China Daye Non Ferrous Metals Mining : MAJOR TRANSACTION AND CONTINUING CONNECTED TRANSACTIONS AND NOTICE OF SPECIAL GENERAL MEETING

December 23, 2019 at 11:56 pm EST

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to what action to take, you should consult your licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in China Daye Non-Ferrous Metals Mining Limited, you should at once hand this circular and the accompanying proxy form to the purchaser or the transferee or to the bank manager, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

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

(Incorporated in Bermuda with limited liability)

(Stock Code: 00661)

MAJOR TRANSACTION AND

CONTINUING CONNECTED TRANSACTIONS

AND

NOTICE OF SPECIAL GENERAL MEETING

Independent Financial Adviser

to the Independent Board Committee and the Independent Shareholders

A letter from the Board is set out on pages 7 to 44 of this circular. A letter from the Independent Board Committee is set out on page 45 of this circular. A letter from the Independent Financial Adviser is set out on pages 46 to 95 of this circular. A notice convening the SGM to be held at Imperial Room III, Mezzanine Floor, Towers Wing, Royal Pacific Hotel, China Hong Kong City, 33 Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong on Wednesday, 15 January 2020 at 10:00 a.m. is set out on pages SGM-1 to SGM-5 of this circular. A form of proxy for use at the SGM is enclosed. Such form of proxy is also published on the websites of The Stock Exchange of Hong Kong Limited (www.hkexnews.hk) and the Company (www.hk661.com).

Whether or not you are able to attend the SGM, please complete and sign the accompanying form of proxy in accordance with the instructions printed thereon and return it to the branch share registrar of the Company in Hong Kong, Tricor Investor Services Limited, at Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude shareholders from attending and voting in person at the SGM or any adjournment thereof if they so wish and in such event, the proxy form shall be deemed to be revoked.

27 December 2019

		CONTENTS
			Page
Definitions . . . .	. . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . .	45
Letter from the Independent Financial Adviser . . . . . . . . . . . . . . . . . . . . . . . . .	46
Appendix I	-	Financial Information of the Group . . . . . . . . . . . . . . . . .	I-1
Appendix II	-	General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	II-1
Notice of SGM .	. . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	SGM-1

- i -

DEFINITIONS

In this circular, unless the context otherwise requires, the following expressions shall have the following meanings:

"associate(s)"	has the meaning ascribed to it under the Listing Rules
"Board"	the board of Directors
"Capital Contribution	the capital contribution agreement dated 28 August 2019
Agreement"	entered into by and among Daye Metal, China No. 15
	Metallurgical, Huangshi Xingang Development and
	Huangshi State-owned Assets Management in relation to
	the establishment of the JV Company, the details of
	which are set out in the announcement of the Company
	dated 30 August 2019 and the circular of the Company
	dated 25 October 2019
"CBIRC"	China Banking and Insurance Regulatory Commission
	(中國銀行保險監督管理委員會)
"China No. 15 Metallurgical"	China No. 15 Metallurgical Construction Group Co.,
	Ltd.* (中國十五冶金建設集團有限公司), a limited
	liability company established in the PRC and a wholly-
	owned subsidiary of CNMC
"China Times"	China Times Development Limited, a company
	incorporated in the British Virgin Islands with limited
	liability and the immediate controlling Shareholder
"CNMC"	China Nonferrous Metal Mining (Group) Co., Ltd* (中國
	有色礦業集團有限公司), a limited liability company
	incorporated in the PRC and a controlling Shareholder
"CNMC Financial Company"	Nonferrous Mining Group Finance Company Limited*
	(有色礦業集團財務有限公司), a limited liability
	company incorporated in the PRC and a non-wholly
	owned subsidiary of CNMC
"CNMC Financial Services	the financial services framework agreement dated 22
Framework Agreement"	November 2019 entered into between the Company and
	CNMC, the details of which are set out in this circular
"CNMC Group"	CNMC and its subsidiaries

- 1 -

	DEFINITIONS
"CNMC Group Purchase and	the purchase and production services framework
Production Services	agreement dated 22 November 2019 entered into between
Framework Agreement"	the Company and CNMC, the details of which are set out
	in this circular
"Combined Ancillary Services	the combined ancillary services framework agreement
Framework Agreement"	dated 22 November 2019 entered into between the
	Company and the Parent Company, the details of which
	are set out in this circular
"Company"	China Daye Non-Ferrous Metals Mining Limited, a
	company incorporated in Bermuda with limited liability,
	the shares of which are listed on the Main Board of the
	Stock Exchange
"connected person(s)"	has the meaning ascribed to it under the Listing Rules
"Connected Transaction	collectively, (i) the Parent Group Sales Framework
Agreements"	Agreement, (ii) the Huangshi Xingang Sales Framework
	Agreement, (iii) the Zhongse Aobote Sales Framework
	Agreement, (iv) the Parent Group Purchase and
	Production Services Framework Agreement, (v) the
	Hubei Gold Purchase Framework Agreement, (vi) the
	CNMC Group Purchase and Production Services
	Framework Agreement, (vii) the Combined Ancillary
	Services Framework Agreement, (viii) the Land Lease
	Framework Agreement and (ix) the CNMC Financial
	Services Framework Agreement
"connected transaction(s)"	has the meaning ascribed to it under the Listing Rules
"Daye Metal"	Daye Non-ferrous Metals Co., Ltd.* (大冶有色金屬有限
	責任公司), a limited liability company established in the
	PRC and a non-wholly owned subsidiary of the Company
"Director(s)"	director(s) of the Company
"Existing Financial Services	the financial services framework agreement dated 3
Framework Agreement"	November 2016 entered into between the Company and
	the Parent Company
"Group"	the Company and its subsidiaries
"HKFRS"	the Hong Kong Financial Reporting Standards

- 2 -

	DEFINITIONS
"Hong Kong"	the Hong Kong Special Administrative Region of the
	PRC
"Huangshi State-owned Assets	Huangshi State-owned Assets Management Co., Ltd.* (黃
Management"	石市國有資產經營有限公司), a limited liability company
	established in the PRC
"Huangshi Xingang"	Huangshi Xingang Nonferrous Chemical Terminal Co.,
	Ltd.* (黃石新港有色化工碼頭有限公司), a limited
	liability company incorporated in the PRC and an
	associate of the Parent Company
"Huangshi Xingang	Huangshi Xingang Development Co., Ltd.* (黃石新港開
Development"	發有限公司), a limited liability company established in
	the PRC
"Huangshi Xingang Sales	the sales framework agreement dated 22 November 2019
Framework Agreement"	entered into between the Company and Huangshi
	Xingang, the details of which are set out in this circular
"Hubei Gold"	Hubei Jilong Mountain Gold Mining Company Limited*
	(湖北雞籠山黃金礦業有限公司), a limited liability
	company established in the PRC and an associate of the
	Parent Company
"Hubei Gold Purchase	the purchase framework agreement dated 22 November
Framework Agreement"	2019 entered into between the Company and Hubei Gold,
	the details of which are set out in this circular
"Independent Board Committee"	the independent board committee of the Company
	comprising Mr. Wang Qihong, Mr. Wang Guoqi and Mr.
	Liu Jishun, being all the independent non-executive
	Directors, which is formed to advise the Independent
	Shareholders on the Non-Exempt Continuing Connected
	Transactions and the Proposed Annual Caps
"Independent Financial Adviser"	Amasse Capital Limited, a licensed corporation to carry
or "Amasse Capital"	out Type 1 (dealing in securities) and Type 6 (advising on
	corporate finance) regulated activities under the SFO,
	which has been appointed by the Company as the
	independent financial adviser to advise the Independent
	Board Committee and the Independent Shareholders on
	the Non-Exempt Continuing Connected Transactions and
	the Proposed Annual Caps

- 3 -

	DEFINITIONS
"Independent Shareholders"	the Shareholders other than China Times, the Parent
	Company, CNMC and their respective associates
"independent third party"	a person or entity who is not a connected person of the
	Company
"JV Company"	Daye Non-ferrous (Xingang) Copper Co., Ltd.* (大冶有
	色(新港)銅業有限公司) (the name is subject to the final
	approval by the relevant industry and commerce
	authorities of the PRC), a limited liability company to be
	established under the laws of the PRC pursuant to the
	terms of the Capital Contribution Agreement
"Land Lease Framework	the land lease framework agreement dated 23 December
Agreement"	2011 entered into between the Company and the Parent
	Company
"Latest Practicable Date"	23 December 2019, being the latest practicable date prior
	to the printing of this circular for the purpose of
	ascertaining certain information contained herein
"Listing Rules"	the Rules Governing the Listing of Securities on The
	Stock Exchange of Hong Kong Limited
"Market Price"	means such price(s) that:
	(1) the contracting party (as the supplier of products or
	service) provides such products or services to
	independent third parties for the same or similar
	products or services;
	(2) independent third parties provide such products or
	services to other independent third parties for the
	same or similar products or services; or
	(3) as determined by industry standards or practice for
	the same or similar products or services
"New Copper Cathode	a high purity copper cathode production plant proposed
Production Plant"	to be located in Huangshi Xingang (Logistics) Industrial
	Park, Huangshi, Hubei, the PRC, with a production
	capacity of 400,000 tonnes per year and a total site area
	of approximately 1 million square metres

- 4 -

	DEFINITIONS
"Non-Exempt Continuing	the continuing connected transactions consisting of the
Connected Transactions"	placing of deposit by the Group to the CNMC Group and
	the provision of bills acceptance and settlement and
	foreign exchange settlement and sales services by the
	CNMC Group to the Group under the CNMC Financial
	Services Framework Agreement and the transactions
	contemplated under each of (i) the Parent Group Sales
	Framework Agreement, (ii) the Huangshi Xingang Sales
	Framework Agreement, (iii) the Zhongse Aobote Sales
	Framework Agreement, (iv) the Parent Group Purchase
	and Production Services Framework Agreement, (v) the
	Hubei Gold Purchase Framework Agreement, (vi) the
	CNMC Group Purchase and Production Services
	Framework Agreement, (vii) the Combined Ancillary
	Services Framework Agreement, and (viii) the Land
	Lease Framework Agreement
"Parent Company"	Daye Nonferrous Metals Group Holdings Company
	Limited* (大冶有色金屬集團控股有限公司), a limited
	liability company established in the PRC and a
	controlling Shareholder
"Parent Group"	the Parent Company and its subsidiaries
"Parent Group Purchase and	the purchase and production services framework
Production Services	agreement dated 22 November 2019 entered into between
Framework Agreement"	the Company and the Parent Company, the details of
	which are set out in this circular
"Parent Group Sales	the sales framework agreement dated 22 November 2019
Framework Agreement"	entered into between the Company and the Parent
	Company, the details of which are set out in this circular
"PBOC"	The People's Bank of China
"percentage ratio"	has the meaning ascribed to it under Chapter 14 of the
	Listing Rules
"PRC"	the People's Republic of China, which for the purpose of
	this circular, excludes Hong Kong, the Macau Special
	Administration of the People's Republic of China and
	Taiwan
"Proposed Annual Caps"	the proposed annual caps for each of the three years
	ending 31 December 2022

- 5 -

	DEFINITIONS
"RMB"	Renminbi, the lawful currency of the PRC
"SFO"	Securities and Futures Ordinance, Chapter 571 of the
	Laws of Hong Kong
"SGM"	the special general meeting of the Company to be
	convened at Imperial Room III, Mezzanine Floor, Towers
	Wing, Royal Pacific Hotel, China Hong Kong City, 33
	Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong on
	Wednesday, 15 January 2020 at 10:00 a.m. to consider,
	and if thought fit, approve the resolutions contained in
	the notice convening the SGM, which are set out on pages
	SGM-1 to SGM-5, or any adjournment thereof
"Shareholder(s)"	holder(s) of the share(s) of the Company
"Stock Exchange"	The Stock Exchange of Hong Kong Limited
"US dollars"	US dollars, the lawful currency of the United States of
	America
"Zhongse Aobote"	Zhongse Aobote Copper Aluminum Co., Ltd.* (中色奧博
	特銅鋁業有限公司), a limited liability company
	established in the PRC and an associate of CNMC
"Zhongse Aobote Sales	the sales framework agreement dated 22 November 2019
Framework Agreement"	entered into between the Company and Zhongse Aobote,
	the details of which are set out in this circular
"%"	per cent

For identification purpose only

- 6 -

LETTER FROM THE BOARD

(Incorporated in Bermuda with limited liability)

(Stock Code: 00661)

Executive Directors:	Registered Office:
Mr. Wang Yan (Chairman)	Clarendon House
Mr. Long Zhong Sheng (Chief Executive Officer)	2 Church Street
Mr. Yu Liming	Hamilton HM 11
Mr. Chen Zhimiao	Bermuda
Independent Non-executive Directors:	Head office and principal place
Mr. Wang Qihong	of business:
Mr. Wang Guoqi	Suite No. 10B, 16/F
Mr. Liu Jishun	Tower 3, China Hong Kong City
	China Ferry Terminal
	33 Canton Road, Kowloon
	Hong Kong
	27 December 2019
To the Shareholders
Dear Sir or Madam,

MAJOR TRANSACTION AND CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

Reference is made to the announcements of the Company dated 22 November 2019 and 23 December 2019 in relation to, among other things, the Non-Exempt Continuing Connected Transactions and the Proposed Annual Caps.

The purposed of this circular is to provide you with, among other things:

further details of the Non-Exempt Continuing Connected Transactions and the Proposed Annual Caps;
a letter from the Independent Board Committee to the Independent Shareholders containing its recommendation in respect of the Non-Exempt Continuing Connected Transactions and the Proposed Annual Caps;

- 7 -

LETTER FROM THE BOARD

a letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders containing its recommendation in respect of the Non-Exempt Continuing Connected Transactions and the Proposed Annual Caps;
the financial and other information of the Group; and
the notice of SGM.

At the SGM, resolutions will be proposed to approve the Non-Exempt Continuing Connected Transactions and the Proposed Annual Caps.

MAJOR TRANSACTION AND CONTINUING CONNECTED TRANSACTIONS

1. CNMC Financial Services Framework Agreement

Date:	22 November 2019
Parties:	(1)	the Company
	(2)	CNMC
Nature of transactions:	The Group shall place deposits with the CNMC Group.
	The CNMC Group shall provide to the Group the
	following financial services: loans, guarantees and
	integrated credit facilities, bills acceptance and settlement,
	foreign exchange settlement and sales and such other
	financial services as agreed by the parties from time to
	time.
Term:	1 January 2020 to 31 December 2022.
Price of services:	With reference to the fees charged by commercial banks
	for similar services, subject to compliance with applicable
	laws and regulations and provisions of PBOC on interest
	rate management.
Time and method of	Based on market practice.
payment:
Deposit and loan amounts:	The average daily amount of deposits placed by the Group
	with the CNMC Group must not exceed the average daily
	amount of outstanding loans extended by the CNMC
	Group to the Group.

- 8 -

LETTER FROM THE BOARD

Set-off upon default on	If the CNMC Group is unable to return on time the
deposits:	deposits (including accrued interest) placed to it by the
	Group, the Group shall have the right to: (i) terminate the
	CNMC Financial Services Framework Agreement; and (ii)
	set off such deposits (including accrued interest) against
	the outstanding loans (including accrued interest) extended
	by the CNMC Group to the Group.
Compensation for losses	CNMC shall fully compensate the Group for any loss
suffered by the Group:	incurred by the Group (including in relation to the amount
	of outstanding deposits or loans and accrued interest or
	any related expenses incurred) as a result of any of the
	following: (i) the CNMC Group breaches, or is likely to
	breach, any PRC laws or regulations; (ii) the occurrence
	of, or likely occurrence of, any material problem in the
	CNMC Group's operations or difficulties in payment; or
	(iii) the CNMC Group does not comply or breaches the
	CNMC Financial Services Framework Agreement.
Undertaking by	The CNMC Group undertakes to the Group that if the
the CNMC Group:	CNMC Financial Company experiences or foresees any
	difficulties in payment, the CNMC Group will inject
	capital into the CNMC Financial Company based on the
	latter's needs in order to ensure the latter's normal
	operations.

To ensure that the pricing policies under the CNMC Financial Services Framework Agreement are complied with, prior to conducting the connected transactions under the CNMC Financial Services Framework Agreement, the Group will enquire with third party commercial banks about the interest rates for loans and deposits of the same term and the fees for provision of similar financial services charged by them, to compare with the interest rates for loans and deposits and fees charged for the connected transactions between the Group and the CNMC Financial Company and determine the relevant interest rates and fees in accordance with the pricing policies under the CNMC Financial Services Framework Agreement. The Group will seek to obtain quotations from at least three independent third party commercial banks in each case where practicable.

- 9 -

LETTER FROM THE BOARD

Proposed Annual Caps

Deposit services

In respect of the deposit services provided or to be provided by the Parent Group or the CNMC Group to the Group, the table below sets out the historical figures and existing annual caps under the Existing Financial Services Framework Agreement and the Proposed Annual Caps under the CNMC Financial Services Framework Agreement:

Year ending

Year ended

Year ending

31 December

31 December 2017

31 December 2018

31 December 2019

2020

2021

2022

Actual

amount

(up to

Actual

31 October

amount

2019)

Proposed

Annual cap

(audited)

Annual cap

(audited)

Annual cap

(unaudited)

annual cap

(RMB'000)

619,859

607,685

651,026

644,786

683,192

682,563

2,681,869

2,885,041

3,110,325

The above Proposed Annual Caps were determined with reference to the: (i) amount of deposits (including accrued interests) historically made by the Group; (ii) estimated daily cash flow of the Group for the three years ending 31 December 2022, having considered the business operations needs and expected development of the Group; and

expected interest rate by reference to prevailing interest rates on deposits offered by other finance companies in the PRC.

The increase in the Proposed Annual Caps for the deposit services to be provided by the CNMC Group to the Group as compared with the existing annual caps for the deposit services provided by the Parent Group to the Group under the Existing Financial Framework Agreement is primarily due to the expected contribution of RMB2.5 billion, which is expected to be in place by 2020, by the parties to the Capital Contribution Agreement for satisfying the capital requirements of the JV Company. Out of the RMB2.5 billion, it is anticipated that approximately RMB1.3 billion will be utilised as part of the construction costs for the New Copper Cathode Production Plant and the remaining RMB1.2 billion will be reserved as working capital of the JV Company, constituting part of the available daily cash balance of the Group. Furthermore, as it is expected that the New Copper Cathode Production Plant will commence operation at a partial capacity during 2021 and will gradually increase its level of operation in 2022, the demand for working capital of the JV Company is expected to further increase in 2022 accordingly.

- 10 -

LETTER FROM THE BOARD

Such working capital required is currently proposed to be satisfied partly by the registered capital of the JV Company and partly by external bank borrowings, which is expected to be deposited with the CNMC Group.

As the highest applicable percentage ratio in respect of the Proposed Annual Caps exceeds 25%, the deposit services under the CNMC Financial Services Framework Agreement constitute (i) continuing connected transactions that are subject to the reporting, announcement, annual review and independent shareholders' approval requirements under Chapter 14A of the Listing Rules; and (ii) a major transaction that is subject to the reporting, announcement, annual review and shareholders' approval requirements under Chapter 14 of the Listing Rules.

Loans, guarantees and integrated credit facilities services

The loans, guarantees and integrated credit facilities services will be provided by the CNMC Group for the benefit of the Company on normal commercial terms similar to those for comparable services in the PRC and no security over the assets of the Group will be granted. Therefore, the provision of such services will constitute continuing connected transactions that are exempt from the reporting, announcement, annual review and independent shareholders' approval requirements under Rule 14A.90 of the Listing Rules.

Bills acceptance and settlement and foreign exchange settlement and sales services

In respect of the bills acceptance and settlement and foreign exchange settlement and sales services provided or to be provided by the Parent Group or the CNMC Group to the Group, the table below sets out the historical figures and existing annual caps under the Existing Financial Services Framework Agreement and the Proposed Annual Caps under the CNMC Financial Services Framework Agreement:

Year ending

Year ended

Year ending

31 December

31 December 2017

31 December 2018

31 December 2019

2020

2021

2022

Actual

amount

(up to

Actual

31 October

amount

2019)

Proposed

Annual cap

(audited)

Annual cap

(audited)

Annual cap

(unaudited)

annual cap

(RMB'000)

6,900

9,600

13,400

6,120,300

11,090,900

16,502,900

- 11 -

LETTER FROM THE BOARD

The above Proposed Annual Caps were determined with reference to: (i) the historical amount of foreign exchange transacted by the Group (which was approximately RMB14.3 billion, RMB14.2 billion and RMB13.0 billion for each of the two years ended 31 December 2018 and ten months ended 31 October 2019, respectively); (ii) the anticipated amount of foreign exchange and settlement services to be purchased by the Group from the CNMC Group for the three years ending 31 December 2022; (iii) the expected growth in the business of the Group; and (iv) the fees of bills acceptance and settlement services historically received by the Group.

The Group expects to satisfy approximately 40% to 50% of its total demand for foreign exchange for each of the three years ending 31 December 2022 with its purchase of foreign exchange and settlement services from the CNMC Group. Regarding the remainder, subject to comparable rates and service fees, the Group will purchase the foreign exchange from other commercial banks and institutions in order to diversify the sources of supply and at the same time to maintain sound business relationships with the commercial banks and institutions. Based on the estimation on the amount and prices of raw materials to be imported by the Group, the total amount of foreign exchange to be transacted by the Group is expected to be approximately RMB15.3 billion, RMB22.2 billion and RMB33.0 billion for the three years ending 31 December 2022, respectively.

