Jor c Report

8/13/2019 Jor c Report

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Report prepared for

Xinjiang Fenglideyuan Trading Limited

Independent Technical Report

for an High-magnesium SerpentiniteProject in Tuoli County,

Xinjiang Uygur Autonomous Region,

P.R. China

Prepared by

January 2014


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YZ/YJ/AX/DG SCN329_SRK_Tuoli_Serpentinite Mine _ITR_Ver3_20140114_Final clean version.docx January2014

Independent Technical Report

for an High-magnesium Serpentinite Projectin Tuoli County, Xinjiang Uygur

Autonomous Region,

P.R. China

For

Xinjiang Fenglideyuan Trading Limited25thFloor, Yingke International Centre, 416 Beijingnan Street

Urumqi CityXinjiang Uygur Autonomous Region, China

SRK Project Number SCN329SRK Consulting China Ltd

B1205, COFCO Plaza, 8 Jianguomennei DajieDongcheng District, Beijing 100005

Contact: Dr. Yiefei JiaTelephone No.: +86 10 8512 0365

Email: [email protected]: www.srk.cn

January 2014

Compiled by:

Dr. Yiefei Jia, FAusIMMPrincipal Consultant(Geology)

Peer reviewed by:

Daniel Guibal, FAusIMMCorporate Consultant

(Geostatistics & Resources)

Authors:Yuanjian Zhu and Dr Yiefei Jia

Peer Reviewers:Dr Anson Xu (internal), Mr. Daniel Guibal (external)


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Executive Summary

Background

Fenglideyuan Trading Limited (Fenglideyuan, the Company or the Client) commissioned SRK

Consulting China Limited (SRK) to review the geology, supervise the exploration program, and prepare amineral resource estimate for the Akekerishi serpentinite deposit (Akekerishi Deposit) in Tuoli County,Xinjiang Uygur Autonomous Region, the Peoples Republic of China (P.R. China). The geological reviewand resource estimates were required to be included in a Competent Persons Report (this Report or theReport) to provide Fenglideyuan and potential equity investors as well as possible future shareholders with

SRKs independent technical opinions on this property.

Summary of Principal Objectives

The principal objective of this Report is to provide the Company and potential investors in the Companywith an independent technical assessment of the geology, exploration and resource aspects of the reviewed

projects based on all available technical data. The aim has been to produce a Competent Persons Report(CPR) suitable for inclusion in a prospectus prepared to support the proposed listing of the Company on

the Alternative Investment Market (AIM) of the London Stock Exchange.

Outline of Work Program

The work programme for this project consisted of:- A review of data provided by Fenglideyuan;- Two site visits to the project area in April and November 2013;- Discussions with Company personnel and the relevant geological professionals and consultants who

conducted the geological exploration;- On-site supervision of the quality assurance and quality control (QA/QC) procedures followed in the

surface drilling programme and sampling between August and October 2013;- Geological modelling and resource estimation of the serpentinite deposit in December 2013;- Analysis of the data provided by the Company and generated by SRK; and- Preparation of this Report.

Results

Summary

Fenglideyuan wholly owns one exploration permit named Xinjiang Tuoli County Akekerishi CooperPolymetallic Exploration permit, covering an area of 21.51 square kilometres (km

2). The property is

located approximately 100 kilometres (km) south of the Tuoli County town in Xinjiang UygurAutonomous Region, P.P. China, and is under the administrative jurisdiction of Tuoli County. Access to theproperty is relatively easy via paved roads from Urumqi.

The reviewed area is located in the southwest of the permit area and covers an area of nearly 5 km2, in which

149 drillholes with an aggregate length of approximately 29,400 metres (m) were drilled between Augustand October 2013, which was under SRKs supervision. A total of 9,612 samples representing 28,793.3 m ofdrilling core were collected during the campaign. Generally SRK is satisfied with the quality of drilling,sampling and assaying, and SRK is confident that the data so obtained are of sufficient quality for use inpreparing a resource statement for the Akekerishi Deposit complying with the requirements of the AustralianCode for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code (2012edition)).

As of 31 December 2013, the Akekerishi Deposit, at a cut-off grade of 30% magnesium oxide (MgO), wasestimated to contain 1,536 million tonnes (Mt) of Measured Resource at an average grades of 41.75% MgO;


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2,666 Mt of Indicated Resource at average grades of 42.01% MgO; and 5,726 Mt of Inferred Resource at anaverage grades of 42.74% MgO.

Exploration permit

The Akekerishi Deposit is located in Tuoli County, Xinjiang Uygur Autonomous Region in China, under thedirect jurisdiction of Tuoli County and 100 km south of the Tuoli urban area. The geographical coordinatesof the deposit area are limited to the area between 8323 00 to 832645 East longitude and 450615 to450845 North latitude.The Xinjiang Tuoli County Akekerishi Cooper Polymetallic Exploration permitwas acquired by Fenglideyuan in October 2008. A copy of the original exploration permit of the AkekerishiDeposit is shown in Appendix 1.

Geology and Mineralogy

The serpentinite deposit in Akekerishi property is recognized as an ultra-mafic intrusion type depositcharacterized by high-MgO content.

Folds and faults are relatively developed in the deposit area. The faults are secondary faults regionallyinduced by the northeast trending Daerbute fault and Mayile fault, and these secondary faults have no effecton the continuity of mineralisation in the Akekerishi deposit. Intermediate-felsic volcanic-sedimentary rocksof the Middle Ordovician Kekesayi Formation dominate the area. Serpentinization is widely developed in theregion. The Late Paleozoic Variscan ultra-mafic serpentinites are the major intrusive rocks which form themineralised zone.

One mineralised zone was defined in the region. It is over 4,000 m long, 3,000 m wide and extends for over600 m deep, in a bedded shape. It is located in the southwest portion of the exploration permit area, coveringapproximately one third of the total area.

The potential useful mineral in Akekerishi Deposit is serpentine or/and olivine, which represents over 90%

of the mineralisation. The secondary associated minerals mostly comprise pyroxene, magnetite, andmagnesite. Gangue minerals mostly consist of amphibole and biotite. Serpentine mostly occurs in microscaly, xenomorphic-hypidiomorphic fine granular or columnar textures, and appears in massive or veinstructures.

The accompanying useful minerals consist of silicon dioxide (SiO2, with an average grade of 35.79%), ironoxide (Fe2O3, with an average grade of 6.81%), nickel (Ni, with an average grade of 0.22%), cobalt(Co, with an average grade of 0.010%), gold (Au, with an average grade of 0.06 gram per tonne (g/t)),and silver (Ag, with an average grade of 5.95 g/t). All of these minerals except Co, Au and Ag can beeconomically recovered based on several metallurgical test reports provided by the Client. The harmfulelements are sulphur (S, with an average grade of 0.016%), phosphorus (P, with an average grade of

0.013%), chromic oxide (Cr2O3, with an average grade of 0.40%), calcium oxide (CaO, with an averagegrade of 0.16%), and arsenic (As, less than the detectable limit of 3 g/t).

Exploration, Sampling, Analytical Procedures, Quality Assurance and Quality Control

Under SRKs supervision, the No. 8 Geological Brigade of Fujian Province (No. 8 Brigade) conducteddrilling and geological exploration programs at the Akekerishi deposit from August to October 2013. As ofOctober 2013, a total of 149 vertical drillholes with an aggregate length of approximately 29,400 m had beendrilled out at the deposit. All drillholes were arranged along exploration lines. The collars of the drill holeswere properly surveyed and down-hole surveying was undertaken at 100 m or lower intervals. The drill coreswere logged while uncut. Samples were taken from halves of drill cores by splitting along the core axis.Sample intervals were marked by geologists and ranged from 1 m to 5 m in length. The most common

sample length amongst the core samples was 3 m. Wall rocks and ore were sampled separately. The recoveryrates for all cores varied from 90% to 100% with an average recovery rate of 98%, and for all mineraliseddrill cores varied from 92% to 100% with an average recovery rate of 98%.


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A total of 9,612 samples from the deposit were collected and analysed by the Laboratory of No. 121Geological Brigade of Fujian Province (No. 121 Laboratory) . Five components including MgO, SiO2,Fe2O3, Ni and Co were assayed. For each 100 sample batch, 10 QA/QC samples were inserted, consisting oftwo certified reference materials (CRM), two blanks, two core duplicates, two coarse rejects and two pulpduplicates. Additionally, four (4) out of every 100 samples were randomly chosen and sent to a secondindependent laboratory (SGS-CSTC Standards Technical Services (Tianjin) Co., Ltd (SGS)) for externalcheck. A total of 1,454 QA/QC samples were inserted, consisting of 392 external check samples, 194 CRMs,180 blanks, 231 core duplicates, 208 coarse rejects, and 160 pulp duplicates. The results are generally withinthe control limits for the CRMs and blank material assays. The duplicates (including core duplicates, coarserejects and pulp duplicates) and external checks display relatively good correlation with the original samples,with only a small number of samples returning relatively large deviations.

