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APPENDIX III INDEPENDENT TECHNICAL REPORT
Competent Person’s Report for the Qiligou Granite Dimension Stone Project, Shaanxi Province, China
Ankang Hanlong Mining Co., Limited
SRK Consulting China Ltd SCN620 May 2021
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APPENDIX III INDEPENDENT TECHNICAL REPORT
Competent Person’s Report for the Qiligou Granite Dimension Stone Project, Shaanxi Province, China
Prepared for: Ankang Hanlong Mining Co., Limited Hanyin County, Ankang, Shaanxi Province China
+852-3596 3641 www.hlmining.com.hk
Prepared by: SRK Consulting China Ltd B315 COFCO Plaza, No.8 Jianguomennei Dajie Dongcheng District, Beijing, 100005 China
+86 10 6511 1000 www.srk.com
Lead Author: Pengfei Xiao Initials: PX Reviewer: Dr Anson Xu Initials: AX
File Name: SCN620_Huayin Granite Project CPR Draft Ver8_20210503_tc(against_0415).docx
Suggested Citation: SRK Consulting China Ltd. 2021. Competent Person’s Report for the Qiligou Granite Dimension Stone Project, Shaanxi Province, China. Draft. Prepared for Ankang Hanlong Mining Co., Limited. Project number: SCN620. Issued May 2021.
Cover Image(s): Project Site
Copyright © 2021
SRK Consulting China Ltd SCN620 May 2021
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APPENDIX III INDEPENDENT TECHNICAL REPORT
Acknowledgments
SRK would like to acknowledge the support and collaboration provided by Ankang Hanlong Mining Co., Limited personnel for this assignment. Their collaboration was greatly appreciated and instrumental to the success of this project.
The opinions expressed in this Report have been based on the information supplied to SRK Consulting China Ltd (SRK) by Ankang Hanlong Mining Co., Limited (the Client). The opinions in this Report are provided in response to a specific request from the Client to do so. SRK has exercised all due care in reviewing the supplied information. Whilst SRK has compared key supplied data with expected values, the accuracy of the results and conclusions from the review are entirely reliant on the accuracy and completeness of the supplied data. SRK does not accept responsibility for any errors or omissions in the supplied information and does not accept any consequential liability arising from commercial decisions or actions resulting from them. Opinions presented in this report apply to the site conditions and features as they existed at the time of SRK’s investigations, and those reasonably foreseeable. These opinions do not necessarily apply to conditions and features that may arise after the date of this Report, about which SRK had no prior knowledge nor had the opportunity to evaluate.
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APPENDIX III INDEPENDENT TECHNICAL REPORT
CONTENTS
UsefulDefinitions ...... [III-15]
ExecutiveSummary ...... [III-18]
1 Introduction and Scope of Report ...... [III-32]
2 Background and Brief ...... [III-32]
3 Programme Objectives and Work Programme ...... [III-33]
3.1 PurposeoftheReport ...... [III-33]
3.2 ReportingStandard ...... [III-33]
3.3 LimitationsStatement ...... [III-33]
3.4 WorkProgramme ...... [III-34]
3.5 ProjectTeam ...... [III-34]
3.6 StatementofSRKIndependence ...... [III-37]
3.7 Warranties ...... [III-38]
3.8 SRKExperience ...... [III-38]
3.9 ComplianceandIndependenceStatement ...... [III-40]
3.10ForwardLookingStatement ...... [III-42]
4 Project Description ...... [III-43]
4.1 Accessibility ...... [III-43]
4.2 Topography,Climate,LocalEconomyandInfrastructure ...... [III-44]
4.3 MineralRight ...... [III-46]
4.4 PreviousExplorationWork ...... [III-47]
4.5 ProductoftheProject ...... [III-49]
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5Geology...... [III-50]
5.1 RegionalGeology ...... [III-50]
5.2 LocalGeology ...... [III-51]
5.2.1 Nomenclature ...... [III-51]
5.2.2 MaficRocks ...... [III-52]
5.2.3 Stratigraphy ...... [III-53]
5.2.4 Structure ...... [III-54]
5.3 Mineralization ...... [III-54]
5.3.1 MineralizedZones/Orebodies ...... [III-54]
5.3.2 MineralogicalCharacteristics ...... [III-59]
5.4 SRKConclusion ...... [III-61]
6 Database for Resource Estimation ...... [III-61]
6.1 Database ...... [III-61]
6.2 TopographicalSurveyandGeologicalMapping ...... [III-61]
6.3 Drilling ...... [III-61]
6.4 Sampling ...... [III-63]
6.5 LaboratoryTests ...... [III-65]
6.5.1 PhysicalPropertyTest ...... [III-67]
6.5.2 RadioactivityTest ...... [III-68]
6.5.3 GeotechnicalFeatures ...... [III-69]
6.5.4 SRKConclusionsonTestingResults ...... [III-70]
6.6 BlockYieldandBlockSize ...... [III-71]
6.7 SRKVerification ...... [III-73]
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7 Mineral Resource Estimates ...... [III-76]
7.1 GraniteMineralResourceClassification ...... [III-76]
7.2 Geological Modelling ...... [III-76]
7.3 ResourceClassification ...... [III-78]
7.4 SRKResourceStatement ...... [III-79]
7.5 ExplorationPotential ...... [III-80]
8 Ore Reserve Estimates ...... [III-80]
8.1 MineDesign ...... [III-80]
8.2 MineInventory ...... [III-81]
8.3 ModifyingFactors ...... [III-81]
8.4 MineLifeAnalysis ...... [III-81]
8.5 OreReserveStatement ...... [III-82]
8.6 PotentialImpactstoOreReserveEstimate ...... [III-82]
9 Mining ...... [III-82]
9.1 MineOperationsHistoryandCurrentStatus ...... [III-82]
9.2 HydrologyandHydrogeology ...... [III-82]
9.3 GeotechnicalProperties ...... [III-83]
9.4 MiningMethod ...... [III-84]
9.4.1 MineDesign ...... [III-84]
9.4.2 DimensionBlockMining ...... [III-86]
9.4.3 MineEquipment ...... [III-89]
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9.5 MineLifeSchedule ...... [III-90]
9.5.1 WorkingFlatCapacity ...... [III-90]
9.5.2 ConstructionandInitialMiningArea ...... [III-90]
9.5.3 ProductionRamp-up ...... [III-91]
9.5.4 MineLifeSchedule ...... [III-91]
9.6 MineServices ...... [III-93]
10 Workforce ...... [III-93]
10.1WorkforceNumbers ...... [III-93]
10.2AssessmentofWorkforce ...... [III-93]
11 Infrastructures and Public Facilities ...... [III-94]
11.1RoadAccess ...... [III-94]
11.2PowerSupply ...... [III-94]
11.3WaterSupply ...... [III-95]
11.4FuelSupply ...... [III-95]
11.5 Repair Facilities ...... [III-96]
11.6BlocksYard ...... [III-96]
11.7WasteDump ...... [III-96]
11.8OfficeBuildingsandAccommodations ...... [III-97]
11.9ConclusionsandRecommendations ...... [III-97]
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12 Environment, Permits and Social Impacts ...... [III-98]
12.1OperationalLicencesandPermits ...... [III-98]
12.1.1 BusinessLicence ...... [III-98]
12.1.2 MiningLicence ...... [III-98]
12.1.3 SafetyProductionPermit ...... [III-98]
12.1.4 OtherOperationalPermits ...... [III-99]
12.2 Environmental, Social, Health and Safety (ESHS) Review Process, ScopeandStandards ...... [III-99]
12.3StatusofESHSApprovalsandPermits ...... [III-100]
12.4EnvironmentalConformanceandCompliance ...... [III-101]
12.5KeyEnvironmental,Social,andHealthandSafetyAspects ...... [III-101]
12.5.1 SiteEcologicalAssessment ...... [III-101]
12.5.2 WasteRockManagement ...... [III-102]
12.5.3 DomesticWasteManagement ...... [III-102]
12.5.4 WaterManagement ...... [III-102]
12.5.5 Airandnoiseemissions ...... [III-103]
12.5.6 HazardousMaterialsManagement ...... [III-103]
12.5.7 Environmental Protection and Management Plan (‘‘EPMP’’) . . . [III-103]
12.5.8 Site Closure Planning and Rehabilitation ...... [III-104]
12.5.9 OccupationalHealthandSafety(OHS) ...... [III-104]
12.5.10 Socialaspects ...... [III-105]
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13 Project Costs ...... [III-106]
13.1InitialCapital ...... [III-106]
13.2SustainingCapital ...... [III-108]
13.3WorkingCapital ...... [III-109]
13.4OperatingCosts ...... [III-109]
13.5ConclusionsandRecommendations ...... [III-110]
14 Project Status and Conclusion ...... [III-110]
14.1ProjectHistory ...... [III-110]
14.2ProjectStatus ...... [III-111]
14.3ProductoftheProject ...... [III-111]
14.4Conclusion ...... [III-112]
Closure ...... [III-113]
References ...... [III-114]
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APPENDIX III INDEPENDENT TECHNICAL REPORT
TABLES
Table1: SRKProjectTeam ...... [III-35]
Table 2: SRK’s recent reports for listing on the HKEx ...... [III-39]
Table 3: Mining Licence Coordinates of Qiligou Granite Project ...... [III-47]
Table4: SummaryofExplorationWorkbyHanzhongBrigade ...... [III-48]
Table5: JointsMappingforOrebodyK1 ...... [III-55]
Table6: JointsMappingforOrebodyK2 ...... [III-56]
Table7: JointsMappingforOrebodyK3 ...... [III-58]
Table8: XRFAssayResults ...... [III-60]
Table9: Semi-QuantitativeTotalAnalysis ...... [III-60]
Table 10: Drillhole and Trench Information ...... [III-63]
Table11: LaboratoryandStandardsUsed ...... [III-66]
Table12: TestResultsofPhysicalProperties ...... [III-67]
Table13: PhysicalTestResultsvsStandardRequirements ...... [III-67]
Table14: RadioactivityTestResults ...... [III-69]
Table15: UniaxialCompressiveStrengthTest ...... [III-69]
Table16: RQDStatistic ...... [III-70]
Table17: BlockSizeRecord(January2020toApril2020) ...... [III-71]
Table18: BlockAttributes ...... [III-77]
Table19: QiligouResourceStatementasof30April2021 ...... [III-79]
Table 20: Qiligou Resource Statement by Orebodies as of 30 April 2021 . . . [III-79]
Table21: MineInventory ...... [III-81]
Table 22: Qiligou Granite Ore Reserve Statement as of 30 April 2021 ...... [III-82]
Table23: EstimateofWaterInflowintheOpenPit ...... [III-83]
Table24: GeotechnicalProperties ...... [III-84]
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Table25: WorkingFlatDesignCriteria ...... [III-87]
Table26: MineEquipmentFleet ...... [III-89]
Table27: SummaryofMineLifeProductionSchedule ...... [III-92]
Table28: WorkforceDemandina FullProductionYear ...... [III-93]
Table29: KeyParametersofPowerSupply ...... [III-94]
Table30: WaterConsumptions ...... [III-95]
Table31: DetailsoftheBusinessLicence ...... [III-98]
Table32: DetailofMiningLicence ...... [III-98]
Table33: DetailsoftheSafetyProductionPermit ...... [III-98]
Table34: EIATableandApproval ...... [III-100]
Table35: WSCPandApproval ...... [III-100]
Table36: SummaryofInitialCapex ...... [III-106]
Table37: BreakdownofInitialCapex(RMB’000) ...... [III-107]
Table38: InvestmentPlanofInitialCapex(RMB’000) ...... [III-108]
Table39: DACalculation ...... [III-108]
Table40: InvestmentPlanofWorkingCapital(RMBk) ...... [III-109]
Table41: BreakdownofOperatingCosts ...... [III-109]
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APPENDIX III INDEPENDENT TECHNICAL REPORT
FIGURES
Figure1: ProjectLocationMap ...... [III-43]
Figure 2: A View of Qiligou Granite Project Area (Looking North) ...... [III-45]
Figure3: LicenceLocation ...... [III-46]
Figure4: GraniteBlockfromQiligouGraniteProject ...... [III-49]
Figure 5: Granite Slab from Qiligou Granite Project (Unpolished,Left,Polished,Right) ...... [III-50]
Figure 6: Regional Geology Setting of Qiligou Granite Project ...... [III-51]
Figure7: ContactBoundary ...... [III-52]
Figure8: GeologicalMapoftheProjectArea ...... [III-53]
Figure 9: An Over View of Out Crop Ore Body/Modelling ...... [III-54]
Figure10: DipFrequencyHistogramofK1 ...... [III-55]
Figure11: JointRoseDiagramofOrebodyK1 ...... [III-56]
Figure12: DipFrequencyHistogramofK2 ...... [III-57]
Figure13: JointRoseDiagramofK2 ...... [III-57]
Figure14: DipFrequencyHistogramofK3 ...... [III-58]
Figure15: JointRoseDiagramofK3 ...... [III-59]
Figure16: SyenitePorphyry ...... [III-60]
Figure 17: Drillholes and Trenches Layout ...... [III-62]
Figure 18: Physical Property Samples from Drillcores ...... [III-65]
Figure19: No.1SafetyPlatformSurveyMap ...... [III-72]
Figure20: DrillCoresOnSite ...... [III-73]
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APPENDIX III INDEPENDENT TECHNICAL REPORT
Figure 21: Drilling and Drillhole ...... [III-74]
Figure22: SafetyPlatformExcavatedin2020 ...... [III-74]
Figure 23: Xixiang Dimension Stone Industrial Park 154 km from ProjectSite ...... [III-75]
Figure 24: Granite Slab from Qiligou Granite Project (Unpolished,Left,Polished,Right) ...... [III-75]
Figure 25: General relationship between Exploration Results, MineralResourcesandOreReserves(JORC2012) ...... [III-76]
Figure 26: Geological Model of Qiligou Granite Project ...... [III-77]
Figure 27: Resource Classification of Qiligou Granite Project ...... [III-78]
Figure28: PlanViewofMineDesign ...... [III-86]
Figure29: PlanViewofMiningMethodScheme ...... [III-88]
Figure30: InitialMiningArea ...... [III-91]
Figure31: ProductionSchedule15-YearMineLife ...... [III-92]
Figure32: WasteDumpLocation ...... [III-97]
Figure33: GraniteBlockfromQiligouGraniteProject ...... [III-112]
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APPENDIX III INDEPENDENT TECHNICAL REPORT
APPENDICES
AppendixA Licences& Permits ...... [III-115]
AppendixB JORCCodeTable1 ...... [III-121]
AppendixC SafetyPlatformBlockRecord ...... [III-145]
AppendixD TestReports ...... [III-163]
AppendixE HanzhongBrigadeOfficialNotice ...... [III-182]
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APPENDIX III INDEPENDENT TECHNICAL REPORT
USEFUL DEFINITIONS
‘‘%’’ Percent
‘‘ ˚’’ Degrees, either of temperature or angle of inclination
‘‘ ˚C’’ Degrees Celsius
‘‘ASL’’ Above sea level
‘‘Assay’’ The chemical analysis of mineral samples to determine the metal content
‘‘AusIMM’’ Australasian Institute of Mining and Metallurgy
‘‘Black Colour Series A type of granite dimension stone classified according to the Granite’’ colour of processed product. The granite stone could be intrusive rocks such as granite, syenite, granite porphyry and syenite porphyry, and sometimes it also includes the dimension stone made of eruptive rocks
‘‘Capital Expenditure All other expenditures not classified as operating costs, which are (Capex)’’ funds used by a company to acquire, upgrade, and maintain physical assets such as property, plants, buildings, technology, or equipment. Capex is often used to undertake new projects or investments by a company. In this Report, initial Capex refers to the investment and/or expenditures prior to the ramped-up production
‘‘cm’’ Centimetre
‘‘Composite’’ Combining more than one sample result to give an average result over a larger distance
‘‘Crushing’’ Initial process of reducing ore particle size to render it more amenable for further processing
‘‘CSV’’ Comma-separated values
‘‘Dip’’ Angle of inclination of a geological feature/rock from the horizontal
‘‘DTM’’ Digital terrain model
‘‘E’’ East
‘‘EIA’’ Environmental Impact Assessment
‘‘EMP’’ Environmental Management Plan
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APPENDIX III INDEPENDENT TECHNICAL REPORT
‘‘Fault’’ The surface of a fracture along which movement has occurred
‘‘Fe’’ Iron
‘‘Footwall’’ The underlying side of an orebody or stope
‘‘g’’ Gramme
‘‘g/t’’ Gramme per tonne
‘‘Hangingwall’’ The overlying side of an orebody or slope
‘‘Haulage’’ A horizontal underground excavation which is used to transport mined ore
‘‘IFC’’ International Finance Corporation
‘‘Igneous’’ Primary crystalline rock formed by the solidification of magma
‘‘Indicated Mineral That part of a Mineral Resource for which quantity, grade (or Resource’’ 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
‘‘Inferred Mineral That part of a Mineral Resource for which quantity and grade Resource’’ (or quality) are estimated on the basis of limited geological evidence and sampling. Geological evidence is sufficient to imply but not verify geological and grade (or quality) continuity. It is based on exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes
‘‘IRR’’ Internal Rate of Return
‘‘JORC Code’’ Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, the current version is 2012
‘‘JORC’’ Joint Ore Reserves Committee
‘‘kg’’ Kilogramme, equivalent to 1,000 grammes
‘‘km’’ Kilometres, equivalent to 1,000 metres
‘‘km2’’ Square kilometres
‘‘kt’’ Thousand tonnes
‘‘kt/d or ktpd’’ Thousand tonnes per day
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APPENDIX III INDEPENDENT TECHNICAL REPORT
‘‘kt/y or ktpa’’ Thousand tonnes per year (annum)
‘‘kV’’ Kilovolt
‘‘kW’’ Kilowatt
‘‘kWh’’ Kilowatt-hour
‘‘kWh/t’’ Kilowatt-hour per metric tonne
‘‘Lithological’’ Geological description pertaining to different rock types.
‘‘LoM’’ Life-of-Mine
‘‘LRP’’ Long Range Plan
‘‘m’’ Metre
‘‘m2’’ Square metre
‘‘m3’’ Cubic metre
‘‘M’’ Million
‘‘mm’’ Millimetre
‘‘Mineral/Mining A lease area for which mineral rights are held. Lease’’
‘‘Mining Assets’’ The Material Properties and Significant Exploration Properties.
‘‘Mt’’ Million tonnes
‘‘Mtpa’’ Million tonnes per year (annum)
‘‘NPV’’ Net Present Value
‘‘OHS’’ Occupational health and safety
‘‘Ore Reserve’’ An ‘‘Ore Reserve’’ is the economically mineable part of a Measured and/or Indicated Mineral Resource. It includes diluting materials and allowances for losses, which may occurred when the material is mined or extracted and is defined by studies at Pre-Feasibility or Feasibility level as appropriate that include application of Modifying Factors
‘‘QA/QC’’ Quality Assurance/Quality Control
‘‘RMB’’ Chinese Yuan
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APPENDIX III INDEPENDENT TECHNICAL REPORT
‘‘RoM’’ Run-of-Mine
‘‘Stratigraphy’’ The study of stratified rocks in terms of time and space
‘‘Strike’’ Direction of line formed by the intersection of strata surfaces with the horizontal plane, always perpendicular to the dip direction
‘‘Sulphide’’ A sulphur bearing mineral
‘‘t’’ Tonne (metric ton)
‘‘tpa’’ Tonnes per year
‘‘tpd’’ Tonnes per day
‘‘Total Expenditure’’ All expenditures including those of an operating and capital nature
‘‘W’’ West
EXECUTIVE SUMMARY
Ankang Hanlong Mining Co., Ltd. (‘‘Hanlong’’, ‘‘the Company’’ or ‘‘the Client’’) commissioned SRK Consulting China Limited (‘‘SRK’’) to undertake an independent assessment of the technical aspects of the Qiligou Granite Project (the ‘‘Qiligou Granite Project’’ or the ‘‘Project’’) located in Bijia Village, Hanyin County, Shaanxi Province, China. Qiligou is developing the Project to extract dark grey granite, and these matrix dimension stone blocks are planned be sold to processing plants to produce black series polished slabs and other black series granite stone products.
SRK was required to prepare an independent Competent Person’s Report (‘‘CPR’’ or the ‘‘Report’’) covering the Granite Dimension Stone Resource and Reserve Statement in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the ‘‘JORC Code’’, 2012 Edition) and the requirements of ‘‘Chapter 18: Equity Securities, Mineral Companies’’ of the Rules (the ‘‘Listing Rules’’) Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the ‘‘Stock Exchange’’ or the ‘‘HKEx’’) as well as associated guidance letters published by the HKEx. The purpose of this Report is to provide potential investors of the Project with unbiased information on relevant technical aspects of the Project.
Location and Access
The Qiligou Granite Project is located approximately 40 kilometres (‘‘km’’) straight-line to the southwest of Hanyin County, and about 200 km to the southwest of Xi’an City, the capital of Shaanxi Province.
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APPENDIX III INDEPENDENT TECHNICAL REPORT
Accessibility to the Project site is relatively convenient. Xi’an City and Hanyin County is about 270 km apart and are connected by the expressway. Another 80 km from Hanyin County to the Project site is connected by paved road with asphalt or concrete. There are commercial flight operations between Xi’an City to other major cities of China and international cities, making the Project site’s accessibility relatively convenient.
Geology
Commercially, ‘‘granite’’ in the dimension stone industry refers to a type of stone represented by granite, including magmatic rock and various silicate metamorphic rock, that can be shaped and used as building material or decoration material. The ‘‘granite’’ stone to be extracted from the Qiligou Project is geologically characterised by syenite porphyry to be shaped and used as building or decoration material. As a type of igneous rock with very similar characteristics of granite itself, the syenite porphyry in this Project is clearly in line with the definition of commercial ‘‘granite’’ dimension stone. In this Report, the term ‘‘granite’’ will be used in line with the dimension stone industry usage.
The stratigraphy of the Project area is characterised by syenite porphyry covered by the widely distributed slate in the region.
According to the topography, elevation and mapping results, the syenite porphyry in the Project area have been divided into K1, K2 and K3 from south to north, and the orebodies are largely exposed, with steep terrain. The general top soil is sparse, with normally 0.2 to 0.5 m weathered layer.
The syenite porphyry is dark grey, porphyritic structure, massive, the minerals in the rock is composed of syenite and porphyry, the syenite (content of about 80–85%) is mainly composed of anorthoclase, black hard chlorite, biotite, opaque minerals and a small amount of other minerals; and the porphyry (content of about 15–20%) is represented by anorthoclase porphyry.
Anorthoclase accounts about 70% to 75% in content, sizing 1.0 to 3.0 mm. The alteration characteristics along with the anorthoclase is seen as clayified, sodicized, recrystallized and striated long petrified, with uniform distribution.
The geological conditions in the Project area are relatively simple. The structure development is not obvious, and the overall rock mass integrity is good.
Most of the drillholes did not penetrate the ore body, shows resource potential of the Project.