The Group has not previously entered into any foreign exchange settlement and sales transactions with the Parent Group or the CNMC Group prior to the entering into of the CNMC Financial Services Framework Agreement. Under the CNMC Financial Services Framework Agreement, the Group and the CNMC Group will enter into definitive contracts pursuant to which the CNMC Group will provide spot foreign exchange settlement and sale services for foreign currencies such as US dollars to the Group, as the Group's revenue are mainly in RMB but it requires US dollars to settle payments to certain raw material suppliers in the international market, including suppliers of copper concentrate and blister copper.

The increase in the Proposed Annual Caps for the bills acceptance and settlement and foreign exchange settlement and sales services to be provided by the CNMC Group to the Group as compared with the existing annual caps for the bills acceptance and settlement services provided by the Parent Group to the Group under the Existing Financial Services Framework Agreement is primarily due to (i) the addition of the purchase of foreign exchange settlement and sales services from the CNMC Group under the CNMC Financial Services Framework Agreement which were not covered under the Existing Financial Framework Agreement; and (ii) the expected increase in the Group's demand for the amount of foreign exchange for its purchases of raw materials from the international market following the commencement of operation of the New Copper Cathode Production Plant in the first half of 2021.

As the highest applicable percentage ratio in respect of the bills acceptance and settlement services and foreign exchange settlement and sales under the CNMC Financial Services Framework Agreement exceeds 5%, the bills acceptance and settlement services and foreign exchange settlement and sales under the Financial Services Framework Agreement are subject to the reporting, announcement, annual review and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

- 12 -

LETTER FROM THE BOARD

Reasons for the transactions

CNMC Financial Company is a non-wholly owned subsidiary of CNMC. It is regulated by PBOC and CBIRC to provide financial services to other members of the Parent Group and the CNMC Group. The Directors consider there are numerous advantages of utilising the financial services provided by the CNMC Financial Company over similar services provided by other independent commercial banks in the PRC for the following reasons:

similar to other independent commercial banks in the PRC, the CNMC Financial Company will be regulated by the PBOC and the CBIRC, and will provide services pursuant to the relevant rules and requirements, including capital risk guidelines and requisite capital adequacy ratios of such regulatory authorities;
the regulation of finance companies (such as the CNMC Financial Company) by the CBIRC is more stringent than the regulation of commercial banks in the PRC in certain aspects, for example, finance companies are required to have a higher capital adequacy ratio;
the CBIRC will review the operations and management of finance companies in the PRC pursuant to the Guideline of Risk Assessment and Classified Regulation on Financial Companies of Enterprise Groups (企業集團財務公司風險評價和分類監管指引) which covers areas including a finance company's internal management, operating conditions and the related group's influence over and support to the finance company; and
the CNMC Financial Services Framework Agreement provides the Group with numerous rights and sets out numerous internal control and risk management measures that safeguard the interests of the Company and the Shareholders. For example, the average daily deposits placed by the Group with the CNMC Group must not exceed the average daily outstanding loans. The Group may also set-off any defaulted deposits against any outstanding loans extended by the CNMC Group to the Group and has various rights of compensation. In addition, the CNMC Financial Company shall (and CNMC shall ensure that the CNMC Financial Company shall):
1. implement stringent internal control and effective risk management measures (the efficiency and effectiveness of which will be regularly reviewed by the CBIRC);
2. comply with applicable laws and regulations, and in particular strictly comply with any requirements relating to the management of financial companies under all PRC laws and regulations (including any PRC laws and regulations), as amended from time to time;
3. - 13 -

LETTER FROM THE BOARD

provide the Group with access to the books and accounts of the CNMC Financial Company for inspection as soon as practicable upon the Group's request; and
when providing financial services to members of the Group, exercise its own judgment and prudent approval process to determine whether to provide such financial services to such members of the Group.

Further, the provision of financial services under the CNMC Financial Services Framework Agreement is expected to render more expedient and efficient financial services to the Group, especially due to the multiple financing channels offered by the CNMC Group. In addition, it is expected that any applicable interest rates for the financial services will be equal to or more favourable to the Group than the benchmark interest rates quoted by the PBOC from time to time, while any other applicable fees and terms will also be equal to or more favourable to the Group than that offered by other independent commercial banks in the PRC, which would reduce the overall financial costs of the Group.

2. Parent Group Sales Framework Agreement

Date:	22 November 2019
Parties:	(1)	the Company
	(2)	the Parent Company
Nature of transactions:	The Group will supply certain products to the Parent
	Group, including silver, copper cathodes, copper
	concentrate, natural gas, residual heat power generation,
	water, electricity, sulfuric acid, waste materials, scrap
	steel, scrap stainless steel, scrap copper cathodes mold,
	spare part materials and such other products as agreed by
	the parties from time to time.
Term:	1 January 2020 to 31 December 2022.
Time and method of	Based on market practice.
payment:
Pricing mechanism:	Based on: (i) the government-prescribed price; or (ii) if
	there is no applicable government-prescribed price, the
	Market Price or a price determined by the internal
	documents of the Group developed with reference to the
	Market Price.

- 14 -

LETTER FROM THE BOARD

If the prices and charges are determined based on or with reference to prices, exchange rates or tax rates stated in specific government documents, internal documents of the Group, exchanges or industry-related websites, the effective aforementioned documents, prices and rates at the time of the entry into of specific transaction agreements by the parties shall prevail.

As at the Latest Practicable Date, prices for the supply of the relevant products will be determined by the parties on the following basis:

Silver:	With reference to the market price of silver as quoted on (i)
	the Shanghai Gold Exchange; (ii) the Shanghai Huatong
	Silver Exchange; (iii) the Chicago Mercantile Exchange
	(adjusted with reference to the premium or discount quoted
	by Reuters); or (iv) the London Bullion Market
	Association (as applicable).
Copper cathodes:	With reference to the market price of copper as quoted on
	(i) the Shanghai Futures Exchange or (ii) the London
	Metal Exchange, adjusted with reference to the premium
	or discount quoted by Reuters or the Shanghai Metal
	Market website (as applicable).
Copper concentrate:	With reference to (as applicable): (i) the market price of
	gold as quoted on the Chicago Mercantile Exchange
	(adjusted with reference to the premium or discount quoted
	by Reuters) or by the London Bullion Market Association;
	(ii) the market price of silver as quoted on the Chicago
	Mercantile Exchange (adjusted with reference to the
	premium or discount quoted by Reuters) or by the London
	Bullion Market Association; or (iii) the market price of
	copper as quoted on the London Metal Exchange (adjusted
	with reference to the premium or discount quoted by
	Reuters as applicable).
Natural gas:	With reference to the price of natural gas prescribed by
	Huangshi Price Bureau* (黃石市物價局).
Residual heat power	With reference to the price of electricity prescribed by
generation:	Hubei Province Price Bureau.
Water:	With reference to the price of water prescribed by
	Huangshi Price Bureau* (黃石市物價局).

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LETTER FROM THE BOARD

Electricity:

Scrap steel, scrap stainless steel, scrap copper cathodes mold, spare part materials:

With reference to the price of electricity prescribed by Hubei Province Price Bureau.

With reference to the tender prices and the overall market condition.

The Group will conduct tenders by invitation, inviting at least three qualified buyers (including the Parent Group and two independent third party buyers) to participate in the relevant tenders. Selection of the final buyer(s) will be made primarily based on price offered, but consideration will also be given to the historical cooperation relationship with and the capability of timely settlement of the buyers.

When actual transactions are proposed to be conducted during the relevant financial year:

in respect of the supply of scrap steel and scrap stainless steel by the Group, the settlement prices for scrap steel and scrap stainless steel will be the tender price, and adjusted (if required) with reference to the market price of scrap steel or scrap stainless steel quoted on the industry related websites, which is currently YD Steel (http://www.ydsteel.com) and CN Gold (https://jiage.cngold.org) respectively, on the day immediately prior to the actual date of transaction.
in respect of the supply of scrap copper cathodes mold by the Group, the price will be the tender price, and adjusted (if required) with reference to the relevant processing costs incurred by the Group and the market price of scrap steel, being the prices charged by independent third party suppliers supplying scrap steel in their ordinary course of business in the same or nearby area.

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LETTER FROM THE BOARD

	(iii) in respect of the supply of spare part materials, the
	price will be the tender price, and adjusted (if
	required) with reference to the relevant market price,
	being the prices charged by independent third party
	suppliers providing similar type of products in their
	ordinary course of business in the same or nearby
	area.
Sulfuric acid:	With reference to market price of sulfuric acid chemical
	products quoted on the industry-related website, which is
	currently Baiinfo website and the overall market condition.
Waste materials:	With reference to the market price determined through
	price inquiries and the market price of copper quoted on
	the Shanghai Futures Exchange.

Historical figures, existing annual caps and Proposed Annual Caps

The table below sets out the historical figures, existing annual caps and Proposed Annual Caps for the Parent Group Sales Framework Agreement:

Year ending

Year ended

Year ending

31 December

31 December 2017

31 December 2018

31 December 2019

2020

2021

2022

Actual

amount

(up to

Actual

31 October

amount

2019)

Proposed

Annual cap

(audited)

Annual cap

(audited)

Annual cap

(unaudited)

annual cap

(RMB'000)

13,450,706

2,266,680

14,848,027

3,861,613

16,694,468

4,537,676

7,207,373

10,802,160

14,383,651

The above Proposed Annual Caps have been determined with reference to the: (i) existing purchase orders placed by the Parent Group; (ii) projected future orders based on the expected increase in the products to be sold to the Parent Group as a result of the expected growth in the business of the Parent Group; and (iii) the average historical market price and the anticipated future market price for the relevant products.

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LETTER FROM THE BOARD

Reasons for the transaction

The Directors consider that the Parent Group Sales Framework Agreement will broaden the revenue base of the Group and allow it to leverage on the sales network of the Parent Group in the PRC and Hong Kong.

In respect of the supply of copper concentrate, while the Group has in the past, and will continue to, procure copper concentrate from the Parent Group in addition to its own production of such for its business operations (as detailed in the paragraph headed "5. Parent Group Purchase and Production Services Framework Agreement" of this section), the entering into of the Parent Group Sales Framework Agreement allows the Group to serve as a reliable back-up source of supply of copper concentrates to the Parent Group, catering for any unforeseen surge of demands or other contingencies on the part of the Parent Group. The Group had not previously supplied any copper concentrate to the Parent Group during the two years ended 31 December 2018 and the ten months ended 31 October 2019, but had purchased certain copper concentrates from the Parent Group during the period in order to meet its production demand, under the relevant existing framework agreements.

Given the long-term business relationship of the Parent Group and the Group and the close geographical proximity of their respective operations, the administrative costs and time costs involved for such sales could be minimized. In addition, upon completion of the New Copper Cathode Production Plant, it is expected that the Group will also supply copper concentrates to the JV Company (which will become a connected person of the Company upon its establishment) for its production of copper cathodes. It is expected that the quantity of copper concentrate to be supplied by the Group under the Parent Group Sales Framework Agreement will only form a small portion of the production of copper concentrate by the Group and represent a small transaction amount.

Listing Rules implications

As the highest applicable percentage ratio in respect of the Proposed Annual Caps exceeds 5%, the Parent Group Sales Framework Agreement is subject to the reporting, announcement, annual review and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

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LETTER FROM THE BOARD

3. Huangshi Xingang Sales Framework Agreement

Date:	22 November 2019
Parties:	(1)	the Company
	(2)	Huangshi Xingang
Nature of transactions:	The Group will supply certain products to Huangshi
	Xingang, including sulfuric acid and such other products
	as agreed by the parties from time to time.
Term:	1 January 2020 to 31 December 2022.
Time and method of	Based on market practice.
payment:
Pricing mechanism:	Based on: (i) the government-prescribed price; or (ii) if
	there is no applicable government-prescribed price, the
	Market Price or a price determined by the internal
	documents of the Group developed with reference to the
	Market Price.

As at the Latest Practicable Date, prices for the supply of sulfuric acid will be determined by the parties on the following basis:

Sulfuric acid:	With reference to market price of sulfuric acid chemical
	products quoted on the industry-related website, which is
	currently Baiinfo website and the overall market condition.

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LETTER FROM THE BOARD

Proposed Annual Caps

The table below sets out the Proposed Annual Caps for the Huangshi Xingang Sales

Framework Agreement:

Year ending	Year ending	Year ending
31 December 2020	31 December 2021	31 December 2022
Proposed annual cap	Proposed annual cap	Proposed annual cap
(RMB'000)	(RMB'000)	(RMB'000)
15,000		40,000	75,000

The above Proposed Annual Caps have been determined with reference to the: (i) historical purchase orders placed by other purchasers with the Group for the relevant products; (ii) projected future orders based on the expected amount of products to be sold to Huangshi Xingang for the three years ending 31 December 2022; and (iii) average historical market price and the anticipated future market price for the relevant products.

Reasons for the transaction

The Directors consider that the Huangshi Xingang Sales Framework Agreement will broaden the revenue base of the Group and allow it to leverage on the sales network of the Huangshi Xingang in the PRC.

The Group has not previously engaged in any transaction of supply of products to Huangshi Xingang prior to the entering into of the Huangshi Xingang Sales Framework Agreement. The Company has been seeking to expand its client base for its supply of sulfuric acid, and Huangshi Xingang has the qualifications and resources for engaging in the business of operation, storage and transportation as well as the trading of sulfuric acid. Further, the production volume of sulfuric acid by the Group is expected to be enhanced following the completion of the construction of the New Copper Cathode Production Plant, which is expected to commence production of copper cathode and sulfuric acid in the first half of 2021.

Listing Rules implications

As the highest applicable percentage ratio in respect of the Proposed Annual Caps exceeds 5%, the Huangshi Xingang Sales Framework Agreement is subject to the reporting, announcement, annual review and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

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LETTER FROM THE BOARD

4. Zhongse Aobote Sales Framework Agreement

Date:	22 November 2019
Parties:	(1)	the Company
	(2)	Zhongse Aobote
Nature of transactions:	The Group will supply certain products to Zhongse Aobote,
	including copper cathodes and such other products as agreed
	by the parties from time to time.
Term:	1 January 2020 to 31 December 2022.
Time and method of	Based on market practice.
payment:
Pricing mechanism:	Based on: (i) the government-prescribed price; or (ii) if there
	is no applicable government-prescribed price, the Market
	Price or a price determined by the internal documents of the
	Group developed with reference to the Market Price.

As at the Latest Practicable Date, prices for the supply of copper cathodes will be determined by the parties on the following basis:

Copper cathodes:	With reference to the market price of copper as quoted on
	the Shanghai Futures Exchange, adjusted with reference to
	the premium or discount quoted by metal spot websites (as
	applicable).

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LETTER FROM THE BOARD

Proposed Annual Caps

The table below sets out the Proposed Annual Caps for the Zhongse Aobote Sales

Framework Agreement:

Year ending	Year ending	Year ending
31 December 2020	31 December 2021	31 December 2022
Proposed annual cap	Proposed annual cap	Proposed annual cap
(RMB'000)	(RMB'000)	(RMB'000)
2,832,000		2,976,000	2,976,000

The above Proposed Annual Caps have been determined with reference to the: (i) existing purchase orders placed by other purchasers with the Group for the relevant products; (ii) projected future orders based on the expected amount of products to be sold to Zhongse Aobote for the three years ending 31 December 2022; and (iii) average historical market price and the anticipated future market price for the relevant products.

Reasons for the transaction

The Directors consider that the Zhongse Aobote Sales Framework Agreement will broaden the revenue base of the Group and allow it to leverage on the sales network of Zhongse Aobote in the PRC.

The Group has not previously engaged in any transaction of supply of products to Zhongse Aobote prior to the entering into of the Zhongse Aobote Sales Framework Agreement. In the past two years, Zhongse Aobote has repeatedly submitted purchase requests for copper cathodes to the Company. However, as the proposed supply of copper cathodes to Zhongse Aobote was not covered by any of the then existing framework agreements of the Company, Zhongse Aobote had to purchase copper cathodes from suppliers other than the Group. The entering into of the Zhongse Aobote Sales Framework Agreement allows the Group to expand its client base and provide a cost-effective, timely and stable source of supply of products to Zhongse Aobote.

Further, the Group, through the JV Company, will construct and operate the New Copper Cathode Production Plant with a production capacity of 400,000 tonnes per year. It is expected that the completion of construction of the New Copper Cathode Production Plant and the commencement of production of copper cathode at the New Copper Cathode Production Plant will take place in the first half of 2021. Based on the current projection and business plans of Zhongse Aobote, the anticipated demand for the relevant products by Zhongse Aobote will remain at a similar level in 2021 and 2022, and hence the Proposed Annual Caps under the Zhongse Aobote Sales Framework Agreement for 2021 and 2022 will be maintained at a similar level. However, the entering into of the Zhongse

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LETTER FROM THE BOARD

Aobote Sales Framework Agreement can allow the Group to develop a long-term trading relationship with Zhongse Aobote and potentially increase the transaction amount of copper cathode between the parties in the long run.

Taking into account the benefits of efficiency and the expected increase in the production capacity of the Group, the entering into of the Zhongse Aobote Sales Framework Agreement is in the interests of the Group and Zhongse Aobote.

Listing Rules implications

As the highest applicable percentage ratio in respect of the Proposed Annual Caps exceeds 5%, the Zhongse Aobote Sales Framework Agreement is subject to the reporting, announcement, annual review and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

5. Parent Group Purchase and Production Services Framework Agreement

Date:	22 November 2019
Parties:	(1)	the Company
	(2)	the Parent Company
Nature of transactions:	The Parent Group will:
	(i)	supply certain products to the Group, including scrap
		copper, copper concentrate, diesel fuel, parts and
		equipment, waste circuit boards and such other
		products as agreed by the parties from time to time;
		and
	(ii)	provide certain production services to the Group,
		including construction maintenance, engineering
		labour, transportation, train loading and unloading
		and such other production services as agreed by the
		parties from time to time.
Term:	1 January 2020 to 31 December 2022.
Time and method of	Based on market practice.
payment:

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	LETTER FROM THE BOARD
Pricing mechanism:	Based on: (i) the government prescribed price; (ii) if there
	is no applicable government prescribed price, the Market
	Price determined by the Company by way of a
	comprehensive evaluation method taking into account
	comparable quotes from at least two independent third
	parties obtained via public tender or price inquiry, or the
	price as negotiated by the parties if the relevant
	procurement does not require public tender or price inquiry
	procedure or a price determined by the internal documents
	of the Group developed with reference to the Market Price.
	If the prices and charges are determined based on or with
	reference to prices, exchange rates or tax rates stated in
	specific government documents, internal documents of the
	Group, exchanges or industry-related websites, the
	effective aforementioned documents, prices and rates at
	the time of the entry into of specific transaction
	agreements by the parties shall prevail.

As at the Latest Practicable Date, prices for the supply of the relevant products and services will be determined by the parties on the following basis:

Scrap copper:	With reference to the market procurement price of scrap
	copper in regions such as Miluo, Hunan, Taizhou, Zhejiang
	and Nanhai, Guangdong as quoted on relevant copper
	industry web portals such as Lingtong Info website.
Copper concentrate:	With reference to (as applicable): (i) the market price of
	gold as quoted on the Chicago Mercantile Exchange
	(adjusted with reference to the premium or discount quoted
	by Reuters) or by the London Bullion Market Association;
	(ii) the market price of silver as quoted on the Chicago
	Mercantile Exchange (adjusted with reference to the
	premium or discount quoted by Reuters) or by the London
	Bullion Market Association; or (iii) the market price of
	copper as quoted on the London Metal Exchange (adjusted
	with reference to the premium or discount quoted by
	Reuters as applicable).
Diesel fuel:	With reference to the retail listing price of diesel fuel
	quoted by Sinopec gas station at Huangshi, Hubei.
Parts and equipment:	With reference to the tender prices and the overall market
	condition.

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LETTER FROM THE BOARD

Waste circuit boards:	Based on market purchase prices.
Construction maintenance:	With reference to the relevant prices prescribed by
	Department of Housing and Urban-Rural Development of
	Hubei Province and the actual tender prices.
Engineering labour:	With reference to the relevant prices prescribed under the
	laws and regulations promulgated by the state, provincial
	and/or municipal construction administrative departments
	and in accordance with the principle of marketization.
Transportation:	Tender-based pricing, price inquiry and price comparison.
Train loading and	Price inquiry and price comparison.
unloading:

In respect of the supply of parts and equipment by the Parent Group, the Group will conduct tenders by invitation, inviting at least three qualified suppliers (including the Parent Group and two independent third party suppliers) to participate in the relevant tenders. Selection will be made primarily based on price offered, but consideration will also be given to the quality of products, effectiveness of communication and historical cooperation relationship with the suppliers. When actual transactions are proposed to be conducted, the price for the products will be the tender price, and adjusted (if required) with reference to the relevant market price, being the prices charged by independent third party suppliers providing similar type of products in their ordinary course of business in the same or nearby area.

