HISTORY AND CORPORATE STRUCTURE

HISTORY AND DEVELOPMENT

Prior to the establishment of our Company on 16 April 2004 as a joint stock limited company, our business was operated by Zhaojin Group.

Originally established in 1974 as Zhaoyuan County Gold Mine Authority ( ) and subsequently incorporated as Zhaojin Group in 2002 after successive rounds of restructuring, Zhaojin Group is a wholly State-owned enterprise with the Zhaoyuan City People’s Government ( ) being its sole shareholder. Zhaojin Group is principally engaged in the business of gold exploration, mining and refining, and has investments in gold exploration, mining, smelting and refining and other gold-related businesses.

After receiving the approval of various state authorities to rationalise and further corporatise its gold mining business, on 5 April 2004, Zhaojin Group, as the lead Promoter, entered into a promoters’ agreement with our other Promoters, namely Shanghai Fosun, Shanghai Yuyuan, Guangxin Investments and Laomiao Gold for the establishment of our Company as a joint stock company. Pursuant to such agreement and other ancillary agreements, Zhaojin Group transferred the operational assets from its gold mining subsidiaries, Jinchiling Mining and Processing Co., Ltd. ( ), Hedong Mining Co., Ltd. ( ) and Xiadian Mining Co., Ltd. ( ), into our Company as contribution in kind to our registered capital, while the other Promoters contributed cash.

In May 2004, we established Hainan Dongfang, in which we held a 90% equity interest, together with Hainan Jinchang Gold Mine Co., Ltd. ( ), the other 10% owner of Hainan Dongfang. In November 2004, we increased our interest in Hainan Dongfang from 90% to 95% by acquiring a further 5% equity interest from Hainan Jinchang Gold Mine Co., Ltd.

In December 2004, we received further governmental approvals, and entered into agreements with Zhaojin Group, for the acquisition of the operational assets of Dayingezhuang Gold Mine from Shandong Zhaojin Group Dayingezhuang Mining Co. Ltd. ( ), a subsidiary of Zhaojin Group, and for the acquisition of a 75% equity interest in Jintingling Mining, which owns and operates Jintingling Gold Mine. The acquisitions were consummated on 1 January 2005.

In May 2005, we established Aletai Zhengyuan, an associated company, together with Zhengyuan International Mining Co., Ltd. ( ), the China Exploration & Engineering Bureau, Shandong Branch ( ) and Zou Cunhai ( ). We hold a 35% equity interest in Aletai Zhengyuan.

As a result, we now have four wholly-owned operating mines, namely Jinchiling Gold Mine, Xiadian Gold Mine, Hedong Gold Mine and Dayingezhuang Gold Mine, and one partially-owned operating mine, Jintingling Gold Mine, which is directly wholly-owned by our 75%-owned subsidiary, Jintingling Mining. The above five mines are engaged in the exploration and mining of gold and other related products. Jinchiling Mining also operates three cyanidation plants and one smelting plant.

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In addition, we now own a 95% interest in the Hainan Gold Mine and a 35% interest in a gold mine in Xinjiang, both of which are at the exploration and mine construction stage, through our 95%-owned subsidiary Hainan Dongfang and our 35%-owned associated company Aletai Zhengyuan, respectively.

OUR ESTABLISHMENT AND RESTRUCTURING

In anticipation of the Global Offering, we underwent a series of asset and shareholding restructuring, as described below. We have obtained all relevant approvals for our establishment and restructuring transactions.

A. Establishment of our Company and asset acquisition

In preparation for the establishment of our Company, on 5 April 2004, our Promoters entered into a promoters’ agreement, pursuant to which Zhaojin Group agreed to contribute RMB441,855,000 to the registered capital of our Company by transferring to our Company certain business assets in exchange for 291,500,000 Shares, and our other Promoters, namely Shanghai Fosun, Shanghai Yuyuan, Guangxin Investments and Laomiao Gold agreed to contribute to our registered capital by way of cash in the amount of RMB160,674,500, RMB160,674,500, RMB32,134,900 and RMB8,033,700, respectively, in exchange for 106,000,000 Shares, 106,000,000 Shares, 21,200,000 Shares and 5,300,000 Shares, respectively.

