides for allocation by ballot, such acceptance will be subject to the satisfaction of such conditions or results of the ballot respectively.

If the Company or its agents exercise their discretion to reject your application:

The Company, the Joint Global Coordinators, the White Form eIPO Service Provider and their respective agents and nominees have full discretion to reject or accept any application, or to accept only part of any application, without giving any reasons.

(a) If the allotment of Hong Kong Offer Shares is void:

The allotment of Hong Kong Offer Shares will be void if the Listing Committee of the Hong Kong Stock Exchange does not grant permission to list the H Shares either:

• within three weeks from the closing date of the application lists; or

— 521 — HOW TO APPLY FOR HONG KONG OFFER SHARES

• within a longer period of up to six weeks if the Listing Committee notifies the Company of that longer period within three weeks of the closing date of the application lists.

(b) If:

• you make multiple applications or suspected multiple applications;

• you or the person for whose benefit you are applying have applied for or taken up, or indicated an interest for, or have been or will be placed or allocated (including conditionally and/or provisionally) Hong Kong Offer Shares and International Offer Shares;

• your Application Form is not completed in accordance with the stated instructions;

• your electronic application instructions through the White Form eIPO service are not completed in accordance with the instructions, terms and conditions on the designated website at www.eipo.com.hk;

• your payment is not made correctly or the cheque or banker’s cashier order paid by you is dishonoured upon its first presentation;

• the Underwriting Agreements do not become unconditional or are terminated;

• the Company or the Joint Global Coordinators believe that by accepting your application, it or they would violate applicable securities or other laws, rules or regulations; or

• your application is for more than 50% of the Hong Kong Offer Shares initially offered under the Hong Kong Public Offering.

13. REFUND OF APPLICATION MONIES

If an application is rejected, not accepted or accepted in part only, or if the Offer Price as finally determined is less than the maximum Offer Price of HK$18.38 per Offer Share (excluding brokerage, SFC transaction levy and the Hong Kong Stock Exchange trading fee thereon), or if the conditions of the Hong Kong Public Offering are not fulfilled in accordance with the section headed “Structure of the Global Offering — Conditions of the Hong Kong Public Offering” in this Prospectus or if any application is revoked, the application monies, or the appropriate portion thereof, together with the related brokerage, SFC transaction levy and the Hong Kong Stock Exchange trading fee, will be refunded, without interest or the cheque or banker’s cashier order will not be cleared.

Any refund of your application monies will be made on or before Thursday, September 27, 2018.

14. DESPATCH/COLLECTION OF SHARE CERTIFICATES AND REFUND MONIES

You will receive one H Share certificate for all Hong Kong Offer Shares allotted to you under the Hong Kong Public Offering (except pursuant to applications made on YELLOW Application Forms or by electronic application instructions to HKSCC via CCASS where the H Share certificates will be deposited into CCASS as described below).

— 522 — HOW TO APPLY FOR HONG KONG OFFER SHARES

No temporary document of title will be issued in respect of the H Shares. No receipt will be issued for sums paid on application. If you apply by WHITE or YELLOW Application Form, subject to personal collection as mentioned below, the following will be sent to you (or, in the case of joint applicants, to the first-named applicant) by ordinary post, at your own risk, to the address specified on the Application Form:

• H Share certificate(s) for all the Hong Kong Offer Shares allotted to you (for YELLOW Application Forms, H Share certificates will be deposited into CCASS as described below); and

• refund cheque(s) crossed “Account Payee Only” in favour of the applicant (or, in the case of joint applicants, the first-named applicant) for (i) all or the surplus application monies for the Hong Kong Offer Shares, wholly or partially unsuccessfully applied for; and/or (ii) the difference between the Offer Price and the maximum Offer Price per Offer Share paid on application in the event that the Offer Price is less than the maximum Offer Price (including brokerage, SFC transaction levy and the Hong Kong Stock Exchange trading fee but without interest).

Part of the Hong Kong identity card number/passport number, provided by you or the first-named applicant (if you are joint applicants), may be printed on your refund cheque, if any. Your banker may require verification of your Hong Kong identity card number/passport number before encashment of your refund cheque(s). Inaccurate completion of your Hong Kong identity card number/ passport number may invalidate or delay encashment of your refund cheque(s).

Subject to arrangement on despatch/collection of H Share certificates and refund monies as mentioned below, any refund cheques and H Share certificates are expected to be posted on or before Thursday, September 27, 2018. The right is reserved to retain any H Share certificate(s) and any surplus application monies pending clearance of cheque(s) or banker’s cashier’s order(s).

H Share certificates will only become valid at 8:00 a.m. on Friday, September 28, 2018 provided that the Global Offering has become unconditional and the right of termination described in the section headed “Underwriting” in this Prospectus has not been exercised. Investors who trade shares prior to the receipt of H Share certificates or the H Share certificates becoming valid do so at their own risk.

Personal Collection

(a) If you apply using a WHITE Application Form

If you apply for 1,000,000 Hong Kong Offer Shares or more and have provided all information required by your Application Form, you may collect your refund cheque(s) and/or Share certificate(s) from the H Share Registrar, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, from 9:00 a.m. to 1:00 p.m. on Thursday, September 27, 2018 or such other date as notified by us in the newspapers.

— 523 — HOW TO APPLY FOR HONG KONG OFFER SHARES

If you are an individual who is eligible for personal collection, you must not authorize any other person to collect for you. If you are a corporate applicant which is eligible for personal collection, your authorized representative must bear a letter of authorization from your corporation stamped with your corporation’s chop. Both individuals and authorized representatives must produce, at the time of collection, evidence of identity acceptable to the H Share Registrar.

If you do not collect your refund cheque(s) and/or H Share certificate(s) personally within the time specified for collection, they will be despatched promptly to the address specified in your Application Form by ordinary post at your own risk.

If you apply for less than 1,000,000 Hong Kong Offer Shares, your refund cheque(s) and/or H Share certificate(s) will be sent to the address on the relevant Application Form on or before Thursday, September 27, 2018, by ordinary post and at your own risk.

(b) If you apply using a YELLOW Application Form

If you apply for 1,000,000 Hong Kong Offer Shares or more and have provided all information required by your Application Form, please follow the same instructions as described above. If you have applied for less than 1,000,000 Hong Kong Offer Shares, your refund cheque(s) will be sent to the address on the relevant Application Form on or before Thursday, September 27, 2018, by ordinary post and at your own risk.

If you apply by using a YELLOW Application Form and your application is wholly or partially successful, your H Share certificate(s) will be issued in the name of HKSCC Nominees and deposited into CCASS for credit to your or the designated CCASS Participant’s stock account as stated in your Application Form on Thursday, September 27, 2018, or upon contingency, on any other date determined by HKSCC or HKSCC Nominees.

If you apply through a designated CCASS Participant (other than a CCASS Investor Participant)

For Hong Kong Offer Shares credited to your designated CCASS Participant’s stock account (other than a CCASS Investor Participant), you can check the number of Hong Kong Offer Shares allotted to you with that CCASS Participant.

If you are applying as a CCASS Investor Participant

The Company will publish the results of CCASS Investor Participants’ applications together with the results of the Hong Kong Public Offering in the manner described in the section headed “— 11. Publication of Results” above. You should check the announcement published by the Company and report any discrepancies to HKSCC before 5:00 p.m. on Thursday, September 27, 2018 or any other date as determined by HKSCC or HKSCC Nominees. Immediately after the credit of the Hong Kong Offer Shares to your stock account, you can check your new account balance via the CCASS phone system and CCASS Internet system.

— 524 — HOW TO APPLY FOR HONG KONG OFFER SHARES

(c) If you apply through the White Form eIPO service

If you apply for 1,000,000 Hong Kong Offer Shares or more and your application is wholly or partially successful, you may collect your H Share certificate(s) from the H Share Registrar, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, from 9:00 a.m. to 1:00 p.m. on Thursday, September 27, 2018, or such other date as notified by the Company in the newspapers as the date of despatch/collection of H Share certificates/e-Refund payment instructions/refund cheques.

If you do not collect your H Share certificate(s) personally within the time specified for collection, they will be sent to the address specified in your application instructions by ordinary post at your own risk.

If you apply for less than 1,000,000 Hong Kong Offer Shares, your H Share certificate(s) (where applicable) will be sent to the address specified in your application instructions on or before Thursday, September 27, 2018 by ordinary post at your own risk.

If you apply and pay the application monies from a single bank account, any refund monies will be despatched to that bank account in the form of e-Refund payment instructions. If you apply and pay the application monies from multiple bank accounts, any refund monies will be despatched to the address as specified in your application instructions in the form of refund cheque(s) by ordinary post at your own risk.

(d) If you apply via Electronic Application Instructions to HKSCC

Allocation of Hong Kong Offer Shares

For the purposes of allocating Hong Kong Offer Shares, HKSCC Nominees will not be treated as an applicant. Instead, each CCASS Participant who gives electronic application instructions or each person for whose benefit instructions are given will be treated as an applicant.

Deposit of Share Certificates into CCASS and Refund of Application Monies

• If your application is wholly or partially successful, your H Share certificate(s) will be issued in the name of HKSCC Nominees and deposited into CCASS for the credit of your designated CCASS Participant’s stock account or your CCASS Investor Participant stock account on Thursday, September 27, 2018, or, on any other date determined by HKSCC or HKSCC Nominees.

• The Company expects to publish the application results of CCASS Participants (and where the CCASS Participant is a broker or custodian, the Company will include information relating to the relevant beneficial owner), your Hong Kong identity card number/passport number or other identification code (Hong Kong business registration number for corporations) and the basis of allotment of the Hong Kong Offer Shares in the manner

— 525 — HOW TO APPLY FOR HONG KONG OFFER SHARES

specified in the section headed “— 11. Publication of Results” above on Thursday, September 27, 2018. You should check the announcement published by the Company and report any discrepancies to HKSCC before 5:00 p.m. on Thursday, September 27, 2018 or such other date as determined by HKSCC or HKSCC Nominees.

• If you have instructed your broker or custodian to give electronic application instructions on your behalf, you can also check the number of Hong Kong Offer Shares allotted to you and the amount of refund monies (if any) payable to you with that broker or custodian.

• If you have applied as a CCASS Investor Participant, you can also check the number of Hong Kong Offer Shares allotted to you and the amount of refund monies (if any) payable to you via the CCASS phone system and the CCASS Internet system (under the procedures contained in HKSCC’s “An Operating Guide for Investor Participants” in effect from time to time) on Thursday, September 27, 2018. Immediately following the credit of the Hong Kong Offer Shares to your stock account and the credit of refund monies to your bank account, HKSCC will also make available to you an activity statement showing the number of Hong Kong Offer Shares credited to your CCASS Investor Participant stock account and the amount of refund monies (if any) credited to your designated bank account.

• Refund of your application monies (if any) in respect of wholly and partially unsuccessful applications and/or difference between the Offer Price and the maximum Offer Price per Offer Share initially paid on application (including brokerage, SFC transaction levy and the Hong Kong Stock Exchange trading fee but without interest) will be credited to your designated bank account or the designated bank account of your broker or custodian on Thursday, September 27, 2018.

5. ADMISSION OF THE SHARES INTO CCASS

If the Hong Kong Stock Exchange grants the listing of, and permission to deal in, the H Shares on the Hong Kong Stock Exchange and we comply with the stock admission requirements of HKSCC, the H Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the Listing Date or any other date as determined by HKSCC. Settlement of transactions between Exchange Participants (as defined in the Hong Kong Listing Rules) is required to take place in CCASS on the second Business Day after any trading day.

All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

Investors should seek the advice of their stockbroker or other professional adviser for details of the settlement arrangement as such arrangements may affect their rights and interests.

All necessary arrangements have been made enabling the H Shares to be admitted into CCASS.

— 526 — APPENDIX I ACCOUNTANT’S REPORT

The following is the text of a report set out on pages I-1 to I-3, received from the Company’s reporting accountant, PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this prospectus. It is prepared and addressed to the directors of the Company and to the Joint Sponsors pursuant to the requirements of HKSIR 200 Accountants’ Reports on Historical Financial Information in Investment Circulars issued by the Hong Kong Institute of Certified Public Accountants.

ACCOUNTANT’S REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE DIRECTORS OF SHANDONG GOLD MINING CO., LTD. AND CCB INTERNATIONAL CAPITAL LIMITED, CHINA SECURITIES (INTERNATIONAL) CORPORATE FINANCE COMPANY LIMITED AND ICBC INTERNATIONAL CAPITAL LIMITED

Introduction

We report on the historical financial information of Shandong Gold Mining Co., Ltd. (the “Company”) and its subsidiaries (together, the “Group”) set out on pages I-4 to I-174, which comprises the consolidated balance sheets as at 31 December 2015, 2016 and 2017 and 31 March 2018, the Company balance sheets as at 31 December 2015, 2016 and 2017 and 31 March 2018, and the consolidated statements of profit or loss, the consolidated statements of comprehensive income, the consolidated statements of changes in equity and the consolidated statements of cash flows for each of the periods then ended (the “Track Record Period”) 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-174 forms an integral part of this report, which has been prepared for inclusion in the prospectus of the Company dated 14 September 2018 (the “Prospectus”) in connection with the initial listing of H shares of the Company on the Main Board of The Stock Exchange of Hong Kong Limited.

Directors’ responsibility for the Historical Financial Information

The directors of the Company are responsible for the preparation of Historical Financial Information that gives a true and fair view in accordance with the basis of preparation set out in Note 2.1 to the Historical Financial Information, and for such internal control as the directors determine is necessary to enable the preparation of Historical Financial Information that is free from material misstatement, whether due to fraud or error.

— I-1 — APPENDIX I ACCOUNTANT’S REPORT

Reporting accountant’s 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 accountant’s 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 accountant considers internal control relevant to the entity’s preparation of Historical Financial Information that gives a true and fair view in accordance with the basis of preparation set out in Note 2.1 to the Historical Financial Information 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 accountant’s report, a true and fair view of the financial position of the Company and the consolidated financial position of the Group as at 31 December 2015, 2016 and 2017 and 31 March 2018, and of its consolidated financial performance and its consolidated cash flows for the Track Record Period in accordance with the basis of preparation set out in Note 2.1 to the Historical Financial Information.

Review of stub period comparative financial information

We have reviewed the stub period comparative financial information of the Group which comprises the consolidated statements of profit or loss, comprehensive income, changes in equity and cash flows for the three months ended 31 March 2017 and other explanatory information (the “Stub Period Comparative Financial Information”). The directors of the Company are responsible for the preparation and presentation of the Stub Period Comparative Financial Information in accordance with the basis of preparation set out in Note 2.1 to the Historical Financial Information. Our responsibility is to express a conclusion on the Stub Period Comparative Financial Information based on our review. We conducted our review in accordance with International Standard on Review Engagements 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the International Auditing and Assurance Standards Board (“IAASB”). A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying

— I-2 — APPENDIX I ACCOUNTANT’S REPORT analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Based on our review, nothing has come to our attention that causes us to believe that the Stub Period Comparative Financial Information, for the purposes of the accountant’s report, is not prepared, in all material respects, in accordance with the basis of preparation set out in Note 2.1 to the Historical Financial Information.

Report on matters under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) 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 34 to the Historical Financial Information which contains information about the dividends payable by Shandong Gold Mining Co., Ltd. in respect of the Track Record Period.

PricewaterhouseCoopers Certified Public Accountants Hong Kong, 14 September 2018

— I-3 — APPENDIX I ACCOUNTANT’S REPORT

I. HISTORICAL FINANCIAL INFORMATION OF THE GROUP

Preparation of Historical Financial Information

Set out below is the Historical Financial Information which forms an integral part of this accountant’s report.

The financial statements of the Group for the Track Record Period, on which the Historical Financial Information is based, were audited by PricewaterhouseCoopers in accordance with International Standards on Auditing issued by the IAASB (“Underlying Financial Statements”).

The Historical Financial Information of the Group is presented in Renminbi (“RMB”) and all values are rounded to the nearest thousand (RMB’000) except when otherwise indicated.

— I-4 — APPENDIX I ACCOUNTANT’S REPORT

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

Three months ended Year ended 31 December 31 March Section II Note 2015 2016 2017 2017 2018

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Revenue 5 38,774,481 49,072,691 51,041,303 9,711,161 14,166,317 Cost of sales 8 (36,175,053) (45,567,129) (47,398,660) (8,850,914) (13,170,342) Gross profit 2,599,428 3,505,562 3,642,643 860,247 995,975

Selling expenses 8 (34,768) (34,440) (31,152) (7,427) (8,269) General and administrative expenses 8 (1,090,491) (1,225,662) (1,214,344) (279,044) (297,893) Research and development costs 8 (153,795) (265,333) (273,559) (34,846) (22,091) Other income 6 8,536 14,845 15,979 309 720 Other gains/(losses), net 7 68,550 39,952 (13,078) (22,436) 12,290 Profit from operations 1,397,460 2,034,924 2,126,489 516,803 680,732

Finance income 10 12,429 10,988 37,445 5,201 9,241 Finance costs 10 (451,033) (375,598) (593,513) (112,151) (209,451) Finance costs, net 10 (438,604) (364,610) (556,068) (106,950) (200,210)

Share of profit of an associate 12 22,881 27,662 34,024 7,950 9,028

Profit before income tax 981,737 1,697,976 1,604,445 417,803 489,550 Income tax expenses 13 (268,480) (385,194) (431,452) (89,343) (135,953) Profit for the year/period 713,257 1,312,782 1,172,993 328,460 353,597

Profit attributable to: Equity holders of the Company 647,930 1,286,642 1,118,920 317,938 327,926 Non-controlling interests 65,327 26,140 54,073 10,522 25,671 713,257 1,312,782 1,172,993 328,460 353,597

Basic and diluted earnings per share for the profit attributable to the equity holders of the Company (RMB) 14 0.46 0.85 0.60 0.17 0.18

— I-5 — APPENDIX I ACCOUNTANT’S REPORT

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three months ended Year ended 31 December 31 March Section II Note 2015 2016 2017 2017 2018

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Profit for the year/period 713,257 1,312,782 1,172,993 328,460 353,597 Other comprehensive income: Items that may be reclassified to profit or loss Change in value of available-for-sale financial assets (25,257) (1,092) — — — Share of other comprehensive income of the associate — 105 (56) — (49) Currency translation differences — — (2,482) — (4,299) Other comprehensive losses for the year/period, net of tax (25,257) (987) (2,538) — (4,348)

Total comprehensive income for the year/period 688,000 1,311,795 1,170,455 328,460 349,249

Total comprehensive income attributable to: — Equity holders of the Company 633,661 1,286,111 1,116,382 317,938 323,578 — Non-controlling interests 54,339 25,684 54,073 10,522 25,671 688,000 1,311,795 1,170,455 328,460 349,249

— I-6 — APPENDIX I ACCOUNTANT’S REPORT

CONSOLIDATED BALANCE SHEETS

As at Section II As at 31 December 31 March Note 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Assets Non-current assets Property, plant and equipment 15 12,911,774 13,512,918 21,110,946 21,108,287 Investment properties 16 207,925 234,470 226,684 224,601 Land use rights 17 244,598 305,079 339,824 343,407 Intangible assets 18 9,282,213 11,117,867 12,014,845 11,871,586 Goodwill 19 120,694 120,694 1,126,673 1,088,785 Investment in an associate 12 343,694 371,461 399,208 408,187 Available-for-sale financial assets 21 4,157 2,015 2,015 — Financial assets at fair value through other comprehensive income 21 — — — 2,015 Inventories 24 — — 143,896 141,151 Deferred income tax assets 31 167,220 161,722 152,421 165,028 Restricted bank deposits 25 — — 520,198 — Other non-current assets 22 1,001,414 494,290 832,017 923,982 24,283,689 26,320,516 36,868,727 36,277,029 Current assets Inventories 24 691,480 1,369,968 2,958,398 3,355,264 Trade and other receivables 23 483,665 333,369 720,841 789,717 Prepaid income tax 30,835 38,918 31,197 23,117 Restricted bank deposits 25 109,481 143,855 149,744 146,989 Cash and cash equivalents 25 497,271 1,159,795 2,402,814 2,473,693 1,812,732 3,045,905 6,262,994 6,788,780

Total assets 26,096,421 29,366,421 43,131,721 43,065,809

— I-7 — APPENDIX I ACCOUNTANT’S REPORT

As at Section II As at 31 December 31 March Note 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 Equity and liabilities Equity attributable to owners of the company Share capital 26(i) 1,423,072 1,857,119 1,857,119 1,857,119 Treasury shares 26(ii) (6,385) (6,385) (6,385) (6,385) Reserves 27(i) 1,908,941 4,825,012 4,905,879 4,901,496 Retained earnings 7,879,967 9,005,069 9,710,812 10,038,738 11,205,595 15,680,815 16,467,425 16,790,968 Non-controlling interests 1,216,195 1,008,906 1,026,341 1,051,907 Total equity 12,421,790 16,689,721 17,493,766 17,842,875

Liabilities Non-current liabilities Borrowings 30 3,406,503 3,378,394 8,091,819 6,797,670 Deferred income tax liabilities 31 2,068,968 1,992,750 4,135,396 3,997,270 Deferred revenue 21,606 16,096 17,526 17,328 Provision for asset retirement obligations 32 — 29,965 570,586 547,448 Other non-current liabilities 33 26,746 19,097 70,443 69,309 5,523,823 5,436,302 12,885,770 11,429,025 Current liabilities Trade and other payables 28 2,560,604 2,994,852 3,927,444 3,731,087 Current income tax liabilities 81,814 47,060 177,231 225,737 Borrowings 30 730,999 1,028,697 2,883,107 3,329,531 Current portion of other non-current liabilities 33 — — 12,992 8,523 Financial liabilities at fair value through profit or loss 29 4,777,391 3,169,789 5,751,411 6,499,031 8,150,808 7,240,398 12,752,185 13,793,909

Total liabilities 13,674,631 12,676,700 25,637,955 25,222,934

Total equity and liabilities 26,096,421 29,366,421 43,131,721 43,065,809

Net current liabilities (6,338,076) (4,194,493) (6,489,191) (7,005,129)

Total assets less current liabilities 17,945,613 22,126,023 30,379,536 29,271,900

— I-8 — APPENDIX I ACCOUNTANT’S REPORT

BALANCE SHEETS OF THE COMPANY

As at Section II As at 31 December 31 March Note 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Assets Non-current assets Property, plant and equipment 15 1,546,901 1,594,000 1,816,116 1,881,135 Investment properties 180,684 208,033 201,707 200,147 Land use rights — 7,141 6,996 6,960 Intangible assets 29,484 24,044 35,301 34,428 Investment in subsidiaries 11a 9,747,941 13,057,045 13,097,045 13,097,045 Investment in an associate 12 343,694 371,461 399,208 408,187 Available-for-sale financial assets 500 500 500 — Financial assets at fair value through other comprehensive income — — — 500 Restricted bank deposits 25 — — 520,198 — Other non-current assets 22 18,676 32,457 442,139 446,159 11,867,880 15,294,681 16,519,210 16,074,561 Current assets Inventories 35,998 37,830 37,532 53,430 Trade and other receivables 23 3,145,613 3,005,122 4,428,749 5,002,318 Prepaid income tax 10,928 10,928 10,941 10,941 Restricted bank deposits 25 4,693 12,346 15,601 15,681 Cash and cash equivalents 25 148,037 976,475 1,374,843 1,559,672 3,345,269 4,042,701 5,867,666 6,642,042

Total assets 15,213,149 19,337,382 22,386,876 22,716,603

Equity and liabilities Equity attributable to owners of the Company Share capital 26 1,423,072 1,857,119 1,857,119 1,857,119 Reserves 27(ii) 923,972 5,505,066 5,586,020 5,586,007 Retained earnings 27(ii) 3,720,649 3,764,279 4,175,859 4,178,582 Total equity 6,067,693 11,126,464 11,618,998 11,621,708

— I-9 — APPENDIX I ACCOUNTANT’S REPORT

As at Section II As at 31 December 31 March Note 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 Liabilities Non-current liabilities Borrowings 30 3,286,503 3,290,394 1,296,252 685,637 Deferred income tax liabilities 35,983 44,234 43,134 40,776 Deferred revenue 32 603 757 912 Provision for asset retirement obligations — — 15,264 15,264 Other non-current liabilities 9,245 6,981 4,717 4,717 3,331,763 3,342,212 1,360,124 747,306 Current liabilities Trade and other payables 28 746,302 1,252,494 1,302,735 1,324,949 Borrowings 30 290,000 790,000 2,668,228 2,698,885 Financial liabilities at fair value through profit or loss 29 4,777,391 2,826,212 5,436,791 6,323,755 5,813,693 4,868,706 9,407,754 10,347,589

Total liabilities 9,145,456 8,210,918 10,767,878 11,094,895

Total equity and liabilities 15,213,149 19,337,382 22,386,876 22,716,603

Net current liabilities (2,468,424) (826,005) (3,540,088) (3,705,547)

Total assets less current liabilities 9,399,456 14,468,676 12,979,122 12,369,014

— I-10 — APPENDIX I ACCOUNTANT’S REPORT

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Attributable to owners of the Company Non- Section II Share Treasury Retained controlling Total Note capital shares Reserves earnings Sub-total interests equity RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Balance at 1 January 2015 1,423,072 (543) 1,855,522 7,419,350 10,697,401 1,201,647 11,899,048

Profit for the year — — — 647,930 647,930 65,327 713,257 Other comprehensive losses Available-for-sale financial assets 21(d) — — (14,269) — (14,269) (10,988) (25,257) Total other comprehensive losses, net of tax — — (14,269) — (14,269) (10,988) (25,257) Total comprehensive (losses)/income — — (14,269) 647,930 633,661 54,339 688,000

Transactions with owners in their capacity as owners Appropriations — — 45,254 (45,254) — — — Change in ownership interests in subsidiaries without change of control — — 1,332 — 1,332 (19,596) (18,264) Capital injection from non-controlling interests —————1,500 1,500 Dividends to shareholders of the Company 34 — — — (142,307) (142,307) — (142,307) Dividends paid by subsidiaries to non-controlling interests —————(21,767) (21,767) 26(ii) and Treasury shares 27(i) — (5,842) 6,580 — 738 — 738 Others — — 14,522 248 14,770 72 14,842 Total transactions with owners in their capacity as owners — (5,842) 67,688 (187,313) (125,467) (39,791) (165,258)

Balance at 31 December 2015 1,423,072 (6,385) 1,908,941 7,879,967 11,205,595 1,216,195 12,421,790

— I-11 — APPENDIX I ACCOUNTANT’S REPORT

Attributable to owners of the Company Non- Section II Share Treasury Retained controlling Total Note capital shares Reserves earnings Sub-total interests equity RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Balance at 1 January 2016 1,423,072 (6,385) 1,908,941 7,879,967 11,205,595 1,216,195 12,421,790

Profit for the year — — — 1,286,642 1,286,642 26,140 1,312,782 Other comprehensive (losses)/income Available-for-sale financial assets 21(d) — — (636) — (636) (456) (1,092) Share of other comprehensive income of the associate — — 105 — 105 — 105 Total other comprehensive losses, net of tax — — (531) — (531) (456) (987) Total comprehensive (losses)/income — — (531) 1,286,642 1,286,111 25,684 1,311,795

Transactions with owners in their capacity as owners Appropriations — — 19,482 (19,482) — — — Change in ownership interests in subsidiaries without change of control 39 — — (219,356) — (219,356) (205,002) (424,358) Capital injection from non-controlling interests — — — — — 1,000 1,000 Dividends to shareholders of the Company 34 — — — (142,307) (142,307) — (142,307) Dividends paid by subsidiaries to non-controlling interests — — — — — (28,874) (28,874) 26(i) and Issuance of ordinary shares 27(b)(ii) 434,047 — 4,564,652 — 4,998,699 — 4,998,699 Capital injection from the Parent Company 27(b)(i) — — 106,961 — 106,961 — 106,961 Consideration for the combination of entities or businesses under common control 27(b)(ii) — — (1,541,467) — (1,541,467) — (1,541,467) Others — — (13,670) 249 (13,421) (97) (13,518) Total transactions with owners in their capacity as owners 434,047 — 2,916,602 (161,540) 3,189,109 (232,973) 2,956,136 Balance at 31 December 2016 1,857,119 (6,385) 4,825,012 9,005,069 15,680,815 1,008,906 16,689,721

— I-12 — APPENDIX I ACCOUNTANT’S REPORT

Attributable to owners of the Company Non- Section II Share Treasury Retained controlling Total Note capital shares Reserves earnings Sub-total interests equity RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Balance at 1 January 2017 1,857,119 (6,385) 4,825,012 9,005,069 15,680,815 1,008,906 16,689,721

Profit for the year — — — 1,118,920 1,118,920 54,073 1,172,993 Other comprehensive losses Share of other comprehensive income of the associate — — (56) — (56) — (56) Currency translation differences — — (2,482) — (2,482) — (2,482) Total other comprehensive losses, net of tax — — (2,538) — (2,538) — (2,538) Total comprehensive (losses)/income — — (2,538) 1,118,920 1,116,382 54,073 1,170,455

Transactions with owners in their capacity as owners Appropriations — — 81,488 (81,488) — — — Change in ownership interests in subsidiaries without change of control 39 — — 1,312 — 1,312 (13,368) (12,056) Dividends to shareholders of the Company 34 — — — (331,938) (331,938) — (331,938) Dividends paid by subsidiaries to non-controlling interests —————(23,190) (23,190) Others — — 605 249 854 (80) 774 Total transactions with owners in their capacity as owners — — 83,405 (413,177) (329,772) (36,638) (366,410)

Balance at 31 December 2017 1,857,119 (6,385) 4,905,879 9,710,812 16,467,425 1,026,341 17,493,766

— I-13 — APPENDIX I ACCOUNTANT’S REPORT

Attributable to owners of the Company Non- Section II Share Treasury Retained controlling Total Note capital shares Reserves earnings Sub-total interests equity RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Balance at 1 January 2018 1,857,119 (6,385) 4,905,879 9,710,812 16,467,425 1,026,341 17,493,766

Profit for the period — — — 327,926 327,926 25,671 353,597 Other comprehensive losses Share of other comprehensive income of the associate — — (49) — (49) — (49) Currency translation differences — — (4,299) — (4,299) — (4,299) Total other comprehensive losses, net of tax — — (4,348) — (4,348) — (4,348)

Total comprehensive (losses)/income — — (4,348) 327,926 323,578 25,671 349,249

Transactions with owners in their capacity as owners Others — — (35) — (35) (105) (140)

Total transactions with owners in their capacity as owners — — (35) — (35) (105) (140)

Balance at 31 March 2018 1,857,119 (6,385) 4,901,496 10,038,738 16,790,968 1,051,907 17,842,875

Balance at 1 January 2017 1,857,119 (6,385) 4,825,012 9,005,069 15,680,815 1,008,906 16,689,721

Profit for the period — — — 317,938 317,938 10,522 328,460

Total comprehensive income — — — 317,938 317,938 10,522 328,460

Transactions with owners in their capacity as owners Others — — 809 — 809 (188) 621

Total transactions with owners in their capacity as owners — — 809 — 809 (188) 621

Balance at 31 March 2017 (unaudited) 1,857,119 (6,385) 4,825,821 9,323,007 15,999,562 1,019,240 17,018,802

— I-14 — APPENDIX I ACCOUNTANT’S REPORT

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three months ended Year ended 31 December 31 March Section II Note 2015 2016 2017 2017 2018

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Cash flows from operating activities Cash generated from operations 35 2,788,895 3,295,839 4,230,525 910,114 812,091 Interest received 12,429 10,988 37,445 5,201 9,241 Income tax paid (378,874) (498,385) (417,496) (128,462) (147,632)

Net cash generated from operating activities 2,422,450 2,808,442 3,850,474 786,853 673,700

Cash flows from investing activities Payment for acquisition of joint operation — — (6,704,624) — — Purchases of intangible assets (77,899) (22,973) (1,620,576) (349,181) (19,867) Purchases of property, plant and equipment (1,612,137) (1,791,053) (2,269,474) (306,909) (970,107) Proceeds from disposal of property, plant and equipment, land use rights and intangible assets 6,815 27,595 10,556 184 501 Purchase of investment properties (722) (991) (329) — — Purchase of land use rights (21,001) (94,473) (36,115) — (6,461) Proceeds from disposal of available-for-sale financial assets 60,629 3,142 ——— Acquisition of available-for-sale financial assets (2,047) — ——— Proceeds from settlement of gold future/forward contracts 27,174 1,067 11,305 (18,084) 17,077 Proceeds from disposal of subsidiary, net of cash disposed — 60,482 ——— Decrease/(increase) in restricted bank deposits 3,688 (34,374) (526,087) 1,061 522,953

Net cash used in investing activities (1,615,500) (1,851,578) (11,135,344) (672,929) (455,904)

— I-15 — APPENDIX I ACCOUNTANT’S REPORT

Three months ended Year ended 31 December 31 March Section II Note 2015 2016 2017 2017 2018

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Cash flows from financing activities Capital injections from equity holders — 1,637,588 — — — Payments for acquisition of additional interests in subsidiary (18,264) (9,583) (12,056) — — Purchase of ordinary shares of the Company (5,842) — — — — Proceeds from bank borrowings 1,256,780 600,000 10,015,896 20,000 735,074 Repayments of bank borrowings (1,521,780) (560,000) (3,090,712) (410,000) (522,358) Proceed from disposal of treasury shares 6,580 — — — — Interest paid (181,318) (284,471) (296,090) (66,751) (119,206) Capital injections from non-controlling interests 1,500 1,000 — — — Proceeds from borrowings from related parties 943,976 1,130,000 1,579,300 235,000 450,600 Repayments of borrowings from related parties (1,150,000) (1,255,457) (1,410,000) (210,000) (645,000) Settlement of borrowings from a third party 30(c) (1,000,000) — — — — Proceeds derived from gold leasing arrangements 6,676,567 5,381,588 6,467,964 2,054,760 3,014,838 Settlement of gold leasing arrangements (6,692,782) (7,031,469) (3,956,193) (715,955) (2,309,878) Proceeds from issuance of corporate bonds 1,300,000 400,000 — — — Repayments of corporate bonds — — (400,000) (400,000) (611,004) Dividends paid to non-controlling interests (81,094) (33,679) (16,390) — — Dividends paid to shareholders (142,059) (142,058) (184,160) — (71,236) Payments for finance cost associated with gold leasing contracts (168,414) (128,562) (134,246) (22,388) (42,062) Payments of guarantee and arrangement fee for a borrowing — — (64,897) — —

Net cash (used in)/generated from financing activities (776,150) (295,103) 8,498,416 484,666 (120,232)

Net increase in cash and cash equivalents 30,800 661,761 1,213,546 598,590 97,564 Cash and cash equivalents at beginning of the year/period 466,471 497,271 1,159,795 1,159,795 2,402,814 Exchange gains/(losses) on cash and cash equivalents — 763 29,473 (43) (26,685)

Cash and cash equivalents at end of the year/period 497,271 1,159,795 2,402,814 1,758,342 2,473,693

— I-16 — APPENDIX I ACCOUNTANT’S REPORT

II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION

1 General information

Shandong Gold Mining Co., Ltd. (the “Company”) was established in the People’s Republic of China (“PRC” or “China”) on 31 January 2000 as a joint stock company with limited liability under the Company Law of the PRC by Shandong Gold Group Co., Ltd. (“SDG Group Co” or the “Parent Company”), Shandong Zhaojin Group Co., Ltd., Shandong Laizhou Gold (Group) Co., Ltd., Jinan Yuquan Development Center (subsequently renamed as Jinan Yuquan Development Co., Ltd.) and Rushan Gold Mine (subsequently renamed as Shandong Jinzhou Mining Group Co., Ltd.).

The A shares of the Company have been listed on the Shanghai Stock Exchange since August 2003.

The Company and its subsidiaries are hereinafter collectively referred to as the “Group”. The Group is principally engaged in mining and processing of gold, sale of gold products and manufacturing and sale of building decoration materials. The address of the Company’s registered office is Building No. 3, Shuntai Square, No. 2000 Shunhua Road, Jinan, Shandong Province, the PRC.

2 Summary of significant accounting policies

The principal accounting policies applied in the preparation of the Historical Financial Information are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2.1 Basis of preparation

The Historical Financial Information of the Company has been prepared in accordance with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (the “IASB”). The Historical Financial Information has been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets, and financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss, which are carried at fair value.

The preparation of financial information in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Historical Financial Information are disclosed in Note 4.

— I-17 — APPENDIX I ACCOUNTANT’S REPORT

2.1.1 Going concern

As at 31 March 2018, the Group’s current liabilities exceeded its current assets by RMB7,005,129,000. The Company’s directors are of the opinion that the Group will be able to finance its future financing requirements and working capital based on the following considerations:

(a) The Group is expected to remain profitable and hence continue to generate operating cash inflows from its future business operations;

(b) The Group has maintained its long business relationship with its principal bankers and the principal bankers have indicated their willingness to further provide banking facilities of RMB10,483,060,000 (the “Facilities”) to the Group whenever it has any financing needs in the next twelve months from 31 March 2018.

In view of the above, the Company’s directors are confident that there will be sufficient financial resources available to the Group to enable it to meet its liabilities as and when they fall due and to continue to operate for at least the next twelve months from 31 March 2018. Accordingly, the Company’s directors have prepared the Historical Financial Information on a going concern basis.