In respect of the waste circuit boards, the price will be determined with reference to the market purchase price, being the price charged by independent third party suppliers providing similar types of products in their ordinary course of business in the same or nearby area, and adjusted (if required) with reference to the waste circuit boards price index quoted on the industry related website, which is currently Ezaisheng.com, the historical purchase price of the Company and the copper prices as quoted on the Shanghai Futures Exchange.

In respect of the provision of engineering labour services by the Parent Group, the price will be determined with reference to the relevant prices prescribed by Department of Housing and Urban-Rural Development of Hubei Province and with reference to the prevailing market price, being the price charged by independent third party suppliers providing similar type of services in their ordinary course of business in the same or nearby service area.

In respect of the provision of transportation services by the Parent Group, the Group will

carry out a centralized tender annually; and (ii) for transportation services beyond the scope of the abovementioned annual tender, carry out price inquiry and comparison. For the annual tender and the price inquiry and comparison to be conducted by the Group from time to time, the Group will invite and/or seek to solicit at least three service providers (including the Parent Group and two independent third party service providers) to participate in the tenders and/or provide price quotations if there are other appropriate service providers in the same or nearby

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LETTER FROM THE BOARD

service area available. Selection will be made primarily based on price offered, but consideration will also be given to the service levels, effectiveness of communication and historical cooperation relationship with the service providers.

In respect of the provision of train loading and unloading services by the Parent Group, the Group will seek to solicit at least three service providers (including the Parent Group and two independent third party service providers) to provide price quotations for the train loading and unloading services if there are other appropriate service providers in the same or nearby service area available. Selection will be made primarily based on the price offered, but consideration will also be given to the service levels, effectiveness of communication and historical cooperation relationship with of the service providers.

Historical figures, existing annual caps and Proposed Annual Caps

The table below sets out the historical figures, existing annual caps and Proposed Annual Caps for the Parent Group Purchase and Production Services Framework Agreement:

Year ending

Year ended

Year ending

31 December

31 December 2017

31 December 2018

31 December 2019

2020

2021

2022

Actual

amount

(up to

Actual

31 October

amount

2019)

Proposed

Annual cap

(audited)

Annual cap

(audited)

Annual cap

(unaudited)

annual cap

(RMB'000)

6,748,587

727,765

7,812,730

650,535

10,436,997

2,227,485

2,176,535

2,567,932

3,121,564

The above Proposed Annual Caps have been determined with reference to the: (i) historical purchase orders placed by the Group; (ii) projected future orders based on the expected increase in the products and services required as a result of the expected growth in the business of the Group; and (iii) average historical market price and the anticipated future market price for the relevant products and services.

Reasons for the transaction

The products and production services to be provided under the Parent Group Purchase and Production Services Framework Agreement will be important to the operations of the Group. Given the long-term business relationship of the Parent Group and the Group and the close geographical proximity of their respective operations, the Directors consider that the entering into of the Parent Group Purchase and Production

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LETTER FROM THE BOARD

Services Framework Agreement will allow the Group to secure a cost effective, timely and stable source of supply of those products and production services, and also to benefit from the procurement network of the Parent Company.

Listing Rules implications

As the highest applicable percentage ratio in respect of the Proposed Annual Caps exceeds 5%, the Parent Group Purchase and Production Services Framework Agreement is subject to the reporting, announcement and annual review and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

6. Hubei Gold Purchase Framework Agreement

Date:	22 November 2019
Parties:	(1)	the Company
	(2)	Hubei Gold
Nature of transactions:	Hubei Gold will supply certain products to the Group,
	including copper concentrate and such other products as
	agreed by the parties from time to time.
Term:	1 January 2020 to 31 December 2022.
Time and method of	Based on market practice.
payment:
Pricing mechanism:	Based on (i) the Market Price determined by the Company
	by way of a comprehensive evaluation method taking into

account comparable quotes from at least two independent third parties obtained via public tender or price inquiry, or the price as negotiated by the parties if the relevant procurement does not require public tender or price inquiry procedure or (ii) a price determined by the internal documents of the Group developed with reference to the Market Price.

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LETTER FROM THE BOARD

As at the Latest Practicable Date, prices for the supply of copper concentrate will be determined by the parties on the following basis:

Copper concentrate:	With reference to (as applicable): (i) the market price of
	copper as quoted on the Shanghai Futures Exchange; (ii)
	the market price of silver as quoted on the Shanghai
	Huatong Silver Exchange; or (iii) the market price of gold
	as quoted on the Shanghai Gold Exchange, and taking into
	account relevant applicable processing costs.

Historical figures, existing annual caps and Proposed Annual Caps

The table below sets out the historical figures, existing annual caps and Proposed Annual Caps for the Hubei Gold Purchase Framework Agreement:

Year ending

Year ended

Year ending

31 December

31 December 2017

31 December 2018

31 December 2019

2020

2021

2022

Actual

amount

(up to

Actual

31 October

amount

2019)

Proposed

Annual cap

(audited)

Annual cap

(audited)

Annual cap

(unaudited)

annual cap

(RMB'000)

83,624

75,066

97,883

14,315

114,441

32,831

69,029

77,755

91,893

The above Proposed Annual Caps have been determined with reference to the: (i) historical purchase orders placed by the Group with Hubei Gold for the relevant products;

projected future orders based on the expected increase in the products and services required as a result of the expected growth in the business of the Group; and (iii) the average historical market price and the anticipated future market price for the relevant products.

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LETTER FROM THE BOARD

Reasons for the transaction

The Directors consider that the Hubei Gold Purchase Framework Agreement will (i) allow the Group to leverage on the competitive advantages of Hubei Gold to obtain many of the products which the Group requires for its production and operations; and (ii) assist the Group in ensuring a cost-effective, timely and stable source of supply of products and materials required for its operations.

Listing Rules implications

As the highest applicable percentage ratio in respect of the Proposed Annual Caps exceeds 5%, the Hubei Gold Purchase Framework Agreement is subject to the reporting, announcement and annual review and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

7. CNMC Group Purchase and Production Services Framework Agreement

Date:	22 November 2019
Parties:	(1)	the Company
	(2)	CNMC
Nature of transactions:	The CNMC Group will:
	(1)	supply certain products to the Group, including
		blister copper, copper concentrate, raw materials,
		auxiliary	equipment,	supporting	materials,
		components, production equipment, tools and such
		other products as agreed by the parties from time to
		time; and
	(2)	provide certain production services to the Group,
		including	supervision,	construction,	design,
		purchase, maintenance and such other production
		services as agreed by the parties from time to time.
Term:	1 January 2020 to 31 December 2022.
Time and method of	Based on market practice.
payment:

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	LETTER FROM THE BOARD
Pricing mechanism:	Based on: (i) the government prescribed price; (ii) if there
	is no applicable government prescribed price, the Market
	Price determined by the Company by way of a
	comprehensive evaluation method taking into account
	comparable quotes from at least two independent third
	parties obtained via public tender or price inquiry, or the
	price as negotiated by the parties if the relevant
	procurement does not require public tender or price inquiry
	procedure or a price determined by the internal documents
	of the Group developed with reference to the Market Price.
	If the prices and charges are determined based on or with
	reference to prices, exchange rates or tax rates stated in
	specific government documents, internal documents of the
	Group, exchanges or industry-related websites, the
	effective aforementioned documents, prices and rates at
	the time of the entry into of specific transaction
	agreements by the parties shall prevail.

As at the Latest Practicable Date, prices for the supply of the relevant products and services will be determined by the parties on the following basis:

Blister copper:	With reference to (as applicable): (i) the market price of
	copper as quoted on the Shanghai Futures Exchange or the
	London Metal Exchange; (ii) the market price of silver as
	quoted on the Shanghai Huatong Silver Exchange or by the
	London Bullion Market Association; or (iii) the market
	price of gold as quoted on the Shanghai Gold Exchange or
	by the London Bullion Market Association, and taking into
	account relevant applicable processing costs.
Copper concentrate:	With reference to (as applicable): (i) the market price of
	copper as quoted on the Shanghai Futures Exchange, or the
	London Metal Exchange (adjusted with reference to the
	premium or discount quoted by Reuters as applicable); (ii)
	the market price of silver as quoted on the Shanghai
	Huatong Silver Exchange, the Chicago Mercantile
	Exchange (adjusted with reference to the premium or
	discount quoted by Reuters) or the London Bullion Market
	Association; and (iii) the market price of gold as quoted on
	the Shanghai Gold Exchange, the Chicago Mercantile
	Exchange (adjusted with reference to the premium or
	discount quoted by Reuters) or the London Bullion Market
	Association, taking into account relevant applicable
	processing costs.

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LETTER FROM THE BOARD

Raw materials, auxiliary	With reference to the tender prices and the overall market
equipment, supporting	condition.
materials, components,
production equipment	The Group will conduct tenders by invitation, inviting at
and tools:	least three qualified suppliers (including the CNMC Group
	and two independent third party suppliers) to participate in
	the relevant tenders. Selection will be made primarily
	based on price offered, but consideration will also be given
	to the quality of products, effectiveness of communication
	and historical cooperation relationship with the suppliers.
	The price will be the tender price, and adjusted (if
	required) with reference to the relevant market price, being
	the prices charged by independent third party suppliers
	providing similar type of products in their ordinary course
	of business in the same or nearby area.
Maintenance work:	With reference to the relevant prices prescribed by
	Department of Housing and Urban-Rural Development of
	Hubei Province and the actual tender prices.
Supervision:	With reference to the results of public tender in accordance
	with applicable PRC laws and regulations.
	In this regard, the price of the provision of supervision
	services by the CNMC Group will be determined with
	reference to (i) the results of public tender in accordance
	with the Tender and Bidding Law of the PRC; (ii) the
	relevant prices prescribed by the Department of Housing
	and Urban-Rural Development of the National
	Development and Reform Commission and Hubei
	Construction Supervision Association* (湖北省建設監理
	協會); and (iii) other applicable PRC laws and regulations.
Construction, design and	With reference to the relevant prices prescribed by
purchase:	Department of Housing and Urban-Rural Development of
	Hubei Province.

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LETTER FROM THE BOARD

Historical figures, existing annual caps and Proposed Annual Caps

The table below sets out the historical figures, existing annual caps and Proposed Annual Caps for the CNMC Group Purchase and Production Services Framework Agreement:

Year ending

Year ended

Year ending

31 December

31 December 2017

31 December 2018

31 December 2019

2020

2021

2022

Actual

amount

(up

Actual

31 October

amount

2019)

Proposed

Annual cap

(audited)

Annual cap

(audited)

Annual cap

(unaudited)

annual cap

(RMB'000)

1,833,681

397,157

2,298,958

836,297

2,868,592

908,285

4,629,255

3,780,591

4,140,206

The above Proposed Annual Caps have been determined with reference to the: (i) historical purchase orders placed by the Group; (ii) projected future orders based on the expected increase in the products and services required as a result of the expected growth in the business of the Group; and (iii) the average historical market price and the anticipated future market price for the relevant products and services.

The increase in the Proposed Annual Caps for the CNMC Group Purchase and Production Services Framework Agreement as compared with the existing annual caps is primarily due to (i) the expected construction costs to be incurred for the New Copper Cathode Production Plant; (ii) the growth trend in the historical purchase amount for orders placed by the Group with the CNMC Group, which has been increasing from approximately RMB397 million for the year ended 31 December 2017, to approximately RMB836 million for the year ended 31 December 2018, and to RMB908 million in the ten months ended 31 October 2019; and (iii) the expected increase in demand for raw materials such as blister copper and copper concentrate by the Group as a result of the New Copper Cathode Production Plant, which is expected to commence operation in the first half of 2021. China No. 15 Metallurgical (being one of the partners of the JV Company and a wholly-owned subsidiary of CNMC) will be primarily responsible for the engineering construction of the New Copper Cathode Production Plant. The estimated total construction costs for the New Copper Cathode Production Plant is approximately RMB4.2 billion, for which RMB2.6 billion, RMB1.0 billion and RMB0.6 billion is expected to be incurred for each of the three years ending 31 December 2022.

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LETTER FROM THE BOARD

Reasons for the transaction

The Directors consider that the entering into of the CNMC Group Purchase and Production Services Framework Agreement will (i) allow the Group to leverage on the vast resources of the CNMC Group to obtain many of the products and production services which the Group requires for its increasing production capacity and operations;

assist the Group in ensuring a cost-effective, timely and stable source of supply of products, materials and production services required for its operations; and (iii) allow the Company to further diversify its business risks through purchases of blister copper imported from a mine in Zambia, Africa, which offers an alternative, abundant and stable supply, as opposed to the supply in the PRC which is generally insufficient to adequately and promptly satisfy market demand.

Listing Rules implications

As the highest applicable percentage ratio in respect of the Proposed Annual Caps exceeds 5%, the CNMC Group Purchase and Production Services Framework Agreement is subject to the reporting, announcement and annual review and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

8. Combined Ancillary Services Framework Agreement

Date:	22 November 2019
Parties:	(1)	the Company
	(2)	the Parent Company
Nature of transactions:	The Parent Group will provide certain services to the
	Group, including steel cylinder inspection and repair, gas
	delivery management, waste disposal, green conservation,
	vehicle rental, property management, food and beverage
	and accommodation, logistics service, mineral water,
	seedling, telecommunication and repair, water, electricity,
	telephone charges, property repair, training and such other
	services as agreed by the parties from time to time.
Term:	1 January 2020 to 31 December 2022.
Time and method of	Based on market practice.
payment:

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	LETTER FROM THE BOARD
Pricing mechanism:	Based on: (i) the government-prescribed price; or (ii) if
	there is no applicable government-prescribed price, the
	Market Price determined by the Company by way of a
	comprehensive evaluation method taking into account
	comparable quotes from at least two independent third
	parties obtained via public tender or price inquiry, or the
	price as negotiated by the parties if the relevant
	procurement does not require public tender or price inquiry
	procedure, or a price determined by the internal documents
	of the Group developed with reference to the Market Price.
	If the prices and charges are determined based on or with
	reference to prices, exchange rates or tax rates stated in
	specific government documents, internal documents of the
	Group, exchanges or industry-related websites, the
	effective aforementioned documents, prices and rates at
	the time of the entry into of specific transaction
	agreements by the parties shall prevail.

As at the Latest Practicable Date, prices for the provision of the relevant services will be determined by the parties on the following basis:

Steel cylinder inspection	With reference to the operating cost of provision of the
and repair,	service(s).
gas delivery
management,	In this regard, the prices for the provision of the relevant
waste disposal,	services will be determined with reference to the existing
green conservation,	operating cost of the relevant services incurred by the
vehicle rental,	suppliers currently engaged by the Group (including but
property management,	not limited to the Parent Group) and the fees charged by
food and beverage and	other independent third party suppliers for the provision of
accommodation and	similar service(s) in the same or nearby service area.
logistics service:
Mineral water and	For mineral water, with reference to the procurement cost,
seedling:	transportation cost and the overall market condition. For
	seedling, with reference to the relevant prices prescribed
	by Department of Housing and Urban-Rural Development
	of Hubei Province.
Telecommunication and	With reference to the relevant prices prescribed by Hubei
repair:	Provincial Communications Administration.
Water:	With reference to the price of water prescribed by
	Huangshi Price Bureau* (黃石市物價局).

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	LETTER FROM THE BOARD
Electricity:	With reference to the price of electricity prescribed by
	Hubei Province Price Bureau.
Telephone charges:	With reference to the relevant prices prescribed by Hubei
	Provincial Communications Administration.
Property repair:	With reference to the relevant prices prescribed by
	Department of Housing and Urban-Rural Development of
	Hubei Province.
Training:	With reference to the relevant standards prescribed under
	the internal document of the Parent Company regarding
	employee training fees management, which are determined
	based on the remuneration of the instructors and
	examination supervisors, costs on preparation of training
	materials and examination questions, and other relevant
	costs incurred in providing the training.
	As prescribed under the abovementioned internal
	document of the Parent Company, amongst other things,
	the standard hourly rates of the trainers (which range from
	approximately RMB30 per hour to RMB500 per hour
	according to their relevant experience) and their
	remuneration on preparation of training materials and
	examination questions (which range from RMB10 to
	RMB60 per a thousand words and RMB100 per subject).

Historical figures, existing annual caps and Proposed Annual Caps

The table below sets out the historical figures, existing annual caps and Proposed Annual Caps for the Combined Ancillary Services Framework Agreement:

Year ending

Year ended

Year ending

31 December

31 December 2017

31 December 2018

31 December 2019

2020

2021

2022

Actual

amount

(up to

Actual

31 October

amount

2019)

Proposed

Annual cap

(audited)

Annual cap

(audited)

Annual cap

(unaudited)

annual cap

(RMB'000)

458,792

291,765

488,604

308,045

490,758

305,526

379,020

385,323

391,613

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LETTER FROM THE BOARD

The above Proposed Annual Caps have been determined with reference to: (i) the historical amounts paid by the Group to the Parent Group for similar ancillary services;

the projected future orders based on the expected increase in the services to be provided during the three years ending 31 December 2022; and (iii) the average historical market price for the relevant services and the anticipated future market price for the relevant products and services.

Reasons for the transaction

The Group currently does not have the capability of providing the ancillary services set out in the Combined Ancillary Services Framework Agreement. The Combined Ancillary Services Framework Agreement will allow the Group to obtain the use of a wide range of support services that it or its employees will require on a day-to-day basis. The provision of such services to the Group will allow the Group to concentrate its resources on its core production operations.

Listing Rules implications

As the highest applicable percentage ratio in respect of the Proposed Annual Caps exceeds 5%, the Combined Ancillary Services Framework Agreement is subject to the reporting, announcement, annual review and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

9. Land Lease Framework Agreement

As disclosed in the circular of the Company dated 29 December 2011 (as supplemented and amended by the supplemental circular dated 17 February 2012) and the announcements of the Company dated 8 October 2013 and 3 November 2016 in relation to continuing connected transactions, the Parent Company and the Company previously entered into the Land Lease Framework Agreement. The Company has complied with the relevant requirements under Chapter 14A of the Listing Rules in respect of the annual caps for each of the eight years ending 31 December 2019. As the term of the Land Lease Framework Agreement lasts until 31 December 2039, the Company has renewed the annual caps for another three years ending on 31 December 2022.

Set out below is a summary of the Land Lease Framework Agreement, the transactions contemplated thereunder, the Proposed Annual Caps and the basis for determining the Proposed Annual Caps:

Date:	23 December 2011
Parties:	(1)	the Company
	(2)	the Parent Company

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LETTER FROM THE BOARD

Nature of transactions:	The Parent Group will lease certain parcels of land to the
	Group.
Term:	From the date on which the Land Lease Framework
	Agreement takes effect in accordance with its terms until
	31 December 2039.
Rent, fees and	Rent will be the annual depreciation amount of the relevant
other payables:	parcel of land, which will be calculated as the total amount
	paid by the owner of the land to the relevant government
	authorities for acquiring the relevant land use right,
	divided by the estimated useful life of such land. The
	lessee will also bear all the taxes and duties payable for the
	lease, which will be calculated by reference to the rent
	payable. Both the rent and the aggregate taxes and duties
	payable by the lessee for each parcel of land will be the
	same for each year during the term of the lease. The above
	pricing mechanism is adopted since the parcels of land to
	be leased by members of the Group from the Parent Group
	are located around the four mines and the smelting plant in
	Hubei held by the Group and there is no comparable land
	in the proximity and no corresponding market rent
	available for reference.
Time and method of	Rent is payable annually to the designated bank account of
payment:	the Parent Company or its relevant subsidiary.

Historical figures, existing annual caps and Proposed Annual Caps

As HKFRS 16 "Lease" has come into effect on 1 January 2019 and be applicable to financial years starting on or after 1 January 2019, pursuant to the requirements of the Stock Exchange, the Proposed Annual Caps relating to the Land Lease Framework Agreement with the Group as the lessee will be set based on the total value of right-of-use assets relating to the leases to be entered into by the Group under the Land Lease Framework Agreement.

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LETTER FROM THE BOARD

The table below sets out the historical figures, existing annual caps and the Proposed

Annual Caps relating to the Land Lease Framework Agreement:

Year ending

Year ended

Year ending

31 December

31 December 2017

31 December 2018

31 December 2019

2020

2021

2022

Actual

amount

(up to

Actual

31 October

amount

2019)

Proposed

Annual cap

(audited)

Annual cap

(audited)

Annual cap

(unaudited)

annual cap

(RMB'000)

13,792

11,490

13,792

11,595

13,792

6,180

145,171

1,100

The above Proposed Annual Caps have been determined with reference to (i) the expected number of parcels of land to be leased by the Group from the Parent Group; (ii) the lease term in relation to the leases; (iii) the benchmark borrowing rate set by PBOC; and (iv) the aggregate rent, taxes and duties payable by the Group for leasing those parcels of land.

Reason for renewing the annual caps for the Land Lease Framework Agreement

The parcels of land under the Land Lease Framework Agreement were previously already leased by the Parent Group to the Group for its production and staff facilities. Renewing the annual caps for the Land Lease Framework Agreement for the three years ending 31 December 2022 would enable the Group to continue using those parcels of land without disruption to its business operations.

Listing Rules implications

As the highest applicable percentage ratio in respect of the Proposed Annual Caps exceeds 5%, the Land Lease Framework Agreement is subject to the reporting, announcement, annual review and the independent shareholders' approval requirement under Chapter 14A of the Listing Rules. As one or more of the applicable percentage ratios of the Proposed Annual Caps under the Land Lease Framework Agreement exceed 5% but are all less than 25%, such transactions also constitute a discloseable transaction for the Company under Chapter 14 of the Listing Rules.