Generally, the geology understanding, structure information and geotechnical information are sufficient to support geological modelling and resource evaluation for the Project.
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APPENDIX III INDEPENDENT TECHNICAL REPORT
Exploration
No systematic exploration work had been conducted in the Project site prior to the exploration work undertaken by Shaanxi Hanzhong Geological Brigade Co., Ltd (the ‘‘Hanzhong Brigade’’) commissioned by Hanlong. Four diamond drillholes have been drilled by previous owner in 2017, and the cores were stored on site. Hanzhong Brigade has performed core logging for these drillholes, and the data have been presented in the Resource Verification Report of Qiligou Granite Project, Hanyin, Shaanxi, 2020,(Resource Verification Report 2020) prepared by the Hanzhong Brigade.
Diamond drillings and trenches were adopted in the project. A total of 13 drillholes totalling 2,177.1 m were drilled from July 2019 to April 2020; together with eight trenches totalling 1,676 m excavated and logged. The drillholes were surveyed for incline and depth check every 50 m. The average core recovery rate is above 90%. These drillholes were sealed with cement with drillhole information marked, and the drillhole coordinates have been surveyed by survey team after all drilling finished.
Geologists from the Hanzhong Brigade have performed geological logging on site. The lithology and structures have been logged and described, then the drillhole columns were digitised in Mapgis.
During the site visit in December 2019, SRK has checked the location and cores of the four holes drilled in 2017. All of these holes had intercepted the orebodies and confirmed the geology continuity SRK is of opinion that the data compiled by the Hanzhong Brigade for the four historical holes is appropriate for the resource estimation.
All of the physical test results (including bulk density, absorption, compressive, flexural strength abrasion resistance and radioactivity) of samples are in compliance with Chinese national standards for dimension stone (GB/T 18601-2009 and GB6566-2001), and SRK considers these tests were done in accordance with the dimension stone industry practice that is widely adopted. SRK is of the opinion that the physical quality of the granite, produced from the Project is of a standard that can be sold as a good quality granite within China.
As the orebodies are very thick there are few holes have penetrated the orebodies and hit the floor rock. Therefore there are only a few rock mechanics samples collected comparing to the roof rocks, and less geotechnical information has been obtained for the rocks beneath the granite (syenite porphyry) orebodies. However, considering the mining method and scheduling, the fact of less geotechnical information for the floor rocks has little impact on the mining operation for this Project.
Hanzhong Brigade has performed joints and fissures mapping on an outcrop on site to estimate the block yield, the minimum edge of the outcrop face was 0.5 m. The block yield was estimated as 34.1% as an average number that applied to estimate the stone blocks for the whole project.
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APPENDIX III INDEPENDENT TECHNICAL REPORT
From January to April 2020, Hanlong carried out the construction of safety platform No. 1 in the K1 ore body. During the construction of the platform, barren material was extracted. Hanlong provided the records of stone blocks extracted, and the total amount of granite blocks (large blocks + medium blocks + small blocks over 0.3 m3) was 647.72 m3, and the total commercial stone blocks (over 0.8 m3)were544.92m3. In June 2020, as commissioned by Hanlong, Xi’an Tianyuhongwei Survey Engineering Co., Ltd, Hanyin Branch carried out the excavated volume measurement. According to the survey result, the total excavated volume was 1,545.2 m3. The block yield for gross stones sized over 0.3 m3 was derived as 41.9%, and the yield for commercial stone blocks was 35.1%; both of which were higher than the average block yield for all ore bodies at 34.1% estimated by the Hanzhong Brigade. In this Report, SRK adopts the block yield at a rate of 34.1% as an average number reporting for the Project.
Dimension Stone Resource Estimates
SRK modelled the geology model of the Project site based on the exploration results by the Hanzhong Brigade. SRK constructed three dimensional (‘‘3D’’) wireframe models from topographical maps at a scale of 1: 2,000, drillhole records and the geological map at a scale of 1: 2,000, and used Surpac, a 3D modelling software to estimate the volume of the deposit. The geological model captures the geology at a scale appropriate for the anticipated mining method and taking into consideration the geological viable scales of mining selectivity.
The modelling procedures included import of the compiled drillhole database together with the geological and topographical maps into Surpac. Wireframes were constructed from the drillholes, trenches and mapped stratigraphic contacts.
A 0.2 m to 0.5 m weathering zone thickness were recorded by the Hanzhong Brigade. Compared with the thickness of orebody, as well as the block size, the 0.2 m to 0.5 m thickness of weathering zone is not considered as material.
A block model was created in Suprac software using a parent block size of 4 m N, 4 m E, 4 m RL. The parent block size was selected considering the drill spacing, bench height, granite block size. Sub celling to 2 m N, 2 m E, 2 m RL was used to provide sufficient resolution within the model.
Resource classification reflects the degree of geological confidence in the mineral resource estimate. This was based primarily on data quality and drill spacing, with geological confidence.
SRK is of the opinion that there is sufficient confidence in the continuity of the granite (syenite porphyry) lithology in a spacing of 200 m between two drillholes. Given the fact that the Project has not commenced formal commercial production and drilling grid has not reached a sufficiently high confident level, SRK has not classified the Measured Resource for the Project.
The block model is constrained by 1: 2,000 topography provided by the Hanzhong Brigade.
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APPENDIX III INDEPENDENT TECHNICAL REPORT
‘‘Indicated’’ attribute is assigned to the blocks between two drillholes of 200 m, ‘‘Inferred’’ attribute is assigned to the blocks 25 m out of the Indicated area.
Closer spaced drilling, more detailed joint analysis, and further tests would be required to upgrade the Resource to the category of ‘‘Measured’’.
Mineral resource statement for the Qiligou Granite Project is presented in table below. As at 30 April 2021, the dimension stone Resource is estimated to have a block yield of approximately 34.1%. Based on the laboratory test work conducted in China, SRK has determined the Resource is of potentially mineable quality and has a potentially economic block yield. There has been no material change of the resources since 30 April 2021.
Table Ex-1: Resource Statement for the Qiligou Granite Project as of 30 April 2021
Category Total Block Yield Block (thousand m3) (%) (thousand m3)
Indicated 17,643.8 34.1 6,016.5 Inferred 18,807.6 34.1 6,413.4
Total 36,451.3 12,429.9
Notes:
1. Within the permitted depth from 880m ASL to 540m ASL as stated in the Mining Licence.
2. Volumes are reported in cubic metres (m3), Cubic metres are rounded appropriately. Rounding, as required by reporting guidelines, may result in apparent summation discrepancies. Where these occur, SRK does not consider these to be material.
Dimension Stone Reserve Estimates
China Development Strategy Institute For Building Materials Industry (the “CSIBM”) has designed the final pit for the Project containing the resources for 60-year operation at capacity of 100,000 m3 per annum. The current mining licence is valid for 15 years, although the renewal is expected. A modified final pit is modelled by SRK.
SRK converts the Indicated Resource above 699 m ASL, which is the bottom level of the 15-year pit, to Ore Reserve. A further study would be conducted to update Ore Reserve afterwards.
The proportion of granite resources that can be mined out as quarry block, which is the mine gate product, i.e., block yield, is 34.1% as mentioned previously.
The mining loss has already been taken into account in the computation of the block yield. The product is quarry block sold at the ‘‘mine gate’’, however, the transportation (haulage inside the mining area) and storage loss allowance is assumed to be 5%.
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APPENDIX III INDEPENDENT TECHNICAL REPORT
The Project hosts over 6 million m3 of Indicated Resources of mineable granite blocks from a total Indicated Resources of 17.6 million m3, sufficient resources for 60 years’ extraction on currently anticipated annual Production Volume of 100,000 m3. A total 4.6 million m3 granite Indicated Resources with block yield of 34.1% are employed for 15-year mine plan with the considerations of validation period of current mining licence and the accomplished mining design. With the renewal of mining licence in future and appropriate considerations of other modifying factors, SRK assumes the life-of-mine (LoM) of this Project could be extended.
The detailed mine production schedule presented in this Report covers the period from 2021 to 2035, which is 15 years including mine construction period.
SRK has classified the final mine gate granite quarry block product, within the 15-year pit and mining licence, as Probable Reserve as presented in Table Ex-2 as of 30 April 2021. The Ore Reserves are included in total Mineral Resources. There has been no material change of the resources since 30 April 2021.
Table Ex-2: Reserve Statement for Qiligou as of 30 April 2021
Reserve Category Granite Block (thousand cubic metres)
Probable 1,297.0
Mining Conditions
The mine is not yet been constructed to date. It will be exploited as an open pit quarry, based on the feasibility study compiled by SCIBM, which is referenced as the Feasibility Study hereinafter this report.
The major aquifer in the mine area is the Quaternary, which bears shallow pore water with a weak water yield. The Quaternary consists of colluvial soils, residual soils, alluvial and pluvial clays, sands, gravels with a little thickness.
The aquiclude consists of syenite, orthophyre, diabase, carbon-bearing silty slate and carbon slate, etc.
Orebody is deep grey syenite porphyry, which is compact and a primary fabric. Both hanging wall and footwall are carbon-bearing silty slates, with platy structure and no foliation.
There is no earthquake record in the history of Hanyin County. Earthquakes outside the Hanyin County has little influence on the mine area, as no significant damage has been observed.
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APPENDIX III INDEPENDENT TECHNICAL REPORT
Mining
Open pit design by CSIBM has an ultimate bench height of 20 m, a safety berm width of 3 m, and a catch platform width of 6 m (the catch berm is set on every 2 safety berms). The working flats (sub-benches) are 0.7–1.3 m in height. This is beneficial particularly in areas that are heavily fractured and containing significantly weak rock. Working bench faces are vertical, and final bench face angle is 70 degrees, however, because of the use of safety and catch berm, the overall pit slope is at an angle of less than 60 degrees.
SRK completed the 3D model for the pit based on the parameters provided by CSIBM and the Mineral Resource model finished by SRK in September 2020 and updated in April 2021, based on the considerations as below:
. The pit design parameters and inputs as CSIBM’s Feasibility Study proposed;
. The mining licence limits;
. Operation with a 15-year life-of mine (LOM) schedule;
. The pit to be modified targeting more Indicated Resources, but not Inferred Resources;
. Model Initial Platform, 15-year Platform and Final pit for K1 & K2 zones; and
. K3 zone to be left for further consideration as the main zone (K1 & K2) could sustain a 30-year operation at a full annual production capacity of 100,000 m3 of granite blocks product.
The parameters of the 15-year pit are as followings:
. Bench height: 20 m
. Bench face angle: 70 degrees
. Final slope angle: <60 degrees
. Safety berm width: 3 m
. Catch platform width: 6 m
. Pit Dimension: 765 6 275 m
. Bottom elevation: 699 m ASL
. Pit depth: 160 m
The mining process, which is detailed below, comprises of cutting and separating, overturning, reshaping, loading, and cleaning the working platform.
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The major mining equipment fleet consists of diamond wire saws, drills, forklifts, wheel loaders, and flatbed trucks. The ancillary equipment includes diamond disc saws, mobile air compressors, and dump trucks.
Production Schedule
The production plan has taken into consideration of the Indicated Resource above 699 m ASL for 15 years’ LoM.
The schedule indicates that #1 dump will be full since 2025, and #2 dump will be employed immediately afterwards. The mine life schedule is presented below.
Table Ex-3: Summary of Mine Life Production Schedule
Item Unit LoM Total 2021 2022 2023 2024 2025 2026 2027
Granite Block ’000 m3 1,256.3 3.0 7.5 52.1 98.9 100.0 99.4 99.1 Un-block ’000 m3 2,704.1 1.6 20.8 168.0 205.6 208.7 209.5 208.8 Indicated Res Stripping ’000 m3 6,037.2 438.6 2,088.7 699.9 926.5 601.4 181.8 174.2 S/R m3/m3 1.5 95.3 73.8 3.2 3.0 1.9 0.6 0.6 Dump requirement ’000 m3 11,512.5 910.7 2,404.0 1,268.1 1,482.0 1,053.2 508.6 497.9
Item Unit 2028 2029 2030 2031 2032 2033 2034 2035
Granite Block ’000 m3 99.3 99.9 99.7 99.9 99.7 99.8 99.2 98.8 Un-block ’000 m3 209.2 210.6 210.1 210.6 210.1 210.4 209.1 211.0 Indicated Res Stripping ’000 m3 168.6 105.5 106.0 105.5 106.0 102.8 92.7 139.0 S/R m3/m3 0.5 0.3 0.3 0.3 0.3 0.3 0.3 0.4 Dump requirement ’000 m3 491.2 411.0 410.9 411.0 410.9 407.2 392.4 453.5
* The production schedule is based on the estimated Ore Reserves and has considered the production until the end of 2035.
S/R — stripping ratio
Open pit’s location makes it possible to drain by gravity. Drainage facilities include:
. Interceptor ditches at the mountain top to drain the precipitation to a safe place;
. Cache pools attached to the main drain ditch to catch slurry run-offs at the start of a precipitation; and
. Wastewater treatment ponds at benches to gather mining wastewater for later use.
Other mine services like water spraying, explosive supply and management and slope monitoring are not described in the FS.
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APPENDIX III INDEPENDENT TECHNICAL REPORT
Environment, Permits and Social Impacts
The following table summarises the status of the key operational licences and permits for the Qiligou Granite Project.
Table Ex-4: Project Permits
Safety Site Business Mining Production Water Use Discharge Project Licence Licence Permit Permit Permit
Qiligou Granite Project Y Y Y Y Y
Notes:
‘Y’ denotes the licence/permit is granted.
‘N’ means the licence/permit is not available.
‘NYR’ means the licence/permit is not yet required for the current operation.
‘NS’ denotes that the licence/permit has not been sighted.
‘n/a’ indicates that the licence/permit is not applicable.
Ankang City Ecological and Environmental Protection Bureau Hanyin Branch issued an inform letter on 29 April 2020. The letter states that Hanlong Mining should apply for site discharge registration. SRK has sighted a site discharge registration receipt for Hanlong which is effective from 10 April 2020 to 9 April 2025.
Shaanxi Province Forest Bureau issued a forestland use approval for the project on 2 April 2020. In addition, Hanyin County Natural Resources Bureau issued a temporary land use approval for the Project on 10 October 2020.
The Water Use Permit No. [2021]10002 for the Project was issued by Hanyin County Water Bureau on 7 January 2021. The permitted quantity of water abstraction is 19,000 m3 per year and the permit is valid for one year.
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APPENDIX III INDEPENDENT TECHNICAL REPORT
The table below summarises the status of the environmental assessments and approvals for the Qiligou Granite Project.
Table Ex-5: Summary of the Status of the Environmental Assessments and Approvals
Environmental Environmental Water and Final Impact Soil Checking and Assessment Approval for Conservation Approval for Acceptance Project Report (EIA) EIA1 Plan (WSCP) WSCP2 Approval3
Qiligou Granite YYYYY Project
Notes:
‘‘Y’’ denotes the licence/permit is granted and has been sighted by SRK.
‘‘N’’ means the licence/permit has not been completed or is not available.
‘‘NYR’’ means that licence/permit is not yet required.
‘‘NS’’ denotes that the licence/permit has not been sighted.
‘‘n/a’’ indicates that it is not applicable.
1 Environmental Impact Assessment 2 Water and Soil Conservation Report 3 Formal environmental approval to commence operating
SRK notes that the EIA form for the Qiligou Granite Project has been compiled in accordance with the relevant Chinese laws and regulations. At the time of the September 2020 site visit, the Project was under construction. The Environmental Final Check and Acceptance (‘‘FCA’’) Report for the Project have been complied in December 2020. The FCA review meeting was held on 9 December 2020 and the acceptance working group agreed that the Project passed the environmental FCA.
The significant inherent environmental and social risks for the Qiligou Granite Project are:
Water management (i.e. water use, stormwater/surface water drainage);
Waste rock management; and
Social aspects (i.e. land acquisition).
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APPENDIX III INDEPENDENT TECHNICAL REPORT
The above inherent environmental risks are categorised as medium/low risks (i.e. requiring risk management measures). It is SRK’s opinion that the environmental and social risks for the Project can be generally managed if Chinese and international recognised environmental standards and regulatory requirements are followed.
Project Costing
The Project proposed to commence construction in late October 2021 and go into commercial production in May 2023. The initial capital costs (the ‘‘Capex’’) are about Chinese Yuan (‘‘RMB’’ or ‘‘CNY’’) 141,254 thousand.
Table Ex-6: Summary of Initial Capex
Item Value Percent Description (RMB’000) (%)
Constructions 85,775.40 60.72 direct Capex Equipment 21,270.00 15.06 direct Capex Installation 5,094.90 3.61 direct Capex Others 16,272.40 11.52 indirect Capex Contingency 12,841.30 9.09 10% of direct and indirect Capex
Total 141,254.00 100.00
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APPENDIX III INDEPENDENT TECHNICAL REPORT
Table Ex-7: Initial Capex Breakdown
Construction/ Capex Centre Details Engineering Equipment Installation Others Contingency
Mine Engineering Stripping and Construction 77,550.0 — — — — Mining (incl. Transportation) — 19,630.0 981.5 — — Equipment Survey Instrument — 150.0 — — — MineAuxiliary— ————— Facilities 144.0 — — — — Diesel Tank 80.0 130.0 10.4 — — ElectricityPower— ————— Substation, Lines and 570.0 300.0 3,900.0 — — Installation Water Supply and — ————— Drainage Water Supply 1,500.0 180.0 27.0 — — Drainage 1,250.0 — — — — Waste Water Disposal 900.0 300.0 60.0 — — Infrastructure and — ————— Transportation Mine Internal Road 391.4 — — — — Stockpile 900.0 — — — — Ditch 750.0———— Waste Dump 900.0 — — — — Mine Office and — ————— Accommodation Office 120.0 100.0 20.0 — — Accommodation (contractor) 720.0 480.0 96.0 — — Others— ————— Land and forest — — — 1,200.0 — Resource Granting Fee — — — 4,196.5 — Exploration — — — 2,000.0 — Construction Management — — — 2,691.4 — Preparation Work — — — 1,500.0 — Safety and Environmental — — — 560.7 — Review Engineering Design and — — — 3,589.2 — Supervision Others — — — 534.6 — Contingency— —————
— — ————12,841.3
Total — 85,775.4 21,270.0 5,094.9 16,272.4 12,841.3
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Table Ex-8: Investment Plan of Initial Capex (RMB’000)
after H2 Investment Centre By 2020 H1 2021 H2 2021 H1 2022 H2 2022 H1 2023 2023 Total
Construction/ Engineering 238.2 7,993.2 38,659.6 24,571.17 14,313.19 85,775.4 Equipment — 7,214.0 480.0 9,344.0 4,232.0 21,270.0 Installation 4,242.1 87.0 554.2 211.60 5,094.9 Others 1,600.0 — 9,199.7 4,938.2 534.6 16,272.4 Contingency 12,841.3 —
Total 1,600.0 238.2 28,649.0 44,164.8 34,469.4 19,291.4 128,412.7
Table Ex-9: DA Calculation
Item Original value DA period Residual rate DA value (RMB’000 per (RMB’000) (years) (%) annum)
Fixed assets 120,562.0 7,595.1 Buildings 87,947.3 20 4 4,221.5 Machines 30,281.5 10 4 2,907.0 Electronic devices 2,333.2 5 0 466.6 Intangible assets 10,914.6 778.9 Land fee 1,200.0 20 0 60.0 Licence fee 9,180.0 15 0 612.0 Deferred asset 534.6 5 0 106.9
Total Assets 131,476.6 8,374.1
Initial working capital is 30% of working capital, which is about RMB7,189,000.
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APPENDIX III INDEPENDENT TECHNICAL REPORT
Forecast of Opex is shown in table below for unit and life of mine (‘‘LoM’’) operation, respectively. Descriptions are shown below:
. Diesel price is RMB7,800 per metric ton (‘‘RMB/t’’);
. Power price is RMB0.5 per kilowatts per hour (‘‘RMB/kWh’’);
. Average salary is RMB75,000 per person per year. Welfare rate is 14%;
. Manufacture overheads are about 4% of initial value of fixed assets;
. General and administrating cost was referred to that of similar operations; and
. Marketing costs are 3% of sales revenue. The product price inclusive of value-added tax (VAT) is 2,200 RMB/m3 block, and the VAT is 13%.
Table Ex-10: Breakdown of Operating Costs
Item Annual Unit (RMB’000) (RMB/m3 block)
Materials 19,800.0 198.00 Fuel and power 21,600.0 216.00 Salary and welfare 19,450.0 194.5 Repair 5,203.2 52.03 Other overheads 6,220.0 62.20 G&A 10,680.0 106.8 Marketing 5,840.7 58.41 Total Opex 88,793.9 887.94 Fixed 41,173.9 411.74 Variable 47,620.0 476.20
The Feasibility Study has conducted a test cashflow model for the Project. The economic analysis presented indicates a net present value (NPV) at a range of about RMB 300 million to RMB 600 million with discount rates varying from 12% to 8%. This has indicated that the Project is economic viable. The internal return rate (IRR) is estimated about 42% and the payback period is about 6 years including 2-year construction period.
SRK is of opinion that the Project has demonstrated both technical feasibility and economic viability, which support an Ore Reserve statement in accordance with JORC Code.
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APPENDIX III INDEPENDENT TECHNICAL REPORT
1 INTRODUCTION AND SCOPE OF REPORT
Ankang Hanlong Mining Co., Ltd. (‘‘Hanlong’’, ‘‘the Company’’ or ‘‘the Client’’) commissioned SRK Consulting China Limited (‘‘SRK’’) to undertake an independent assessment of the technical aspects of the Qiligou Granite Project (the ‘‘Qiligou Granite Project’’ or the ‘‘Project’’) which is located in Bijia Village, Hanyin County, Shaanxi Province, China.
SRK was required to prepare an independent Competent Person’s Report (‘‘CPR’’ or the ‘‘Report’’) covering the Granite Dimension Stone Resource and Reserve Statement in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the ‘‘JORC Code’’, 2012 Edition) and the requirements of ‘‘Chapter 18: Equity Securities, Mineral Companies’’ of the Rules (the ‘‘Listing Rules’’) Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the ‘‘Stock Exchange’’ or the ‘‘HKEx’’) as well as associated guidance letters published by the HKEx. The purpose of this Report is to provide potential investors of the Project with unbiased information on relevant technical aspects of the Project. SRK consents the Report to be included as a part of the submission documents for Hanlong’s proposed [REDACTED] on the Main Board of the Stock Exchange.
2 BACKGROUND AND BRIEF
SRK completed four visits on the Project. The initial visit was conducted by Pengfei Xiao and Jinhui Liu from 14th to 16th June 2019. During the site visit, SRK held discussions with shareholders and management team of the company, exploration company and local engineers, and collected the Project related data; 9th to 11th December 2019 by Pengfei Xiao and Feng Li for checking during drilling; 3rd to 4th April 2020 by Yongchun Hou for progress checking; 8th to 11th September 2020 by Pengfei Xiao, Feng Li, Falong Hu, Lanliang Niu and Nan Xue for checking the relevant technical aspects after exploration.