2.1.2 Changes in accounting policy and disclosures

(a) New standards and interpretations not yet adopted

New standards and amendments to standards and interpretations are not yet effective for the financial period commencing on 1 January 2018 and have not been applied in preparing the Historical Financial Information are set out below:

New standards, amendments and interpretations Published date Effective date

IFRS 16 Leases January 2016 Annual periods beginning on or after 1 January 2019

IFRS 17 Insurance contracts February 2018 Annual periods beginning on or after 1 January 2021

IFRIC 23 Uncertainty over income June 2017 Annual periods beginning tax treatments on or after 1 January 2019

— I-18 — APPENDIX I ACCOUNTANT’S REPORT

New standards, amendments and interpretations Published date Effective date

IAS 19 ‘Employee benefits’ on February 2018 Annual periods beginning plan amendment, on or after 1 January curtailment or settlement 2019

Amendments to Sale or contribution September 2014 To be determined IFRS 10 and IAS assets between an 28 investor and its associate or joint venture

Amendments to Annual Improvements to December 2017 Annual periods beginning IFRS IFRSs 2015-2017 Cycle on or after 1 January 2019

Amendment to IAS Long term interests in October 2017 Annual periods beginning 28 associates and joint on or after 1 January ventures 2019

Amendment to Prepayment features with October 2017 Annual periods beginning IFRS 9 negative compensation on or after 1 January 2019

The Group has already commenced an assessment of the impact of these new or amended standards and interpretation, certain of which are relevant to the Group’s operation. According to the assessment made by the Board of Directors, except for the below discussed, no significant impact on the financial performance and positions of the Group is expected when they become effective.

IFRS 16, Leases

Nature of change

IFRS 16 was issued in January 2016. It will result in almost all leases being recognised on the lessee’s balance sheet, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only exceptions are short-term and low-value leases. The accounting for lessors will not significantly change.

Impact

The standard will affect primarily the accounting for the Group’s operating leases. As at 31 March 2018, the Group’s future aggregate minimum lease payments under non-cancellable operating leases is approximately RMB165,314,000 (Note 37(b)). IFRS 16 provides new provisions for the

— I-19 — APPENDIX I ACCOUNTANT’S REPORT accounting treatment of leases and all non-current leases, including future operating lease commitments, must be recognised in the form of an asset (for the right of use) and a financial liability (for the payment obligation). Short-term leases of less than twelve months and leases of low-value assets are exempt from the reporting obligation. The new standard will therefore result in an increase in assets and financial liabilities in the consolidated balance sheets. Operating expenses under otherwise identical circumstances will decrease, and depreciation, amortisation and interest expense will increase. It is expected that certain portion of these lease commitments will be required to be recognised in the statement of financial position as right of use assets and lease liabilities. The Group also anticipates that the net impact (as a result of the combination of the interest expense arising from the lease liabilities and the amortisation of the right-of-use assets as compared to the rental expenses under existing standard) on the Group’s financial performance will not be material.

Date of adoption by Group

Mandatory for financial years commencing on or after 1 January 2019. Management expects the adoption of such new standard should have no material impact to the Group.

(b) Changes in accounting policies

This note explains the impact of the adoption of IFRS 9 “Financial Instruments” (“IFRS 9”) and IFRS 15 “Revenue from Contracts with Customers” (“IFRS 15”) on the Group’s financial information and also discloses the new accounting policies that have been applied from 1 January 2018, where they are different to those applied in prior periods.

Certain of the Group’s accounting policies have been changed to comply with the adoption of IFRS 9 and IFRS 15. IFRS 9 replaces the provisions of IAS 39 Financial Instruments (“IAS 39”) that relate to the recognition, classification and measurement of financial assets and financial liabilities; derecognition of financial instruments; impairment of financial assets and hedge accounting. IFRS 9 also significantly amends other standards dealing with financial instruments such as IFRS 7 “Financial Instruments — Disclosures”. IFRS 15 replaces the provisions of IAS 18 “Revenue” (“IAS 18”) and IAS “11 Construction Contracts” (“IAS 11”) that relate to the recognition, classification and measurement of revenue and costs.

(i) IFRS 9 - Impact on the financial information of the Group

As a result of the changes in the Group’s accounting policies, IFRS 9 was generally adopted without restating any comparative information. The adoption of IFRS 9 in the current period does not result in any impact on the amounts reported in the consolidated financial information set out in the consolidated financial information except that the Group has adopted the accounting policies on financial instruments with effect from 1 January 2018.

— I-20 — APPENDIX I ACCOUNTANT’S REPORT

The following table shows the adjustments recognised for each individual line item. Line items that were not affected by the changes have not been included. As a result, the sub-totals and totals disclosed cannot be recalculated from the numbers provided.

1 January 2018 As 1 January originally 2018 Balance sheet (extract) presented IFRS 9 Restated RMB’000 RMB’000 RMB’000

Non-current assets Financial assets at fair value through other comprehensive income — 2,015 2,015 Available-for-sale financial assets 2,015 (2,015) — Total 2,015 — 2,015

Management has assessed the business models and the contractual terms of the cash flows apply to the financial assets held by the Group at the date of initial application of IFRS 9 (1 January 2018) and has classified its financial instruments into the appropriate IFRS 9 categories, which are those to be measured subsequently at fair value (either through other comprehensive income (“FVOCI”), or through profit or loss (“FVPL”)), and those to be measured at amortised cost.

(a) Classification and measurement

The main effects resulting from this reclassification are as follows:

Available-for- sale financial As at 1 January 2018 assets FVOCI RMB’000 RMB’000

Opening balance - IAS 39 2,015 — Reclassify non-trading unlisted equity securities from AFS to FVOCI (2,015) 2,015 Opening balance - IFRS 9 — 2,015

There is no effect resulting from this reclassification on the Group’s equity as both IAS 39 and IFRS 9 require any changes in the fair value of the non-trading unlisted equity securities to be recognised as other comprehensive income/loss in equity.

— I-21 — APPENDIX I ACCOUNTANT’S REPORT

There is no impact on the Group’s accounting for financial liabilities. The Group accounts for the gold leasing contracts as financial liabilities that are designated at fair value through profit or loss. The derecognition rules have been transferred from IAS 39 Financial Instruments: Recognition and Measurement and have not been changed. The Group’s financial liabilities previously carried at amortised costs remained to be measured at amortised costs under IFRS 9.

(ii) IFRS 15 - Impact on the financial information of the Group

As a result of the changes in the Group’s accounting policies, as explained below, IFRS 15 was generally adopted without restating any comparative information. The adoption of IFRS 15 in the current period does not result in any impact on the amounts reported in the consolidated financial information set out in the consolidated financial information except that, the Group has adopted revised accounting policies on revenues with effect from 1 January 2018 (Note 2.26).

2.2 Subsidiaries

2.2.1 Consolidation

A subsidiary is an entity (including a structured entity) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

(a) Business combinations not under common control

The Group applies the acquisition method to account for business combinations not under common control. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.

The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis. Non-controlling interests in the acquiree that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation are measured at either fair value or the present ownership interests’ proportionate share in the recognised amounts of the acquiree’s identifiable net assets. All other components of non-controlling interests are measured at their acquisition date fair value, unless another measurement basis is required by IFRS.

Acquisition-related costs are expensed as incurred.

— I-22 — APPENDIX I ACCOUNTANT’S REPORT

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognised in profit or loss.

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 in profit or loss. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity.

Intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. When necessary, amounts reported by subsidiaries have been adjusted to conform with the Group’s accounting policies.

(b) Business combination under common control

For business combination under common control, the Historical Financial Information of the Group incorporates the financial information of the combining entities or businesses as if they had been combined from the earliest date presented or since the date when the combining entities or businesses first came under the control of the controlling party, whichever is shorter.

The assets acquired and liabilities assumed of the combining entities or businesses are combined using the existing book values from the controlling parties’ perspective. The difference between the carrying amount of the net assets acquired and the consideration paid for the combination is adjusted against the equity.

Any cost in relation to the combination is recognised as an expense when incurred.

(c) Changes in ownership interests in subsidiaries without change of control

Transactions with non-controlling interests that do not result in a loss of control are accounted for as equity transactions — that is, as transactions with the owners of the subsidiary in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying amount of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

(d) Disposal of subsidiaries

When the Group ceases to have control, any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously

— I-23 — APPENDIX I ACCOUNTANT’S REPORT recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. It means the amounts previously recognised in other comprehensive income are reclassified to profit or loss or transferred to another category of equity as specified/permitted by applicable IFRSs.

2.2.2 Separate financial statements

Investments in subsidiaries and associates are accounted for at cost less impairment. Cost includes direct attributable costs of investment. The results of subsidiaries are accounted for by the Company on the basis of dividend received and receivable.

Impairment testing of the investments in subsidiaries is required upon receiving a dividend from these investments if the dividend exceeds the total comprehensive income of the subsidiary in the period the dividend is declared or if the carrying amount of the investment in the separate financial statements exceeds the carrying amount in the consolidated financial statements of the investee’s net assets including goodwill.

2.3 Associates

An associate is an entity over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor’s share of the profit or loss of the investee after the date of acquisition. The Group’s investments in associates include goodwill identified on acquisition. Upon the acquisition of the ownership interest in an associate, any difference between the cost of the associate and the Group’s share of the net fair value of the associate’s identifiable assets and liabilities is accounted for as goodwill.

If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to profit or loss where appropriate.

The Group’s share of post-acquisition profit or loss is recognised in the statement of profit or loss, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.

The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount adjacent to ‘share of profit of an associate, in the statement of profit or loss.

— I-24 — APPENDIX I ACCOUNTANT’S REPORT

Profits and losses resulting from upstream and downstream transactions between the Group and its associate are recognised in the Group’s financial statements only to the extent of unrelated investor’s interests in the associates. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.

Gain or losses on dilution of equity interest in associates are recognised in the statement of profit or loss.

2.4 Joint arrangements

The Group has applied IFRS 11 to all joint arrangements. Under IFRS 11 investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. The Group has assessed the nature of its joint arrangements and determined them to be joint operations. Joint operations are accounted for by recognising the operator’s relevant share of assets, liabilities, revenues and expenses.

Where a joint operator acquires an interest in a joint operation, the accounting treatment depends on whether the activity of the acquired joint operation constitutes a business. The joint operator should apply business combination accounting to the extent of its share, where the activity of the joint operation constitutes a business. This applies to the acquisition of both the initial interest and additional interests in a joint operation in which the activity of the joint operation constitutes a business.

Where the entity is involved in a joint operation, the investors account for their rights and obligations by recognising:

a) its assets, including its share of any assets held jointly;

b) its liabilities, including its share of any liabilities incurred jointly;

c) its revenue from the sale of its share of the output arising from the joint operation;

d) its share of the revenue from the sale of the output by the joint operation; and

e) its expenses, including its share of any expenses incurred jointly.

Management should classify and measure the recognised asset, liability and items of revenue or expense, or the share of an asset, liability or item of revenue or expense, according to the applicable standard for each item.

— I-25 — APPENDIX I ACCOUNTANT’S REPORT

2.5 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the steering committee that makes strategic decisions.

2.6 Foreign currency translation

(a) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Renminbi, which is the Company’s functional and the Group’s presentation currency.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of profit or loss, except when deferred in other comprehensive income as qualifying cash flow hedges and qualifying net investment hedges.

Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the statement of profit or loss within ‘finance income or costs’.

Changes in the fair value of debt securities denominated in foreign currency classified as available-for-sale are analysed between translation differences resulting from changes in the amortised cost of the security and other changes in the carrying amount of the security. Translation differences related to changes in amortised cost are recognised in profit or loss, and other changes in carrying amount are recognised in other comprehensive income.

Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary financial assets, such as equities classified as available for sale, are included in other comprehensive income.

— I-26 — APPENDIX I ACCOUNTANT’S REPORT

(c) Group companies

The results and financial position of all the group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

(a) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

(b) income and expenses for each statement of profit or loss are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and

(c) all resulting currency translation differences are recognised in other comprehensive income.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Currency translation differences arising are recognised in other comprehensive income.

2.7 Property, plant and equipment

Property, plant and equipment comprise building, mining structures, plant, machinery and equipment and construction in progress.

Buildings comprise mainly factories. Other property, plant and equipment are stated at historical cost, less accumulated depreciation and impairment losses. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its present working condition and location for its intended use.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the statement of profit or loss during the financial period in which they are incurred.

Other than mining structures, depreciation of each asset is calculated using the straight-line method to allocate its cost less its residual value over its estimated useful life as follows:

- Buildings 5 - 50 years - Plant, machinery and equipment 2 - 20 years

— I-27 — APPENDIX I ACCOUNTANT’S REPORT

Mining structures include the main and auxiliary mine shafts and underground tunnels and capitalised open pit mine development costs. Mining Structures are depreciated on the unit of production method (“UOP”), based on the proven and probable reserves and where appropriate the portion of mineral resources considered to be probable of economic extraction based on the current Life of Mine (“LOM”) Plans.

In open pit mining operations, it is necessary to remove overburden and other waste materials to access ore from which minerals can be extracted economically. The process of mining overburden and waste materials is referred to as stripping. Stripping costs incurred in order to provide initial access to the ore body (referred to as pre-production stripping) are capitalised as open pit mine development costs.

Stripping costs incurred during the production stage of a pit are accounted for as costs of the inventory produced during the period that the stripping costs are incurred, unless these costs are expected to provide a future economic benefit to an identifiable component of the ore body. Components of the ore body are based on the distinct development phases identified by the mine planning engineers when determining the optimal development plan for the open pit. Production phase stripping costs generate a future economic benefit when the related stripping activity: (i) improves access to a component of the ore body to be mined in the future; (ii) increases the fair value of the mine (or pit) as access to future mineral reserves becomes less costly; and (iii) increases the productive capacity or extends the productive life of the mine (or pit). Production phase stripping costs that are expected to generate a future economic benefit are capitalised as open pit mine development costs.

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

Construction in progress represents property, plant and equipment under construction or pending installation, and is stated at cost less impairment losses. Cost comprises direct costs of construction including borrowing costs attributable to the construction during the period of construction. No provision for depreciation is made on construction in progress until such time as the relevant assets are completed and ready for intended use.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (Note 2.12).

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within ‘Other gains/(losses), net’ in the statement of profit or loss.

2.8 Investment properties

Investment properties include those portions of office buildings that are held for long-term rental yields or for capital appreciation.

Investment properties are initially measured at cost and subsequently accounted for under the cost model in accordance with the requirements of IAS 16 Property, Plant and Equipment.

— I-28 — APPENDIX I ACCOUNTANT’S REPORT

Depreciation of the investment properties is calculated using the straight-line method to allocate its cost less its residual value over its estimated useful life. The estimated useful life of these investment properties is estimated to be 13 to 42 years.

Investment properties are subject to renovations or improvements at regular intervals. The cost of major renovations and improvements is capitalised and the carrying amounts of the replaced components are written off to the profit or loss. The cost of maintenance, repairs and minor improvements is charged to the profit or loss when incurred.

2.9 Land use rights

Land use rights are stated at cost less accumulated amortisation and impairment losses. Cost represents prepaid operating lease payments for leasehold land located in the PRC with lease periods of 50 years. Amortisation of land use rights is calculated on a straight-line basis over the period of the land use rights.

2.10 Intangible assets

(a) Mining and exploration rights

Mining rights are stated at cost less accumulated amortisation and impairment losses and are amortised based on the UOP method whereby the denominator is the proven and probable reserves and where appropriate the portion of mineral resources considered to be probable of economic extraction.

Exploration rights are stated at cost less impairment losses. Cost of the exploration rights are transferred to mining rights upon the government’s approval of the mining license.

(b) Goodwill

Goodwill arises on the acquisition of subsidiaries represents the excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identified net assets acquired.

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units (“CGUs”), or groups of CGUs, that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.

Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of the CGU containing the goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs of disposal. Any impairment is recognised immediately as an expense and is not subsequently reversed.

— I-29 — APPENDIX I ACCOUNTANT’S REPORT

(c) Patent rights

Patent rights are capitalised on the basis of the costs incurred to acquire and bring to use the patent rights. These costs are amortised over estimated useful life of 20 years, which are restricted by the period for which the legal rights are held.

(d) Trademarks and licences

Separately acquired trademarks and licences are shown at historical cost. Trademarks and licences acquired in a business combination are recognised at fair value at the acquisition date. Trademarks and licences have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of trademarks and licences over their estimated useful lives of 15 to 20 years. The useful lives of trademarks and licences are restricted by the period for which contractual or other legal rights are held.

Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives of 3 to 5 years.

2.11 Impairment of non-financial assets

Intangible assets that have an indefinite useful life or intangible assets not ready to use are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).

An assessment is made at each reporting date to determine whether there is an indication that previously recognised impairment losses may no longer exist or may have decreased. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the CGU’s recoverable amount since the last impairment loss was recognised. This reversal is recognised in the carve out statements of income and is limited to the carrying value that would have been determined, net of any depreciation where applicable, had no impairment charge been recognized in prior years. When an impairment reversal is undertaken, the recoverable amount is assessed by reference to the higher of Value in Use (“VIU”) and Fair Value Less Costs of Disposal (“FVLCD”). We have determined that the FVLCD is greater than the VIU amounts and therefore used as recoverable amount for impairment testing purposes.

— I-30 — APPENDIX I ACCOUNTANT’S REPORT

2.12 Financial assets

2.12.1 Classification

For the year ended 31 December 2015, 2016 and 2017

The Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, and available for sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

(a) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if expected to be settled within 12 months; otherwise, they are classified as non-current.

(b) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for the amounts that are settled or expected to be settled more than 12 months after the end of the reporting period. These are classified as non-current assets. The Group’s loans and receivables comprise ‘trade and other receivables’, ‘restricted bank deposits’ and ‘cash and cash equivalents’ in the balance sheet (Notes 2.16 and 2.17).

(c) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months of the end of the reporting period.

For the three months ended 31 March 2018

The Group classifies its financial assets in the following measurement categories:

• those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and

• those to be measured at amortised cost.

The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows.

— I-31 — APPENDIX I ACCOUNTANT’S REPORT

For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments that are not held for trading, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI).

See Note 20 for details of each type of financial asset.

The Group reclassifies debt investments when and only when its business model for managing those assets changes.

2.12.2 Recognition and measurement

For the year ended 31 December 2015, 2016 and 2017

Regular way purchases and sales of financial assets are recognised on the trade-date — the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in the statement of profit or loss. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently carried at amortised cost using the effective interest method.

Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are presented in the statement of profit or loss within ‘Other gains/(losses), net’ in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in the statement of profit or loss as part of other income when the Group’s right to receive payments is established.

Changes in the fair value of monetary and non-monetary securities classified as available for sale are recognised in other comprehensive income.

When securities classified as available for sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included in the statement of profit or loss as ‘Other gains/(losses), net’.

— I-32 — APPENDIX I ACCOUNTANT’S REPORT

For the three months ended 31 March 2018

Measurement

At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss.

Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.

Debt instruments

Subsequent measurement of debt instruments depends on the Group’s business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the Group classifies its debt instruments:

• Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains/(losses), together with foreign exchange gains and losses. Impairment losses are presented as separate line item in the statement of profit or loss.

• FVOCI: Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in other gains/(losses). Interest income from these financial assets is included in finance income using the effective interest rate method. Foreign exchange gains and losses are presented in other gains/(losses) and impairment expenses are presented as separate line item in the statement of profit or loss.

• FVPL: Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain or loss on a debt investment that is subsequently measured at FVPL is recognised in profit or loss and presented net within other gains/(losses) in the period in which it arises.

— I-33 — APPENDIX I ACCOUNTANT’S REPORT

Equity instruments

The Group subsequently measures all equity investments at fair value. Where the Group’s management has elected to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. Dividends from such investments continue to be recognised in profit or loss as other income when the Group’s right to receive payments is established.

Changes in the fair value of financial assets at FVPL are recognised in other gains/(losses), net in the statement of profit or loss as applicable. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.

2.13 Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.

2.14 Impairment of financial assets

For the year ended 31 December 2015, 2016 and 2017

(a) Assets carried at amortised cost

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

For loans and receivables category, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the

— I-34 — APPENDIX I ACCOUNTANT’S REPORT consolidated statement of profit or loss. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable price.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognized in the consolidated statement of profit or loss.

(b) Assets classified as available for sale

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired.

For equity investments, a significant or prolonged decline in the fair value of the security below its cost is also evidence that the assets are impaired. If any such evidence exists the cumulative loss— measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss — is reclassified from equity and recognised in profit or loss. Impairment losses recognised in the consolidated statement of profit or loss on equity instruments are not reversed through the consolidated statement of profit or loss.

For the three months ended 31 March 2018

The Group has types of financial assets subject to IFRS 9’s new expected credit loss model:

— trade receivables

— other receivables (excluding non-financial assets)

The Group revised its impairment methodology under IFRS 9 for each of these classes of assets. While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was immaterial.

For trade and other receivables (excluding non-financial assets), the Group applies the simplified approach to providing for expected credit losses as prescribed by IFRS 9, which requires the use of the lifetime expected loss provision for all trade and other receivables (excluding non-financial assets). No further provision has been recognised in retained earnings as at 1 January 2018 for those trade and other receivables (excluding non-financial assets) whose credit risk has been assessed as other than low because the balance is not significant and the adoption of the new impairment methodology as described in note 3.1(b) only results in an insignificant incremental amount of provision to be made.

— I-35 — APPENDIX I ACCOUNTANT’S REPORT

2.15 Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average cost method. The cost of finished goods and work in progress comprises design costs, raw materials, direct labour, other direct costs and related production overheads (based on normal operating capacity). It excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

2.16 Trade and other receivable

Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection of trade and other receivables is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less allowance for impairment. See Note 2.12.2 for further information about the Group’s accounting for trade receivables and Note 2.14 for a description of the Group’s impairment policies.

2.17 Cash and cash equivalents

In the consolidated statement of cash flows, cash and cash equivalents include cash on hand, deposits held at call with banks, and other short-term highly liquid investments with original maturities of three months or less.

2.18 Share capital and treasury shares

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Where any Group’s entity purchases the Group’s equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the Group’s equity owners. Where such shares are subsequently sold or reissued, the cost of the treasury shares is reversed from the treasury share account and the realised gain or loss on sales or reissue, net of any directly attributable incremental transaction costs and the related income tax effects, is recognised in the capital reserve of the Company.

2.19 Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

— I-36 — APPENDIX I ACCOUNTANT’S REPORT

2.20 Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the statement of profit or loss over the period of the borrowings using the effective interest method.

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.

2.21 Borrowing costs

General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

2.22 Current and deferred income tax

The tax expense for the period comprises current and deferred tax. Tax is recognised in the statement of profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

(a) Current income tax

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company’s subsidiaries and associate operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

— I-37 — APPENDIX I ACCOUNTANT’S REPORT

(b) Deferred income tax

Inside basis differences

Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Outside basis differences

Deferred income tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries, associates and joint arrangements, except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Generally the Group is unable to control the reversal of the temporary difference for associates. Only when there is an agreement in place that gives the Group the ability to control the reversal of the temporary difference in the foreseeable future, deferred tax liability in relation to taxable temporary differences arising from the associate’s undistributed profits is not recognised.

Deferred income tax assets are recognised on deductible temporary differences arising from investments in subsidiaries, associates and joint arrangements only to the extent that it is probable the temporary difference will reverse in the future and there is sufficient taxable profit available against which the temporary difference can be utilised.

(c) Offsetting

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

— I-38 — APPENDIX I ACCOUNTANT’S REPORT

2.23 Employee benefits

(a) Short term compensation

Short term compensation includes salaries, bonuses, allowances and subsidies, employee benefits, medical insurance premiums, work-related injury insurance premium, maternity insurance premium, contributions to housing fund, unions and education fund and short-term absence with payment etc. When an employee has rendered service to the Group during an accounting period, the Group shall recognise the short term compensation actually incurred as a liability and charged to the cost of an asset or to profit or loss in the same period, and non-monetary benefits are valued with the fair value.

(b) Post-employment benefits

The Group classifies post-employment benefits into either Defined Contribution Plan (“DC plan”) or Defined Benefit Plan (“DB plan”). DC plan means the Group only contributes a fixed amount to an independent fund and no longer bears other payment obligation; DB plan is post-employment benefits other than DC plan. In this reporting period, the post-employment benefits of the Group primarily comprise basic pension insurance and unemployment insurance and both of them are DC plans.

Basic pension insurance

Employees of the Group participate in the social insurance system established and managed by local labor and social security department. The Group makes basic pension insurance to the local social insurance agencies every month, at the applicable benchmarks and rates stipulated by the government for the benefits of its employees. After the employees retire, the local labor and social security department has obligations to pay them the basic pension. When an employee has rendered service to the Group during an accounting period, the Group shall recognise the accrued amount according to the above social security provisions as a liability and charged to the cost of an asset or to profit or loss in the same period.

(c) Termination benefits

When the Group terminates the employment relationship with employees before the employment contracts expire, or provides compensation as an offer to encourage employees to accept voluntary redundancy, a provision for the termination benefits provided is recognised in profit or loss under the conditions of both the Group has a formal plan for the termination of employment or has made an offer to employees for voluntary redundancy, which will be implemented shortly; and the Group is not allowed to withdraw from termination plan or redundancy offer unilaterally.

— I-39 — APPENDIX I ACCOUNTANT’S REPORT

2.24 Provisions

Provisions for environmental restoration, restructuring costs and legal claims are recognised when: the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Restructuring provisions comprise lease termination penalties and employee termination payments. Provisions are not recognised for future operating losses.

Provision for future decommissioning and restoration is recognised in full on the installation of mining properties. The amount recognised is the present value of the estimated future expenditure determined in accordance with local conditions and requirements. A corresponding addition to the related mining properties of an amount equivalent to the provision is also created. This is subsequently depreciated as part of the costs of the mining properties. Any change in the present value of the estimated expenditure other than due to passage of time, which is regarded as interest expense, is reflected as an adjustment to the provision and mining properties.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense.

2.25 Exploration and evaluation

Exploration expenditures are the costs incurred in the initial search for mineral deposits with economic potential or in the process of obtaining more information about existing mineral deposits. Exploration expenditures typically include costs associated with prospecting, sampling, mapping, diamond drilling and other work involved in searching for ore.

Evaluation expenditures are the costs incurred to establish the technical and commercial viability of developing mineral deposits identified through exploration activities or by acquisition. Evaluation expenditures include the cost of (i) establishing the volume and grade of deposits through drilling of core samples, trenching and sampling activities in an ore body that is classified as either a mineral resource or a proven and probable reserve; (ii) determining the optimal methods of extraction and metallurgical and treatment processes; (iii) studies related to surveying, transportation and infrastructure requirements; (iv) permitting activities; and (v) economic evaluations to determine whether development of the mineralised material is commercially justified, including scoping, prefeasibility and final feasibility studies.

— I-40 — APPENDIX I ACCOUNTANT’S REPORT

Once the technical feasibility and commercial viability of a program or project has been demonstrated with a prefeasibility study and recognised reserves in accordance with the Canadian Securities Administrators’ National Instrument 43-101, future expenditures incurred in the development of that program or project are accounted for in accordance with the Group’s policy for property, plant and equipment, as described in note 2.7.

2.26 Revenue recognition

For the year ended 31 December 2015, 2016 and 2017

Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for goods supplied, stated net of discounts, returns and value added taxes. The Group recognises revenue when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when specific criteria have been met for each of the Group’s activities, as described below. The Group bases its estimates of return on historical results, taking into consideration the type of customers, the type of transactions and the specifics of each arrangement.

(a) Sale of goods

Revenue is recorded when evidence exists that all of the following criteria are met:

• The significant risks and rewards of ownership of the product have been transferred to the buyer;

• Neither continuing managerial involvement to the degree usually associated with ownership, nor effective control over the goods sold, has been retained;

• The amount of revenue can be reliably measured;

• It is probable that the economic benefits associated with the sale will flow to the Group; and

• The costs incurred or to be incurred in respect of the sale can be reliably measured. These conditions are generally satisfied when title passes to the customer.

(b) Rental income

Rental income from investment property is recognised in the statement of profit or loss on a straight-line basis over the term of the lease.

(c) Processing income

Processing income is recognised in the statement of profit or loss upon performance of the services.

— I-41 — APPENDIX I ACCOUNTANT’S REPORT

For the three months ended 31 March 2018

IFRS 15 requires that revenue from contracts with customers be recognised upon the transfer of control over goods or services to the customer. As such, upon adoption, this requirement under IFRS 15 resulted in no impact to the consolidated financial information as the timing of revenue recognition on our sale of goods is unchanged.

(a) Sale of goods

Revenue is recognised when control over the goods has been transferred to the customer. It is generally satisfied at a point in time when the legal title has passed to the customer.

(b) Rental income

Rental income from investment property is recognised in the statement of profit or loss on a straight-line basis over the term of the lease.

(c) Processing income

Processing income is recognised in the statement of profit or loss upon performance of the services

Contract asset and liability

When either party to a contract has performed, the Group presents the contract in the balance sheet as a contract asset or a contract liability, depending on the relationship between the Group’s performance and the customer’s payment.

If a customer pays consideration or the Group has a right to an amount of consideration that is unconditional, before the Group transfers goods or provide services to the customer, the Group presents the contract as a contract liability when the payment is received or a receivable is recorded (whichever is earlier). A contract liability is the Group’s obligation to transfer services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer. This has been classified under ‘Trade and other payables’.

Incremental costs incurred to obtain a contract, if recoverable, are capitalised as contract assets and subsequently amortised when the related revenue is recognised.

2.27 Interest income

Interest income is recognised on a time-proportion basis taking into account of the principal outstanding and the effective interest rate over the period to maturity, when it is determined that such income will accrue to the Group.

— I-42 — APPENDIX I ACCOUNTANT’S REPORT

2.28 Dividend income

Dividend income is recognised when the right to receive payment is established.

2.29 Government grants

Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions.

Government grants relating to costs are deferred and recognised in the income statement over the period necessary to match them with the costs that they are intended to compensate.

Government grants relating to the purchase of property, plant and equipment are included in non-current liabilities as deferred revenue and are credited to the statement of comprehensive income on a straight-line basis over the expected useful lives of the related assets.

2.30 Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the statement of profit or loss on a straight-line basis over the period of the lease.

Each lease payment is allocated between the liability and finance charges. The corresponding rental obligations, net of finance charges, are included in other long-term payables. The interest element of the finance cost is charged to the statement of profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the shorter of the useful life of the asset and the lease term.

2.31 Research and development costs

Research expenditure is recognised as an expense as incurred.

Costs incurred on development projects (relating to the design and testing of new or improved software) are capitalised as intangible assets when recognition criteria are fulfilled and tests for impairment are performed annually. Other development expenditures that do not meet those criteria are recognised as expenses as incurred.

Development costs previously recognised as expenses are not recognised as assets in subsequent periods. Capitalised development costs are amortised from the point at which the assets are ready for use on a straight-line basis over their estimated useful lives.

— I-43 — APPENDIX I ACCOUNTANT’S REPORT

2.32 Dividend distribution

Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial statements in the period in which the dividends are approved by the Company’s shareholders or directors, where appropriate.

2.33 Earnings per share

Basic earnings per share are calculated by dividing the profit attributable to equity owners of the Group by the weighted average number of ordinary shares in issue during the year, excluding ordinary shares purchased by the Group and held as treasury shares.

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares.

3 Financial risk management

3.1 Financial risk factors

The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk and cash flow interest rate risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. The Group uses derivative financial instruments to hedge certain risk exposures.

Risk management is carried out by a central treasury department (group treasury) under policies approved by the Board of Directors. Group treasury identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating units. The board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, and credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.

(a) Market risk

(i) Foreign exchange risk

The Group’s operations (such as export sales, imports of machinery and equipment, foreign currency deposits, trade and other receivables) expose it to foreign exchange risk arising from various currency exposures primarily with respect to the US Dollar (“USD”). In addition, the RMB is not freely convertible into other foreign currencies and conversion of the RMB into foreign currencies is subject to rules and regulations of foreign exchange control promulgated by the PRC government.

Management has set up a policy to require group companies to manage their foreign exchange risk against their functional currency. The group companies are required to hedge their entire foreign exchange risk exposure with the group treasury. To manage their foreign exchange risk arising from

— I-44 — APPENDIX I ACCOUNTANT’S REPORT future commercial transactions and recognised assets and liabilities, entities in the group use forward contracts, transacted with group treasury. Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the entity’s functional currency.

The Group historically has not used any derivative instruments to hedge exchange rate of USD and currently does not have a fixed policy to do so in the foreseeable future. The Group mainly operates in the PRC with most of the transactions settled in RMB, which is also the functional currency of the Company and the presentation currency of the Group. In 2017, the Company set up Shandong Gold Mining (HongKong) Co., Limited (山東黃金礦業(香港)有限公司 or “SDHK”), whereby together with its newly acquired joint operation, have their functional currency in USD. Foreign exchange rate risk arises when recognised assets and liabilities are denominated in a currency that is not the entity’s functional currency. As at 31 December 2015, 2016, 2017 and 31 March 2018, the Group’s assets and liabilities are primarily denominated in their functional currencies.

The Group will constantly review the economic situation and its foreign exchange risk profile, and will consider appropriate hedging measures in the future, as may be necessary.

(ii) Cash flow and fair value interest rate risk

The Group’s exposure to cash flow interest rate risks arises from the Group’s interest bearing bank deposits, bank borrowings and long-term bonds, whose interest rates may subject to adjustments by the PRC government. Borrowings at variable rates expose the Group to cash flow interest-rate risk while borrowings and long-term bonds at fixed rates expose the Group to fair value interest-rate risk. The Group historically has not used any financial instruments to hedge potential fluctuations in interest rates.

Other than those mentioned above, the Group’s income and operating cash flows are substantially independent of changes in the market interest rates.

If interest rates on borrowings at variable rates had been 50 basis point higher/lower with all other variables held constant, the impact on post-tax profit were as follows:

Three months ended Year ended 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Impact on post-tax profit at 50 basis point higher (450) (300) (25,813) (23,250) Impact on post-tax profit at 50 basis point lower 450 300 25,813 23,250

— I-45 — APPENDIX I ACCOUNTANT’S REPORT

(iii) Price risk

The Group is exposed to equity securities price risk because of investments held by the Group and classified on the consolidated balance sheet as available-for-sale financial assets. To manage its price risk arising from investments in equity securities, the Group diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the Group.

The Group engages in gold mining and refining operations and is exposed to commodity price risk related to price volatility of gold products. The fluctuations in prices of gold products could have significant impact on the Group. The Group uses derivative financial instruments, including commodity futures and swaps, to manage a portion of this risk.

(b) Credit risk

Credit risk is managed on a group basis. Credit risk mainly arises from cash and cash equivalents, restricted bank deposits, trade and other receivables and other non-current assets.

The Group expects that there is no significant credit risk associated with cash at bank since they are deposited at state-owned banks and other medium or large size listed banks. Management does not expect that there will be any significant losses from non-performance by these counterparties.

The Group is exposed to credit risk if counterparties fail to make payments as they fall due. For financial assets, the following credit risk modelling applies:

The Group considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk, the Group compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition.

It considers available reasonable and supportive forwarding-looking information. Especially the following indicators are incorporated:

• internal credit rating;

• external credit rating;

• actual or expected significant adverse changes in business, financial or economic conditions that are expected to cause a significant change to the customer’s ability to meet its obligations;

• actual or expected significant changes in the operating results of the debtor/customer;

• significant increases in credit risk on other financial instruments of the same customer;

— I-46 — APPENDIX I ACCOUNTANT’S REPORT

• significant changes in the expected performance and behaviour of the customer, including changes in the payment status of customer in the group and changes in the operating results of the customer.

(i) Other receivables from related parties

The Group uses four categories for those receivables which reflect their credit risk and how the loss provision is determined for each of those categories. These internal credit risk ratings are aligned to external credit ratings.

A summary of the assumptions underpinning the Group’s expected credit loss model is as follows:

Basis for recognition of Category Group’s definition of categories expected credit loss provision

Performing Customers have a low risk of 12 months expected losses. Where default and a strong capacity to the expected lifetime of an asset is meet contractual cash flows less than 12 months, expected losses are measured at its expected lifetime

Underperforming Receivables for which there is a Lifetime expected losses significant increase in credit risk; as significant increase in credit risk is presumed if interest and/or principal repayments are 30 days past due

Non-performing Interest and/or principal repayments Lifetime expected losses are 60 days past due

Write-off Interest and/or principal repayments Asset is written off are 120 days past due and there is no reasonable expectation of recovery

The Group accounts for its credit risk by appropriately providing for expected credit losses on a timely basis. In calculating the expected credit loss rates, the Group considers historical loss rates for each category of receivables and adjusts for forward looking macroeconomic data.

As at 1 January 2018, majority of the internal credit rating of other receivables from related parties were performing, with a carrying amount of other receivables of RMB65,430,000, and the allowance provision of other receivables from related parties was RMB8,302,000. No further provision was deemed required to restate the impairment provision at 1 January 2018.

— I-47 — APPENDIX I ACCOUNTANT’S REPORT

(ii) Trade and other receivables (excluding prepayments and other receivables from related parties)

The Group applies the simplified approach to provide for expected credit losses prescribed by IFRS 9, which permits the use of the lifetime expected loss provision for all trade and other receivables (excluding prepayments and other receivables from related parties).