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LETTER FROM THE BOARD

PAYMENT TERMS

The time and method of payment for the transactions under the Connected Transaction Agreements will be determined based on market practice and would differ greatly on a case-by-case basis, and which will be specified under the definitive agreements to be entered into by the parties. In general, the time and method of payment will be determined with reference to various factors, including the transaction and payment history, market position and creditworthiness of the parties and the market practice regarding the relevant products and/or services. Such payment terms will be negotiated on an arm's length basis between the parties and based on terms no less favourable to the Group than those available to/from independent third parties.

INTERNAL CONTROL

The Company has established the connected transactions management committee, which is the discussion and decision-making body for the connected transactions management, and is led by the Board which directly and comprehensively manages the relevant matters of the connected transactions.

The Company has implemented stringent measures to monitor the pricing standards for the continuing connected transactions of the Group. The department heads of the relevant business departments are responsible for the initial price determination of the proposed connected transactions of the Group. Such initial price determination will be reported to and approved by the finance department of the Company. Then, these prices will be reported to the legal department of the Company, which is responsible for collating from the various business departments such information regarding the proposed connected transactions of the Group, and ensuring that the terms of any such proposed connected transactions are in compliance with applicable laws, rules and regulations. After all these review processes, the legal representative or authorised representative of the Company will execute such connected transactions on behalf of the Company. The capital operation department, finance department and legal department of the Company are responsible for monitoring each of the connected transactions of the Group to ensure that they are conducted in accordance with its terms, including the relevant pricing mechanism and the periodic reporting of the relevant transaction amounts.

The capital operation department and the finance department of the Company will monitor the continuing connected transactions and summarise the transaction amounts incurred under each of the connected transaction framework agreements regularly on a monthly basis, and reports will be submitted to the Board for its quarterly review. In the event the actual transaction amount reaches 80% of the relevant annual cap, a re-assessment will be conducted. If it is determined after such re-assessment that the annual cap may be exceeded, the capital operation department of the Company would initiate the procedures for a board meeting and/or shareholders' meeting (as and when required) to increase the annual cap as soon as practicable.

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LETTER FROM THE BOARD

Further, each of the Non-Exempt Continuing Connected Transactions is subject to the reporting requirements and the annual review by the independent non-executive Directors and the auditors of the Company to ensure that the transactions are conducted in accordance with its terms (including the pricing mechanism) as set out in the Connected Transaction Agreements.

The Board is of the view that the above internal control measures can ensure that the continuing connected transactions of the Group under the Connected Transaction Agreements are conducted on normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole.

In addition, the Company will closely monitor the Non-Exempt Continuing Connected Transactions to ensure that the applicable ratios for the transaction amounts fall below 5% pursuant to the Listing Rules during the period from 1 January 2020 to the date of approval of the Connected Transaction Agreements and the Proposed Annual Caps at the SGM.

REASONS FOR AND BENEFITS OF THE CONTINUING CONNECTED TRANSACTIONS

In addition to the reasons set out above, the Directors are of the view that the continuing connected transactions set out in this circular have been and will continue to be beneficial to the Group and will facilitate the growth and development of the Group.

Mr. Wang Yan and Mr. Long Zhong Sheng, who are executive Directors, is also a director of the Parent Company and a director of China Times, respectively. As such, each of Mr. Wang Yan and Mr. Long Zhong Sheng was deemed to have a material interest in, and they have abstained from voting on, the resolutions passed by the Board to approve the Connected Transaction Agreements and the transactions contemplated thereunder. Save as disclosed above, none of the Directors has any material interest in, or is required to abstain from voting on the resolutions passed by the Board to approve the Connected Transaction Agreements and the transactions contemplated thereunder.

IV. IMPLICATIONS UNDER THE LISTING RULES

As at the Latest Practicable Date, China Times directly held 11,962,999,080 Shares, representing approximately 66.85% of the issued share capital of the Company, and is a wholly owned subsidiary of the Parent Company. Accordingly, the Parent Company is a controlling Shareholder indirectly interested in approximately 66.85% of the issued share capital of the Company, and CNMC is the controlling shareholder of the Parent Company holding approximately 57.99% of the equity interests in the Parent Company. Therefore, each of China Times, the Parent Company and CNMC is a connected person of the Company. Each of Huangshi Xingang and Hubei Gold is indirectly owned by the Parent Company as to more than 30% and are therefore associates of the Parent Company and connected persons of the Company. Zhongse Aobote is indirectly owned by CNMC as to more than 30% and is therefore an associate of CNMC and a connected person of the Company. Therefore, the transactions contemplated under each of the framework agreements set out in this circular constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.

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LETTER FROM THE BOARD

Regarding each of the Non-Exempt Continuing Connected Transactions, as the highest applicable percentage ratio in respect of their Proposed Annual Caps exceeds 5%, the Non-Exempt Continuing Connected Transactions are subject to the reporting, announcement, annual review and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

Regarding the loans, guarantees and integrated credit facilities services to be provided under the CNMC Financial Services Framework Agreement, such services will be provided by the CNMC Group for the benefit of the Company on normal commercial terms similar to those for comparable services in the PRC and no security over the assets of the Group will be granted. Therefore, the provision of such services will constitute a continuing connected transaction that is exempt from the reporting, announcement, annual review and independent shareholders' approval requirements under Rule 14A.90 of the Listing Rules.

Regarding the deposit services to be provided under the CNMC Financial Services Framework Agreement, as the highest applicable percentage ratio in respect of the Proposed Annual Caps exceeds 25%, the provision of such services will constitute (i) a continuing connected transaction that is subject to the reporting, announcement, annual review and independent shareholders' approval requirements under Chapter 14A of the Listing Rules; and

a major transaction that is subject to the reporting, announcement, annual review and shareholders' approval requirements under Chapter 14 of the Listing Rules.

As one or more of the applicable percentage ratios of the Proposed Annual Caps under the Land Lease Framework Agreement exceed 5% but are all less than 25%, such transactions also constitute a discloseable transaction for the Company under Chapter 14 of the Listing Rules.

FINANCIAL EFFECTS OF THE DEPOSIT SERVICES

As mentioned above, the interest rates for the deposit services to be provided by the CNMC Group to the Group under the CNMC Financial Services Framework Agreement are expected to be equal to or more favorable to the Group than the prevailing benchmark interest rates quoted by the PBOC from time to time. The deposits to be placed with the Parent Group under the Financial Services Framework Agreement for each of the three years ending 31 December 2022 are expected to not exceed RMB2,681,869,000, RMB2,885,041,000 and RMB3,110,325,000 respectively, and the Company expects that the interest income to be earned from the deposit services will be affected by the level of interest rates. However, taking into account the prevailing interest rates for deposits in the PRC, the potential interest income to be earned from the deposit services for the three years ending 31 December 2022 is expected to represent only a small contribution to the earnings and assets of the Group. As such, the Company anticipates that such potential interest income to be earned from the deposit services for the three years ending 31 December 2022 will not have any material impact on the earnings, assets and liabilities of the Group.

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LETTER FROM THE BOARD

VI. INFORMATION OF THE GROUP, THE PARENT GROUP AND THE CNMC

GROUP

The Group

The Group is principally engaged in the exploitation of mineral resources, the mining and processing of mineral ores and the trading of metal products.

The Parent Group

The Parent Company is a state-owned conglomerate in the PRC. Its controlling shareholder is CNMC, a state-owned enterprise established in the PRC. The principal business of the Parent Group is copper mining and processing. The Parent Group has a fully integrated operation which enables it to undertake the different stages of copper production from mining, processing, smelting and plating, research and development, design to sales and trading.

China Times is a company incorporated in the British Virgin Islands with limited liability and is principally engaged in investment holding. It is the immediate controlling Shareholder and is a wholly-owned subsidiary of the Parent Company.

Huangshi Xingang is a limited liability company established in the PRC and principally engaged in the businesses of development, construction and operation of a chemical berth and its port facilities (including the rear land area) in Huangshi Xingang.

Hubei Gold is a limited liability company established in the PRC and principally engaged in selecting, mining and sale of gold ore, procurement and sale of chemical products (other than inflammable and explosive materials and hazardous chemicals), construction materials and electromechanical equipment and design of mine engineering and mine technology consulting.

The CNMC Group

CNMC is a PRC state-owned enterprise directly administered by the State-owned Assets Supervision and Administration Commission of the State Council. The CNMC Group is principally engaged in the development of non-ferrous metal resources, construction and engineering, as well as related trade and services, both in the PRC and overseas.

Zhongse Aobote is a limited liability company established in the PRC and principally engaged in the businesses of manufacturing, processing and operation of self-manufactured products (copper and aluminum materials), the export business of technologies and the import business of self-required machinery and equipment, spare parts, raw materials and technologies.

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LETTER FROM THE BOARD

VII. INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL

ADVISER

The Independent Board Committee (comprising all the independent non-executive Directors) has been formed in accordance with Chapter 14A of the Listing Rules to advise the Independent Shareholders on the Non-Exempt Continuing Connected Transactions and the Proposed Annual Caps.

In this connection, the Company has appointed the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Non-Exempt Continuing Connected Transactions and the Proposed Annual Caps.

VIII. SPECIAL GENERAL MEETING

The SGM will be convened and held at Imperial Room III, Mezzanine Floor, Towers Wing, Royal Pacific Hotel, China Hong Kong City, 33 Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong on Wednesday, 15 January 2020 at 10:00 a.m. for the Independent Shareholders to consider and, if thought fit, approve the Non-Exempt Continuing Connected Transactions and the Proposed Annual Caps. The notice of SGM is set out on pages SGM-1 to SGM-5 of this circular. China Times, which directly held 11,962,999,080 Shares (representing 66.85% of the issued share capital of the Company) as at the Latest Practicable Date, will abstain from voting on the resolutions approving the Non-Exempt Continuing Connected Transactions and the Proposed Annual Caps.

Save as abovementioned, to the best of the Directors' knowledge, information and belief, having made all reasonable enquiries, no other Shareholder has a material interest in the Non-Exempt Continuing Connected Transactions and the Proposed Annual Caps and therefore, no other Shareholder is required to abstain from voting at the SGM for the relevant resolutions.

A form of proxy for use at the SGM is despatched to Shareholders together with this circular. Whether or not you are able to attend the SGM, please complete and sign the accompanying form of proxy in accordance with the instructions printed thereon and return it to the branch share registrar of the Company in Hong Kong, Tricor Investor Services Limited, at Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude shareholders from attending and voting in person at the SGM or any adjournment thereof if they so wish and in such event, the proxy form shall be deemed to be revoked.

Pursuant to Rule 13.39(4) of the Listing Rules, any vote of the Shareholders to be taken at a general meeting of the Company shall be taken by poll except where the Chairman, in good faith, decides to allow a resolution which relates purely to a procedural or administrative matter to be voted on by a show of hands. An announcement of the poll results will be made by the Company after the SGM in the manner prescribed under Rule 13.39(5) of the Listing Rules.

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LETTER FROM THE BOARD

IX. RECOMMENDATIONS

The Independent Board Committee, having taken into account and based on the recommendation of the Independent Financial Adviser, considers that each of the Non-Exempt Continuing Transactions have been entered into on normal commercial terms, in the ordinary and usual course of business of the Group, and together with the Proposed Annual Caps, are fair and reasonable and in the interest of the Company and the Shareholders as a whole. Accordingly, the Independent Board Committee has recommended the Independent Shareholders to vote in favour of the resolutions to be proposed at the SGM to approve the Non-Exempt Continuing Connected Transactions and the Proposed Annual Caps.

ADDITIONAL INFORMATION

Your attention is drawn to (i) the letter from the Independent Board Committee set out on page 45 of this circular, containing its recommendation in respect of the Non-Exempt Continuing Connected Transactions and the Proposed Annual Caps; (ii) the letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders set out on pages 46 to 95 of this circular, containing its recommendation in respect of the Non-Exempt Continuing Connected Transactions and the Proposed Annual Caps; and (iii) the additional information set out in the appendices to this circular.

By order of the Board

China Daye Non-Ferrous Metals Mining Limited

Wang Yan

Chairman

- 44 -

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

(Incorporated in Bermuda with limited liability)

(Stock Code: 00661)

27 December 2019

To the Independent Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION AND CONTINUING CONNECTED TRANSACTIONS

We refer to the circular dated 27 December 2019 issued by the Company (the "Circular") of which this letter forms part. Terms defined in the Circular shall have the same meanings when used herein, unless the context otherwise requires.

We have been appointed as members of the Independent Board Committee to advise the Independent Shareholders in respect of the Non-Exempt Continuing Connected Transactions and the Proposed Annual Caps, details of which are set out in the "Letter from the Board" in the Circular. Amasse Capital Limited has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

We wish to draw your attention to (i) the "Letter from the Board" set out on pages 7 to 44 of the Circular; (ii) the "Letter from the Independent Financial Adviser" set out on pages 46 to 95 of the Circular and (iii) the additional information set out in the appendices to the Circular.

Having taken into account, among other things, the principal factors and reasons considered by, and the advice of, the Independent Financial Adviser, we concur with the view of the Independent Financial Adviser and consider that: (1) the Non-Exempt Continuing Connected Transactions (together with the Proposed Annual Caps) were entered into in the ordinary and usual course of business of the Group on normal commercial terms; and (2) the terms of the Non-Exempt Continuing Connected Transactions (together with the Proposed Annual Caps) are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the relevant resolutions to be proposed at the SGM to approve the Non-Exempt Continuing Connected Transactions and the Proposed Annual Caps.

Yours faithfully,

for and on behalf of

the Independent Board Committee

Wang Qihong

Wang Guoqi

Liu Jishun

Independent Non-executive Directors

- 45 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Set out below is the full text of the letter received from Amasse Capital Limited, the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, which has been prepared for the purpose of incorporation in this circular.

27 December 2019

To the Independent Board Committee and the Independent Shareholders

Dear Sirs,

MAJOR TRANSACTION AND CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the terms of

the Parent Group Sales Framework Agreement, (ii) the Huangshi Xingang Sales Framework Agreement, (iii) the Zhongse Aobote Sales Framework Agreement, (iv) the Parent Group Purchase and Production Services Framework Agreement, (v) the Hubei Gold Purchase Framework Agreement, (vi) the CNMC Group Purchase and Production Services Framework Agreement, (vii) the Combined Ancillary Services Framework Agreement, (viii) the Land Lease Framework Agreement, and (ix) the placing of deposit by the Group to the CNMC Group and the provision of bills acceptance and settlement and foreign exchange settlement and sales services by the CNMC Group to the Group under the CNMC Financial Services Framework Agreement (together referred as to the "Non-ExemptContinuing Connected Transaction Agreements"), and the respective annual caps and transactions contemplated thereunder (the "Continuing Connected Transactions"). Details of the Continuing Connected Transactions are set out in the letter from the Board contained in the circular of the Company dated 27 December 2019 (the "Circular"), of which this letter forms a part. Capitalised terms used in this letter shall have the same meanings as those defined in the Circular unless the context requires otherwise.

OUR INDEPENDENCE

As at the Latest Practicable Date, we did not have any relationships or interests with the Company or any other parties that could reasonably be regarded as relevant to our independence. In the last two years, we have not acted as an independent financial adviser to the Independent Board Committee and the Independent Shareholders for any transaction.

- 46 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

With regard to our independence from the Company, it is noted that apart from normal professional fees paid or payable to us in connection with the current appointment as the Independent Financial Adviser, no arrangements exist whereby we had received or will receive any fees or benefits from the Company or any other parties that could reasonably be regarded as relevant to our independence.

BASIS OF OUR OPINION

In formulating our opinion to the Independent Board Committee and the Independent Shareholders, we have relied on the statements, information, opinions and representations contained or referred to in the Circular and the information and representations as provided to us by the Directors and the management of the Company (collectively, the "Management"). We have reviewed information on the Company, including but not limited to (i) the announcement of the Company dated 22 November 2019; (ii) the Non-Exempt Continuing Connected Transaction Agreements; and (iii) other information contained in the Circular. We have assumed that all information and representations that have been provided by the Management, for which the Directors are solely and wholly responsible, are true and accurate at the time when they were made and continue to be so as at the Latest Practicable Date. We have also assumed that all statements of belief, opinion, expectation and intention made by the Directors in the Circular were reasonably made after due enquiry and careful consideration. We have no reason to suspect that any material facts or information have been withheld or to doubt the truth, accuracy and completeness of the information and facts contained in the Circular, or the reasonableness of the opinions expressed by the Company, its advisers and/or the Directors, which have been provided to us. Our opinion is based on the representation and confirmation of the Management that there are no undisclosed private agreements/arrangements or implied understanding with anyone concerning the Continuing Connected Transactions. We consider that we have taken sufficient and necessary steps on which to form a reasonable basis and an informed view for our opinion in compliance with the Listing Rules.

The Directors have collectively and individually accepted full responsibility for the accuracy of the information contained in the Circular and have confirmed, having made all reasonable enquiries, which to the best of their knowledge and belief, that the information contained in the Circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement in the Circular or the Circular as a whole misleading. We, as the Independent Financial Adviser, take no responsibility for the contents of any part of the Circular, save and except for this letter of advice.

We consider that we have been provided with sufficient information to reach an informed view and to provide a reasonable basis for our opinion. We have not, however, carried out any independent verification of the information provided by the Management, nor have we conducted any independent in-depth investigation into the business and affairs of any members of the Group, the counter party(ies) to the Non-Exempt Continuing Connected Transaction Agreements or their respective subsidiaries or associates. We also have not considered the taxation implication on the Group or the Shareholders as a result of the Continuing Connected Transactions. We have not carried out any feasibility study on the past, and forthcoming investment decision, opportunity or project undertaken or to be undertaken by the Group. Our

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

opinion has been formed on the assumption that any analysis, estimation, anticipation, condition and assumption provided by the Group are feasible and sustainable. Our opinion shall not be construed as to give any indication to the validity, sustainability and feasibility of any past, existing and forthcoming investment decision, opportunity or project undertaken or to be undertaken by the Group.

Our opinion is necessarily based on the financial, economic, market and other conditions in effect and the information made available to us as at the Latest Practicable Date. Shareholders should note that subsequent developments (including any material change in market and economic conditions) may affect and/or change our opinion and we have no obligation to update this opinion to take into account events occurring after the Latest Practicable Date or to update, revise or reaffirm our opinion. In addition, nothing contained in this letter should be construed as a recommendation to hold, sell or buy any Shares or any other securities of the Company. We expressly disclaim any liability and/or any loss arising from or in reliance upon the whole or any part of the contents of this letter.

Lastly, where information in this letter has been extracted from published or otherwise publicly available sources, we are not obligated to conduct any independent in-depth investigation into the accuracy and completeness of those information.

PRINCIPAL FACTORS TAKEN INTO CONSIDERATION

In formulating our opinion, we have taken into consideration the following principal factors and reasons.

1. Background Information of the Group, the Parent Group and the CNMC Group

The Group

The Group is principally engaged in the exploitation of mineral resources, the mining and processing of mineral ores and the trading of metal products.

The Parent Group

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The CNMC Group

2. Major Terms of the Non-Exempt Continuing Connected Transaction Agreements

2.1 CNMC Financial Services Framework Agreement

Date:	22 November 2019
Parties:	(1)	the Company
	(2)	CNMC
Nature of	The Group shall place deposits with the CNMC Group.
transactions:
	The CNMC Group shall provide to the Group the
	following financial services: loans, guarantees and
	integrated credit facilities, bills acceptance and settlement,
	foreign exchange settlement and sales and such other
	financial services as agreed by the parties from time to
	time.
Term:	1 January 2020 to 31 December 2022.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Price of services:	With reference to the fees charged by commercial banks
	for similar services, subject to compliance with applicable
	laws and regulations and provisions of the People's Bank
	of China on interest rate management.
Time and method of	Based on market practice.
payment:
Deposit and loan	The average daily amount of deposits placed by the Group
amounts:	with the CNMC Group must not exceed the average daily
	amount of outstanding loans extended by the CNMC
	Group to the Group.
Set-off upon default	If the CNMC Group is unable to return on time the
on deposits:	deposits (including accrued interest) placed to it by the
	Group, the Group shall have the right to: (i) terminate the
	CNMC Financial Services Framework Agreement; and (ii)
	set off such deposits (including accrued interest) against
	the outstanding loans (including accrued interest) extended
	by the CNMC Group to the Group.
Compensation for	CNMC shall fully compensate the Group for any loss
losses suffered by	incurred by the Group (including in relation to the amount
the Group:	of outstanding deposits or loans and accrued interest or
	any related expenses incurred) as a result of any of the
	following: (i) the CNMC Group breaches, or is likely to
	breach, any PRC laws or regulations; (ii) the occurrence
	of, or likely occurrence of, any material problem in the
	CNMC Group's operations or difficulties in payment; or
	(iii) the CNMC Group does not comply or breaches the
	CNMC Financial Services Framework Agreement.
Undertaking by the	The CNMC Group undertakes to the Group that if the
CNMC Group:	CNMC Financial Company experiences or foresees any
	difficulties in payment, the CNMC Group will inject
	capital into the CNMC Financial Company based on the
	latter's needs in order to ensure the latter's normal
	operations.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Reasons for and benefits of entering into the CNMC Financial Services Framework Agreement

CNMC Financial Company is a non-wholly owned subsidiary of CNMC. It is regulated by PBOC and CBIRC as a financial company in the PRC to provide financial services to other members of the Parent Group and the CNMC Group. As discussed with the Management, the entering into the CNMC Financial Services Framework Agreement is for the purpose to obtain efficient and cost-effective financial services provided by the CNMC Group. As such, we are of the view that the entering into the CNMC Financial Services Framework Agreement falls within the ordinary and usual course of business of the Group.