In May 2020, SRK was provided a Mineral Resource Verification Report of Qiligou Granite Project, compiled by Shaanxi Hanzhong Geological Brigade Co., Ltd (Hanzhong Brigade), which concluded the exploration of Qiligou Granite Project and reported the resource in Chinese mineral reporting standard. SRK performed desktop review of this report and has re-estimated the Dimension Stone Resource and prepared the JORC compliant resource statement which is included in this Report.
In November 2020, China Development Strategy Institute For Building Materials Industry (the ‘‘CSIBM’’) compiled the Feasibility Study Report of Granite Mining Project of Ankang Hanlong Mining Co., Ltd (the ‘‘Feasibility Study’’).
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APPENDIX III INDEPENDENT TECHNICAL REPORT
3 PROGRAMME OBJECTIVES AND WORK PROGRAMME
3.1 Purpose of the Report
The purpose of this Report is to provide an independent technical assessment on Project’s geology, exploration, resources, reserve, mining, environmental and social, as well as project costing based on available data reviewing.
3.2 Reporting Standard
This Report has been prepared to the standard of, and is considered by SRK to be, a Technical Assessment Report under the guidelines of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the ‘‘JORC Code’’). The signing authors and peer reviewers are qualified as Competent Persons as defined in the JORC Code with the relevant experience regarding to the type of deposit and the activity undertaken for this Project.
This Report is not a Valuation Report and does not express an opinion as to the value of mineral assets.
This Report may include technical information that requires subsequent calculations to derive sub-totals, totals, and weighted averages. Such calculations inherently involve a degree of rounding and consequently introduce a margin of error. Where these occur, SRK does not consider them to be material.
3.3 Limitations Statement
SRK is not professionally qualified to opine upon and/or confirm that the Client has 100% ownership of its underlying tenement and/or has any unresolved legal matters relating to any transfer of ownership or associated fees and royalties. SRK has therefore assumed that there are no legal impediments regarding the existence of the relevant tenements and that the Client has legal right to all underlying tenements as purported. Assessing the legal tenures and rights to the prospects of the Client and or any of its subsidiary companies are the responsibility of legal due diligence conducted by entities other than SRK.
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3.4 Work Programme
Theworkprogrammeforthisprojectinvolved:
— SRK has conducted several site visits: (1) 14th to 16th June 2019 by Pengfei Xiao and Jinhui Liu to perform a preliminary exploration review and designing of additional exploration and verification programme; (2) 9th to 11th December 2019 by Pengfei Xiao and Feng Li for checking the on-going drilling; (3) 3rd to 4th April 2020 by Yongchun Hou for progress checking; and (4) 8th to 11th September 2020 by Pengfei Xiao, Feng Li, Falong Hu, Nan Xue for exploration, mining, infrastructure and environmental review;
— Discussions with the Company employees and relevant mining professionals and engineers from Hanzhong Brigade who conducted the geological exploration;
— Review the Project’s Feasibility Study and related data/documents provided by the Company and third parties such as CSIBM;
— Resource modelling and estimation using validated data;
— Mining and production schedule review;
— Geotechnical, hydrogeological, infrastructural and environmental and social review for the Project;
— Review of the capital expenditure and operating cost; and
— Preparing of this Report.
3.5 Project Team
SRK Consulting Group now employs more than 1,400 professionals internationally in 45 permanent offices on six continents, offering services from exploration through feasibility, mine planning, and production to mine closure. SRK Consulting’s independence is ensured by the fact that it holds no equity in any project and that its ownership rests solely with its staff. This enables SRK to provide its clients with objective, conflict-free recommendations on crucial judgement issues. As a leading specialist in the mining industry, SRK provides focused advice and solutions, including resource and reserve assessment, mining project assessment and valuation, and independent technical reporting and feasibility study in compliance with international recognised standards, to mining enterprises, exploration companies, banks and government departments. Among the company’s more than 1500 clients are most of the world’s major and medium-sized international metal and industrial mineral mining houses.
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The SRK project team, their titles, and their responsibilities within this Report are showninTable1below.
Table 1: SRK Project Team
Consultant Title Discipline and Task
Pengfei Xiao Principal Consultant (Geology) Project Manager, compilation of the Report Feng Li Senior Consultant (Geology) Geology, QA/QC and Reporting Yongchun Hou Senior Consultant (Geology) Geology, QA/QC Falong Hu Senior Consultant (Mining) Mining, Reserve Yonggang Wu Principal Consultant (Mining) Mining, Infrastructure Nan Xue Senior Consultant (Environmental) Environmental, Jinhui Liu Principal Consultant (Geology) Geology, Exploration, Review Dr. Anson Xu Corporate Consultant (Geology) Peer Review and Quality Control
Pengfei Xiao, MSc, MAusIMM, is a Principal Consultant (Geology) and Managing Director of SRK China. He graduated from the Institute of Geology and Geophysics, Chinese Academy of Sciences and specialised in comprehensive geophysical exploration of metal mineral deposits applying geo-electric and electromagnetic methods. Since joining SRK China in 2008, Pengfei has accumulated experience in more than 100 consulting projects including due diligence reviews (geology, exploration, and resource reviews), exploration design and resource verifications in China, Mongolia, Africa, South America, Southeast Asia, and Central Asia. These projects involve precious, base, and other nonferrous metal deposits, and also include some non-metal projects. Pengfei also has expertise in exploration QA/QC protocols for sampling, and sample preparation and analysis. Recently he has assisted in compiling public technical reports to aid SRK clients in successful property transactions. Pengfei is the project manager and he is responsible for the compilation of the CPR.
Feng Li, BEng, MSc, MAusIMM, is a Senior Consultant (Geology). He joined SRK in 2010 and has been involved in more than 40 projects, including project coordination, data verification, exploration management, geological logging and mapping, resource modelling. the projects located in China, Mongolia, Southeast Asia, Africa and South America; the projects include gold, silver, lead, zinc, iron, nickel, vanadium, magnesium, marble, bauxite, etc. He has a deep understanding of analysis and mineral resource reporting conversions between of Chinese and JORC Code standards and has abundant experience in project management and quality control. Feng was responsible for the geology and data quality review, modelling, resource estimation as well as report compiling.
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Yongchun (Roger) Hou, MSc, MAusIMM, is a Senior Consultant (Coal Geology) at SRK China. He graduated in 2008 from the China University of Mining and Technology and has nine years’ experience in exploration management, resource estimation, GIS and coal washing. He worked as a coal geologist in Kalimantan, Indonesia and Mozambique under JORC Code practice and is proficient with Minex and Vulcan modelling software. At SRK, he has been involved in exploration supervision, resource and reserve estimation, coal washing projects, and technical report writing for projects in China, Indonesia, and Cambodia. Yongchun was responsible for the data quality review.
Falong Hu, MBA, B.Eng, MAusIMM, Chinese Certified Mine Constructor, Chinese Certified Mineral Right Value, Chinese Certified Consulting Engineer (Investment), is a Senior Consultant (Mining). He obtained his Bachelor’s degree in mining engineering from Central South University and Master of Business Administration (MBA) in China University of Geosciences (Beijing). Before joining SRK he worked as an on-site and head office mining engineer in 2 different international mining companies which were called Sino Gold Mining Limited (later merged with Eldorado Gold Corp.) and Silvercorp Metals Inc. He is familiar with underground and open pit mines’ production systems and has been involved in mining engineering and development design, scheduling, long-hole blasting and production operation, rock mechanics, ventilation, back-fill; and cost accounting. After take part in SRK, he accumulated extensive experience in ore reserve estimation, economic analysis, project valuation, mining assessment, scoping/pre-feasibility/feasibility studies and so on. Minerals include gold, silver, lead, zinc, copper, iron, bauxite, laterite-nickel, sylvine, phosphate and graphite, as well as quartzite, marble, bentonite and so on. He is a modeler on both technical and economic and also proficient in digital modelling by using Surpac, Whittle, Minesched, Datamine and AutoCAD. Falong reviewed the mining issues and completed the reserve modelling and estimate for the project.
Yonggang Wu, MEng, MAusIMM, is a Principal Consultant (Mining), joining SRK in 2007 after his graduation from the Jiangxi University of Science and Technology. He has acquired specialised knowledge of mining engineering and MineSight software and has been involved in a large number of projects to date. He has accumulated extensive experience in resource/reserve estimation, pit limit optimisation and design, underground-mining design, long-term production planning, and due diligence studies, with minerals including Au, Pb, Zn, Mn, Cu, Fe, fluorite, potassium salts, alum, and phosphorus among many others. Yonggang has expertise in geological and mining modelling and is proficient in using MineSight, AutoCAD, and other specialised software packages. Yonggang reviewed the mining issues and completed mining and infrastructure section for the project.
Nan Xue, MSc, MAusIMM, is a Senior Consultant (Environmental) at SRK China. He holds a master’s degree in Environmental Science from Nankai University, in Tianjin. He has twelve years’ experience in environmental impact assessment, environmental planning, environmental management, and environmental due diligence. He has been involved in a number of large EIA projects and pollution source surveys for SINOPEC as well as in the environmental-planning project funded by UNDP. He has particular expertise in construction project engineering analysis, pollution source calculation, and impact predictions. He also has an acute understanding of equator principles and International Finance Corporation environmental and social performance standards. After joining SRK,
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Nan has been involved in a number of IPO and due diligence projects in China, Laos, Russia, Mongolia, Philippines, Indonesia, Kazakhstan, Kyrgyzstan, South Africa, DRC, Ecuador, Chile and Ghana; the clients include the Fuguiniao Mining, Zijin Mining, Hanking Mining, Future Bright Mining, CNMC, China Gold, Shandong Gold. Mr. Xue updated the review and report on the environmental and permit issues.
Jinhui Liu, PhD, MAIG, He has over 16 years’ experience in geological modelling and resource estimation and is experienced in review of geology (including resources). He has completed many due diligence review projects in various countries and regions; commodities reviewed include gold, copper, lead and zinc, bauxite, phosphate, nickel, tungsten and iron ore. Jinhui has completed many dimension stone and industry minerals projects including granite, marble, brine, bentonite and other clay minerals. Jinhui has also prepared many technical reports for the Hong Kong Stock Exchange and Toronto Stock Exchange. Jinhui provided internal peer review to ensure the quality the report.
Dr Anshun (Anson) Xu, PhD, FAusIMM, is a Corporate Consultant (Geology) who specialises in the exploration of mineral deposits. He has more than 30 years’ experience in the exploration and development of various types of mineral deposits, including Cu-Ni sulphide deposits related to ultra-basic rocks, tungsten and tin deposits, diamond deposits, and especially deep expertise in various types of gold deposits, including vein-type, fracture-breccia zone type, alteration type, and Carlin type. He was responsible for the resource estimations of several diamond deposits and for reviews of resource estimations for several gold deposits. He recently completed for clients from both China and overseas several due diligence projects, including technical review projects, such as Canadian NI43–101 reports and HKEx IPO technical reports. Anson will provide peer review to ensure the quality the report meets the required standard.
3.6 Statement of SRK Independence
Neither SRK nor any of the authors of this Report have any material present or contingent interest in the outcome of this Report, nor do they have any pecuniary or other interest that could be reasonably regarded as being capable of affecting their independence or that of SRK.
SRK’s fee for completing this Report is based on its normal professional daily rates plus reimbursement of incidental expenses. The payment of that professional fee is not contingent upon the outcome of the Report.
SRK has no prior association with the Company or the Company’s employees or in regard to the mineral assets that are the subject of this CPR. SRK has no beneficial interest in the outcome of the technical assessment being capable of affecting its independence. SRK is independent of the Company applying all of the tests in 18.21 and 18.22 of the Listing Rules of HKEx.
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3.7 Warranties
It is understood by SRK that Hanlong has provided and made full disclosure of all material information and that, to the best of its knowledge and understanding, such information is complete, accurate and true. SRK has no reason to doubt that.
3.8 SRK Experience
The SRK Consulting Group (‘‘SRK Consulting’’) is an independent, international consulting practice that provides focused advice and solutions to clients, mainly from earth and water resource industries. For mining projects, SRK Consulting offers services from exploration through feasibility, mine planning, and production to mine closure.
Among the company’s more than 1500 clients are most of the world’s major and medium-sized metal and industrial mineral mining houses, exploration companies, banks, petroleum exploration companies.
Formed in 1974 in Johannesburg, South Africa, SRK Consulting now employs more than 1400 professionals internationally in 45 permanent offices across 20 countries on six continents. A broad range of internationally recognised associate consultants complements the core staff.
SRK Consulting employs leading specialists in each field of science and engineering. Its seamless integration of services, along with its global base, has made the company a world leader in due diligence, feasibility studies, and confidential internal reviews.
SRK Consulting’s independence is ensured by the fact that it holds no equity in any project and that its ownership rests solely with its staff. This enables the company to provide its clients with objective, conflict-free recommendations on crucial judgement issues.
SRK Consulting China Ltd (‘‘SRK’’) was established in 2005 in Beijing. Either independently or together with other SRK Consulting offices — especially SRK Australasia — SRK has been providing independent mining-project reviews to Chinese companies for their overseas listings and acquisitions and in the past few years has been involved with some of the largest IPO listings and acquisitions.
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SRK has prepared dozens of independent technical reports on mining projects for various companies who acquired Chinese projects or completed public listings on the HKEx. A summary of these past projects is shown below:
Table 2: SRK’s recent reports for listing on the HKEx
Company Year Nature of Transaction
Yanzhou Coal Limited (listed in 2000 Sale of Jining III coal mine to the listed HKEx) operating company Chalco (Aluminium Corporation 2001 Listing on HKEx and New York Stock of China Limited) Exchange Fujian Zijin Gold Mining Group 2004 IPO Listing on HKEx Lingbao Gold Limited 2005 IPO Listing on HKEx Yue Da Holdings Limited (listed 2006 Acquisition of shareholding in mining in HKEx) projects in Yunnan, China China Coal Energy Company Ltd 2006 IPO Listing on HKEx (China Coal) Sino Gold Mining Limited 2007 Dual Listing on HKEx Xinjiang Xinxin Mining Industry 2007 IPO Listing on HKEx Co., Ltd Kiu Hung International Holding 2008 Acquisition of shareholding in coal Limited projects in Inner Mongolia, China Hao Tian Resource Group 2009 Very Substantial Acquisition of two coal Limited mines in Inner Mongolia, China Green Global Resources 2009 Acquisition of shareholding in one iron Holdings Ltd project in Mongolia Ming Fung Jewellery Group 2009 Acquisition of shareholding in gold Holdings Ltd project in Inner Mongolia, China Continental Holdings Limited 2009 Acquisition of a gold project in Henan, China North Mining Shares Company 2009 Acquisition of a molybdenum mining Limited project in Shaanxi, China CNNC International Ltd 2010 Acquisition of an uranium mine in Africa Sino Prosper Mineral Products 2010 Acquisition of shareholdings in one gold Ltd project in Inner Mongolia, China New Times Energy Corporation 2010 Acquisition of shareholding in gold Ltd projects in Hebei, China United Company RUSAL 2010 IPO Listing on HKEx Limited Citic Dameng Holdings Limited 2010 IPO Listing on HKEx China Hanking Holdings Limited 2011 IPO Listing on HKEx China Daye Non-Ferrous Metal 2012 Very Substantial Acquisition on HKEx Mining Limited China Nonferrous Mining 2012 IPO Listing on HKEx Corporation Limited
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Company Year Nature of Transaction
Hengshi Mining Investments 2013 IPO Listing on HKEx Limited Future Bright Mining Holdings 2014 IPO Listing on HKEx Limited King Stone Energy Group 2014 Acquisition of Shareholding in silver Limited mines in Fujian, China Agritrade International Pte LTD 2015 Acquisition of Shareholding in one coal mine in Indonesia China Unienergy Group Limited 2016 IPO Listing on HKEx Pizu Investment Co. Ltd 2020 Acquisition of Shareholding in a polymetallic project in China
3.9 Compliance and Independence Statement
The report is compiled by SRK China, and Mr Pengfei Xiao as the project manager and chief compiler takes overall responsibility of the Report.
This Report is a Competent Person’s Report in line with the Listing Rules of HKEx.
The information in this Report that relatestoMineralResourcesisbasedon information compiled by Mr Feng Li, MAusIMM under the supervision of Mr Pengfei Xiao, a Competent Person who is a Member of The Australasian Institute of Mining and Metallurgy and is a full time employee of SRK Consulting China Ltd. The resource statement is reviewed by Jinhui Liu, MAIG, who is also a Competent Person for Mineral Resource evaluation.
The information in this Report that relates to Ore Reserves is based on information compiled by Mr Falong Hu, a Competent Person who is a Member of The Australasian Institute of Mining and Metallurgy and is a full time employee of SRK Consulting China Ltd.
Other supporting information in this Report that relates to Mineral Resources and Ore Reserves is based on information compiled by Mr Lanliang Niu, Mr Nan Xue, Mr Yonggang Wu and Mr Yongchun Hou. They are all members of the Australasian Institute of Mining and Metallurgy.
Peer Review and Quality Control are conducted by Dr Anson Xu, FAusIMM.
Mr Pengfei Xiao as the chief compiler or the CPR has no prior association with Hanlong in regard to the asset that is the subject of this Report. None of the SRK team aforementioned has prior association with Hanlong in regard to the mineral assets that are the subject of this Report. SRK team has no beneficial interest in the outcome of the technical assessment being capable of affecting its independence.
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Mr Pengfei Xiao has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’’.
Mr Pengfei Xiao consents to the inclusion in the Report of the matters based on his information in the form and context in which it appears.
As the author of portions of the Report for Hanglong on the reported property in Hanyin County, Shaanxi Province, China, I, Pengfei Xiao, do hereby certify that:
— I am employed by, and carried out the assignment (Principal Consultant (Geology) and Managing Director) for SRK Consulting China Limited, located at:
— B315 COFCO Plaza No.8 Jianguomen Nei Dajie Beijing, the People’s Republic of China 100005
Phone: 86–10–6511 1000, Fax: 86–10–8512 0385, Email: [email protected]
— IgraduatedwithaBachelor’sdegreein Geophysics in China University of Sciences (B.Sc.) in 2005, a Master’s degree in Solid Earth Physics and Mineral Exploration from China University of Sciences; Institute of Geology and Geophysics, China Academy of Sciences (M.Sc.) in 2008.
— I am a Member with the Australasian Institute of Mining and Metallurgy since 2011 (MAusIMM #307962).
— I have been directly involved in mineral project evaluation for more than 12 years.
— I have read the definition of ‘‘Competent Person’’ set out in HKEx listing rules and certify that by reason of my education, affiliation with a professional associations (as defined in the listing rules) and past relevant work experience, I fulfil the requirements to be a ‘‘competent person’’ for the purposes of the technical report.
— I have sufficient experience in project management and compilation of the Competent Person’s Report submission to HKEx and other types of public reports.
— I rely on the work from other team members including exploration geologist, mining engineers and environmental scientist, and I am responsible for the teamwork to form this technical report.
— I visited the reported property in June and December 2019 and September 2020.
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— I am the primary author responsible for the preparation and compilation of the report, and supervising Mr. Feng Li (Frank) to prepare geology and resource section.
— I have had no previous involvement with the Qiligou Granite Project. I have no interest, nor do I expect to receive any interest, either directly or indirectly, in the Qiligou Granite Project, nor in the securities of Hanlong Group, or its subsidiary mining companies or any associate companies.
— I am not aware of any material fact or material change with respect to the subject matter of the Technical Report that is not reflected in the Technical Report, the omission to disclose which makes the Technical Report misleading.
— I consent to the filing of the Technical Assessment Report with HKEx and other regulatory authority and any publication by them, including electronic publication in the public company files on their websites accessible by the public, of the Technical Report.
3.10 Forward Looking Statement
Estimates of resources, reserves, and mine production are inherently forward-looking statements, which being projections of future performance will necessarily differ from the actual performance. The errors in such projections result from the inherent uncertainties in the interpretation of geologic data, in variations in the execution of mining and processing plans, in the inability to meet construction and production schedules due to many factors including weather, availability of necessary equipment and supplies, fluctuating prices, ability of the workforce to maintain equipment, and changes in regulations or the regulatory climate.
The possible sources of error in the forward-looking statements are addressed in more detail in the appropriate sections of this report. Also provided in the report are comments on the areas of concern inherent in the different areas of the mining and processing operations.
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4 PROJECT DESCRIPTION
4.1 Accessibility
The Qiligou Granite Project is located approximately 40 km straight-line to the southwest of Hanyin County and about 200 km to the southwest of Xi’an City, the capital of Shaanxi Province. The geographical coordinates of the Project area are near 32839´36´´ Latitude and 108816´13´´longitude (WGS84 Coordination System) (Figure 1). The traffic conditions of the Project are relatively convenient. From Xi’an City to Hanyin County is about 270 km by national expressway, and from Hanyin County to the Project site is approximately 80 km road paved with asphalt or concrete, there are also two other options which are 108 km and 143 km respectively as shown in Figure 1. The internal road from safety production platform to the entrance of the Project about 1.7 km was built by Hanlong in late 2020 and early 2021. There are commercial flight operations between Xi’an to other major cities of China and international cities.
Figure 1: Project Location Map
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Sources: Bing Map
4.2 Topography, Climate, Local Economy and Infrastructure
The Project area is located in the south slope of Fenghuang Mountain. The highest altitude is 880 metres above sea level (ASL), and the lowest altitude is 526 metres ASL within the mining licence area. The mountain has steep terrain with well-developed streams and deep-cut valleys. the climate belongs to subtropical climate. The rainy season is mostly from July to September, and the frost period is from late November to mid-March of next year. The four seasons are distinct, with an average annual temperature of 15.48C, a maximum temperature of 40.78C, a minimum temperature of –4.78C. The average annual rainfall is about 1,000 mm.
Local economy is dominated by farming. The local crops are mainly corn, beans and potatoes, followed by rice and wheat, and the food is self-sufficient.
Though the labour force is sufficient in the Project area, SRK is advised the mining labour will be mainly outsourced from the mining contractor and local villagers may provide additional labour assistance. The Project is connected to national grid through a 10 kV substation by 2.5 km 10 kV power line connecting one 250 kVA transformer is installed in the Project area.
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Figure 2: A View of Qiligou Granite Project Area (Looking North)
Sources: SRK 2019 Site Visit
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4.3 Mineral Right
This Project consists of one mining licence, owned by Ankang Hanlong Mining Co., Ltd, covering 0.517 km2, with permit vertical limitation ranging from 880 m to 540 m ASL (Above Sea Level). The mining licence No. is C6109212010027120055921. The mining right coordinatesareshowninTable3.PermittedMiningmethodisopenpitminingwiththe production capacity of 100,000 m3/a. SRK is not aware of any other mining licences adjacent to the Project.