Therefore, it is the opinion of SRK that the No. 8 Brigade followed the QA/QC practices proposed by SRK.Assay results of the sample blanks, core duplicates, pulp duplicates and laboratory external checks werewithin acceptable limits. Therefore, SRK has confidence in the geological database obtained during the

exploration program, and the resource estimation based upon these data complies with the requirements ofthe Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC

Code).

Mineral Resource Estimation

The drillhole database used for the resource estimation consists of 149 core holes. A total of 9,612 intervalswere sampled at the deposit, representing 28,793.3 m of drilling cores. All the available data was input into aSurpac (version 6.3) database for the estimation procedure. The database was validated within Surpac tosearch for errors such as missing or overlapping intervals, and to correct hole lengths, azimuths and dips, andto eliminate duplicated samples.

The cut-off grade was determined based on the assumptions of a price of 10,000 Renminbi Yuan (RMB) per

tonne of magnesium hydroxide (the final product, with grade above 98%), a mining dilution rate of 5%, totalprocessing recovery rate of 68%, and overall production cost of 2804 RMB per tonne of ore, includingmining, processing and metallurgical, and administration costs. The metallurgical costs are based on themetallurgical test reports provided by the Company. The cost of production of high purity ultra-finemagnesium hydroxide is 2,704 RMB per tonne of ore with a recovery rate of 68%. In addition, the price ofthe magnesium hydroxide product is also sourced from the test reports. The mining and stripping cost of 50RMB per tonne of ore, the administration cost of 50 RMB per tonne of ore, and the mining dilution rate of 5%were selected based on the following considerations: similar type of mine in this region and open pit miningmethod and so on. Based on these assumptions, SRK selected a cut-off grade of 30% MgO for the resourceestimate.

The following table presents a summary of the estimated Mineral Resources at Akekerishi Deposit as of 31

December 2013 using an MgO cut-off grade of 30%. Only the Measured and Indicated Mineral Resourcescan be used for ore reserve estimation and mine planning.

Resource Category Resources (Mt) MgO (%) SiO2(%) Fe2O3(%) Ni (%) Co (%)

Measured 1,536 41.75 35.50 6.73 0.22 0.010

Indicated 2,666 42.01 35.96 6.86 0.22 0.010

Measured + Indicated 4,202 41.91 35.79 6.81 0.22 0.010

Inferred 5,223 42.79 36.36 6.83 0.23 0.010

The information in this report which relates to Mineral Resources is based on information compiled by Mr Yuanjian

Zhu and Dr Yiefei Jia, full time employees of SRK Consulting (China) Ltd and members of the Australasian Institute of

Mining and Metallurgy(AusIMM). Mr Zhu and Dr Jia have sufficient experience which is relevant to the style ofmineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as

Competent Persons as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results,


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Mineral Resources and Ore Reserves. Mr Zhu and Dr Jia consent to the reporting of this information in the form and

context in which it appears.

Exploration Potential

The continuity the major mineralised zone is suitably controlled by the exploration grid of drilling and iswell understood. In addition, major features that affect the mineral distribution, such as faults, folds,intrusions and shear zones, were logged and interpreted competently. As the current resources are notcompletely closed off in the down-dip extension, SRK believes there is great potential to extend the currentresources of the Akekerishi Deposit. Additional step out deeper drilling could be conducted which wouldundoubtedly further increase the resource tonnages.


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Table of Contents

Executive Summary .......................................................................................................... iiiDisclaimer .......................................................................................................................... xList of Abbreviations.......................................................................................................... xi

1 Introduction and Scope of Report ............................................................................ 12 Background and Brief .............................................................................................. 13 Program Objectives and Work Program .................................................................. 1

3.1 Program Objectives ................................................................................................ 13.2 Reporting Standard ................................................................................................. 13.3 Limitations Statement ............................................................................................. 13.4 Work Program ......................................................................................................... 23.5 Project Team .......................................................................................................... 23.6 Statement of SRKsIndependence ......................................................................... 33.7 Representation ....................................................................................................... 33.8 Consent .................................................................................................................. 33.9 SRKs Experience ................................................................................................... 33.10 Forward-looking Statements ................................................................................... 5

4 Regional Geography and Access ............................................................................ 64.1 Regional Location ................................................................................................... 64.2 Access .................................................................................................................... 64.3 Topography, Climate and Local Economy and Infrastructure .................................. 6

5 Exploration Licences and Permits ........................................................................... 76 Geological Description ............................................................................................ 8

6.1 Regional Geology ................................................................................................... 86.2 Local Geology ......................................................................................................... 9

6.2.1 Stratigraphy .............................................................................................................96.2.2 Structures ................................................................................................................96.2.3 Alteration ..................................................................................................................96.2.4 Intrusions .............................................................................................................. 10

6.3 Deposit Geology ................................................................................................... 106.3.1 Characteristics of Mineralised Zone ..................................................................... 106.3.2 Mineralogy ............................................................................................................ 11

6.4 Exploration History ................................................................................................ 116.5 Exploration, Sampling, Analytical Procedures, Quality Assurance and Quality

Control .................................................................................................................. 126.5.1 Exploration, Sampling Procedures and Quality Control ....................................... 126.5.2 Analytical Procedures and Quality Control ........................................................... 14

6.6 Resource Estimation under the JORC Code ......................................................... 206.6.1 Introduction ........................................................................................................... 206.6.2 Resource Estimation Procedures ......................................................................... 216.6.3 Exploration Database ........................................................................................... 216.6.4 Solid Modelling ..................................................................................................... 226.6.5 Compositing .......................................................................................................... 226.6.6 Statistical Analysis and Variography .................................................................... 236.6.7 Block Model and Grade Estimation ...................................................................... 256.6.8 Model Validation ................................................................................................... 266.6.9

Mineral Resource Classification ........................................................................... 27

6.6.10 Mineral Resources Statement .............................................................................. 286.6.11 Grade Sensitivity Analysis .................................................................................... 29

6.7 Exploration Potential ............................................................................................. 30


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References .................................................................................................................... 31Appendices .................................................................................................................... 32

Appendix 1: Exploration Licences .................................................................................... 32


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List of Tables

Table 3-1: SRK Project Team .................................................................................................... 2Table 3-2: Recent Reports by SRK for Chinese Companies ...................................................... 4Table 5-1: Coordinates of the Akekerishi Exploration permit (in Xian Geodetic Coordinate

System 1980) ................................................................................................................ 7Table 6-1: Recovery Rate of Drillholes in Exploration Line 9, 15 and 19 ................................... 12Table 6-2: Summary Statistics: All MgO Raw Assays .............................................................. 23Table 6-3: Parameters Chosen for the Mineralised Zone (MgO) .............................................. 24Table 6-4: Coordinate Extents of Block Model ......................................................................... 26Table 6-5: Assumptions Used for Cut-Off-Grade Calculation ................................................... 28Table 6-6: Estimated Resources at Akekerishi Deposit, as of 31 December 2013 ................... 29Table 6-7: Global Grade-Tonnage Table*, as of 30 June 2013 ................................................ 29List of Figures

Figure 4-1: Schematic Map of the Project Location .................................................................... 6Figure 6-1: Regional Geological Map of Akekerishi Deposit ....................................................... 8Figure 6-2: Simplified Geological Map of Akekerishi Deposit...................................................... 9Figure 6-3: Schematic Exploration Cross Section in Akekerishi Deposit .................................. 10Figure 6-4: Typical Drillhole Logging Histograms ..................................................................... 11Figure 6-5: Drill Hole Distribution Map ...................................................................................... 12Figure 6-6: Drill Cores with High Recovery Rate (left) and Core Shed (right) ........................... 14Figure 6-7: CRM Performance ................................................................................................. 15Figure 6-8: Duplicate Performance .......................................................................................... 17Figure 6-9: External Check Sample Performance .................................................................... 19Figure 6-10: Scatter Diagrams for Bulk Density vs. Grade of TFe ............................................ 20Figure 6-11: Digital Terrain Model Used in the Resource Estimation ........................................ 22Figure 6-12: Three-Dimensional View of Mineralised Zone in Akekerishi Deposit .................... 22Figure 6-13: Cumulative Probability Plot for MgO in the Akekerishi Deposit(left) and Histogram

of Core Length (right) .................................................................................................. 23Figure 6-14: Frequency Distribution Histograms for MgO Composite in the Mineralised Zone . 24Figure 6-15: Variogram Models for Each Axis in the Mineralised Zone .................................... 25Figure 6-16: Swath Plot of the Akekerishi Deposit .................................................................... 27Figure 6-17: Grade Tonnage Curves for the Akekerishi Deposit .............................................. 30


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Disclaimer

The opinions expressed in this report have been based on information supplied to SRK Consulting China Ltd(SRK) by Fenglideyuan. The opinions in this Report are provided in response to a specific request fromFenglideyuan. SRK has exercised all due care in reviewing the supplied information. While SRK has

compared key supplied data with expected values, the accuracy of the results and conclusions from thereview are entirely reliant on the accuracy and completeness of the supplied data. SRK does not acceptresponsibility for any errors or omissions in the supplied information and does not accept any consequentialliability arising from commercial decisions or actions resulting from them.