We are given to understand by the Management that the risk profile of CNMC Financial Company is no greater than that of other independent commercial banks in the PRC, while there are numerous advantages of utilising the financial services provided by the CNMC Financial Company over similar services provided by other independent commercial banks in the PRC for the following reasons:

similar to other independent commercial banks in the PRC, the CNMC Financial Company will be regulated by the PBOC and the CBIRC, and will provide services pursuant to the relevant rules and requirements, including capital risk guidelines and requisite capital adequacy ratios of such regulatory authorities;
the regulation of finance companies (such as the CNMC Financial Company) by the CBIRC is more stringent than the regulation of commercial banks in the PRC in certain aspects, for example, finance companies are required to have a higher capital adequacy ratio;
the CBIRC will review the operations and management of finance companies in the PRC pursuant to the Guideline of Risk Assessment and Classified Regulation on Financial Companies of Enterprise Groups (企業集團財務公司風險評價和分類監管指引) which covers areas including a finance company's internal management, operating conditions and the related group's influence over and support to the finance company; and
the CNMC Financial Services Framework Agreement provides the Group with numerous rights and sets out numerous internal control and risk management measures that safeguard the interests of the Company and the Shareholders. For example, the average daily deposits placed by the Group with the CNMC Group must not exceed the average daily outstanding loans. The Group may also set-off any defaulted deposits against any outstanding loans extended by the CNMC Group to the Group and has various rights of compensation. In addition, the CNMC Financial Company shall (and CNMC shall ensure that the CNMC Financial Company shall):
1. implement stringent internal control and effective risk management measures (the efficiency and effectiveness of which will be regularly reviewed by the CBIRC);

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

comply with applicable laws and regulations, and in particular strictly comply with any requirements relating to the management of financial companies under all PRC laws and regulations (including any PRC laws and regulations), as amended from time to time;
provide the Group with access to the books and accounts of the CNMC Financial Company for inspection as soon as practicable upon the Group's request; and
when providing financial services to members of the Group, exercise its own judgment and prudent approval process to determine whether to provide such financial services to such members of the Group.

Further, as an inter-group service provider, the provision of financial services under the CNMC Financial Services Framework Agreement is expected to render more expedient and efficient financial services to the Group, especially due to the multiple financing channels offered by the CNMC Group. In addition, it is expected that any applicable interest rates for the financial services will be equal to or more favourable to the Group than the benchmark interest rates quoted by the PBOC from time to time, while any other applicable fees, terms and exchange rates offered will also be equal to or more favourable to the Group than that offered by other independent commercial banks in the PRC, which would reduce the overall financial costs of the Group.

We agree with the Management that the financial assets of the Group maintained by the CNMC Group shall be regulated according to the relevant rules and regulations as applied to other independent commercial banks and financial institutions in the PRC. We consider the Group's financial assets shall be properly safeguarded by the relevant standards, rules and regulations. In addition, we understand from the Company that in order to ensure that the pricing policies under the CNMC Financial Services Framework Agreement are complied with, prior to conducting the transactions under the CNMC Financial Services Framework Agreement, the Group will enquire with third party commercial banks where applicable, including but not limited to obtaining at least three quotes from third party commercial banks, about (i) the interest rates for deposits for comparing the interest rates provided by the CNMC Financial Company; (ii) the exchange rates for foreign exchange settlement for comparing the exchange rates offered by the CNMC Financial Company; and (iii) the applicable handling fees for the same or similar financial services provided for comparing the applicable handling fees charged by the CNMC Financial Company, and determine the relevant interest rates, exchange rates and handling fees in accordance with the pricing policies under the CNMC Financial Services Framework Agreement.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Moreover, we have discussed with the Management and understand that the provision of deposit services as well as the bills acceptance, settlement, foreign exchange settlement and sales services by the CNMC Financial Company will help to facilitate the fund management amongst the members of the Group and the CNMC Group in a more efficient manner. By maintaining accounts of the Group with the CNMC Financial Company and leveraging on the CNMC Financial Company as the settlement platform, fund transmission time can be reduced to expedite the turnaround of funds, and thus strengthen the Company's centralised fund management. In addition, enabling the Group to access a centralised fund pool can provide flexibility to the Group in making timely inter-group transfers from time to time without any restriction in meeting its funding needs, utilise idle cash balances within the Group, and reduce funding cost of the Group in general.

In conclusion, we are of the view that entering into the CNMC Financial Services Framework Agreement is in the interests of the Group and the Shareholders as a whole.

Proposed Annual Caps under the CNMC Financial Services Framework Agreement

Deposit services

Year ending

Year ended

Year ending

31 December

31 December 2017

31 December 2018

31 December 2019

2020

2021

2022

Actual

amount (up

Actual

to 31 October

amount

2019)

Proposed

Annual cap

(audited)

Annual cap

(audited)

Annual cap

(unaudited)

annual cap

(RMB'000)

619,859

607,685

651,026

644,786

683,192

682,563

2,681,869

2,885,041

3,110,325

We understand that the above Proposed Annual Caps were determined with reference to: (i) the amount of deposits (including accrued interests) historically made by the Group; (ii) the estimated daily cash flow of the Group for the three years ending 31 December 2022, having considered the business operations needs and expected development of the Group; and (iii) the expected interest rate by reference to prevailing interest rates on deposits offered by other finance companies in the PRC.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As advised by the Management, the historical maximum daily outstanding balance of deposits (including accrued interest) placed by the Group with the Parent Group during the two years ended 31 December 2018 and the ten months ended 31 October 2019 amounted to approximately RMB608 million, RMB645 million and RMB683 million, respectively.

We have obtained from the Management and reviewed the available daily cash balance of the Group during the ten months ended 31 October 2019, and note that the available daily cash and bank balances of the Group (excluding any cash and/or bank balances that are earmarked for specific development/operation purpose) had reached as high as approximately RMB1.4 billion during the said period. We have also reviewed the latest interim report of the Company and note that the cash and bank balances of the Group as at 30 June 2019 amounted to approximately RMB1.7 billion.

In order to assess the fairness and reasonableness of the Proposed Annual Caps, we have discussed with the Management in respect of the possible maximum deposits to be placed by the Group on any given day during the term of the CNMC Financial Services Framework Agreement, after having taken into account the Group's development plan, expected cash flow, business operation and financial needs.

As disclosed in the circular dated 25 October 2019 of the Company (the "JV Circular"), a total capital amount of RMB2.5 billion will be contributed by the parties to the JV Company and it is expected to be in place by 2020. Out of such RMB2.5 billion, it is anticipated that approximately RMB1.3 billion will be utilised as to part of the construction costs for the New Copper Cathode Production Plant, while the remaining RMB1.2 billion will be reserved as working capital of the JV Company, and constitute part of the Group's available daily cash balance.

Moreover, we understand from the Management that (i) the interest rates received by the Company during the ten months ended 31 October 2019 from commercial banks in the PRC for its bank balance are around 0.3% per annum; and (ii) the interest rate for deposits to be provided by the CNMC Financial Company is expected to be around 0.35% to 1.15% per annum. Accordingly, we agree with the Management that the expected interest rate of 0.35% to 1.15%% per annum to be provided by the CNMC Financial Company is more favourable to the Group as compared with interest rates offered by commercial banks in the PRC.

Taking into account the above factors as a whole, we are of the view that the Proposed Annual Caps for the deposit services are fair and reasonable.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Bills acceptance and settlement and foreign exchange settlement and sales services

Year ending

Year ended

Year ending

31 December

31 December 2017

31 December 2018

31 December 2019

2020

2021

2022

Actual

amount (up

Actual

to 31 October

amount

2019)

Proposed

Annual cap

(audited)

Annual cap

(audited)

Annual cap

(unaudited)

annual cap

(RMB'000)

6,900

9,600

13,400

6,120,300

11,090,900

16,502,900

We understand that the above Proposed Annual Caps were determined with reference to: (i) the fees of bills acceptance and settlement services historically received by the Group; (ii) the expected growth in the business of the Group; (iii) the historical amount of foreign exchange transacted by the Group for the two years ended 31 December 2018 and the ten months ended 31 October 2019; and (iv) the anticipated amount of foreign exchange and settlement services to be purchased by the Group from the CNMC Group for the three years ending 31 December 2022.

As advised by the Management, the Group purchases certain raw materials from the international market which are primarily conducted in US dollars for its production purposes. The historical amount of foreign exchange transacted by the Group for the two years ended 31 December 2018 and the ten months ended 31 October 2019 amounted to approximately RMB14.3 billion, RMB14.2 billion and RMB13.0 billion, respectively.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The increase in the Proposed Annual Caps for the bills acceptance and settlement and foreign exchange settlement and sales services to be provided by the CNMC Group to the Group as compared with the existing annual caps for the bills acceptance and settlement services provided by the Parent Group to the Group under the Existing Financial Services Framework Agreement is primarily due to (i) the addition of the purchase of foreign exchange settlement and sales services from the CNMC Group under the CNMC Financial Services Framework Agreement which were not covered under the Existing Financial Services Framework Agreement; and (ii) the expected increase in the Group's demand for the amount of foreign exchange for its purchases of raw materials from the international market following the commencement of operation of the New Copper Cathode Production Plant in the first half of 2021.

The Proposed Annual Caps in FY2020, FY2021 and FY2022 are approximately RMB6.1 billion, RMB11.1 billion and RMB16.5 billion, respectively. We have discussed with the Management and understand that the Proposed Annual Caps were determined with reference to, among others:

the Proposed Annual Caps in FY2020 is primarily made with reference to (a) the historical amount of foreign exchange transacted during the two years ended 31 December 2018 and the ten months ended 31 October 2019 which amounted to approximately RMB14.3 billion, RMB14.2 billion and RMB13.0 billion, respectively; (b) the estimation by the Company that the total amount of foreign exchange transacted by the Group for the year ending 31 December 2019 will reach approximately RMB14.7 billion; and (c) the intention of the Group to satisfy approximately 40% to 50% of its total demand for foreign exchange for each of the three years ending 31 December 2022 with its purchase of foreign exchange and settlement services from the CNMC Group. Regarding the remainder, subject to comparable rates and service fees, the Group will purchase the foreign exchange from other commercial banks and institutions in order to diversify the sources of supply and at the same time to maintain sound business relationships with the commercial banks and institutions. Based on the estimation on the amount and prices of raw materials to be imported by the Group, the total amount of foreign exchange to be transacted by the Group is expected to be approximately RMB15.3 billion, RMB22.2 billion and RMB33.0 billion for the three years ending 31 December 2022, respectively; and
the increases in the Proposed Annual Caps in FY2021 and FY2022 as compared with FY2020 are mainly due to the expected increase in business scale following the commencement of operation of the New Copper Cathode Production Plant which is expected to take place in the first half of 2021, which will cause a corresponding increase in demand in the amount of foreign exchange for the Group's purchases of certain raw materials from the international market.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Moreover, we understand from the Management that the fees charged by commercial banks in the PRC to the Group for the bills acceptance and settlement services during the ten months ended 31 October 2019 ranged from approximately 3.5% to 4.0%. As advised by the Management, it is expected that the fees in respect of the said services to be charged by the CNMC Financial Company will be around 3.5% to 4.0%. Accordingly, we agree with the Management that the expected fees of 3.5% to 4.0% to be charged by the CNMC Financial Company is comparable with those offered by commercial banks in the PRC.

Taking into account the above factors as a whole, we are of the view that the Proposed Annual Caps for the bills acceptance, settlement services and foreign exchange settlement and sales services are fair and reasonable.

2.2 Parent Group Sales Framework Agreement

Date:	22 November 2019
Parties:	(1)	the Company
	(2)	the Parent Company
Nature of	The Group will supply certain products to the Parent
transactions:	Group, including silver, copper cathodes, copper
	concentrate, natural gas, residual heat power generation,
	water, electricity, sulfuric acid, waste materials, scrap
	steel, scrap stainless steel, scrap copper cathodes mold,
	spare part materials and such other products as agreed by
	the parties from time to time.
Term:	1 January 2020 to 31 December 2022.
Time and method of	Based on market practice.
payment:
Pricing mechanism:	Based on: (i) the government-prescribed price; or (ii) if
	there is no applicable government-prescribed price, the
	Market Price or a price determined by the internal

documents of the Group developed with reference to the Market Price.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As at the Latest Practicable Date, prices for the supply of the relevant products will be determined by the parties on the following basis:

Silver:	With reference to the market price of silver as quoted on
	(i) the Shanghai Gold Exchange; (ii) the Shanghai Huatong
	Silver Exchange; (iii) the Chicago Mercantile Exchange
	(adjusted with reference to the premium or discount quoted
	by Reuters); or (iv) the London Bullion Market
	Association (as applicable).
Copper cathodes:	With reference to the market price of copper as quoted on
	(i) the Shanghai Futures Exchange or (ii) the London
	Metal Exchange, adjusted with reference to the premium
	or discount quoted by Reuters or the Shanghai Metal
	Market website (as applicable).
Copper concentrate:	With reference to (as applicable): (i) the market price of
	gold as quoted on the Chicago Mercantile Exchange
	(adjusted with reference to the premium or discount quoted
	by Reuters) or by the London Bullion Market Association;
	(ii) the market price of silver as quoted on the Chicago
	Mercantile Exchange (adjusted with reference to the
	premium or discount quoted by Reuters) or by the London
	Bullion Market Association; and (iii) the market price of
	copper as quoted on the London Metal Exchange (adjusted
	with reference to the premium or discount quoted by
	Reuters as applicable).
Natural gas:	With reference to the price of natural gas prescribed by
	Huangshi Price Bureau* (黃石市物價局).
Residual heat power	With reference to the price of electricity prescribed by
generation:	Hubei Province Price Bureau.
Water:	With reference to the price of water prescribed by
	Huangshi Price Bureau* (黃石市物價局).
Electricity:	With reference to the price of electricity prescribed by
	Hubei Province Price Bureau.
Scrap steel, scrap	With reference to the tender prices and the overall market
stainless steel,	condition.
scrap copper
cathodes mold,
spare part material:
Sulfuric acid:	With reference to market price of sulfuric acid chemical
	products quoted on the industry-related website, which is
	currently Baiinfo website and the overall market condition.
Waste materials:	With reference to the market price determined through
	price inquiries and the market price of copper quoted on
	the Shanghai Futures Exchange.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Reasons for and benefits of entering into the Parent Group Sales Framework Agreement

In respect of the existing continuing connected transactions, the sales framework agreement dated 3 November 2016 entered into between the Company and the Parent Company will expire on 31 December 2019. The Company intends to continue to enter into transactions of a similar nature from time to time after the expiry date. Therefore, on 22 November 2019, the Company and the Parent Company entered into the Parent Group Sales Framework Agreement, nature of which is similar to that of the transactions under the aforesaid sales framework agreement, for a term of three years from 1 January 2020 to 31 December 2022.

We have discussed with the Management and understand that entering into the Parent Group Sales Framework Agreement will broaden the revenue base of the Group and allow it to leverage on the sales network of the Parent Group in the PRC and Hong Kong.

We have obtained from the Company and reviewed the Group's relevant internal control manual. We note that when considering the terms of the relevant products, the Company shall primarily refer to the government-prescribed price. If such government- prescribed price is not available, the Group shall refer to the Market Price and/or quotes from other independent third parties.

We have reviewed the Parent Group Sales Framework Agreement and note that the basis of determining the prices for the products are clearly stated thereunder, which is primarily made with reference to the relevant government-prescribed price, or the Market Price if there is no applicable government-prescribed price. In addition, we have obtained from the Company and reviewed samples of existing contracts for the relevant products. We note that the prices of the relevant products were primarily determined with reference to the Market Price, such as the market price as quoted on the Shanghai Futures Exchange and the London Metal Exchange. We consider that the Company has complied with its internal control procedures and the contract prices under the samples are in line with the Company's pricing policy as described above.

In view of the aforementioned factors, we are of the view that the pricing mechanism of the products under the Parent Group Sales Framework Agreement is fair and reasonable.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

approval by the Independent Shareholders, the relevant business department of the Company will be responsible for the implementation of the Parent Group Sales Framework Agreement; and (iii) before the signing of each individual agreement, the finance department of the Company will evaluate the terms, including the fairness of the price, of the agreement as well as monitor the Company's existing continuing connected transactions, and review whether the Company's transactions are fair and reasonable in accordance with the terms of the Parent Group Sales Framework Agreement and internal control manual. As such, we are of the view that the Group has a sound risk management system to safeguard the interest of the Company.

Moreover, we are given to understand that the business model of the Group and the Parent Group are distinct and there should not be any significant direct competition among the businesses of the Group and the Parent Group given that (i) the core copper-related business of the Parent Group has already been transferred to the Group; (ii) the Parent Group is mainly engaged in the midstream to downstream business (e.g. processing of coarse copper into anode plates, production and sales of copper rods and copper tubes), while the Group is mainly engaged in the upstream to midstream business (e.g. exploration, mining and processing of copper ore, smelting of copper concentrates and sales of copper cathodes); and (iii) the trading business, which is a core business of the Parent Group, will not be a core business of the Group.

In conclusion, we are of the view that entering into the Parent Group Sales Framework Agreement is in the interests of the Company and the Shareholders as a whole.

Proposed annual caps under the Parent Group Sales Framework Agreement

The table below sets out the historical figures, existing annual caps and Proposed Annual Caps for the Parent Group Sales Framework Agreement:

Year ending

Year ended

Year ending

31 December

31 December 2017

31 December 2018

31 December 2019

2020

2021

2022

Actual

amount (up

Actual

to 31 October

amount

2019)

Proposed

Annual cap

(audited)

Annual cap

(audited)

Annual cap

(unaudited)

annual cap

(RMB'000)

13,450,706

2,266,680

14,848,027

3,861,613

16,694,468

4,537,676

7,207,373

10,802,160

14,383,651

We understand that the above Proposed Annual Caps have been determined with reference to: (i) the existing purchase orders placed by the Parent Group; (ii) the projected future orders based on the expected increase in the products to be sold to the Parent Group as a result of the expected growth in the business of the Parent Group; and

the average historical market price and the anticipated future market price for the relevant products.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In order to assess the fairness and reasonableness of the Proposed Annual Caps, we have obtained from the Management and reviewed the relevant calculations of the Proposed Annual Caps.

We note that the major product expected to be sold by the Group to the Parent Group under the Parent Group Sales Framework Agreement is the copper cathode. As advised by the Management, the Group's current production capacity of copper cathodes is approximately 550,000 tonnes per year.

Referring to the JV circular, the Group has entered into the Capital Contribution Agreement with China No. 15 Metallurgical Construction Group Co., Ltd.* (a wholly- owned subsidiary of CNMC), Huangshi Xingang and Huangshi State-owned Assets Management Co., Ltd.* in relation to the establishment of the JV Company. The JV Company, which is owned as to 52% by the Group, will be constructing the New Copper Cathode Production Plant in Hubei, the PRC, with a production capacity of 400,000 tonnes per year. The completion of construction of the New Copper Cathode Production Plant and the commencement of its production of copper cathode is expected to take place in the first half of 2021, and will increase the Group's total production capacity of copper cathode, and also the demand for relevant raw materials such as copper concentrate and scrap copper for production purpose. The New Copper Cathode Production Plant is expected to generate an annual revenue exceeding RMB20 billion for the JV Company. Please refer to the JV Circular for further details of the New Copper Cathode Production Plant.

We have enquired with the Management and set out below the expected production amount by the Group and sales volume of copper cathode by the Group to the Parent Group in FY2020, FY2021 and FY2022:

	FY2020	FY2021	FY2022
	approx.	approx.	approx.
	tonnes	tonnes	tonnes
Total expected production of
copper cathode by the Group	510,000	640,000	850,000
Expected sales volume of copper
cathode by the Group to the
Parent Group	142,000	155,000	175,000

As advised by the Management, it is expected that the Group will conduct certain maintenance and repairing works for its existing production plant in FY2020 and thus will affect its total expected production of copper cathode in FY2020 as compared with its existing total production capacity. Further, we note that the estimated sales volume of copper cathode by the Group to the Parent Group during the three years ending 31 December 2022 ranges from approximately 20.6% to 27.8% of the Group's total expected production of copper cathode. We consider that the above estimated sales volume of copper cathode by the Group to the Parent Group do not form a majority portion of the total expected production of copper cathode by the Group and it is within the Group's production capacity.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Proposed Annual Caps in FY2020, FY2021 and FY2022 are approximately RMB7.2 billion, RMB10.8 billion and RMB14.4 billion respectively. We have interviewed with the Management and understand that the Proposed Annual Caps were determined with reference to, among others:

the Proposed Annual Caps in FY2020 is primarily made with reference to
1. the growth trend in the historical sales amount between the Company and the Parent Group during the past two to three years. The historical sales amount for the two years ended 31 December 2018 and the ten months ended 31 October 2019 had been increasing from approximately RMB2.3 billion to RMB3.9 billion and RMB4.5 billion, respectively; and (b) the estimation by the Company that the total sales amount for the year ending 31 December 2019 will reach approximately RMB6.6 billion;

the increases in the Proposed Annual Caps in FY2021 and FY2022 as compared with FY2020 are mainly due to the new sales of raw materials such as copper concentrate for the New Copper Cathode Production Plant that is necessary for its production of copper cathode, following commencement of the operation of the New Copper Cathode Production Plant which is expected to take place in the first half of 2021; and
the Company has entered into letters of intent with members of the Parent Group, which have explicitly set out the target sales volume of certain products under the Parent Group Sales Framework Agreement for each of the three years ending 31 December 2022. We have obtained from the Management and reviewed the letters of intent, and understood that both parties have reached consensus on the target sales volume as stated thereunder. There will be no consequence or penalty on the Company for not reaching the target volume.