On 7 April 2004, Zhaojin Group and our Company (acting through its incorporation preparation committee) entered into a reorganisation and asset injection agreement to further implement the transfer of business assets as Zhaojin Group’s contribution to our registered capital. The agreement provided, among other things:

1. Zhaojin Group would contribute to our Company the operating business assets of Jinchiling Mining and Processing Co., Ltd., Hedong Mining Co., Ltd. and Xiadian Mining Co., Ltd. relating to the businesses of gold exploration and mining, ore processing and smelting (including all employees, all intellectual property and all mining rights, but excluding the land use rights and exploration rights held by Jinchiling Mining and Processing Co., Ltd., Hedong Mining Co., Ltd. and Xiadian Mining Co., Ltd., and the mining rights held by Jinchiling Mining and Processing Co., Ltd., which were to be transferred to our Company separately for value according to their valuation as confirmed by the State Land Resources Bureau), which had a net asset value of RMB441,855,000, according to the valuation report in respect of these assets as confirmed by the Yantai State Assets Administration Bureau;

2. Our Company would be entitled to all rights to, and assume all liabilities relating to, the business assets contributed to our Company as described in paragraph 1 above from the date of contribution of such assets;

3. Zhaojin Group would retain all rights to, and assume all liabilities relating to, all business assets not covered by the scope set out in paragraph 1 above; and

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4. Zhaojin Group provided certain warranties in connection with the transferred business assets, and undertook to indemnify our Company for any losses suffered by our Company as a result of Zhaojin Group’s breach of the warranties.

Following our incorporation, Zhaojin Group and our Company also entered into a series of transactions, pursuant to which we acquired certain exploration rights, mining rights and land use rights relating to Jinchiling Gold Mine, Xiadian Gold Mine and Hedong Gold Mine from Zhaojin Group as contemplated in the reorganisation and asset injection agreement.

Details including the date and consideration of such transfers are summarised below:

Type of asset Relevant gold mine transferred Date Consideration

(RMB)

Jinchiling Gold Mine...... Mining rights September 2004 1,408,680 Land use rights September 2004 8,050,142 Exploration rights November 2004 8,250,000

Hedong Gold Mine ...... Land use rights September 2004 1,483,017 Exploration rights November 2004 4,543,400

Xiadian Gold Mine ...... Exploration rights November 2004 3,116,200

On 1 January 2005, we acquired all of the business assets of Shandong Zhaojin Group Dayingezhuang Mining Co., Ltd., which related to Dayingezhuang Gold Mine, for a consideration of RMB258,867,200, pursuant to an asset acquisition agreement dated 31 December 2004 between Zhaojin Group and our Company. Zhaojin Group has also provided a warranty to us under the acquisition agreement with respect to the title to the assets and such assets being free from encumbrances.

Between 1 January 2005 and 30 June 2006, in order to further rationalise our assets prior to Listing, we entered into certain transactions with Zhaojin Group for the acquisition and disposal of certain property and assets. For further information, please see Section II, Note 34 to the accountants’ report set out in Appendix I to this prospectus.

B. Establishment and acquisition of our subsidiaries

Hainan Dongfang

Hainan Dongfang was established in the PRC on 13 May 2004 as a limited liability company with a total registered capital of RMB5,800,000. Our Company and Hainan Jinchang Gold Mine Co., Ltd., an independent third party, contributed capital to Hainan Dongfang by way of cash in the amount of RMB5,220,000 and RMB580,000, respectively, representing 90% and 10% of Hainan Dongfang’s registered capital, respectively.