Figure 3: Licence Location
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Table 3: Mining Licence Coordinates of Qiligou Granite Project
Boundary point Easting Northing
1 3616112.21 36523960.10 2 3616252.21 36524064.10 3 3616256.22 36524409.10 4 3615875.21 36524821.11 5 3615090.21 36524484.11
1 Xi’an 80 Coordination System 2 upper limit 880 ASL, lower limit 540 ASL
SRK has not conducted an in-depth review of mineral title and ownership or a legal audit of the mining licence. SRK has been informed that Hanlong holds the mining licence which contains the Project. SRK has been provided with copies of the mining licence.
4.4 Previous Exploration Work
No systematic exploration work has been conducted in the Project area prior to the exploration work undertaken by Shaanxi Hanzhong Geological Brigade Co., Ltd (‘‘Hanzhong Brigade’’) commissioned by Hanlong.
The Hanzhong Brigade has performed exploration between May 2019 to April 2020, including topographical survey, geological mapping, hydrological study, and sampling for physical and chemical tests (Table 4). A total of 13 vertical diamond holes were also drilled for a total of 2,177.1 m. The drillholes were drilled at a spacing of approximately 100 m x 100 m.
Four diamond drillholes have been drilled by previous owner in 2017, the cores were stored on site, Hanzhong Brigade has performed core logging for these drillholes, the data have been involved in the Resource Verification Report of Qiligou Granite Project, Hanyin, Shaanxi, 2020, (Resource Verification Report 2020) by Hanzhong Brigade.
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Table 4: Summary of Exploration Work by Hanzhong Brigade
Item Unit Amount
Control Point Survey Point 4 Geological Cross-section Survey at 1: 1,000 Scale Km 0.85 Topographical Survey at 1: 2,000 Scale Km2 0.517 Hydrological Survey at 1: 20,000 Scale Km2 0.517 Geological Profiling Km 2.21 Trench m3 410 Diamond Drilling (13 holes) m 2,177.09 Block Yield Survey Point 1 Chemical Assay Samples Sample 3 Spectrum Analysis sample Sample 2 Standard Samples Sample 1 Basic Samples Sample 537 Ore Identification Samples Sample 2 Physical Properties Samples Set 6 Radioactive Test Samples Sample 3 Water Quality Chemical Total Analysis Samples Sample 2 Geotechnical Test Samples Sample 3
Sources: Resource Verification Report 2020, Hanzhong Brigade
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4.5 Product of the Project
Hanlong is developing the Project to mine the granite blocks. The stones will be sold to process plants for further production such as black series polished slabs and other black series granite stone products.
Figure 4: Granite Block from Qiligou Granite Project
Sources: September 2020, SRK Site Visit
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Figure 5: Granite Slab from Qiligou Granite Project (Unpolished, Left, Polished, Right)
Sources: September 2020, SRK Site Visit
5GEOLOGY
The geological profile mainly refers to the ‘‘Mineral Resource Verification Report of Qiligou Granite Project’’ compiled by Shaanxi Hanzhong Geological Brigade Co., Ltd (‘‘Hanzhong Brigade’’) in April 2020.
5.1 Regional Geology
Regionally, the Project is situated in the Ziyang-Pingli Rift, Southern Qinling Terrestrial Activity Zone, South China Plate. The strata exposed in the area are from Paleoproterozoic to Cenozoic, but mainly Silurian.
The magma activity in the region has developed varying phases from Early Proterozoic to Late Proterozoic, from Paleozoic to Mesozoic. Early Paleozoic magmatic rocks are the most widely distributed in the area. An Early Paleozoic tectonic magmatic rock belt is distributed in the North Daba Mountain area, trending NWW to SEE, mainly consisting of two subzones, One is the diabase-diorite subzone, where the main rock types are amphibolite, fine-grained gabbro (diabase), and diorite; the other one is the syenite porphyry subzone, where the main rock types are Syenite porphyry and syenite, in the form of belt-like, layered dikes, dikes, and rock branches intruded into a set of fine clastic rocks in the Early Paleozoic, and mostly intrusive contact with surrounding rocks. The syenite porphyry dike is controlled by the structure formed in Caledonian. The syenite porphyry ore body of this project is in the syenite porphyry dike. The regional geology map is shown in Figure 6.
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Figure 6: Regional Geology Setting of Qiligou Granite Project
Sources: 2020 Exploration Report of Hanzhong Brigade
5.2 Local Geology
5.2.1 Nomenclature
Commercially, ‘‘granite’’ refers to a type of stone represented by granite, including magmatic rock and various silicate metamorphic rock, that can be shaped and used as building material or decoration material. Geologically, the ‘‘granite’’ to be extracted from the Project is syenite porphyry, in the dimension stone industry, it is clearly within the definition of granite because it can be shaped and used as building or decoration material. In this Report, the term ‘‘granite’’ will be used in line with local and dimension stone industry usage.
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5.2.2 Mafic Rocks
The mafic rocks in the Project area are mainly syenite porphyry dikes, which are shallow intrusive rocks.
The syenite porphyry in project area mainly occurs intrusive syenite dike, is dark grey, porphyritic structure, massive, the minerals in the rock is composed of matrix and porphyry, the matrix (content of about 80–85%) is mainly composed of anorthoclase, black hard chlorite, black mica, opaque minerals and a small amount of other minerals; porphyry (content of about 15–20%) is anorthoclase porphyry. Under the influence of alteration, anorthoclase is clayified, sodicized, recrystallized, striated long petrified and other phenomena; black mica has strong iron precipitation and chlorite phenomenon; the overall distribution of minerals in the rock is uniform.
Figure 7: Contact Boundary
Sources: 2020 Exploration Report, Hanzhong Brigade
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5.2.3 Stratigraphy
The stratigraphy of the Project area is shown in Figure 8, the major formation in the Project area is Silurian Banjiuguan Formation, Silurian Doushangou Formation and Quaternary, the orebodies of this Project are syenite porphyry described in the following section.
Banjiuguan Formation: mainly occurs in the southwest of the Project area, spreading in a northwest direction. The formation occurs with the orientation of 38*88˚∠24*61˚, which is in intrusive contacts of with the syenite dike intrusion. The main lithology is carbonaceous slate.
Doushangou Formation: mainly occurs in the central and northeast part of the project area, spreading in the northwest direction with the stratigraphic occurrence of 38˚to 56˚∠44˚to 65˚and contact with the intrusive syenite dike, due to the intrusion, the Doushangou Formation was uplifted, and overlain on the intrusive syenite dike. The lithology is mainly carbonaceous slate and carbonaceous silty slate.
Figure 8: Geological Map of the Project Area
Sources: 2020 Exploration Report, Hanzhong Brigade
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5.2.4 Structure
The Project is located on the southern flank of the Fenghuang Mountain anticlinorium, and on the northern flank of the upper Qili syncline, where the regional Haoping-Hanwangcheng fault passes through the northern part of the area. The stratigraphy in the mine is generally a monoclinic structure dip to northeast, and the stratigraphy in the area strikes north-west to south-east, dip to the north-east with an angle of 40–60˚. The fault is not developed in the project area, and there are only some inter-layer fractures and very small fissures, joints, etc.
5.3 Mineralization
5.3.1 Mineralized Zones/Orebodies
According to the topography, elevation and mapping results, the syenite porphyry in the Project area have been divided into K1, K2 and K3 from south to north, the orebodies are largely exposed, with steep terrain, the general top soil is sparse, with normally 0.2 to 0.5 m weathered layer.
Figure 9: An Over View of Out Crop Ore Body/Modelling
Hanzhong Brigade used to name the orebody as K2 at the south end, where was named as K1 in later version, Hanzhong brigade has issued one official letter (attached in the appendix) to clarify this difference. SRK has sighted the file and adopted the K1 to K3 from south to north.
Orebody K1
Orebody K1 is steep dip to southeast, the outcrop length is about 156 m to 430 m, width about 205 m, with elevation from 560 m ASL to 831 m ASL. The joints are less developed, Hanzhong Brigade has surveyed 52 joints, with the most joints strike 508 to 608, and then strike 708 to 808, joints mostly dip 808 to 908.
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The joints survey of K1 are shown below.
Table 5: Joints Mapping for Orebody K1
Joint Strike Ave. Dip Percentage Joint Strike Ave. Dip Percentage
270–280 848 3.8% 0–10 568 5.8% 280–290 08 0.0% 10–20 588 3.8% 290–300 348 1.9% 20–30 538 7.7% 300–310 08 0.0% 30–40 538 3.8% 310–320 748 7.7% 40–50 628 11.5% 320–330 568 1.9% 50–60 738 15.4% 330–340 318 1.9% 60–70 808 5.8% 340–350 618 1.9% 70–80 788 17.3% 350–360 798 3.8% 80–90 778 5.8%
Sources: 2020 Exploration Report, Hanzhong Brigade
Figure 10: Dip Frequency Histogram of K1
Sources: 2020 Exploration Report, Hanzhong Brigade
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Figure 11: Joint Rose Diagram of Orebody K1
Sources: 2020 Exploration Report, Hanzhong Brigade
Orebody K2
Orebody K2 is steep dip to southwest, the outcrop length is about 195 m to 420 m, width about 51 m to 193 m, with elevation from 542 m ASL to 790 m ASL. The joints are less developed, Hanzhong brigade has surveyed 28 joints, with the most joints strike 0˚to 10˚and 70˚to 80˚,thenfrom50˚to 60˚joints mostly dip 80˚to 90˚.
The joints survey of K2 are shown below.
Table 6: Joints Mapping for Orebody K2
Joint Strike Ave. Dip Percentage Joint Strike Ave. Dip Percentage
270–280 0˚ 0.0% 0–10 56˚ 17.9% 280–290 0˚ 0.0% 10–20 0˚ 0.0% 290–300 0˚ 0.0% 20–30 84˚ 10.7% 300–310 68˚ 3.6% 30–40 85˚ 3.6% 310–320 56˚ 3.6% 40–50 83˚ 3.6% 320–330 0˚ 0.0% 50–60 85˚ 14.3% 330–340 0˚ 0.0% 60–70 81˚ 14.3% 340–350 0˚ 0.0% 70–80 72˚ 17.9% 350–360 63˚ 3.6% 80–90 87˚ 7.1%
Sources: 2020 Exploration Report, Hanzhong Brigade
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Figure 12: Dip Frequency Histogram of K2
Sources: 2020 Exploration Report, Hanzhong Brigade
Figure 13: Joint Rose Diagram of K2
Sources: 2020 Exploration Report, Hanzhong Brigade
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Orebody K3
Orebody K3 is steep dip to northeast, the outcrop length is about 143 m to 400 m, width about 135 m to 309 m, elevation is about 552 m ASL to 750 m ASL. Hanzhong brigade has surveyed 34 joints, with the most joints strike 40˚to 50˚, then from 50˚to 90˚, joints mostly dip 70˚to 80˚.
The joints survey of K3 are shown below.
Table 7: Joints Mapping for Orebody K3
Joint Strike Ave. Dip Percentage Joint Strike Ave. Dip Percentage
270–280 83˚ 5.9% 0–10 74˚ 5.9% 280–290 69˚ 11.8% 10–20 47˚ 5.9% 290–300 0˚ 0.0% 20–30 51˚ 5.9% 300–310 0˚ 0.0% 30–40 48˚ 2.9% 310–320 0˚ 0.0% 40–50 60˚ 17.6% 320–330 0˚ 0.0% 50–60 78˚ 2.9% 330–340 0˚ 0.0% 60–70 71˚ 5.9% 340–350 68˚ 8.8% 70–80 73˚ 8.8% 350–360 78˚ 2.9% 80–90 75˚ 14.7%
Sources: 2020 Exploration Report, Hanzhong Brigade
Figure 14: Dip Frequency Histogram of K3
Sources: 2020 Exploration Report, Hanzhong Brigade
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Figure 15: Joint Rose Diagram of K3
Sources: 2020 Exploration Report, Hanzhong Brigade
5.3.2 Mineralogical Characteristics
The syenite porphyry is dark grey, porphyritic structure, massive, the minerals in the rock is composed of matrix and porphyry, the matrix (content of about 80–85%) is mainly composed of anorthoclase, black hard chlorite, black mica, opaque minerals and a small amount of other minerals; porphyry (content of about 15–20%) is anorthoclase porphyry.
Anorthoclase: 70% to 75% of the content, sizing 1.0 to 3.0 mm; Under the influence of alteration, anorthoclase is clayified, sodicized, recrystallized, striated long petrified, etc; with uniform distribution.
Black hard chlorite: 2% to 4% of the content, sizing mostly less than 0.05 mm, the overall distribution of minerals in the rock is uneven.
Black mica: 1% to 2% of the content, sizing 0.05 to 1.0 mm, has strong iron precipitation and chlorite phenomenon, distribution is uneven.
Calcite: minor, sizing 0.01 to 0.2 mm, uneven distribution.
Apatite: minor, sizing 0.01 to 0.2 mm, uneven distribution.
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Figure 16: Syenite Porphyry
Three sample from the trench was sent and analysed using X-ray fluorescence
(‘‘XRF’’) for major elements (SiO2,Al2O3,CaO,Fe2O3,K2O, MgO, MnO, Na2O, P2O5 and TiO2) under analysis test code of GB/T 14506.3–2010, by Shaanxi Lab. The assay result is listed below.
Table 8: XRF Assay Results
Sample No. ω(B)/10–2
SiO2 Al2O3 CaO Fe2O3 K2OMgOMnONa2OP2O5 TiO2 LOSS
H1 59.73 16.57 0.895 6.36 5.52 1.59 0.415 4.77 0.407 1.35 1.75 H2 59.46 16.43 0.819 6.92 5.53 1.81 0.392 4.56 0.466 1.35 1.69 H3 58.13 16.26 1.09 7.36 5.84 1.88 0.334 4.80 0.387 1.44 1.33
Sources: Resource Verification Report, 2020, Hanzhong Brigade
Table 9: Semi-Quantitative Total Analysis
Sample No. ω(B)/10–6 Sr Ni Co Ag Y Yb Zr Cd La Li Ce Sn Mo Nb Bi Cr W Mn Sb As Ti Pb Be 1005 50.55 5 52030502005 5 5 5 55050100200505 5
GP1 <100 400 40 <0.5 <5 15 15 <20 <30 <50 <200 5 300 20 <5 150 150 100 <100 <200 <50 5 <5 GP2 <100 30 15 <0.5 <5 <5 15 <20 <30 <50 <200 <5 <5 <5 <5 50 <50 5000 <100 <200 <50 <5 <5
Sources: Resource Verification Report, 2020, Hanzhong Brigade
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5.4 SRK Conclusion
The geological conditions in the Project area are relatively simple, the structure development is not obvious, and the overall rock mass integrity is of good condition.
Most of the drillholes have intersected the ore bodies which are still open to depth, indicating exploration potential for the Project.
Generally, the geology understanding, structure information and geotechnical information are sufficient to support geological modelling and resource estimation.
The carbonaceous slates overlying Ore Body 1 and Ore Body 2 are also a good natural building material and amendable to be further shaped as commercial products, currently only geological mapping has been performed to outline the distribution of the carbonaceous slate. Hanlong plans to carry out systematic geological work to identify its spatial distribution and geological continuity.
6 DATABASE FOR RESOURCE ESTIMATION
6.1 Database
The data used for resource estimation are mainly from the Resource Verification Report of Qiligou Granite Project, April 2020, by Hanzhong Brigade. Geological maps, cross-sections, drillhole records, laboratory test results and topographical map were provided in MapGIS, a Chinese GIS software package and Excel spreadsheet format. SRK has performed checking and digitised the provided data into a database that was further viewed and validated in Surpac, a 3D modelling software package.
6.2 Topographical Survey and Geological Mapping
Topographical survey was done by Hanzhong Brigade using Topcon Total Station at 1: 2,000 scale, the survey data was provided in MapGIS format, SRK has converted the file into DXF (Drawing Exchange Format) and imported into Surpac for model constrain.
Geological mapping has been performed by Hanzhong Brigade during the exploration, the geological mapping information has been considered in outlining the orebody.
6.3 Drilling
Diamond drillings and trenches were adopted in the Project, a total of 13 drillholes totalling 2,177.1 m were drilled from July 2019 to April 2020; eight trenches totalling 1,676 m were excavated and logged; the drillholes were surveyed for incline and depth check every 50 m, the average core recovery rate is above 90%, drillholes were sealed with cement with drillhole information marked, the drillhole coordination have been surveyed by survey team after all drilling finished.
Hanzhong brigade geologists have performed geological logging on site, lithology and structures have been logged and described, then the drillhole columns were digitised in Mapgis.
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Four drillholes drilled in 2017 by previous mine owner were logged by Hanzhong brigade. SRK has checked the drillhole location and cores during the site visit in December 2019, finding that the lithology of the cores is consistently syenite porphyry. SRK confirms the use of these data in the resource estimation. The drillhole and trench information are listed in Table 10 and shown in Figure 17.
Figure 17: Drillholes and Trenches Layout
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Table 10: Drillhole and Trench Information
Hole_id Y X Z End of Hole Exploration Line Year (m) (m) (m) (m)
ZK001 3615448 36524397 779.8 170.0 K1–0 2019 ZK001_1 3615449 36524397 779.8 44.9 K1–0 2019 ZK002 3615519 36524471 767.6 160.1 K1–2 2019 ZK003 3615359 36524345 783.0 118.0 K1–1 2019 ZK004 3615947 36524342 699.0 90.0 K2–2 2019 ZK005 3615864 36524291 781.4 170.0 K2–0 2019 ZK006 3615792 36524220 809.1 194.7 K2–1 2019 ZK007 3616256 36524078 768.4 158.9 K3–2 2019 ZK008 3616172 36524015 740.0 130.5 K3–0 2019 ZK009 3615771 36524282 867.0 280.0 K1–4 2020 ZK001_2 3615505 36524313 869.0 260.0 K1–0 2020 ZK002_1 3615575 36524389 814.0 200.0 K1–2 2020 ZK002_2 3615689 36524225 816.0 200.0 K1–2 2020 LZK001 3616139 36523984 749.0 140.0 K3–1 2017 LZK002 3616254 36524224 677.0 70.0 K3–4 2017 LZK003 3615591 36524539 681.0 65.8 K1–4 2017 LZK004 3615676 36524419 801.0 189.5 K1–4 2017 TC001 3615354 36524532 654.0 243.0 K1–0 2019 TC002 3615424 36524603 629.0 207.0 K1–2 2019 TC003 3615356 36524351 779.3 234.0 K1–1 2019 TC004 3616025 36524240 617.2 159.5 K2–2 2019 TC005 3615877 36524267 719.8 223.0 K2–0 2019 TC006 3615902 36524071 647.5 204.5 K2–1 2019 TC007 3616145 36524241 599.5 220.0 K3–2 2019 TC008 3616183 36524014 743.5 185.0 K3–0 2019
6.4 Sampling
Samples for the Project include following types:
— Chemical Samples
Chemical samples are used to determine the chemical composition of granite ores. Three chemical samples were collected in trenches.
— Spectrum Analysis Samples
Spectrum analysis samples are taken from trenches, one sample comprises continuous grab samples of same lithology to ensure the representativeness of the sample, two spectrum analysis samples were collected.
— Ore Identification Samples
Three ore identification samples were collected during geological mapping and trench logging, the samples are taken from fresh surface of bedrock, size 3x6x9 cm.
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— Standard Sample
Standard samples are used as the basis for identifying granite type. The samples are collected from fresh rock that characterises the colour, pattern, etc. The standard sample is taken in two parts: one is polished to determine gloss, the other one is not polished. The sample size is generally 30 cm630 cm. As the lithology and colour, pattern is consistent in the project area, one standard sample wascollectedfromfreshrockoftrenchTC002.
— Basic Sample
Basic samples are used to compare with the standard sample for product classification. In the Qiligou Granite Project, basic samples are taken at 5 m intervalsintrenchesandcoreswith10cmx5cmsize.Atotalof537basicsamples were taken, 313 were taken from trenches and 224 were taken from drill cores, totalling 537 pieces, 54 of which have been polished.
— Radioactive Test Sample
Three radioactive test samples were taken from the trenches of three orebodies respectively, the samples were used for radioactive test.
— Physical Properties Samples
Physical properties samples were taken from trenches, outcrops and drill cores, the samples are used for density, water absorption, compressive strength, flexural strength, gloss test and abrasion resistance tests to determine if the samples have met the require of granite product. The sample size follows the test requirement, normally 50650650 mm or Φ50650 mm for compressive strength test and abrasion resistance tests; 160640620 mm for flexural strength test. Three sets of samples were taken from trenches and three sets of samples were taken from drill cores.
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Figure 18: Physical Property Samples from Drillcores
6.5 Laboratory Tests
Laboratory tests have been carried out to determine the physical and chemical characteristics of the granite at the Project area. The results of these tests provide information on the quality of the stone and the applications for which it will be most suitable. Some of the test results are used as geotechnical data for mine design. The price of dimension stone is affected by both quality and appearance.
Unlike traditional metal projects where drill cores are usually halved for whole rock assay, the granite drill cores are subject to a number of physical and chemical tests. With the exception of the whole rock geochemical analysis, all the physical tests require either full cores from which standard size samples can be prepared or bulk samples from the trenches.
The samples were taken by Hanzhong Brigade and transported to Laboratory of Shaanxi Branch of China National Geological Exploration Centre of Building Materials Industry (Shaanxi Lab) for tests.
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The Shaanxi Lab has been qualified of Chinese national standard with a registration number of: CMA150002280974, and the scan file of the certification and test reports are attached in the appendix.
Table 11: Laboratory and Standards Used
Laboratory National Standards Tests Carried Out
Laboratory of Shaanxi Branch GB/T 18601–2009 1. Compressive Strength; of China National GB/T 18601–2009 2. Flexural Strength; Geological Exploration GB/T 18601–2009 3. Water Absorption; Centre of Building Materials GB/T 18601–2009 4. Density; Industry DZ/T 0276.7–2015 5. Glossiness; GB/T 18601–2009 6. Abrasion Resistance; GB 6566–2001 7. Radioactivity Test
SRK considers that these tests are the most appropriate tests for assessing granite dimension stone, covering the features that most potential buyers would consider in assessing the quality of the stone.
The physical attributes for the product are explained below:
(1) Bulk density is an important factor in the engineering design to determine the supporting structure of the stone. The higher the bulk density, the more stable the granite will be during cutting, sawing and polishing processes.
(2) The water absorption test provides water absorption information of the stone. The lower the water absorption rate, the less susceptible to decay the granite is, and the better it is able to sustain wet weather.
(3) The compressive strength test measures the ability of the stone to carry loads in building and other structure without crushing or deforming. The higher the compressive strength, the higher the resistance of the granite to external damage.
(4) The flexural strength test measures the bending strength of the stone. The higher theflexuralstrength,themoreflexiblethegraniteisandtheharderforittobreak and chap.
(5) The abrasion resistance test measures the resistance of the stone to scratching, abrasion and loss of polish. The higher the abrasion resistance, the better the granite is in resisting erosion caused by scraping, rubbing and other types of mechanical wear.
(6) The radioactivity test measures the radioactivity of the stone which determines their usage restriction.