Further, we have conducted analysis on the copper price in the PRC and reviewed the market report - "Commodity Markets Outlook" published by the World Bank Group in October 2019 (www.worldbank.org/commodities). According to the report, it is forecasted that the copper price per ton will increase from US$6,010 in 2019 to US$6,150 in 2020, US$6,230 in 2021 and US$6,311 in 2022. We note that there is a general mild upward trend in the copper price for the upcoming three years, and it is in line with the unit price adopted by the Company to determine the Proposed Annual Caps.

Taking into account the above factors as a whole, we are of the view that the Proposed Annual Caps are fair and reasonable.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

2.3 Huangshi Xingang Sales Framework Agreement

Date:	22 November 2019
Parties:	(1)	the Company
	(2)	Huangshi Xingang
Nature of	The Group will supply certain products to Huangshi
transactions:	Xingang, including sulfuric acid and such other products
	as agreed by the parties from time to time.
Term:	1 January 2020 to 31 December 2022.
Time and method of	Based on market practice.
payment:
Pricing mechanism:	Based on: (i) the government-prescribed price; or (ii) if
	there is no applicable government-prescribed price, the
	Market Price or a price determined by the internal

documents of the Group developed with reference to the Market Price.

As at the Latest Practicable Date, prices for the supply of sulfuric acid will be determined by the parties on the following basis:

Sulfuric acid:	With reference to market price of sulfuric acid chemical
	products quoted on the industry-related website, which is
	currently Baiinfo website and the overall market condition.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Reasons for and benefits of entering into the Huangshi Xingang Sales Framework

Agreement

We have discussed with the Management and understand that entering into the Huangshi Xingang Sales Framework Agreement will broaden the revenue base of the Group and allow it to leverage on the sales network of the Huangshi Xingang in the PRC.

We have reviewed the Huangshi Xingang Sales Framework Agreement and note that the basis of determining the prices for the products are clearly stated thereunder, which is primarily made with reference to the relevant government-prescribed price, or the Market Price if there is no applicable government-prescribed price. In addition, we have obtained from the Company and reviewed samples of existing contracts for the relevant products. We note that the prices of the relevant products were primarily determined with reference to the Market Price. We consider that the Company has complied with its internal control procedures and the contract prices under the samples are in line with the Company's pricing policy as described above.

In view of the aforementioned factors, we are of the view that the pricing mechanism of the products under the Huangshi Xingang Sales Framework Agreement is fair and reasonable.

Further, we have interviewed with the Management and understand that the directors and senior management of the Company will monitor closely and review regularly the continuing connected transactions of the Company. The Company will adopt a series of risk management arrangements, and endeavour to maintain, in relation to the continuing connected transactions, the independence of the Company; the fairness of the price of the transactions; the fairness of the terms of the transactions; and the right of the Company to conduct transactions with independent third parties other than Huangshi Xingang. The relevant arrangements include: (i) the continuing connected transactions contemplated under the Huangshi Xingang Sales Framework Agreement are conducted on a non- exclusive basis; (ii) upon the signing of the Huangshi Xingang Sales Framework Agreement and its approval by the Independent Shareholders, the relevant business department of the Company will be responsible for the implementation of the Huangshi Xingang Sales Framework Agreement; and (iii) before the signing of each individual agreement, the finance department of the Company will evaluate the terms, including the fairness of the price, of the agreement as well as monitor the Company's existing continuing connected transactions, and review whether the Company's transactions are fair and reasonable in accordance with the terms of the Huangshi Xingang Sales Framework Agreement and internal control manual. As such, we are of the view that the Group has a sound risk management system to safeguard the interest of the Company.

In conclusion, we are of the view that entering into the Huangshi Xingang Sales Framework Agreement is in the interests of the Company and the Shareholders as a whole.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Proposed annual caps under the Huangshi Xingang Sales Framework Agreement

The table below sets out the Proposed Annual Caps for the Huangshi Xingang Sales Framework Agreement:

Year ending	Year ending	Year ending
31 December 2020	31 December 2021	31 December 2022
Proposed annual cap	Proposed annual cap	Proposed annual cap
(RMB'000)	(RMB'000)	(RMB'000)
15,000		40,000	75,000

We understand that the above Proposed Annual Caps have been determined with reference to: (i) the historical purchase orders placed by other purchasers with the Group for the relevant products; (ii) the projected future orders based on the expected amount of products to be sold to Huangshi Xingang for the three years ending 31 December 2022; and (iii) the average historical market price and the anticipated future market price for the relevant products.

In order to assess the fairness and reasonableness of the Proposed Annual Caps, we have obtained from the Management and reviewed the relevant calculations of the Proposed Annual Caps.

As advised by the Management, the Group's current production capacity of sulfuric acid amounts to approximately 1,150,000 tonnes per year. The Group targets to expand its production capacity of sulfuric acid in the coming years to cope with its business operations. We have enquired with the Management and set out below the expected production amount by the Group and sales volume of sulfuric acid by the Group to Huangshi Xingang in FY2020, FY2021 and FY2022:

	FY2020	FY2021	FY2022
	approx.	approx.	approx.
	tonnes	tonnes	tonnes
Total expected production of
sulfuric acid by the Group	970,000	1,600,000	2,400,000
Expected sales volume of sulfuric
acid by the Group to Huangshi
Xingang	100,000	200,000	300,000

As advised by the Management, sulfuric acid is produced as a by-product during the production process of copper cathode. The amount of sulfuric acid produced depends on, among other factors, the type of raw materials used to produce copper cathode, such as copper concentrate and waste circuit boards. The Group intends to increase the utilization

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

of waste circuit boards (which has a lower output rate of sulfuric acid during the production process), while decreasing the utilization of imported copper concentrate (which has a higher output rate of sulfuric acid during the production process), as raw material during the production process of copper cathode in its coming production. As a result, it is expected that the total expected production of sulfuric acid by the Group will decrease in FY2020 as compared with its existing production capacity. Further, we note that the estimated sales volume of sulfuric acid by the Group to Huangshi Xingang during the three years ending 31 December 2022 ranges from approximately 10.3% to 12.5% of the Group's total expected production of sulfuric acid. We consider that the above estimated sales volume of sulfuric acid by the Group to Huangshi Xingang do not form a majority portion of the total expected production of sulfuric acid by the Group and it is within the Group's production capacity.

Besides, we understand that the unit price of the products is mainly determined with reference to the historical purchase orders placed by other purchasers with the Group, the average historical market price and the anticipated future market price for the relevant products. We have reviewed samples of historical purchase orders placed by other purchasers with the Group for the relevant products, and note the unit price adopted by the Company to determine the Proposed Annual Caps is in line with these purchase orders place by other purchasers.

Furthermore, we note that the Proposed Annual Caps will increase from RMB15 million in FY2020 to RMB40 million in FY2021, and to RMB75 million in FY2022. We have discussed with the Management and understand that the primary reason for such increases is mainly due to the expected increase in demand from Huangshi Xingang based on its projections and business expansion plan.

Further, the Company has entered into letters of intent with Huangshi Xingang, which have explicitly set out the target sales volume of the products under the Huangshi Xingang Sales Framework Agreement for each of the three years ending 31 December 2022. We have obtained from the Management and reviewed the letters of intent, and understood that the target sales volume conforms to the Proposed Annual Caps, both parties have reached consensus on the target sales volume as stated thereunder. There will be no consequence or penalty on the Company for not reaching the target volume.

Taking into account the above factors as a whole, we are of the view that the Proposed Annual Caps are fair and reasonable.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

2.4 Zhongse Aobote Sales Framework Agreement

Date:	22 November 2019
Parties:	(1)	the Company
	(2)	Zhongse Aobote
Nature of	The Group will supply certain products to Zhongse
transactions:	Aobote, including copper cathode and such other products
	as agreed by the parties from time to time.
Term:	1 January 2020 to 31 December 2022.
Time and method of	Based on market practice.
payment:
Pricing mechanism:	Based on: (i) the government-prescribed price; or (ii) if
	there is no applicable government-prescribed price, the
	Market Price or a price determined by the internal

documents of the Group developed with reference to the Market Price.

As at the Latest Practicable Date, prices for the supply of copper cathodes will be determined by the parties on the following basis:

Copper cathodes:	With reference to the market price of copper as quoted on
	the Shanghai Futures Exchange, adjusted with reference to
	the premium or discount quoted by metal spot websites (as
	applicable).

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Reasons for and benefits of entering into the Zhongse Aobote Sales Framework Agreement

We have discussed with the Management and understand that entering into the Zhongse Aobote Sales Framework Agreement will broaden the revenue base of the Group and allow it to leverage on the sales network of Zhongse Aobote in the PRC.

We have reviewed the Zhongse Aobote Sales Framework Agreement and note that the basis of determining the prices for the products are clearly stated thereunder, which is primarily made with reference to the relevant government-prescribed price, or the Market Price if there is no applicable government-prescribed price. In addition, we have obtained from the Company and reviewed samples of existing contracts for the relevant products. We note that the prices of the relevant products were primarily determined with reference to the Market Price, such as the market price as quoted on the Shanghai Futures Exchange. We consider that the Company has complied with its internal control procedures and the contract prices under the samples are in line with the Company's pricing policy as described above.

In view of the aforementioned factors, we are of the view that the pricing mechanism of the products under the Zhongse Aobote Sales Framework Agreement is fair and reasonable.

Further, we have interviewed with the Management and understand that the directors and senior management of the Company will monitor closely and review regularly the continuing connected transactions of the Company. The Company will adopt a series of risk management arrangements, and endeavour to maintain, in relation to the continuing connected transactions, the independence of the Company; the fairness of the price of the transactions; the fairness of the terms of the transactions; and the right of the Company to conduct transactions with independent third parties other than Zhongse Aobote. The relevant arrangements include: (i) the continuing connected transactions contemplated under the Zhongse Aobote Sales Framework Agreement are conducted on a non-exclusive basis; (ii) upon the signing of the Zhongse Aobote Sales Framework Agreement and its approval by the Independent Shareholders, the relevant business department of the Company will be responsible for the implementation of the Zhongse Aobote Sales Framework Agreement; and (iii) before the signing of each individual agreement, the finance department of the Company will evaluate the terms, including the fairness of the price, of the agreement as well as monitor the Company's existing continuing connected transactions, and review whether the Company's transactions are fair and reasonable in accordance with the terms of the Zhongse Aobote Sales Framework Agreement and internal control manual. As such, we are of the view that the Group has a sound risk management system to safeguard the interest of the Company.

In conclusion, we are of the view that entering into the Zhongse Aobote Sales Framework Agreement is in the interests of the Company and the Shareholders as a whole.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Proposed annual caps under the Zhongse Aobote Sales Framework Agreement

The table below sets out the Proposed Annual Caps for the Zhongse Aobote Sales Framework Agreement:

Year ending	Year ending	Year ending
31 December 2020	31 December 2021	31 December 2022
Proposed annual cap	Proposed annual cap	Proposed annual cap
(RMB'000)	(RMB'000)	(RMB'000)
2,832,000		2,976,000	2,976,000

We understand that the above Proposed Annual Caps have been determined with reference to: (i) the existing purchase orders placed by other purchasers with the Group for the relevant products; (ii) the projected future orders based on the expected amount of products to be sold to Zhongse Aobote for the three years ending 31 December 2022; and (iii) the average historical market price and the anticipated future market price for the relevant products.

In order to assess the fairness and reasonableness of the Proposed Annual Caps, we have obtained from the Management and reviewed the relevant calculations of the Proposed Annual Caps.

As advised by the Management, the Group's current production capacity of copper cathodes is approximately 550,000 tonnes per year. The Group, through the JV Company, is currently constructing the New Copper Cathode Production Plant in Hubei, the PRC, with a production capacity of 400,000 tonnes per year. The completion of construction of the New Copper Cathode Production Plant and the commencement of its production of copper cathode is expected to take place in the first half of 2021, and will increase the Group's total production capacity of copper cathode. Please refer to the JV Circular for further details of the New Copper Cathode Production Plant.

We have enquired with the Management and set out below the expected production amount by the Group and sales volume of copper cathodes by the Group to Zhongse Aobote in FY2020, FY2021 and FY2022:

	FY2020	FY2021	FY2022
	approx.	approx.	approx.
	tonnes	tonnes	tonnes
Total expected production of
copper cathodes by the Group	510,000	640,000	850,000
Expected sales volume of copper
cathodes by the Group to
Zhongse Aobote	60,000	60,000	60,000

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We note that the estimated sales volume of copper cathode by the Group to Zhongse Aobote during the three years ending 31 December 2022 ranges from approximately 7.1% to 11.8% of the Group's total expected production of copper cathode. We consider that the above estimated sales volume of copper cathodes by the Group to Zhongse Aobote do not form a majority portion of the total expected production of copper cathodes by the Group and it is within the Group's production capacity.

We understand that the unit price of the products is mainly determined with reference to the existing purchase orders placed by other purchasers with the Group, the average historical market price and the anticipated future market price for the relevant products. We have reviewed samples of existing purchase orders placed by other purchasers with the Group for the relevant products, and note the unit price adopted by the Company to determine the Proposed Annual Caps is in line with these purchase orders place by other purchasers.

The Company has entered into letters of intent with Zhongse Aobote, which have explicitly set out the target sales volume of the products under the Zhongse Aobote Sales Framework Agreement for each of the three years ending 31 December 2022. We have obtained from the Management and reviewed the letters of intent, understood that the target sales volume conforms to the Proposed Annual Caps, both parties have reached consensus on the target sales volume as stated thereunder. There will be no consequence or penalty on the Company for not reaching the target volume.

Despite the expected increase in the Group's total production capacity of copper cathode following completion of construction of the New Copper Cathode Production Plant, we note that the Proposed Annual Caps in FY2021 and FY2022 remain at similar level with the Proposed Annual Caps in FY2020. As advised by the Management, we understand that the Group had determined the Proposed Annual Caps after also having taken into account the projection and business plans of Zhongse Aobote, which the anticipated demand in the relevant products by Zhongse Aobote will remain at similar level in FY2021 and FY2022. Further, we note that the Proposed Annual Caps increase slightly from approximately RMB2.8 billion in FY2020 to RMB3.0 billion in both FY2021 and FY2022. We have discussed with the Management and understand that the reason to such increase is mainly due to the anticipated mild increase in the price of copper cathodes.

Taking into account the above factors as a whole, we are of the view that the Proposed Annual Caps are fair and reasonable.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

2.5 Parent Group Purchase and Production Services Framework Agreement

Date:	22 November 2019
Parties:	(1)	the Company
	(2)	the Parent Company
Nature of	The Parent Group will:
transactions:
	(1) supply certain products to the Group, including scrap
		copper, copper concentrate, diesel fuel, parts and
		equipment, waste circuit boards and such other
		products as agreed by the parties from time to time;
		and
	(2) provide certain production services to	the	Group,
		including construction	maintenance,	engineering
		labour, transportation, train loading and unloading
		and such other production services as agreed by the
		parties from time to time.
Term:	1 January 2020 to 31 December 2022.
Time and method of	Based on market practice.
payment:
Pricing mechanism:	Based on: (i) the government prescribed price; (ii) if there
	is no applicable government prescribed price, the Market
	Price	determined by the	Company by	way	of a

comprehensive evaluation method taking into account comparable quotes from at least two independent third parties obtained via public tender or price inquiry, or the price as negotiated by the parties if the relevant procurement does not require public tender or price inquiry procedure or a price determined by the internal documents of the Group developed with reference to the Market Price.

As at the Latest Practicable Date, prices for the supply of the relevant products and services will be determined by the parties on the following basis:

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Scrap copper:	With reference to the market procurement price of scrap
	copper in regions such as Miluo, Hunan, Taizhou, Zhejiang
	and Nanhai, Guangdong as quoted on relevant copper
	industry web portals such as Lingtong Info website.
Copper concentrate:	With reference to (as applicable): (i) the market price of
	gold as quoted on the Chicago Mercantile Exchange
	(adjusted with reference to the premium or discount quoted
	by Reuters) or by the London Bullion Market Association;
	(ii) the market price of silver as quoted on the Chicago
	Mercantile Exchange (adjusted with reference to the
	premium or discount quoted by Reuters) or by the London
	Bullion Market Association; and (iii) the market price of
	copper as quoted on the London Metal Exchange (adjusted
	with reference to the premium or discount quoted by
	Reuters as applicable).
Diesel fuel:	With reference to the retail listing price of diesel fuel
	quoted by Sinopec gas station at Huangshi, Hubei.
Parts and equipment:	With reference to the tender prices and the overall market
	condition.
Waste circuit boards:	Based on market purchase prices.
Construction	With reference to the relevant prices prescribed by
maintenance:	Department of Housing and Urban-Rural Development of
	Hubei Province and the actual tender prices.
Engineering labour:	With reference to the relevant prices prescribed under the
	laws and regulations promulgated by the state, provincial
	and/or municipal construction administrative departments
	and in accordance with the principle of marketization.
Transportation:	Tender-based pricing, price inquiry and price comparison.
Train loading and	Price inquiry and price comparison.
unloading:

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Reasons for and benefits of entering into the Parent Group Purchase and Production Services Framework Agreement

In respect of the existing continuing connected transactions, the purchase and production services framework agreement dated 3 November 2016 entered into between the Company and the Parent Company will expire on 31 December 2019. The Company intends to continue to enter into transactions of a similar nature from time to time after the expiry date. Therefore, on 22 November 2019, the Company and the Parent Company entered into the Parent Group Purchase and Production Services Framework Agreement, nature of which is similar to that of the transactions under the aforesaid purchase and production services framework agreement, for a term of three years from 1 January 2020 to 31 December 2022.

We have discussed with the Management and understand that the products and production services to be provided under the Parent Group Purchase and Production Services Framework Agreement will be important to and are necessary for the Group's business operation. Given the long-term business relationship of the Parent Group and the Group and the close geographical proximity of their respective operations, the Directors consider that the entering into of the Parent Group Purchase and Production Services Framework Agreement will allow the Group to secure a cost effective, timely and stable source of supply of those products and production services, and also to benefit from the procurement network of the Parent Company.

By entering into the Parent Group Purchase and Production Services Framework Agreement, the Parent Group will be able to act as an inter-group supplier and service provider. The Parent Group will be able to provide a better and more efficient communication with the Group, and the Group may be able to negotiate more favourable terms with the Parent Group, as compared with other suppliers and/or service providers. Further, it will allow the Group to secure a cost effective, timely and stable source of supply of those products and materials and production services, and also to benefit from the procurement network of the Parent Group, given its long-term relationship with the Parent Group and the close geographical proximity of their respective operations.

Regarding the pricing policy, we have obtained from the Company and reviewed the Group's relevant internal control manual. We note that when considering the terms of the relevant products, the Company shall primarily refer to the government-prescribed price. If such government-prescribed price is not available, the Group shall refer to the Market Price and/or quotes from other independent third parties.

We have reviewed the Parent Group Purchase and Production Services Framework Agreement and note that the basis of determining the prices for the products and production services are clearly stated thereunder, which is primarily made with reference to the relevant government-prescribed price, or the Market Price if there is no applicable government-prescribed price. We note that the Group must obtain at least two quotes from other independent third parties as part of the assessment of the Market Price. Further, the terms offered by the Parent Group to the Group must be equal to or more favourable than those offered to its other independent customers (if available). In addition, we have obtained from the Company and reviewed samples of existing contracts for the relevant

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

products and/or services. We note that the prices of the relevant products and/or services were primarily determined with reference to the Market Price, such as the market price as quoted on the London Metal Exchange. We consider that the Company has complied with its internal control procedures and the contract prices under the samples are in line with the Company's pricing policy as described above.

In view of the aforementioned factors, we are of the view that the pricing mechanism of the products under the Parent Group Purchase and Production Services Framework Agreement is fair and reasonable.