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Pursuant to a share transfer agreement dated 25 November 2004, our Company acquired a further 5% equity interest in Hainan Dongfang from Hainan Jinchang Gold Mine Co., Ltd. for a consideration of RMB600,000 on 25 November 2004.

In July 2005, Hainan Jinchang Gold Mine Co., Ltd.’s 5% interest in Hainan Dongfang was transferred to Yangpu Sanyuan Mining Development Co., Ltd. ( ).

Hainan Dongfang’s authorised business scope is gold exploration, mining, ore processing, smelting and sales. As at the Latest Practicable Date, Hainan Dongfang does not own any operating mines but holds two exploration permits and one mining permit, and is engaged in exploration and mine construction in Hainan province.

Jintingling Mining

On 10 October 2002, Jintingling Mining was established in the PRC as a limited liability company with a registered capital of RMB3,000,000, contributed by Zhaojin Group, Zhaoyuan People’s Government Luofeng Street Office ( ) and Zhaoyuan Luofeng Street Office Shimen Mengjia Village Committee ( ) as to RMB1,530,000, RMB750,000 and RMB720,000, respectively, representing 51%, 25% and 24% of its registered capital, respectively. Pursuant to the shareholders’ resolutions of Jintingling Mining passed in August 2004, the registered capital of Jintingling Mining was increased to RMB60,000,000, allocated as to 75% to Zhaojin Group, 13% to Zhaoyuan People’s Government Luofeng Street Office and 12% to Zhaoyuan Luofeng Street Office Shimen Mengjia Village Committee. The 13% equity interest owned by Zhaoyuan People’s Government Luofeng Street Office was subsequently transferred to Zhaoyuan Luoling Mining Machine Fittings Factory ( ) pursuant to a share transfer agreement dated 11 December 2004.

On 1 January 2005, we acquired a 75% equity interest in Jintingling Mining from Zhaojin Group for a consideration of RMB259,749,000, pursuant to a share transfer agreement between Zhaojin Group and our Company dated 28 December 2004. Under the agreement, as a customary term for transactions of this nature, Zhaojin Group warranted to us that the equity interest in Jintingling Mining acquired from Zhaojin Group was free from encumbrances or third party claims, and undertook to bear all financial and legal liability as a result of any breach of such warranty. There were no special circumstances or shareholder disputes relating to this acquisition that gave rise to the provision of this warranty and undertaking by Zhaojin Group.

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C. Other investments

Aletai Zhengyuan

Aletai Zhengyuan was incorporated in the PRC on 20 May 2005 as a limited liability company with a total registered capital of RMB50,000,000. Our Company, Zhengyuan International Mining Co., Ltd. ( ) (“Zhengyuan International Mining”), China Exploration and Engineering Bureau, Shandong Branch ( ) and Zou Cunhai ( ) contributed capital to Aletai Zhengyuan by way of cash in the amount of RMB17,500,000, RMB20,000,000, RMB7,500,000 and RMB5,000,000, respectively. As such, Aletai Zhengyuan is owned as to 35%, 40%, 15% and 10% by our Company, Zhengyuan International Mining, China Exploration and Engineering Bureau, Shandong Branch and Zou Cunhai, respectively.

The approved scope of business of Aletai Zhengyuan is the exploration, mining, smelting and refinery of gold, silver, copper, iron, lead, zinc and the sale of the related products.

D. Certain indemnities from Zhaojin Group

Gold production and development fund and gold geological exploration fund

Prior to our incorporation in 2004, Jinchiling Gold Mine, Xiadian Gold Mine, Hedong Gold Mine and Dayingezhuang Gold Mine (through their respective predecessor entities) were provided financial assistance from the Gold Production and Development Fund ( ) and Gold Geological Exploration Fund ( ) (together the “China Gold Funds”). These funds were originally made available to companies in the gold exploration and production industry by the government pursuant to a decision promulgated by the State Council in 1987. It was unclear what the repayment terms, if any, were when the funding was made. In 2002, the State Council approved the establishment of China National Gold Group Company ( ) and authorised China National Gold Group Company to administer the China Gold Funds and collect repayment of previously provided funding.