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6.5.1 Physical Property Test
The compressive strength, flexural strength, bulk density, water absorption, gloss, abrasion resistance tests were conducted by Shaanxi Lab. The summary of these testing results is listed in Table 12. Flexural strength and gloss test were not performed for the core samples Wx4, Wx5 and Wx6 due to the size limitation.
Table 12: Test Results of Physical Properties
Bulk Water Abrasion Sample No. Sample From Compressive Strength Flexural Strength Density Absorption Gloss Test Resistance (MPa) (MPa) (g/cm3)(%)(GS)(g/cm2 1/cm3) DryWetDryWet
Wx1 TC001 108.2 101.8 9.5 8.4 2.63 0.28 60 N/A Wx2 TC005 112.7 105.7 10.0 8.7 2.64 0.26 68 N/A Wx3 TC008 109.8 102.2 9.7 8.3 2.63 0.29 62 N/A Wx4 ZK002–1 ZK002–2 ZK001–2 132.2 110.1 N/A N/A 2.61 0.3 N/A 0.10/27 Wx5 ZK004 ZK005 127.5 106.7 N/A N/A 2.63 0.28 N/A 0.09/30 Wx6 ZK007 ZK008 110.3 102.9 N/A N/A 2.62 0.32 N/A 0.09/30
Table 13: Physical Test Results vs Standard Requirements
Standard Test Item Unit Count Requirement Test Results Note GB/T Max. Min. Average 18601–2009
Bulk Density g/cm3 6 52.56 2.64 2.63 2.63 Qualified Water Absorption % 6 0.60 0.29 0.26 0.28 Qualified Compressive Mpa (dry) 6 5100 112.7 108.2 110.2 Qualified Strength Compressive Mpa (wet) 6 5100 105.7 101.8 103.2 Qualified Strength Flexural Strength Mpa (dry) 3 58.0 10.0 9.5 9.7 Qualified Flexural Strength Mpa (wet) 3 58.0 [8.7] [8.3] 8.5 Qualified Abrasion Resistance I/cm3 3 525 66 50 59.7 Qualified
Notes: Shaanxi lab reported abrasion resistance result following the GBT 9966.4-2001 of which the unit is ‘‘g/cm2’’, and has converted to the unit 1/cm3 in GB/T 18601-2009 for comparison.
There is no standard requirement for Glossiness in the national standard: GB/T 18601–2009 as it is considered as a reference value rather than a benchmark value.
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Bulk density is an important factor in the engineering design to determine the supporting structure of the stone. The higher the bulk density, the more stable the granite will be during cutting, sawing and polishing processes. The bulk density for the received samples are similar with means of 2.63 g/cm3 and meet the Chinese standard specifications.
The water absorption test provides water absorption information of the stone. The lower the water absorption rate, the less susceptible to decay the granite is, and the better it is able to sustain wet weather. The water absorption test results averaging 0.28% which is below the higher limit as required by the Chinese standard specification of 0.60%.
The compressive strength test measures the ability of the stone to carry loads in building and other structure without crushing or deforming. The higher the compressive strength, the higher the resistance of the granite to external damage. The flexural strength test measures the bending strength of the stone. The higher the flexural strength, the more flexible the granite is and the harder for it to break and chap. The dry and wet compressive tests are both above 100 Mpa and flexural strength test results showed averaging 9.7 Mpa, which meets Chinese standard.
The abrasion resistance test measures the resistance of the stone to scratching, abrasion and loss of polish. The higher the abrasion resistance, the better the granite is in resisting erosion caused by scraping, rubbing and other types of mechanical wear. The abrasion resistance test results for satisfy the minimum value required by the Chinese standard specification requirement of 25 1/cm-3.
Glossiness tests are also performed on three trench tests, all tests have returned value above 60 showing good glossiness of the samples.
6.5.2 Radioactivity Test
The national mandatory standard (GB6566–2001) of ‘‘Limit of Radionuclide in Building Materials’’ has been effective since 1 July 2002. It divides dimension stones into three classes according to their radioactivity:
. Class A (IRa4 1.0 and Iγ4 1.3) — no restrictions.
. Class B (IRa4 1.3 and Iγ4 1.9) — cannot be used for houses, flats, hospitals, schools, and other commercial buildings.
. Class C (IRa4 2.8) — can only be used on building exteriors.
. Class D (Iγ5 2.8) — can only be used for seawalls and piers.
Where IRa is internal exposure index and Iγ is the external exposure index.
The analysis result for samples taken from the Project area indicates that their radioactivity is very low and the samples belong to Class A, i.e. no restricted use.
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Table 14: Radioactivity Test Results
Sample No. Test Results Class A IRa Iγ IRa Iγ
Fs1 0.20 0.70 41.0 41.3 Fs2 0.23 0.63 Fs3 0.34 1.03
6.5.3 Geotechnical Features
The compressive strength samples from roof, orebody and floor, wet saturated uniaxial compressive strength and dry uniaxial compressive strength have been tested to determine the strength of roof, orebody and floor, samples are taken by Hanzhong Brigade, test results are listed below.
Table 15: Uniaxial Compressive Strength Test
Wet Uniaxial Dry Uniaxial Compressive Compressive Softening Type Lithology Sample No. Strength Strength Coefficient (MPa) (MPa) Value Average Value Average
43.08 82.22 Carbonaceous Roof YL1 65.76 59.81 59.36 73.50 0.81 Slate 70.58 78.93
93.25 84.39 119.59 103.09 Orebody Syenite Porphyry YL2 96.95 101.84 0.95 73.89 123.25 101.05 96.62
58.82 65.52 Carbonaceous Floor YL3 60.23 58.83 62.75 71.38 0.82 Slate 57.46 85.88
Sources: 2020 Exploration Report, Hanzhong Brigade
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Integrity of orebody and surrounding rocks are evaluated by drill core RQD statistic, and the RQD statistic results are listed in Table 16.
Table 16: RQD Statistic
Type ZK001 ZK002 ZK003 ZK004 ZK005 ZK006 ZK007 ZK008 RQD (%)
Roof >10cm (m) 2.72 1.41 18.69 33.51 0.25 Total (m) 5.50 12.00 27.00 39.00 1.89 RQD (%) 49.5 11.75 69.22 85.92 13.23 66.26 Ore body >10cm (m) 136.77 135.27 78.43 65.46 122.37 117.81 133.13 120.37 Total (m) 170 154.60 88.00 78.00 143.00 145.20 157.00 130.50 RQD (%) 80.45 87.50 89.13 83.92 85.57 81.14 84.8 92.24 85.31 Floor >10cm (m) 24.71 Total (m) 33.00 RQD (%) 74.88 74.88
Sources: 2020 Exploration Report, Hanzhong Brigade
The dry uniaxial compressive strength is 101.84 Mpa; the wet uniaxial compressive strength in saturated state is 96.95 Mpa, 0.95 softening coefficient and 85.13% RQD shows that the ore body classify as compact and massive structure hard rock with generally high stability.
6.5.4 SRK Conclusions on Testing Results
In conclusion, all of the physical test results (bulk density, absorption, compressive, flexural strength abrasion resistance and radioactivity) of samples are in compliance with Chinese national dimension stone standards (GB/T 18601–2009), (GB6566–2001).
There are fewer rock mechanics samples and less geotechnical information of the floor, however, the geotechnical information of the floor has little impact on the mining operation for this Project.
SRK is of the opinion that according to the physical test quality of the granite from the Project, the product can be expected to be sold as a good quality granite dimension stone in China market as the physical test results have all achieved the Chinese national standard.
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6.6 Block Yield and Block Size
Hanzhong Brigade has performed joints and fissures mapping on an outcrop on site to estimate the block yield, the minimum edge of the outcrop face was 0.5 m. The block yield was estimated as 34.1%.
From January to April 2020, Hanlong carried out the excavation of safety platform No. 1 in the K1 ore body, Hanlong provided the block records, the block size were divided into ‘‘Large Blocks’’, ‘‘Medium Blocks’’ and ‘‘Small Blocks’’, however, the definition is slightly different of production and commercial use. During the trial production, the block size definition is generally referring to the Chinese Industrial Specification of Granite Blocks ‘‘JCT204–2011’’. However, for the commercial use, blocks smaller than 0.8 m3 were not considered for sale as to maximise the product value. The block size definition comparison and record of 2020 January to April production are listed in Table 17.
Table 17: Block Size Record (January 2020 to April 2020)
Type JCT204–2011 Production Quantity Size % Commercial Quantity Size %
Total Mined LxWxH (cm) m3 1545.2m3 N/A 1545.2m3 N/A Large Block (A-1) 245x100x150 53.6m3 53m3 110.58m3 17.10% 53m3 110.58m3 20.30% Medium Block (A-2) 185x60x95 1m3 to 3.6m3 1m3 to 3m3 373.7m3 57.70% 1m3 to 3m3 373.7m3 68.61% Small Block (A-3) 65x40x70 0.18m3 to 1m3 0.18m3 to 1m3 163.44m3 25.20% 0.8m3 to 1m3 60.64m3 11.09% Block Yield (Large+Medium+Small)/Total Mined* 100% 647.72m3 41.90% 544.7m3 35.10%
Sources: Platform 1 Survey Report, Xi’an Tianyuhongwei Survey Engineering Co., Ltd, Hanyin Branch
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Figure 19: No.1 Safety Platform Survey Map
Sources: Platform Survey Report, Xi’an Tianyuhongwei Survey Engineering Co., Ltd, Hanyin Branch
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6.7 SRK Verification
SRK has conducted four site visits: 14th to 16th June 2019 by Pengfei Xiao and Jinhui Liu to perform exploration instruction; 9th to 11th December 2019 by Pengfei Xiao and Feng Li for checking during drilling; 3rd to 4th April 2020 by Yongchun Hou for progress checking; 8th to 11th September 2020 by Pengfei Xiao, Feng Li, Falong Hu, Nan Xue for checking after exploration.
SRK has checked all the drillholes, including the four drilled by previous owner in 2017; sighted drillcores on site, visited the safety platform excavated in 2020 and held discussion with company staff, as well as geologists of Hanzhong Brigade.
Figure 20: Drill Cores On Site
Sources: December 2019, SRK Site Visit
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Figure 21: Drilling and Drillhole
Sources: April 2020, SRK Site Visit
Figure 22: Safety Platform Excavated in 2020
Sources: September 2020, SRK Site Visit
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Figure 23: Xixiang Dimension Stone Industrial Park 154 km from Project Site
Sources: September 2020, SRK Site Visit
Figure 24: Granite Slab from Qiligou Granite Project (Unpolished, Left, Polished, Right)
Sources: September 2020, SRK Site Visit
SRK is of opinion that the general quality of geological engineering is of industrial best practice, the data collected from the field is integrated and sufficient to support resource estimation.
SRK has inspected all drillholes and checked the cores, the colour and pattern are evenly distributed; SRK has sighted the polished granite slate named as ‘‘Ankang Crystal Black’’ in the stone processing plant.
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7 MINERAL RESOURCE ESTIMATES
7.1 Granite Mineral Resource Classification
In this report, identified Mineral Resources are quoted using categorisation in accordance with the JORC Code (2012).
A Mineral Resource is a concentration or occurrence of solid material of economic interest in or on the Earth’s crust in such form, grade (or quality), and quantity that there are reasonable prospects for eventual economic extraction. Mineral Resources are classified as Measured, Indicated and Inferred according to the degrees of geological confidence (Figure 25).
Figure 25: General relationship between Exploration Results, Mineral Resources and Ore Reserves (JORC 2012)
Sources: JORC Code 2012
7.2 Geological Modelling
SRK modelled the geology model of the Project area based on the exploration results by Hanzhong Brigade. SRK constructed 3D wireframe models from topographical maps at 1: 2,000 scale, drillhole records and the geological map at a scale of 1: 2,000, and used Surpac, a 3D modelling software to estimate the volume of the deposit. The geological model captures the geology at a scale appropriate for the anticipated mining method and taking into consideration the geological viable scales of mining selectivity.
The modelling procedures included import of the compiled drillhole database together with the geological and topographical maps into Surpac. Wireframes were constructed from the drillholes, trenches and mapped stratigraphic contacts.
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A 0.2 m to 0.5 m weather zone thickness were recorded by Hanzhong Brigade, compared with the thickness of orebody, as well as the block size, the 0.2 m to 0.5 m weather thickness is not considered as material.
A block model was created in Suprac software using a parent block size of 4 m N, 4 m E, 4 m RL. The parent block size was selected considering the drill spacing, bench height, granite block size. Sub celling to 2 m N, 2 m E, 2 m RL was permitted to allow sufficient resolution within the model.
Figure 26: Geological Model of Qiligou Granite Project
Table 18: Block Attributes
Attribute Name Type Description
cat Character ‘‘ind’’ for Indicated, ‘‘inf’’ for Inferred granite Integer ‘‘1’’ for Granite ob Character ‘‘1’’ for orebody1, ‘‘2’’ for orebody2, ‘‘3’’ for orebody3 sg Real 2.63g/cm3 for granite Slate Character ‘‘1’’ for Slate solid Real 1 for blocks below DTM
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7.3 Resource Classification
Resource classification reflects the degree of geological confidence in the mineral resource estimate. This was based primarily on data quality and drill spacing, with geological confidence.
SRK is of the opinion that there is sufficient confidence in the continuity of granite lithology in 200 m between two drillholes.
The block model is constrained by 1: 2000 topography provided by Hanzhong Brigade.
‘‘Indicated’’ attribute is assigned to the blocks between two drillholes of 200 m, ‘‘Inferred’’ attribute is assigned to the blocks 25 m out of the Indicated area.
Closer spaced drilling, more detailed joint analysis, further tests would be required to upgrade the Resource estimate to Measured.
Geological mapping information and drillhole and trenching status is also considered to adjust the range of classification.
Indicated and Inferred categories are classified for the Qiligou Granite Project by considering the factors above. Given the fact that the Project has not commenced formal commercial production and drilling grid has not reached a sufficiently high confident level, SRK has not classified the Measured Resource.
Figure 27: Resource Classification of Qiligou Granite Project
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7.4 SRK Resource Statement
Mineral resource statement for the Qiligou Granite Project is presented in Table 19. As of 30 April 2021, and the Mineral Resource is estimated to have a block yield of approximately 34.1%. Based on the laboratory test work conducted in China, SRK have determined the whole Resource is of potentially mineable quality and has a potentially economic block yield.
Table 19: Qiligou Resource Statement as of 30 April 2021
Category Total Block Yield Block (thousand m3) (%) (thousand m3)
Indicated 17,643.8 34.1 6,016.5 Inferred 18,807.6 34.1 6,413.4 Total 36,451.3 12,429.9
Notes:
1. Within the permitted depth from 880m ASL to 540m ASL as stated in the Mining Licence.
2. Volumes are reported in cubic metres (m3), Cubic metres are rounded appropriately. Rounding, as required by reporting guidelines, may result in apparent summation differences. Where these occur, SRK does not consider these to be material.
Table 20: Qiligou Resource Statement by Orebodies as of 30 April 2021
Category Orebody Total Block Yield Block (thousand m3) (%) (thousand m3)
Indicated K1 12,556.8 34.1 4,282.4 K2 2,978.4 34.1 1,016.7 K3 2,108.5 34.1 719.0 Inferred K1 11,093.5 34.1 3,782.9 K2 5,085.4 34.1 1,734.1 K3 2,628.6 34.1 896.4 Total 36,451.3 12,429.9
Notes:
1. Within the permitted depth from 880m ASL to 540m ASL as stated in the Mining Licence
2. Volumes are reported in cubic metres (m3), Cubic metres are rounded appropriately. Rounding, as required by reporting guidelines, may result in apparent summation differences. Where these occur, SRK does not consider these to be material.
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7.5 Exploration Potential
The current resource estimate has been constrained to the mining licence area and permitted elevation range for mining. There is sufficient potential to further upgrade the resources and to covert resources to reserves with additional exploration and technical studies.
In the region, the black carbonaceous slates are widely distributed and are used as natural building material, such as pieces of tile (roof covers) produced and sold to domestic and oversea markets. Hanlong plans to carry out systematic geological work to identify the spatial distribution and geological continuity.
8 ORE RESERVE ESTIMATES
Mine design of the Project with the associated estimates of production and costs as derived from the production schedule are detailed in the ‘‘Feasibility Study Report on Qiligou Granite Project for Hanlong Company’’, by CSIBM, dated November 2020. This report is referred as ‘‘FS’’. The mine is designed at a mining capacity of 100,000 m3 quarry block of Granite per annum and operated using conventional open pit mining methods.
After reviewing the site and the modifying factors in conjunction with mining parameters provided in the FS, SRK considers the current open-pit mining method is appropriate, and the FS is appropriate to allow conversion from Indicated Resources to Ore Reserves.
However, SRK found the FS has been described and based on Chinese design standards that allow Inferred Resource considered in the pit design. SRK modified some factors, which are the pit size and so on as described in Mining Method Chapter, then modelled the pit into 3 dimensional (‘‘3D’’) wireframes and reviewed the design with SRK resource model together.
SRK converted the Ore Reserves for the Project based on the FS parameters, modified factors and SRK resource model, and reported in accordance with the JORC Code (2012).
8.1 Mine Design
The mine design is described in Mining Method Chapter.
A modified final pit is modelled by SRK as the pit design by CSIBM is as large as containing the resource for 60 years operation, and various assumptions and factors will change as time being. The mining licence is valid for 15 years and the renewal is possible after the expiration.
SRK converts the Indicated Resource above 699 m ASL which is 15 year-end pit level to Ore Reserve, which could serve the Project about 15 years operation. The elevation at 699 m ASL is the bottom level of the designed pit and further study would be conducted to update ore reserve afterwards.
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8.2 Mine Inventory
The mine inventory is the in-situ resource and other rock within the 15-year pit. SRK reports the mine inventory based on the Resource Model, as well as topography, as presented in Table 21 below.
Table 21: Mine Inventory
Indicated Inferred From To Resources Resources Waste Stripping Rate (m ASL) (m ASL) (km3)(km3)(km3)(m3/m3)
879 above — — 0.1 — 859 879 — — 131.8 — 839 859 0.0 0.0 502.1 15,691.1 819 839 7.8 7.0 803.6 103.2 799 819 25.3 43.2 1,039.4 41.1 779 799 168.2 75.8 1,134.9 6.7 759 779 421.7 110.1 1,122.7 2.7 739 759 1,151.3 223.0 478.3 0.4 719 739 1,389.9 250.0 247.1 0.2 699 719 1,472.7 253.5 188.1 0.1
Total 4,636.9 962.6 5,648.2 1.4
Notes: Volumes are reported in cubic metres (m3/km3), Cubic metres are rounded appropriately. Rounding, as required by reporting guidelines, may result in apparent summation differences. Where these occur, SRK does not consider these to be material.
8.3 Modifying Factors
The proportion of granite resources that can be mined out as quarry block, which is the direct product of the Project. The block yield is averaged at 34.1% according to the geological investigation and study.
The mining loss has already built in block yield. The product is mine gate sold quarry block, however, the transportation (internal haulage within the mine site) and storage loss allowance is assumed as 5%.
8.4 Mine Life Analysis
The Project hosts a total 4.6 million m3 Indicated granite resources within the pit, supporting an estimate of over 15 year serve life on the currently anticipated annual Production Volume at 100,000 m3 and the block yield at 34.1%.
The detail mine production schedule from 2021 to 2035, which is 15 years including construction period, is presented in Mine Life Schedule Chapter.
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The current analysis of the life-of-mine (LoM) has only considered the Ore Reserves within the pit shell designed for 15 years as per current mining licence, while SRK opines that the LoM can be extended in future by incorporating additional Ore Reserves to be converted from Mineral Resources.
8.5 Ore Reserve Statement
SRK has classified the final mine gate granite quarry block product, within the 15-year pit and mining licence, as Probable Reserve as presented in table below as of 30 April 2021. The Ore Reserves are included in Mineral Resources.
Table 22: Qiligou Granite Ore Reserve Statement as of 30 April 2021
Reserve Category Granite Block (thousand cubic metres)
Probable 1,297.0
8.6 Potential Impacts to Ore Reserve Estimate
As in the case for most mining projects, the extent to which the estimate of Ore Reserves may be affected by mining, conditions, infrastructure, permitting, market conditions, and other factors could vary from major gains to total losses of Ore Reserves.
9MINING
9.1 Mine Operations History and Current Status
The mine is not yet constructed to date. It will be exploited as an open pit quarry, based on the following feasibility study, which is referenced as the FS hereinafter this report.
. Feasibility Study Report of Granite Mining Project of Ankang Hanlong Mining Co., Ltd which was prepared by the China Development Strategy Institute For Building Materials Industry (the ‘‘CSIBM’’) and dated in November 2020.
Unless otherwise specified, the deliverable of this section is a summary of the FS.
9.2 Hydrology and Hydrogeology
ThemineislocatedinatributaryoftheNaxiRiver,upstreamofMoziRiver,river system of Han River. Gullies occurred widely over the mine area, in which the largest two are described below:
. Dagou is a perennial watercourse changing with seasons. It broke through the mine area in southwest-northeast direction and elevated ranging from 520 m ASL to 687 m ASL. Dagou flows northeast two kilometres into Naxi River. The flow rates are 6–10 L/s and 10–50 L/s in dry season and rainy season, respectively.
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. Hanlong is also a perennial watercourse changing with seasons. It crossed the mine area, from west to east. Average flow rate is 8.65 L/s.
Erosion basis is at 520 m ASL. Orebody occurred between 540 m ASL and 830 m ASL.
The major aquifer in the mine area is the Quaternary, which bears shallow pore water with a weak water yield. The Quaternary consists of colluvial soils, residual soils, alluvial and pluvial clays, sands, gravels with a little thickness.
The aquiclude consists of syenite, orthophyre, diabase, carbon-bearing silty slate and carbon slate, etc.
The groundwater is mainly charged with precipitation and surface runoff. Estimate of water inflow in the open pit is shown in Table 23.
Table 23: Estimate of Water Inflow in the Open Pit
Orebody Catchment Runoff Precipitation Number Area Precipitation Coefficient Runoff Remarks (m2)(mm) (m3)
1 122,000 17.028[1]/168.5[2] 0.5/0.7 1,038.7/14,389.9 normal/rainstorm 2 149,400 1,272.0/17,621.7 3 106,600 907.6/1,273.5
Notes:
1 Normal daily precipitation derived from records of Gaochuan Town 25km northwest of Qiligou from June to September in the year 2000 at 17.028 mm.