The loss allowance provision for the remaining balances was determined and the expected credit losses below also incorporated forward looking information. The loss allowance provision as of 1 January 2018 and 31 March 2018 are determined as follows:

Up to 1 1to2 2to3 Over 3 year years years years Total

Trade receivables As at 1 January 2018 Expected loss rate 0.3% 10% 20% 75% Gross carrying amount (RMB’000) 114,775 77 82 7,198 122,132 Loss allowance provision (RMB’000) (316) (8) (16) (5,405) (5,745)

As at 31 March 2018 Expected loss rate 0.2% 10% 23% 76% Gross carrying amount (RMB’000) 156,921 465 47 6,969 164,402 Loss allowance provision (RMB’000) (328) (46) (11) (5,288) (5,673) Other receivables (excluding prepayments and other receivables from related parties) As at 31 December 2015 Expected loss rate 6% 30% 31% 83% Gross carrying amount (RMB’000) 69,098 14,289 11,526 90,031 184,944 Loss allowance provision (RMB’000) (4,379) (4,223) (3,533) (74,721) (86,856)

As at 31 December 2016 Expected loss rate 4% 58% 65% 91% Gross carrying amount (RMB’000) 110,962 3,207 5,299 77,186 196,654 Loss allowance provision (RMB’000) (4,976) (1,870) (3,425) (70,037) (80,308)

As at 31 December 2017 Expected loss rate 3% 29% 64% 90% Gross carrying amount (RMB’000) 106,983 7,923 2,880 81,535 199,321 Loss allowance provision (RMB’000) (3,244) (2,304) (1,831) (73,699) (81,078)

As at 31 March 2018 Expected loss rate 2% 27% 61% 94% Gross carrying amount (RMB’000) 123,205 9,949 3,448 83,680 220,282 Loss allowance provision (RMB’000) (2,514) (2,662) (2,087) (78,685) (85,948)

— I-48 — APPENDIX I ACCOUNTANT’S REPORT

(c) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and cash equivalents and the availability of funding through an adequate amount of borrowing facilities. Due to the dynamic nature of the underlying businesses, the Group maintains a reasonable level of cash and cash equivalents, and further supplements this by keeping committed credit lines available.

The Group’s primary cash requirements have been for purchases of materials, machinery and equipment and payment of related debts. The Group finances its working capital requirements through a combination of funds generated from operations, bank loans, short-term and long-term bonds and the net proceeds from the initial public offering.

Management monitors rolling forecasts of the Group’s liquidity reserve (comprises undrawn borrowing facility and cash and cash equivalents (Note 25)) on the basis of expected cash flow.

— I-49 — APPENDIX I ACCOUNTANT’S REPORT

The table below analyses the undiscounted cash outflow relating to the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date.

Between Between Less than 1 and 2 and Over 1 year 2 years 5 years 5 years Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

As at 31 March 2018 Borrowings 3,525,907 907,424 6,239,310 — 10,672,641 Trade and other payables 3,330,465 — — — 3,330,465 Other non-current liabilities 8,523 21,893 19,426 27,990 77,832 Financial liabilities at fair value through profit or loss 6,499,031 — — — 6,499,031 13,363,926 929,317 6,258,736 27,990 20,579,969

As at 31 December 2017 Borrowings 3,144,245 270,279 8,274,831 — 11,689,355 Trade and other payables 3,515,273 — — — 3,515,273 Other non-current liabilities 12,992 23,027 19,426 27,990 83,435 Financial liabilities at fair value through profit or loss 5,751,411 — — — 5,751,411 12,423,921 293,306 8,294,257 27,990 21,039,474

As at 31 December 2016 Borrowings 1,265,590 2,191,380 1,418,257 — 4,875,227 Trade and other payables 2,654,697 — — — 2,654,697 Other non-current liabilities 2,264 13,027 2,453 1,353 19,097 Financial liabilities at fair value through profit or loss 3,169,789 — — — 3,169,789 7,092,340 2,204,407 1,420,710 1,353 10,718,810

As at 31 December 2015 Borrowings 926,383 193,300 3,614,159 — 4,733,842 Trade and other payables 2,309,089 — — — 2,309,089 Other non-current liabilities 2,264 18,413 4,717 1,352 26,746 Financial liabilities at fair value through profit or loss 4,777,391 — — — 4,777,391 8,015,127 211,713 3,618,876 1,352 11,847,068

— I-50 — APPENDIX I ACCOUNTANT’S REPORT

3.2 Capital management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

Consistent with others in the industry, the Group monitors capital on the basis of the net debt to total capital ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including ‘current and non-current borrowings’ as shown in the consolidated balance sheet) less restricted bank deposits and cash and cash equivalents. Total capital is calculated as ‘equity’ plus net debt.

As at 31 December 2015, 2016 and 2017 and 31 March 2018, the net debt to total capital ratios were as follows:

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Total borrowings 4,137,502 4,407,091 10,974,926 10,127,201 Less: cash and cash equivalents (Note 25(b)) (497,271) (1,159,795) (2,402,814) (2,473,693) Less: restricted bank deposits (Note 25(a)) (109,481) (143,855) (669,942) (146,989) Net debt 3,530,750 3,103,441 7,902,170 7,506,519 Total equity 12,421,790 16,689,721 17,493,766 17,842,875 Total capital 15,952,540 19,793,162 25,395,936 25,349,394 Net debt to total capital ratio 22% 16% 31% 30%

The decrease in the gearing ratio during 2016 is primarily due to the issue of the Company’s shares which enlarged the Group’s total equity in 2016. The increase in the gearing ratio during 2017 is primarily due to the drawdown of a long term bank borrowing for the acquisition of the joint operation in June 2017.

As described in Note 29, the Group has also financed through entering into gold leasing contract arrangements. If the financial liabilities at fair value through profit or loss associated with these gold leasing contacts have been included as part of the “net debt”, the net debt to total capital ratio would become 40%, 27%, 44% and 44% as of 31 December 2015, 2016 and 2017 and 31 March 2018, respectively.

— I-51 — APPENDIX I ACCOUNTANT’S REPORT

3.3 Fair value estimation

The table below analyses financial instruments carried at fair value as at 31 March 2018 by level of the inputs to valuation techniques used to measure fair value. Such inputs are categorised into three levels within a fair value hierarchy as follows:

• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).

• Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).

• Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).

The following table presents the Group’s assets and liabilities that are measured at fair value at 31 March 2018.

Level 1 Level 2 Level 3 Total RMB’000 RMB’000 RMB’000 RMB’000

Liabilities Financial liabilities at fair value through profit or loss - Gold leasing contracts 6,499,031 — — 6,499,031

The following table presents the Group’s assets and liabilities that are measured at fair value at 31 December 2017.

Level 1 Level 2 Level 3 Total RMB’000 RMB’000 RMB’000 RMB’000

Liabilities Financial liabilities at fair value through profit or loss - Gold leasing contracts 5,751,411 — — 5,751,411

The following table presents the Group’s assets and liabilities that are measured at fair value at 31 December 2016.

— I-52 — APPENDIX I ACCOUNTANT’S REPORT

Level 1 Level 2 Level 3 Total RMB’000 RMB’000 RMB’000 RMB’000

Liabilities Financial liabilities at fair value through profit or loss - Gold leasing contracts 3,169,789 — — 3,169,789

The following table presents the Group’s assets and liabilities that are measured at fair value at 31 December 2015.

Level 1 Level 2 Level 3 Total RMB’000 RMB’000 RMB’000 RMB’000

Assets Available-for-sale financial assets -Equity securities 2,142 — — 2,142

Liabilities Financial liabilities at fair value through profit or loss - Gold leasing contracts 4,777,391 — — 4,777,391

(a) Financial instruments in level 1

The fair value of financial instruments traded in active market is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The quoted market price used for financial assets held by the Group is the current bid price.

4 Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

4.1 Critical accounting estimates and assumptions

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.

— I-53 — APPENDIX I ACCOUNTANT’S REPORT

(a) Estimated impairment of goodwill

The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in Note 2.11. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates (Note 19).

(b) Proved and probable mineral reserves and resources

Proved and probable mineral reserves and resources are estimated based on professional knowledge, experience and industrial practice. Most of the time, the estimation basis on probing and estimation may not be very accurate. The estimation is updated in accordance with new technologies and new information. This forms the basis for the LOM plans, and any changes in estimation will have impacts on amounts of mining assets’ depreciation and mining rights’ amortisation using the unit-of-production method. That may result in changes of or impacts on the Group’s development and operation programme, and the Group’s operation and operating results.

(c) Business combination

The recognition of business combinations requires the excess of the purchase price of acquisitions over the net book value of assets acquired to be allocated to the assets and liabilities of the acquired entity. The Group makes judgements and estimates in relation to the fair value allocation of the purchase price. If any unallocated portion is positive it is recognised as goodwill and if negative, it is recognised in the consolidated statement of comprehensive income.

(d) Impairment of non-current assets

Non-current assets, including property, plant and equipment, investment properties, land use rights, mining and exploration rights and intangible assets, are carried at cost less accumulated depreciation/amortisation. These carrying amounts are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. In estimating the recoverable amounts of assets, various assumptions, including future cash flows to be associated with the non-current assets and discount rates, are made. If future events do not correspond to such assumptions, the recoverable amounts will need to be revised, and this may have an impact on the Group’s results of operations and financial position.

(e) Useful lives of property, plant and equipment

The Group’s management determines the estimated useful lives and related depreciation charges for its property, plant and equipment. This estimate is based on the historical experience of the actual useful lives of property, plant and equipment of similar nature and functions. It could change significantly as a result of technical innovations and competitor actions in response to severe industry cycles. Management will increase the depreciation charges where useful lives are less than previously estimated lives, or it will write-off or write-down technically obsolete or non-strategic assets that have been abandoned or sold.

— I-54 — APPENDIX I ACCOUNTANT’S REPORT

(f) Income taxes

The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made.

(g) Estimation of asset retirement obligations (“ARO”)

Provisions are recognised for the future decommissioning and restoration of mines. The amounts of the provision recognised are the present values of the estimated future expenditures that the Group is expected to incur. The estimation of the future expenditures is based on current local conditions and requirements, including legal requirements, technology, price level, etc. In addition to these factors, the present values of these estimated future expenditures are also impacted by the estimation of the economic lives of mining properties. Changes in any of these estimates will impact the operating results and the financial position of the Group over the remaining economic lives of the mining properties.

4.2 Critical judgements in applying the company’s accounting policies

Joint operation - investment in Argentina Gold (Bermuda) II Ltd. (“AGBII Group”) by the Group

The Group has determined that Argentina Gold (Bermuda) II Ltd. (“AGBII”) is jointly controlled by SDHK, a wholly-owned subsidiary of the Company, and Barrick Gold Corporation’s subsidiary, Barrick Cayman (V) Ltd. (“Barrick Cayman”), and each of the parties has rights to the assets and obligations for the liabilities of AGBII and its subsidiary Minera Argentina Gold S.R.L. (together the “AGBII Group”), and is eligible to the AGBII Group’s products and recognises expenses incurred in the proportion of 50% each. Therefore, the Group defined its investment in the AGBII Group as an investment in a joint operation.

5 Segment information

The President Office (總裁辦公會) of the Company is the Group’s chief operating decision-maker (“CODM”). Management has determined the operating segments based on the information reviewed by the CODM for the purposes of allocating resources and assessing performance. Financial information of the following reportable segments has been separately presented as discrete segment information for CODM’s review:

• Gold mining — Mining of gold ore; and

• Gold refining — Production and sales of gold.

— I-55 — APPENDIX I ACCOUNTANT’S REPORT

The financial information of the reportable segments as set out below are presented in a manner consistent with the way in which the information is reported to the CODM for the purpose of allocating resources and assessing performance.

The Group evaluates performance based on profit or loss before income tax expense. The Group accounts for inter-segment sales and transfers as if the sales or transfers were to third parties.

For the three months ended 31 March 2018 Gold Gold Inter-segment Mining Refining elimination Total RMB’000 RMB’000 RMB’000 RMB’000

Revenue from customers and recognised at a point in time Revenue from customers (other than rental income) 2,461,448 13,591,082 (1,888,623) 14,163,907 Rental income 2,410 — — 2,410 Inter-segment revenue (1,888,623) — 1,888,623 — Revenue from external customers 575,235 13,591,082 — 14,166,317

Profit from operations 625,681 55,051 — 680,732

Finance income 8,647 594 — 9,241 Finance costs (207,455) (1,996) — (209,451) Share of profit of an associate 9,028 — — 9,028

Profit before income tax 435,901 53,649 — 489,550 Income tax expenses (122,541) (13,412) — (135,953) Profit for the period 313,360 40,237 — 353,597

Other material non-cash items Depreciation and amortisation 646,192 10,573 — 656,765 (Reversal of)/provision for impairment of trade and other receivables, net (1,453) 11 — (1,442)

— I-56 — APPENDIX I ACCOUNTANT’S REPORT

As at 31 March 2018 Gold Gold Inter-segment Mining Refining elimination Total RMB’000 RMB’000 RMB’000 RMB’000

Segment assets and liabilities Total assets 42,275,725 2,503,897 (1,713,813) 43,065,809 Include: investment in an associate 408,187 — — 408,187 Addition to non-current assets 1,046,251 10,385 — 1,056,636 Total liabilities 25,057,586 1,879,161 (1,713,813) 25,222,934

For the three months ended 31 March 2017 (unaudited) Gold Gold Inter-segment Mining Refining elimination Total RMB’000 RMB’000 RMB’000 RMB’000

Revenue from customers and recognised at a point in time Revenue from customers (other than rental income) 2,020,544 9,623,621 (1,935,538) 9,708,627 Rental income 2,534 — — 2,534 Inter-segment revenue (1,935,538) — 1,935,538 — Revenue from external customers 87,540 9,623,621 — 9,711,161

Profit from operations 484,537 32,266 — 516,803

Finance income 4,782 419 — 5,201 Finance costs (110,753) (1,398) — (112,151) Share of profit of an associate 7,950 — — 7,950

Profit before income tax 386,516 31,287 — 417,803 Income tax expenses (81,521) (7,822) — (89,343) Profit for the period 304,995 23,465 — 328,460

Other material non-cash items Depreciation and amortisation 402,977 12,848 — 415,825 Provision for/(reversal of) impairment of trade and other receivables, net 2,521 (206) — 2,315

— I-57 — APPENDIX I ACCOUNTANT’S REPORT

For the year ended 31 December 2017 Gold Gold Inter-segment Mining Refining elimination Total RMB’000 RMB’000 RMB’000 RMB’000

Revenue from customers and recognised at a point in time Revenue from customers (other than rental income) 9,791,566 49,048,579 (7,818,574) 51,021,571 Rental income 19,732 — — 19,732 Inter-segment revenue (7,818,574) — 7,818,574 — Revenue from external customers 1,992,724 49,048,579 — 51,041,303

Profit from operations 1,998,822 127,667 — 2,126,489

Finance income 34,216 3,229 — 37,445 Finance costs (587,526) (5,987) — (593,513) Share of profit of an associate 34,024 — — 34,024

Profit before income tax 1,479,536 124,909 — 1,604,445 Income tax expenses (400,257) (31,195) — (431,452) Profit for the year 1,079,279 93,714 — 1,172,993

Other material non-cash items Depreciation and amortisation 2,206,722 49,238 — 2,255,960 Provision for impairment of property, plant and equipment 5,832 — — 5,832 (Reversal of)/provision for impairment of trade and other receivables, net (9,159) 454 — (8,705)

As at 31 December 2017 Gold Gold Inter-segment Mining Refining elimination Total RMB’000 RMB’000 RMB’000 RMB’000

Segment assets and liabilities Total assets 42,380,200 2,297,777 (1,546,256) 43,131,721 Include: investment in an associate 399,208 — — 399,208 Addition to non-current assets 11,413,472 21,423 — 11,434,895 Total liabilities 25,470,360 1,713,851 (1,546,256) 25,637,955

— I-58 — APPENDIX I ACCOUNTANT’S REPORT

For the year ended 31 December 2016 Gold Gold Inter-segment Mining Refining elimination Total RMB’000 RMB’000 RMB’000 RMB’000

Revenue from customers and recognised at a point in time Revenue from customers (other than rental income) 8,019,680 48,063,303 (7,022,198) 49,060,785 Rental income 11,906 — — 11,906 Inter-segment revenue (7,022,198) — 7,022,198 — Revenue from external customers 1,009,388 48,063,303 — 49,072,691

Profit from operations 1,863,943 145,029 25,952 2,034,924

Finance income 9,736 1,252 — 10,988 Finance costs (368,546) (7,052) — (375,598) Share of profit of an associate 27,662 — — 27,662

Profit before income tax 1,532,795 139,229 25,952 1,697,976 Income tax expenses (353,912) (31,282) — (385,194) Profit for the year 1,178,883 107,947 25,952 1,312,782

Other material non-cash items Depreciation and amortisation 1,514,803 54,224 — 1,569,027 Provision for impairment of property, plant and equipment 7,391 — — 7,391 Provision for impairment of inventories 26 — — 26 (Reversal of)/provision for impairment of trade and other receivables, net (5,050) 1,170 — (3,880)

As at 31 December 2016 Gold Gold Inter-segment Mining Refining elimination Total RMB’000 RMB’000 RMB’000 RMB’000

Segment assets and liabilities Total assets 28,840,170 2,344,864 (1,818,613) 29,366,421 Include: investment in an associate 371,461 — — 371,461 Addition to non-current assets 3,771,119 12,535 — 3,783,654 Total liabilities 12,543,356 1,951,957 (1,818,613) 12,676,700

— I-59 — APPENDIX I ACCOUNTANT’S REPORT

For the year ended 31 December 2015 Gold Gold Inter-segment Mining Refining elimination Total RMB’000 RMB’000 RMB’000 RMB’000

Revenue from customers and recognised at a point in time Revenue from customers (other than rental income) 7,051,702 37,658,111 (5,955,384) 38,754,429 Rental income 20,052 — — 20,052 Inter-segment revenue (5,955,384) — 5,955,384 — Revenue from external customers 1,116,370 37,658,111 — 38,774,481

Profit from operations 1,276,726 109,685 11,049 1,397,460

Finance income 10,728 1,701 — 12,429 Finance costs (440,714) (10,319) — (451,033) Share of profit of an associate 22,881 — — 22,881

Profit before income tax 869,621 101,067 11,049 981,737 Income tax expenses (245,042) (23,438) — (268,480) Profit for the year 624,579 77,629 11,049 713,257

Other material non-cash items Depreciation and amortisation 1,433,630 53,084 — 1,486,714 Provision for impairment of inventories 3,120 — — 3,120 Provision for impairment of trade and other receivables, net 15,177 703 — 15,880

As at 31 December 2015 Gold Gold Inter-segment Mining Refining elimination Total RMB’000 RMB’000 RMB’000 RMB’000

Segment assets and liabilities Total assets 25,689,297 1,688,368 (1,281,244) 26,096,421 Include: investment in an associate 343,694 — — 343,694 Addition to non-current assets 1,855,244 12,335 — 1,867,579 Total liabilities 13,268,983 1,686,892 (1,281,244) 13,674,631

— I-60 — APPENDIX I ACCOUNTANT’S REPORT

Analysis of revenue

Three months ended Year ended 31 December 31 March 2015 2016 2017 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

The PRC 38,774,481 49,072,691 49,312,459 9,711,161 13,691,732 Outside the PRC — — 1,728,844 — 474,585 38,774,481 49,072,691 51,041,303 9,711,161 14,166,317

Revenue is attributed to countries based on the customers’ locations.

Gold sold through the Shanghai Gold Exchange were as follows:

Three months ended Year ended 31 December 31 March 2015 2016 2017 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Gold refining segment 37,012,172 38,487,468 37,178,200 7,045,473 9,034,075

Analysis of non-current assets

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

The PRC 24,112,312 26,156,779 28,960,854 28,676,003 Outside the PRC — — 7,753,437 7,433,983 24,112,312 26,156,779 36,714,291 36,109,986

Note: The non-current assets above exclude available-for-sale financial assets, financial assets at fair value through other comprehensive income and deferred income tax assets.

— I-61 — APPENDIX I ACCOUNTANT’S REPORT

6 Other income

Three months ended Year ended 31 December 31 March 2015 2016 2017 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Dividend income ————198 Government grants 8,536 14,845 15,979 309 522 8,536 14,845 15,979 309 720

7 Other gains/(losses), net

Three months ended Year ended 31 December 31 March 2015 2016 2017 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Fair value gains/(losses) on gold future/forward contracts 27,174 1,067 11,305 (18,084) 17,077 Gains from disposal of available-for-sale financial assets 53,774 2,456 — — — Gains from disposal of subsidiaries (Note 40(f)) — 58,253 — — — Net losses on disposal/write-off of property, plant and equipment, land use rights and intangible assets (13,651) (22,036) (22,267) (2,718) (987) Others 1,253 212 (2,116) (1,634) (3,800) 68,550 39,952 (13,078) (22,436) 12,290

— I-62 — APPENDIX I ACCOUNTANT’S REPORT

8 Expenses by nature

Expenses included in cost of sales, selling expenses, general and administrative expenses and research and development costs are analysed as follows:

Three months ended Year ended 31 December 31 March 2015 2016 2017 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Changes in inventories of finished goods and work in progress (40,619) 431,695 (1,154,533) 11,959 62,497 Raw materials and consumables used 32,725,742 41,403,043 43,715,441 7,864,301 11,846,681 Employee benefit expenses (including directors’ emoluments) (Note 9) 1,622,141 1,696,367 1,906,718 416,155 477,650 Depreciation 854,718 949,508 1,607,282 250,428 497,986 Amortisation 631,996 619,519 648,678 165,397 158,779 Labor outsourcing expenses 688,360 901,557 859,218 225,156 153,863 Outsourcing stripping costs — — 150,171 — 27,978 Mining resource compensation fees 153,784 84,784 85,667 — 16,428 Mining resource tax 103,538 149,244 189,200 44,012 49,210 Repairs and maintenance costs 76,339 89,540 98,760 17,116 19,167 Transportation costs and port expenses 44,722 51,955 73,375 12,421 24,000 Auditor’s remuneration 3,200 3,000 3,000 — 1,000 Operating lease rental expenses 12,317 9,371 40,452 3,217 10,038 Provision for/(reversal of) impairment of trade and other receivables, net (Note 23) 15,880 (3,880) (8,705) 2,315 (1,442) Provision for impairment of inventories (Note 24) 3,120 26 — — — Provision for impairment of property, plant and equipment — 7,391 5,832 — — Others 558,869 699,444 697,159 159,754 154,760 Total cost of sales, selling expenses, general and administrative expenses and research and development costs 37,454,107 47,092,564 48,917,715 9,172,231 13,498,595

— I-63 — APPENDIX I ACCOUNTANT’S REPORT

(a) Depreciation charged to profit or loss is analysed as follows:

Three months ended Year ended 31 December 31 March 2015 2016 2017 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Depreciation for the year — Property, plant and equipment (Note 15) 861,382 958,630 1,645,585 264,295 502,621 — Investment properties (Note 16) 9,013 6,439 11,017 2,078 2,083 870,395 965,069 1,656,602 266,373 504,704 Less: capitalised in construction in progress (15,677) (15,561) (49,320) (15,945) (6,718) Amount charged to profit or loss 854,718 949,508 1,607,282 250,428 497,986 Charged to: — Cost of sales 755,821 815,988 1,484,483 222,644 468,008 — General and administrative expenses 98,897 133,520 122,799 27,784 29,978 854,718 949,508 1,607,282 250,428 497,986

(b) Amortisation charged to profit or loss is analysed as follows:

Three months ended Year ended 31 December 31 March 2015 2016 2017 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Amortisation for the year — Land use rights (Note 17) 8,077 9,476 10,500 2,270 2,878 — Intangible assets (Note 18) 593,958 586,397 615,271 158,005 153,175 — Long-term prepayments 30,271 24,330 23,110 5,122 2,776 632,306 620,203 648,881 165,397 158,829 Less: capitalised in construction in progress (310) (684) (203) — (50) Amount charged to profit or loss 631,996 619,519 648,678 165,397 158,779 Charged to: — Cost of sales 601,591 580,670 609,371 156,532 151,714 — General and administrative expenses 30,405 38,849 39,307 8,865 7,065 631,996 619,519 648,678 165,397 158,779

— I-64 — APPENDIX I ACCOUNTANT’S REPORT

9 Employee benefit expenses

Three months ended Year ended 31 December 31 March 2015 2016 2017 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Wages, salaries, bonuses and allowances 1,133,986 1,199,703 1,322,977 281,006 325,847 Housing subsidies (note (a)) 98,902 96,530 103,617 23,111 23,525 Contributions to pension plans (note (b)) 160,226 168,105 198,482 40,894 54,582 Welfare and other expenses 229,027 232,029 281,642 71,144 73,696 1,622,141 1,696,367 1,906,718 416,155 477,650

(a) These mainly include the Group’s contributions to government-sponsored housing funds in the PRC at rates ranging from 5% to 12% of the employees’ basic salaries.

(b) Pensions - defined contribution plans

The Group participates in various pension plans organised by the relevant municipal and provincial governments in the PRC under which the Group is required to make monthly defined contributions to these plans at rates ranging from 18% to 20% of the employees’ basic salaries depending on the applicable local regulations; while the AGBII Group is required to contribute approximately 28% of the employees’ basic salaries to the applicable pension plan in Argentina.

(c) Five highest paid individuals

The five individuals whose emoluments were the highest in the Group during the years/periods are as follows:

Three months ended Year ended 31 December 31 March 2015 2016 2017 2017 2018 (unaudited)

Director —3221 Non-director 52334 55555

— I-65 — APPENDIX I ACCOUNTANT’S REPORT

The emoluments payable to the non-directors are as follows:

Three months ended Year ended 31 December 31 March 2015 2016 2017 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Wages, salaries, bonuses and allowances 3,063 1,519 2,268 288 753 Social benefits 196 94 283 47 59 3,259 1,613 2,551 335 812

The emoluments to the non-directors fell within the following bands:

Three months ended Year ended 31 December 31 March 2015 2016 2017 2017 2018 (unaudited)

Emolument bands (in HK dollar) Less than HK$1,000,000 52334 More than HK$1,000,000 —————

All of the analysis on the highest paid individuals above did not take into account the emoluments paid to the employees of the joint operation, AGBII Group.

— I-66 — APPENDIX I ACCOUNTANT’S REPORT

10 Finance costs, net

Three months ended Year ended 31 December 31 March 2015 2016 2017 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Interest expense: - bank borrowings 42,525 59,721 131,770 6,838 59,998 - borrowings from related parties 37,456 5,775 9,908 1,485 2,264 - borrowings from a third party 24,692 ———— - corporate bonds 153,416 169,492 169,685 42,403 42,447 - provisions: unwinding of discount from asset retirement obligations (Note 32) — 871 5,021 276 2,299 Finance costs for arranging gold leasing contracts 168,414 128,562 134,246 22,388 42,062 Realised and unrealised fair value losses on gold leasing contracts 71,704 42,279 69,851 38,963 42,660 Guarantee and arrangement fee for a borrowing — — 64,897 — — Net foreign exchange (gains)/losses — (763) 17,547 43 18,766 Finance costs 498,207 405,937 602,925 112,396 210,496 Less: amounts capitalised on qualifying assets (47,174) (30,339) (9,412) (245) (1,045) Total finance costs 451,033 375,598 593,513 112,151 209,451

Interest income: - bank deposits 11,935 8,604 34,766 4,665 7,903 - deposits within a related party 494 2,384 2,679 536 1,338 Total finance income 12,429 10,988 37,445 5,201 9,241

Finance costs, net 438,604 364,610 556,068 106,950 200,210

— I-67 — 11a Subsidiaries I APPENDIX

The following is a list of the principal subsidiaries at each balance date:

As at 31 March 2018

Attributable equity Held by interest held by the Place of Principal activities Type of legal Registered non-controlling Company name incorporation and place of operation entity capital Company Group interests

(RMB)

Shandong Gold Mining (Laizhou) Co., Ltd. The PRC Gold mining in the Limited liability 410,000,000 100% 100% — (“Shandong Laizhou”) PRC company

Shandong Gold Smelting Co., Ltd. The PRC Gold and silver Limited liability 350,000,000 100% 100% — smelting in the PRC company -8— I-68 —

Shandong Gold Mining (Xinhui) Co., Ltd. The PRC Gold mining in the Limited liability 257,000,000 100% 100% — (“Shandong Xinhui”) PRC company

Shandong Gold Mining (Linglong) Co., Ltd. The PRC Gold mining in the Limited liability 300,000,000 100% 100% — PRC company

Shandong Jinshi Mining Co., Ltd. The PRC Mining investment in Limited liability 26,800,000 100% 100% —

the PRC company REPORT ACCOUNTANT’S

Xihe Zhongbao Mining Co., Ltd. The PRC Exploration of Gold Limited liability 200,000,000 70% 70% 30% Mine in the PRC company

Shandong Gold Group Penglai Mining Co., Ltd. The PRC Gold mining in the Limited liability 50,000,000 100% 100% — PRC company

Shandong Gold Guilaizhuang Mining Co., Ltd. The PRC Gold mining in the Limited liability 621,670,000 70.65% 70.65% 29.35% PRC company As at 31 December 2017 I APPENDIX

Attributable equity Principal Held by interest held by the Place of activities and Type of Registered non-controlling Company name incorporation place of operation legal entity capital Company Group interests

(RMB)

Shandong Gold Mining (Laizhou) Co., Ltd. The PRC Gold mining in the Limited liability 410,000,000 100% 100% — (“Shandong Laizhou”) PRC company

Shandong Gold Smelting Co., Ltd. The PRC Gold and silverLimited liability 350,000,000 100% 100% — smelting in the PRC company

Shandong Gold Mining (Xinhui) Co., Ltd. The PRC Gold mining in the Limited liability 257,000,000 100% 100% — (“Shandong Xinhui”) PRC company

Shandong Gold Mining (Linglong) Co., Ltd. The PRC Gold mining in the Limited liability 300,000,000 100% 100% —

-9— I-69 — PRC company

Shandong Jinshi Mining Co., Ltd. The PRC Mining investment in Limited liability 26,800,000 100% 100% — the PRC company

Xihe Zhongbao Mining Co., Ltd. The PRC Exploration of Gold Limited liability 200,000,000 70% 70% 30% Mine in the PRC company

Shandong Gold Group Penglai Mining Co., Ltd. The PRC Gold mining in the Limited liability 50,000,000 100% 100% — REPORT ACCOUNTANT’S PRC company

Shandong Gold Guilaizhuang Mining Co., Ltd. The PRC Gold mining in the Limited liability 621,670,000 70.65% 70.65% 29.35% PRC company As at 31 December 2016 I APPENDIX

Attributable equity Principal Held by interest held by the Place of activities and Type of Registered non-controlling Company name incorporation place of operation legal entity capital Company Group interests

(RMB)

Shandong Gold Mining (Laizhou) Co., Ltd. The PRC Gold mining in the Limited liability 410,000,000 100% 100% — (“Shandong Laizhou”) PRC company

Shandong Gold Smelting Co., Ltd. The PRC Gold and silverLimited liability 350,000,000 100% 100% — smelting in the PRC company

Shandong Gold Mining (Xinhui) Co., Ltd. The PRC Gold mining in the Limited liability 257,000,000 100% 100% — (“Shandong Xinhui”) PRC company

Shandong Gold Mining (Linglong) Co., Ltd. The PRC Gold mining in the Limited liability 300,000,000 100% 100% —

-0— I-70 — PRC company

Shandong Jinshi Mining Co., Ltd. The PRC Mining investment in Limited liability 26,800,000 100% 100% — the PRC company

Xihe Zhongbao Mining Co., Ltd. The PRC Exploration of Gold Limited liability 200,000,000 70% 70% 30% Mine in the PRC company

Shandong Gold Group Penglai Mining Co., Ltd. The PRC Gold mining in the Limited liability 50,000,000 100% 100% — REPORT ACCOUNTANT’S PRC company

Shandong Gold Guilaizhuang Mining Co., Ltd. The PRC Gold mining in the Limited liability 621,670,000 70.65% 70.65% 29.35% PRC company As at 31 December 2015 I APPENDIX

Attributable equity Principal Held by interest held by the Place of activities and Type of Registered non-controlling Company name incorporation place of operation legal entity capital Company Group interests

(RMB)

Shandong Gold Mining (Laizhou) Co., Ltd. The PRC Gold mining in the Limited liability 760,000,000 100% 100% — (“Shandong Laizhou”) PRC company

Shandong Gold Mining (Xinhui) Co., Ltd. The PRC Gold mining in the Limited liability 257,000,000 100% 100% — (“Shandong Xinhui”) PRC company

Shandong Gold Mining (Linglong) Co., Ltd. The PRC Gold miningLimited in the liability 300,000,000 100% 100% — PRC company

Shandong Jinshi Mining Co., Ltd. The PRC Mining investment in Limited liability 10,017,700 73.52% 73.52% 26.48% -1— I-71 — the PRC company

Xihe Zhongbao Mining Co., Ltd. The PRC Exploration of Gold Limited liability 26,800,000 100% 100% — Mine in the PRC company

Shandong Gold Group Penglai Mining Co., Ltd. The PRC Gold mining in the Limited liability 50,000,000 51% 51% 49% PRC company

Shandong Gold Guilaizhuang Mining Co., Ltd. The PRC Gold mining in the Limited liability 621,670,000 70.65% 70.65% 29.35% REPORT ACCOUNTANT’S PRC company APPENDIX I ACCOUNTANT’S REPORT

(a) Material non-controlling interests

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Non-controlling interests 1,216,195 1,008,906 1,026,341 1,051,907

The carrying amount of non-controlling interests in respective subsidiaries with material non-controlling interest are analysed as below.

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Subsidiaries with material non-controlling interest Shandong Jinzhou Mining Group Co., Ltd. (“Shandong Jinzhou”) 302,975 301,259 297,324 306,234 Xihe Zhongbao Mining Co., Ltd. (“Xihe Zhongbao”) 359,547 357,015 353,602 354,692 Shandong Gold Group Penglai Mining Co., Ltd. (“Penglai”) (note) 177,304 — — — Shandong Gold Guilaizhuang Mining Co., Ltd. (“Guilaizhuang”) (note) 233,420 220,327 240,698 250,868 1,073,246 878,601 891,624 911,794

Note: The Group’s 100% equity interest in Penglai and 70.65% equity interest in Guilaizhuang are acquired from a subsidiary of the Parent Company in October 2016 and the acquisitions have been accounted for as business combinations under common control (Note 27(b)(ii)).

— I-72 — APPENDIX I ACCOUNTANT’S REPORT

The non-controlling interests in respect of Chifeng Chaihu Gold Mining Co. Ltd., Fujian Yuanxin Mining Co. Ltd. (“Fujian Yuanxin”), Jinzhou Qianlin Co. Ltd. and Shenzheng Shanjin Co. Ltd. are not material.

(b) Summarised financial information on subsidiaries with material non-controlling interests

There are no significant restrictions on the ability of subsidiaries to transfer funds to the Company or any of its other subsidiaries.

Set out below are the summarised financial information for each subsidiary that has non-controlling interests that are material to the Group. See Note 39 for transactions with non-controlling interests.