Zhaojin Group has agreed with China National Gold Group Company to repay the funding granted from the China Gold Funds to Jinchiling Gold Mine, Xiadian Gold Mine, Hedong Gold Mine and Dayingezhuang Gold Mine. In this connection, Zhaojin Group has provided our Group with an indemnity against any damage, expense, liability or loss in connection with any claims from China National Gold Group Company with respect to the amount owed to the China Gold Funds. The funding from the China Gold Funds had been mainly used by our mines in connection with exploration activities and capital investment in production facilities. Our PRC legal advisers, King & Wood PRC Lawyers, have opined that, even in the event of any default in payment by Zhaojin Group to China National Gold Group Company, China National Gold Group Company does not have any legal recourse against us or our assets, but only against Zhaojin Group.

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Gold mineral resources compensation levies

Zhaojin Group has undertaken to indemnify our Company and Jintingling Mining, respectively, for any liability for uncollected gold mineral resources compensation levies and related withholding payments or penalties, if any, arising between 24 December 1999 and the Listing Date and which our Company and Jintingling Mining may respectively be ordered to pay by the competent State land resources authorities. See “Financial information – Taxation and other government charges” for a further description of such uncollected gold resources compensation levy. None of such indemnity undertakings is subject to a maximum cap.

For details regarding other indemnities provided to us by Zhaojin Group, please refer to “Statutory and general information — 5. Other information — B. Indemnities” in Appendix VIII.

For further details regarding our establishment and restructuring transactions, including the relevant governmental approvals we received, please refer to “Statutory and general information — 1. Further information about our Company — D. Corporate Reorganisation” in Appendix VIII.

After completion of our restructuring transactions, Zhaojin Group has retained some of its gold-related operations. To reduce potential competition between the businesses retained by Zhaojin Group and our business, we have entered into a non-competition agreement with Zhaojin Group, details of which are set out in “Relationship with Promoters — Non- competition agreement”.

Prior to the Global Offering, our Group engaged in certain transactions with Zhaojin Group, including the sale of products to and the commission of certain services from Zhaojin Group, details of which are set out in Section II, Note 34 to the accountants’ report set out in Appendix I. After completion of the Global Offering, Zhaojin Group will continue to provide certain services to our business. We have entered into a number of agreements with Zhaojin Group to regulate these transactions, the terms of which are set out in more detail in “Connected transactions”.

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CORPORATE STRUCTURE

The diagram below sets forth the corporate structure of our Group immediately following the Global Offering assuming the Over-allotment Option is not exercised:

Notes:

(1) Shanghai Fosun and Shanghai Yuyuan are parties to a share transfer agreement dated 23 September 2004, pursuant to which Shanghai Fosun has agreed to transfer to Shanghai Yuyuan 79,500,000 Shares, representing a majority of the Shares legally held by Shanghai Fosun, as follows: (i) subject to the payment in full of the transfer price, which shall be equal to 15% of our net asset value as of 31 December 2006, as audited by a qualified accounting firm, the economic interest attaching to the 79,500,000 Shares will be transferred to Shanghai Yuyuan as of 1 January 2007; and (ii) transfer of the legal title to such Shares shall take place after 16 April 2007, in order not to contravene the then-prevailing provision under the Company Law prohibiting transfers of promoters’ shares in a joint stock company within three years of its incorporation. Under the agreement, during the period from the effective date of the agreement until the transfer is completed, Shanghai Fosun has entrusted the rights (including voting rights) attaching to the 79,500,000 Shares to Shanghai Yuyuan’s management and control. As an entrustment fee, Shanghai Fosun must pay Shanghai Yuyuan a fee of RMB1,800,000, RMB7,230,000 and RMB7,230,000 for the years ended 31 December 2004, 2005 and 2006, respectively. Save as disclosed above, the agreement contains no substantive conditions for completion of such transfer. In particular, the agreement is not conditional upon our Listing. Immediately after the completion of such transfer, and assuming there is no other change to Shanghai Yuyuan’s shareholding in our Company or our issued share capital from the completion of the Global Offering (assuming the Over-allotment Option is not exercised) through the completion of such transfer, Shanghai Yuyuan will hold a 26.4% interest in our Company and Shanghai Fosun will hold a 3.8% interest in our Company.