Opinions presented in this Report apply to the sites conditions and features as they existed at the time ofSRKs investigations, and those reasonably foreseeable. These opinions do no t necessarily apply toconditions and features that may arise after the date of this Report, about which SRK have had no knowledgenor had the opportunity to evaluate.


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List of Abbreviations

% Percent

Degrees, either of temperature or angle of inclination

ASL Above sea level

AusIMM Australasian Institute of Mining and Metallurgy

E East

g Gram

g/t Gram per tonne

Indicated MineralResource

That part of a resource for which tonnage, densities, shape, physical characteristics, gradeand mineral content can be estimated with a reasonable level of confidence. It is based onexploration, sampling and testing information gathered through appropriate techniques fromlocations such as outcrops, trenches, pits, workings and drill holes. The locations are toowidely or inappropriately spaced to confirm geological and/or grade continuity but arespaced closely enough for continuity to be assumed

Inferred Mineral

Resource

That part of a resource for which tonnage, grade and mineral content can be estimated with

a low level of confidence. It is inferred from geological evidence and assumed but notverified geological and/or grade continuity. It is based on information gathered throughappropriate techniques from locations such as outcrops, trenches, pits, workings, and drillholes which may be limited or of uncertain quality and reliability

JORC Code Joint Ore Reserves Committee Code

JORC Joint Ore Reserves Committee of The Australasian Institute of Mining and Metallurgy,Australian Institute of Geoscientists and Minerals Council of Australia

kg Kilogram, equivalent to 1,000 grams

km Kilometres, equivalent to 1,000 metres

km2

Square kilometres

m

m2

m3

Metre

Square metre

Cubic metre

M Million

Measured MineralResource

That part of a resource for which tonnage, densities, shape, physical characteristics, gradeand mineral content can be estimated with a high level of confidence. It is based ondetailed and reliable exploration, sampling and testing information gathered throughappropriate techniques from locations such as outcrops, trenches, pits, workings and drillholes

Mg Magnesium

mm Millimetre/s

Mt Million tonne (s)

Mtpa Million tonnes per annum

PRC Peoples Republic of China

Probable Ore Reserve The economically mineable part of an indicated, and in some circumstances measured,resource. It includes diluting materials and allowances for losses which may occur when thematerial is mined. Appropriate assessments, which may include feasibility studies, havebeen carried out, and include consideration of and modification by realistically assumedmining, metallurgical, economic, marketing, legal, environmental, social and governmentfactors. These assessments demonstrate at the time of reporting that extraction couldreasonably be justified

Proved Ore Reserves The economically mineable part of a measured resource. It includes diluting materials andallowances for losses which may occur when the material is mined. Appropriateassessments, which may include feasibility studies, have been carried out, and includeconsideration of and modification by realistically assumed mining, metallurgical, economic,marketing, legal, environmental, social and government factors. These assessmentsdemonstrate at the time of reporting that extraction could reasonably be justified.

QA/QC Quality Assurance/Quality Control

RMB Renminbi


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ROM Run of mine

t Tonne

tpa

tpd

Tonnes per annum

Tonnes per day

Valmin Code Code for Technical Assessment and Valuation of Mineral and Petroleum Assets and

Securities for Independent Expert Reports


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1 Introduction and Scope of Report

Fenglideyuan Trading Limited (Fenglideyuan, the Company or the Client) commissioned SRK toreview Fenglideyuans serpentinite project, the Akekerishi serpentinite deposit (Akekerishi Depositor theProject), located in Tuoli County, Xinjiang Uygur Autonomous Region, the Peoples Republic of China

(P.R. China). SRK was required to provide a Competent Persons Report (this Report or the Report)including reviews of the geology and resources aspects. The principal objective of this Report is to providethe Company, financial institutions and the London Stock Exchange (LSE) with the Report suitable forinclusion in documents for a proposed listing on the Alternative Investment Market (AIM) of the LSE.

2 Background and Brief

Fenglideyuan commissioned SRK to review and report geological and technical aspects of AkekerishiDeposit in Tuoli County, Xinjiang Uygur Autonomous Region, P.R. China. The Company is the sole holderof the exploration permit. Copy of the original exploration permit is shown in Appendix 1.

3 Program Objectives and Work Program

3.1 Program Objectives

The principal objectives of this Report is to provide existing and potential shareholders of Fenglideyuan and

the London Stock Exchange (LSE) with this Report suitable for inclusion in documents that the Companyplans to submit to LSE in relation to the proposed listing on the AIM. The SRK report is proposed to provide

LSE and existing and potential shareholders in Fenglideyuan an unbiased technical assessment of the risksand opportunities of the proposed listing company.

3.2 Reporting Standard

The Mineral Resource estimates presented in this report have been reported in accordance with the 2012edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves(the JORC Code). The signing authors and peer reviewers of this Report qualify as Competent Personsas defined by the JORC Code.

This Report is not a valuation report and does not express an opinion as to the value of the mineral assetsunder review.

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 Fenglideyuan has 100% ownership ofAkekerishi Deposit and its various underlying tenements and/or has any unresolved legal matters relating toany transfer of ownership or associated fees and royalties. SRK has therefore assumed that no legalimpediments exist regarding the relevant tenements and that Fenglideyuan has legal rights to all underlyingtenements as purported. Assessing the legal tenure and processing rights of the prospects of Fenglideyuanand its subsidiary company is the responsibility of legal due diligence conducted by entities other than SRK.

SRK has however confirmed that the Mineral Resources as presented here occur entirely within the tenementareas.


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3.4 Work Program

The work programme for this project consisted of:- a review of data provided by Fenglideyuan;- two site visits to the project area in April and November 2013;

- discussions with Company personnel and the relevant geological professionals and consultants whoconducted the geological exploration;- on-site supervision of the quality assurance and quality control (QA/QC) procedures followed in the

surface drilling programme and sampling between August and October 2013;- geological modelling and resource estimation of the serpentinite deposit in December 2013;- analysis of the data provided by the Company and generated by SRK;- and preparation of this Report.

3.5 Project Team

The SRK project team, their title, and their responsibilities within this Report are shown in Table 3-1 below.

Table 3-1: SRK Project Team

Consultant Title Discipline and Task

Dr Yiefei Jia Principal Consultant (Geology) Geology and Resources, Overall Reporting

Yuanjian Zhu Senior Consultant (Geology) Geology and Resources

Dr Anson Xu Principal Consultant (Geology) Internal Peer Review

Daniel Guibal Corporate Consultant (Geostatistics & Resources) External Peer Review

Yiefei Jia, PhD, FAusIMM,is a Principal Consultant (Geology) specialising in of exploration of mineral

deposits. He has more than 20 years experience in the field of exploration, development, and resourcesestimate of precious metal (gold, silver and PGE), base metals (lead, zinc, copper, vanadium and titanium),and black metals (iron and manganese) as well as other metal ore deposits in various geological settings in

Australia, Africa, China, and North and Central America. He has extensive experience in projectmanagement, exploration design and resource assessment. He, as Competent Person, has coordinated a

number of due diligence projects withtechnical reports either for fund raising or initial public offerings (IPO)such as on HKEx.Dr Jia was the project manager of this project and the Competent Person (CP) who takes

overall responsibility for this report. He visited the property in April and November 2013.

Yuanjian Zhu, M .Sc,MAusIMM, is a Senior Consultant (Geology), obtained a Masters degree in Geology

from the Institute of Geology and Geophysics at the Chinese Academy of Sciences in 2008. He also holds aBachelors degree in Geology from Peking University. He has been involved in the oil and gas profile

national investigation project and was a technical leader in a mining company in charge of resourceexplorations and due diligence reviews for new projects. He has extensive exploration experience inepithermal Au, Ag, Sb, Pb and Zn deposits as well as Cu and Fe deposits. He has expertise in geological

modelling, resource/reserve reconciliation and geo-statistical theory and software (GS+, ArcGIS, Grapher,etc.). Yuanjian is proficient with geological and digital graphic processing software such as MapGIS,

AutoCAD, CorelDraw, Surfer, Photoshop, and many others. Mr Zhu assisted Dr. Jia in completing thegeological QA/QC and resource estimate. He visited the property in April and November 2013.