— I-73 — Summarised balance sheets I APPENDIX

Shandong Jinzhou Xihe Zhongbao As at 31 December As at 31 March As at 31 December As at 31 March 2015 2016 2017 2018 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Current assets 189,926 191,899 161,868 176,688 25,380 21,616 12,365 15,439 Non-current assets 785,578 849,061 873,749 873,102 1,855,612 1,847,056 1,831,940 1,832,966 975,504 1,040,960 1,035,617 1,049,790 1,880,992 1,868,672 1,844,305 1,848,405

Current liabilities (190,648) (201,141) (188,262) (184,968) (210,104) (242,570) (265,244) (267,901) Non-current liabilities (14,671) (27,517) (31,445) (30,013) (472,399) (436,053) (400,390) (398,197) (205,319) (228,658) (219,707) (214,981) (682,503) (678,623) (665,634) (666,098) Net assets 770,185 812,302 815,910 834,809 1,198,489 1,190,049 1,178,671 1,182,307 -4— I-74 —

Penglai (note) Guilaizhuang As at 31 December As at 31 December As at 31 March 2015 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Current assets 28,246 82,448 73,390 111,472 139,208 CONATSREPORT ACCOUNTANT’S Non-current assets 557,735 924,233 905,816 788,364 774,908 585,981 1,006,681 979,206 899,836 914,116

Current liabilities (159,064) (203,933) (216,878) (64,373) (44,173) Non-current liabilities (65,071) (7,450) (11,639) (15,368) (15,196) (224,135) (211,383) (228,517) (79,741) (59,369) Net assets 361,846 795,298 750,689 820,095 854,747

Note: Penglai becomes a wholly owned subsidiary of the Group since October 2016 and hence its financial information as of 31 December 2016 and 2017 and 31 March 2018 have not been presented for the purpose of this disclosure note. Summarised statements of comprehensive income I APPENDIX

Shandong Jinzhou Xihe Zhongbao Three months Three months Year ended 31 December ended 31 March Year ended 31 December ended 31 March 2015 2016 2017 2017 2018 2015 2016 2017 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) (unaudited)

Revenue 193,107 308,050 331,201 77,946 97,715 — 73,369 123,922 29,600 36,682 Profit/(loss) before income tax 69,649 69,566 65,369 18,875 30,577 (4,579) (13,411) (21,243) (7,967) 1,338 Income tax (expenses)/credit (19,106) (20,883) (15,246) (6,077) (7,679) (1,681) 4,713 10,124 3,062 2,193 Profit/(loss) for the year/period 50,543 48,683 50,123 12,798 22,898 (6,260) (8,698) (11,119) (4,905) 3,531

-5— I-75 — Other comprehensive (loss)/income for the year/period (27,341) 27,895 (1,103) (360) (380) — — — — — Total comprehensive income/(loss) for the year/period 23,202 76,578 49,020 12,438 22,518 (6,260) (8,698) (11,119) (4,905) 3,531

Total comprehensive income/(loss) allocated to non-controlling interests 10,988 455 20,500 5,431 9,291 (1,878) (2,609) (3,336) (1,471) 1,059

Dividends paid to non-controlling interests 11,061 10,342 9,964 — — — — — — — REPORT ACCOUNTANT’S Penglai (note) Guilaizhuang I APPENDIX Year ended Three months ended 31 December Year ended 31 December 31 March 2015 2015 2016 2017 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Revenue 197,340 480,232 196,502 414,422 109,265 104,292 Profit/(loss) before income tax 33,328 98,027 (71,869) 112,661 27,577 41,291 Income tax (expenses)/credit (8,354) (10,441) 27,725 (28,304) 75 (6,125) Profit/(loss) for the year/period 24,974 87,586 (44,144) 84,357 27,652 35,166 Other comprehensive income for the year/period — —————

-6— I-76 — Total comprehensive income/(loss) for the year/period 24,974 87,586 (44,144) 84,357 27,652 35,166

Total comprehensive income/(loss) allocated to non-controlling interests 12,238 25,706 (12,956) 24,759 8,116 10,321

Dividends paid to non-controlling interests — — — 4,388 — — CONATSREPORT ACCOUNTANT’S

Note: Penglai becomes a wholly owned subsidiary of the Group since 1 October 2016 and hence its financial information for the years ended 31 December 2016 and 2017 and the three months ended 31 March 2017 and 2018 have not been presented for the purpose of this disclosure note. Summarised cash flows I APPENDIX

Shandong Jinzhou Xihe Zhongbao Three months Three months Year ended 31 December ended 31 March Year ended 31 December ended 31 March 2015 2016 2017 2017 2018 2015 2016 2017 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) (unaudited)

Cash flows from operating activities Cash generated from/(used in) operations 43,134 110,261 122,353 78,890 65,034 (56,067) 52,013 51,548 10,479 12,486 Interest received 1,094 658 735 — — 329 7 79 — — Income tax paid (25,368) (21,332) (19,596) (7,484) (11,026) — — — (663) (963)

-7— I-77 — Net cash generated from/(used in) operating activities 18,860 89,587 103,492 71,406 54,008 (55,738) 52,020 51,627 9,816 11,523 Net cash used in investing activities (5,549) (65,015) (56,771) (12,224) (14,134) (26,508) (23,595) (28,212) 1,186 (9,107) Net cash (used in)/generated from financing activities (22,713) (24,982) (46,557) — (1) 57,485 (38,670) (23,326) (7,247) (1,744) Net (decrease)/increase in cash and cash equivalents (9,402) (410) 164 59,182 39,873 (24,761) (10,245) 89 3,755 672 CONATSREPORT ACCOUNTANT’S

Cash and cash equivalents at beginning of the year/period 10,423 1,021 611 611 775 35,072 10,311 66 66 155

Cash and cash equivalents at end of the year/period 1,021 611 775 59,793 40,648 10,311 66 155 3,821 827 Penglai (note) Guilaizhuang I APPENDIX Year ended Three months ended 31 December Year ended 31 December 31 March 2015 2015 2016 2017 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Cash flows from operating activities Cash generated from/(used in) operations 87,313 136,245 (10,139) 163,876 45,993 28,874 Interest received 410 627 441 883 — — Income tax paid (12,389) (1,825) (10,853) — — (3,095) Net cash generated from/(used in) operating activities 75,334 135,047 (20,551) 164,759 45,993 25,779 -8— I-78 — Net cash used in investing activities (58,659) (49,063) (66,174) (94,058) (16,845) (4,680) Net cash (used in)/generated from financing activities (27,749) (105,443) 82,944 (68,518) (620) 500 Net (decrease)/increase in cash and cash equivalents (11,074) (19,459) (3,781) 2,183 28,528 21,599

Cash and cash equivalents at beginning of the REPORT ACCOUNTANT’S year/period 18,439 40,698 21,239 17,458 17,458 19,641 Cash and cash equivalents at end of the year/period 7,365 21,239 17,458 19,641 45,986 41,240

Note: Penglai becomes a wholly owned subsidiary of the Group since 1 October 2016 and hence its financial information for the years ended 31 December 2016 and 2017 and the three months ended 31 March 2017 and 2018 have not been presented for the purpose of this disclosure note.

The information above is the amount before inter-company eliminations. APPENDIX I ACCOUNTANT’S REPORT

11b Joint operation

On 30 June 2017, the Company, through its wholly-owned subsidiary, SDHK, completed the acquisition of a 50% interest in AGBII from Barrick Cayman, the subscription of 2.155% interest in Minera Argentina Gold S.R.L. (“MAG”) (a non-wholly owned subsidiary of AGBII) and the purchase of 50% of MAG’s shareholder’s loan, pursuant to a purchase agreement dated 6 April 2017 (the “Purchase Agreement”) entered into amongst the Company, SDHK, Barrick Gold Corporation (“Barrick Gold”) and Barrick Cayman at a consideration of approximately US$960 million (which was adjusted in November 2017 to approximately US$990 million, equivalent to approximately RMB6,705 million, pursuant to the Share Purchase Agreement based on certain financial metrics), out of which, consideration of US$141 million (equivalent to approximately RMB935 million) is for the purchase of 50% of MAG’s shareholders’ loan.

After completion of the Share Purchase Agreement, AGBII, SDHK and other shareholders owned 95.69%, 2.155% and 2.155% equity interests in MAG respectively and MAG remained as a non-wholly owned subsidiary of AGBII. The Group and Barrick Gold then jointly operate the Veladero gold mine in Argentina (the “Veladero mine”) held by MAG as joint operators. Both the Group and Barrick Gold have the right to the assets and obligations for the liabilities of the AGBII and MAG (collectively the “AGBII Group”) and are eligible to the products produced by the Veladero mine and recognise expenses as incurred by the AGBII Group in the proportion of 50% each.

The Group has accounted for its investment in the AGBII Group as a joint operation and consolidated its proportionate share of the assets and liabilities, as well as its share of the revenue and expenses of the AGBII Group starting from 1 July 2017.

12 Investment accounted for using the equity method

Three months ended Year ended 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Beginning of the year/period 320,813 343,694 371,461 399,208 Share of profit 22,881 27,662 34,024 9,028 Share of other comprehensive income — 105 (56) (49) Dividends — — (6,221) — End of the year/period 343,694 371,461 399,208 408,187

— I-79 — APPENDIX I ACCOUNTANT’S REPORT

Details of the associate of the Group is set out below. The associate has share capital consisting solely of ordinary shares, which are held directly by the Company.

Place of business/country % of ownership Measurement Name of entity of incorporation interest method

Shandong Gold Group Finance Co., The PRC 30% Equity Ltd. (“Group Finance”)

There are no contingent liabilities relating to the Group’s interests in the associate.

Summarised financial information for associate

Set out below is a summary of the unaudited financial information for the associate.

Summarised balance sheets

Shandong Gold Group Finance Co., Ltd. As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Current Cash and cash equivalents 1,504,506 1,555,141 1,107,864 2,520,565 Other current assets (excluding cash) 624,416 676,935 1,308,008 776,725 Total current assets 2,128,922 2,232,076 2,415,872 3,297,290 Financial liabilities (excluding trade payables) 3,470,383 4,010,713 4,436,235 5,619,952 Other current liabilities (including trade payables) 22,164 23,213 57,779 50,422 Total current liabilities 3,492,547 4,033,926 4,494,014 5,670,374 Non-current Assets 2,509,271 3,040,171 3,408,836 3,733,706 Liabilities — 117 — — Net assets 1,145,646 1,238,204 1,330,694 1,360,622

— I-80 — APPENDIX I ACCOUNTANT’S REPORT

Summarised statements of comprehensive income

Shandong Gold Group Finance Co., Ltd. Three months ended Year ended 31 December 31 March 2015 2016 2017 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Revenue 172,059 177,549 197,631 37,185 42,054 Profit before income tax 102,759 122,895 150,920 36,098 40,122 Profit for the year/period 76,270 92,208 113,414 27,073 30,092 Other comprehensive income/(loss) — 350 (187) (574) (164) Total comprehensive income for the year/period 76,270 92,558 113,227 26,499 29,928

Reconciliation of summarised financial information

Shandong Gold Group Finance Co., Ltd. Three months ended Year ended 31 December 31 March 2015 2016 2017 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Opening net assets attributable to equity holder of the associate at beginning of the year/period 1,069,376 1,145,646 1,238,204 1,238,204 1,330,694 Profit for the year/period 76,270 92,208 113,414 27,073 30,092 Other comprehensive income/(loss) — 350 (187) (574) (164) Dividends paid — — (20,737) — — Closing net assets attributable to equity holder of the associate at end of the year/period 1,145,646 1,238,204 1,330,694 1,264,703 1,360,622 Interest in associate (30%) 343,694 371,461 399,208 379,411 408,187 Carrying value 343,694 371,461 399,208 379,411 408,187

— I-81 — APPENDIX I ACCOUNTANT’S REPORT

13 Income tax expenses

Three months ended Year ended 31 December 31 March 2015 2016 2017 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Current income tax: - The PRC (note (a)) 382,524 455,550 368,250 113,990 127,657 - Outside the PRC (note (b)) — — 187,138 — 76,561 382,524 455,550 555,388 113,990 204,218 Deferred income tax credit (Note 31) (114,044) (70,356) (123,936) (24,647) (68,265) 268,480 385,194 431,452 89,343 135,953

(a) The provision for PRC enterprise income tax (“EIT”) is calculated based on the statutory income tax rate of 25%. The applicable income tax rate is 25% on the estimated tax assessable profit of each of the companies comprising the Group, determined in accordance with the relevant PRC income tax rules and regulations, except for the Company and certain subsidiaries which are taxed at preferential tax rate of 15% based on the relevant PRC tax laws and regulations.

(b) The estimated tax assessable profit of the Group’s overseas joint operation (i.e. the AGBII Group) is taxed at the statutory income tax rate in Argentina of 35% (subsequently reduced to 30% with effect from 1 January 2018) in accordance with the Argentina income tax law.

(c) No provision for income tax has been made by SDHK (a subsidiary incorporated in Hong Kong in 2017) as it has no estimated taxable profits in any financial year/period since the date of its incorporation.

— I-82 — APPENDIX I ACCOUNTANT’S REPORT

(d) The taxation of the Group’s profit before taxation differs from the theoretical amount that would arise using the rates prevailing in the jurisdictions in which the Group operates as follows:

Three months ended Year ended 31 December 31 March 2015 2016 2017 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Profit before income tax 981,737 1,697,976 1,604,445 417,803 489,550

Tax calculated at applicable tax rates (25%) 245,434 424,494 401,111 104,451 122,387 Different tax rates applicable to certain subsidiaries and the overseas joint operation (2,218) (14,897) 18,439 (3,248) 543 Income not subject to taxation (4,013) (7,530) (5,104) (1,192) (1,304) Expenses not deductible for taxation purposes 18,782 13,280 25,597 1,187 10,738 Utilisation of previously unrecognised tax losses (2,119) (12,404) (5,281) (7,372) (2,692) Tax losses for which no deferred income tax asset has been recognised 35,866 15,293 25,828 3,764 11,169 Additional expenses allowable for tax deduction (21,060) (34,876) (28,420) (619) (146) Adjustment in respect of prior years (2,192) 1,834 (718) (7,628) (4,742) Income tax expense 268,480 385,194 431,452 89,343 135,953

Weighted average applicable tax rate 27% 23% 27% 21% 28%

— I-83 — (e) The tax (charge)/credit relating to components of other comprehensive income is as follows: I APPENDIX

Year ended 31 December

2015 2016 2017

Deferred Deferred Deferred income tax income tax income tax Before tax credit After tax Before tax credit After tax Before tax credit After tax

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Available-for-sale financial assets (33,676) 8,419 (25,257) (1,456) 364 (1,092) — — —

Three months ended 31 March 2017 (unaudited) 2018 -4— I-84 — Deferred Deferred income tax income tax Before tax credit After tax Before tax credit After tax RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Available-for-sale financial assets —————— CONATSREPORT ACCOUNTANT’S APPENDIX I ACCOUNTANT’S REPORT

14 Earnings per share

Basic earnings per share are calculated by dividing the profit attributable to equity holders of the Company by the number of ordinary shares in issue.

Three months ended Year ended 31 December 31 March 2015 2016 2017 2017 2018 (unaudited)

Profit attributable to equity holders of the Company (RMB’000) 647,930 1,286,642 1,118,920 317,938 327,926 Weighted number of ordinary shares in issue (thousands) 1,416,687 1,505,875 1,850,734 1,850,734 1,850,734 Basic earnings per share (RMB per share) 0.46 0.85 0.60 0.17 0.18

As the Company had no dilutive instruments for the years ended 31 December 2015, 2016 and 2017 and the three months ended 31 March 2017 and 2018, the Group’s diluted earnings per share equals to its basic earnings per share.

15 Property, plant and equipment

Group

Plant machinery Mining and Construction Buildings structures equipment in progress Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

As at 1 January 2015 Cost 3,720,981 5,598,504 3,889,687 3,124,439 16,333,611 Accumulated depreciation (968,826) (1,761,922) (1,651,579) — (4,382,327) Impairment provision (16,435) (32,110) (216) — (48,761)

Net book amount 2,735,720 3,804,472 2,237,892 3,124,439 11,902,523

— I-85 — APPENDIX I ACCOUNTANT’S REPORT

Plant machinery Mining and Construction Buildings structures equipment in progress Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Year ended 31 December 2015 Opening net book amount 2,735,720 3,804,472 2,237,892 3,124,439 11,902,523 Additions 12,692 221 188,968 1,689,030 1,890,911 Transfer to construction in progress — — (15,256) 15,256 — Transfers upon completion of construction 189,148 1,246,420 225,221 (1,660,789) — Disposals/write-off (886) — (19,392) — (20,278) Depreciation charges (191,052) (228,926) (441,404) — (861,382)

Closing net book amount 2,745,622 4,822,187 2,176,029 3,167,936 12,911,774

As at 31 December 2015 Cost 3,919,068 6,845,145 4,234,005 3,167,936 18,166,154 Accumulated depreciation (1,157,011) (1,990,848) (2,057,801) — (5,205,660) Impairment provision (16,435) (32,110) (175) — (48,720)

Net book amount 2,745,622 4,822,187 2,176,029 3,167,936 12,911,774

Year ended 31 December 2016 Opening net book amount 2,745,622 4,822,187 2,176,029 3,167,936 12,911,774 Additions 19,934 16,831 224,246 1,497,625 1,758,636 Transfers upon completion of construction 660,737 1,453,893 227,744 (2,342,374) — Transfer to construction in progress — — (4,889) 4,889 — Transfer to investment properties (Note 16) (31,993) — — — (31,993) Disposals/write-off (3,300) (1,383) (15,840) (29,108) (49,631) Disposal of subsidiaries (Note 40(f)) (103,075) — (6,772) — (109,847) Depreciation charges (227,737) (274,980) (455,913) — (958,630) Provision for impairment — — (7,391) — (7,391)

Closing net book amount 3,060,188 6,016,548 2,137,214 2,298,968 13,512,918

As at 31 December 2016 Cost 4,434,122 8,310,892 4,520,910 2,298,968 19,564,892 Accumulated depreciation (1,357,499) (2,262,234) (2,376,130) — (5,995,863) Impairment provision (16,435) (32,110) (7,566) — (56,111)

Net book amount 3,060,188 6,016,548 2,137,214 2,298,968 13,512,918

— I-86 — APPENDIX I ACCOUNTANT’S REPORT

Plant machinery Mining and Construction Buildings structures equipment in progress Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Year ended 31 December 2017 Opening net book amount 3,060,188 6,016,548 2,137,214 2,298,968 13,512,918 Additions 10,823 182,265 201,151 2,109,298 2,503,537 Acquisition of a joint operation 1,235,928 3,589,350 1,939,333 256,580 7,021,191 Transfers upon completion of construction 595,898 1,138,544 313,941 (2,048,383) — Transfer to construction in progress (87) — (57,725) 57,812 — Transfer to investment properties (Note 16) (2,902) — — — (2,902) Disposals/write-off (7,524) (64) (16,820) (8,415) (32,823) Depreciation charges (396,093) (526,305) (723,187) — (1,645,585) Provision for impairment (5,715) — (117) — (5,832) Currency translation differences (41,196) (124,689) (64,575) (9,098) (239,558)

Closing net book amount 4,449,320 10,275,649 3,729,215 2,656,762 21,110,946

As at 31 December 2017 Cost 6,259,115 13,216,013 6,819,353 2,665,860 28,960,341 Accumulated depreciation (1,746,449) (2,783,565) (3,017,929) — (7,547,943) Impairment provision (22,150) (32,110) (7,634) — (61,894) Currency translation differences (41,196) (124,689) (64,575) (9,098) (239,558)

Net book amount 4,449,320 10,275,649 3,729,215 2,656,762 21,110,946

Three months ended 31 March 2018 Opening net book amount 4,449,320 10,275,649 3,729,215 2,656,762 21,110,946 Additions 4,626 147,225 32,988 576,772 761,611 Transfer to construction in progress — — (11,715) 11,715 — Transfers upon completion of construction 16,859 239,715 39,717 (296,291) — Disposals/write-off (Note a) (64) — (13,209) — (13,273) Depreciation charges (117,133) (183,293) (202,195) — (502,621) Currency translation differences (46,620) (131,548) (61,758) (8,450) (248,376)

Closing net book amount 4,306,988 10,347,748 3,513,043 2,940,508 21,108,287

As at 31 March 2018 Cost 6,280,536 13,602,953 6,854,096 2,958,056 29,695,641 Accumulated depreciation (1,863,582) (2,966,858) (3,207,086) — (8,037,526) Impairment provision (22,150) (32,110) (7,634) — (61,894) Currency translation differences (87,816) (256,237) (126,333) (17,548) (487,934)

Net book amount 4,306,988 10,347,748 3,513,043 2,940,508 21,108,287

— I-87 — APPENDIX I ACCOUNTANT’S REPORT

(a) The disposals/write-off for the three months ended 31 March 2018 included an amount of approximately RMB11,785,000 which was arisen from the change in the discount rate used for the asset retirement obligations as disclosed in Note 32.

Depreciation of the Group charged to profit or loss and capitalised as construction in progress is analysed as follows:

Three months ended Year ended 31 December 31 March 2015 2016 2017 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Cost of sales 746,961 809,770 1,473,466 220,566 465,925 General and administrative expenses 98,744 133,299 122,799 27,784 29,978 Capitalised as construction in progress 15,677 15,561 49,320 15,945 6,718 861,382 958,630 1,645,585 264,295 502,621

The Group has capitalised borrowing costs and weighted average rate of its general borrowings were as follows:

Three months ended Year ended 31 December 31 March 2015 2016 2017 2018

Capitalised borrowing costs (RMB’000) 47,174 30,339 9,412 1,045 Weighted average rate (%) 5.45 4.73 3.91 4.75

The Group was in the process of applying the ownership certificates for certain buildings as follows:

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Net book value 919,272 1,031,368 993,571 922,938

— I-88 — APPENDIX I ACCOUNTANT’S REPORT

Company

Plant machinery Mining and Construction Buildings structures equipment in progress Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

As at 1 January 2015 Cost 583,482 666,355 656,072 190,971 2,096,880 Accumulated depreciation (152,106) (126,900) (307,308) — (586,314)

Net book amount 431,376 539,455 348,764 190,971 1,510,566

Year ended 31 December 2015 Opening net book amount 431,376 539,455 348,764 190,971 1,510,566 Additions 1,395 — 6,112 154,044 161,551 Transfers upon completion of construction 10,093 74,213 43,767 (128,073) — Disposals/write-off (212) — (9,775) — (9,987) Depreciation charges (24,716) (15,557) (74,956) — (115,229)

Closing net book amount 417,936 598,111 313,912 216,942 1,546,901

As at 31 December 2015 Cost 593,599 740,568 685,541 216,942 2,236,650 Accumulated depreciation (175,663) (142,457) (371,629) — (689,749)

Net book amount 417,936 598,111 313,912 216,942 1,546,901

Year ended 31 December 2016 Opening net book amount 417,936 598,111 313,912 216,942 1,546,901 Additions 5,544 — 2,259 200,910 208,713 Transfers upon completion of construction 7,255 36,116 44,447 (87,818) — Transfer to investment properties (Note 16) (31,993) — — — (31,993) Disposals/write-off (87) — (2,591) (4,410) (7,088) Depreciation charges (31,920) (17,976) (72,637) — (122,533)

Closing net book amount 366,735 616,251 285,390 325,624 1,594,000

As at 31 December 2016 Cost 567,677 776,684 708,476 325,624 2,378,461 Accumulated depreciation (200,942) (160,433) (423,086) — (784,461)

Net book amount 366,735 616,251 285,390 325,624 1,594,000

— I-89 — APPENDIX I ACCOUNTANT’S REPORT

Plant machinery Mining and Construction Buildings structures equipment in progress Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Year ended 31 December 2017 Opening net book amount 366,735 616,251 285,390 325,624 1,594,000 Additions 5,907 — 3,200 332,879 341,986 Transfers upon completion of construction 12,299 29,302 91,956 (133,557) — Transfer to construction in progress — — (38,269) 38,269 — Transfer to investment properties (Note 16) (2,902) — — — (2,902) Disposals/write-off (558) — (2,153) (5,936) (8,647) Depreciation charges (22,961) (19,080) (66,280) — (108,321)

Closing net book amount 358,520 626,473 273,844 557,279 1,816,116

As at 31 December 2017 Cost 581,487 805,986 727,164 557,279 2,671,916 Accumulated depreciation (222,967) (179,513) (453,320) — (855,800)

Net book amount 358,520 626,473 273,844 557,279 1,816,116

Three months ended 31 March 2018 Opening net book amount 358,520 626,473 273,844 557,279 1,816,116 Additions — — — 89,322 89,322 Transfers upon completion of construction 1,052 — 17,900 (18,952) — Transfer to construction in progress — — (11,230) 11,230 — Depreciation charges (5,501) (7,040) (11,762) — (24,303)

Closing net book amount 354,071 619,433 268,752 638,879 1,881,135

As at 31 March 2018 Cost 582,539 805,986 724,594 638,879 2,761,238 Accumulated depreciation (228,468) (186,553) (455,842) — (880,103)

Net book amount 354,071 619,433 268,752 638,879 1,881,135

— I-90 — APPENDIX I ACCOUNTANT’S REPORT

Depreciation of the Company charged to profit or loss and capitalised as construction in progress is analysed as follows:

Three months ended Year ended 31 December 31 March 2015 2016 2017 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Cost of sales 77,801 84,321 73,884 25,422 15,779 General and administrative expenses 32,522 32,925 29,516 6,593 4,394 Capitalised as construction in progress 4,906 5,287 4,921 1,125 4,130 115,229 122,533 108,321 33,140 24,303

The Company was in the process of applying the ownership certificates for certain buildings as follows:

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Net book value 106,815 102,593 29,001 22,227

16 Investment properties

Three months ended Year ended 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Opening net book amount 216,216 207,925 234,470 226,684 Additions 722 991 329 — Transfer from property, plant and equipment (Note 15) — 31,993 2,902 — Depreciation charges (9,013) (6,439) (11,017) (2,083) Closing net book amount 207,925 234,470 226,684 224,601

— I-91 — APPENDIX I ACCOUNTANT’S REPORT

An independent valuation of the Group’s investment properties was performed by an independent valuer to determine the fair value of the investment properties as at each balance sheet date and details of which are summarised as below.

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Fair value of investment properties 244,919 291,261 295,921 292,077

Amounts recognised in profit and loss for investment properties

Three months ended Year ended 31 December 31 March 2015 2016 2017 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Rental income 20,052 11,906 19,732 2,534 2,410 Direct operating expenses from properties that generated rental income (1,244) (983) (760) (198) (171) 18,808 10,923 18,972 2,336 2,239

— I-92 — APPENDIX I ACCOUNTANT’S REPORT

17 Land use rights

Three months ended Year ended 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Opening net book amount 247,931 244,598 305,079 339,824 Additions 4,754 87,206 45,245 6,461 Disposals (10) — — — Disposals of subsidiaries (Note 40(f)) — (17,249) — — Amortisation charge (8,077) (9,476) (10,500) (2,878) Closing net book amount 244,598 305,079 339,824 343,407

Cost 311,012 376,218 421,463 427,924 Accumulated amortisation (58,377) (63,102) (73,602) (76,480) Impairment provision (8,037) (8,037) (8,037) (8,037) Net book amount 244,598 305,079 339,824 343,407

The Group’s land use rights represent prepaid operating lease payments for leasehold land located in the PRC with lease periods of 50 years.

Amortisation of the Group charged to profit or loss and capitalised as construction in progress is analysed as follows:

Three months ended Year ended 31 December 31 March 2015 2016 2017 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

General and administrative expenses 8,077 9,209 10,500 2,270 2,878 Capitalised as construction in progress — 267 — — — 8,077 9,476 10,500 2,270 2,878

— I-93 — APPENDIX I ACCOUNTANT’S REPORT

The Group was in the process of applying the ownership certificates for certain land use rights as follows:

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Net book value 8,773 39,779 43,878 32,097

18 Intangible assets

Mining and exploration Patent Software Trademark rights rights licenses and others Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

As at 1 January 2015 Cost 12,056,400 13,361 44,880 894 12,115,535 Accumulated amortisation (2,243,293) (7,236) (14,455) (878) (2,265,862) Net book amount 9,813,107 6,125 30,425 16 9,849,673

Year ended 31 December 2015 Opening net book amount 9,813,107 6,125 30,425 16 9,849,673 Additions 28,722 — 2,364 — 31,086 Transferred to other non-current assets — — (4,410) — (4,410) Amortisation charges (588,257) (1,337) (4,362) (2) (593,958) Disposals (178) — — — (178) Closing net book amount 9,253,394 4,788 24,017 14 9,282,213

As at 31 December 2015 Cost 12,085,122 13,361 42,493 894 12,141,870 Accumulated amortisation (2,831,728) (8,573) (18,476) (880) (2,859,657) Net book amount 9,253,394 4,788 24,017 14 9,282,213

Year ended 31 December 2016 Opening net book amount 9,253,394 4,788 24,017 14 9,282,213 Additions 2,418,694 — 1,031 2,326 2,422,051 Amortisation charges (580,648) (1,337) (4,410) (2) (586,397) Closing net book amount 11,091,440 3,451 20,638 2,338 11,117,867

— I-94 — APPENDIX I ACCOUNTANT’S REPORT

Mining and exploration Patent Software Trademark rights rights licenses and others Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

As at 31 December 2016 Cost 14,503,816 13,361 43,524 3,220 14,563,921 Accumulated amortisation (3,412,376) (9,910) (22,886) (882) (3,446,054) Net book amount 11,091,440 3,451 20,638 2,338 11,117,867

Year ended 31 December 2017 Opening net book amount 11,091,440 3,451 20,638 2,338 11,117,867 Additions 1,507,860 — 4,262 127 1,512,249 Amortisation charges (609,349) (1,337) (4,583) (2) (615,271) Closing net book amount 11,989,951 2,114 20,317 2,463 12,014,845

As at 31 December 2017 Cost 16,011,676 13,361 47,786 3,347 16,076,170 Accumulated amortisation (4,021,725) (11,247) (27,469) (884) (4,061,325) Net book amount 11,989,951 2,114 20,317 2,463 12,014,845

Three months ended 31 March 2018 Opening net book amount 11,989,951 2,114 20,317 2,463 12,014,845 Additions — — — 9,916 9,916 Amortisation charges (151,713) (334) (1,127) (1) (153,175) Closing net book amount 11,838,238 1,780 19,190 12,378 11,871,586

As at 31 March 2018 Cost 16,011,676 13,361 47,786 13,263 16,086,086 Accumulated amortisation (4,173,438) (11,581) (28,596) (885) (4,214,500) Net book amount 11,838,238 1,780 19,190 12,378 11,871,586

— I-95 — APPENDIX I ACCOUNTANT’S REPORT

Amortisation of the Group charged to profit or loss is analysed as follows:

Three months ended Year ended 31 December 31 March 2015 2016 2017 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Cost of sales 588,257 580,648 609,349 156,532 151,714 General and administrative expenses 5,701 5,749 5,922 1,473 1,461 593,958 586,397 615,271 158,005 153,175

19 Goodwill

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Goodwill on business combinations in the PRC (note a) 120,694 120,694 120,694 120,694 Goodwill on acquisition of the joint operation (note b) — — 1,042,959 1,042,959 Currency translation differences — — (36,980) (74,868) 120,694 120,694 1,126,673 1,088,785

(a) This balance comprised of the goodwill arose from the Group’s acquisition of a non-wholly owned subsidiary, Chifeng Chaihulanzi Gold Mining Co., Ltd. (“Chifeng Chai Gold”) of approximately RMB65,340,000 and the goodwill as taken up upon the acquisition of Guilaizhuang (an acquisition which has been accounted for as a business combination under common control as mentioned in Note 27(b)(ii)) of approximately RMB55,354,000. The Directors have performed impairment assessments on the aforesaid goodwill and concluded that no impairment charge has to be recognised. The recoverable amount of each cash-generating unit has been determined based on a value-in-use calculation using cash flow projection based on a financial budget covering a five-year period approved by management. The pre tax discount rates applied to the cash flow projections for each year/period are in a range from 11% to 13%. The key assumptions as adopted by the Directors in the impairment assessment are summarised as below: • Gold output - The values assigned to the future revenues are estimated based on the annual gold production, which is in line with the processing capacity of each cash-generating unit, taking into consideration the expected future capital expenditure and capacity expansion. • Mining costs - The basis used to determine the values assigned to the mining costs is the input requirements in accordance with the long-term mining plan at real unit costs. • Commodity price - Future commodity prices in the valuation model are estimated by management based on their industry experience, historic price trends and independent expert reports and commentaries. • Discount rates - The discount rates used are based on a weighted average cost of capital, and are real rates, before tax reflecting specific risks relating to the cash-generating units.

— I-96 — APPENDIX I ACCOUNTANT’S REPORT

(b) The goodwill of US$153,956,000 (approximately RMB1,042,959,000 on the acquisition date) was resulted from the acquisition of 50% interest in the AGBII Group (Notes 11(b) and 38) on 30 June 2017. The AGBII Group principally engages in the production and sale of gold globally. The goodwill was allocated to the Veladero mine as owned by MAG, the subsidiary of AGBII. The acquisition was completed on 30 June 2017 and the Directors have determined the goodwill on the acquisition based on a purchase price allocation (“PPA”) as performed by an independent valuer. The key assumption used in the PPA included in the expected Life of Mine (“LOM”) to be 12 years, gold prices ranging from US$1,307 per ounce to US$1,332 per ounce over the span of the LOM and a discount rate of 6.5%. The Directors revisited the assumptions used in the PPA valuation and concluded that there were no indicators of impairment on the aforesaid goodwill. The recoverable amount of US$1,151.5 million (approximately RMB7,800.7 million) has been determined based on its estimated FVLCD, which has been determined to be greater than the carrying amounts of the Group’s interest in the AGBII Group plus the aforesaid goodwill on acquisition of US$1,037.5 million (approximately RMB7,028.4 million) by US$114 million (approximately RMB772.3 million). The key assumptions and estimates used in determining the FVLCD are related to commodity prices, discount rates, net asset value multiples for gold assets, operating costs, exchange rates, capital expenditures, the LOM production profile and continued license to operate. In addition, assumptions are related to observable market evaluation metrics, including identification of comparable entities, and associated market values per ounce and per pound of reserves and/or resource as well as the valuation of resources beyond what is included in LOM plans.

A 2.5% increase in estimated discount rate, a 5% decrease in estimated gold prices or a decrease of 3.3 years in LOM, all changes taken in isolation in the FVLCD calculations, would remove the remaining headroom.

The following table sets forth the impact of reasonable possible changes in each of the key assumptions, with all other variables held constant, of goodwill impairment testing of Veladero mine at the dates indicated.

Recoverable amount of the cash-generating unit Possible changes of key assumptions exceeding its carrying amount by

As at 31 December 2017 As at 31 March 2018

RMB’000 RMB’000

Pre-tax discount rate increases by 1 percentage point 429,631 286,982 Pre-tax discount rate increases by 2 percentage points 135,219 8,648 Life of mine decreases 1 year 710,129 547,659 Life of mine decreases 2 years 463,952 308,834 Gold price decreases by 1% 598,017 448,256 Gold price decreases by 3% 303,046 173,177

Reasonably possible changes in key assumptions would not lead to impairment as of 31 December 2017 and 31 March 2018, respectively.

— I-97 — APPENDIX I ACCOUNTANT’S REPORT

20 Financial instruments by category

Financial assets at amortised Assets at cost FVOCI Total RMB’000 RMB’000 RMB’000

As at 31 March 2018 Assets as per balance sheet Financial assets at fair value through other comprehensive income — 2,015 2,015 Trade and other receivables excluding non-financial assets 315,126 — 315,126 Restricted bank deposits 146,989 — 146,989 Cash and cash equivalents 2,473,693 — 2,473,693 Total 2,935,808 2,015 2,937,823

Liabilities at Liabilities at amortised FVPL cost Total RMB’000 RMB’000 RMB’000

Liabilities as per balance sheet Borrowings — 10,127,201 10,127,201 Trade and other payables excluding non-financial liabilities — 3,330,465 3,330,465 Other non-current liabilities — 77,832 77,832 Financial liabilities at fair value through profit or loss 6,499,031 — 6,499,031 Total 6,499,031 13,535,498 20,034,529

— I-98 — APPENDIX I ACCOUNTANT’S REPORT

Loans and Assets at receivables FVOCI Total RMB’000 RMB’000 RMB’000

As at 31 December 2017 Assets as per balance sheet Available-for-sale financial assets — 2,015 2,015 Trade and other receivables excluding non-financial assets 317,032 — 317,032 Restricted bank deposits 669,942 — 669,942 Cash and cash equivalents 2,402,814 — 2,402,814 Total 3,389,788 2,015 3,391,803

Liabilities at Liabilities at amortised FVPL cost Total RMB’000 RMB’000 RMB’000

Liabilities as per balance sheet Borrowings — 10,974,926 10,974,926 Trade and other payables excluding non-financial liabilities — 3,515,273 3,515,273 Other non-current liabilities — 83,435 83,435 Financial liabilities at fair value through profit or loss 5,751,411 — 5,751,411 Total 5,751,411 14,573,634 20,325,045

Loans and Assets at receivables FVOCI Total RMB’000 RMB’000 RMB’000

As at 31 December 2016 Assets as per balance sheet Available-for-sale financial assets — 2,015 2,015 Trade and other receivables excluding non-financial assets 186,565 — 186,565 Restricted bank deposits 143,855 — 143,855 Cash and cash equivalents 1,159,795 — 1,159,795 Total 1,490,215 2,015 1,492,230

— I-99 — APPENDIX I ACCOUNTANT’S REPORT

Liabilities at Liabilities at amortised FVPL cost Total RMB’000 RMB’000 RMB’000

Liabilities as per balance sheet Borrowings — 4,407,091 4,407,091 Trade and other payables excluding non-financial liabilities — 2,654,697 2,654,697 Other non-current liabilities — 19,097 19,097 Financial liabilities at fair value through profit or loss 3,169,789 — 3,169,789 Total 3,169,789 7,080,885 10,250,674

Loans and Assets at receivables FVOCI Total RMB’000 RMB’000 RMB’000

As at 31 December 2015 Assets as per balance sheet Available-for-sale financial assets — 4,157 4,157 Trade and other receivables excluding non-financial assets 160,660 — 160,660 Restricted bank deposits 109,481 — 109,481 Cash and cash equivalents 497,271 — 497,271 Total 767,412 4,157 771,569

Liabilities at Liabilities at amortised FVPL cost Total RMB’000 RMB’000 RMB’000

Liabilities as per balance sheet Borrowings — 4,137,502 4,137,502 Trade and other payables excluding non-financial liabilities — 2,309,089 2,309,089 Other non-current liabilities — 26,746 26,746 Financial liabilities at fair value through profit or loss 4,777,391 — 4,777,391 Total 4,777,391 6,473,337 11,250,728

— I-100 — APPENDIX I ACCOUNTANT’S REPORT

21 Available-for-sale financial assets/ financial assets at fair value through other comprehensive income

Available-for-sale financial assets

Three months ended Year ended 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Beginning of the year/period 42,641 4,157 2,015 2,015 Additions 2,047 — — — Disposals (6,855) (686) — — Net realised and unrealised fair value losses charged to equity (33,676) (1,456) — — Reclassified to financial assets at fair value through other comprehensive income — — — (2,015) End of the year/period 4,157 2,015 2,015 —

Financial assets at fair value through other comprehensive income

Three months ended Year ended 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Beginning of the year/period ———— Reclassified from available-for-sale financial assets — — — 2,015 End of the year/period — — — 2,015

— I-101 — APPENDIX I ACCOUNTANT’S REPORT

Available-for-sale financial assets/ financial assets at fair value through other comprehensive income include the following:

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Listed securities, at fair value: - Equity securities, listed in the PRC 2,142 — — — Unlisted securities, at cost: - Equity securities (note b) 2,015 2,015 2,015 2,015 4,157 2,015 2,015 2,015

(a) Available-for-sale financial assets/ financial assets at fair value through other comprehensive income are all denominated in RMB.

(b) These investments carried at cost represented investments in equity shares of unlisted entities that do not have a quoted market price in an active market and the fair value of which cannot be reliably measured.

(c) None of these financial assets is either past due or impaired.