(2) Shanghai Yuyuan holds a 95% interest in Laomiao Gold.

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(3) Guangxin Investments has entered into a share transfer agreement dated 26 November 2004 with Zhaoyuan City State-owned Assets Management Co., Ltd. ( ) (“Zhaoyuan State Assets”), an independent party, pursuant to which Guangxin Investments agreed to transfer to Zhaoyuan State Assets 21,200,000 Shares, representing all of the Shares legally held by Guangxin Investments, for a transfer price of RMB34,134,900, payable in full to Guangxin Investments within seven days of the agreement. The agreement provides the transfer of the legal title to such Shares shall take place within three months after 16 April 2007, in order not to contravene the then-prevailing provisions under the Company Law prohibiting transfers of promoters’ shares in a joint stock company within three years of its incorporation. Under the agreement, after the date of payment of the transfer price, Zhaoyuan State Assets will be entitled to all substantive rights and bear all substantive liabilities attaching to Guangxin Investments’ Shares; such rights (including voting rights) may be exercised by Zhaoyuan State Assets after such date by the legal representative of Zhaoyuan State Assets as the authorized shareholder representative of Guangxin Investments in relation to its holding of our Shares. Save as disclosed above, the agreement contains no substantive conditions for completion of the Share transfer. In particular, the agreement is not conditional upon our Listing. Immediately after the completion of such transfer, assuming there is no other change to Guangxin Investments’ shareholding in our Company or our issued share capital from the completion of the Global Offering (assuming the Over-allotment Option is not exercised) through the completion of such transfer, Zhaoyuan State Assets will hold a 3.0 % interest in our Company.

(4) Includes the 2.5% interest to be held by the NSSF Council.

(5) Jinchiling Gold Mine, Xiadian Gold Mine, Hedong Gold Mine and Dayingezhuang Gold Mine are wholly-owned and directly operated by our Company through our branch companies.

(6) Our Company has a 75% equity interest in Jintingling Mining. The other 25% equity interest in Jintingling Mining is owned by Zhaoyuan Luoling Mining Machine Fittings Factory ( ) and Zhaoyuan Luofeng Street Office Shimen Mengjia Village Committee ( ), each an independent third party, as to 13% and 12% of the equity interest in Jintingling Mining, respectively. Jintingling Gold Mine is wholly-owned and operated by Jintingling Mining.

(7) Our Company has a 95% equity interest in Hainan Dongfang. The other 5% equity interest in Hainan Dongfang is owned by Yangpu Sanyuan Mining Development Co., Ltd. ( ), an independent third party. Hainan Gold Mine is wholly-owned and operated by Hainan Dongfang. Hainan Gold Mine is currently conducting exploration and mine construction.

(8) Aletai Zhengyuan is an associated company of our Company only and does not form part of our Group. Our Company has a 35% equity interest in Aletai Zhengyuan. The other 65% equity interest in Aletai Zhengyuan is owned by Zhengyuan International Mining Co., Ltd. ( ), China Exploration and Engineering Bureau, Shandong Branch ( ) and Zou Cunhai ( ), each an independent third party, as to 40%, 15% and 10% of the equity interest in Aletai Zhengyuan, respectively.

For further details regarding our subsidiaries, please refer to “Statutory and general information — 1. Further information about our Company — D. Corporate Reorganisation” in Appendix VIII.

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