Anson Xu, PhD, FAusIMM , is a Principal Consultant (Geology) specialising in exploration of mineral

deposits. He has more than 20 years experience in exploration and development of various types of mineraldeposits including copper-nickel sulphide deposits related to ultrabasic rocks, tungsten and tin deposits,diamond deposits, and in particular, various types of gold deposits, including vein-type, fracture-breccia zonetype, alteration type and Carlin type. He was responsible for the resource estimates of several diamonddeposits, and review of resource estimates of several gold deposits. He has recently completed several due

diligence jobs for clients in China, including gold, silver, lead-zinc, iron, bauxite, and copper projects, andseveral technical review projects, as well as technical reports for listing on HKEx . Dr Xu provided internalpeer review to ensure the quality control of the Report.


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Daniel Guibal, M.Sc, FAusIM M , MM ICA, MGAA, is a Corporate Consultant with SRK Australasia. Hisrange of deposit types studied covers a very broad spectrum and includes gold, copper, iron, tin, nickel(laterite and sulphides), lead-silver-zinc, uranium, mineral sands, phosphate, coal, diamonds and bauxite.His particular fields of expertise include resource estimation, resource classification (JORC), recoverableresource evaluation (non-linear geostatistics, MIK, uniform conditioning), conditionals simulation oforebodies, application of conditional simulation to grade control and risk analysis, sampling theory, design,implementation and audit of grade control, and resource estimation systems, mining simulation, open pitoptimisation and training of professionals in statistics, geostatistics, sampling and grade control. Mr Guibalprovided external peer review and quality control for the Report.

3.6 Statement of SRKsIndependence

Neither SRK nor any of the authors of this Report have any material, present or contingent interest in theoutcome of this Report, nor do they have any pecuniary or other interest that could be reasonably regarded asbeing capable of affecting their independence or that of SRK.

SRKs fee for completing this Report is based on its normal professional daily rates plus reimbursement ofincidental expenses. Payment of that professional fee is not contingent upon the outcome of the Report.

None of SRK or any authors of this report have any direct or indirect interest in any assets which had beenacquired, or disposed of by, or leased to any member of the Company or any of the Company or any of itssubsidiaries within the two years immediately preceding the issue of this transaction.

3.7 Representation

Fenglideyuan has represented to SRK that full disclosure has been made of all material information and that,

to the best of its knowledge and understanding, such information is complete, accurate, and true. SRK has noreason to doubt this representation.

3.8 Consent

SRK consents to this Report being included in full in the application for a listing of Fenglideyuan on theAIM of the LSE, in the form and context in which the technical assessment is provided, and not for any otherpurpose.

SRK provides this consent on condition that the technical reviews expressed in the summary and in theindividual sections of this Report are considered with, and not independently of, the information set out in

the complete Report and its cover letter.

3.9 SRKsExperience

SRK Consulting is an independent, international consulting group with extensive experience in preparingindependent technical reports for various stock exchanges around the world (see www.srk.com for a review).SRK is a one-stop consultancy offering specialist services to mining and exploration companies for the entirelife cycle of a mining project, from exploration through to mine closure. Among SRK's more than 1,500clients are most of the worlds major and medium-sized metal and industrial mineral mining houses,exploration companies, banks, petroleum exploration companies, agribusiness companies, construction firms,and government departments.

Formed in Johannesburg, South Africa, in 1974 SRK now employs more than 1,500 professionalsinternationally in more than 40 permanent offices on six continents. A broad range of internationallyrecognized associate consultants complements the core staff.


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SRK Consulting employs leading specialists in each field of science and engineering. Its seamless integrationof services, and global base, has made the company a world's leading practice in due diligence, feasibilitystudies and confidential internal reviews.

The SRK Groups independence is ensured by the fact that it holds no equity in any project and that itsownership rests solely with its staff. This permits the SRK Group to provide its clients with conflict-free andobjective recommendations on crucial judgment issues.

SRK China was established in early 2005, and is mainly working on Chinese mining projects independentlyor together with SRKs other offices, mainly SRK Australasia(see www.srk.cn and www.srk.com.au). SRKChina has prepared a number of independent technical reports on mining projects for various companies whoacquired Chinese projects or completed public listings on overseas stock exchanges, as showing in Table 3-2.

Table 3-2: Recent Reports by SRK for Chinese Companies

Company Year Nature of Transaction

Yanzhou Coal Limited (company listed on the

Stock Exchange of Hong Kong Limited)

2000 Sale of Jining III coal mine by parent company to the

listed operating companyChalco (Aluminum Corporation of China) 2001 Listing on the Stock Exchange of Hong Kong Limited

and New York Stock Exchange

Fujian Zijin Gold Mining Company 2004 Listing on the Stock Exchange of Hong Kong Limited

Lingbao Gold Limited 2005 Listing on the Stock Exchange of Hong Kong Limited

Yue Da Holdings Limited (company listed on theStock Exchange of Hong Kong Limited)

2006 Proposed acquisition of shareholding in miningprojects in P.R. China

China Coal Energy Company Limited (ChinaCoal)

2006 Listing on the Stock Exchange of Hong Kong Limited

Sino Gold Mining Limited 2007 Dual listing on the Stock Exchange of Hong KongLimited

Xinjiang Xinxin Mining Industry CompanyLimited 2007 Listing on the Stock Exchange of Hong Kong Limited

Espco Technology Holdings Limited 2008 Acquisition of shareholding in Tongguan Taizhou Gold-Lead projects in P.R. China

China Shenzhou Mining and Resources Inc 2008 Listing (SHZ) on the American Stock Exchange

Green Global Resource Ltd 2009 Acquisition of shareholding in iron project in Mongolia

Ming Fung Jewellery Group Holdings Ltd 2009 Acquisition of shareholding in gold projects in Anhuiand Hebei Provinces, P.R. China

Continental Holdings Ltd 2009 Acquisition of a gold project in Henan Province, P.R.China

North Mining Shares Company Ltd 2009 Acquisition of a molybdenum projects in Shaanxi,Province, P.R. China

CNNC International Ltd 2010 Acquisition of an uranium mine in Africa

New Times Energy Corporation Ltd 2010 Acquisition of shareholding in gold projects in Hebei,Province, P.R. China

Sino Prosper Mineral Products Ltd 2010 Acquisition of shareholding in gold projects in Hebei,Province, P.R. China

United Company RUSAL Ltd 2010 Listing on the Stock Exchange of Hong Kong Limited

CITIC Dameng Holdings Ltd 2010 Listing on the Stock Exchange of Hong Kong Limited

China Hanking Holdings Ltd 2011 Listing on the Stock Exchange of Hong Kong Limited

China Non-ferrous Mining Corporation Ltd 2012 Listing on the Stock Exchange of Hong Kong Limited

Hengshi Mining Investments Ltd 2013 Listing on the Stock Exchange of Hong Kong Limited


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3.10 Forward-looking Statements

Estimates of Mineral Resources, Ore Reserves and mine and processing plant production are inherentlyforward-looking statements, which, being projections of future performance, will necessarily differ fromactual performance. The errors in such projections result from inherent uncertainties in the interpretation of

geologic data, variations in the execution of mining and processing plans, the ability to meet constructionand production schedules due to many factors including weather, availability of necessary equipment andsupplies, fluctuating prices, and changes in regulations. The possible sources of error in forward-lookingstatements are addressed in more detail in the appropriate sections of this report. Also provided in the reportare comments on the risks inherent in the different areas of mining and processing operations.


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4 Regional Geography and Access

4.1 Regional Location

The Akekerishi Deposit is located in Tuoli County, Xinjiang Uygur Autonomous Region in China (Figure4-1), under the jurisdiction of Tuoli County, 100 km south of the Tuoli County Town. The geographicalcoordinates of the deposit area are limited to the area between 8323 00 to 832645 East longitude and

450615 to 450845 North latitude.

Figure 4-1: Schematic Map of the Project Location

4.2 Access

Access to the property is relatively easy. The Kuytun-Bole National Road passes by about 60 km south of theproject area, and the Karamay-Tuoli Road passes by about 70 km north of the deposit. In addition, numerousunimproved dirt roads connect the deposit to paved highways. Access to the Project takes about 12 hours by

car from Urumqi, the capital of Xinjiang, which is connected through regular flights with majors cities inChina.

4.3 Topography, Climate and Local Economy and Infrastructure

The Akekerishi Deposit is located in the southeast edge of the Mayile Range, northwest of Aibi Lake,characterised by low hills with altitudes ranging from 800 m to 1040 m above sea level (ASL) withrelative reliefs between 50 m and 200m. Perennial surface runoffs and springs are widely distributed, most of

which are brackish.