(d) The net realised and unrealised fair value losses transferred to equity, net of the related tax impact, are analysed as below:

Three months ended Year ended 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Net fair value losses charged to equity (33,676) (1,456) — — Associated deferred income tax credited to equity (Note 13(e)) 8,419 364 — — (25,257) (1,092) — —

Attributable to: - Owners of the Company (14,269) (636) — — - Non-controlling interests (10,988) (456) — — (25,257) (1,092) — —

— I-102 — APPENDIX I ACCOUNTANT’S REPORT

22 Other non-current assets

Group

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Prepayments for: - construction in progress and equipment 267,923 131,858 120,402 218,628 - mining and exploration rights 519,984 52,118 496,672 497,026 - land use rights 141,411 134,703 125,573 125,573 Value-added tax recoverable — 123,471 54,540 49,368 Others 72,096 52,140 34,830 33,387 Total 1,001,414 494,290 832,017 923,982

Company

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Prepayments for: - construction in progress and equipment 6,498 18,858 17,116 24,063 - mining and exploration rights — — 398,894 398,894 - land use rights 3,800 — — — Value-added tax recoverable — 7,705 21,396 15,025 Others 8,378 5,894 4,733 8,177 Total 18,676 32,457 442,139 446,159

— I-103 — APPENDIX I ACCOUNTANT’S REPORT

23 Trade and other receivables

Group

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Trade receivables (Note a) - related parties (Note 40(d)) 5,555 7,558 5,722 16,281 - third parties 24,838 19,774 116,410 148,121 30,393 27,332 122,132 164,402 Less: provision for impairment of trade receivables (5,536) (6,087) (5,745) (5,673) Trade receivables - net 24,857 21,245 116,387 158,729 Notes receivable 7,888 4,100 19,066 3,650

Prepayments - related parties (Notes d and 40(d)) 2,750 2,998 2,171 3,421 - third parties 307,290 112,954 173,133 191,809 310,040 115,952 175,304 195,230

Amounts due from related parties (Notes e and 40(d)) 50,008 61,930 65,430 14,249 Deposits 69,928 97,020 78,257 79,221 Payments on behalf of third parties 52,271 41,195 37,078 40,873 Advances to staff 3,676 8,410 9,065 4,198 Others 59,069 50,030 74,921 95,990 234,952 258,585 264,751 234,531 Less: provision for impairment of other receivables (107,037) (97,365) (89,393) (88,005) Other receivables — net 127,915 161,220 175,358 146,526

Value-added tax recoverable 12,965 30,852 228,505 279,361

Dividends receivable from the associate — — 6,221 6,221 Total 483,665 333,369 720,841 789,717

— I-104 — APPENDIX I ACCOUNTANT’S REPORT

(a) Aging analysis of trade receivables at each balance date based on invoice dates were as follows:

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Within 1 year 21,883 14,759 114,775 156,921 1 - 2 years 1,161 5,075 77 465 2 - 3 years 1,471 1,055 82 47 Over 3 years 5,878 6,443 7,198 6,969 30,393 27,332 122,132 164,402

(b) There is no trade receivables that are past due but not impaired as at each balance sheet date.

(c) Trade receivables that are impaired

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Trade receivables - impaired 22,245 26,774 14,120 14,494 Provision (5,536) (6,087) (5,745) (5,673) 16,709 20,687 8,375 8,821

The individually impaired receivables mainly relate to customers which are in unexpectedly difficult economic situations. It was assessed that a portion of the receivables is expected to be recovered. The ageing of these receivables is as follows:

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Within 1 year 13,735 14,201 6,763 7,013 1 - 2 years 1,161 5,075 77 465 2 - 3 years 1,471 1,055 82 47 Over 3 years 5,878 6,443 7,198 6,969 22,245 26,774 14,120 14,494

— I-105 — APPENDIX I ACCOUNTANT’S REPORT

(d) Prepayments to related parties comprise mainly prepayments for raw materials and services. Details of prepayments to related parties are shown in Note 40(d).

(e) Amounts due from related parties mainly represented payments on behalf of related parties and these amounts are unsecured, interest free and repayable on demand.

(f) Movement of provision for impairment of trade and other receivables is as follows:

Three months ended Year ended 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

At beginning of the year/period 96,693 112,573 103,452 95,138 Provision 16,588 6,475 8,428 1,367 Reversal (708) (10,355) (17,133) (2,809) Written-off — (5,241) — (18) Others — — 391 — At the end of the year/period 112,573 103,452 95,138 93,678

(g) There are no collaterals for trade and other receivables.

(h) The carrying amounts of trade and other receivables are denominated in the following currencies:

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

RMB 483,665 333,369 400,926 426,264 USD — — 318,067 361,809 HKD — — 1,848 1,644 483,665 333,369 720,841 789,717

— I-106 — APPENDIX I ACCOUNTANT’S REPORT

Company

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Trade receivables (Note a) - related parties 466,357 251,400 207,891 277,327 - third parties 4,973 5,832 — — 471,330 257,232 207,891 277,327 Less: provision for impairment of trade receivables (249) (540) — — Trade receivables - net 471,081 256,692 207,891 277,327

Prepayments - related parties (Note d) 2,750 2,989 500 3,047 - third parties 273 912 23,027 36,266 3,023 3,901 23,527 39,313

Amounts due from related parties (Note e) 2,543,786 2,576,695 3,267,283 3,732,323 Deposits 2,914 2,180 12,376 1,318 Payments on behalf of third parties 11,004 12,008 1,895 20,313 Advances to staff 708 896 967 — Others 9,274 1,648 1,353 4,963 2,567,686 2,593,427 3,283,874 3,758,917 Less: provision for impairment of other receivables (25,756) (23,603) (14,754) (12,590) Other receivables — net 2,541,930 2,569,824 3,269,120 3,746,327

Value-added tax recoverable 5,241 5,832 8,366 19,506

Dividends receivable 124,338 168,873 919,845 919,845 Total 3,145,613 3,005,122 4,428,749 5,002,318

— I-107 — APPENDIX I ACCOUNTANT’S REPORT

(a) Aging analysis of trade receivables at each balance date based on invoice dates were as follows:

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Within 1 year 471,330 252,259 207,891 277,327 1 - 2 years — 4,973 — — 471,330 257,232 207,891 277,327

(b) Trade receivables that are not impaired

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Within 1 year 466,357 251,749 207,891 277,327

(c) Trade receivables that are impaired

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Trade receivables - impaired 4,973 5,483 — — Provision (249) (540) — — 4,724 4,943 — —

— I-108 — APPENDIX I ACCOUNTANT’S REPORT

The individually impaired receivables mainly relate to customers which are in unexpectedly difficult economic situations. It was assessed that a portion of the receivables is expected to be recovered. The ageing of these receivables is as follows:

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Within 1 year 4,973 510 — — 1 - 2 years — 4,973 — — 4,973 5,483 — —

(d) Prepayments to related parties comprise mainly prepayments for raw materials and services.

(e) Amounts due from related parties mainly represented advances to related companies and payments on behalf of related parties which are all unsecured, interest free and repayable on demand.

(f) Movement of provision for impairment of trade and other receivables is as follows:

Three months ended Year ended 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

At beginning of the year/period 17,131 26,005 24,143 14,754 Provision 8,874 953 5,451 534 Reversal — (2,815) (14,832) (2,698) Written-off — — (8) — At end of the year/period 26,005 24,143 14,754 12,590

(g) There are no collaterals for trade and other receivables.

— I-109 — APPENDIX I ACCOUNTANT’S REPORT

(h) The carrying amounts of trade and other receivables are denominated in the following currencies:

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

RMB 3,145,613 3,005,122 4,428,749 5,002,318

24 Inventories

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Raw materials 128,279 1,238,642 1,817,902 2,274,464 Work in progress 399,173 8,219 37,532 198,376 Finished goods 132,276 91,535 1,216,755 993,414 Others 31,752 31,572 30,105 30,161 691,480 1,369,968 3,102,294 3,496,415 Less: non-current portion (note a) — — (143,896) (141,151) 691,480 1,369,968 2,958,398 3,355,264

(a) The non-current portion of inventories represent ore that the Group does not expect to process in the next 12 months.

The cost of inventories recognised as expense and included in ‘cost of sales’ is as follows:

Three months ended Year ended 31 December 31 March 2015 2016 2017 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Cost of inventories 32,685,123 41,834,738 42,560,908 7,876,260 11,909,178 Including: Inventory write-down 3,120 26 — — —

— I-110 — APPENDIX I ACCOUNTANT’S REPORT

Movement of the provision for impairment of inventories is as follows:

Three months ended Year ended 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

At beginning of the year/period 199 3,319 129 129 Provision 3,319 129 — — Reversal (199) (103) — — Written-off — (3,216) — — At the end of the year/period 3,319 129 129 129

25 Cash and bank balances

Group

(a) Restricted bank deposits

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Restricted bank deposits - current 109,481 143,855 149,744 146,989 - non-current — — 520,198 — 109,481 143,855 669,942 146,989

— I-111 — APPENDIX I ACCOUNTANT’S REPORT

The analysis of restricted bank deposits of the Group on each balance sheet date is as follows:

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Security deposits for a syndicated bank borrowing — — 520,198 — Security deposits for issuance of notes 93,821 69,610 63,417 58,565 Security deposits for environmental restoration and governance 3,230 72,770 85,827 88,424 Security deposits for legal claims 12,430 1,475 — — Others — — 500 — 109,481 143,855 669,942 146,989

(b) Cash and cash equivalents

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Cash on hand 431 437 477 444 Short-term deposits of original maturity within 3 months with banks 367,273 1,025,984 1,803,805 1,719,596 Short-term deposits with a financial institution (Note 40(d)) 129,567 133,374 598,532 753,653 497,271 1,159,795 2,402,814 2,473,693

— I-112 — APPENDIX I ACCOUNTANT’S REPORT

(c) Cash and bank deposits (including restricted bank deposits of the Group) are denominated in the following currencies:

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

RMB 606,752 1,303,650 2,309,617 2,071,346 USD — — 761,275 549,206 Other currencies — — 1,864 130 606,752 1,303,650 3,072,756 2,620,682

Cash and bank deposits mainly represent RMB-denominated deposits placed with banks and the associate in the PRC. The conversion of RMB-denominated deposits into foreign currencies and remittance out of the PRC are subject to certain PRC rules and regulations of foreign exchange control promulgated by the PRC government.

The carrying amount of bank deposits approximates their fair value.

Company

(a) Restricted bank deposits

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Restricted bank deposits - current 4,693 12,346 15,601 15,681 - non-current — — 520,198 — 4,693 12,346 535,799 15,681

— I-113 — APPENDIX I ACCOUNTANT’S REPORT

The analysis of restricted bank deposits of the Company on each balance sheet date is as follows:

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Security deposits for a syndicated bank borrowing — — 520,198 — Security deposits for issuance of notes 4,693 12,346 14,779 14,737 Security deposits for environmental restoration and governance — — 822 944 4,693 12,346 535,799 15,681

(b) Cash and cash equivalents

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Cash on hand 36 54 69 47 Short-term deposits of original maturity within 3 months with banks 43,745 869,288 828,886 929,200 Short-term deposits with a financial institution 104,256 107,133 545,888 630,425 148,037 976,475 1,374,843 1,559,672

(c) Cash and bank deposits (including restricted bank deposits of the Company) are denominated in the following currencies:

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

RMB 152,730 988,821 1,910,642 1,575,353

The carrying amount of bank deposits approximates their fair value.

— I-114 — 26 Share capital and treasury shares I APPENDIX

(i) Share capital

Ordinary shares, issued and fully paid:

As at As at As at As at 31 December 2015 31 December 2016 31 December 2017 31 March 2018 Number Share Number Share Number Share Number Share of shares capital of shares capital of shares capital of shares capital (thousands) RMB’000 (thousands) RMB’000 (thousands) RMB’000 (thousands) RMB’000

Domestic shares (“A shares”) of RMB1.00 -1 — I-115 — each - held by Shandong Gold Group 715,098 715,098 831,934 831,934 831,934 831,934 831,934 831,934 - held by other shareholders 707,974 707,974 1,025,185 1,025,185 1,025,185 1,025,185 1,025,185 1,025,185 1,423,072 1,423,072 1,857,119 1,857,119 1,857,119 1,857,119 1,857,119 1,857,119

During the year ended 31 December 2016, the Company has issued 434,046,401 shares (Note 27(b)(ii)). REPORT ACCOUNTANT’S

On 17 October 2016, the Company has completed the registration of the above 434,046,401 shares in total with the China Securities Depository and Clearing Co., Ltd., Shanghai Branch and hence increasing the Company’s issued share capital from 1,423,072,408 shares to 1,857,118,809 shares. (ii) Treasury shares I APPENDIX

Year ended Year ended Year ended Three months ended 31 December 2015 31 December 2016 31 December 2017 31 March 2018 Number Treasury Number Treasury Number Treasury Number Treasury of shares capital of shares capital of shares capital of shares capital (thousands) RMB’000 (thousands) RMB’000 (thousands) RMB’000 (thousands) RMB’000

At beginning of the year/period 2,482 543 2,491 6,385 2,491 6,385 2,491 6,385 Purchased 272 6,483 —————— Sold (263) (641) —————— At end of the year/period 2,491 6,385 2,491 6,385 2,491 6,385 2,491 6,385 -1 — I-116 —

The treasury shares represented the shares of the Company as acquired by the Company’s subsidiary, Shandong Jinzhou, which remained unsold as of the respective balance sheet dates. CONATSREPORT ACCOUNTANT’S 27 Reserves I APPENDIX

(i) Reserves movement of the Group

Statutory Available- Transactions and other for-sale with non- Foreign Capital reserve financial controlling currency reserve funds assets interests translation Others Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Balance at 1 January 2015 1,449,260 406,419 14,905 (16,997) — 1,935 1,855,522

Available-for-sale financial assets — — (14,269) — — — (14,269) Other comprehensive loss — — (14,269) — — — (14,269) -1 — I-117 — Appropriations from retained earnings (Note a) — 45,254 ————45,254 Acquisition of non-controlling interests (Note 39(ii)) — — — 1,332 — — 1,332 Treasury shares — — — 6,580 — — 6,580 Others — ————14,52214,522

Transactions with owners in their capacity as owners — 45,254 — 7,912 — 14,522 67,688 CONATSREPORT ACCOUNTANT’S Balance at 31 December 2015 1,449,260 451,673 636 (9,085) — 16,457 1,908,941 Statutory Available- Transactions I APPENDIX and other for-sale with non- Foreign Capital reserve financial controlling currency reserve funds assets interests translation Others Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Balance at 1 January 2016 1,449,260 451,673 636 (9,085) — 16,457 1,908,941 Available-for-sale financial assets — — (636) — — — (636) Share of other comprehensive income of the associate — ————105105 Other comprehensive (loss)/income — — (636) — — 105 (531)

Appropriations from retained earnings (Note a) — 19,482 ————19,482 Capital injection from the Parent Company (Note b(i)) 106,961 —————106,961

-1 — I-118 — Issuance of ordinary shares (Note b(ii)) 4,564,652 —————4,564,652 Consideration for the combination of entities or businesses under common control (Note b(ii)) (1,541,467) —————(1,541,467) Acquisition of non-controlling interests (Notes 39(i) and 39(ii)) — — — (219,356) — — (219,356) Others — ————(13,670) (13,670)

Transactions with owners in their capacity as CONATSREPORT ACCOUNTANT’S owners 3,130,146 19,482 — (219,356) — (13,670) 2,916,602 Balance at 31 December 2016 4,579,406 471,155 — (228,441) — 2,892 4,825,012 Statutory Available- Transactions I APPENDIX and other for-sale with non- Foreign Capital reserve financial controlling currency reserve funds assets interests translation Others Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Balance at 1 January 2017 4,579,406 471,155 — (228,441) — 2,892 4,825,012 Share of other comprehensive income of the associate — ————(56)(56) Currency translation differences — — — — (2,482) — (2,482) Other comprehensive loss — — — — (2,482) (56) (2,538)

Appropriations from retained earnings (Note a) — 81,488 ————81,488 Acquisition of non-controlling interests (Note 39(ii)) — — — 1,312 — — 1,312 Others — ————605605 -1 — I-119 —

Transactions with owners in their capacity as owners — 81,488 — 1,312 — 605 83,405 Balance at 31 December 2017 4,579,406 552,643 — (227,129) (2,482) 3,441 4,905,879 CONATSREPORT ACCOUNTANT’S Statutory Available- Transactions I APPENDIX and other for-sale with non- Foreign Capital reserve financial controlling currency reserve funds assets interests translation Others Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Balance at 1 January 2018 4,579,406 552,643 — (227,129) (2,482) 3,441 4,905,879 Share of other comprehensive income of the associate — ————(49)(49) Currency translation differences — — — — (4,299) — (4,299) Other comprehensive loss — — — — (4,299) (49) (4,348)

Others — ————(35)(35)

Transactions with owners in their capacity as -2 — I-120 — owners — ————(35)(35) Balance at 31 March 2018 4,579,406 552,643 — (227,129) (6,781) 3,357 4,901,496 CONATSREPORT ACCOUNTANT’S APPENDIX I ACCOUNTANT’S REPORT

(ii) Retained earnings and reserves movement of the Company

Statutory and other Retained Capital reserve earnings reserve funds Others Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Balance at 1 January 2015 3,441,296 298,200 576,895 666 4,317,057

Profit for the year 466,914 — — — 466,914

Total comprehensive income 466,914 — — — 466,914

Appropriations from retained earnings (45,254) — 45,254 — — Dividends (142,307) — — — (142,307) Others — — — 2,957 2,957 Transactions with owners in their capacity as owners (187,561) — 45,254 2,957 (139,350)

Balance at 31 December 2015 3,720,649 298,200 622,149 3,623 4,644,621

Balance at 1 January 2016 3,720,649 298,200 622,149 3,623 4,644,621

Profit for the year 205,419 — — — 205,419 Share of other comprehensive income of the associate — — — 105 105 Total comprehensive income 205,419 — — 105 205,524

Appropriations from retained earnings (19,482) — 19,482 — — Issuance of ordinary shares — 4,564,652 — — 4,564,652 Dividends (142,307) — — — (142,307) Others — — — (3,145) (3,145) Transactions with owners in their capacity as owners (161,789) 4,564,652 19,482 (3,145) 4,419,200

Balance at 31 December 2016 3,764,279 4,862,852 641,631 583 9,269,345

— I-121 — APPENDIX I ACCOUNTANT’S REPORT

Statutory and other Retained Capital reserve earnings reserve funds Others Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Balance at 1 January 2017 3,764,279 4,862,852 641,631 583 9,269,345

Profit for the year 825,006 — — — 825,006 Share of other comprehensive income of the associate — — — (56) (56)

Total comprehensive income/(loss) 825,006 — — (56) 824,950

Appropriations from retained earnings (81,488) — 81,488 — — Dividends (331,938) — — — (331,938) Others — — — (478) (478) Transactions with owners in their capacity as owners (413,426) — 81,488 (478) (332,416)

Balance at 31 December 2017 4,175,859 4,862,852 723,119 49 9,761,879

Balance at 1 January 2018 4,175,859 4,862,852 723,119 49 9,761,879

Profit for the period 2,723 — — — 2,723 Share of other comprehensive income of the associate — — (49) (49) Total comprehensive income/(loss) 2,723 — — (49) 2,674

Others — — — 36 36 Transactions with owners in their capacity as owners ———36 36

Balance at 31 March 2018 4,178,582 4,862,852 723,119 36 9,764,589

(a) Statutory and other reserve funds

In accordance with the PRC Company Law and the Company’s articles of association, the Company is required to set aside 10% of its profit after tax as determined in accordance with the relevant accounting principles and financial regulations applicable to PRC companies (“PRC GAAP”) and regulations applicable to the Company, to the statutory reserve funds until such reserve reaches 50% of the registered capital of the Company. The appropriation to the reserve must be made before any distribution of dividends to equity holders before reaching 50% threshold mentioned above. The

— I-122 — APPENDIX I ACCOUNTANT’S REPORT statutory surplus reserve can be used to offset previous years’ losses, if any, and part of the statutory surplus reserve can be capitalised as the Company’s share capital provided that the amount of such reserve remaining after the capitalisation shall not be less than 25% of the share capital of the Company.

(b) Capital reserves

(i) The increase in capital reserve of RMB106,961,000 during the year ended 31 December 2016 represented the capital as injected by the Parent Company to the Dongfeng Project for financing its expenses or capital expenditure as incurred prior to Group’s acquisition of the Dongfeng Project in October 2016 as described in Note (ii) below.

(ii) In October 2016, the Company has issued 117,425,346 shares at RMB14.3 per share through non-public offering and 316,621,055 shares to the Parent Company and two of its subsidiaries (collectively the “then controlling parties”) at RMB14.13 per share for acquisition of 70.65% equity interest in Guilaizhuang, 100% equity interest in Penglai, Dongfeng exploration rights and related assets and liabilities (“Dongfeng Project”) (collectively the “Combining Entities or Businesses”) and the Xinli exploration rights (“Xinli Exploration Rights”). The premium on the issue of the shares (net of the related transaction costs for the issue) of RMB4,564,652,000 has been credited to capital reserve during the financial year ended 31 December 2016.

The Group’s acquisitions of the aforesaid Combining Entities or Businesses have been accounted for as business combinations under common control. Hence, the financial information of the aforesaid Combining Entities or Businesses have been consolidated by the Group as if they have been combined from the earliest date presented in the Historical Financial Information. The difference between the considerations as settled for the aforesaid business combinations under common control and the Group’s share of the book values of the net assets as acquired (from the then controlling parties’ perspectives) of approximately RMB1,541,467,000 has been debited to capital reserve during the year ended 31 December 2016.

— I-123 — APPENDIX I ACCOUNTANT’S REPORT

28 Trade and other payables

Group

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Trade payables (Note a) - third parties 413,042 398,108 949,419 925,780 - related parties (Note 40(d)) 37,036 25,848 12,662 24,989 450,078 423,956 962,081 950,769 Notes payable 440,421 515,888 388,878 436,942 Payable for purchases of property, plant and equipment and mining rights 720,306 570,334 800,143 685,053 Deposits received from contractors 206,487 260,297 267,631 259,076 Purchase consideration payable 191,827 191,827 191,827 191,827 Customer deposits and receipts in advance 135,726 171,398 127,219 — Contract liabilities (Note b) — — — 230,490 Other taxes payable 46,688 72,840 135,563 71,091 Dividends payable 39,340 34,535 188,863 117,628 Amounts due to related parties (Notes d and 40(d)) 83,127 503,376 517,147 512,488 Salaries and staff welfare payable 69,101 95,917 149,389 99,041 Interest payable 104,800 100,271 110,576 95,033 Others 72,703 54,213 88,127 81,649 Total 2,560,604 2,994,852 3,927,444 3,731,087

— I-124 — APPENDIX I ACCOUNTANT’S REPORT

(a) Aging analysis of trade payable of the Group on each balance sheet date based on invoice dates were as follows:

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Less than 1 year 420,513 399,255 942,330 916,791 1 - 2 years 14,158 13,733 8,365 20,037 2 - 3 years 9,809 1,996 1,714 3,861 Over 3 years 5,598 8,972 9,672 10,080 450,078 423,956 962,081 950,769

(b) With effective from 1 January 2018, receipts in advance from customers have been classified as ‘contract liabilities’ in accordance with IFRS 15.

(c) Aging analysis of notes payable of the Group on each balance sheet date based on issue dates of the notes were as follows:

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Less than 1 year 440,421 515,888 388,878 436,942

(d) Amounts due to related parties of the Group mainly represented payables for purchases of property, plant and equipment and mining rights.

— I-125 — APPENDIX I ACCOUNTANT’S REPORT

(e) The carrying amounts of trade and other payables of the Group are denominated in the following currencies:

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

RMB 2,560,604 2,994,852 3,242,226 3,498,675 USD — — 684,857 232,412 HKD — — 361 — 2,560,604 2,994,852 3,927,444 3,731,087

(f) The carrying amounts of trade and other payables of the Group approximate their fair values.

(g) Certain of the Group’s bank deposits have been secured to banks for the issue of certain notes payable, as follows:

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Bank deposits secured to banks for issuance of notes (Note 25(a)) 93,821 69,610 63,417 58,565 Notes payable being secured 396,946 344,342 320,788 289,233

— I-126 — APPENDIX I ACCOUNTANT’S REPORT

Company

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Trade payables - third parties 38,893 40,289 56,941 54,076 - related parties 4,140 9,720 9,912 5,250 43,033 50,009 66,853 59,326 Notes payable 22,818 61,728 75,257 74,355 Payable for purchases of property, plant and equipment and mining rights 19,929 28,502 48,737 32,886 Deposits received from contractors 49,679 53,143 62,377 56,170 Purchase consideration payable 191,827 191,827 191,827 191,827 Customer deposits and receipts in advance 326 2,707 2,753 — Contract liabilities — — — 2,305 Other taxes payable 12,548 14,298 21,161 7,790 Dividends payable 2,144 2,393 153,588 82,353 Amounts due to related parties (Note c) 251,271 695,398 545,083 695,770 Salaries and staff welfare payable 32,222 33,490 4,694 4,118 Interest payable 104,181 100,143 107,820 89,238 Others 16,324 18,856 22,585 28,811 Total 746,302 1,252,494 1,302,735 1,324,949

(a) Aging analysis of trade payable of the Company on each balance sheet date based on invoice dates were as follows:

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Less than 1 year 37,948 42,474 66,515 58,969 1 - 2 years 520 4,196 131 157 2 - 3 years 3,400 65 28 27 Over 3 years 1,165 3,274 179 173 43,033 50,009 66,853 59,326

— I-127 — APPENDIX I ACCOUNTANT’S REPORT

(b) Aging analysis of notes payable of the Company on each balance sheet date based on issue dates of the notes were as follows:

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Less than 1 year 22,818 61,728 75,257 74,355

(c) Amounts due to related parties of the Company mainly represented payables for purchases of property, plant and equipment and mining rights.

(d) The carrying amounts of trade and other payables of the Company are denominated in the following currencies:

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

RMB 746,302 1,252,494 1,302,735 1,324,949

(e) The carrying amounts of trade and other payables of the Company approximate their fair values.

(f) Certain of the Company’s bank deposits have been secured to banks for the issue of certain notes payable, as follows:

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Bank deposits secured to banks for issuance of notes (Note 25(a)) 4,693 12,346 14,779 14,737 Notes payable being secured 22,818 61,728 75,257 73,685

— I-128 — APPENDIX I ACCOUNTANT’S REPORT

29 Financial liabilities at fair value through profit or loss

Group

Three months ended Year ended 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

At beginning of the year/period 4,721,902 4,777,391 3,169,789 5,751,411 Proceeds received during the year/period 6,676,567 5,381,588 6,467,964 3,014,838 Changes in fair value of the obligations associated with outstanding gold leasing contracts 112,996 (16,998) 26,799 15,582 Settlement during the year/period (6,734,074) (6,972,192) (3,913,141) (2,282,800) At end of the year/period 4,777,391 3,169,789 5,751,411 6,499,031

The Group financed through entering into gold leasing contracts with banks to lease gold from banks and subsequently sold the gold through the Shanghai Gold Exchange to obtain financing. Upon maturity of those lease contracts, the Group has to return to such banks with gold of the same quantity and specification, which would be usually purchased through the Shanghai Gold Exchange. The maturity periods of gold leasing contracts are generally less than 1 year (1 year inclusive). The Group has designated the liabilities associated with such gold leasing arrangements as financial liabilities at fair value through profit or loss. Realised or unrealised fair value gain/loss on gold leasing contracts are recognised and presented in the consolidated statement of profit or loss as ‘finance costs’ (Note 10). The fair value of all gold leasing contracts are determined based on current ask prices in an active market.

The Group had also entered into certain gold forward/future contracts for managing part of the risk associated with the fluctuation in the purchase prices of gold for its operations or managing the price risk associated with the aforesaid gold leasing contracts. These gold forward/future contracts have also been designated as financial liabilities at fair value through profit or loss. Realised and unrealised fair values gain/loss on the gold forward/future contracts are recognised in the consolidated statement of profit or loss as ‘other gains/(losses), net’ (Note 7).

— I-129 — APPENDIX I ACCOUNTANT’S REPORT

Company

Three months ended Year ended 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

At beginning of the year/period 3,690,389 4,777,391 2,826,212 5,436,791 Proceeds received during the year/period 6,138,851 4,829,002 6,068,184 3,014,838 Changes in fair value of the obligations associated with outstanding gold leasing contracts 50,720 (27,175) 39,216 17,886 Settlement during the year/period (5,102,569) (6,753,006) (3,496,821) (2,145,760) At end of the year/period 4,777,391 2,826,212 5,436,791 6,323,755

— I-130 — APPENDIX I ACCOUNTANT’S REPORT

30 Borrowings

Group

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Non-current Long-term bank borrowings - secured (Note a) — — 4,835,308 4,225,603 - unsecured 120,000 110,000 1,960,259 1,886,430 Corporate bonds (Note b) 3,286,503 3,290,394 3,294,480 2,684,522 3,406,503 3,400,394 10,090,047 8,796,555 Less: borrowings due within one year — (22,000) (1,998,228) (1,998,885) 3,406,503 3,378,394 8,091,819 6,797,670 Current Short-term bank borrowings - unsecured 440,000 490,000 598,000 1,238,167 Borrowings from related parties (Note 40(c)) 290,999 116,697 286,879 92,479 Corporate bonds (Note b) — 400,000 1,998,228 1,998,885 Current portion of long-term bank borrowings — 22,000 — — 730,999 1,028,697 2,883,107 3,329,531 Total 4,137,502 4,407,091 10,974,926 10,127,201

(a) Secured borrowings pledged as security

As at 31 December 2017, bank borrowings of US$740 million (approximately RMB4,835,308,000) are wholly repayable in June 2020 and secured by 50% equity interest in AGBII and 2.155% equity interest in MAG as held by SDHK.

In March 2018, the Group has early repaid a portion of the aforesaid bank borrowings of US$68 million and the outstanding bank borrowings of US$672 million (approximately RMB4,225,603,200) remained wholly repayable in June 2020.

— I-131 — APPENDIX I ACCOUNTANT’S REPORT

(b) Corporate bonds

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Non-current Corporate bonds payable 3,300,000 3,300,000 1,300,000 688,996 Less: commission payable (13,497) (9,606) (3,748) (3,359) 3,286,503 3,290,394 1,296,252 685,637 Current Corporate bonds payable — 400,000 2,000,000 2,000,000 Less: commission payable — — (1,772) (1,115) — 400,000 1,998,228 1,998,885 Total 3,286,503 3,690,394 3,294,480 2,684,522

On 3 September 2013, the Company issued 20,000,000 corporate bonds with a par value of RMB100 each and received total proceeds of RMB2,000,000,000. The bonds are fully repayable on 3 September 2018 when they become due. These bonds carry a coupon rate of 5.16% per annum and the interest charge will be paid on 3 September annually in each of the following five years. The effective interest rate is 5.30% per annum. The underwriting commission for the issue of the bond amounted to RMB12,000,000 and was settled by the Company.

On 30 March 2015, the Company issued 13,000,000 corporate bonds with a par value of RMB100 each and received a total proceeds of RMB1,300,000,000. The bonds are fully repayable on 30 March 2020 when they become due. These bonds carry a coupon rate of 4.80% per annum and the interest charge will be paid on 30 March annually in each of the following five years. The effective interest rate is 4.94% per annum. The underwriting commission for the issue of the bond amounted to RMB7,800,000 and was settled by the Company. In March 2018, the Company partially redeemed 6,110,040 corporate bonds at a total consideration amounted to RMB611,004,000.

On 8 April 2016, the Company issued 4,000,000 corporate bonds with a par value of RMB100 each and received a total proceeds of RMB400,000,000. The bonds were fully repaid on 8 April 2017 when they became due. These bonds carried a coupon rate of 2.82% per annum.

The bonds are initially recognised at the amount of the total proceeds net of the commission paid on the dates of issuance.

— I-132 — APPENDIX I ACCOUNTANT’S REPORT

Accrued interests for the corporate bonds are recorded in interest payable as follows:

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Interest payable for current bonds — 8,366 34,400 60,200 Interest payable for non-current bonds 81,200 81,200 46,800 —

The fair values of non-current bonds are as follows:

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Non-current bonds 3,449,800 3,453,500 1,310,400 690,374

(c) Borrowings from a third party

In September 2014, the Group obtained a loan of RMB1,000 million from ICBC Credit Suisse Asset Management Co., Ltd. (工銀瑞信投資管理有限公司, “ICBC-CS Asset Management”) to finance its capital injection to several subsidiaries. In 2015, the Group had fully repaid the loan.

(d) The Group’s borrowings were repayable as follows:

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Within one year 730,999 1,028,697 2,883,107 3,329,531 Between one and two years — 2,021,674 — 685,637 Between two and five years 3,406,503 1,356,720 8,091,819 6,112,033 4,137,502 4,407,091 10,974,926 10,127,201

— I-133 — APPENDIX I ACCOUNTANT’S REPORT

(e) The exposure of the Group’s borrowings to interest rate changes and the contractual repricing dates at the end of the year/period are as follows:

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Less than 6 months 660,999 606,697 854,879 639,879 6 — 12 months 70,000 22,000 30,000 690,767 1 - 5 years 120,000 88,000 6,795,567 6,112,033 850,999 716,697 7,680,446 7,442,679

(f) The carrying amount of bank borrowings are not materially different from their fair value as at each balance date. The fair value are based on cash flows discounted using a market rate and are within level 2 of the fair value hierarchy.

(g) The Group’s borrowings are denominated in the following currencies:

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

RMB 4,137,502 4,407,091 4,179,359 4,015,168 USD — — 6,795,567 6,112,033 4,137,502 4,407,091 10,974,926 10,127,201

(h) The average coupon rates of the Group’s borrowings for the respective years/period are summarised as below.

As at As at 31 December 31 March 2015 2016 2017 2018

Average coupon rates 5.49% 4.84% 2.89% 3.55%

— I-134 — APPENDIX I ACCOUNTANT’S REPORT

Company

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Non-current Corporate bonds 3,286,503 3,290,394 3,294,480 2,684,522 Less: borrowings due within one year — — (1,998,228) (1,998,885) 3,286,503 3,290,394 1,296,252 685,637 Current Short-term bank borrowings - unsecured 290,000 390,000 500,000 700,000 Borrowings from related parties — — 170,000 — Corporate bonds — 400,000 1,998,228 1,998,885 290,000 790,000 2,668,228 2,698,885 Total 3,576,503 4,080,394 3,964,480 3,384,522

(a) The Company’s borrowings were repayable as follows:

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Within one year 290,000 790,000 2,668,228 2,698,885 Between one and two years — 1,995,674 — 685,637 Between two and five years 3,286,503 1,294,720 1,296,252 — 3,576,503 4,080,394 3,964,480 3,384,522

— I-135 — APPENDIX I ACCOUNTANT’S REPORT

(b) The exposure of the Company’s borrowings to interest rate changes and the contractual repricing dates at the end of the years/period are as follows:

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Less than 6 months 290,000 390,000 670,000 500,000 6 — 12 months — — — 200,000 290,000 390,000 670,000 700,000

(c) The Company’s borrowings are denominated in the following currencies:

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

RMB 3,576,503 4,080,394 3,964,480 3,384,522

(d) The average coupon rates of the Company’s borrowings for the respective years/period are summarised as below.