2 Daily maximum precipitation was recorded on 17 August 2000 at 168.5 mm.
9.3 Geotechnical Properties
Stratums observed from outcrops are described below:
. Hard rocks consist of syenite and syenite-porphyry. These rocks spread widely in the mine area with no large faults and fractures being observed, except for locally stress-release crack in a small scale and little length. Orebodies stability was not broken by hard rocks;
. Semi-hard rocks consist of black carbon slate, black carbon-bearing silty slate and carbon slate, outcropped in the middle and eastern of the mine area with no foliation and little crack developed. Mechanical strength is moderate. It’s not easy to be soft. Integrity is good. Orebody was directly surrounded by the semi-hard rocks. There is no large-scale joint or fractured zone occurred in these wall rocks. Natural disasters like surface subside, landslide and mudslide were not observed. There is neither abandoned mining works; and
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. Soft rocks are quaternary alluvium, spreading mainly in large valleys, slope lowlands, mild slopes and locally at northeastern of the mine, with a thickness generally less than two metres. They are typically loose to semi-compact, with a weak stability and weak engineering geological properties. Landslide or deformation could happen to soft rocks, especially for those at hillside, when the angle of repose being damaged after man’s cutting or natural gully scouring.
Orebody is deep grey syenite porphyry, which is compact and a primary [joint. Both hanging wall and footwall are carbon-bearing silty slates, with platy structure and no foliation. Geotechnical parameters are shown in Table 24.
Table 24: Geotechnical Properties
Item Unit Hanging wall Orebody Footwall
Uniaxial compressive MPa 73.50 (dry) 101.84 (dry) 71.38 (dry) strength 59.81 (saturated) 96.95 (saturated) 58.83 (saturated) Softening coefficient / 0.76 0.95 0.82 Rock quality designation % 66.26 85.31 74.88
There is no earthquake record in the history of Hanyin County. Earthquakes around the Hanyin County has little influence on the mine area, as no significant damage has been observed.
9.4 Mining Method
9.4.1 Mine Design
Open pit designed by CSIBM has an ultimate bench height of 20 m, a safety berm width of 3 m, and a catch platform width of 6 m (the catch berm is set on every 2 safety berms). The working flats (sub-benches) are 0.7–1.3 m in height. This is beneficial particularly in areas that are heavily fractured and containing significant weak rock. Working bench faces are vertical, and final bench face angle is 70 degree, however, because of the use of safety and catch berm, the overall pit slope is at an angle of less than 60 degree.
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SRK modelled the pit shell based on the parameters presented in the Feasibility Study Report completed by CSIBM and the Mineral Resource model finished by SRK in September 2020, with the considerations as below:
. Based on the pit design parameters and inputs as CSIBM proposed;
. Within the mining licence limits;
. Consider 15 years’ LOM operation;
. Shrink the pit targeting more Indicated Resources, but not Inferred Resources;
. Model Initial Platform, 15-year Platform and Final pit for K1 & K2 zones; and
. Leave K3 zone for future considering as the main zone (K1 & K2) could sustain 30 years operation at a full capacity of 100,000 m3 granite blocks product.
The parameters of 15-year pit as followings:
. Bench height: 20 m
. Bench face angle: 70 degree
. Final slope angle: <60 degree
. Safety berm width: 3 m
. Catch platform width: 6 m
. Pit Dimension: 765 6 275 m
. Bottom elevation: 699 m ASL
. Pit depth: 160 m
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The plan view of the mine design is presented in Figure 28 below.
Figure 28: Plan View of Mine Design
A road development and truck transportation system connected to the mine access and pits are selected. According to the mine plan, the haul road is located in the east side of the pit and the temporary roads connected to each working flat are in the pit. The road width is no less than 6.5 m, with a longitudinal slope less than 9%, and passing tracks are planned every 200 m along the road. The minimum turning radius is 15 m. 1# waste dump is in the valley to the northwest and 2# waste dump locates in the east valley.
9.4.2 Dimension Block Mining
In the FS, the dimension stone mining method adopted by the Company consists of diamond wire saw and diamond disc saw cutting, forklift loading, and flatbed truck transport.
The initial working flat preparation and stripping are proposed drill and blast method for overburn stripping. However, disc saw cutting will be employed when stripping work advanced 8–10 m far from 798 m Platform or meet Granite Resource.
Since the working flat moving down and the deposit is exposed, the diamond wire saw is employed for horizontal cutting, and diamond disc saw is proposed for vertical cutting.
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The working flat is a sub-bench of the open pit, and several working flat will combine to one (1) 20 m permanent bench of the pit. The criteria of working flat are presentedinTable25.Theworkingflat scheme is shown in Figure 29.
Table 25: Working Flat Design Criteria
Item Unit Parameter
Working bench height (Sub-bench) m 0.7–1.3 Angle of working bench Degree 90 Minimum width of working flat m 15–20 Minimum length of working flat m 40–100 Capacity M3/y 15,000*30,000 Working Platform Simultaneously QTY 5 Drill rig QTY/working plat 2–4 Diamond wire saw QTY/working plat 2–3 Diamond disc saw QTY/working plat 1–2
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Figure 29: Plan View of Mining Method Scheme
The mining process, which is detailed below, is composed of cutting and separating, overturning, reshaping, loading, and cleaning the working flat and is described as following:
. Cutting: the cutting work includes two processes which are vertical and horizontal cuttings. Diamond disc saw (φ2.6 m and/or φ3.2 m) is used for vertical cutting and diamond wire saw is used for horizontal cutting. Prior to cutting, holes (diameter 40~60 mm) are drilled horizontally for the wire saw to pass through the rock;
. Overturning: A loader is used to form a rock fragment-composed cushion layer, which serves as a working flat. The large rectangular stone is tilted downward by an air bag pushing machine and air compressor, which are used together similarly to a hydraulic jack;
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. Reshaping: The large overturned stone is separated into rough blocks of 2–3 m length with a diamond wire saw. The rough blocks are shaped and trimmed by a light diamond wire saw for commercial sale or slab production. During separation and shaping of the stone, consideration is given to avoid creating cracks and to maximise block recovery;
. Loading: The granite quarry blocks are loaded by forklift onto the flatbed truck to temporary block stockpile, which is on the side of main road for picking up and delivery by the customers; and
. Cleaning: The rock fragments on the working flat are loaded into dump trucks by wheel loader or excavator. These trucks haul them to the next working flat if needed, or to the waste dump. SRK considers that this mining dimension block mining technique is a reasonable and typical method for a mine of this type.
9.4.3 Mine Equipment
The major mining equipment fleet consists of diamond wire saws, drills, forklifts, wheel loaders, and flatbed trucks. The ancillary equipment includes diamond disc saws, mobile air compressors, and dump trucks. The equipment that the company plans to purchase are listed in Table 26 below.
Table 26: Mine Equipment Fleet
Equipment Model QTY
Excavator Komatsu PC300–7 2 Excavator Komatsu PC450–7 2 Dump truck Shaan Qi Delong 20t 9 Forklift FDM756T-18 6 Forklift 32t 1 Flat truck Shaan Qi Delong 25t 6 Jack-leg driller 7655 18 Diamond wire saw 55kw 5 Diamond wire saw 75kw 7 Diamond disc saw KSQJ1500/2000 15 Air compressor 13m3 5 Diesel tank 1 Pump 4
Total 81
* The equipment is assumed to be purchased and installed by end of 2022.
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SRK considers the mining method appropriate for the mine design of the Qiligou Project and the production rate of 100 km3 per annual of granite quarry block achievable. The equipment types selected for the mining processes and the ancillary equipment are considered to be suitable for the planned operation. However, the mine construction stripping and operation stripping are considered contract mining, at a price of 50 RMB/m3 as stated by the Company.
9.5 Mine Life Schedule
9.5.1 Working Flat Capacity
The raw rock separation is completed with diamond disc saw and diamond wire saw. Two disc-saws and two to three wire saws are arranged for each working flat. Depending on the process, 1–2 sets of 55 KW diamond wire saws can be flexibly configured. The re-shaping of the blocks is done with a diamond wire saw. Each working surface is equipped with 3 to 4 saws.
The equipment used for overturning, cleaning and loading of blocks is shared by a whole working flat. Generally, each working flat is equipped with 2 forklifts, 1–2 excavators. They are inter-usable by adjacent flats according to needs.
According to the topographic and geological conditions of the mine, the optimal length of the working line in the flat is 40–100 m, to maximum efficiency of the production team, equipment and site can be fully utilised.
According to the configuration level of the working flat equipment and referring to the actual production level of other domestic mines, the annual Production Volume of each mining flat is 15,000–30,000 m3. The FS proposed at least five (5) working flats are operated simultaneously to meet the requires of 100,000 m3 mine design capacity.
9.5.2 Construction and Initial Mining Area
The mine construction is considered from the hilltop (876 m ASL) downwards 798 m platform. The main method of construction is drill and blast. The waste will be dump to #1 waste dump.
According to the model of SRK, 2,560,000 m3 rock will be stripped during the open pit construction, and about 10,500 m3 granite quarry block will be produced during this time which is from October 2021 to April 2023.
The initial mining area will be constructed in 1.5 years and finished in April 2023. Production will be ramp up since initial mining area constructed. The initial mining area is about 4006172 m and the area is about 55,000 m2. The initial mining bench could serve about 3 years since 2023, however, the mining would go downwards when half of the initial mining bench is extracted to form 2 benches work simultaneously achieving production target. The rest resources of initial mining bench would continuously be mined together with bench 759 m (toe elevation). The initial mining area is presented in Figure 30 below.
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Figure 30: Initial Mining Area
9.5.3 Production Ramp-up
The production ramp-up period is about 2 years, which are 2023 and 2024. The working flats are 779 m and 759 m Platforms. The area of two platforms are around 69,000 m3 and 83,000 m3, respectively. The potion of 779 m platform would be mined to about 60% left in 2023 and 50% left in 2024, respectively. Meanwhile, the 759 m platform would be mined to about 50% left and 40% left in 2023 and 2024, respectively. The block produces in these 2 years are 52,100 m3 and 98,900 m3.The Project is planned to operate at full capacity of quarry block 100,000 m3 since 2025.
9.5.4 Mine Life Schedule
The production plan considered the Indicated Resource above 699 m ASL for 15 years life of mine.
The mining sequence is from top downwards, 2 benches work together for one year. Each bench consists about 20 working sub-benches, which are at a range of 0.7–1.3 m high depending the resource occurrence to arrange diamond disc saw for
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cutting work. The mine would extract K1 orebody for the first 4 years, at the second half year operating of 2025, a part of K2 orebody would be employed at bench 759 m. The mining operation proposed by the FS is considered working 300 days a year and 2 7-hour shifts a day.
The schedule indicates that #1 dump will be full since 2025, and #2 dump will be employed. The mine life schedule is presented in Table 27 and Figure 31 below.
Table 27: Summary of Mine Life Production Schedule
Item Unit LoM Total 2021 2022 2023 2024 2025 2026 2027
Granite Block ’000 m3 1,256.3 3.0 7.5 52.1 98.9 100.0 99.4 99.1 Un-block ’000 m3 2,704.1 1.6 20.8 168.0 205.6 208.7 209.5 208.8 Indicated Res Stripping ’000 m3 6,037.2 438.6 2,088.7 699.9 926.5 601.4 181.8 174.2 S/R m3/m3 1.5 95.3 73.8 3.2 3.0 1.9 0.6 0.6 Dump requirement ’000 m3 11,512.5 910.7 2,404.0 1,268.1 1,482.0 1,053.2 508.6 497.9
Item Unit 2028 2029 2030 2031 2032 2033 2034 2035
Granite Block ’000 m3 99.3 99.9 99.7 99.9 99.7 99.8 99.2 98.8 Un-block ’000 m3 209.2 210.6 210.1 210.6 210.1 210.4 209.1 211.0 Indicated Res Stripping ’000 m3 168.6 105.5 106.0 105.5 106.0 102.8 92.7 139.0 S/R m3/m3 0.5 0.3 0.3 0.3 0.3 0.3 0.3 0.4 Dump requirement ’000 m3 491.2 411.0 410.9 411.0 410.9 407.2 392.4 453.5
Figure 31: Production Schedule 15-Year Mine Life
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9.6 Mine Services
Open pit’s location makes it possible to drain by gravity. Drainage facilities include:
. Interceptor ditches at the mountain top to drain the precipitation to a safe place;
. Cache pools attached to the main drain ditch to catch slurry run-offs at the start of a precipitation; and
. Wastewater treatment ponds at benches to gather mining wastewater for later use.
10 WORKFORCE
10.1 Workforce Numbers
Workforce demands in the full production year is shown in Table 28.
Table 28: Workforce Demand in a Full Production Year
Persons per Item shift Shifts Total
Direct 59 / 142 Excavator drivers 4 2 8 Handler drivers 6 2 12 Vehicle drivers 6 2 12 Saw operators 22 3 66 Assistants 9 2 18 Plumbers and electricians 2 3 6 Waste hauling 9 2 18 Blocks yard 1 2 2 Indirect 20 / 20 Administrators 8 1 8 Sellers 12 1 12
Total / / 162
10.2 Assessment of Workforce
There is no error found after reviewing of assumptions and steps to estimate labour requirements. The mining will be contracted and labour can be outsourced.
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Although the source of workforce is not stated, SRK does not think it’s a problem that would out of control. Labour demand will relieve the local employment pressure and further improve the living standard of residents. Direct labours could be recruited locally and trained during the pre-production period, while the technicians could be employed by normal social recruitment.
11 INFRASTRUCTURES AND PUBLIC FACILITIES
11.1 Road Access
The mine is located about 40 km line distance southwest of Hanyin County. There are Yang(pingguan)-An(kang) railroad and G7011 national road (ShiTian Highway) passing through the Hanyin County. The mine can be accessed to the Hanyin County via an 80 km road paved with asphalt or concrete. There are also two other options which are 108 km and 143 km respectively as shown in Figure 1. The internal road from safety production platform to the entrance of the project about 1.7 km was built by Hanlong in late 2020 and early 2021.
It was assumed that the blocks would be sold directly at the mine site, then transported to delivery points via private trucks arranged by customers.
Themineislocatedfarfromthosemajorlogistics channels. It was supposed in the FS that the mine should further communicate with the Hanyin County government to speed up the construction of a new road to the mine. However, the current road condition is able to support the Project’s operation at its full capacity of 100,000 m3 per year.
11.2 Power Supply
A 10 kV power transmission line has been connected to the piedmont of the mine by the Hanyin County government from a 10 kV substation near to the mine. The 10 kV substation in the mine has been equipped with a 250 kVA transformer and will be equipped with additional 630 kVA transformer and 1,000 kVA transformer. Key parameters of power supply are shown in Table 29. The power supply is sourced from State Grid and will be sufficient for the mine operation during the full production years.
Table 29: Key Parameters of Power Supply
Item Unit Value
Installation capacity kW 1,852.83 Active load kW 1,482.3 Reactive load kvar 675.3 Apparent power kVA 1,628.9 Power factor / 0.91 Yearly consumption MWh 3,909 Unit consumption kWh/m3 block 39.1
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11.3 Water Supply
The mine was flanked by the Dagou and Qiligou valleys. Surface water in these valleys will be caught by newly building dams to the elevated tank in the mine to supply process water. The process water is mainly used to cool down the mine equipment.
Domestic water will be sourced from the Gounao Spring due to its good quality, which is the upstream of Dagou valley. An integrated water purifier SSJ101C will be installed in the mine to process raw water. Processed water will be distributed to users via DN75 PPR pipe.
Daily maximum water consumption estimates are shown in Table 30. Annual water consumption is about 129 kt, in which 17.5 kt are fresh water during the full production year. SRK notes that Hanlong has obtained a permit to use water at a capacity of 19 kt in 2021 which is sufficient, this permit should be renewed to support the normal production.
Table 30: Water Consumptions
Maximum Maximum Daily Hourly Item Consumption Consumption (m3/d) (m3/hr)
Domestic 21 9 Process 518 81 Replenishing 51.84 8.1 Sprinkling and afforesting 50 15 Others 30 20
Total 670.84 133.1
11.4 Fuel Supply
Diesel consumption is about 1,200 tpa or 12 kg/m3.
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11.5 Repair Facilities
A repair workshop was proposed to be constructed on site, which are equipped with lathes, electric single-beam bridge cranes, hand-held electric welding machines, electric hand drills, electric hoists, toolboxes, bench vices, bench grinders, etc. Light repair would be performed in this workshop.
Overhaul of trucks, excavators and handlers would be outsourced to some contractors.
11.6 Blocks Yard
A blocks yard will be located at a flat site near to the southwest of the K3 orebody and the southeastern entrance/exit of mine area to bear the blocks. The yard has a footprint of about 15 hectares and can store 50,000 m3 blocks. Additional storage will be temporarily used if necessary.
11.7 Waste Dump
Two waste dumps will be constructed in the valley outside of the mining licence area. Descriptions of these two dumps are shown below:
. Dump #1 is located southwest of K2 orebody. It was estimated that about 5–6 million m3 wastes and associated slates can be dumped here during the pre-production period. The dump crest is at 698 m ASL; and
. Dump #2 is located southeast of K1 orebody. It was estimated that about 3–4 million m3 granite wastes can be dumped here during later mechanical stripping and commercial production period. The dump crest is 650 m ASL.
Sources of overlaid wastes include mainly the Quaternary topsoil, weathered surface rocks and stripped hanging wall slates. During mining operation, rubbles are generated by cutting and slicing of rough blocks. It was assumed that these wastes and rubbles would be furtherly sold to the market.
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Figure 32: Waste Dump Location
11.8 Office Buildings and Accommodations
There is no description of office buildings and accommodations in the FS. As the production will be contractor mining, the accommodation for most labours is not included in Hanlong’s plan.
11.9 Conclusions and Recommendations
The road, power supply and water supply have been strongly supported by the Hanyin County government. Risks related to these infrastructures would be under control.
Infrastructures related to fuel supply, repair facilities, office buildings and accommodations were not clearly described in the FS, but industrial practises indicate that lacking detailed plan of these facilities are unlikely to be material risks to successfully develop a project, especially in China.
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12 ENVIRONMENT, PERMITS AND SOCIAL IMPACTS
12.1 Operational Licences and Permits
12.1.1 Business Licence
The Business Licence details for the Project are presented in Table 31.
Table 31: Details of the Business Licence
Project/ Expiry Licenced Business Company Business Licence No. Issued To Issued By Issue Date Date Activities
Qiligou 91610921552166711K Ankang Ankang City 8/27/2019 3/22/2040 Granite mining, Granite Hanlong Market processing and Project Mining Supervision sales. Company Administration Limited
12.1.2 Mining Licence
The Mining licence for the Project is presented in Table 32. The current mining licence has defined a permit mining elevation ranging from 880 m to 540 m ASL.
Table 32: Detail of Mining Licence
Mining Expiry Mining Production Project Licence No. Issued To Issued By Issue Date Date Area Type Rate (km2)(m3 per year)
Qiligou C61092120 Ankang Hanyin 12/31/2020 12/31/2035 0.517 Open pit 100,000 Granite 100271200 Hanlong County Project 55921 Mining Natural Company Resources Limited Bureau
12.1.3 Safety Production Permit
The Safety Production Permit for the Project is presented in Table 33.
Table 33: Details of the Safety Production Permit
Safety Production Project Permit No. Issued To Issued By Issue Date Expiry Date
Qiligou (Shan’an) FM Ankang Hanlong Ankang City 5/29/2020 5/19/2023 Granite [0161] Mining Safety Project Company Production Limited Supervision Bureau
The above safety permit was issued to the K2 orebody of the Project.
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12.1.4 Other Operational Permits
Ankang City Ecological and Environmental Protection Bureau Hanyin Branch issued an inform letter on 29 April 2020. The letter states that Hanlong Mining should apply for site discharge registration. SRK has sighted a site discharge registration receipt for the Hanlong Mining which is effective from 10 April 2020 to 9 April 2025.
Shaanxi Province Forest Bureau issued a forestland use approval for the project on 2 April 2020. The permitted area of forestland use is 1.0034 ha. In addition, Hanyin County Natural Resources Bureau issued a temporary land use approval for the Project on 10 October 2020. The approved area of land use is 12,211 m2 and approval is valid for two years.
The Water Use Permit No. [2021]10002 for the Project was issued by Hanyin County Water Bureau on 7 January 2021. The permitted quantity of water abstraction is 19,000 m3 peryearandthepermitisvalidforoneyear.
The table below summarises the status of the main operational licences and permits for the Qiligou Granite Project.
Forest Use Safety Site and Land Business Mining Production Water Use Discharge Use Project Licence Licence Permit Permit Permit Approval
Qiligou Sighted Sighted Sighted (for K2 Sighted Sighted Sighted Granite orebody) Project
12.2 Environmental, Social, Health and Safety (ESHS) Review Process, Scope and Standards
The process for the verification of the environmental compliance and conformance for the Project comprised a review and inspection of the Project’s environmental management performance against:
. Chinese national environmental regulatory requirements; and
. Equator Principles (World Bank/International Finance Corporation (‘‘IFC’’) environmental and social standards and guidelines) and Internationally Recognised Environmental Management Practices.
The methodology applied for this environmental review of the Qiligou Granite Project consisted of a combination of documentation review, site visit, and interviews with Company technical representatives. The site visit for the environmental review was undertaken from 8 to 10 September 2020.
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12.3 Status of ESHS Approvals and Permits
The details of the Environmental Impact Assessment (‘‘EIA’’) table and approval for the Project are presented in Table 34.
Table 34: EIA Table and Approval
Production Approval Project Produced By date Approved By date
Qiligou Hanzhong 1/28/2016 Hanyin County 2/6/2016 Granite Environmental Environmental Project Planning and Protection Engineering Bureau Company Limited
Shanxi Zhonglanqifang 5/2020 Ankang City 5/28/2020 Environmental Environmental Technology Protection Company Limited Bureau Hanyin Branch
In addition, SRK has sighted an Ecological Environment Treatment Plan (‘‘EETP’’) for the Project which was produced by Shanxi Zhonglanqifang Environmental Technology Company Limited in May 2020.
The details of the Water and Soil Conservation Plan (‘‘WSCP’’) and approval for the Project are presented in Table 35.
Table 35: WSCP and Approval
Production Approval Project Produced By date Approved By date
Qiligou Shanxi Hansen 5/2019 Hanyin County 10/14/2019 Granite Technology Administration Project Consulting Company Approval Service Limited Bureau
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The Environmental Final Check and Acceptance (‘‘FCA’’) Report for the Project have been complied in December 2020. The FCA review meeting was held on 9 December 2020 and the acceptance working group agreed that the Project passed the environmental FCA.
SRK has had sight of the following project safety assessments for the Project:
. Safety Pre-Assessment Report for the Qiligou Granite Project;
. Safety Design Report for the Qiligou Granite Project; and
. Safety Final Check Assessment Report for the Qiligou Granite Project.
12.4 Environmental Conformance and Compliance
SRK notes that the EIA tables for the Project has been compiled in accordance with the relevant Chinese laws and regulations. At the time of the September 2020 site visit, the Project was under construction.
In the following sections, SRK provides comments in respect of the Project’s existing and proposed environmental management measures, and their conformance to recognised international industry environmental management standards, guidelines and practices.
12.5 Key Environmental, Social, and Health and Safety Aspects
12.5.1 Site Ecological Assessment
The landform and topography in the mining area is commonly changed by open pit mining, waste rock dumping, haul roads, office buildings and dormitories, and other facilities. The development of the Qiligou Granite Project may also result in impacts to or loss of flora and fauna habitat. If effective measures are not taken to manage and rehabilitate the disturbed areas, the surrounding land can become polluted and the land utilisation function will be changed, causing an increase in land desertification, water loss and soil erosion.