The deposit area is characterised by a continental dry climate with seasonal temperatures varying fromwinter lows reaching -10 degrees centigrade (C) to summer highs up to 40C. The average annualprecipitation is between 160 mm and 170 mm, mainly in June and July.

Population in the region is relatively sparse, and the workforce is insufficient for the mine s labour needs.The local economy is dominated by animal husbandry.

Project Area

Tuoli

Map Location


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5 Exploration Licences and Permits

Fenglideyuan initially acquired the exploration permit in October, 2008. After two renewals, the latestexploration permit will expire on 31 May, 2015. The Client is now applying for a new mining permit in thearea for serpentinite mining activity. The coordinates of the tenements are given in Table 5-1. Appendix 1

also shows a copy of the exploration permit.

Table 5-1: Coordinates of the Akekerishi Exploration permit (in Xian Geodetic CoordinateSystem 1980)

Boundary Point Northing Easting

1 5001349.117 451378.368

2 5001313.513 456293.783

3 4997609.032 456268.390

4 4997618.155 454956.847

5 4996692.039 454950.310

6 4996718.519 451343.048


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6 Geological Description

6.1 Regional Geology

The Akekerishi Deposit is located in the conjunction zone of the Kazakh plate, the Jungar plate, the westsegment of the Tuoli-Santanghu Late Paleozoic trench-arc belt, and the Jungar Meso-Cenozoic depression.Stratigraphically, rocks exposed in the area consist of Early Ordovician phyllitized siltstone, slate and

phyllite; Mid Ordovician tuff, andesite, basalt and silicalite; Silurian volcanoclastic rocks; Devonian tuffsand sandstone; Carboniferous volcaniclastic rocks and carbonate rocks; and Quaternary deposits.

Igneous rocks are well developed in the region, from ultra-mafic rocks to felsic rocks, with structurallycontrolled spatial distribution. Numerous secondary faults sourced from northeast trending Daerbute fault

and Mayile fault are widely distributed in this region. Most rocks in the region experienced regionalmetamorphism of low greenschist facies. Widely distributed faults also led to ductile shearing or brittlefracture metamorphism.

Nickel mines formed through magmatic differentiation are the major deposits in the region, followed bytungsten, molybdenum and copper deposits.

Figure 6-1: Regional Geological Map of Akekerishi Deposit


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6.2 Local Geology

6.2.1 Stratigraphy

Outcrops in the Akekerishi Deposit are dominated by intermediate-felsic rocks of the Middle OredovicianKekesayi Formation (see Figure 6-2). The Kekesayi Formation consists of tuff, andesite, felsites andsilicolite, generally striking east-west, dipping north-northeast with dip angles varying from 55 to 70. Inaddition, Tertiary strata are also widespread over the region.

Figure 6-2: Simplified Geological Map of Akekerishi Deposit

6.2.2 Structures

Folds and faults are relatively developed in the Akekerishi area. The faults are secondary faults regionallyinduced by the northeast trending Daerbute fault and Mayile fault, and have no effect on the continuity of

mineralisation in the Akekerishi deposit. In addition, these secondary faults are not well-developed in thesouth-western part of the Akekerishi exploration tenement area (Figure 6-2).

6.2.3 Alteration

Alterations such as serpentinization, sericitization, chloritization and silicification are widely developed inthe region.


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6.2.4 Intrusions

Variscan ultra-mafic serpentinite rocks are the major intrusive rocks in the region. These rocks feature high

magnesium and iron contents, and mostly consist of serpentine, augite and olivine. Felsitic dikes have alsobeen discovered in the region.

6.3 Deposit Geology

6.3.1 Characteristics of Mineralised Zone

The target deposit is an ultra-mafic intrusive type deposit. The wall rocks mostly consist of tuff and silicaliteof Kekesayi Formation. SRK defined one mineralised zone of serpentinite as delineated by 149 vertical

drillholes. It is over 4,000 m long, 200 m - 3,000 m wide and extends for over 600 m deep, in a triangularthick-plate shape. It is distributed in the southwest portion of the exploration permit area, coveringapproximately one third of the total area. The current maximum depth of drillhole is 600 m. All of thedrillholes are not deep enough to drill through the floor of the mineralised zone except a few drillholeslocated on the edge of the mineralised zone. Figure 6-3 and Figure 6-4 show a typical cross-section of an

exploration line and some drillhole logging histograms, which indicate that the mineralised zone hasrelatively good continuity and the MgO grade in serpentinite is relatively stable.

Figure 6-3: Schematic Exploration Cross Section in Akekerishi Deposit


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Figure 6-4: Typical Drillhole Logging Histograms

6.3.2 Mineralogy

The potential useful mineral in Akekerishi Deposit is serpentine or/and olivine, which represents over 90%of the mineralisation. The secondary associated minerals mostly comprise pyroxene, magnetite, andmagnesite. Gangue minerals mostly consist of amphibole and biotite.

Serpentine mostly occurs in micro scaly, xenomorphic-hypidiomorphic fine granular or columnar textures,and appears in massive or vein structures.

The accompanying possible useful minerals consist of silicon dioxide (SiO2), with an average grade of35.79%, iron oxide (Fe2O3), with an average grade of 6.81%, nickel (Ni), with an average grade of

0.22%, cobalt (Co), with an average grade of 0.010%, gold (Au), with an average grade of 0.06 gram pertonne (g/t), and silver (Ag), with an average grade of 5.95 g/t. All of these minerals except Co, Au and Agcan be economically recovered according to the several metallurgical test reports provided by the Client. Theharmful elements are sulphur (S), with an average grade of 0.016%, phosphorus (P), with an averagegrade of 0.013%, chromic oxide (Cr2O3), with an average grade of 0.40%, calcium oxide (CaO, with anaverage grade of 0.16%), and arsenic (As), less than the detectable limit of 3 g/t.

6.4 Exploration History

Historical explorations in the Akekerishi area began in 1983. Between 1983 and 1985, a geological mapping

at a 1:500,000 scale was conducted in Tacheng area by the No. 7 Geological Brigade of Xinjiang GeologyBureau. After that, the same brigade carried out a 1:50,000 scale geological prospecting and submitted a

regional geological mineral report of the area in 1990.

In 1998, a regional geochemical survey at a 1:10,000 scale was carried out in the area by the No. 1 Regional

Geological Survey Brigade of Xinjiang Geological Exploration Bureau. Between 2003 and 2005, the samebrigade conducted a 1:50,000 scale geological prospecting and submitted a 1:50,000 scale regional

geological mineral report of the northwest Akekerishi area. Between 2007 and 2009, this same brigadeconducted another 1:50,000 scale geological mineral survey in the north region.

In 2011, the Taian Geological Exploration Institute conducted a general exploration of the AkekerishiDeposit.

0.0

1

00.0

ZK5-12

MgO

(%)

0

40

0.0

100.0

200.0

300.0

400.0

500.0

600.0

ZK7-5

0

50

0.0

1

00.0

2

00.0

3

00.0

ZK15-1

50

0

Lithology

Depth(m)

MgO

(%)

Lithology

Depth(m)

MgO

(%)

Lithology

Depth(m)

Legend

Tertiary Sandstone Silicolite Tuff Serpentinite MgO Grade D:\work\SRK.jpg


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6.5 Exploration, Sampling, Analytical Procedures, Quality Assuranceand Quality Control

Under SRKs supervision, the No. 8 Geological Brigade of Fujian Province (No. 8 Brigade) conducted

drilling and geological exploration programs at the Akekerishi deposit from August to October 2013. Figure

6-5 shows the distribution of all drillholes drilled and used for the resource estimation presented in thisReport. The following sections summarise the resource data verification and reconciliation for the property.

Figure 6-5: Drill Hole Distribution Map

6.5.1 Exploration, Sampling Procedures and Quality Control

As of October 2013, a total of 149 drillholes with an aggregate length of approximately 29,400 m had beendrilled at the deposit. All drillholes were arranged along exploration lines. The exploration grid was set at200 m 200 m for Measured Resource and 400 m 400 m for Indicated Resource. All drillholes werevertical. The collars of the drill holes were properly surveyed and down-hole surveying was undertaken atminimum 100 m intervals. The drill cores were logged while uncut. The recovery rates for all cores vary

from 90% to 100% with an overall recovery rate of 98%, and for all mineralised drill cores varied from 92%to 100% with an overall recovery rate of 98%. Table 6-1 shows recovery rates from all drillholes.