As at As at 31 December 31 March 2015 2016 2017 2018

Average coupon rates 5.39% 5.05% 4.39% 4.35%

— I-136 — APPENDIX I ACCOUNTANT’S REPORT

31 Deferred income tax

The analysis of deferred income tax assets and deferred income tax liabilities is as follows:

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Deferred income tax assets 167,220 161,722 152,421 165,028 Deferred income tax liabilities (2,068,968) (1,992,750) (4,135,396) (3,997,270) Deferred income tax liabilities (net) (1,901,748) (1,831,028) (3,982,975) (3,832,242)

The gross movement on the deferred income tax account is as follows:

Three months ended 31 Year ended 31 December March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Beginning of the year/period (2,024,211) (1,901,748) (1,831,028) (3,982,975) Credited to profit or loss (Note 13) 114,044 70,356 123,936 68,265 Credited to other comprehensive income (Note 13(e)) 8,419 364 — — Acquisition of a joint operation (Note 38) — — (2,358,331) — Currency translation differences — — 82,448 82,468 End of the year/period (1,901,748) (1,831,028) (3,982,975) (3,832,242)

— I-137 — The movement in deferred income tax assets during the year/period, without taking into consideration the offsetting of balances within I APPENDIX the same tax jurisdiction, is as follows:

Financial Inter- liabilities at company fair value Provisions interest Property, through Provision for asset payable and plant and Unrealised profit or for retirement withholding Deferred income tax assets equipment profit loss impairment Tax losses obligations tax Others Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

At 1 January 2015 156,778 26,747 2,902 39,210 — — — — 225,637 (Charged)/credited to profit or loss (6,893) (5,323) 6,715 4,750 86 — — — (665)

-3 — I-138 — At 31 December 2015 149,885 21,424 9,617 43,960 86 — — — 224,972 At 1 January 2016 149,885 21,424 9,617 43,960 86 — — — 224,972 (Charged)/credited to profit or loss (8,179) (21,424) 2,639 884 29,195 — — — 3,115 At 31 December 2016 141,706 — 12,256 44,844 29,281 — — — 228,087 At 1 January 2017 141,706 — 12,256 44,844 29,281 — — — 228,087

Credited/(charged) to profit or REPORT ACCOUNTANT’S loss 21,474 — 16,359 (2,223) (29,281) (20,972) (38,617) 13,006 (40,254) Acquisition of a joint operation — — — — — 71,995 40,282 3,822 116,099 Currency translation differences — — — — — (2,220) (816) (342) (3,378) At 31 December 2017 163,180 — 28,615 42,621 — 48,803 849 16,486 300,554 At 1 January 2018 163,180 — 28,615 42,621 — 48,803 849 16,486 300,554 Credited/(charged) to profit or loss 2,397 12,930 2,683 (148) — — — — 17,862 Currency translation differences — (143) — — — (1,837) (32) (621) (2,633)

At 31 March 2018 165,577 12,787 31,298 42,473 — 46,966 817 15,865 315,783 The movement in deferred income tax liabilities during the year/period, without taking into consideration the offsetting of balances within I APPENDIX the same tax jurisdiction, is as follows:

Financial liabilities at Available- Mining and fair value for-sale Property, exploration through profit financial plant and Deferred income tax liabilities rights or loss assets equipment Inventories Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

At 1 January 2015 (2,210,120) (30,945) (8,783) — — (2,249,848) Credited to profit or loss 87,712 26,997 — — — 114,709 Credited to other comprehensive income — — 8,419 — — 8,419 At 31 December 2015 (2,122,408) (3,948) (364) — — (2,126,720) -3 — I-139 —

At 1 January 2016 (2,122,408) (3,948) (364) — — (2,126,720) Credited/(charged) to profit or loss 77,997 (10,756) — — — 67,241 Credited to other comprehensive income — — 364 — — 364 At 31 December 2016 (2,044,411) (14,704) — — — (2,059,115)

At 1 January 2017 (2,044,411) (14,704) — — — (2,059,115) Credited to profit or loss 42,352 1,427 — 99,840 20,571 164,190 REPORT ACCOUNTANT’S Acquisition of a joint operation — — — (2,315,122) (159,308) (2,474,430) Currency translation differences — — — 80,504 5,322 85,826 At 31 December 2017 (2,002,059) (13,277) — (2,134,778) (133,415) (4,283,529)

At 1 January 2018 (2,002,059) (13,277) — (2,134,778) (133,415) (4,283,529) Credited/(charged) to profit or loss 23,540 (2,666) — 29,529 — 50,403 Currency translation differences — — — 80,076 5,025 85,101

At 31 March 2018 (1,978,519) (15,943) — (2,025,173) (128,390) (4,148,025) APPENDIX I ACCOUNTANT’S REPORT

Deferred income tax assets are recognised for tax losses carried-forward to the extent that realisation of the related tax benefit through future taxable profits is probable. The Group does not recognise the following deferred income tax assets as management believes that it is more likely than not that such tax losses would not be utilised before they expire, details of which are as follows:

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Deferred income tax assets not recognised 61,866 66,399 86,203 101,006

The corresponding accumulated tax losses of the subsidiaries which deferred income tax have not been recognised 247,463 265,594 386,918 410,917

The aforesaid tax losses that have not been recognised as deferred income tax assets will be expired in the following years:

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

2016 13,645 — — — 2017 24,520 19,164 — — 2018 29,865 25,916 25,916 25,916 2019 39,736 34,238 34,238 34,238 2020 139,697 87,472 87,472 87,472 2021 — 98,804 98,804 98,804 2022 — — 129,113 129,113 2023 — — — 17,106 Undated (note (i)) — — 11,375 18,268 247,463 265,594 386,918 410,917

(i) This amount is attributable to SDHK that has unused tax losses that may be carried forward indefinitely.

— I-140 — APPENDIX I ACCOUNTANT’S REPORT

32 Provision for asset retirement obligations

Three months ended Year ended 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Beginning of the year/period — — 29,965 570,586 Interest charge on unwinding of discounts — 871 5,021 2,299 Additional provision — 29,094 182,754 — Acquisition of a joint operation — — 365,818 — Change in discount rate (Note 15(a)) — — — (11,785) Currency translation differences — — (12,972) (13,652) End of the year/period — 29,965 570,586 547,448

Provision for asset retirement obligations represented the estimated amount and timing of future closure and restoration projects.

33 Other non-current liabilities

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Consideration payable for Shandong Xinhui’s acquisition of a portfolio of assets and liabilities of Jinxing (note a) — — 61,430 56,960 Payable for mining rights 25,394 17,745 10,094 10,094 Provision for a legal claim (note b) — — 7,721 6,863 Others 1,352 1,352 4,190 3,915 26,746 19,097 83,435 77,832 Less: current portion (note a) — — (12,992) (8,523) 26,746 19,097 70,443 69,309

— I-141 — APPENDIX I ACCOUNTANT’S REPORT

(a) On 26 September 2017, Shandong Xinhui, Qingdao Pingdu Jinxing Gold Mining Co. Ltd. (Jinxing”) and Dazhuangzi Villagers’ Committee of Pingdu Xinhe Town (平度市新河鎮大莊子村 民委員會), the former shareholder of Jinxing entered into an asset reorganisation agreement (the “Agreement”). Pursuant to the Agreement, Shandong Xinhui acquired a portfolio of assets and liabilities of Jinxing, including part of the receivables and payables, property, plant and equipment and exploration rights at a total consideration of RMB174 million. As of 31 March 2018, the Group has settled part of consideration of RMB108 million and the remaining non-interest bearing consideration of RMB66 million (the “Remaining Consideration”) will be paid by instalments prior to 2026. As at 31 March 2018, the carrying amount of the Remaining Consideration (which was initially recognised at fair value and subsequently measured at amortised cost) as included as “other non-current liabilities” amounted to approximately RMB57 million (31 December 2017: RMB61 million) and the current portion of which to be settled within the next twelve months amounted to approximately RMB9 million (31 December 2017: RMB13 million).

(b) The provision of US$1.1 million (equivalent to approximately RMB6.9 million) is recognised in connection with certain outstanding labour claims of MAG, a non-wholly owned subsidiary of the Group’s joint operation.

34 Dividends

Three months ended Year ended 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

2014, 2015 and 2016 final dividend of RMB0.1 per ordinary share 142,307 142,307 184,410 — 2017 interim dividend of RMB0.08 per ordinary share — — 147,528 — 142,307 142,307 331,938 —

Pursuant to the distribution notice dated 18 May 2018, the eligible shareholders as at 24 May 2018 are entitled to a cash dividend of RMB0.04 per share, totalling RMB73,764,000.

— I-142 — APPENDIX I ACCOUNTANT’S REPORT

35 Cash generated from operations

Three months ended Year ended 31 December 31 March 2015 2016 2017 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Profit before income tax 981,737 1,697,976 1,604,445 417,803 489,550 Adjustments for: - Depreciation of property, plant and equipment and investment properties (Note 8) 854,718 949,508 1,607,282 250,428 497,986 - Amortisation (Note 8) 631,996 619,519 648,678 165,397 158,779 - Net losses on disposals/write-off of property, plant and equipment, land use rights and intangible assets 13,651 22,036 22,267 2,718 987 - Provision for/(reversal of) impairment, net (Note 8) 19,000 3,537 (2,873) 2,315 (1,442) - Net gains from disposal of available-for-sale investment (Note 7) (53,774) (2,456) — — — - Net gains from disposal of subsidiaries (Note 7) — (58,253) — — — - Net increase/(decrease) in deferred revenue 898 (5,510) 1,430 (638) (198) - Fair value (gains)/losses on gold future/forward contracts (Note 7) (27,174) (1,067) (11,305) 18,084 (17,077) - Share of profit of the associate (Note 12) (22,881) (27,662) (34,024) (7,950) (9,028) - Finance costs (Note 10) 451,033 376,361 575,966 112,108 190,685 - Net foreign exchange (gains)/losses (Note 10) — (763) 17,547 43 — - Finance income (Note 10) (12,429) (10,988) (37,445) (5,201) (9,241) 2,836,775 3,562,238 4,391,968 955,107 1,301,001 Changes in working capital (excluding the effects of acquisitions and exchange differences on consolidation): - Inventories (44,650) (679,007) (58,466) (329,894) (448,657) - Trade and other receivables 242,030 136,853 (348,751) (116,655) (80,243) - Trade and other payables (240,585) 299,053 182,643 366,171 39,271 - Other non-current assets (4,675) (23,298) 63,131 35,385 719 Cash generated from operations 2,788,895 3,295,839 4,230,525 910,114 812,091

— I-143 — APPENDIX I ACCOUNTANT’S REPORT

(a) Proceeds from sale of property, plant and equipment, land use rights and intangible assets comprise:

Three months ended Year ended 31 December 31 March 2015 2016 2017 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Net book amount 20,466 49,631 32,823 2,902 13,273 Net losses on disposal of property, plant and equipment, land use rights and intangible assets (13,651) (22,036) (22,267) (2,718) (987) Change in the discount rate used for the asset retirement obligations — — — — (11,785) Proceeds from disposal of property, plant and equipment, land use rights and intangible assets 6,815 27,595 10,556 184 501

(b) Major non-cash transactions

During the year ended 31 December 2016, the Company purchased 70.65% equity interest in Guilaizhuang, 100% equity interest in Penglai, the Dongfeng Project and Xinli Exploration Rights at a total consideration of RMB4,473,856,000 which are settled through the issue of the Company’s shares to Shandong Gold Group, Shandong Gold Non-ferrous Metal Mine Group Co., Ltd., Shandong Gold Geological Mine Exploration Co., Ltd., Jinmao Mining Group and Wang Zhiqiang (Note 27(b)(ii)).

— I-144 — (c) Reconciliation for liabilities from financing activities I APPENDIX

Liabilities from financing activities Financial Bonds Bonds Borrowings Borrowings liabilities at fair due within due after due within due after value through 1 year 1 year 1 year 1 year profit or loss Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

As at 1 January 2015 — (1,990,885) (1,290,540) (1,000,000) (4,721,902) (9,003,327) Cash flows — (1,300,000) 591,024 880,000 57,507 228,531 Interest charged by related companies — — (37,456) — — (37,456) Interest paid to related companies — — 5,973 — — 5,973

-4 — I-145 — Other non-cash movements — 4,382 — — (112,996) (108,614) As at 31 December 2015 — (3,286,503) (730,999) (120,000) (4,777,391) (8,914,893)

Cash flows (400,000) — 75,457 10,000 1,590,604 1,276,061 Reclass to current liabilities — — (22,000) 22,000 — — Interest charged by related companies — — (5,775) — — (5,775)

Interest paid to related companies — — 54,620 — — 54,620 REPORT ACCOUNTANT’S Other non-cash movements — (3,891) — — 16,998 13,107 As at 31 December 2016 (400,000) (3,290,394) (628,697) (88,000) (3,169,789) (7,576,880) Liabilities from financing activities I APPENDIX Financial Bonds Bonds Borrowings Borrowings liabilities at fair due within due after due within due after value through 1 year 1 year 1 year 1 year profit or loss Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Cash flows 400,000 — (189,300) (6,905,184) (2,554,823) (9,249,307) Foreign exchange adjustments — — — 131,617 — 131,617 Reclass to current liabilities (1,998,228) 1,998,228 (66,000) 66,000 — — Interest charged by related companies — — (9,908) — — (9,908) Interest paid to related companies — — 9,026 — — 9,026 Other non-cash movements — (4,086) — — (26,799) (30,885) -4 — I-146 — As at 31 December 2017 (1,998,228) (1,296,252) (884,879) (6,795,567) (5,751,411) (16,726,337)

Cash flows — 611,004 (450,674) 432,358 (732,038) (139,350) Foreign exchange adjustments — — 4,907 251,176 — 256,083 Interest charged by related companies — — (2,264) — — (2,264)

Interest paid to related companies — — 2,264 — — 2,264 REPORT ACCOUNTANT’S Other non-cash movements (657) (389) — — (15,582) (16,628) As at 31 March 2018 (1,998,885) (685,637) (1,330,646) (6,112,033) (6,499,031) (16,626,232) APPENDIX I ACCOUNTANT’S REPORT

36 Contingencies

The Veladero Mine held by the AGBII Group, a joint operation of the Group, experienced several environmental incidents as set out below:

— Release of cyanide-bearing process solution incident in 2015 — the failure of a valve on a leach pad pipeline at the Veladero Mine resulted in the release of cyanide-bearing process solution into a nearby waterway through a diversion channel gate that was open at the time of the incident;

— Release of crushed-ore saturated with process solution incident in 2016 - ice rolled down the slope of the leach pad damaged a pipe carrying process solution, and caused some material to leave the leach pad; and

— Release of gold-bearing process solution incident in 2017 - the monitoring system at the Veladero Mine detected a rupture of a pipe carrying gold-bearing process solution on the leach pad.

As of 31 March 2018, MAG, the subsidiary of AGBII, was involved in several ongoing administrative and civil proceedings with respect to the abovementioned environmental incidents.

In assessing loss contingencies, the AGBII Group has evaluated the legal proceedings and determined that no amounts should be made for any potential liabilities or asset impairment relating to the aforesaid legal proceedings as an amount cannot be reasonably estimated.

The Group has evaluated the legal proceedings with the assistance from its external legal counsel. Additionally, the Group will be indemnified by Barrick Gold Corporation (but only until 30 June 2019) for any losses suffered in relation to any final decision against MAG in respect of legal proceedings commenced by the third parties (including government authorities) in relation to these incidents as occurred prior to the Group’s acquisition of its interest in the AGBII Group. As a result, no provision has been made for any potential liabilities or asset impairment relating to the aforesaid legal proceedings.

Other than those as disclosed above, the Group does not have any other pending litigations which may result in a significant loss to the Group.

— I-147 — APPENDIX I ACCOUNTANT’S REPORT

37 Commitments

(a) Capital commitments

Capital expenditure contracted for by the Group at the balance sheet date but not yet incurred is as follows:

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Property, plant and equipment 202,509 159,997 355,692 487,394 Mining and exploration rights — — 366,465 366,465

(b) Operating lease commitments — where the Group is the lessee

The Group leases various plant and machinery under cancellable operating lease agreements. The lease expenditures charged to profit or loss during the financial years ended 31 December 2015, 2016 and 2017 and three months ended 31 March 2018 were disclosed in Note 8.

The Group has commitments to make the following future minimum lease payments under non-cancelable operating leases are as follows:

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Land and buildings: - Within 1 year 7,387 7,440 14,640 14,347 - From 1 year to 5 years 16,063 14,207 31,294 31,385 - Over 5 years 88,731 91,639 90,981 90,919 112,181 113,286 136,915 136,651 Machinery: - Within 1 year 885 1,035 14,445 9,699 - From 1 year to 5 years 3,205 2,270 18,989 16,430 - Over 5 years 300 200 — — 4,390 3,505 33,434 26,129 Others: - Within 1 year 940 1,318 2,663 1,783 - From 1 year to 5 years 166 100 575 751 1,106 1,418 3,238 2,534 Total 117,677 118,209 173,587 165,314

— I-148 — APPENDIX I ACCOUNTANT’S REPORT

38 Business combinations

On 30 June 2017, the Group has completed the acquisition of 50% interest in the AGBII Group (Note 11(b)).

The following table summarises the consideration paid or, payable by the Group, the fair value of assets acquired and liabilities assumed at the acquisition date.

USD’000 RMB’000

Consideration: At 30 June 2017 Total consideration — in cash 989,700 6,704,624

Recognised amounts of identifiable assets acquired and liabilities assumed Trade and other receivables 636 4,309 Inventories 225,342 1,526,557 Other current assets 4,440 30,078 Non-current portion of inventories 21,744 147,303 Property, plant and equipment 1,036,430 7,021,191 Trade and other payables (50,445) (341,735) Other non-current liabilities (279) (1,889) Provisions (54,000) (365,818) Deferred income tax liabilities (net) (348,124) (2,358,331) Total identifiable net assets 835,744 5,661,665 Goodwill (Note 19) 153,956 1,042,959 989,700 6,704,624

The goodwill arose from the deferred income tax liabilities that were resulted due to fair value adjustments on the net identifiable assets.

— I-149 — APPENDIX I ACCOUNTANT’S REPORT

39 Transactions with non-controlling interests

Acquisition of additional interest in a subsidiary

(i) In 2016, the Company acquired an additional 49% of equity shares of Penglai for a purchase consideration of RMB414,775,000. After the step-up acquisition of additional shares, the Company owns 100% equity interest in Penglai. The effect of changes in the ownership interest of Penglai on the equity attributable to owners of the Company during the year ended 31 December 2016 is summarised as follows:

2016 RMB’000

Carrying amount of non-controlling interests acquired 194,478 Consideration paid to non-controlling interests (414,775) Excess of consideration paid recognised within equity (220,297)

(ii) During the financial years ended 31 December 2015, 2016 and 2017 and three months ended 31 March 2017 and 2018, Shandong Jinzhou repurchased its ordinary shares owned by its employees, which resulted in a decrease in non-controlling interests and an increase in reserves. The effect of changes in the ownership interest in Shandong Jinzhou on the equity attributable to owners of the Company in respective years/periods are summarised as follows:

Three months ended Year ended 31 December 31 March 2015 2016 2017 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Carrying amount of non-controlling interests acquired 19,596 10,524 13,368 — — Considerations paid for repurchases of shares (18,264) (9,583) (12,056) — — Gain recognised within equity 1,332 941 1,312 — —

— I-150 — APPENDIX I ACCOUNTANT’S REPORT

40 Related party transactions

The directors of the Company consider that Shandong Gold Group, a company registered in the PRC, as the Company’s parent company. The State-owned Assets Supervision and Administration Commission of Shandong Provincial People’s Government is the ultimate controlling party. The Group has extensive transactions with the Parent Company. For the purpose of disclosures of related party transactions, to the extent possible, the Group has procedures in place to assist the identification of the immediate ownership structure of its customers and suppliers as to whether they are related parties.

Management believes that all material related party transactions and balances, of which they are aware of, have been adequately disclosed. Sales of goods and provision of services to related parties are at state-prescribed prices or prices that are also available to other customers. The Group considers that these sales are activities in the ordinary course of business. In addition to the transactions detailed elsewhere in these financial information, the Group had the following material transactions with related parties.

(a) Transaction with Shandong Gold Group and fellow subsidiaries

Three months ended Year ended 31 December 31 March 2015 2016 2017 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Purchases of electricity 367,733 368,859 367,944 58,732 60,033 Purchases of construction services 131,516 125,875 103,944 9,961 14,829 Purchases of processing services 2,501 6,896 3,162 201 305 Purchases of gold 729,890 283,250 48,597 2,837 4,451 Purchases of other services 18,642 11,615 29,565 1,402 1,977 Total purchases 1,250,282 796,495 553,212 73,133 81,595

Sales of processing services 1,239 4 738 — — Sales of gold 550,292 692,914 136,193 27,197 21,150 Sales of other metals 1,288 59,382 23,011 352 668 Sales of other materials and services 2,502 1,645 4,428 1,154 1,078 Total sales 555,321 753,945 164,370 28,703 22,896

Acquisition of mining and exploration rights 125,386 5,386 464,058 — — Total acquisitions 125,386 5,386 464,058 — —

— I-151 — APPENDIX I ACCOUNTANT’S REPORT

(b) Property leasing

Three months ended Year ended 31 December 31 March 2015 2016 2017 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Rental fees paid to Shandong Gold Group and fellow subsidiaries 4,322 4,116 4,209 1,052 3,291 Rental fees received from Shandong Gold Group and fellow subsidiaries 7,787 6,964 7,213 1,803 1,803

(c) Loans obtained from related parties

Three months ended Year ended 31 December 31 March 2015 2016 2017 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Loans obtained from Shandong Gold Group and fellow subsidiaries: At beginning of the year/period 155,540 260,999 76,697 76,697 7,579 Drawdown during the year/period 73,976 30,000 20,000 — — Repayments paid during the year/period — (165,456) (90,000) — — Interest charged 31,483 3,141 1,582 872 — Interest paid — (51,987) (700) (326) — At end of the year/period 260,999 76,697 7,579 77,243 7,579

Loans obtained from the associate: At beginning of the year/period 310,000 30,000 40,000 40,000 279,300 Drawdown during the year/period 870,000 1,100,000 1,559,300 235,000 450,600 Repayments during the year/period (1,150,000) (1,090,000) (1,320,000) (210,000) (645,000) Interest charged 5,973 2,633 8,326 613 2,264 Interest paid (5,973) (2,633) (8,326) (613) (2,264) At end of the year/period 30,000 40,000 279,300 65,000 84,900

— I-152 — APPENDIX I ACCOUNTANT’S REPORT

Three months ended Year ended 31 December 31 March 2015 2016 2017 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) Total loans obtained from related parties: At beginning of the year/period 465,540 290,999 116,697 116,697 286,879 Drawdown during the year/period 943,976 1,130,000 1,579,300 235,000 450,600 Repayments during the year/period (1,150,000) (1,255,457) (1,410,000) (210,000) (645,000) Interest charged 37,456 5,775 9,908 1,485 2,264 Interest paid (5,973) (54,620) (9,026) (939) (2,264) At end of the year/period 290,999 116,697 286,879 142,243 92,479

The loans obtained from related parties are denominated in RMB and due within one year.

Three months ended Year ended 31 December 31 March 2015 2016 2017 2017 2018 (unaudited)

Average interest rates 5.41% 4.86% 4.42% 4.69% 4.36%

— I-153 — APPENDIX I ACCOUNTANT’S REPORT

(d) Year-end balances arising from sales/purchases of goods/services

As at As at 31 December 31 March 2015 2016 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000

Receivables from related parties Trade receivables - Shandong Gold Group and fellow subsidiaries 5,555 7,558 5,722 16,281 Other receivables - Shandong Gold Group and fellow subsidiaries 50,008 61,878 65,430 14,249 - Associate — 52 — — 50,008 61,930 65,430 14,249 Dividends receivable - Associate — — 6,221 6,221 Prepayments - Shandong Gold Group and fellow subsidiaries 2,750 2,998 2,171 3,421 Deposits with a financial institution - Associate 129,567 133,374 598,532 753,653 Other non-current assets - Shandong Gold Group and fellow subsidiaries 480,988 15,456 476,155 476,155 668,868 221,316 1,154,231 1,269,980 Payables to related parties Trade payables - Shandong Gold Group and fellow subsidiaries 37,036 25,848 12,662 24,989 Other payables - Shandong Gold Group and fellow subsidiaries 83,127 503,376 517,147 512,488 Dividends payable - Shandong Gold Group and fellow subsidiaries 22,506 22,506 110,582 104,690 Receipts in advance - Shandong Gold Group and fellow subsidiaries 45,173 60,269 37,849 38,288 Other non-current liabilities - Shandong Gold Group 25,394 17,745 10,094 10,094 213,236 629,744 688,334 690,549

— I-154 — APPENDIX I ACCOUNTANT’S REPORT

(e) Key management compensation

Key management includes directors (executive and non-executive), members of the Executive Committee and respective department heads. The compensation paid or payable to key management for employee services is shown below:

Three months ended Year ended 31 December 31 March 2015 2016 2017 2017 2018 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Salaries and other short-term employee benefits - Directors and supervisors 4,108 7,653 7,962 1,211 1,602 - Other key management 4,659 5,291 3,198 750 810 8,767 12,944 11,160 1,961 2,412

(f) Disposal of subsidiaries

On 27 October 2016, the Board of Directors approved the Proposal on Transferring 100% Equity Interest of Shandong Xinyi Ornaments Ltd (“Shandong Xinyi”) and Shandong Jinbo Jingmao Ltd. (“Shandong Jinbo”) to Shandong Gold Real Estate Tourism Group Co., Ltd. (“Shandong Gold Tourism”). All parties entered into the equity transfer agreement to transfer 100% equity interest of Shandong Xinyi and Shandong Jinbo at RMB4,665,000 and RMB55,850,000 respectively to Shandong Gold Tourism. The gain from the disposals of the equity interests in the aforesaid subsidiaries is analysed as follows:

Shandong Shandong Xinyi Jinbo Total RMB’000 RMB’000 RMB’000

Fair value of the consideration 4,665 55,850 60,515 Less: Carrying value of former subsidiary’s net assets — (2,262) (2,262) Gain on interests sold 4,665 53,588 58,253

— I-155 — APPENDIX I ACCOUNTANT’S REPORT

The major classes of assets and liabilities of the disposal group are as follows:

As at 31 October 2016 Shandong Shandong Xinyi Jinbo RMB’000 RMB’000

Assets : - Cash and cash equivalents — 33 - Other receivables — 390 - Property, plant and equipment — 109,847 - Land use rights — 17,249 Total assets of the disposed subsidiaries — 127,519 Liabilities: - Trade and other payables — (125,257) Total liabilities of the disposed subsidiaries — (125,257) Total net assets of the disposal subsidiaries — 2,262

— I-156 — APPENDIX I ACCOUNTANT’S REPORT

41 Benefits and interests of directors

Directors’ and chief executive’s emoluments

The remuneration of every director and the chief executive is set out below:

For the three months ended 31 March 2018:

Social Name Fees Salary Bonuses benefits Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Chairman Li Guohong (李國紅) — 39 155 15 209

Executive directors Chen Daojiang (陳道江) — 39 154 15 208 Wang Lijun (王立君) — 39 148 15 202 Wang Peiyue (王培月) — 39 148 15 202 Wang Xiaoling (汪曉玲) — 39 147 15 201 Tang Qi (湯琪) — 39 147 15 201

Independent non-executive directors Gao Yongtao (高永濤) —45——45 Lu Bin (盧斌) —45——45 Xu Ying (許穎) —45——45 Total — 369 899 90 1,358

— I-157 — APPENDIX I ACCOUNTANT’S REPORT

For the year ended 31 December 2017:

Social Name Fees Salary Bonuses benefits Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Chairman Li Guohong (李國紅) — 305 400 99 804 Executive directors Chen Daojiang (陳道江) — 133 335 81 549 Wang Lijun (王立君) — 204 259 82 545 Wang Peiyue (王培月) — 245 703 87 1,035 Wang Xiaoling (汪曉玲) — 214 553 88 855 Qiu Ziyu (邱子裕)* — 144 337 114 595 Tang Qi (湯琪)** —24— 529

Independent non-executive directors Gao Yongtao (高永濤) — 125 — — 125 Bingsheng Teng *** — 110 — — 110 Jiang Jun (姜軍) **** — 110 — — 110 Lu Bin (盧斌) ***** — 15 — — 15 Xu Ying (許穎) ****** — 15 — — 15 Total — 1,644 2,587 556 4,787

* Qiu Ziyu ceased being an executive director from 21 November 2017. ** Tang Qi was elected as an executive director from 21 November 2017. *** Bingsheng Teng ceased being an independent director from 8 December 2017. **** Jiang Jun ceased being an independent director from 8 December 2017. ***** Lu Bin was elected as an independent director from 8 December 2017. ****** Xu Ying was elected as an independent director from 8 December 2017.

— I-158 — APPENDIX I ACCOUNTANT’S REPORT

For the year ended 31 December 2016:

Social Name Fees Salary Bonuses benefits Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Chairman Li Guohong (李國紅)* — 342 733 40 1,115 Wang Lijun (王立君)** — 246 169 71 486 Executive directors Chen Daojiang (陳道江) — 196 517 51 764 Wang Peiyue (王培月)*** — 160 694 51 905 Wang Xiaoling (汪曉玲)**** — 90 529 31 650 Qiu Ziyu (邱子裕) — 144 364 58 566 Bi Hongtao (畢洪濤)***** — 60 104 20 184 Liu Qingde (劉清德)****** — 112 — — 112 Sun Youmin (孫佑民)******* — 127 — 20 147 Independent non-executive directors Gao Yongtao (高永濤) — 120 — — 120 Bingsheng Teng — 120 — — 120 Jiang Jun (姜軍) — 120 — — 120 Total — 1,837 3,110 342 5,289

* Li Guohong was elected as the chairman from 16 May 2016. ** Wang Lijun ceased being the chairman from 15 May 2016. *** Wang Peiyue was elected as a director from 16 May 2016. **** Wang Xiaoling was elected as a director from 16 May 2016. ***** Bi Hongtao ceased being a director from 16 May 2016. ****** Liu Qingde ceased being a director from 16 May 2016. ******* Sun Youmin ceased being a director from 16 May 2016.

— I-159 — APPENDIX I ACCOUNTANT’S REPORT

For the year ended 31 December 2015:

Social Name Fees Salary Bonuses benefits Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Chairman Wang Lijun (王立君)* — 185 190 56 431 Chen Yumin (陳玉民)** —37271074 Executive directors Chen Daojiang (陳道江)*** — 146 216 42 404 Bi Hongtao (畢洪濤)**** — 143 151 34 328 Liu Qingde (劉清德) — 144 182 38 364 Sun Youmin (孫佑民) — 144 220 46 410 Qiu Ziyu (邱子裕)***** — 144 179 44 367 Cui Lun (崔侖)****** — 29 22 10 61 Lin Pufang (林樸芳)******* — 22 — — 22 Independent non-executive directors Gao Yongtao (高永濤) — 120 — — 120 Bingsheng Teng — 120 — — 120 Jiang Jun (姜軍) — 120 — — 120 Total — 1,354 1,187 280 2,821

* Wang Lijun was elected as the chairman from 11 February 2015. ** Chen Yumin ceased being the chairman from 10 February 2015. *** Chen Daojiang was elected as a director from 27 February 2015. **** Bi Hongtao was elected as a director from 27 February 2015. ***** Qiu Ziyu was elected as a director from 27 February 2015. ****** Cui Lun ceased being a director from 10 February 2015. ******* Lin Pufang ceased being a director from 10 February 2015.

In addition to the directors’ emoluments as disclosed above, certain directors who are also directors of the Parent Company and certain fellow subsidiaries received emoluments from different related companies during the years ended 31 December 2015, 2016 and 2017 and the three months ended 31 March 2018, part of which is in respect of their services rendered to the Group in respective years. No apportionment has been made as the directors consider that it is impracticable to apportion this amount between their services rendered to the Group and their services rendered to the Parent Company and the respective fellow subsidiaries.

42 Events after the reporting period

Save as disclosed in the Historical Financial Information, no other significant subsequent events take place subsequent to 31 March 2018.

— I-160 — APPENDIX I ACCOUNTANT’S REPORT

III. ADDITIONAL FINANCIAL INFORMATION OF AGBII

The Group acquired 50% interest in AGBII Group on 30 June 2017. The pre-acquisition financial information of AGBII, including the consolidated balance sheets of AGBII as at 31 December 2015 and 2016 and 30 June 2017, and the consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated cash flow statements for the years ended 31 December 2015 and 2016 and the six months ended 30 June 2016 and 2017 are presented as follows:

Consolidated statements of comprehensive income of AGBII

Section Year ended Six months ended III 31 December 30 June Note 2015 2016 2016 2017 USD’000 USD’000 USD’000 USD’000 (Unaudited)

Revenue 1 706,251 683,258 309,192 320,188 Cost of sales 2 (494,978) (467,011) (202,070) (217,764) Gross profit 211,273 216,247 107,122 102,424 General and administrative expenses (1,339) 893 300 (2,208) Exploration, evaluation and project expenses (2,262) (910) (302) (2,645) Impairment reversals 3 — 275,200 — — Loss on currency translation (52,443) (19,054) (12,236) (5,216) Other (expenses)/income (1,648) 1,025 1,434 46 Profit from operations 153,581 473,401 96,318 92,401 Finance income 4 10,733 8,030 3,674 2,210 Finance costs 4 (31,464) (26,292) (13,333) (9,953) Profit before income tax 132,850 455,139 86,659 84,658 Income tax expenses 5 (62,624) (168,320) (33,305) (33,989) Profit for the year/period 70,226 286,819 53,354 50,669

Attributable to: Equity holders of Argentina Gold (Bermuda) II Ltd. (“AGBII”) 68,291 280,564 52,207 49,514 Non-controlling interests 1,935 6,255 1,147 1,155 70,226 286,819 53,354 50,669

— I-161 — APPENDIX I ACCOUNTANT’S REPORT

Consolidated balance sheets of AGBII

Section As at III As at 31 December 30 June Note 2015 2016 2017 USD’000 USD’000 USD’000

Assets Non-current assets Non-current portion of inventory 34,436 38,446 42,576 Property, plant and equipment 6 835,942 1,072,596 1,155,617 Loans receivable due from related parties 649,163 221,651 — Receivables due from related parties 37,507 1,583 — Other assets 33 38 38 1,557,081 1,334,314 1,198,231

Current assets Cash and equivalents 23,738 95,952 47,632 Trade receivables 1,363 1,739 — Inventories 7 285,286 316,851 395,932 Receivables due from related parties 8,492 175,273 14 Current loans receivable due from related parties 29,028 427,512 — Other current assets 112,896 67,063 90,713 460,803 1,084,390 534,291 Total assets 2,017,884 2,418,704 1,732,522

Liabilities Non-current liabilities Payable due to related parties 48,541 55 — Loans payable due to related parties 400,000 92,000 282,850 Provisions 8 59,383 60,042 110,809 Deferred income tax liabilities 9 230,197 334,390 355,073 738,121 486,487 748,732

— I-162 — APPENDIX I ACCOUNTANT’S REPORT

Section As at III As at 31 December 30 June Note 2015 2016 2017 USD’000 USD’000 USD’000

Current liabilities Trade payables and accruals 111,295 101,950 100,350 Current income tax liabilities — — 629 Payables due to related parties 2,946 68,368 2,305 Current loans due to related parties 50,391 358,391 25,368 Other current liabilities 738 1,360 541 165,370 530,069 129,193 Total liabilities 903,491 1,016,556 877,925

Carve out equity attributable to AGBII shareholders 1,084,736 1,366,215 787,214 Non-controlling interests 29,657 35,933 67,383 Total carve out equity 1,114,393 1,402,148 854,597

Total liabilities and carve out equity 2,017,884 2,418,704 1,732,522

— I-163 — APPENDIX I ACCOUNTANT’S REPORT

Consolidated statements of changes in equity of AGBII

Attributable to equity holders of AGBII

Total carve out equity attributable to equity Non- Total Section III Ordinary Capital Retained Contributed holders of controlling carve out Note Shares stock earnings surplus AGBII interests equity

(in thousands) USD’000 USD’000 USD’000 USD’000 USD’000 USD’000

Balance at 1 January 2015 43 228,249 1,512,037 (728,573) 1,011,713 27,616 1,039,329

Profit for the year — — 68,291 — 68,291 1,935 70,226 Other decreases — — — 4,732 4,732 106 4,838

Balance at 31 December 2015 43 228,249 1,580,328 (723,841) 1,084,736 29,657 1,114,393

Balance at 1 January 2016 43 228,249 1,580,328 (723,841) 1,084,736 29,657 1,114,393

Profit for the year — — 280,564 — 280,564 6,255 286,819 Other decreases — — — 915 915 21 936

Balance at 31 December 2016 43 228,249 1,860,892 (722,926) 1,366,215 35,933 1,402,148

Balance at 1 January 2017 43 228,249 1,860,892 (722,926) 1,366,215 35,933 1,402,148

Profit for the period — — 49,514 — 49,514 1,155 50,669

Transactions with owners Dividend distribution — — (767,885) — (767,885) — (767,885) Funding from non-controlling interest — ————27,15727,157 Other increases — — — 139,370 139,370 3,138 142,508

Balance at 30 June 2017 43 228,249 1,142,521 (583,556) 787,214 67,383 854,597

— I-164 — APPENDIX I ACCOUNTANT’S REPORT

Consolidated statements of cash flows of AGBII

Section Year ended Six months ended III 31 December 30 June Note 2015 2016 2016 2017 USD’000 USD’000 USD’000 USD’000 (Unaudited)

Operating activities Profit for the year/period 70,226 286,819 53,354 50,669 Adjustments for the following items: Depreciation 109,506 120,081 51,540 63,558 Finance costs, net 20,731 18,262 9,659 7,744 Impairment reversals — (275,200) — — Income tax expenses 62,624 168,320 33,305 33,989 Net currency translation losses 52,443 19,054 12,236 5,216 Gains on sale of non-current assets/investments (605) (218) (218) (370) Change in working capital (22,390) (49,827) (3,167) (107,540) Other operating activities 8,743 (97,946) (121,502) (45,285) Operating cash flows before interest and income taxes 301,278 189,345 35,207 7,981 Net interest paid (9,518) (7,456) — (9,013) Income taxes paid (17,880) (3,863) (2,735) — Net cash generated from/(used in) operating activities 273,880 178,026 32,472 (1,032)

Investing activities Property, plant and equipment Capital expenditures (223,000) (106,000) (40,878) (112,420) Issuance of loans receivables (221,651) — — — Settlement of loan receivables 221,651 — — — Net cash used in investing activities (223,000) (106,000) (40,878) (112,420)

Financing activities Debt Repayments (31,200) — — — Proceeds — — — 25,368 Funding from non-controlling interests — — — 40,000 Net cash used in financing activities (31,200) — — 65,368 Effect of exchange rate changes on cash and equivalents (1,007) 188 (112) (236) Net increase/(decrease) in cash and equivalents 18,673 72,214 (8,518) (48,320) Cash and equivalents at beginning of year/period 5,065 23,738 23,738 95,952 Cash and equivalents at the end of year/period 23,738 95,952 15,220 47,632

— I-165 — APPENDIX I ACCOUNTANT’S REPORT

Notes to the additional financial information of AGBII

1 Revenue

Year ended Six months ended 31 December 30 June 2015 2016 2016 2017 USD’000 USD’000 USD’000 USD’000 (Unaudited)

Spot market sales 688,194 660,891 295,738 309,416 Other sales 18,057 22,367 13,454 10,772 706,251 683,258 309,192 320,188

For the six months ended 30 June 2017, revenue is presented net of direct sales taxes of nil (years ended 31 December 2016 and 2015: USD 1,539,000 and USD 33,722,000 respectively).

Revenues include the sale of by-products from the mine of AGBII.