The Project’s EIA proposes the conceptional measures to reduce and manage the potential impacts on the ecosystem. The EETP report makes detailed description of the project’s ecological environment management. SRK recommends Hanlong Mining follow the requirements of EIA and EETP reports during the Project’s construction and operation. The EIA table also indicates that there is no natural reserve identified near the project area. The main ecosystem type at the mine site is shrubland ecosystem. There are no special protected plant species and animals in the project area, and most of the animals are birds, rabbits and rats.
According to the WSCP report, the total disturbed area for the Project are estimated to be 52.344 ha. At the time of writing, no other documented, estimated, and/or currently surveyed areas of land disturbance for the Project’s mine site have been sighted as part of this review. SRK recommends that the operational areas of land disturbed for the Project be surveyed and recorded on an annual basis.
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12.5.2 Waste Rock Management
AccordingtotheEIAtable,thewasterockshouldbedischargedtothewasterock dump (‘‘WRD’’) which is located to the west of the mine site. The EIA table also states the retaining wall and cut-off ditch will be constructed for the WRD. At the time of the site visit in September 2020, SRK observed that a small amount of stripped topsoil and waste rock had been discharged on site and no WRD had been sighted as part of this review. The total amount of waste rock for the Project is estimated to be 354,800 m3. SRK recommends that the Company formulate a comprehensive design for waste rock dumping and collect the topsoil for future rehabilitation. No geochemical characterization of waste rocks or acid rock drainage assessment has been sighted as part of this review. Acid rock drainage (‘‘ARD’’) refers to the acidic water that is created when sulphide minerals are exposed to air and water and, through a natural chemical reaction, produce sulphuric acid. ARD has the potential to introduce acidity and dissolved metals into water, which can be harmful to surface and groundwater. However, no evidence was observed during the site visit of any leaching or acid rock drainage impacts.
12.5.3 Domestic Waste Management
The EIA table states that the total domestic waste, in the amount of 1.4 tpa, will be collected on site and then disposed by the sanitation department. The sewage is to be discharged to septic system and then reused as fertiliser. SRK recommends that the Company manage the domestic waste based on the EIA table’s suggestions.
12.5.4 Water Management
The nearest surface water body near the mine site is Moba River which is 1 km northeast to the Project. Hanlong Mining stated that the water source for the Project’s production is from nearby spring water. Please refer to the previous section 11.3 for the water consumption of this project. Hanlong Mining also reported to SRK that the water plant (Bijia Village Water Plant) services local villagers of Bijia Village obtains fresh water at the upstream of the Project’s water intake point and the project will not have any adverse impact on the local villagers’ water use.
According to the EIA table, the settling ponds will be constructed to collect the waste water generated by dust suppression on site. The collected waste water will be reused for production. The EETP report also proposes settling ponds to collect leachate of WRD. During the time of this site visit, SRK observed that large-scale construction has not yet begun and no settling ponds, comprehensive surface water drainage/flood collection system were constructed on site.
The water use permit for the Project has been issued. SRK recommends the Company extract water in line with the requirements of the water use permit. At the time of report writing, the Company has been constructing drainage system on site, as well as settling ponds to mitigate the water pollution risks.
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12.5.5 Air and noise emissions
The dust emission sources for the Project are mainly from open pit mining, loading and unloading, cutting, WRD and movement of vehicles and mobile equipment. During the time of this site visit, SRK did not observe obvious fugitive dust emissions on the mining site. The EIA table states wet drilling and cutting will be adopted to lower the fugitive dust emissions.
The main sources of noise emissions for the Project are from the operation of rock drill, wire saw, circular disc cutter, crane, loader and vehicles. The EIA table states that the noise emissions will meet the relevant standards through the corresponding shock absorption facilities and natural attenuation.
12.5.6 Hazardous Materials Management
Hazardous materials have the characteristics of corrosive, reactive, explosive, toxic, flammable and potentially biologically infectious, which pose a potential risk to human and/or environmental health. The hazardous materials will be generated mainly by the Project’s construction, mining, and include of hydrocarbons (i.e. fuels, waste oils, and lubricants), chemical and oil containers, batteries, medical waste, and paint.
During the site visit, SRK observed that there was no evidence of any significant hydrocarbon (i.e. fuel and oils) spillage on site. However, SRK recommends the waste oil should be collected and treated by a qualified contractor. SRK recommends that all hydrocarbon storage facilities have secondary containment.
12.5.7 Environmental Protection and Management Plan (‘‘EPMP’’)
The purpose of an operational Environmental Protection and Management Plan (‘‘EPMP’’) is to direct and coordinate the management of the Project’s environmental risks. The EPMP documents the establishment, resourcing, and implementation of the Project’s environmental management programmes. The site environmental performance should be monitored, and feedback from this monitoring could then be utilised to revise and streamline the implementation of the EPMP.
No such plan has been developed for Project operations covering the above-mentioned components. SRK recommends that as the Project moves toward fully operation, the Company develop and implement an operational EPMP — inclusive of a monitoring programme — in line with the recognised international practices.
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12.5.8 Site Closure Planning and Rehabilitation
The Chinese national requirements for mine closure are covered under Article 21 of the Mineral Resources Law of People’s Republic of China (1996), the Rules for Implementation of the Mineral Resources Law of the People’s Republic of China (2006), the Mine Site Geological Environment Protection Regulations (1 May 2009), and the Land Rehabilitation Regulation (2011) issued by the State Council. In summary, these legislative requirements cover the need to conduct land rehabilitation, to prepare a site closure report, and submit a site closure application for assessment and approval.
The recognised international industry practice for managing site closure is to develop and implement an operational site closure planning process and document this through an operational closure plan. While this site closure planning process is not specified in the Chinese national requirements for mine closure, the implementation of this process for a Chinese mining project will:
. Facilitate achieving compliance with these Chinese national legislative requirements; and
. Demonstrate conformance to a recognised international industry management practice.
There is currently no overall operational closure planning process in place for the Project that is in line with the recognised international industry management practices. However, SRK has sighted a Geological Environment Protection and Land Reclamation Plan which was developed by Hanlong Mining in May 2018. The Plan describes the proposed treatment measures, schedule, monitoring, cost estimation, etc. The Plan also stated that the total cost for the geological environment protection and land reclamation is estimated to be RMB3,447,000, which comprises geological environment protection of RMB709,500 and land reclamation of RMB2,737,500. According to the Chinese legal requirements, a mine geological environment treatment and restoration fund account should be established by the mine. SRK has sighted a fund supervision agreement which was signed by Hanyin County Natural Resources Bureau, Hanlong Mining and Industrial and Commercial Bank of China Hanyin Branch on 20 March 2019.
12.5.9 Occupational Health and Safety (OHS)
SRK has reviewed the safety assessment reports as provided by the Hanlong, and is of the opinion that the reports cover items that are generally in line with recognised Chinese industry practices and Chinese safety regulations. The safety assessment reports cover the basic safety production managements for mining, drainage, transportation, power supply, communication, WRD and personal protection. SRK notes that these proposed safety management measures are the basis for the operational OHS management system/procedures.
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Hanlong Mining reported to SRK that no safety accidents had occurred on site in the last three years. SRK recommends Hanlong Mining conduct safety record and develop incident analysis reports for the possible injuries in future. The proposed reports analyse the cause of injuries and identified measures to prevent a recurrence, which are in line with international recognised OHS accident monitoring practice.
12.5.10 Social aspects
The Project is located in Hanyin County, Shaanxi Province. The general surrounding land of the mine site comprises mainly forest and farmland.
The main administrative body for the Project is the Shaanxi Provincial Government, with some delegation of environmental regulation to the city of Hanzhong and Hanyin County. According to the provided documentation and Company statement, SRK has not sighted any historical or current non-compliance notices and or other documented regulatory directives in relation to the development of the Project. The Company states that there are no natural reserves or significant cultural heritage sites within or surrounding the Project area; and the EIA table also does not report any natural reserves or protected cultural heritage sites within the mine site.
The nearest residents live in Bijia Village which is about 400 metres away from the mine site. Hanlong states all villagers are Han Chinese. SRK has sighted the public consultation tables of the Geological Environment Protection and Land Reclamation Plan for the Project. No public consultation investigation of the EIA for the Project has been sighted as part of this review. However, according to the provisions of the Environmental Impact Assessment Law and the Measures for Public Participation in Environmental Impact Assessment, public participation is not required for projects that prepare environmental impact assessment table. SRK recommends that the Company design and implement a public consultation and disclosure plan to ensure ongoing community engagement. As part of this review, SRK has not sighted any documentation in relation to any actual or potential impacts of non-governmental organisations on the sustainability of the Project.
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13 PROJECT COSTS
13.1 Initial Capital
The project was proposed to commence the construction in October 2021 and go into commercial production in May 2023. In general, preparation work including initial overburden stripping will be done in 2021 and 2022, as well as the first four months in 2023, and the mining production will ramp up to the designed capacity about 100,000 m3 per annum in 2025.
The initial capital costs (the ‘‘Capex’’) are about Chinese Yuan (‘‘RMB’’ or ‘‘CNY’’) 141,254 thousand. Summary of initial Capex are shown in Table 36 with details shown in Table 37. Investment plan of initial Capex is shown in Table 38. Depreciation and amortisation (the ‘‘DA’’) calculation are shown in Table 39.
Table 36: Summary of Initial Capex
Item Value Percent Description (RMB ’000) (%)
Constructions 85,775.40 60.72 direct Capex Equipment 21,270.00 15.06 direct Capex Installation 5,094.90 3.61 direct Capex Others 16,272.40 11.52 indirect Capex Contingency 12,841.30 9.09 10% of direct and indirect Capex
Total 141,254.00 100.00
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Table 37: Breakdown of Initial Capex (RMB ’000)
Construction/ Capex Centre Details Engineering Equipment Installation Others Contingency
Mine Engineering Stripping and 77,550.0 — — — — Construction Mining (incl. — 19,630.0 981.5 — — Transportation) Equipment Survey Instrument — 150.0 — — — Mine Auxiliary — ———— — Facilities 144.0 — — — — Diesel Tank 80.0 130.0 10.4 — — Electricity Power — ———— — Substation, Lines and 570.0 300.0 3,900.0 — — Installation Water Supply and — ———— — Drainage Water Supply 1,500.0 180.0 27.0 — — Drainage 1,250.0 — — — — Waste Water Disposal 900.0 300.0 60.0 — — Infrastructure and — ———— — Transportation Mine Internal Road 391.4 — — — — Stockpile 900.0 — — — — Ditch 750.0 — — — — Waste Dump 900.0 — — — — Mine Office and — ———— — Accommodation Office 120.0 100.0 20.0 — — Accommodation 720.0 480.0 96.0 — — (contractor) Others— ———— — Land and forest — — — 1,200.0 — Resource Granting — — — 4,196.5 — Fee Exploration — — — 2,000.0 — Construction — — — 2,691.4 — Management Preparation Work — — — 1,500.0 — Safety and ———560.7— Environmental Review Engineering Design — — — 3,589.2 — and Supervision Others ———534.6— Contingency — ———— —
— — — — 12,841.3
Total 85,775.4 21,270.0 5,094.9 16,272.4 12,841.3
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Investment plan of initial Capex is shown in Table 38.
Table 38: Investment Plan of Initial Capex (RMB’000)
after H2 Investment Centre By 2020 H1 2021 H2 2021 H1 2022 H2 2022 H1 2023 2023 Total
Construction/ Engineering — 238.2 7,993.2 38,659.6 24,571.17 14.319.19 — 85,775.4 Equipment — — 7.214.0 480.0 9,344.0 4,232.0 — 21,270.0 Installation — — 4,242.1 87.0 554.2 211.60 — 5,094.9 Others 1,600.0 — 9,199.7 4,938.2 — 534.6 — 16,272.4 Contingency——————12,841.3— Total 1,600.0 238.2 28,649.0 44,164.8 34,469.4 19,291.4 — 128,412.7
Table 39: DA Calculation
Original Residual Item value DA period rate DA value (RMB’000 (RMB’000) (years) (%) per annum)
Fixed assets 120,562.0 7,595.1 Buildings 87,947.3 20 4 4,221.5 Machines 30,281.5 10 4 2,907.0 Electronic devices 2,333.2 5 0 466.6 Intangible assets 10,914.6 778.9 Land fee 1,200.0 20 0 60.0 Licence fee 9,180.0 15 0 612.0 Deferred asset 534.6 5 0 106.9 Total Assets 131,476.6 8,374.1
13.2 Sustaining Capital
The sustaining capitals were not estimated in the FS.
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13.3 Working Capital
Investment plan of working capital is shown in Table 40. Initial working capital is 30% of working capital, which is about RMB7,189,000. No working capital is proposed for 2021 and 2022 as the construction and engineering are ongoing.
Table 40: Investment Plan of Working Capital (RMB k)
Item Total 2023 2024
Working capital 23,963.4 19,868.9 4,094.5
13.4 Operating Costs
Forecast of Opex is shown in Table 41 for unit and life of mine (‘‘LoM’’) operation, respectively. Descriptions are shown below:
. Diesel price is RMB7,800 per metric ton (‘‘RMB/t’’).
. Power price is RMB0.5 per kilowatts per hour (‘‘RMB/kWh’’).
. Salary is RMB75,000 per person per year. Welfare rate is 14%.
. Manufacture overheads are about 4% of initial value of fixed assets.
. General and administrating cost was referred to that of similar operations.
. Marketing costs are 3% of sales revenue. The average product price inclusive of value-added tax (VAT) is 2,200 RMB/m3 block and the VAT is 13%.
Table 41: Breakdown of Operating Costs
Item Annual Unit (RMB’000) (RMB/m3 block)
Materials 19,800.0 198.00 Fuel and power 21,600.0 216.00 Salary and welfare 19,450.0 194.5 Repair 5,203.2 52.03 Other overheads 6,220.0 62.20 G&A 10,680.0 106.8 Marketing 5,840.7 58.41 Total Opex 88,793.9 887.94 Fixed 41,173.9 411.74 Variable 47,620.0 476.20
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13.5 Conclusions and Recommendations
The initial Capex is about RMB141 million (‘‘RMB M’’). SRK opines the initial Capex is in line with common practices.
Sustaining capital costs were not estimated in the FS, it could be set to 3–5% of initial Capex.
Working capital is about RMB24 million in the first full-production year, while the Opex is about RMB89 million. SRK understood that the working capital is in line with general practices, in which the working capital is usually 20–30% of Opex.
The FS has conducted a test cashflow model for the Project. The economic analysis presented in the FS indicates a net present value (NPV) at a range of about RMB300 million to RMB600 million with discount rates varying from 12% to 8%. This has indicated that the Project is economic viable. The internal return rate (IRR) is estimated about 42% and the payback period is about 6 years including 2-year construction period.
SRK is of opinion that the Project has demonstrated both technical feasibility and economic viability, which support an Ore Reserve statement in accordance with JORC Code.
14 PROJECT STATUS AND CONCLUSION
14.1 Project History
Hanlong has obtained the mining licence valid from 31st December 2017 to 31st December 2020, and renewed the mining licence in 31st December 2020, current mining licence is valid from 31st December 2020 to 31st December 2035.
Hanlong has commissioned Hanzhong Brigade to perform resource verification between May 2019 to April 2020, a Resource Verification Report of Qiligou Granite Project, Hanyin, Shaanxi was submitted.
In June 2019, Hanlong has commissioned SRK to undertake an independent assessment of the technical aspects of the Project. SRK was required to prepare an independent Competent Person’s Report (‘‘CPR’’ or the ‘‘Report’’) covering Dimension Stone Resource and Reserve Statement in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the ‘‘JORC Code’’, 2012 Edition) and compliant with the requirements of ‘‘Chapter 18: Equity Securities, Mineral Companies’’ of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong (‘‘Listing Rules of HKEx’’) for a proposed [REDACTED] on the Main Board of the Stock Exchange of Hong Kong Limited (the ‘‘Stock Exchange’’).
In November 2020, China Development Strategy Institute For Building Materials Industry (the ‘‘CSIBM’’) compiled the Feasibility Study Report of Granite Mining Project of Ankang Hanlong Mining Co., Ltd.
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From January to April 2020, Hanlong has performed safety production platform construction in the project area, the total excavated volume was 1,545.2 m3, the block yield was derived as 41.9%.
From April 2020 to December 2020, no production activity was performed in the project area, only minor road maintenance, including construction of retaining wall, drainage ditch, sedimentation pond, sewage pond and culvert bridge, approximately 1,600 m3 of rocks during this period which were all used for the construction of our Qiligou Project, the 1,600m3 was deducted in the mineral resource reporting.
14.2 Project Status
The Qiligou Granite Project is currently at development stage, according to the Feasibility Study, the planned project development period is from October 2021 to April 2023, totaling 18 months. The detail implementation plan is described in section 9.5 Mine Life Schedule of this report.
Hanlong’s major activity in the project area in 2020 mainly include two phases:
January 2020 to April 2020, safety production platform for the initial mining area, detail was described in Section 6.6 of this report.
In later 2020, Hanlong commissioned Bijia Changfa Construction Co., Ltd to carry out a series of preparation work including: road maintenance from the safety production platform to the entrance, retaining wall of the waste rock dump, retaining wall for the block yard, drainage ditch construction, sedimentation pond, sewage pond and culvert bridge construction. The rock for the above construction were about 1,600 m3 excavated from the Project. SRK has deducted them from the mineral resource.
14.3 Product of the Project
The product of Qiligou Granite Project is granite block, named as ‘‘Ankang Crystal Black’’ shown in Figure 33. The general physical properties of Hanlong granite blocks have met the requirement of Chinese standard: JC/T 204–2011 as described in Section 6.5 Laboratory Tests.
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Figure 33: Granite Block from Qiligou Granite Project
Sources: September 2020, SRK Site Visit
14.4 Conclusion
The Qiligou Project is in the development stage, roads, and other supporting facilities are available, The project was proposed to commence the construction in October 2021 and go into commercial production in May 2023. No production or project construction was planned prior to October 2021. The product of Qiligou Granite Project is currently dimension stone blocks, named as ‘‘Ankang Crystal Black’’. SRK considers that the current granite Reserve of 1.297 Mm3 can support a LoM of 15 years at an annual Production Volume of up to 100,000 m3. Having reviewed the FS prepared by CSIBM and information provided by Hanlong, it is SRK’s opinion that the Qiligou Project is technically and economically viable.
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Closure
This report, Competent Person’s Report for the Qiligou Granite Dimension Stone Project, Shaanxi Province, China, was prepared by
Pengfei Xiao Add title
andreviewedby
Dr Anson Xu Add title
All data used as source material plus the text, tables, figures, and attachments of this document have been reviewed and prepared in accordance with generally accepted professional engineering and environmental practices.
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References
Resource Verification Report of Qiligou Granite Project, Hanyin, Shaanxi, 2020
Feasibility Study Report of Ornamental Granite Mining Project of Ankang Hanlong Mining Co.
Mining Licence
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Appendix A Licences & Permits
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Appendix B JORC Code Table 1
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Section 1: Sampling Techniques and Data (Criteria in this section apply to all succeeding sections.)
Criteria Explanation Commentary
Sampling techniques . Nature and quality of sampling . A total of 17 drillholes totaling (e.g. cut channels, random chips, 2,642.4m and 7 trenches totaling or specific specialised industry 1,676m were carried out from 2017 standard measurement tools to 2020. Samples include core appropriate to the minerals under samples, trench channel samples. investigation, such as downhole gamma sondes, or handheld XRF . The drillhole collars were measured instruments, etc.). These examples by total station and downhole should not be taken as limiting the survey was measured every 50 m. broad meaning of sampling. Diamond core was used to obtain high quality samples that were . Include reference to measures logged for lithological and taken to ensure sample structural attributes. Sampling was representativity and the carried out under standard appropriate calibration of any dimension stone industry practice, measurement tools or systems as well as the Chinese exploration used. standards.
. Aspects of the determination of . Diamond core was HQ or NQ size, mineralisation that are Material to sampled on representative intervals the Public Report. for whole rock major element geochemical analysis, bulk density, In cases where ‘industry standard’ water absorption, compressive and work has been done this would be tensile strength, abrasion resistance relatively simple (e.g. ‘reverse and radioactivity. circulation drilling was used to obtain 1 m samples from which 3 kg . Surface samples were also collected was pulverised to produce a 30 g for above specifications and charge for fire assay’). In other specular glossiness analysis. cases more explanation may be required, such as where there is coarse gold that has inherent sampling problems. Unusual commodities or mineralisation types (e.g. submarine nodules) may warrant disclosure of detailed information.
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Criteria Explanation Commentary
Drilling techniques . Drill type (e.g. core, reverse . The drillholes diameter starts with circulation, open-hole hammer, HQ (89mm) and reduced to NQ rotary air blast, auger, Bangka, (75mm) in deeper part. sonic, etc.) and details (e.g. core diameter, triple or standard tube, depth of diamond tails, face-sampling bit or other type, whether core is oriented and if so, by what method, etc.).
Drill sample recovery . Method of recording and assessing . Diamond core recoveries were core and chip sample recoveries logged and recorded in the and results assessed. database. Recoveries are from 87.17 to 100%. . Measures taken to maximise sample recovery and ensure . Decreased footage per run in representative nature of the fractured strata to ensure the core samples. recovery is meet the requirement.
. Whether a relationship exists . The poor recoveries would have an between sample recovery and grade impact representativity of the and whether sample bias may have samples, probably lead to a occurred due to preferential loss/ negativity bias. gain of fine/coarse material.
Logging . Whether core and chip samples . The lithology, structure zones, have been geologically and mineralization are detail described geotechnically logged to a level of during the core logging. The level detail to support appropriate of the details is sufficient to Mineral Resource estimation, support a Resource estimate. mining studies and metallurgical studies. . Logging is quantitative in nature; no core photos are received. . Whether logging is qualitative or quantitative in nature. Core (or . The logging has provided adequate costean, channel, etc.) coverage of the full length of each photography. sample the project.
. The total length and percentage of the relevant intersections logged.
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Criteria Explanation Commentary
Sub-sampling . If core, whether cut or sawn and . Core samples were taken whole techniques and whether quarter, half or all core length. sample preparation taken. . The sample preparation of . If non-core, whether riffled, tube diamond core follows the standard sampled, rotary split, etc. and industry practice for dimension whether sampled wet or dry. stones. Major element analysis involved oven drying, coarse . For all sample types, the nature, crushing, followed by quality and appropriateness of the pulverisation. sample preparation technique. . No duplicate samples were taken. . Quality control procedures adopted for all sub-sampling stages . No certified reference materials or to maximise representativity of blanks were inserted in the sample samples. batches for assay. The assays were for semi-quantitative purposes and . Measures taken to ensure that the not used in the resource estimate of sampling is representative of the in dimension stone. situ material collected, including for instance results for field duplicate/second-half sampling.