Table 6-1: Recovery Rate for All Cores in Akekerishi Deposit

Hole ID Length Recovery Rate Hole ID Length Recovery Rate Hole ID Length Recovery Rate

ZK9-A 150.16 94.91% ZK3-3 222.24 98.25% ZK13-A 146.81 94.52%ZK9-12 95.90 94.21% ZK3-2 184.31 99.95% ZK13-14 130.00 100.00%ZK9-11 138.50 98.77% ZK3-1 202.32 98.63% ZK13-13 148.55 99.73%

ZK9-10 100.30 95.51% ZK2-5 117.30 95.56% ZK13-12 147.10 99.25%ZK9-9 150.70 99.93% ZK2-4 150.09 95.12% ZK13-11 148.30 99.93%ZK9-8 94.10 92.32% ZK2-3 147.00 94.39% ZK13-10 149.33 97.20%ZK9-7 145.70 99.86% ZK2-2 138.70 98.05% ZK13-9 141.90 95.91%


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ZK9-6 100.30 98.31% ZK2-1 133.40 94.08% ZK13-8 146.00 99.28%ZK9-5 145.60 99.24% ZK19-13 306.39 98.18% ZK13-7 150.70 100.00%ZK9-4 100.15 97.65% ZK19-12 149.59 97.74% ZK13-6 148.50 100.00%ZK9-3 149.95 100.00% ZK19-11 350.20 100.00% ZK13-5 150.65 100.00%ZK9-2 99.97 90.73% ZK19-10 150.50 99.87% ZK13-4 150.00 97.50%ZK9-1 144.80 90.95% ZK19-9 349.30 99.41% ZK13-3 146.40 98.70%ZK8-B 281.20 99.26% ZK19-8 151.10 99.87% ZK13-2 151.40 97.75%

ZK8-A 133.00 99.40% ZK19-7 350.48 99.87% ZK13-1 146.70 93.63%ZK7-12 118.30 97.46% ZK19-6 150.34 98.17% ZK12-1 211.60 96.24%ZK7-11 350.20 99.74% ZK19-5 350.60 99.71% ZK11-N1 103.60 96.24%ZK7-10 145.70 100.00% ZK19-4 348.68 98.09% ZK1-12 144.80 93.02%ZK7-9 346.30 93.30% ZK19-3 107.09 93.97% ZK11-15 200.07 100.00%ZK7-8 149.41 99.69% ZK19-2 147.27 93.45% ZK11-14 118.80 93.43%ZK7-7 342.66 98.13% ZK19-1 312.14 100.00% ZK11-13 328.80 95.48%ZK7-6 144.20 98.99% ZK17-A 145.20 99.17% ZK11-12 146.85 99.18%ZK7-5 620.10 98.35% ZK17-14 151.46 97.12% ZK11-11 347.00 97.75%ZK7-4 146.30 96.69% ZK17-13 151.05 100.00% ZK11-10 146.50 95.22%ZK7-3 348.98 98.33% ZK17-12 147.72 99.28% ZK11-9 341.50 93.29%ZK7-2 148.00 99.38% ZK17-11 147.90 100.00% ZK11-8 142.80 93.77%

ZK7-1N 279.50 99.86% ZK17-10 149.80 100.00% ZK11-7 349.70 99.63%ZK7-1 223.50 99.35% ZK17-9 150.90 99.87% ZK11-6 149.50 99.67%

ZK6-B 335.50 98.87% ZK17-8 147.90 100.00% ZK11-5 347.10 99.63%ZK6-A 148.35 98.83% ZK17-7 148.62 98.68% ZK11-4 150.30 99.77%ZK5-12 159.90 99.31% ZK17-6 149.24 99.36% ZK11-3 348.70 99.68%ZK5-11 128.50 98.64% ZK17-5 149.30 99.80% ZK11-2 149.46 99.87%ZK5-10 148.24 100.00% ZK17-4 146.75 99.86% ZK11-1 90.10 92.56%ZK5-9 142.83 96.46% ZK17-3 150.69 99.96% ZK1-10 143.20 99.86%ZK5-8 147.20 91.24% ZK17-2 150.26 99.23% ZK1-9 124.10 100.00%ZK5-7 150.27 99.95% ZK17-1 146.15 100.00% ZK1-7 145.70 100.00%ZK5-6 149.18 99.77% ZK15-14 339.97 97.67% ZK1-6 141.14 94.62%ZK5-5 150.86 99.54% ZK15-13 348.00 99.01% ZK1-5 143.90 96.52%ZK5-4 151.18 98.10% ZK15-12 150.38 98.86% ZK1-4 147.10 98.70%ZK5-3 151.50 98.75% ZK15-11 350.60 99.71% ZK1-3 146.50 93.52%ZK5-2 150.00 93.93% ZK15-10 150.10 99.77% ZK1-2 97.40 92.09%ZK5-1 140.30 98.11% ZK15-9 500.33 99.97% ZK1-1 143.10 100.00%ZK4-A 199.37 99.50% ZK15-8 150.10 99.87% ZK0-12 147.00 97.79%ZK3-10 147.23 100.00% ZK15-7 348.03 100.00% ZK0-9 344.70 98.78%ZK3-9 237.90 99.12% ZK15-6 150.30 99.50% ZK0-5 336.72 94.51%ZK3-8 58.65 97.95% ZK15-5 347.70 99.99% ZK0-4 144.00 95.83%ZK3-7 101.00 99.11% ZK15-4 149.00 99.80% ZK0-3 501.56 96.73%ZK3-6 288.78 100.00% ZK15-3 262.67 97.17% ZK0-2 143.40 100.00%ZK3-5 65.70 95.98% ZK15-2 150.26 100.00% ZK0-1 335.12 92.46%ZK3-4 346.95 98.65% ZK15-1 355.36 98.38%

Upon completion of each hole, preliminary logging was carried out by a geologist to record various aspectsincluding weathering, texture, lithology, alteration and structure. After logging, the core was stored in core

trays and each core tray was digitally photographed. Core trays were clearly marked with box and holenumbers and starting and ending depths. Further details of each run were also recorded on a paper chart andkept in a sealed plastic envelope inside the tray. The core boxes were then stacked and transported to the coreshed for further checking and core spliting.

Samples were taken from drill cores by splitting along the core axis. Sample intervals were marked bygeologists and ranged from 1 m to 5 m in length. The most common sample length was 3 m. Wall rocks andore were sampled separately. One half of each core was sampled and bagged while the other half was storedin the core tray. Each bag was numbered by the on-site geologist, and some numbers were reserved forinserting the QA/QC samples. Samples were transported to an Urumqi office of the Laboratory of No. 121Geological Brigade of Fujian Province (No. 121 Laboratory) for assaying under the supervision of SRKson site staff. Figure 6-6 shows drilling cores stored in core trays on site and core shed.


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Figure 6-6: Drill Cores with High Recovery Rate (left) and Core Shed (right)

6.5.2 Analytical Procedures and Quality Control

6.5.2.1 Sample Preparation and Analysis

A total of 9,612 samples were collected from the deposit. They were prepared and analysed by the No. 121Laboratory. Samples were first crushed to less than 3 mm and then divided into four portions using aquartering approach in which the two portions diagonally opposite each other were taken for furtherprocessing while the other half of the samples was kept as a spare (coarse reject). Following crushing thesamples were pulverised to -180 mesh (0.080 mm). A 30 gram (g) charge was then taken for assaying andthe remains of the pulverised material were stored at the laboratory. Five components including MgO, SiO2,Fe2O3, Ni and Co were assayed. MgO, SiO2, and Fe2O3 were assayed by X-ray fluorescence spectrometry(XRF), while Ni and Co were analysed by atomic absorption spectrophotometry (AAS).

6.5.2.2 Control Sample Insertion

For QAQC purpose, each 100 samples batch included 10 QA/QC samples, consisting of two certified

reference materials (CRM), two blanks, two core duplicates, two coarse rejects and two pulp duplicates.Additionally, four (4) out of every 100 samples were randomly chosen and sent to a second independent

laboratory (SGS-CSTC Standards Technical Services (Tianjin) Co., Ltd (SGS)) for external check. A totalof 1,454 QA/QC samples were inserted, consisting of 392 external check samples, 194 CRMs, 180 blanks,231 core duplicates, 208 coarse rejects, and 160 pulp duplicates.

6.5.2.3 CRM

The certified standards for serpentinite were purchased from the Chinese National Institute of Metrology.

CRM performance is considered acceptable, and the assaying process well-controlled, given that at least 90%of the results fall within 10% of the certified value for MgO, SiO2 and Fe2O3 and within 20% of thecertified value for Ni and Co, respectively. As shown in Figure 6-7, all assayed data fell within the controllimits, these suggest there are no systematic assaying problems (biases) in the analysis.