2 Cost of sales

Year ended Six months ended 31 December 30 June 2015 2016 2016 2017 USD’000 USD’000 USD’000 USD’000 (Unaudited)

Direct mining cost 358,704 320,014 139,166 140,794 Depreciation 109,506 120,081 51,540 63,558 Royalty expense 25,278 24,399 10,615 11,983 Community relations 1,490 2,517 749 1,429 494,978 467,011 202,070 217,764

For the six months ended 30 June 2017, direct mining cost includes charges to reduce the cost of inventory to net realisable value of nil (years ended 31 December 2016 and 2015: nil and USD 15,848,000 respectively) and employee costs of USD 52,187,000 (years ended 31 December 2016 and 2015: USD 36,121,000 and USD 85,681,000 respectively).

Direct mining cost includes the costs of extracting by-products.

— I-166 — APPENDIX I ACCOUNTANT’S REPORT

3 Impairment reversals

For the six-month period ended 30 June 2017, AGBII recorded impairment reversals of nil (2016 and 2015: USD 275,200,000 and nil respectively) for non-current assets.

In the fourth quarter of 2016, AGBII management reviewed the updated Life of Mine (“LOM”) plan for the operating mine site for indicators of impairment or reversal, and noted no indicators of impairment, but did note an indicator of potential impairment reversal.

As a result of improvements in the cost structure at the Veladero mine in Argentina, AGBII expanded the open pit in the LOM plan, increasing the expected production and the number of years in the plan. These changes increased Veladero’s Fair Value Less Costs of Disposal (“FVLCD”) which has resulted in a full reversal of the non-current asset impairment loss recorded in 2013. After reflecting the amount of depreciation that would have been taken on the impaired assets, an amount of USD 275 million was recorded as an impairment reversal in the fourth quarter of 2016. The recoverable amount, based on the mine’s FVLCD, was USD 1.6 billion.

4 Finance income and costs

Year ended Six months ended 31 December 30 June 2015 2016 2016 2017 USD’000 USD’000 USD’000 USD’000 (Unaudited)

Interest 29,978 24,977 12,597 9,116 Accretion 1,486 1,315 736 837 Finance income (10,733) (8,030) (3,674) (2,210) Finance costs, net 20,731 18,262 9,659 7,743

— I-167 — APPENDIX I ACCOUNTANT’S REPORT

5 Income tax expenses

Year ended Six months ended 31 December 30 June 2015 2016 2016 2017 USD’000 USD’000 USD’000 USD’000 (Unaudited)

Tax on profit Current tax Charge for the year/period 4,765 64,127 17,173 18,255 Adjustment in respect of prior years/periods 558 — — (2,675) 5,323 64,127 17,173 15,580

Deferred tax Origination and reversal of the temporary differences in the current year/period 57,842 104,343 16,132 16,768 Adjustment in respect of prior years/periods (541) (150) — 1,641 57,301 104,193 16,132 18,409 Income tax expenses 62,624 168,320 33,305 33,989

Tax expense Current Argentina 5,323 64,127 17,173 15,580 International ———— 5,323 64,127 17,173 15,580

Deferred Argentina 57,301 104,193 16,132 18,409 International ———— 57,301 104,193 16,132 18,409 Income tax expenses 62,624 168,320 33,305 33,989

— I-168 — APPENDIX I ACCOUNTANT’S REPORT

Reconciliation to Argentinean Statutory Rate:

Six months ended Year ended 31 December 30 June 2015 2016 2017 USD’000 USD’000 USD’000

At 35% statutory rate 46,497 159,299 29,630 (Decrease)/increase due to: Impact of foreign tax rates (1,474) (861) (326) Income not subject to tax (46,476) (16,485) 436 Net currency translation losses on deferred tax balances 62,250 22,548 — Adjustments in respect of prior years/period 17 (150) — Other withholding taxes 3,747 2,967 — Other items (1,937) 1,002 4,249 Income tax expenses 62,624 168,320 33,989

Statutory rate for Argentina

AGBII operates in foreign tax jurisdictions that have tax rates different from the Argentinean statutory rate.

Currency translation

Deferred tax balances are subject to remeasurement for changes in currency exchange rates each period. The most significant balances are Argentinean deferred tax liabilities. The income tax expenses for year ended 31 December 2016 were USD 22,548,000 (2015: USD 62,250,000), primarily arose from translation losses due to the weakening of the Argentinean peso against the US dollar. These losses are included within deferred tax expense.

6 Property, plant, and equipment

As at As at 31 December 30 June 2015 2016 2017 USD’000 USD’000 USD’000

Net book value - Buildings, plant and equipment 125,212 293,846 294,934 - Mining property costs subject to depreciation 637,610 718,100 784,933 - Mining property costs not subject to depreciation 73,120 60,650 75,750 835,942 1,072,596 1,155,617

— I-169 — APPENDIX I ACCOUNTANT’S REPORT

7 Inventories

As at As at 31 December 30 June 2015 2016 2017 USD’000 USD’000 USD’000

Raw materials - Ore in stockpiles 34,436 38,446 42,576 - Ore on leach pads 136,095 171,818 265,780 Mine operating supplies 132,092 120,184 124,327 Work in process 17,099 17,134 5,825 Finished products — 7,715 — 319,722 355,297 438,508 Non-current ore in stockpiles (34,436) (38,446) (42,576) 285,286 316,851 395,932

8 Provisions

A. Provisions

As at As at 31 December 30 June 2015 2016 2017 USD’000 USD’000 USD’000

Environmental rehabilitation (“PER”) 59,185 59,715 110,251 Share-based payments 198 327 558 59,383 60,042 110,809

— I-170 — APPENDIX I ACCOUNTANT’S REPORT

B. Environmental rehabilitation

Six months ended Year ended 31 December 30 June 2015 2016 2017 USD’000 USD’000 USD’000

At the beginning of the year/period 59,249 59,185 59,715 PERs (decreasing)/arising in the year/period (1,524) (781) 49,699 Settlements, in cash (26) (4) — Accretion 1,486 1,315 837 At the end of the year/period 59,185 59,715 110,251

The eventual settlement of all PERs is expected to take place between 2017 and 2050.

9 Deferred income tax

Recognition and measurement

Deferred income tax assets and liabilities where temporary differences exist between the carrying amounts of assets and liabilities in the AGBII’s balance sheet and their tax bases are recorded. The measurement and recognition of deferred income tax assets and liabilities takes into account: substantively enacted rates that will apply when temporary differences reverse; interpretations of relevant tax legislation; estimates of the tax bases of assets and liabilities; and the deductibility of expenditures for income tax purposes. In addition, the measurement and recognition of deferred tax assets takes into account tax planning strategies. The effect of changes in the assessment of these estimates and factors when they occur are recognised. Changes in deferred income tax assets and liabilities are allocated between net income, other comprehensive income, and goodwill based on the source of the change.

— I-171 — APPENDIX I ACCOUNTANT’S REPORT

Sources of deferred income tax assets and liabilities

As at As at 31 December 30 June 2015 2016 2017 USD’000 USD’000 USD’000

Deferred income tax assets - Environmental rehabilitation 4,731 3,257 1,182 - Other working capital 17,392 19,319 1,132 - Other 1,970 846 (131) 24,093 23,422 2,183

Deferred income tax liabilities - Property, plant and equipment (229,382) (332,196) (332,276) - Inventory (24,908) (25,616) (24,980) (254,290) (357,812) (357,256) Deferred income tax liabilities (net) (230,197) (334,390) (355,073)

The deferred income tax liability of USD 334,390,000 is expected to be realised in more than one year.

Recognition of deferred income tax assets

Deferred income tax assets taking into account the effects of local tax law are recognised. Deferred income tax assets are fully recognised when AGBII conclude that sufficient positive evidence exists to demonstrate that it is probable that a deferred income tax asset will be realised. The main factors considered are:

- Historic and expected future levels of taxable income;

- Tax plans that affect whether tax assets can be realised; and

- The nature, amount and expected timing of reversal of taxable temporary differences.

Levels of future income are mainly affected by: market gold, copper and silver prices; forecasted future costs and expenses to produce gold and copper reserves; quantities of proven and probable gold and copper reserves; market interest rates; and foreign currency exchange rates. If these factors or other circumstances change, an adjustment to the recognition of deferred assets to reflect the latest assessment of the amount of deferred tax assets that is probable will be recorded.

— I-172 — APPENDIX I ACCOUNTANT’S REPORT

Deferred income tax assets not recognised

As at As at 31 December 30 June 2015 2016 2017 USD’000 USD’000 USD’000

Argentina — 98,396 —

Deferred income tax assets not recognised relate to non-capital loss carry forwards of USD 98,396,000, which will expire in 2021.

Source of changes in deferred income tax balances

Six months ended Year ended 31 December 30 June 2015 2016 2017 USD’000 USD’000 USD’000

Deferred income tax (charge)/credit associated with changes in: temporary differences - Property, plant and equipment (44,902) (102,814) (7,006) - Environmental rehabilitation (271) (1,474) (2,074) - Inventory (19,088) (708) 635 - Others 6,960 803 (9,963) (57,301) (104,193) (18,408)

IV. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by the Company or the Group in respective to any period subsequent to 31 March 2018 and up to date of this report. Save as disclosed in this report, no dividend or distribution has been declared or made by the Company in respect of any period subsequent to 31 March 2018.

— I-173 — APPENDIX IIA UNAUDITED PRO FORMA FINANCIAL INFORMATION

The information set forth in this Appendix does not form part of the Accountant’s Report from PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, the reporting accountant of the Company, as set forth in Appendix I to this prospectus, and is included herein for illustrative purposes only. The unaudited pro forma financial information should be read in conjunction with the section headed “Financial Information” in this prospectus and the Accountant’s Report set forth in Appendix I to this prospectus.

A. UNAUDITED PRO FORMA ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS

The following statement of our unaudited pro forma adjusted consolidated net tangible assets is prepared in accordance with Rule 4.29 of the Listing Rules and is set out below to illustrate the effect of the Global Offering on our consolidated net tangible assets as at 31 March 2018 as if the Global Offering had taken place on that date.

Our unaudited pro forma adjusted consolidated net tangible assets has been prepared for illustrative purposes only and because of its hypothetical nature, it may not give a true picture of our consolidated net tangible assets as at 31 March 2018 or at any future dates following the Global Offering. It is prepared based on our audited consolidated net tangible assets as at 31 March 2018 as set out in the Accountant’s Report in Appendix I to this prospectus, and adjusted as described below. No adjustment has been made to reflect any trading result or other transactions of our Group entered into subsequent to 31 March 2018:

Audited consolidated Unaudited net tangible pro forma assets of adjusted Unaudited our Group consolidated pro forma adjusted attributable to net tangible consolidated net equity holders Estimated net assets tangible assets of the of the proceeds from attributable to Group attributable Company as of the Global the owners of to owners of our 31 March 2018 Offering the Company Company per Share RMB’000 RMB’000 RMB’000 RMB HK$ (Note 1) (Note 2) (Note 3) (Note 4)

Based on the Offer Price of HK$18.38 per Share 15,668,835 5,075,009 20,743,844 9.49 10.92 Based on the Offer Price of HK$14.70 per Share 15,668,835 4,035,374 19,704,209 9.02 10.37

— IIA-1 — APPENDIX IIA UNAUDITED PRO FORMA FINANCIAL INFORMATION

Notes:

(1) The audited consolidated net tangible assets attributable to the owners of the Company as at 31 March 2018 is extracted from the Accountant’s Report set out in Appendix I to this prospectus, which is based on the audited consolidated net assets of the Group attributable to the owners of the Company as at 31 March 2018 of RMB16,790,968,000 with an adjustment for the goodwill and intangible assets (except for mining and exploration rights) as at 31 March 2018 of RMB1,122,133,000. (2) The estimated net proceeds from the Global Offering are based on the indicative Offer Price of HK$18.38 and HK$14.70 per Share, being the higher and lower end of the indicative Offer Price range respectively, after deduction of the underwriting fees and other related expenses payable by the Company. (3) The unaudited pro forma net tangible assets per Share is arrived at after the adjustments referred to in the preceding paragraphs and on the basis that 2,184,848,809 Shares were in issue immediately upon completion of the Global Offering, which is assumed to be on 31 March 2018 for the purpose of this unaudited pro forma financial information, and assuming the Over-allotment Option is not exercised. (4) For the purpose of this unaudited pro forma adjusted net tangible assets, the balance stated in Renminbi are converted into Hong Kong dollars at a rate of RMB0.86974 to HKD1.00 set by the PBOC prevailing on 5 September 2018. No representation is made that any amount in Renminbi or U.S. dollars can be or could have been at the relevant dates converted at the above rates or any other rates or at all.

(5) No adjustment has been made to the unaudited pro forma adjusted consolidated net tangible assets to reflect any trading results or other transactions of the Group entered into subsequent to 31 March 2018. In particular, the unaudited pro forma net adjusted tangible assets of the Group has not taken into account the cash dividend of approximately RMB73,764,000 pursuant to the distribution notice dated 18 May 2018. The unaudited pro forma net tangible assets per Share would have been HK$10.88 and HK$10.33 per Share based on the Offer Price of HK$18.38 and HK$14.70, respectively.

— IIA-2 — APPENDIX IIA UNAUDITED PRO FORMA FINANCIAL INFORMATION

B. REPORT FROM THE REPORTING ACCOUNTANT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following is the text of a report received from PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this prospectus.

INDEPENDENT REPORTING ACCOUNTANT’S ASSURANCE REPORT ON THE COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION

To the Directors of Shandong Gold Mining Co., Ltd.

We have completed our assurance engagement to report on the compilation of unaudited pro forma financial information of Shandong Gold Mining Co., Ltd. (the “Company”) and its subsidiaries (collectively the “Group”) by the directors for illustrative purposes only. The unaudited pro forma financial information consists of the unaudited pro forma statement of adjusted net tangible assets of the Group as at 31 March 2018, and related notes (the “Unaudited Pro Forma Financial Information”) as set out on pages IIA-1 to IIA-2 of the Company’s prospectus dated 14 September 2018, in connection with the proposed initial public offering of the H shares of the Company. The applicable criteria on the basis of which the directors have compiled the Unaudited Pro Forma Financial Information are described on pages IIA-1 to IIA-2.

The Unaudited Pro Forma Financial Information has been compiled by the directors to illustrate the impact of the proposed initial public offering on the Group’s financial position as at 31 March 2018 as if the proposed initial public offering had taken place at 31 March 2018. As part of this process, information about the Group’s financial position and financial performance has been extracted by the directors from the Group’s financial information, on which an accountant’s report has been published.

Directors’ Responsibility for the Unaudited Pro Forma Financial Information

The directors are responsible for compiling the Unaudited Pro Forma Financial Information in accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting Guideline 7 Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars (“AG 7”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

— IIA-3 — APPENDIX IIA UNAUDITED PRO FORMA FINANCIAL INFORMATION

Our Independence and Quality Control

We have complied with the independence and other ethical requirements of the Code of Ethics for Professional Accountants issued by the HKICPA, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.

Our firm applies Hong Kong Standard on Quality Control 1 issued by the HKICPA and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

Reporting Accountant’s Responsibilities

Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements 3420, Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus, issued by the HKICPA. This standard requires that the reporting accountant plans and performs procedures to obtain reasonable assurance about whether the directors have compiled the Unaudited Pro Forma Financial Information in accordance with paragraph 4.29 of the Listing Rules and with reference to AG 7 issued by the HKICPA.

For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the Unaudited Pro Forma Financial Information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the Unaudited Pro Forma Financial Information.

The purpose of unaudited pro forma financial information included in a prospectus is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the entity as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the proposed initial public offering at 31 March 2018 would have been as presented.

— IIA-4 — APPENDIX IIA UNAUDITED PRO FORMA FINANCIAL INFORMATION

A reasonable assurance engagement to report on whether the unaudited pro forma financial information has been properly compiled on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the directors in the compilation of the unaudited pro forma financial information provide a reasonable basis for presenting the significant effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether:

• The related pro forma adjustments give appropriate effect to those criteria; and

• The unaudited pro forma financial information reflects the proper application of those adjustments to the unadjusted financial information.

The procedures selected depend on the reporting accountant’s judgment, having regard to the reporting accountant’s understanding of the nature of the company, the event or transaction in respect of which the unaudited pro forma financial information has been compiled, and other relevant engagement circumstances.

The engagement also involves evaluating the overall presentation of the unaudited pro forma financial information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Our work has not been carried out in accordance with auditing standards or other standards and practices generally accepted in the United States of America or auditing standards of the Public Company Accounting Oversight Board (United States) and accordingly should not be relied upon as if it had been carried out in accordance with those standards and practices.

Opinion

In our opinion:

(a) the Unaudited Pro Forma Financial Information has been properly compiled by the directors of the Company on the basis stated;

(b) such basis is consistent with the accounting policies of the Group; and

(c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

PricewaterhouseCoopers Certified Public Accountants Hong Kong, 14 September 2018

— IIA-5 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

The following is the text of a report set out on pages IIB-1 to IIB-2, received from the Company’s reporting accountant, PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this prospectus. The information set out below is the unaudited interim financial information of the Group for the six months ended 30 June 2018, and does not form part of the Accountant’s Report from the reporting accountant, PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, as set out in Appendix I, and is included herein for information purpose only.

REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION

THE DIRECTORS SHANDONG GOLD MINING CO., LTD.

Introduction

We have reviewed the interim financial information set out on pages IIB-3 to IIB-47, which comprises the interim condensed consolidated balance sheet of Shandong Gold Mining Co., Ltd. (the “Company”) and its subsidiaries (together, the “Group”) as at 30 June 2018 and the related interim condensed consolidated statements of profit or loss, comprehensive income, changes in equity and cash flows for the six-month period then ended, and a summary of significant accounting policies and other explanatory notes. The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of a report on interim financial information to be in compliance with the relevant provisions thereof and International Accounting Standard 34 “Interim Financial Reporting”. The directors of the Company are responsible for the preparation and presentation of this interim financial information in accordance with International Accounting Standard 34 “Interim Financial Reporting”. Our responsibility is to express a conclusion on this interim financial information based on our review and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity”. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

— IIB-1 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the interim financial information is not prepared, in all material respects, in accordance with International Accounting Standard 34 “Interim Financial Reporting”.

PricewaterhouseCoopers Certified Public Accountants Hong Kong, 14 September 2018

— IIB-2 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS FOR THE SIX MONTHS ENDED 30 JUNE 2018

Unaudited Six months ended 30 June Note 2018 2017 RMB’000 RMB’000

Revenue 5 26,018,565 25,124,733 Cost of sales 7 (24,014,955) (23,333,044) Gross profit 2,003,610 1,791,689

Selling expenses 7 (14,353) (17,844) General and administrative expenses 7 (575,030) (603,209) Research and development costs 7 (79,711) (109,708) Net impairment gains/(losses) on financial assets 1,808 (810) Other income 1,065 622 Other losses, net 6 (19,223) (34,675) Profit from operations 1,318,166 1,026,065

Finance income 9 17,575 10,172 Finance costs 9 (433,585) (235,865) Finance costs, net 9 (416,010) (225,693)

Share of profit of an associate 10 19,633 17,210

Profit before income tax 921,789 817,582 Income tax expenses 11 (308,870) (171,645) Profit for the period 612,919 645,937

Profit attributable to: Equity holders of the Company 575,290 615,432 Non-controlling interests 37,629 30,505 612,919 645,937

Basic and diluted earnings per share for the profit attributable to the equity holders of the Company (RMB) 12 0.31 0.34

— IIB-3 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 30 JUNE 2018

Unaudited Six months ended 30 June Note 2018 2017 RMB’000 RMB’000

Profit for the period 612,919 645,937 Other comprehensive income: Items that may be reclassified to profit or loss Share of other comprehensive losses of the associate (49) — Currency translation differences 330 (55) Other comprehensive income/(losses) for the period, net of tax 281 (55)

Total comprehensive income for the period 613,200 645,882

Total comprehensive income attributable to: — Equity holders of the Company 575,571 615,377 — Non-controlling interests 37,629 30,505 613,200 645,882

— IIB-4 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS AS AT 30 JUNE 2018

As at As at 30 June 31 December Note 2018 2017 RMB’000 RMB’000 (Unaudited) (Audited)

Assets Non-current assets Property, plant and equipment 13 21,830,475 21,110,946 Investment properties 226,538 226,684 Land use rights 342,469 339,824 Intangible assets 14 11,774,709 12,014,845 Goodwill 15 1,139,359 1,126,673 Investment in an associate 10 418,792 399,208 Financial assets at fair value through other comprehensive income 2,015 — Available-for-sale financial assets — 2,015 Inventories 185,538 143,896 Deferred income tax assets 20 176,286 152,421 Restricted bank deposits — 520,198 Other non-current assets 858,268 832,017 36,954,449 36,868,727 Current assets Inventories 3,104,891 2,958,398 Trade and other receivables 16 924,890 720,841 Prepaid income tax 22,444 31,197 Restricted bank deposits 130,796 149,744 Cash and cash equivalents 2,593,592 2,402,814 6,776,613 6,262,994

Total assets 43,731,062 43,131,721

— IIB-5 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

As at As at 30 June 31 December Note 2018 2017 RMB’000 RMB’000 (Unaudited) (Audited)

Equity and liabilities Equity attributable to owners of the company Share capital 1,857,119 1,857,119 Treasury shares (6,385) (6,385) Reserves 4,904,068 4,905,879 Retained earnings 10,212,636 9,710,812 16,967,438 16,467,425 Non-controlling interests 1,052,637 1,026,341 Total equity 18,020,075 17,493,766

Liabilities Non-current liabilities Borrowings 19 7,117,190 8,091,819 Deferred income tax liabilities 20 4,115,905 4,135,396 Deferred revenue 16,920 17,526 Provision for asset retirement obligations 21 570,202 570,586 Other non-current liabilities 64,931 70,443 11,885,148 12,885,770 Current liabilities Trade and other payables 17 3,664,265 3,927,444 Current income tax liabilities 182,692 177,231 Borrowings 19 4,730,884 2,883,107 Current portion of other non-current liabilities 15,992 12,992 Financial liabilities at fair value through profit or loss 18 5,232,006 5,751,411 13,825,839 12,752,185

Total liabilities 25,710,987 25,637,955

Total equity and liabilities 43,731,062 43,131,721

Net current liabilities (7,049,226) (6,489,191)

Total assets less current liabilities 29,905,223 30,379,536

— IIB-6 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 30 JUNE 2018

Attributable to owners of the Company

Non- Section II Share Treasury Retained controlling Total Note capital shares Reserves earnings Sub-total interests equity

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

(Unaudited) Balance at 1 January 2018 1,857,119 (6,385) 4,905,879 9,710,812 16,467,425 1,026,341 17,493,766

Profit for the period — — — 575,290 575,290 37,629 612,919 Other comprehensive income Share of other comprehensive losses of an associate — — (49) — (49) — (49) Currency translation differences — — 330 — 330 — 330

Total other comprehensive income, net of tax — — 281 — 281 — 281

Total comprehensive income — — 281 575,290 575,571 37,629 613,200

Transactions with owners in their capacity as owners Dividends to shareholders of the Company — — — (73,466) (73,466) — (73,466) Dividends paid by subsidiaries to non-controlling interests — — — — — (9,798) (9,798) Change in ownership interests in subsidiaries without change of control — — (2,265) — (2,265) (1,483) (3,748) Others — — 173 — 173 (52) 121

Total transactions with owners in their capacity as owners — — (2,092) (73,466) (75,558) (11,333) (86,891)

Balance at 30 June 2018 1,857,119 (6,385) 4,904,068 10,212,636 16,967,438 1,052,637 18,020,075

— IIB-7 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

Attributable to owners of the Company

Non- Section II Share Treasury Retained controlling Total Note capital shares Reserves earnings Sub-total interests equity

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

(Unaudited) Balance at 1 January 2017 1,857,119 (6,385) 4,825,012 9,005,069 15,680,815 1,008,906 16,689,721

Profit for the period — — — 615,432 615,432 30,505 645,937 Other comprehensive losses Currency translation differences — — (55) — (55) — (55)

Total other comprehensive losses, net of tax — — (55) — (55) — (55)

Total comprehensive (losses)/income — — (55) 615,432 615,377 30,505 645,882

Transactions with owners in their capacity as owners Dividends to shareholders of the Company — — — (184,161) (184,161) — (184,161) Dividends paid by subsidiaries to non-controlling interests —————(8,838) (8,838) Others — — 798 — 798 (424) 374

Total transactions with owners in their capacity as owners — — 798 (184,161) (183,363) (9,262) (192,625)

Balance at 30 June 2017 1,857,119 (6,385) 4,825,755 9,436,340 16,112,829 1,030,149 17,142,978

— IIB-8 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED 30 JUNE 2018

Unaudited Six months ended 30 June Note 2018 2017 RMB’000 RMB’000

Cash flows from operating activities Cash generated from operations 2,171,865 1,527,432 Interest received 17,575 10,172 Income tax paid (365,357) (210,265) Net cash generated from operating activities 1,824,083 1,327,339

Cash flows from investing activities Payment for acquisition of a joint operation, net of cash acquired — (6,349,852) Purchases of intangible assets (54,879) (372,687) Purchases of property, plant and equipment (1,845,655) (724,916) Purchases of land use rights (8,202) (23,669) Proceeds from disposal of property, plant and equipment, land use rights and intangible assets 11,281 5,283 Payments of deposits for gold future contracts (40,186) — Payment for settlement of gold future/forward contracts (24,925) (17,225) Dividends received from the associate 6,221 — Decrease/(increase) in restricted bank deposits 539,146 (2,193,645) Net cash used in investing activities (1,417,199) (9,676,711)

Cash flows from financing activities Payments for acquisition of additional interests in subsidiary (3,748) — Proceeds from bank borrowings 2,335,711 7,827,327 Repayments of bank borrowings (1,122,976) (430,000) Interest paid (207,008) (71,111) Proceeds from borrowings from related parties 1,102,600 579,300 Repayments of borrowings from related parties (919,300) (580,000) Proceeds derived from gold leasing arrangements 4,318,665 5,388,574 Settlement of gold leasing arrangements (4,905,496) (2,508,889) Repayments of corporate bonds (611,004) (400,000) Dividends paid to shareholders (103,609) (81,430) Dividends paid to non-controlling interests (3,133) (8,838) Payments for finance cost associated with gold leasing contracts (79,496) (55,035) Payments of guarantee and arrangement fee for a borrowing (18,687) (19,751) Net cash (used in)/generated from financing activities (217,481) 9,640,147

Net increase in cash and cash equivalents 189,403 1,290,775 Cash and cash equivalents at beginning of the period 2,402,814 1,159,795 Exchange gains/(losses) on cash and cash equivalents 1,375 (344) Cash and cash equivalents at end of the period 2,593,592 2,450,226

— IIB-9 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION

1 General information

Shandong Gold Mining Co., Ltd. (the “Company”) was established in the People’s Republic of China (“PRC” or “China”) on 31 January 2000 as a joint stock company with limited liability under the Company Law of the PRC by Shandong Gold Group Co., Ltd. (“SDG Group Co” or the “Parent Company”), Shandong Zhaojin Group Co., Ltd., Shandong Laizhou Gold (Group) Co., Ltd., Jinan Yuquan Development Center (subsequently renamed as Jinan Yuquan Development Co., Ltd.) and Rushan Gold Mine (subsequently renamed as Shandong Jinzhou Mining Group Co., Ltd.).

The A shares of the Company have been listed on the Shanghai Stock Exchange since August 2003.

The Company and its subsidiaries, hereinafter collectively referred to as the “Group”, is principally engaged in mining and processing of gold, sale of gold products, manufacturing and sale of building decoration materials. The address of the Company’s registered office is Building No. 3, Shuntai Square, No. 2000 Shunhua Road, Jinan, Shandong Province, the PRC.

The condensed consolidated financial information is presented in Renminbi (“RMB”), which is also the functional currency of the Company.

2 Basis of preparation

This condensed consolidated interim financial information of the Company for the six months ended 30 June 2018 has been prepared in accordance with IAS 34 “Interim financial reporting” issued by the International Accounting Standards Board (“IASB”). The condensed consolidated interim financial information should be read in conjunction with the Group’s Historical Financial Information for the three years ended 31 December 2015, 2016 and 2017 and three months ended 31 March 2018 (the “Historical Financial Information”), which have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) issued by IASB.

The condensed consolidated interim financial information have been prepared under the historical cost convention except for certain financial instruments, which are measured at fair value. Except as described below, the accounting policies applied are consistent with those as adopted for the preparation of the Historical Financial Information of the Company for the years ended 31 December 2015, 2016 and 2017 and three months ended 31 March 2018.

— IIB-10 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

Going concern

As at 30 June 2018, the Group’s current liabilities exceeded its current assets by approximately RMB7,049,226,000. The Company’s directors are of the opinion that the Group will be able to finance its future financing requirements and working capital based on the following considerations:

(a) The Group is expected to remain profitable and hence continue to generate significant operating cash inflows from its future business operations; and

(b) The Group has maintained its long business relationship with its principal bankers and the principal bankers have indicated their willingness to further provide banking facilities of RMB9,809,870,000 (the “Facilities”) to the Group whenever it has any financing needs in the next twelve months from 30 June 2018.

In view of the above, the Company’s directors are confident that there will be sufficient financial resources available to the Group to enable it to meet its liabilities as and when they fall due and to continue to operate for at least the next twelve months from 30 June 2018. Accordingly, the Company’s directors have prepared the condensed consolidated interim financial information on a going concern basis.

(a) New or amended standards and interpretations adopted by the Group

A number of new or amended standards and interpretation (“IFRIC”) which became effective for the current reporting period are summarised as below:

IFRS 9 Financial Instruments

IFRS 15 Revenue from Contracts with Customers

Amendments to IFRS 2 Share Based Payments, on clarifying how to account for certain types of share-based payment transactions

IFRIC 22 Foreign Currency Transactions and Advance Consideration

The adoption of IFRS 2 (amendments) and IFRIC 22 did not have any impact on the Group’s accounting policies and presentation of the condensed consolidated interim financial information. The impact of the adoption of IFRS 9 and IFRS 15 and any applicable changes in accounting policies have been disclosed in Note (c) below.

Except for the impact of the new or amended standards and interpretation as mentioned above, the significant accounting policies and methods of computation used in the condensed consolidated interim financial information for the six months ended 30 June 2018 are the same as those followed in the preparation of the Historical Financial Information.

— IIB-11 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

(b) Impact of standards and interpretations issued but not yet applied by the Group

Certain new or revised standards and interpretation to existing standards have been issued which may be applicable to the Group but are not effective for the financial year beginning on 1 January 2018 and not being early adopted by the Group are summarised as below:

New standards, amendments and interpretations Published date Effective date

IFRS 16 Leases January 2016 Annual periods beginning on or after 1 January 2019

IFRS 17 Insurance contracts February 2018 Annual periods beginning on or after 1 January 2021

IFRIC 23 Uncertainty over income tax June 2017 Annual periods beginning on treatments or after 1 January 2019

IAS 19 ‘Employee benefits’ on plan February 2018 Annual periods beginning on amendment, curtailment or or after 1 January 2019 settlement

Amendments Sale or contribution assets September 2014 To be determined to IFRS 10 between an investor and its and IAS 28 associate or joint venture

Amendments Annual Improvements to December 2017 Annual periods beginning on to IFRS IFRSs 2015-2017 Cycle or after 1 January 2019

Amendment Long term interests in October 2017 Annual periods beginning on to IAS 28 associates and joint ventures or after 1 January 2019

Amendment Prepayment features with October 2017 Annual periods beginning on to IFRS 9 negative compensation or after 1 January 2019

The Group has already commenced an assessment of the impact of these new or amended standards and interpretations. According to the preliminary assessment made by the Company’s directors, except for the below discussed, no significant impact on the financial performance and positions of the Group is expected when they become effective.

IFRS 16 ‘Leases’

IFRS 16 will result in almost all leases being recognised on the balance sheet, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only exceptions are short-term and low-value leases.

The accounting for lessors will not significantly change.

— IIB-12 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

The standard will affect primarily the accounting for Group’s operating leases. As at 30 June 2018, the Group has non-cancellable operating lease commitments of RMB165,485,000 (Note 24(b)). The Group anticipates that the net impact (as a result of the combination of the interest expense arising from the lease liabilities and the amortisation of the right-of-use assets as compared to the rental expenses under existing standard) on the Group’s financial performance will not be material.

Some of the commitments may be covered by the exception for short-term and low value leases and some commitments may relate to arrangements that will not qualify as leases under IFRS 16.

There are no other standards that are not yet effective and that would be expected to have a material impact on the Group in the current or future reporting periods and on foreseeable future transactions.

(c) Changes in accounting policies

This note explains the impact of the adoption of IFRS 9 “Financial Instruments” (“IFRS 9”) and IFRS 15 “Revenue from Contracts with Customers” (“IFRS 15”) on the Group’s financial information and also discloses the new accounting policies that have been applied from 1 January 2018, where they are different to those applied in prior years/periods.

Certain of the Group’s accounting policies have been changed to comply with the adoption of IFRS 9 and IFRS 15. IFRS 9 replaces the provisions of IAS 39 Financial Instruments (“IAS 39”) that relate to the recognition, classification and measurement of financial assets and financial liabilities; derecognition of financial instruments; impairment of financial assets and hedge accounting. IFRS 9 also significantly amends other standards dealing with financial instruments such as IFRS 7 “Financial Instruments — Disclosures”. IFRS 15 replaces the provisions of IAS 18 “Revenue” (“IAS 18”) and IAS “11 Construction Contracts” (“IAS 11”) that relate to the recognition, classification and measurement of revenue and costs.

(i) IFRS 9 - Impact on the financial information of the Group

As a result of the changes in the Group’s accounting policies, as explained below, IFRS 9 was adopted without restating any comparative information.

— IIB-13 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

The following table shows the adjustments recognised for each individual line item. Line items that were not affected by the changes have not been included. As a result, the sub-totals and totals disclosed cannot be recalculated from the numbers provided.

1 January 2018 As originally 1 January 2018 Balance sheet (extract) (unaudited) presented IFRS 9 Restated RMB’000 RMB’000 RMB’000

Non-current assets Financial assets at fair value through other comprehensive income — 2,015 2,015 Available-for-sale financial assets 2,015 (2,015) — Total 2,015 — 2,015

Management has assessed the business models and the contractual terms of the cash flows apply to the financial assets held by the Group at the date of initial application of IFRS 9 (1 January 2018) and has classified its financial instruments into the appropriate IFRS 9 categories, which are those to be measured subsequently at fair value (either through other comprehensive income (“FVOCI”), or through profit or loss (“FVPL”)), and those to be measured at amortised cost.

(a) Classification and measurement

The main effects resulting from this reclassification are as follows:

Available-for-sale As at 1 January 2018 financial assets FVOCI RMB’000 RMB’000

Opening balance - IAS 39 2,015 — Reclassify non-trading unlisted equity securities from AFS to FVOCI (2,015) 2,015 Opening balance - IFRS 9 — 2,015

There is no effect resulting from this reclassification on the Group’s equity as both IAS 39 and IFRS 9 require any changes in the fair value of the non-trading unlisted equity securities to be recognised as other comprehensive income/loss in equity.

There is no impact on the Group’s accounting for financial liabilities. The Group accounts for the gold leasing contracts as financial liabilities that are designated at fair value through profit or loss. The derecognition rules have been transferred from IAS 39 Financial Instruments: Recognition and Measurement and have not been changed. The Group’s financial liabilities previously carried at amortised costs remained to be measured at amortised costs under IFRS 9.

— IIB-14 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

(b) Impairment of financial assets

The Group has two types of financial assets at amortised cost subject to IFRS 9’s new expected credit loss model:

— trade receivables

— other receivables (excluding non-financial assets)

The Group revised its impairment methodology under IFRS 9 for each of these classes of assets. While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was immaterial.

For trade and other receivables (excluding non-financial assets), the Group applies the simplified approach to providing for expected credit losses as prescribed by IFRS 9, which requires the use of the lifetime expected loss provision for all trade and other receivables (excluding non-financial assets). No further provision has been recognised in retained earnings as at 1 January 2018 for those trade and other receivables (excluding non-financial assets) whose credit risk has been assessed as other than low because the balance is not significant and the adoption of the new impairment methodology as described in note 4.2 only results in an insignificant incremental amount of provision to be made.

(c) Accounting policies applied from 1 January 2018 onwards due to the adoption of IFRS 9

Investments and other financial assets

Classification

From 1 January 2018, the Group classifies its financial assets in the following measurement categories:

• those to be measured subsequently at fair value (either through OCI, or through profit or loss), and

• those to be measured at amortised cost.

The classification depends on the Group’s business model for managing the financial assets and the contractual terms of the cash flows.

For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in equity instruments that are not held for trading, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI).

The Group reclassifies debt investments when and only when its business model for managing those assets changes.

— IIB-15 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

Measurement

At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss.

Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.

Debt instruments

Subsequent measurement of debt instruments depends on the Group’s business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the Group classifies its debt instruments:

• Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains/(losses), together with foreign exchange gains and losses. Impairment losses are presented as separate line item in the statement of profit or loss.

• FVOCI: Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in other gains/(losses). Interest income from these financial assets is included in finance income using the effective interest rate method. Foreign exchange gains and losses are presented in other gains/(losses) and impairment expenses are presented as separate line item in the statement of profit or loss.

• FVPL: Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain or loss on a debt investment that is subsequently measured at FVPL is recognised in profit or loss and presented net within other gains/(losses) in the period in which it arises.

Equity instruments

The Group subsequently measures all equity investments at fair value. Where the Group’s management has elected to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. Dividends from such investments continue to be recognised in profit or loss as other income when the Group’s right to receive payments is established.

— IIB-16 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

Changes in the fair value of financial assets at FVPL are recognised in other gains/(losses), net in the statement of profit or loss as applicable. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.