. Whether sample sizes are appropriate to the grain size of the material being sampled.
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Criteria Explanation Commentary
Quality of assay data . The nature, quality and . The labs which undertook sample and laboratory tests appropriateness of the assaying tests and analysis were accredited and laboratory procedures used with CMA certifications. and whether the technique is considered partial or total. . The analytical technique for major element assay is XRF. Other . For geophysical tools, physical tests undertaken include spectrometers, handheld XRF bulk density, water absorption, instruments, etc., the parameters compressive and flexural strength, used in determining the analysis abrasion resistance, radioactivity including instrument make and and specular glossiness. These model, reading times, calibrations physical tests were conducted in factors applied and their accordance with Chinese derivation, etc. dimension stone standard techniques. . Nature of quality control procedures adopted (e.g. . No geophysical tools or handheld standards, blanks, duplicates, XRF instruments were used to external laboratory checks) and determine any data that was used whether acceptable levels of in this resource estimate. accuracy (i.e. lack of bias) and precision have been established. . No certified reference materials or blanks were inserted in the sample batches for assay. Blanks are not required for physical tests. The chemical analysis does not have any reference for the resource estimation of dimension stone except those used for internal laboratory quality control.
Verification of . The verification of significant . SRK has visually verified sampling and intersections by either independent significant granite unit assaying or alternative company personnel. intersections in diamond cores and selected samples were taken for . The use of twinned holes. check analysis, as part of the resource estimation process. . Documentation of primary data, data entry procedures, data . No twinned holes were done. verification, data storage (physical and electronic) protocols. . The data from laboratory and other documents were properly . Discuss any adjustment to assay saved electronically. data. . Adjustment to assay data is not necessary.
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Criteria Explanation Commentary
Location of data . Accuracy and quality of surveys . The drillhole collars and points used to locate drill holes (collar topography were surveyed by total and down-hole surveys), trenches, station. mine workings and other locations used in Mineral Resource . Unless specified, all the estimation. coordinates used in the report are Xi’an 80 coordination system. . Specification of the grid system used. . The accuracy and quality of surveys used to locate drill holes . Quality and adequacy of (collar and downhole surveys), topographic control. trenches, and other locations used is considered as enough to support Resource estimation.
Data spacing and . Data spacing for reporting of . The basic drillhole spacing is 100m, distribution Exploration Results. with some adjustment.
. Whether the data spacing and . The drillhole spacing is sufficient distribution is sufficient to to support resource estimation and establish the degree of geological classification. and grade continuity appropriate for the Mineral Resource and Ore . Not applicable to this project. Reserve estimation procedure(s) and classifications applied.
. Whether sample compositing has been applied.
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Criteria Explanation Commentary
Orientation of data in . Whether the orientation of . Most drillholes were drilled –90 dip relation to sampling achieves unbiased angle, only except ZK001–1 was geological structure sampling of possible structures and drilled –60 dip angle. the extent to which this is known, considering the deposit type. . The sampling followed site geologists’ logging, the site . If the relationship between the geologists have considered the drilling orientation and the mineralization when logging. orientation of key mineralised structures is considered to have introduced a sampling bias, this should be assessed and reported if material.
Sample security . The measures taken to ensure . Samples were taken and sample security. transportedtolablocatedinXi’an by Hanzhong brigade.
Audits or reviews . The results of any audits or reviews . A review of the sampling of sampling techniques and data. techniques and data was carried out by SRK as part of the Resource estimate and the database is considered to be sufficient quality to carry out Resource estimation.
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Section 2: Reporting of Exploration Results (Criteria listed in the preceding section also apply to this section.)
Criteria Explanation Commentary
Mineral tenement and . Type, reference name/number, . This project consists one mining land tenure status location and ownership including licence. Current mining licence is agreements or material issues with valid from December 31st, 2020 to third parties such as joint ventures, December 31st, 2035. The range of partnerships, overriding royalties, the mining right covers 0.517 km2. native title interests, historical The mining licence No. is sites, wilderness or national park C6109212010027120055921. and environmental settings. . Regarding any impediments, it is . The security of the tenure held at unknown to SRK at this moment. the time of reporting along with any known impediments to obtaining a licence to operate in the area.
Exploration done by . Acknowledgment and appraisal of . Described in the project history other parties exploration by other parties. section.
Geology . Deposit type, geological setting . Mineralization are mainly syenite and style of mineralisation. porphyry of the shallow intrusive rocks.
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Criteria Explanation Commentary
Drill hole Information . A summary of all information . See Section Exploration of the material to the understanding of Report. the exploration results including a tabulation of the following information for all Material drill holes:
. easting and northing of the drill hole collar
. elevation or RL (Reduced Level — elevation above sea level in metres) of the drill hole collar
. dip and azimuth of the hole
. down hole length and interception depth
. Hole length.
. If the exclusion of this information is justified on the basis that the information is not Material and this exclusion does not detract from the understanding of the report, the Competent Person should clearly explain why this is the case.
Data aggregation . In reporting Exploration Results, . Not applicable to this project methods weighting averaging techniques, maximum and/or minimum grade truncations (e.g. cutting of high grades) and cut-off grades are usually Material and should be stated.
. Where aggregate intercepts . Not applicable to this project incorporate short lengths of high-grade results and longer lengths of low grade results, the procedure used for such aggregation should be stated and some typical examples of such aggregations should be shown in detail.
. The assumptions used for any . Not applicable to this project reporting of metal equivalent values should be clearly stated.
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Criteria Explanation Commentary
Relationship between . These relationships are particularly . The vertical drilling has adequately mineralisation important in the reporting of intersected and tested the syenite widths and intercept Exploration Results. porphyry sequence lengths (mineralisation). . If the geometry of the mineralisation with respect to the . See Section 7.2 Modelling drillhole angle is known, its nature should be reported.
. If it is not known and only the down hole lengths are reported, there should be a clear statement to this effect (e.g. ‘down hole length, true width not known’).
Diagrams . Appropriate maps and sections . See Section 5: Geology and Section (with scales) and tabulations of 7: Mineral Resource Estimation of intercepts should be included for this Report. any significant discovery being reported These should include, but not be limited to a plan view of drill hole collar locations and appropriate sectional views.
Balanced reporting . Where comprehensive reporting of . Aseriesoftablesandfigures all Exploration Results is not including drillhole location, practicable, representative outlined orebody for project were reporting of both low and high shown in the report to avoid grades and/or widths should be misleading reporting of exploration practised to avoid misleading results. reporting of Exploration Results.
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Criteria Explanation Commentary
Other substantive . Other exploration data, if . SRK is not aware of any other exploration data meaningful and material, should be material or substantive exploration reported including (but not limited data that has not been reported. to): geological observations; geophysical survey results; geochemical survey results; bulk samples — size and method of treatment; metallurgical test results; bulk density, groundwater, geotechnical and rock characteristics; potential deleterious or contaminating substances.
Further work . The nature and scale of planned . No further work recommended further work (e.g. tests for lateral extensions or depth extensions or large-scale step-out drilling).
. Diagrams clearly highlighting the areas of possible extensions, including the main geological interpretations and future drilling areas, provided this information is not commercially sensitive.
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Section 3: Estimation and Reporting of Mineral Resources (Criterialistedinsection1,andwhererelevantinsection2,alsoapplytothissection.)
Criteria Explanation Commentary
Database integrity . Measures taken to ensure that data . ThedatawereprovidedtoSRKin has not been corrupted by, for Excel and Autocad format. example, transcription or keying errors, between its initial collection . SRK validated the database and its use for Mineral Resource estimation purposes. . SRK modelled the mineralised domains based on the database . Data validation procedures used.
Site visits . Comment on any site visits . SRK completed four visits to the undertaken by the Competent Project. From June 2019 to Person and the outcome of those September 2020, SRK’s main CP, visits. and CP of mineral resources visited the site, and held discussions with . If no site visits have been shareholders, management team, undertaken indicate why this is the exploration company and local case. engineers, and collected the Project related data. logical interpretation . Confidence in (or conversely, the . The geological interpretation is uncertainty of the geological supported by sufficient drilling and interpretation of the mineral trenching. deposit. . The data include geological . Nature of the data used and of any mapping, drillhole and trench assumptions made. loggings to outline the mineralisation ranges. . The effect, if any, of alternative interpretations on Mineral . The mineralisation zone is outlined Resource estimation. based on geological mapping and drillhole logging. . The use of geology in guiding and controlling Mineral Resource . The syenite porphyry intrusion estimation. range is the main factor considered in geology continuity. . The factors affecting continuity both of grade and geology.
Dimensions . The extent and variability of the . The syenite porphyry Mineral Resource expressed as mineralisation is around of length (along strike or otherwise), 1,000m(northwest-southeast plan width, and depth below direction) and 400m surface to the upper and lower (northeast-southwest direction), limits of the Mineral Resource. thickness varies from 20m to 150m.
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Criteria Explanation Commentary
Estimation and . The nature and appropriateness of . The database used to estimate the modelling the estimation technique(s) applied Qiligou Mineral Resource was techniques and key assumptions, including audited by SRK. SRK is of the treatment of extreme grade values, opinion that the current drilling domaining, interpolation information is sufficiently reliable parameters and maximum distance to interpret with confidence the of extrapolation from data points. boundaries for the syenite If a computer assisted estimation porphyry mineralised zones and method was chosen include a that the logging data are description of computer software sufficiently reliable to support and parameters used. Mineral Resource estimation.
. The availability of check estimates, . Dassault Syste` mes’ Geovia Surpac previous estimates and/or mine 6™ software was used to construct production records and whether the geological solids, prepare data, the Mineral Resource estimate construct the block model, and takes appropriate account of such tabulate Mineral Resources. data. . SRK established the block model . The assumptions made regarding according to the geometry of the recovery of by-products. solid model, and the block size was determinedas4mby4mby4m . Estimation of deleterious elements (X, Y, Z) with subsidiary blocks at or other non-grade variables of asizeof2mby2mby2m(X,Y, economic significance (e.g. sulphur Z). for acid mine drainage characterisation). . SRK has modelled the solid wireframe for the granite resource . Inthecaseofblockmodel domain. During the process, the interpolation, the block size in topography and the roof and base relation to the average sample of the mineralisation domain spacing and the search employed. (syenite porphyry) were key factors to constrain the solid model. . Any assumptions behind modelling Knowledge of the geological of selective mining units. characteristics discussed in aforementioned sections . Any assumptions about correlation constructed the resource between variables. modelling.
. Description of how the geological . No grade capping needed for interpretation was used to control dimension stone project. the resource estimates. . No geostatistical analysis was . Discussion of basis for using or not undertaken, which is not applicable using grade cutting or capping. to dimension stone.
. The process of validation, the checking process used, the comparison of model data to drill hole data, and use of reconciliation data if available.
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Criteria Explanation Commentary
Moisture . Whether the tonnages are . The resource is reported as a estimated on a dry basis or with volume hence the moisture content natural moisture, and the method is not relevant to the resource of determination of the moisture estimate. content.
Cut-off parameters . The basis of the adopted cut-off . Not applicable to dimension stone. grade(s) or quality parameters applied.
Mining factors or . Assumptions made regarding . Diamond wire saw method was assumptions possible mining methods, minimum selected to mine the granite mining dimensions and internal Resource. ultimate bench height of (or, if applicable, external) mining 20m, a safety berm width of 3m, dilution. It is always necessary as and a catch platform width of 6m part of the process of determining (the catch berm is set on every 2 reasonable prospects for eventual safety berms). economic extraction to consider potential mining methods, but the assumptions made regarding mining methods and parameters when estimating Mineral Resources may not always be rigorous. Where this is the case, this should be reported with an explanation of the basis of the mining assumptions made.
Metallurgical factors . The basis for assumptions or . Not applicable to granite or assumptions predictions regarding metallurgical dimension stone. amenability. It is always necessary as part of the process of determining reasonable prospects for eventual economic extraction to consider potential metallurgical methods, but the assumptions regarding metallurgical treatment processes and parameters made when reporting Mineral Resources may not always be rigorous. Where this is the case, this should be reported with an explanation of the basis of the metallurgical assumptions made.
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Criteria Explanation Commentary
Environmental factors . Assumptions made regarding . An environmental impact or assumptions possible waste and process residue assessment report approval has disposal options. It is always been issued by the relevant necessary as part of the process of authority and has been taken into determining reasonable prospects account in the current Resource for eventual economic extraction estimate. to consider the potential environmental impacts of the mining and processing operation. While at this stage the determination of potential environmental impacts, particularly for a greenfields project, may not always be well advanced, the status of early consideration of these potential environmental impacts should be reported. Where these aspects have not been considered this should be reported with an explanation of the environmental assumptions made.
Bulk density . Whether assumed or determined. If . Bulk density is not applicable to assumed, the basis for the this Resource estimate as only a assumptions. If determined, the volumetric estimate was made. method used, whether wet or dry, the frequency of the measurements, the nature, size and representativeness of the samples.
. The bulk density for bulk material must have been measured by methods that adequately account for void spaces (vugs, porosity, etc), moisture and differences between rock and alteration zones within the deposit.
. Discuss assumptions for bulk density estimates used in the evaluation process of the different materials.
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Criteria Explanation Commentary
Classification . The basis for the classification of . The Resource classification is the Mineral Resources into varying based on good confidence in the confidence categories. geological, quality and colour continuity, along with 200 m . Whether appropriate account has spaced between drillholes. The been taken of all relevant factors proximity to the drillholes and data (ie relative confidence in tonnage/ quality was used during the grade estimations, reliability of classification process. Weathering input data, confidence in material, geological structures, continuity of geology and metal joint pattern and spacing have been values, quality, quantity and taken into account of the distribution of the data). classification.
. Whether the result appropriately reflects the Competent Person’s view of the deposit.
Audits or reviews. . The results of any audits or reviews . The input data, including of Mineral Resource estimates. geological mapping and drillhole data are comprehensive in their coverage of the mineralisation.
. The Resource estimate appropriately reflects the view of the Competent Person.
. The relative accuracy of the Resource estimate is reflected in the reporting of the Resource as per the guidelines of the JORC Code 2012.
. The statement relates to global volumetric estimates.
. Actual production data has been reviewed by SRK.
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Section 4: Estimation and Reporting of Ore Reserves (Criteria listed in section 1, and where relevant in sections 2 and 3, also apply to this section.)
It’s not applicable for estimation and reporting of Ore Reserves for the Project to date due to many fatal flaws have been observed in the available feasibility study. Just pit inventory was converted at the time of this reporting. The following table is just a check list of pit inventory reporting.
Criteria Explanation Commentary
Mineral Resource . Description of the Mineral . ThegraniteOreReservesestimate estimate for Resource estimate used as a basis was based on the Mineral Resource conversion to Ore for the conversion to an Ore model developed by the SRK team, Reserves Reserve. and excluded Inferred Resources.
. ThegraniteOreReservesare reported inclusive of Indicated Mineral Resources.
. Clear statement as to whether the . This Project contains no Measure Mineral Resources are reported Mineral Resources. additional to, or inclusive of, the Ore Reserves. . TheOreReserveestimateis derived from the pit design, according to the design parameters prepared by China Development Strategy Institute for Building Materials Industry. (‘‘CSIBM’’)’’
Site visits . Comment on any site visits . SRK mining, processing, undertaken by the Competent environmental engineers and Person and the outcome of those geologists undertook a site visit visits. from 8th to 10th September 2020.
. If no site visits have been . Not applicable. undertaken indicate why this is the case.
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Criteria Explanation Commentary
Study status . The type and level of study . A report entitled ‘‘Feasibility Study undertaken to enable Mineral Report’’ has been compiled by Resources to be converted to Ore engineers of China Development Reserves. Strategy Institute for Building Materials Industry. (‘‘CSIBM’’), dated November 2020.
. The Code requires that a study to . The FS report associated by at least Pre-Feasibility Study level drawings indicates the project has been undertaken to convert could be planned feasibility and Mineral Resources to Ore viability, by technical and Reserves. Such studies will have economic parameters/factors been carried out and will have designed. determined a mine plan that is technically achievable and economically viable, and that material Modifying Factors have been considered.
Cut-off parameters . The basis of the cut-off grade(s) or . N/A quality parameters applied.
Mining factors or . The method and assumptions used . The conversion of Resources to assumptions as reported in the Pre-Feasibility or Reserves is based on the 15-year pit Feasibility Study to convert the design developed from the Mineral Resource to an Ore potential final pit drafted by Reserve (i.e. either by application CSIBM and modified by SRK of appropriate factors by mining engineer. optimisation or by preliminary or detailed design). . The final product of mine gate is granite quarry block.
. The choice, nature and . The pit is an open pit with appropriateness of the selected adequate benches for movement of mining method(s) and other mining machinery and safe access. parameters including associated design issues such as pre-strip, . The granite resource will be cut, access, etc. separated and reshape by diamond disc saw and wire saw, loaded by forklift and hauled by truck.
. The assumptions made regarding . The bench face angle is 70 degree geotechnical parameters (e.g. pit slopes, stope sizes, etc.), grade . Overall slope angle considering control and pre-production bermsislessthan67degree. drilling. . The catch berm is 6m and safety berm is 3 m width.
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Criteria Explanation Commentary
. The major assumptions made and . This granite project did not Mineral Resource model used for conduct pit optimization as the pit and stope optimisation (if ‘‘grade’’ of mineral resource is appropriate). unanimous and the waste to ore stripping ratio is low somehow. However, a post economic analysis conducted to verifying mineable.
. The mining dilution factors used. . N/A
. The mining recovery factors used. . The following factors have been included in the determining granite quarry block:
. 34.1% block yield; and
. 5.0% handling loss as well as quality factor.
. Any minimum mining widths used. . The working flat is proposed 40–100 m length and the widths is 15–20 m
. The manner in which Inferred . No Inferred Mineral Resources are Mineral Resources are utilised in state as Ore Resource. mining studies and the sensitivity of the outcome to their inclusion. . The Inferred Resources within the pit are considered as waste.
. The infrastructure requirements of . Temporary roads would be the selected mining methods. constructed along the pit development.
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Criteria Explanation Commentary
Metallurgical factors . The metallurgical process proposed . Not applicable for this Project or assumptions and the appropriateness of that (Coal Preparation process to the style of and Coal Quality) mineralisation.
. Whether the metallurgical process is well-tested technology or novel in nature.
. The nature, amount and representativeness of metallurgical test work undertaken, the nature of the metallurgical domaining applied and the corresponding metallurgical recovery factors applied.
. Any assumptions or allowances made for deleterious elements.
. The existence of any bulk sample or pilot scale test work and the degree to which such samples are considered representative of the orebody as a whole.
. For minerals that are defined by a specification, has the ore reserve estimation been based on the appropriate mineralogy to meet the specifications?
Environmental . The status of studies of potential . No material environmental issues environmental impacts of the identified to affect the dimension mining and processing operation. stone reserve statement at this Details of waste rock stage. characterisation and the consideration of potential sites, status of design options considered and, where applicable, the status of approvals for process residue storage and waste dumps should be reported.
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Criteria Explanation Commentary
Infrastructure . The existence of appropriate . The infrastructure is detailed in infrastructure: Section 11.’’ availability of land for plant development, power, water, transportation (particularly for bulk commodities), labour, accommodation; or the ease with which the infrastructure can be provided, or accessed.
Costs . The derivation of, or assumptions . Project capital costs and operating made, regarding projected capital costs were estimated in the costs in the study. Feasibility Study and detailed in Section 13. . The methodology used to estimate operating costs.
. Allowances made for the content of deleterious elements.
. The derivation of assumptions made of metal or commodity price(s), for the principal minerals and co-products.
. The source of exchange rates used in the study.
. Derivation of transportation charges.
. The basis for forecasting or source of treatment and refining charges, penalties for failure to meet specification, etc.
. The allowances made for royalties payable, both Government and private.
Revenue factors . The derivation of, or assumptions . Commodity price assumption is made regarding revenue factors based on Company’s contract and including head grade, metal or market analysis. commodity price(s) exchange rates, transportation and treatment charges, penalties, net smelter returns, etc.
. The derivation of assumptions made of metal or commodity price(s), for the principal metals, minerals and co-products.
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Criteria Explanation Commentary
Market assessment . The demand, supply and stock . Existing sale contracts and situation for the particular industry report were referred. commodity, consumption trends and factors likely to affect supply and demand into the future.
. A customer and competitor analysis along with the identification of likely market windows for the product.
. Price and volume forecasts and the basis for these forecasts.
. For industrial minerals the customer specification, testing and acceptance requirements prior to a supply contract.
Economic . The inputs to the economic . The FS has conducted a test analysis to produce the net present cashflow model for the Project. value (NPV) in the study, the The economic analysis presented in source and confidence of these the FS indicates a net present value economic inputs including (NPV) at a arrange of about estimated inflation, discount rate, RMB300 million to RMB600 etc. million with discount rates varying from 12% to 8%. This has . NPV ranges and sensitivity to indicated that the Project is variations in the significant economic viable. The internal assumptions and inputs. return rate (IRR) is estimated about 42% and the payback period is about 6 years including 2-year construction period.
Social . The status of agreements with key . No social issues identified stakeholders and matters leading to social licence to operate.
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Criteria Explanation Commentary
Other . To the extent relevant, the impact . Not applicable. of the following on the project and/ or on the estimation and classification of the Ore Reserves:
. Any identified material naturally occurring risks.
. The status of material legal agreements and marketing arrangements.
. The status of governmental agreements and approvals critical to the viability of the project, such as mineral tenement status, and government and statutory approvals. There must be reasonable grounds to expect that all necessary Government approvals will be received within the timeframes anticipated in the Pre-Feasibility or Feasibility study. Highlight and discuss the materiality of any unresolved matter that is dependent on a third party on which extraction of the reserve is contingent.
Classification . The basis for the classification of . Not applicable. the Ore Reserves into varying confidence categories.
. Whether the result appropriately . Not applicable. reflects the Competent Person’s view of the deposit.
. The proportion of Probable Ore . Not applicable. Reserves that have been derived from Measured Mineral Resources (if any).
Audits or reviews . The results of any audits or reviews . Not applicable. of Ore Reserve estimates.
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Criteria Explanation Commentary
Discussion of relative . Where appropriate a statement of . Not applicable. accuracy/confidence the relative accuracy and confidence level in the Ore Reserve estimate using an approach or procedure deemed appropriate by the Competent Person. For example, the application of statistical or geostatistical procedures to quantify the relative accuracy of the reserve within stated confidence limits, or, if such an approach is not deemed appropriate, a qualitative discussion of the factors which could affect the relative accuracy and confidence of the estimate.
. Accuracy and confidence . Not applicable. discussions should extend to specific discussions of any applied Modifying Factors that may have a material impact on Ore Reserve viability, or for which there are remaining areas of uncertainty at the current study stage.
. It is recognised that this may not . Not applicable. be possible or appropriate in all circumstances. These statements of relative accuracy and confidence of the estimate should be compared with production data, where available.
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Appendix C Safety Platform Block Record
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Appendix D Test Reports
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Appendix E Hanzhong Brigade Official Notice
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