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Figure 6-7: CRM Performance

6.5.2.4 Blank

A total of 180 blank samples were submitted for analysis. The results are generally within the control limitfor the blank material assays. The results of blank samples suggest that neither considerable nor systematiccontamination occurred during sample preparation.

6.5.2.5 Duplicates

Duplicate samples, including core duplicates, coarse rejects and pulps, were inserted into each batch ofregular samples during the assaying procedure to ensure the quality of the assay. SRK completed arepeatability analysis of the original samples and duplicates, as shown in Figure 6-8. The duplicate assays

display relatively strong correlation with the original samples, with only a small number of samples returningrelatively large deviations. The assays are considered acceptably repeatable.

30

32

34

36

38

40

42

44

AssayedValue(%

)

Sample No.

MgO Standard Value30

32

34

36

38

40

42

44

AssayedValue(%

)

Sample No.

SiO2 Standard Value

5

5.5

6

6.5

7

7.5

8

8.5

9

AssayedValue(%)

Sample No.

Fe2O3 StandardValue0.000

0.005

0.010

0.015

0.020

0.025

0.030

0.00

0.05

0.10

0.15

0.20

0.25

CoGrade(%)

NiGrade(%)

Sample No.

Ni CoStandardValue


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GradeofDuplicate(%)

Grade of Original Sample (%)

Q-Q Plot

.0 10.0 20.0 30.0 40.0 50.0

.0

10.0

20.0

30.0

40.0

50.0

MgO

y=x

GradeofDuplicate(%

)


Scatter Plot

0.0 10.0 20.0 30.0 40.0 50.0

0.0

10.0

20.0

30.0

40.0

50.0

MgO

10% Tolerance Limit

Number of data 599

Number plotted 599

X Variable: mean 38.628

std. dev. 10.349Y Variable: mean 38.165

std. dev. 10.186

Correlation 0.991

Rank correlation 0.716

GradeofDuplicate(%)


Q-Q Plot

0. 20. 40. 60. 80. 100.

0.

20.

40.

60.

80.

100.

SiO2

y=x

G

radeofDuplicate(%),


Scatter Plot

0.0 20.0 40.0 60.0 80.0 100.0

0.0

20.0

40.0

60.0

80.0

100.0

Number of dat a 599

Number plotte d 599

X Variable: mea n 37.575std. dev . 8.321

Y Variable: mea n 37.767std. dev . 8.419

Correlatio n 0.985Rank correlatio n 0.828

SiO2

10% Tolerance Limit

Q-Q Plot

.0 2.0 4.0 6.0 8.0 10.0

.0

2.0

4.0

6.0

8.0

10.0

GradeofDuplicate(%

)


Fe2O3

y=x

GradeofDuplicate(%),


Scatter Plot

Number of data 599

Number plotted 598


std. dev. 1.296

Y Variable: mean 6.714

std. dev. 1.082

Correlation 0.882


Fe2O3

10% Tolerance Limit

.0 2.0 4.0 6.0 8.0 10.0

.0

2.0

4.0

6.0

8.0

10.0


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Figure 6-8: Duplicate Performance

6.5.2.6 External Sample Performance

External checks of the primary assay were performed by SGS-CSTC Standards Technical Services (Tianjin)

Co., Ltd (SGS) on approximately 4% of the total samples. SRK compared the resulting data with theoriginal sample tests; the results are shown in Figure 6-9. The external checks indicate a good correlationwith original samples, with only a small number of samples returning relatively large deviations. The

repeatability of the assay conducted by the 121 Laboratory is considered acceptable.

Q-Q Plot

.00 .05 .10 .15 .20 .25 .30

.00

.05

.10

.15

.20

.25

.30

GradeofDuplicate

(%)


Ni

y=x

GradeofDuplicate(%

),


Scatter Plot

Number of data 599

Number plotted 599


std. dev. 0.058


std. dev. 0.061

Correlation 0.939


Ni

20% Tolerance Limit

.00 .10 .20 .30

.00

.10

.20

.30

GradeofDuplicate(%)


Q-Q Plot

.000 .004 .008 .012 .016

.000

.004

.008

.012

.016

Co

y=x

GradeofDuplicate(%),


Scatter Plot

.000 .005 .010 .015 .020

.000

.005

.010

.015

.020Number of dat a 599

Number plotte d 599X Variable: mea n 0.010

std. dev . 0.002



Co

20% Tolerance Limit


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Q-Q Plot

.0 10.0 20.0 30.0 40.0 50.0

.0

10.0

20.0

30.0

40.0

50.0

MgO

y=x


GradeofExternalCheckSam

ple(%)

GradeofExternalCheckSample(%)


Scatter Plot

0.0 10.0 20.0 30.0 40.0 50.0

0.0

10.0

20.0

30.0

40.0

50.0

Number of dat a 392Number plotte d 392

X Variable: mea n 39.163std. dev . 9.438



MgO

10% Tolerance Limit

Q-Q Plot

0. 20. 40. 60. 80. 100.

0.

20.

40.

60.

80.

100.


SiO2

y=x


Grade

ofExternalCheckSample(%)


Scatter Plot

0. 20. 40. 60. 80. 100.

0.

20.

40.

60.

80.

100.

Number of dat a 392

Number plotte d 392

X Variable: mea n 37.181std. dev. 6.999

Y Variable: mea n 36.962std. dev. 6.978

Correlatio n 0.986

Rank correlatio n 0.947

SiO2

10% Tolerance Limit

Q-Q Plot

.0 4.0 8.0 12.0

.0

4.0

8.0

12.0


Fe2O3

y=xGradeofExternalCheckSample(%

)


Scatter Plot

.0 4.0 8.0 12.0

.0

4.0

8.0

12.0

Number of dat a 392

Number plotte d 392

X Variable: mea n 6.830std. dev . .913

Y Variable: mea n 6.777std. dev . .850

Correlation 0.927Rank correlatio n 0.875

Fe2O3

10% Tolerance Limit

GradeofExternalCheckSample

(%)


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Figure 6-9: External Check Sample Performance

6.5.2.7 Bulk Density Sample Analysis

A total of 59 bulk density samples were collected from various locations within the deposit, and were used

by the No. 121 Laboratory for ore density. Scatter diagrams for the samples bulk density plotted againstMgO, SiO2 and Fe2O3grades are shown in Figure 6-10. Overall, bulk density results vs. MgO, SiO2 andFe2O3grades scatter irregularly, with bulk densities values ranging from 2.27 grams per cubic centimetre(g/cm

3) to 2.97 g/cm

3. SRK has checked these data with using a linear regression and found no linear

relationship between bulk density and grade of MgO, SiO2and Fe2O3. The average density is 2.54 g/cm3.

Q-Q Plot

.00 .10 .20 .30 .40

.00

.10

.20

.30

.40


Ni

y=x

GradeofExternalCheckSam

ple(%)



Scatter Plot

.00 .10 .20 .30 .40 .50

.00

.10

.20

.30

.40

.50

Number of dat a 392Number plotte d 392X Variable: mea n 0.209

std. dev. 0.056Y Variable: mea n 0.205

std. dev . 0.057Correlatio n 0.952Rank correlatio n 0.625

Ni

20% Tolerance Limit

Q-Q Plot

.000 .004 .008 .012

.000

.004

.008

.012

Grade



Co

y=x


Grade


Scatter Plot

Number of data 392

Number plotted 392

X Variable: mean 0.010std. dev. 0.002


std. dev. 0.002Correlation 0.903


Co

20% Tolerance Limit

.000 .005 .010 .015 .020

.000

.005

.010

.015

.020


32/45



Figure 6-10: Scatter Diagrams for Bulk Density

In general, SRK is satisfied with the quality and result of the sample preparation and assaying performed bythe No. 121 Laboratory and is confident that the primary sample results are suitably reliable for use inresource estimation.

6.6 Resource Estimation under the JORC Code

6.6.1 Introduction

The Mineral Resource Statement presented herein summarises the Akekerishi mineral resource evaluationsprepared for the Fenglideyuan Project in accordance with the 2012 Australasian Code for Reporting ofExploration Results, Mineral Resources and Ore Reserves (the JORC Code2012).

This section describes the resource estimation methodology and summarizes the key assumptions consideredby SRK. In SRKs opinion, the resource evaluation reported herein is a reasonable representation of theglobal serpentinite mineral resource found in the Akekerishi Deposit at the current level of sampling. Themineral resources are reported in accordance with the JORC Code.