Further, we have interviewed with the Management and understand that the directors and senior management of the Company will monitor closely and review regularly the continuing connected transactions of the Company. The Company will adopt a series of risk management arrangements, and endeavour to maintain, in relation to the continuing connected transactions, the independence of the Company; the fairness of the price of the transactions; the fairness of the terms of the transactions; and the right of the Company to conduct transactions with independent third parties other than the Parent Group. The relevant arrangements include: (i) the continuing connected transactions contemplated under the Parent Group Purchase and Production Services Framework Agreement are conducted on a non-exclusive basis; (ii) upon the signing of the Parent Group Purchase and Production Services Framework Agreement and its approval by the Independent Shareholders, the relevant business department of the Company will be responsible for the implementation of the Parent Group Purchase and Production Services Framework Agreement; and (iii) before the signing of each individual agreement, the finance department of the Company will evaluate the terms, including the fairness of the price, of the agreement as well as monitor the Company's existing continuing connected transactions, and review whether the Company's transactions are fair and reasonable in accordance with the terms of the Parent Group Purchase and Production Services Framework Agreement and internal control manual. As such, we are of the view that the Company has a sound risk management system to safeguard the interest of the independent shareholders.

In conclusion, we are of the view that entering into the Parent Group Purchase and Production Services Framework Agreement is in the interests of the Group and the Shareholders as a whole.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Proposed annual caps under the Parent Group Purchase and Production Services Framework Agreement

The table below sets out the historical figures, existing annual caps and Proposed Annual Caps for the Parent Group Purchase and Production Services Framework Agreement:

Year ending

Year ended

Year ending

31 December

31 December 2017

31 December 2018

31 December 2019

2020

2021

2022

Actual

amount

(up to

Actual

31 October

amount

2019)

Proposed

Annual cap

(audited)

Annual cap

(audited)

Annual cap

(unaudited)

annual cap

(RMB'000)

6,748,587

727,765

7,812,730

650,535

10,436,997

2,227,485

2,176,535

2,567,932

3,121,564

We understand that the above Proposed Annual Caps have been determined with reference to: (i) the historical purchase orders placed by the Group; (ii) the projected future orders based on the expected increase in the products and services required as a result of the expected growth in the business of the Group; and (iii) the average historical market price and the anticipated future market price for the relevant products and services.

In order to assess the fairness and reasonableness of the Proposed Annual Caps, we have obtained from the Management and reviewed the relevant calculations of the Proposed Annual Caps.

The Proposed Annual Caps in FY2020, FY2021 and FY2022 are approximately RMB2.2 billion, RMB2.6 billion and RMB3.1 billion, respectively. We have interviewed with the Management and understand that the Proposed Annual Caps were determined with reference to, among others:

the Proposed Annual Caps in FY2020 is primarily made with reference to the historical sales amount between the Company and the Parent Group during the ten months ended 31 October 2019 which has reached approximately RMB2.2 billion;
the increases in the Proposed Annual Caps in FY2021 and FY2022 as compared with FY2020 are mainly due to the expected increase in demand in raw materials such as copper concentrate and scrap copper by the Group to cope with its New Copper Cathode Production Plant which is expected to commence operation in the first half of 2021; and
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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

the Company has entered into letters of intent with members of the Parent Group, which have explicitly set out the target sales volume of certain products under the Parent Group Purchase and Production Services Framework Agreement for each of the three years ending 31 December 2022. We have obtained from the Management and reviewed the letters of intent, and understood that both parties have reached consensus on the target sales volume as stated thereunder. There will be no consequence or penalty on the Company for not reaching the target volume.

Taking into account the above factors as a whole, we are of the view that the Proposed Annual Caps are fair and reasonable.

2.6 Hubei Gold Purchase Framework Agreement

Date:	22 November 2019
Parties:	(1)	the Company
	(2)	Hubei Gold
Nature of	Hubei Gold will supply certain products to the Group,
transactions:	including copper concentrate and such other products as
	agreed by the parties from time to time.
Term:	1 January 2020 to 31 December 2022.
Time and method of	Based on market practice.
payment:

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Pricing mechanism:	Based on (i) the Market Price determined by the Company
	by way of a comprehensive evaluation method taking into
	account comparable quotes from at least two independent
	third parties obtained via public tender or price inquiry, or
	the price as negotiated by the parties if the relevant
	procurement does not require public tender or price inquiry
	procedure or (ii) a price determined by the internal
	documents of the Group developed with reference to the
	Market Price.
	If the prices and charges are determined based on or with
	reference to prices, exchange rates or tax rates stated in
	specific government documents, internal documents of the
	Group, exchanges or industry-related websites, the
	effective aforementioned documents, prices and rates at
	the time of the entry into of specific transaction
	agreements by the parties shall prevail.

As at the Latest Practicable Date, price for the supply of copper concentrate will be determined by the parties on the following basis:

Copper concentrate:	With reference to (as applicable): (i) the market price of
	copper as quoted on the Shanghai Futures Exchange; (ii)
	the market price of silver as quoted on the Shanghai
	Huatong Silver Exchange; and (iii) the market price of
	gold as quoted on the Shanghai Gold Exchange, and taking
	into account relevant applicable processing costs.

Reasons for and benefits of entering into the Hubei Gold Purchase Framework Agreement

In respect of the existing continuing connected transactions, the purchase framework agreement dated 3 November 2016 entered into between the Company and Hubei Gold will expire on 31 December 2019. The Company intends to continue to enter into transactions of a similar nature from time to time after the expiry date. Therefore, on 22 November 2019, the Company and Hubei Gold entered into the Hubei Gold Purchase Framework Agreement, nature of which is similar to that of the transactions under the aforesaid purchase framework agreement, for a term of three years from 1 January 2020 to 31 December 2022.

We have discussed with the management of the Company and understand that the purchase of products from Hubei Gold can reduce the costs of production of the Group and entering into the Hubei Gold Purchase Framework Agreement will (i) allow the Group to leverage on the competitive advantages of Hubei Gold to obtain many of the

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

products which the Group requires for its production and operations; and (ii) assist the Group in ensuring a cost-effective, timely and stable source of supply of products and materials required for its operations.

We have reviewed the Hubei Gold Purchase Framework Agreement and note that the basis of determining the prices for the products are clearly stated thereunder, which is primarily made with reference to the Market Price. We note that the Group must obtain at least two quotes from other independent third parties as part of the assessment of the Market Price. Further, the terms offered by Hubei Gold to the Group must be equal to or more favourable than those offered to its other independent customers (if available). In addition, we have obtained from the Company and reviewed samples of existing contracts for the relevant products. We note that the prices of the relevant products were primarily determined with reference to the Market Price, such as the market price as quoted on the Shanghai Futures Exchange and the Shanghai Huatong Silver Exchange. We consider that the Company has complied with its internal control procedures and the contract prices under the samples are in line with the Company's pricing policy as described above.

In view of the aforementioned factors, we are of the view that the pricing mechanism of the products under the Hubei Gold Purchase Framework Agreement is fair and reasonable.

Further, we have interviewed with the Management and understand that the directors and senior management of the Company will monitor closely and review regularly the continuing connected transactions of the Company. The Company will adopt a series of risk management arrangements, and endeavour to maintain, in relation to the continuing connected transactions, the independence of the Company; the fairness of the price of the transactions; the fairness of the terms of the transactions; and the right of the Company to conduct transactions with independent third parties other than Hubei Gold. The relevant arrangements include: (i) the continuing connected transactions contemplated under the Hubei Gold Purchase Framework Agreement are conducted on a non-exclusive basis; (ii) upon the signing of the Hubei Gold Purchase Framework Agreement and its approval by the Independent Shareholders, the relevant business department of the Company will be responsible for the implementation of the Hubei Gold Purchase Framework Agreement; and (iii) before the signing of each individual agreement, the finance department of the Company will evaluate the terms, including the fairness of the price, of the agreement as well as monitor the Company's existing continuing connected transactions, and review whether the Company's transactions are fair and reasonable in accordance with the terms of the Hubei Gold Purchase Framework Agreement and internal control manual. As such, we are of the view that the Company has a sound risk management system to safeguard the interest of the independent shareholders.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In conclusion, we are of the view that entering into the Hubei Gold Purchase Framework Agreement is in the interests of the Group and the Shareholders as a whole.

Proposed annual caps under the Hubei Gold Purchase Framework Agreement

The table below sets out the historical figures, existing annual caps and Proposed Annual Caps for the Hubei Gold Purchase Framework Agreement:

Year ending

Year ended

Year ending

31 December

31 December 2017

31 December 2018

31 December 2019

2020

2021

2022

Actual

amount

(up to

Actual

31 October

amount

2019)

Proposed

Annual cap

(audited)

Annual cap

(audited)

Annual cap

(unaudited)

annual cap

(RMB'000)

83,624

75,066

97,883

14,315

114,441

32,831

69,029

77,755

91,893

We understand that the above Proposed Annual Caps have been determined with reference to: (i) the historical purchase orders placed by the Group with Hubei Gold for the relevant products; (ii) the projected future orders based on the expected increase in the products and services required as a result of the expected growth in the business of the Group; and (iii) the average historical market price and the anticipated future market price for the relevant products.

In order to assess the fairness and reasonableness of the Proposed Annual Caps, we have obtained from the Management and reviewed the relevant calculations of the Proposed Annual Caps.

The Proposed Annual Caps in FY2020, FY2021 and FY2022 are approximately RMB69.0 million, RMB77.8 million and RMB91.9 million, respectively. We have interviewed with the Management and understand that the Proposed Annual Caps were determined with reference to, among others:

the Proposed Annual Caps in FY2020 is primarily made with reference to the historical purchases from Hubei Gold during the two years ended 31 December 2018 and the ten months ended 31 October 2019 which had reached as high as approximately RMB75.1 million. As advised by the Management, we understand that Hubei Gold had encountered a temporary suspension in its production in 2018 due to an unexpected incident in its mining operation. Such incident had negatively affected Hubei Gold's supply of the relevant products, and hence the historical purchase orders placed by the Group with Hubei Gold during the year ended 31 December 2018 and the ten months ended 31 October 2019. The operation of Hubei Gold has been gradually recovered, and fully resumed in the second half of 2019;

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

the increases in the Proposed Annual Caps in FY2021 and FY2022 as compared with FY2020 are mainly due to the expected increase in demand in raw materials such as copper concentrate by the Group to cope with its New Copper Cathode Production Plant which is expected to commence operation in the first half of 2021; and
the Company has entered into letters of intent with Hubei Gold, which have explicitly set out the target sales volume of the products under the Hubei Gold Purchase Framework Agreement for each of the three years ending 31 December 2022. We have obtained from the Management and reviewed the letters of intent, and understood that the target sales volume conforms to the Proposed Annual Caps, both parties have reached consensus on the target sales volume as stated thereunder. There will be no consequence or penalty on the Company for not reaching the target volume.

Taking into account the above factors as a whole, we are of the view that the Proposed Annual Caps are fair and reasonable.

2.7 CNMC Group Purchase and Production Services Framework Agreement

Date:	22 November 2019
Parties:	(1)	the Company
	(2)	CNMC
Nature of	The CNMC Group will:
transactions:
	(1)	supply certain products	to the Group,	including
		blister copper, copper concentrate, raw materials,
		auxiliary	equipment,	supporting	materials,
		components,	production	equipment, tools	and such

other products as agreed by the parties from time to time; and

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

	(2) provide certain production services to the Group,
	including	supervision,	construction,	design,
	purchase, maintenance and such other production
	services as agreed by the parties from time to time.
Term:	1 January 2020 to 31 December 2022.
Time and method of	Based on market practice.
payment:
Pricing mechanism:	Based on: (i) the government prescribed price; (ii) if there
	is no applicable government prescribed price, the Market
	Price determined	by the Company by way	of a

As at the Latest Practicable Date, prices for the supply of the relevant products and services will be determined by the parties on the following basis:

Blister copper:	With reference to (as applicable) (i) the market price of
	copper as quoted on the Shanghai Futures Exchange or the
	London Metal Exchange; (ii) the market price of silver as
	quoted on the Shanghai Huatong Silver Exchange or by the
	London Bullion Market Association; or (iii) the market
	price of gold as quoted on the Shanghai Gold Exchange or
	by the London Bullion Market Association, and taking into
	account relevant applicable processing costs.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Copper concentrate:	With reference to (as applicable): (i) the market price of
	copper as quoted on the Shanghai Futures Exchange, or the
	London Metal Exchange (adjusted with reference to the
	premium or discount quoted by Reuters as applicable); (ii)
	the market price of silver as quoted on the Shanghai
	Huatong Silver Exchange, the Chicago Mercantile
	Exchange (adjusted with reference to the premium or
	discount quoted by Reuters) or the London Bullion Market
	Association; and (iii) the market price of gold as quoted on
	the Shanghai Gold Exchange, the Chicago Mercantile
	Exchange (adjusted with reference to the premium or
	discount quoted by Reuters) or the London Bullion Market
	Association, taking into account relevant applicable
	processing costs.
Raw materials,	With reference to the tender prices and the overall market
auxiliary	condition.
equipment,
supporting
materials,
components,
production
equipment and
tools:
Maintenance work:	With reference to the relevant prices prescribed by
	Department of Housing and Urban-Rural Development of
	Hubei Province and the actual tender prices.
Supervision:	With reference to the results of public tender in accordance
	with applicable PRC laws and regulations.
Construction, design	With reference to the relevant prices prescribed by
and purchase:	Department of Housing and Urban-Rural Development of
	Hubei Province.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Reasons for and benefits of entering into the CNMC Group Purchase and Production Services Framework Agreement

In respect of the existing continuing connected transactions, the purchase and production services framework agreement dated 3 November 2016 entered into between the Company and CNMC will expire on 31 December 2019. The Company intends to continue to enter into transactions of a similar nature from time to time after the expiry date. Therefore, on 22 November 2019, the Company and CNMC entered into the CNMC Group Purchase and Production Services Framework Agreement, nature of which is similar to that of the transactions under the aforesaid purchase and production services framework agreement, for a term of three years from 1 January 2020 to 31 December 2022.

We have discussed with the Management and understand that the products and production services to be provided under the CNMC Group Purchase and Production Services Framework Agreement will be important to and are necessary for the Group's business operation. The entering into of the CNMC Group Purchase and Production Services Framework Agreement will (i) allow the Group to leverage on the vast resources of the CNMC Group to obtain many of the products and production services which the Group requires for its increasing production capacity and operations; (ii) assist the Group in ensuring a cost-effective, timely and stable source of supply of products, materials and production services required for its operations; and (iii) allow the Company to further diversify its business risks through purchases of blister copper imported from a mine in Zambia, Africa, which offers an alternative, abundant and stable supply, as opposed to the supply in the PRC which is generally insufficient to adequately and promptly satisfy market demand.

By entering into the CNMC Group Purchase and Production Services Framework Agreement, the CNMC Group will be able to act as an inter-group supplier and service provider. The CNMC Group will be able to provide a better and more efficient communication with the Group, and the Group may be able to negotiate more favourable terms with the CNMC Group, as compared with other suppliers and/or service providers. Further, it will allow the Group to also benefit from the procurement network of the CNMC Group, given its long-term relationship with the CNMC Group and the close geographical proximity of their respective operations.

We have also enquired with the Management and understand that the purchase of blister copper from CNMC Group can reduce the costs of production of the Group by saving costs in transportation. Further, supply of blister copper in the PRC is generally insufficient to adequately and promptly satisfy market demand. In this regard, the Group intends to purchase (on normal commercial terms) from the CNMC Group certain blister copper that are imported from a mine in Zambia, Africa, that is operated by a subsidiary of the CNMC Group. Such mine in Zambia, Africa offers an alternative, abundant and stable supply of blister copper, and the Group intends to satisfy a portion of its demand for blister copper with such overseas purchases to diversify its business risks.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We concur with the Management that the entering into the CNMC Group Purchase and Production Services Framework Agreement will allow the Group to (i) leverage on the vast resources of the CNMC Group; (ii) obtain cost-effective, timely and stable source of supply of products, materials and production services required for its operations; and (iii) diversify its business risks through purchases of blister copper from overseas.

Regarding the pricing policy, we have obtained from the Company and reviewed the Group's relevant internal control manual. We note that when considering the terms of the relevant products and services, the Company shall primarily refer to the government- prescribed price. If such government-prescribed price is not available, the Group shall refer to the Market Price and/or quotes from other independent third parties.

We have reviewed the CNMC Group Purchase and Production Services Framework Agreement and note that the basis of determining the prices for the products and production services are clearly stated thereunder, which is primarily made with reference to the relevant government-prescribed price, or the Market Price if there is no applicable government-prescribed price. We note that the Group must obtain at least two quotes from other independent third parties as part of the assessment of the Market Price. Further, the terms offered by the CNMC Group to the Group must be equal to or more favourable than those offered to its other independent customers (if available). In addition, we have obtained from the Company and reviewed samples of existing contracts for the relevant products and/or services. We note that the prices of the relevant products and/or services were primarily determined with reference to the Market Price, such as the market price as quoted on the London Metal Exchange, or the government-prescribed price, such as the prices prescribed by the Department of Housing and Urban-Rural Development of Hubei Province. We consider that the Company has complied with its internal control procedures and the contract prices under the samples are in line with the Company's pricing policy as described above.

In view of the aforementioned factors, we are of the view that the pricing mechanism of the products and production services under the CNMC Group Purchase and Production Services Framework Agreement is fair and reasonable.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

the implementation of the CNMC Group Purchase and Production Services Framework Agreement; and (iii) before the signing of each individual agreement, the finance department of the Company will evaluate the terms, including the fairness of the price, of the agreement as well as monitor the Company's existing continuing connected transactions, and review whether the Company's transactions are fair and reasonable in accordance with the terms of the CNMC Group Purchase and Production Services Framework Agreement and internal control manual. As such, we are of the view that the Company has a sound risk management system to safeguard the interest of the independent shareholders.

In conclusion, we are of the view that entering into the CNMC Group Purchase and Production Services Framework Agreement is in the interests of the Group and the Shareholders as a whole.

Proposed annual caps for the CNMC Group Purchase and Production Services Framework Agreement

The table below sets out the historical figures, existing annual caps and Proposed Annual Caps for the CNMC Group Purchase and Production Services Framework Agreement:

Year ending

Year ended

Year ending

31 December

31 December 2017

31 December 2018

31 December 2019

2020

2021

2022

Actual

amount

(up to

Actual

31 October

amount

2019)

Proposed

Annual cap

(audited)

Annual cap

(audited)

Annual cap

(unaudited)

annual cap

(RMB'000)

1,833,681

397,157

2,298,958

836,297

2,868,592

908,285

4,629,255

3,780,591

4,140,206

In order to assess the fairness and reasonableness of the Proposed Annual Caps, we have obtained from the Management and reviewed the relevant calculations of the Proposed Annual Caps.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Proposed Annual Caps in FY2020, FY2021 and FY2022 are approximately RMB4.6 billion, RMB3.8 billion and RMB4.1 billion, respectively. We have interviewed with the Management and understand that the Proposed Annual Caps were determined with reference to, among others:

the Proposed Annual Caps in FY2020 is primarily made with reference to:
1. the estimated construction costs of approximately RMB2.6 billion for the New Copper Cathode Production Plant (being part of the total estimated construction costs of approximately RMB4.2 billion) which construction works are expected to commence in 2020. We note from the JV Circular that, among others, China No. 15 Metallurgical Construction Group Co., Ltd.* (being one of the partners under the JV Company and a wholly- owned subsidiary of CNMC) is principally engaged in general contracting for engineering construction, and it will be primarily responsible for the engineering construction of the New Copper Cathode Production Plant for the JV Company. Through the arrangement regarding the JV Company, the Group will be able to leverage on the expertise in engineering construction of China No. 15 Metallurgical Group Co., Ltd.* in the construction and future operation of the New Copper Cathode Production Plant;
2. the growth trend in the historical purchase amount between the Company and the CNMC Group during the past two to three years. The historical purchase amount for the two years ended 31 December 2018 and the ten months ended 31 October 2019 had been increasing from approximately RMB397 million to RMB836 million and RMB908 million, respectively. It is estimated by the Company that the total purchase amount for the year ending 31 December 2019 will reach approximately RMB1.0 billion; and
3. the anticipated purchase of additional raw materials such as blister copper and copper concentrate in the second half of 2020 to prepare for the commencement of operation of the New Copper Cathode Production Plant which is expected to take place in 2021;

the Proposed Annual Caps in FY2021 and FY2022 are primarily made with reference to (a) the estimated construction costs of approximately RMB1.0 billion and RMB0.6 billion for the New Copper Cathode Production Plant (being part of the total estimated construction costs of approximately RMB4.2 billion), respectively; and (b) the expected increase in demand in raw materials such as blister copper and copper concentrate by the Group to cope with its New Copper Cathode Production Plant which is expected to commence operation in the first half of 2021; and

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

the Company has entered into letters of intent with members of the CNMC Group, which have explicitly set out the target sales volume of certain products under the CNMC Group Purchase and Production Services Framework Agreement for each of the three years ending 31 December 2022. We have obtained from the Management and reviewed the letters of intent, and understood that both parties have reached consensus on the target sales volume as stated thereunder. There will be no consequence or penalty on the Company for not reaching the target volume.

Taking into account the above factors as a whole, we are of the view that the Proposed Annual Caps are fair and reasonable.