Impairment

From 1 January 2018, the Group assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk.

For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables.

(ii) IFRS 15 - Impact on the financial information of the Group

As a result of the changes in the Group’s accounting policies, as explained below, IFRS 15 was generally adopted without restating any comparative information. The adoption of IFRS 15 in the current period does not result in any impact on the amounts reported in the condensed consolidated interim financial information and/or disclosures set out in the condensed consolidated interim financial information except that, the Group has adopted the following accounting policies on revenues with effect from 1 January 2018:

Accounting policies applied from 1 January 2018 onwards due to the adoption of IFRS 15

IFRS 15 requires that revenue from contracts with customers be recognised upon the transfer of control over goods or services to the customer. As such, upon adoption, this requirement under IFRS 15 resulted in no impact to our financial statements as the timing of revenue recognition on our sale of goods is unchanged.

(a) Sale of goods

Revenue is recognised when control over the goods has been transferred to the customer. It is generally satisfied at a point in time when the legal title has passed to the customer.

(b) Rental income

Rental income from investment property is recognised in the statement of profit or loss on a straight-line basis over the term of the lease.

(c) Processing income

Processing income is recognised in the statement of profit or loss upon performance of the services.

— IIB-17 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

3 Critical accounting estimates and judgements

The preparation of interim financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing this condensed consolidated interim financial information, the significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the Historical Financial Information.

4 Financial risk management and financial instruments

4.1 Financial risk factors

The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk.

The condensed consolidated interim financial information do not include all financial risk management information and disclosures required in the annual financial information, and should be read in conjunction with the Historical Financial Information.

There have been no changes in the risk management policies since 31 March 2018.

4.2 Credit risk

The Group is exposed to credit risk if counterparties fail to make payments as they fall due. For financial assets originated from 1 January 2018, the following credit risk modelling applies:

The Group considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk, the Group compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition.

It considers available reasonable and supportive forwarding-looking information. Especially the following indicators are incorporated:

• internal credit rating;

• external credit rating;

• actual or expected significant adverse changes in business, financial or economic conditions that are expected to cause a significant change to the customer’s ability to meet its obligations;

— IIB-18 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

• actual or expected significant changes in the operating results of the debtor/customer;

• significant increases in credit risk on other financial instruments of the same customer;

• significant changes in the expected performance and behaviour of the customer, including changes in the payment status of customer in the Group and changes in the operating results of the customer.

(i) Other receivables from related parties

The Group uses four categories for those receivables which reflect their credit risk and how the loss provision is determined for each of those categories. These internal credit risk ratings are aligned to external credit ratings.

A summary of the assumptions underpinning the Group’s expected credit loss model is as follows:

Basis for recognition of Category Group’s definition of categories expected credit loss provision

Performing Customers have a low risk of default 12 months expected losses. Where the and a strong capacity to meet expected lifetime of an asset is less contractual cash flows than 12 months, expected losses are measured at its expected lifetime

Underperforming Receivables for which there is a Lifetime expected losses significant increase in credit risk; as significant increase in credit risk is presumed if interest and/or principal repayments are 30 days past due

Non-performing Interest and/or principal repayments Lifetime expected losses are 60 days past due

Write-off Interest and/or principal repayments Asset is written off are 120 days past due and there is no reasonable expectation of recovery

The Group accounts for its credit risk by appropriately providing for expected credit losses on a timely basis. In calculating the expected credit loss rates, the Group considers historical loss rates for each category of receivables and adjusts for forward looking macroeconomic data.

— IIB-19 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

As at 1 January 2018, majority of the internal credit rating of other receivables from related parties were performing. As at 1 January 2018, the carrying amount of other receivables from related parties amounted to RMB65,430,000 and the related loss allowance provision amounted to RMB8,302,000. No further provision was deemed required to restate the impairment provision at 1 January 2018.

(ii) Trade and other receivables (excluding prepayments and other receivables from related parties)

The Group applies the simplified approach to provide for expected credit losses prescribed by IFRS 9, which permits the use of the lifetime expected loss provision for all trade and other receivables (excluding prepayments and other receivables from related parties).

As at 1 January 2018, the loss allowance provision for the remaining balances was determined and the expected credit losses below has already incorporated the consideration of forward looking information. No further provision was deemed required to restate the impairment provision at 1 January 2018.

Up to 1 1to2 2to3 Over 3 year years years years Total

Unaudited Trade receivables

As at 1 January 2018 Expected loss rate 0.3% 10% 20% 75% Gross carrying amount (RMB’000) 114,775 77 82 7,198 122,132 Loss allowance provision (RMB’000) (316) (8) (16) (5,405) (5,745)

Other receivables (excluding prepayments and other receivables from related parties)

As at 1 January 2018 Expected loss rate 0.2% 17% 64% 90% Gross carrying amount (RMB’000) 92,383 22,523 2,880 81,535 199,321 Loss allowance provision (RMB’000) (1,797) (3,764) (1,831) (73,699) (81,091)

— IIB-20 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

4.3 Liquidity risk

The table below analyses the Group’s non-derivative financial liabilities and net-settled derivative financial liabilities into relevant maturity grouping based on the remaining period at the date of statement of consolidated balance sheets to the contractual maturity date. Derivative financial liabilities are included in the analysis if their contractual maturities are essential for an understanding of the timing of the cash flows. The amounts disclosed in the table are the contractual undiscounted cash flows.

Less than 1 Between 1 Between 2 Over 5 year and 2 years and 5 years years Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Unaudited As at 30 June 2018 Borrowings 5,048,749 7,407,164 90,027 — 12,545,940 Trade and other payables 3,380,418 — — — 3,380,418 Other non-current liabilities 15,992 58,861 6,040 30 80,923 Financial liabilities at fair value through profit or loss 5,232,006 — — — 5,232,006 13,677,165 7,466,025 96,067 30 21,239,287

Audited As at 31 December 2017 Borrowings 3,144,245 270,279 8,274,831 — 11,689,355 Trade and other payables 3,515,273 — — — 3,515,273 Other non-current liabilities 12,992 23,027 19,426 27,990 83,435 Financial liabilities at fair value through profit or loss 5,751,411 — — — 5,751,411 12,423,921 293,306 8,294,257 27,990 21,039,474

4.4 Fair value estimation

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).

• Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).

• Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).

— IIB-21 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

The following table presents the Group’s assets and liabilities that are measured at fair value at 30 June 2018.

Level 1 Level 2 Level 3 Total RMB’000 RMB’000 RMB’000 RMB’000

Unaudited Liabilities Financial liabilities at fair value through profit or loss - Gold leasing contracts 5,232,006 — — 5,232,006

The following table presents the Group’s assets and liabilities that are measured at fair value at 31 December 2017.

Level 1 Level 2 Level 3 Total RMB’000 RMB’000 RMB’000 RMB’000

Audited Liabilities Financial liabilities at fair value through profit or loss - Gold leasing contracts 5,751,411 — — 5,751,411

There were no transfers among level 1, 2 and 3 during the period.

There were no changes in valuation techniques during the period.

5 Segment information

The President Office (總裁辦公會) of the Company is the Group’s chief operating decision-maker (“CODM”). Management has determined the operating segments based on the information reviewed by the CODM for the purposes of allocating resources and assessing performance. Financial information of the following reportable segments has been separately presented as discrete segment information for CODM’s review:

• Gold mining — Mining of gold ore; and

• Gold refining — Production and sales of gold.

The financial information of the reportable segments as set out below are presented in a manner consistent with the way in which the information is reported to the CODM for the purpose of allocating resources and assessing performance.

— IIB-22 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

The Group evaluates performance based on profit or loss before income tax expense. The Group accounts for inter-segment sales and transfers as if the sales or transfers were to third parties.

For the six months ended 30 June 2018 (Unaudited) Gold Gold Inter-segment Mining Refining elimination Total RMB’000 RMB’000 RMB’000 RMB’000

Revenue from customers and recognised at a point in time Revenue from customers (other than rental income) 5,289,594 24,543,905 (3,822,709) 26,010,790 Rental income 7,775 — — 7,775 Inter-segment revenue (3,822,709) — 3,822,709 — Revenue from external customers 1,474,660 24,543,905 — 26,018,565

Profit from operations 1,261,708 56,458 — 1,318,166

Finance income 16,353 1,222 — 17,575 Finance costs (430,607) (2,978) — (433,585) Share of profit of an associate 19,633 — — 19,633

Profit before income tax 867,087 54,702 — 921,789 Income tax expenses (295,194) (13,676) — (308,870) Profit for the period 571,893 41,026 — 612,919

Other material non-cash items Depreciation and amortisation 1,279,832 21,245 — 1,301,077 Reversal of impairment of trade and other receivables, net (380) (1,428) — (1,808) Other segment information Addition to non-current assets 1,821,369 19,576 — 1,840,945

As at 30 June 2018 (Unaudited) Gold Gold Inter-segment Mining Refining elimination Total RMB’000 RMB’000 RMB’000 RMB’000

Segment assets and liabilities Total assets 42,724,179 2,707,245 (1,700,362) 43,731,062 Include: investment in an associate 418,792 — — 418,792 Total liabilities 25,330,105 2,081,244 (1,700,362) 25,710,987

— IIB-23 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

For the six months ended 30 June 2017 (Unaudited) Gold Gold Inter-segment Mining Refining elimination Total RMB’000 RMB’000 RMB’000 RMB’000

Revenue from customers and recognised at a point in time Revenue from customers (other than rental income) 4,227,905 24,987,488 (4,098,898) 25,116,495 Rental revenue 8,238 — — 8,238 Inter-segment revenue (4,098,898) — 4,098,898 — Revenue from external customers 137,245 24,987,488 — 25,124,733

Profit from operations 956,983 69,082 — 1,026,065

Finance income 9,524 648 — 10,172 Finance costs (233,298) (2,567) — (235,865) Share of profit of an associate 17,210 — — 17,210

Profit before income tax 750,419 67,163 — 817,582 Income tax expenses (154,854) (16,791) — (171,645) Profit for the period 595,565 50,372 — 645,937

Other material non-cash items Depreciation and amortisation 825,348 25,694 — 851,042 Provision for/(reversal of) impairment of trade and other receivables, net 1,828 (1,018) — 810 Other segment information Addition to non-current assets 6,551,373 5,341 — 6,556,714

As at 31 December 2017 (Audited) Gold Gold Inter-segment Mining Refining elimination Total RMB’000 RMB’000 RMB’000 RMB’000

Segment assets and liabilities Total assets 42,380,200 2,297,777 (1,546,256) 43,131,721 Include: investment in an associate 399,208 — — 399,208 Total liabilities 25,470,360 1,713,851 (1,546,256) 25,637,955

— IIB-24 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

Analysis of revenue

Unaudited Six months ended 30 June 2018 2017 RMB’000 RMB’000

The PRC 24,717,222 25,124,733 Outside the PRC 1,301,343 — 26,018,565 25,124,733

Revenue is attributed to countries based on the customers’ locations.

Gold sold through the Shanghai Gold Exchange were as follows:

Unaudited Six months ended 30 June 2018 2017 RMB’000 RMB’000

Gold refining segment 18,886,820 20,025,406

Analysis of non-current assets

As at As at 30 June 31 December 2018 2017 RMB’000 RMB’000 (Unaudited) (Audited)

The PRC 28,905,644 28,960,854 Outside the PRC 7,870,504 7,753,437 36,776,148 36,714,291

Note: The non-current assets above exclude available-for-sale financial assets, financial assets at fair value through other comprehensive income and deferred income tax assets.

— IIB-25 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

6 Other losses, net

Unaudited Six months ended 30 June 2018 2017 RMB’000 RMB’000

Fair value losses on gold future/forward contracts (24,925) (17,225) Net losses on disposal/write-off of property, plant and equipment (8,496) (9,312) Others 14,198 (8,138) (19,223) (34,675)

7 Expenses by nature

Expenses included in cost of sales, selling expenses, general and administrative expenses and research and development costs are analysed as follows:

Unaudited Six months ended 30 June 2018 2017 RMB’000 RMB’000

Changes in inventories of finished goods and work in progress (61,684) 182,217 Raw materials and consumables used 21,450,082 21,151,228 Employee benefit expenses (including directors’ emoluments) (Note 8) 1,004,934 840,083 Depreciation (Note a) 986,668 508,143 Amortisation (Note b) 314,409 342,899 Labor outsourcing expenses 338,435 492,116 Outsourcing stripping costs 66,303 — Mining resource compensation fees 29,174 — Mining resource tax 98,335 92,921 Repairs and maintenance costs 40,187 37,184 Transportation costs and port expenses 39,426 34,060 Operating lease rental expenses 20,443 9,834 Auditor’s remuneration 1,800 1,500 Others 355,537 371,620 Total cost of sales, selling expenses, general and administrative expenses and research and development costs 24,684,049 24,063,805

— IIB-26 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

(a) Depreciation charged to profit or loss is analysed as follows:

Unaudited Six months ended 30 June 2018 2017 RMB’000 RMB’000

Depreciation for the period — Property, plant and equipment (Note 13) 1,002,084 526,037 — Investment properties 5,591 5,503 1,007,675 531,540 Less: capitalised in construction in progress (21,007) (23,397) Amount charged to profit or loss 986,668 508,143

Charged to: — Cost of sales 920,710 450,153 — General and administrative expenses 65,958 57,990 986,668 508,143

(b) Amortisation charged to profit or loss is analysed as follows:

Unaudited Six months ended 30 June 2018 2017 RMB’000 RMB’000

Amortisation for the period — Land use rights 5,556 4,734 — Intangible assets (Note 14) 303,773 325,105 — Long-term prepayments 5,181 13,160 314,510 342,999 Less: capitalised in construction in progress (101) (100) Amount charged to profit or loss 314,409 342,899

Charged to: — Cost of sales 301,696 322,296 — General and administrative expenses 12,713 20,603 314,409 342,899

— IIB-27 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

8 Employee benefit expenses

Unaudited Six months ended 30 June 2018 2017 RMB’000 RMB’000

Wages, salaries, bonuses and allowances 689,571 563,465 Housing subsidies 48,864 44,430 Contributions to pension plans 110,718 84,163 Welfare and other expenses 155,781 148,025 1,004,934 840,083

9 Finance costs, net

Unaudited Six months ended 30 June 2018 2017 RMB’000 RMB’000

Interest expense: - bank borrowings 134,729 10,180 - borrowings from related parties 3,979 2,493 - corporate bonds 78,251 87,731 - provisions: unwinding of discount from asset retirement obligations (Note 21) 4,771 411 Finance costs for arranging gold leasing contracts 79,496 55,035 Realised and unrealised fair value losses on gold leasing contracts 67,426 62,617 Guarantee and arrangement fee for a borrowing 18,687 19,751 Net foreign exchange losses 48,359 289 Finance costs 435,698 238,507 Less: amounts capitalised on qualifying assets (2,113) (2,642) Total finance costs 433,585 235,865

Interest income: - bank deposits 14,770 8,424 - deposits within a related party 2,805 1,748 Total finance income 17,575 10,172

Finance costs, net 416,010 225,693

— IIB-28 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

10 Investment accounted for using the equity method

Unaudited Six months ended 30 June 2018 2017 RMB’000 RMB’000

Beginning of the period 399,208 371,461 Share of profit 19,633 17,210 Share of other comprehensive losses (49) — End of the period 418,792 388,671

Details of the associate of the Group is set out below. The associate has share capital consisting solely of ordinary shares, which are held directly by the Company.

Place of business/country of % of ownership Measurement Name of entity incorporation interest method

Shandong Gold Group Finance Co., Ltd. (“Group Finance”) The PRC 30% Equity

There are no contingent liabilities relating to the Group’s interests in the associate.

— IIB-29 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

Summarised financial information for associate

Set out below is a summary of the unaudited financial information for the associate.

Summarised balance sheet

Shandong Gold Group Finance Co., Ltd. As at As at 30 June 31 December 2018 2017 RMB’000 RMB’000 (Unaudited) (Audited)

Current Cash and cash equivalents 1,365,584 1,107,864 Other current assets (excluding cash) 1,518,324 1,308,008 Total current assets 2,883,908 2,415,872 Financial liabilities (excluding trade payables) 5,155,400 4,436,235 Other current liabilities (including trade payables) 26,895 57,779 Total current liabilities 5,182,295 4,494,014 Non-current Assets 3,694,361 3,408,835 Net assets 1,395,974 1,330,693

Summarised statements of comprehensive income

Shandong Gold Group Finance Co., Ltd. Six months ended 30 June 2018 2017 RMB’000 RMB’000 (Unaudited) (Unaudited)

Revenue 89,200 90,848 Profit before income tax 87,257 77,994

Profit for the period 65,443 57,367 Other comprehensive losses (164) — Total comprehensive income for the period 65,279 57,367

— IIB-30 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

Reconciliation of summarised financial information

Shandong Gold Group Finance Co., Ltd. Six months ended 30 June 2018 2017 RMB’000 RMB’000 (Unaudited) (Unaudited)

Opening net assets attributable to equity holder of the associate at beginning of period 1,330,694 1,238,204 Profit for the period 65,443 57,367 Other comprehensive losses (164) — Closing net assets attributable to equity holder of the associate at end of period 1,395,973 1,295,571 Interest in associate (30%) 418,792 388,671 Carrying value 418,792 388,671

11 Income tax expenses

Unaudited Six months ended 30 June 2018 2017 RMB’000 RMB’000

Current income tax: - The PRC (note (a)) 236,006 219,384 - Outside the PRC (note (b)) 143,565 — 379,571 219,384 Deferred income tax credit (70,701) (47,739) 308,870 171,645

(a) The provision for PRC enterprise income tax (“EIT”) is calculated based on the statutory income tax rate of 25% on the estimated tax assessable profit of each of the companies comprising the Group, determined in accordance with the relevant PRC income tax rules and regulations, except for the Company and certain subsidiaries which are taxed at preferential tax rate of 15% based on the relevant PRC tax laws and regulations.

— IIB-31 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

(b) The estimated tax assessable profit of the Group’s overseas joint operation (as acquired on 30 June 2017) is taxed at the statutory income tax rate in Argentina of 30% in accordance with the Argentina income tax law with effect from 1 January 2018. In February 2017, the Company set up Shandong Gold Mining (Hong Kong) Co., Limited (山東黃金礦業(香港)有限公司 or “SDHK”), a wholly-owned subsidiary, that is incorporated in Hong Kong. No provision for income tax has been made by SDHK as it has no estimated taxable profits in any financial period since the date of its incorporation.

12 Earnings per share

Basic earnings per share are calculated by dividing the profit attributable to equity holders of the Company by the number of ordinary shares in issue.

Unaudited Six months ended 30 June 2018 2017

Profit attributable to equity holders of the Company (RMB’000) 575,290 615,432 Weighted number of ordinary shares in issue (thousands) 1,850,734 1,850,734 Basic earnings per share (RMB per share) 0.31 0.34

As the Company had no dilutive instruments for the six months ended 30 June 2017 and 2018, the Group’s diluted earnings per share equals to its basic earnings per share.

13 Property, plant and equipment

Plant machinery Mining and Construction Buildings structures equipment in progress Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

As at 1 January 2018 Cost 6,259,115 13,216,013 6,819,353 2,665,860 28,960,341 Accumulated depreciation (1,746,449) (2,783,565) (3,017,929) — (7,547,943) Impairment provision (22,150) (32,110) (7,634) — (61,894) Currency translation differences (41,196) (124,689) (64,575) (9,098) (239,558) Net book amount 4,449,320 10,275,649 3,729,215 2,656,762 21,110,946

— IIB-32 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

Plant machinery Mining and Construction Buildings structures equipment in progress Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Six months ended 30 June 2018 (Unaudited) Opening net book amount 4,449,320 10,275,649 3,729,215 2,656,762 21,110,946 Additions 7,015 297,068 74,375 1,303,988 1,682,446 Transfer to construction in progress — — (17,221) 17,221 — Transfers upon completion of construction 182,197 241,200 123,650 (547,047) — Transfer to investment properties (4,927) — — — (4,927) Disposals/write-off (Note a) (2,581) — (27,683) (8,157) (38,421) Depreciation charges (230,496) (340,134) (431,454) — (1,002,084) Currency translation differences 17,899 50,081 14,009 526 82,515 Closing net book amount 4,418,427 10,523,864 3,464,891 3,423,293 21,830,475

As at 30 June 2018 (Unaudited) Cost 6,440,085 13,754,281 6,867,423 3,431,865 30,493,654 Accumulated depreciation (1,976,211) (3,123,699) (3,344,332) — (8,444,242) Impairment provision (22,150) (32,110) (7,634) — (61,894) Currency translation differences (23,297) (74,608) (50,566) (8,572) (157,043) Net book amount 4,418,427 10,523,864 3,464,891 3,423,293 21,830,475

(a) The disposals/write-off for the period included an amount of approximately RMB11,785,000 which has arisen from the change in the discount rate used for the asset retirement obligations as disclosed in Note 21.

— IIB-33 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

14 Intangible assets

Mining and exploration Patent Software Trademark rights rights licenses and others Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

As at 1 January 2018 Cost 16,011,676 13,361 47,786 3,347 16,076,170 Accumulated amortisation (4,021,725) (11,247) (27,469) (884) (4,061,325) Net book amount 11,989,951 2,114 20,317 2,463 12,014,845

Six months ended 30 June 2018 (Unaudited) Opening net book amount 11,989,951 2,114 20,317 2,463 12,014,845 Additions 37,349 — 539 25,749 63,637 Amortisation charges (300,906) (668) (2,198) (1) (303,773) Closing net book amount 11,726,394 1,446 18,658 28,211 11,774,709

As at 30 June 2018 (Unaudited) Cost 16,049,025 13,361 48,325 29,096 16,139,807 Accumulated amortisation (4,322,631) (11,915) (29,667) (885) (4,365,098) Net book amount 11,726,394 1,446 18,658 28,211 11,774,709

15 Goodwill

As at As at 30 June 31 December 2018 2017 RMB’000 RMB’000 (Unaudited) (Audited)

Goodwill on business combinations in the PRC (note a) 120,694 120,694 Goodwill on acquisition of the joint operation (note b) 1,042,959 1,042,959 Currency translation differences (24,294) (36,980) 1,139,359 1,126,673

(a) This balance comprised of the goodwill arose from the Group’s acquisition of a non-wholly owned subsidiary, Chifeng Chaihulanzi Gold Mining Co., Ltd. of approximately RMB65,340,000 and the goodwill as taken up upon the acquisition of Shandong Gold Guilaizhuang Mining Co., Ltd. (an acquisition which has been accounted for as a business combination under common control) of approximately RMB55,354,000.

— IIB-34 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

(b) The goodwill of US$153,956,000 (approximately RMB1,042,959,000 on the acquisition date) was resulted from the acquisition of 50% interest in Argentina Gold (Bermuda) II Ltd. (“AGBII”) and its subsidiary Minera Argentina Gold S.R.L. (“MAG”) (together the “AGBII Group”) as completed on 30 June 2017. The AGBII Group principally engages in the production and sale of gold globally. The goodwill was allocated to the Veladero mine as owned by MAG, the subsidiary of AGBII. The Directors have determined the goodwill on the acquisition based on a purchase price allocation (“PPA”) as performed by an independent valuer.

16 Trade and other receivables

As at As at 30 June 31 December 2018 2017 RMB’000 RMB’000 (Unaudited) (Audited)

Trade receivables (Note a) - related parties 36,161 5,722 - third parties 303,939 116,410 340,100 122,132 Less: provision for impairment of trade receivables (5,942) (5,745) Trade receivables — net 334,158 116,387 Notes receivable 2,650 19,066 336,808 135,453

Prepayments - related parties 2,854 2,171 - third parties 195,876 173,133 198,730 175,304

Amounts due from related parties 19,202 65,430 Deposits 127,989 78,257 Payments on behalf of third parties 41,415 37,078 Advances to staff 6,179 9,065 Others 67,664 74,921 262,449 264,751 Less: provision for impairment of other receivables (87,370) (89,393) Other receivables — net 175,079 175,358 Value-added tax recoverable 214,273 228,505 Dividends receivable from the associate — 6,221 Total 924,890 720,841

— IIB-35 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

(a) Aging analysis of trade receivables at each balance date based on invoice dates were as follows:

As at As at 30 June 31 December 2018 2017 RMB’000 RMB’000 (Unaudited) (Audited)

Within 1 year 328,617 114,775 1 - 2 years 4,489 77 2 - 3 years 52 82 Over 3 years 6,942 7,198 340,100 122,132

(b) Movement of provision for impairment of trade and other receivables is as follows:

Unaudited Six months ended 30 June 2018 2017 RMB’000 RMB’000

At beginning of the period 95,138 103,452 Provision 1,994 2,610 Reversal (3,802) (1,800) Written-off (18) — At end of the period 93,312 104,262

— IIB-36 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

17 Trade and other payables

As at As at 30 June 31 December 2018 2017 RMB’000 RMB’000 (Unaudited) (Audited)

Trade payables (Note a) - third parties 987,622 949,419 - related parties 34,085 12,662 1,021,707 962,081 Notes payable (Note b) 437,445 388,878 Payable for purchases of property, plant and equipment and mining rights 605,290 800,143 Deposits received from contractors 251,846 267,631 Purchase consideration payable 191,827 191,827 Customer deposits and receipts in advance — 127,219 Contract liabilities 88,449 — Other taxes payable 63,310 135,563 Dividends payable 165,385 188,863 Amounts due to related parties 509,209 517,147 Salaries and staff welfare payable 132,088 149,389 Interest payable 118,605 110,576 Others 79,104 88,127 Total 3,664,265 3,927,444

(a) Aging analysis of trade payables of the Group on each balance sheet date based on invoice dates were as follows:

As at As at 30 June 31 December 2018 2017 RMB’000 RMB’000 (Unaudited) (Audited)

Less than 1 year 994,246 942,330 1 - 2 years 14,088 8,365 2 - 3 years 3,471 1,714 Over 3 years 9,902 9,672 1,021,707 962,081

— IIB-37 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

(b) Aging analysis of notes payable of the Group on each balance sheet date based on issue dates of the notes were as follows:

As at As at 30 June 31 December 2018 2017 RMB’000 RMB’000 (Unaudited) (Audited)

Less than 1 year 437,445 388,878

18 Financial liabilities at fair value through profit or loss

Unaudited Six months ended 30 June 2018 2017 RMB’000 RMB’000

At beginning of the period 5,751,411 3,169,789 Proceeds received during the period 4,318,665 5,388,574 Changes in fair value of the obligations associated with outstanding gold leasing contracts 40,714 26,122 Settlement during the period (4,878,784) (2,472,394) At end of the period 5,232,006 6,112,091

Financial liabilities at fair value through profit or loss primarily represent the fair value of gold leasing contracts, gold forward contracts and futures contracts. As at 30 June 2018, the fair value of these financial liabilities was RMB5,232 million (30 June 2017: RMB6,112 million).

The Group financed through entering into gold leasing contracts with banks to lease gold from banks and subsequently sold the gold through the Shanghai Gold Exchange to obtain financing. Upon maturity of those lease contracts, the Group has to return to such banks with gold of the same quantity and specification, which would be usually purchased through the Shanghai Gold Exchange. The maturity periods of gold leasing contracts are generally less than 1 year (1 year inclusive). The Group has designated the liabilities associated with such gold leasing arrangements as financial liabilities at fair value through profit or loss. Realised or unrealised fair value gain/loss on gold leasing contracts are recognised and presented in the consolidated statement of profit or loss as ‘finance costs’ (Note 9). The fair value of all gold leasing contracts are determined based on current ask prices in an active market.

— IIB-38 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

The Group had also entered into certain gold forward/future contracts for managing part of the risk associated with the fluctuation in the purchase prices of gold for its operations or managing the price risk associated with the aforesaid gold leasing contracts. These gold forward/future contracts have also been designated as financial liabilities at fair value through profit or loss. Realised and unrealised fair values gain/loss on the gold forward/future contracts are recognised in the consolidated statement of profit or loss as ‘other gains/(losses), net’ (Note 6).

19 Borrowings

As at As at 30 June 31 December 2018 2017 RMB’000 RMB’000 (Unaudited) (Audited)

Non-current Long-term bank borrowings - secured 4,446,355 4,835,308 - unsecured 1,984,980 1,960,259 Corporate bonds 2,685,398 3,294,480 9,116,733 10,090,047 Less: borrowings due within one year (1,999,543) (1,998,228) 7,117,190 8,091,819

Current Short-term bank borrowings - unsecured 2,261,162 598,000 Borrowings from related parties 470,179 286,879 Corporate bonds 1,999,543 1,998,228 4,730,884 2,883,107 Total 11,848,074 10,974,926

— IIB-39 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

20 Deferred income tax

The analysis of deferred income tax assets and deferred income tax liabilities is as follows:

As at As at 30 June 31 December 2018 2017 RMB’000 RMB’000 (Unaudited) (Audited)

Deferred income tax assets 176,286 152,421 Deferred income tax liabilities (4,115,905) (4,135,396) Deferred income tax liabilities (net) (3,939,619) (3,982,975)

The gross movement on the deferred income tax account is as follows:

Unaudited Six months ended 30 June 2018 2017 RMB’000 RMB’000

Beginning of the period (3,982,975) (1,831,028) Credited to profit or loss 70,701 47,739 Acquisition of a joint operation — (2,504,103) Currency translation differences (27,345) — End of the period (3,939,619) (4,287,392)

21 Provision for asset retirement obligations

Unaudited Six months ended 30 June 2018 2017 RMB’000 RMB’000

Beginning of the period 570,586 29,965 Interest charge on unwinding of discounts 4,771 411 Additional provision 2,229 168,867 Change in discount rate (Note 13(a)) (11,785) — Acquisition of a joint operation — 205,701 Currency translation differences 4,401 — End of the period 570,202 404,944

— IIB-40 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

Provision for asset retirement obligations represented the estimated amount and timing of future closure and restoration projects.

22 Dividends

Six months ended Year ended 30 June 31 December 2018 2017 RMB’000 RMB’000 (Unaudited) (Audited)

2017 final dividend of RMB0.04 per ordinary share 73,764 — 2017 interim dividend of RMB0.08 per ordinary share — 147,528 2016 final dividend of RMB0.1 per ordinary share — 184,410 73,764 331,938

23 Contingencies

The Veladero Mine held by the AGBII Group, a joint operation of the Group, experienced several environmental incidents as set out below:

— Release of cyanide-bearing process solution incident in 2015 — the failure of a valve on a leach pad pipeline at the Veladero Mine resulted in the release of cyanide-bearing process solution into a nearby waterway through a diversion channel gate that was open at the time of the incident;

— Release of crushed-ore saturated with process solution incident in 2016 - ice rolled down the slope of the leach pad damaged a pipe carrying process solution, and caused some material to leave the leach pad; and

— Release of gold-bearing process solution incident in 2017 - the monitoring system at the Veladero Mine detected a rupture of a pipe carrying gold-bearing process solution on the leach pad.

As of 30 June 2018, MAG, the subsidiary of AGBII, was involved in several ongoing administrative and civil proceedings with respect to the abovementioned environmental incidents.

In assessing loss contingencies, the AGBII Group has evaluated the legal proceedings and determined that no amounts should be made for any potential liabilities or asset impairment relating to the aforesaid legal proceedings as an amount cannot be reasonably estimated.

— IIB-41 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

The Group has evaluated the legal proceedings with the assistance from its external legal counsel. Additionally, the Group will be indemnified by Barrick Gold Corporation (but only until 30 June 2019) for any losses suffered in relation to any final decision against MAG in respect of legal proceedings commenced by the third parties (including government authorities) in relation to these incidents as occurred prior to the Group’s acquisition of its interest in the AGBII Group. As a result, no provision has been made for any potential liabilities or asset impairment relating to the aforesaid legal proceedings.

Other than those as disclosed above, the Group does not have any other pending litigations which may result in a significant loss to the Group.

24 Commitments

(a) Capital commitments

Capital expenditure contracted for by the Group at the balance sheet date but not yet incurred is as follows:

As at As at 30 June 31 December 2018 2017 RMB’000 RMB’000 (Unaudited) (Audited)

Property, plant and equipment 698,274 355,692 Mining and exploration rights 366,465 366,465 1,064,739 722,157

(b) Operating lease commitments — where the Group is the lessee

The Group leases various plant and machinery under cancellable operating lease agreements. The lease expenditures charged to profit or loss during the six months ended 30 June 2017 and 2018 were disclosed in Note 7.

— IIB-42 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

The Group has commitments to make the following future minimum lease payments under non-cancelable operating leases are as follows:

As at As at 30 June 31 December 2018 2017 RMB’000 RMB’000 (Unaudited) (Audited)

Land and buildings: - Within 1 year 21,972 14,640 - From 1 year to 5 years 35,142 31,294 - Over 5 years 89,539 90,981 146,653 136,915 Machinery: - Within 1 year 4,848 14,445 - From 1 year to 5 years 11,898 18,989 16,746 33,434

Others: - Within 1 year 1,362 2,663 - From 1 year to 5 years 724 575 2,086 3,238

Total 165,485 173,587

25 Related party transactions

The directors of the Company consider that Shandong Gold Group, a company registered in the PRC, as the Company’s parent company. The State-owned Assets Supervision and Administration Commission of Shandong Provincial People’s Government is the ultimate controlling party. The Group has extensive transactions with the Parent Company. For the purpose of disclosures of related party transactions, to the extent possible, the Group has procedures in place to assist the identification of the immediate ownership structure of its customers and suppliers as to whether they are related parties.

Management believes that all material related party transactions and balances, of which they are aware of, have been adequately disclosed. Sales of goods and provision of services to related parties are at state-prescribed prices or prices that are also available to other customers. The Group considers that these sales are activities in the ordinary course of business. In addition to the transactions detailed elsewhere in these condensed consolidated interim financial information, the Group had the following material transactions with related parties.

— IIB-43 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

(a) Transaction with Shandong Gold Group and fellow subsidiaries

Unaudited Six months ended 30 June 2018 2017 RMB’000 RMB’000

Purchases of electricity 190,257 183,932 Purchases of construction services 42,339 34,939 Purchases of processing services 1,622 1,575 Purchases of gold 110,038 24,816 Purchases of other services 26,173 5,719 Total purchases 370,429 250,981

Sales of gold 56,871 49,674 Sales of other metals 3,755 16,946 Sales of other materials and services 3,116 1,296 Total sales 63,742 67,916

(b) Property leasing

Unaudited Six months ended 30 June 2018 2017 RMB’000 RMB’000

Rental fees paid to Shandong Gold Group and fellow subsidiaries 7,779 2,869

Rental fees received from Shandong Gold Group and fellow subsidiaries 2,850 3,469

— IIB-44 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

(c) Loans obtained from related parties

Unaudited Six months ended 30 June 2018 2017 RMB’000 RMB’000

Loans obtained from Shandong Gold Group and fellow subsidiaries: At beginning of the period 7,579 76,697 Drawdown during the period — 20,000 Repayments paid during the period — (70,000) Interest charged — 881 Interest paid — (508) At end of the period 7,579 27,070

Loans obtained from the associate: At beginning of the period 279,300 40,000 Drawdown during the period 1,102,600 559,300 Repayments during the period (919,300) (510,000) Interest charged 3,979 1,612 Interest paid (3,979) (1,612) At end of the period 462,600 89,300

Total loans obtained from related parties: At beginning of the period 286,879 116,697 Drawdown during the period 1,102,600 579,300 Repayments during the period (919,300) (580,000) Interest charged 3,979 2,493 Interest paid (3,979) (2,120) At end of the period 470,179 116,370

The loans obtained from related parties are denominated in RMB and due within one year.

Unaudited Six months ended 30 June 2018 2017

Average interest rates 4.35% 4.60%

— IIB-45 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

(d) Year-end balances arising from sales/purchases of goods/services

As at As at 30 June 31 December 2018 2017 RMB’000 RMB’000 (Unaudited) (Audited)

Receivables from related parties Trade receivables - Shandong Gold Group and fellow subsidiaries 36,161 5,722

Other receivables - Shandong Gold Group and fellow subsidiaries 19,202 65,430

Dividends receivable - Associate — 6,221

Prepayments - Shandong Gold Group and fellow subsidiaries 2,854 2,171

Deposits with a financial institution - Associate 332,828 598,532

Other non-current assets (prepayment for long-term assets) - Shandong Gold Group and fellow subsidiaries 479,341 476,155

870,386 1,154,231

Payables to related parties Trade payables - Shandong Gold Group and fellow subsidiaries 34,085 12,662

Other payables - Shandong Gold Group and fellow subsidiaries 509,209 517,147

Dividends payable - Shandong Gold Group 145,783 110,582

Advances - Shandong Gold Group and fellow subsidiaries 32,051 37,849

Other non-current liabilities (payables for long-term assets) - Shandong Gold Group 10,094 10,094

731,222 688,334

— IIB-46 — APPENDIX IIB UNAUDITED INTERIM FINANCIAL INFORMATION

(e) Key management compensation

Key management includes directors (executive and non-executive), members of the Executive Committee and respective department heads. The compensation paid or payable to key management for employee services is shown below:

Unaudited Six months ended 30 June 2018 2017 RMB’000 RMB’000

Salaries and other short-term employee benefits - Directors and supervisors 3,010 2,658 - Other key management 1,995 1,998 5,005 4,656

— IIB-47 — 山東黃金礦業股份有限公司 SHANDONG CO.,LTD. GOLD MINING 山東黃金礦業股份有限公司 SHANDONG GOLD MINING CO.,LTD. (A joint stock company incorporated in the People’s Republic of China with limited liability) Stock code: 1787

山東黃金礦業股份有限公司 GLOBAL OFFERING SHANDONG GOLD MINING CO.,LTD. Volume 1

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