The project limits are based on the Xian Geodetic Coordinate System 1980 (XAS1980). The databaseused to estimate the mineral resources was audited by SRK. SRK is of the opinion that the current drilling

y= 0.0128x+ 2.0049R = 0.0225

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

38.00 40.00 42.00 44.00 46.00

BulkDensity

(g/cm3)

MgOGrade(%)

MgO

y= 0.0326x+ 1.3756R = 0.1977

30.00 35.00 40.00 45.00

SiO2 Grade(%)

SiO2

y= 0.0482x + 2.2157R = 0.041

5.00 6.00 7.00 8.00 9.00

Fe2O3 Grade(%)

Fe2O3

Linear Relationship

y = 0.0305x - 0.0351R = 0.2642

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

80.0 82.0 84.0 86.0 88.0 90.0 92.0

BulkDensity(g/cm3)

Grade of MgO + SiO2 + Fe2O3 (%)

Linear Relationship


33/45



information is sufficiently reliable to interpret with confidence the boundaries for mineralisation and that theassay data are sufficiently reliable to support mineral resource estimation.

Surpac Version 6.3 was used to construct the geological solids, prepare assay data for geostatistical analysis,construct the block model, estimate metal grades and tabulate mineral resources. The Geostatistical SoftwareLibrary (GSLib) family of software and Excel were used for geostatistical analysis.

6.6.2 Resource Estimation Procedures

The resource evaluation methodology involved the following procedures:

Database compilation and verification; Construction of wireframe models for the boundaries of the mineralization; Definition of resource domains; Data preparation (compositing) for geostatistical analysis and variography; Block modelling and grade interpolation; Resource classification and validation; Assessment of reasonable prospects for economic extraction and selection of appropriate

cut-off grades; and

Preparation of the Mineral Resource Statement.6.6.3 Exploration Database

The drillhole database used for the resource estimation consists of 149 boreholes. A total of 9,612 intervalswere sampled at the deposit, representing 28,793.3 m of sample drilling cores. All the available data wasinput into a Surpac (version 6.3) database for the estimation procedure. The database was validated withinSurpac to search for errors such as missing or overlapping intervals, and to correct hole lengths, azimuthsand dips, and to eliminate duplicated samples. Drillhole collars for the holes used in this estimate are shown

in Figure 6-5.

All drilling data as well as the digital topographic surface have been provided to SRK in the XAS80coordinate system and resource modelling and grade estimation work was conducted in this coordinatesystem.

Wireframe digital terrain model (DTM) of the surface topography of the deposit was modelled by SRKbased on the contour maps provided by the Client and is shown in Figure 6-11. A visual comparison betweenthe drillhole collars and the topography shows very good agreement, and SRK considers that the topographicmaps covering the deposits as provided by the Client are appropriate for use in the resource estimation.


34/45



Figure 6-11: Digital Terrain Model Used in the Resource Estimation

6.6.4 Solid Modelling

One (1) Mineralised zone was modelled by SRK based on cross-sectional interpretations. A 3-dimensional

(3D) view of this zone is shown in Figure 6-12. Boundaries were interpreted according to the lithology ofserpentinite. The minimum mineable thickness is 2 m with a maximum interburden waste thickness of 2 m.

Figure 6-12: Three-Dimensional View of Mineralised Zone in Akekerishi Deposit

6.6.5 Compositing

Univariate statistics were calculated for MgO within the mineralised zone and are shown in Table 6-2. Thecumulative probability plot for MgO and the distribution of core sample lengths are provided in Figure 6-13.

No assay cap was applied for the deposit and composites were created at 3 m down-hole intervals, broken atzone boundaries, as the majority of the core lengths were 3 m.


35/45



Table 6-2: Summary Statistics: All MgO Raw Assays

ZoneNumber of

samplesAverage Minimum Median Maximum

Standarddeviation

Coef. ofvariation

Skewness

All 9,612 38.59 0.43 41.79 51.47 10.52 0.27 -2.83

MineralisedZone

8,609 41.79 1.08 41.99 51.47 2.58 0.06 -6.57

Figure 6-13: Cumulative Probability Plot for MgO in the Akekerishi Deposit (left) andHistogram of Core Length (right)

6.6.6 Statistical Analysis and Variography

The histogram of the composited MgO data from mineralised zone is displayed in Figure 6-14. Histogram

analysis indicates that the distribution of MgO composites in Akekerishi deposits approaches normality.

Frequency

Length (m)

0 1.00 2.00 3.00 4.00 5.00 6.00

0

2,000

4,000

6,000

8,000

Statistics

Num ber of Data 9,612

Mean 3.00

Median 3.00

Standard Deviation 0.23

C oe f. o f Va ri atio n 0 .0 8

Minimum 0.90

Maximum 5.10


36/45



Figure 6-14: Frequency Distribution Histograms for MgO Composite in the MineralisedZone

General directional variograms of MgO, SiO2, Fe2O3, Ni, and Co were generated. Variogram parameters

selected are listed in Table 6-3. Variogram models along the three axes are also provided in Figure 6-15

Table 6-3: Parameters Chosen for the Mineralised Zone

Bearing Plunge Dip Major/Semi-Major Major/Minor Nugget Sill Range

MgO 144 0 0 1.170 1.647 0.17 0.63 600

SiO2 144 0 0 1.058 3.860 0.04 0.64 600

Fe2O3 162 0 0 2.060 2.319 0.11 0.79 700

Ni 36 0 0 1.609 2.913 0 0.82 500

Co 126 0 0 1.000 2.157 0.02 0.48 460

Frequency

MgO (%)

0 10.0 20.0 30.0 40.0 50.0

0

1000

2000

3000

4000

Statistics

Number ofData 8,511

Mean 41.84

Median 42.01Standard Deviation 2.20

Coef. ofVariation 0.05

Minimum 5.94

Maximum 51.12

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

0 200 400 600 800

Gamma(h)

Distance (m)

Major (Mg)

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

0 200 400 600 800

Gamma(h)

Distance (m)

Semi-major (Mg)0

0.2

0.4

0.6

0.8

1

1.2

1.4

0 100 200 300 400

Gamma(h)

Distance (m)

Minor (Mg)


37/45



Figure 6-15: Variogram Models for Each Axis in the Mineralised Zone

6.6.7 Block Model and Grade Estimation

Grade estimation for Akekerishi Deposit was done using Ordinary Kriging (OK)within the mineralised

zone. The maximum and minimum numbers of composites used for grade estimation were 25 and 3,respectively. The search type is ellipsoid. In all cases three passes were used for block estimation, controlled

by a search ellipsoid with attitudes taken from the parameters stated in Table 6-3. The search radius for thefirst pass was kept at 400 m for all variables. The search radius for the second pass was 600 m for MgO, SiO2,and Fe2O3; and 500 m for Ni and Co. The third radius for all variables was held at 2 times of each variogramrange if there were still un-estimated blocks after the first two passes. The coordinate extents of the blockmodel are represented in Table 6-4. An average bulk density of 2.54 g/cm 3was used for the purposes of

reporting resources.

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0 200 400 600 800

Gamma(h)

Distance (m)

Major (SiO2)

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0 200 400 600 800

Gamma(h)

Distance (m)

Semi-major (SiO2)

0

0.2

0.4

0.6

0.8

1

1.2

1.4

0 100 200 300 400

Gamma(h)

Distance (m)

Minor (SiO2)

0

0.2

0.4

0.6

0.8

1

1.2

0 200 400 600 800

Gamma(h)

Distance (m)

Major (Fe2O3)

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

0 200 400 600 800

Gamma(h)

Distance (m)

Semi-major (Fe2O3)

0

0.2

0.4

0.6

0.8

1

1.2

1.4

0 100 200 300 400

Gamma(h)

Distance (m)

Minor (Fe2O3)

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

0 200 400 600 800

Gamma(h)

Distance (m)

Major (Ni)

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

0 200 400 600 800

Gamma(h)

Distance (m)

Semi-major (Ni)

0

0.5

1

1.5

2

2.5

0 100 200 300 400

Gamma(h)

Distance (m)

Minor (Ni)

0

0.1

0.2

0.3

0.4

0.5

0.6

0 200 400 600 800

Gamma(h)

Distance (m)

Major (Co)

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0 200 400 600 800

Gamma(h)

Distance (m)

Semi-major (Co)

0

0.2

0.4

0.6

0.8

1

1.2

1.4

0 100 200 300 400

Gamma(h)

Distance (m)

Minor (Co)


38/45



Table 6-4: Coordinate Extents of Block Model

Coordinate Min MaxBlock Size

Maximum Minimum

Northing 4996000 5001024 32 16Easting 451000 455000 32 16Elevation -300 820 32 16

6.6.8 Model Validation

Swath plots of MgO, SiO2, Fe2O3, Ni and Co were created in three orthogonal directions (northing, eastingand vertical) in particular slice thickness in each direction to validate the resultant block models, as shown inFigure 6-16. The block models and composites match reasonably well in all orthogonal directions. Thiscomparison shows close agreement between the block model and composites in terms of overall distributio

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