2.8 Combined Ancillary Services Framework Agreement

Date:	22 November 2019
Parties:	(1)	the Company
	(2)	the Parent Company
Nature of	The Parent Group will provide certain services to the
transactions:	Group, including steel cylinder inspection and repair, gas
	delivery management, waste disposal, green conservation,
	vehicle rental, property management, food and beverage
	and accommodation, logistics service, mineral water,
	seedling, telecommunication and repair, water, electricity,
	telephone charges, property repair, training and such other
	services as agreed by the parties from time to time.
Term:	1 January 2020 to 31 December 2022.
Time and method of	Based on market practice.
payment:

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Pricing mechanism:	Based on: (i) the government-prescribed price; or (ii) if
	there is no applicable government-prescribed price, the
	Market Price determined by the Company by way of a
	comprehensive evaluation method taking into account
	comparable quotes from at least two independent third
	parties obtained via public tender or price inquiry, or the
	price as negotiated by the parties if the relevant
	procurement does not require public tender or price inquiry
	procedure, or a price determined by the internal documents
	of the Group developed with reference to the Market Price.
	If the prices and charges are determined based on or with
	reference to prices, exchange rates or tax rates stated in
	specific government documents, internal documents of the
	Group, exchanges or industry-related websites, the
	effective aforementioned documents, prices and rates at
	the time of the entry into of specific transaction
	agreements by the parties shall prevail.

As at the Latest Practicable Date, prices for the provision of the relevant services will be determined by the parties on the following basis:

Steel cylinder	With reference to the operating cost of provision of the
inspection and	service(s).
repair, gas delivery
management, waste
disposal, green
conservation,
vehicle rental,
property
management, food
and beverage and
accommodation and
logistics service:
Mineral water and	For mineral water, with reference to the procurement cost,
seedling:	transportation cost and the overall market condition.
	For seedling, with reference to the relevant prices
	prescribed by Department of Housing and Urban-Rural
	Development of Hubei Province.
Telecommunication	With reference to the relevant prices prescribed by Hubei
and repair:	Provincial Communications Administration.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Water:	With reference to the price of water prescribed by
	Huangshi Price Bureau* (黃石市物價局).
Electricity:	With reference to the price of electricity prescribed by
	Hubei Province Price Bureau.
Telephone charges:	With reference to the relevant prices prescribed by Hubei
	Provincial Communications Administration.
Property repair:	With reference to the relevant prices prescribed by
	Department of Housing and Urban-Rural Development of
	Hubei Province.
Training:	With reference to the relevant standards prescribed under
	the internal document of the Parent Company regarding
	employee training fees management, which are determined
	based on the remuneration of the instructors and
	examination supervisors, costs on preparation of training
	materials and examination questions, and other relevant
	costs incurred in providing the training.

Reasons for and benefits of entering into the Combined Ancillary Services Framework Agreement

In respect of the existing continuing connected transactions, the combined ancillary services framework agreement dated 3 November 2016 entered into between the Company and the Parent Company will expire on 31 December 2019. The Company intends to continue to enter into transactions of a similar nature from time to time after the expiry date. Therefore, on 22 November 2019, the Company and the Parent Company entered into the Combined Ancillary Services Framework Agreement, nature of which is similar to that of the transactions under the aforesaid combined ancillary services framework agreement, for a term of three years from 1 January 2020 to 31 December 2022.

Pursuant to the Combined Ancillary Services Framework Agreement, the Parent Group will provide the Group with certain ancillary services that are necessary for the Group's business operation, including steel cylinder inspection and repair, gas delivery management, waste disposal, green conservation, vehicle rental, property management,

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

food and beverage and accommodation, logistics service, mineral water, seedling, telecommunication and repair, water, electricity, telephone charges, property repair, training and such other services as agreed by the parties from time to time.

By entering into the Combined Ancillary Services Framework Agreement, the Parent Group will be able to act as an inter-group service provider. The Parent Group will be able to provide a better and more efficient communication with the Group, and the Group may be able to negotiate more favourable terms with the Parent Group, as compared with other suppliers and/or service providers.

Regarding the pricing policy, we have obtained from the Company and reviewed the Group's relevant internal control manual. We note that when considering the terms of the relevant services, the Company shall primarily refer to the government-prescribed price. If such government-prescribed price is not available, the Group shall refer to the Market Price and/or quotes from other independent third parties.

We have reviewed the Combined Ancillary Services Framework Agreement and note that the basis of determining the prices for the services are clearly stated thereunder, which is primarily made with reference to the relevant government-prescribed price, or the Market Price if there is no applicable government-prescribed price. We note that the Group must obtain at least two quotes from other independent third parties as part of the assessment of the Market Price. Further, the terms offered by the Parent Group to the Group must be equal to or more favourable than those offered to its other independent customers (if available). In addition, we have obtained from the Company and reviewed samples of existing contracts for the relevant services. We note that the prices of the relevant services were primarily determined with reference to the government-prescribed price, such as the prices as prescribed by Huangshi Price Bureau* (黃石市物價局) and Hubei Province Price Bureau. We consider that the Company has complied with its internal control procedures and the contract prices under the samples are in line with the Company's pricing policy as described above.

In view of the aforementioned factors, we are of the view that the pricing mechanism of the services under the Combined Ancillary Services Framework Agreement is fair and reasonable.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Agreement and its approval by the Independent Shareholders, the relevant business department of the Company will be responsible for the implementation of the Combined Ancillary Services Framework Agreement; and (iii) before the signing of each individual agreement, the finance department of the Company will evaluate the terms, including the fairness of the price, of the agreement as well as monitor the Company's existing continuing connected transactions, and review whether the Company's transactions are fair and reasonable in accordance with the terms of the Combined Ancillary Services Framework Agreement and internal control manual. As such, we are of the view that the Company has a sound risk management system to safeguard the interest of the independent shareholders.

In conclusion, we are of the view that entering into the Combined Ancillary Services Framework Agreement is in the interests of the Group and the Shareholders as a whole.

Proposed annual caps under the Combined Ancillary Services Framework Agreement

The table below sets out the historical figures, existing annual caps and Proposed Annual Caps for the Combined Ancillary Services Framework Agreement:

Year ending

Year ended

Year ending

31 December

31 December 2017

31 December 2018

31 December 2019

2020

2021

2022

Actual

amount

(up to

Actual

31 October

amount

2019)

Proposed

Annual cap

(audited)

Annual cap

(audited)

Annual cap

(unaudited)

annual cap

(RMB'000)

458,792

291,765

488,604

308,045

490,758

305,526

379,020

385,323

391,613

We understand that the above Proposed Annual Caps have been determined with reference to: (i) the historical amounts paid by the Group to the Parent Group for similar ancillary services; (ii) the projected future orders based on the expected increase in the services to be provided during the three years ending 31 December 2022; and (iii) the average historical market price for the relevant services and the anticipated future market price for the relevant products and services.

In order to assess the fairness and reasonableness of the Proposed Annual Caps, we have obtained from the Management and reviewed the relevant calculations of the Proposed Annual Caps.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Proposed Annual Caps in FY2020, FY2021 and FY2022 are approximately RMB379 million, RMB385 million and RMB392 million, respectively. We have interviewed with the Management and understand that the Proposed Annual Caps were determined with reference to, among others:

the Proposed Annual Caps in FY2020 is primarily made with reference to the historical purchase amount between the Company and the Parent Group during the past two to three years, in particular, the purchase amount for the ten months ended 31 October 2019 has reached approximately RMB306 million. It is estimated by the Company that the total purchase amount for the year ending 31 December 2019 will reach approximately RMB373 million; and
the increases in the Proposed Annual Caps in FY2021 and FY2022 as compared with FY2020 are mainly due to the expected increase in demand of the related ancillary services which are necessary for the Group's business operations arising from the New Copper Cathode Production Plant which is expected to commence operation in the first half of 2021. We concur with the Management that an increase in the Group's production will cause a corresponding increase in the amount of ancillary services required by the Group for its business operations.

Taking into account the above factors as a whole, we are of the view that the Proposed Annual Caps are fair and reasonable.

2.9 Land Lease Framework Agreement

Date:	23	December 2011
Parties:	(1)	the Company
	(2)	the Parent Company
Nature of	The Parent Group will lease certain parcels of land to the
transactions:	Group.
Term:	From the date on which the Land Lease Framework
	Agreement takes effect in accordance with its terms until
	31	December 2039.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Rent, fees and other	Rent will be the annual depreciation amount of the relevant
payables:	parcel of land, which will be calculated as the total amount
	paid by the owner of the land to the relevant government
	authorities for acquiring the relevant land use right,
	divided by the estimated useful life of such land. The
	lessee will also bear all the taxes and duties payable for the
	lease, which will be calculated by reference to the rent
	payable. Both the rent and the aggregate taxes and duties
	payable by the lessee for each parcel of land will be the
	same for each year during the term of the lease. The above
	pricing mechanism is adopted since the parcels of land to
	be leased by members of the Group from the Parent Group
	are located around the four mines and the smelting plant in
	Hubei held by the Group and there is no comparable land
	in the proximity and no corresponding market rent
	available for reference.
Time and method of	Rent is payable annually to the designated bank account of
payment:	the Parent Company or its relevant subsidiary.

Reasons for and benefits of entering into the Land Lease Framework Agreement

As advised by the Management, the parcels of land under the Land Lease Framework Agreement are located around the four mines and the smelting plant in Hubei held by the Group and there is no comparable land in the proximity and no corresponding market rent available for reference. We understand that the major products of the four mines include copper concentrate, being raw material necessary for producing copper cathode. The smelting plant undertakes the smelting of copper concentrate and production of the copper cathode, which is the primary product sold by the Group to its customers.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Given the above factors, we concur with the Management that the Land Lease Framework Agreement falls within the ordinary and usual course of business of the Group, and is in the interests of the Group and the Shareholders as a whole.

Proposed annual caps under the Land Lease Framework Agreement

As HKFRS 16 "Lease" has come into effect on 1 January 2019 and is applicable to financial years starting on or after 1 January 2019, pursuant to the requirements of the Stock Exchange, the Proposed Annual Caps relating to the Land Lease Framework Agreement with the Group as the lessee will be set based on the total value of right-of-use assets relating to the leases to be entered into by the Group under the Land Lease Framework Agreement.

The table below sets out the Proposed Annual Caps for the Land Lease Framework Agreement:

Year ending

Year ended

Year ending

31 December

31 December 2017

31 December 2018

31 December 2019

2020

2021

2022

Actual

amount

(up to

Actual

31 October

amount

2019)

Proposed

Annual cap

(audited)

Annual cap

(audited)

Annual cap

(unaudited)

annual cap

(RMB'000)

13,792

11,490

13,792

11,595

13,792

6,180

145,171

1,100

We understand that the above Proposed Annual Caps have been determined with reference to: (i) the expected number of parcels of land to be leased by the Group from the Parent Group; (ii) the lease term in relation to the leases; (iii) the benchmark borrowing rate set by the People's Bank of China; and (iv) the aggregate rent, taxes and duties payable by the Group for leasing those parcels of land.

We note that pursuant to HKFRS 16, certain parcels of land under the Land Lease Framework Agreement will be recognised as right-of-use assets, and the Proposed Annual Caps for FY2020, FY2021 and FY2022 are approximately RMB145 million, RMB1 million and RMB1 million, respectively.

We have discussed with the Management and understand that the Proposed Annual Caps have taken into account the total value of right-of-use assets of certain parcels of land under the Land Lease Framework Agreement, which are calculated with reference to the future years by discounting the estimated total rental fee for the leased lands in each year with discount rate which is referenced to the benchmark borrowing rate set by the PBOC.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In this regard, we have obtained from the Management and reviewed the relevant calculations. We note that in arriving at the Proposed Annual Caps, the Company has applied the prevailing benchmark interest rate of 4.9%, which is the benchmark interest rate for RMB loan for over five years set by the PBOC, in calculating the total value of right-of-use assets of certain parcels of land under the Land Lease Framework Agreement. We understand from the Management that the Company adopted such benchmark interest rate after taking into account the term of the aforesaid land parcels under the Land Lease Framework Agreement lasts until 31 December 2039, which is over 5 years from the date of the Land Lease Framework Agreement. We consider that it is fair and reasonable to use such benchmark interest rate for calculating the total value of right-of-use assets of the aforesaid land parcels under the Land Lease Framework Agreement.

Further, as advised by the Management, it would be appropriate to adopt the benchmark interest rate of the PBOC in arriving the total value of right-of-use assets of the aforesaid land parcels under the Land Lease Framework Agreement, given that it is commonly adopted in lease transactions in the PRC, especially when the repayment of rental fee is denominated in RMB.

Taking into account the above factors, we are of the view that the Proposed Annual Caps are fair and reasonable.

RECOMMENDATION

Having considered the principal factors and reasons above, we are of the view that the Continuing Connected Transactions (including the Proposed Annual Caps) are (i) entered into in the ordinary and usual course of business of the Group; (ii) on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; and (iii) in the interests of the Company and the Shareholders as a whole. Accordingly, we advise the Independent Board Committee to recommend, and we ourselves recommend the Independent Shareholders to vote in favour of the resolutions in relation to the Continuing Connected Transactions and the Proposed Annual Caps to be proposed at the SGM.

Yours faithfully,

For and on behalf of

Amasse Capital Limited

May Tsang

Director

Ms. May Tsang is a licensed person registered with the Securities and Future Commission of Hong Kong and regards as a responsible officer of Amasse Capital Limited to carry out type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities under the SFO and has over 12 years of experience in corporate finance industry.

For identification purpose only

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

1. FINANCIAL INFORMATION OF THE GROUP

The Company is required to set out in this circular the financial information for the last three financial years with respect to the profits and losses, financial record and position, set out as a comparative table and the latest published audited balance sheet together with the notes to the annual accounts for the last financial year for the Group.

The audited consolidated financial statements of the Group for the three years ended 31 December 2016, 2017 and 2018 respectively and the unaudited condensed consolidated financial statements of the Group for the six months ended 30 June 2019 have been published on the websites of the Stock Exchange (www.hkexnews.hk) and the Company (www.hk661.com):

annual report of the Company for the year ended 31 December 2016 published on 27 April 2017 (pages 69 to 158)https://www1.hkexnews.hk/listedco/listconews/sehk/2017/0427/ltn20170427327.pdf
annual report of the Company for the year ended 31 December 2017 published on 24 April 2018 (pages 56 to 144)https://www1.hkexnews.hk/listedco/listconews/sehk/2018/0424/ltn20180424886.pdf
annual report of the Company for the year ended 31 December 2018 published on 29 April 2019 (pages 55 to 158)https://www1.hkexnews.hk/listedco/listconews/sehk/2019/0429/ltn201904292008.pdf
interim report of the Company for the six months ended 30 June 2019 published on 24 September 2019 (pages 19 to 60)https://www1.hkexnews.hk/listedco/listconews/sehk/2019/0924/2019092400783.pdf

2. FINANCIAL AND TRADING PROSPECTS

The Group focused on work objectives throughout the year, which include improvement of technical and economic indices, orderly progression of mines replacement and further expansion into the circular economy industry. The Group has been striving to enhance the quality of its business development by aligning with the market expectations and implementing comprehensive in-depth reforms. The Group will focus on the main subject of "enhancing production, improving indices, reducing costs and expanding market" with pragmatic and cautious attitude in a continuous and proactive effort to align with the market mechanism.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

3. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors confirmed that there was no material adverse change in the financial or trading position of the Group since 31 December 2018, being the date to which the latest published audited financial statements of the Group were made up.

4. FURTHER INFORMATION

Pursuant to the major transaction requirements under Chapter 14 of the Listing Rules, the Company is required to include in this circular (a) a statement of indebtedness of the Group and (b) a statement of working capital sufficiency of the Group made by the Directors.

The Directors are of the view that the state of indebtedness and sufficiency of working capital of the Group would not be adversely affected by the deposit services to be provided under the CNMC Financial Services Framework Agreement, and the Company has applied for and the Stock Exchange has granted a waiver from compliance with the requirements under Rule 14.66(10) of the Listing Rules to include in this circular (a) a statement of indebtedness of the Group and (b) a statement of working capital sufficiency of the Group made by the Directors. The information with respect to the solvency and capital adequacy of the Group by providing the deposit services under the CNMC Financial Services Framework Agreement is alternatively disclosed as follows:

Indebtedness

The deposit services to be provided under the CNMC Financial Services Framework Agreement would not increase the indebtedness of the Group, and the amount of indebtedness of the Group as at 30 June 2019 has been disclosed in the interim report of the Company for the six months ended 30 June 2019 and the amount of indebtedness of the Group as at 31 August 2019 has been disclosed in the circular of the Company dated 25 October 2019.

Working capital

The deposit services to be provided under the CNMC Financial Services Framework Agreement will not have adverse effect towards the sufficiency of working capital of the Group.

- I-2 -

APPENDIX II

GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this document misleading.

2. DIRECTORS' AND CHIEF EXECUTIVE'S INTERESTS AND SHORT POSITIONS IN THE SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY

As at the Latest Practicable Date, the interests and short positions of each of the Directors and chief executives of the Company in the Shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO), which were required to be recorded in the register maintained by the Company under Section 352 of the SFO, or required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions in which they were taken or deemed to have under such provisions of the SFO) and the Model Code for Securities Transactions by Directors of Listed Issuers in the Listing Rules, were as follows:

				Percentage
Name of		Nature of	Number of	of issued
Director	Capacity	Interest	Shares	Shares
				(%)(Note 3)
Wang Qihong	Beneficial owner	Personal	594,000(L)	0.00
	Interest of spouse	Personal	1,000,000(L)	0.01
			(Note 2)
Wang Guoqi	Beneficial owner	Personal	600,000(L)	0.00

Notes:

The letter "L" denotes a long position in the Shares.
Mr. Wang Qihong is deemed to be interested in 1,000,000 shares through the interests of his spouse, Ms. Geng Shuang, pursuant to Part XV of the SFO.
The shareholding percentage was calculated based on 17,895,579,706 Shares as at the Latest Practicable Date.

- II-1 -

APPENDIX II

GENERAL INFORMATION

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executives of the Company had or was deemed to have any interests or short positions in the shares or the underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) that was required to be recorded pursuant to Section 352 of the SFO; or as otherwise notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO and the Model Code for Securities Transactions by Directors of Listed Issuers in the Listing Rules.

As at the Latest Practicable Date: (i) Mr. Wang Yan was a director of the Parent Company;

Mr. Long Zhong Sheng was a director of China Times and an employee of the Parent Company; and (iii) Mr. Yu Liming and Mr. Chen Zhimiao were employees of the Parent Company. Save as disclosed above, as at the Latest Practicable Date, so far as was known to the Directors, none of the Directors was a director or an employee of a company which had an interest or short position in the Company's shares which would fall to be disclosed under the provisions of Division 2 and 3 of Part XV of the SFO.

3. DIRECTORS' INTERESTS IN ASSETS OF THE GROUP

As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets which had been acquired or disposed of by or leased to, or which were proposed to be acquired or disposed of by or leased to, any member of the Group since 31 December 2018, being the date to which the latest published audited accounts of the Group were made up.

4. DIRECTORS' INTERESTS IN CONTRACTS OR ARRANGEMENT

As at the Latest Practicable Date, so far as the Directors were aware, none of the Directors was materially interested in any contracts or arrangements subsisting as at the Latest Practicable Date which was significant in relation to the business of the Group.

5. DIRECTORS' SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had entered into or proposed to enter into a service contract with any member of the Group which will not expire or is not determinable within one year without payment of compensation (other than statutory compensation).

- II-2 -

APPENDIX II

GENERAL INFORMATION

6. DIRECTORS' INTERESTS IN COMPETING BUSINESS

As at the Latest Practicable Date, so far as the Directors were aware, none of the Directors or their respective close associates was interested in any business which competes or is likely to compete, either directly or indirectly, with business of the Group, or had or might have any other conflicts of interest with the Group pursuant to Rule 8.10 of the Listing Rules.

7. MATERIAL LITIGATION

As at the Latest Practicable Date, no member of the Group was engaged in any litigation or claim of material importance and, so far as the Directors were aware, no litigation or claim of material importance was pending or threatened against any members of the Group.

8. MATERIAL CONTRACT

Set out below is the material contract (not being contract entered into in the ordinary course of business) entered or to be entered into by any member of the Group within the two years immediately preceding the Latest Practicable Date:

the Capital Contribution Agreement.

Save as disclosed above, there is no material contract (not being entered into in the ordinary course of business) entered into by any member of the Group within the two years immediately preceding the Latest Practicable Date.

9. QUALIFICATIONS OF EXPERT AND CONSENT

The following is the qualification of the professional adviser who has given its opinion or advice which is contained in this circular:

Name	Qualification
Amasse Capital Limited	a licensed corporation under the SFO permitted to carry
	out Type 1 (dealing in securities) and Type 6 (advising
	on corporate finance) regulated activities under the SFO

As at the Latest Practicable Date, the Independent Financial Adviser did not have any shareholding in the Company or any of its subsidiaries or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

- II-3 -

APPENDIX II

GENERAL INFORMATION

As at the Latest Practicable Date, the Independent Financial Adviser had given and had not withdrawn its written consent to the issue of this circular, with the inclusion herein of its letter of advice and references to its name and/or its advice in the form and context in which they appeared.

As at the Latest Practicable Date, the Independent Financial Adviser did not have any direct or indirect interests in any assets which had been acquired, disposed of or leased to, or which were proposed to be acquired, disposed of by or leased to, any member of the Group since 31 December 2018, being the date to which the latest published audited consolidated financial statements of the Group were made up.

MISCELLANEOUS
1. The registered office of the Company is at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda. The head office and principal place of business of the Company in Hong Kong is Suite No. 10B, 16/F, Tower 3, China Hong Kong City, China Ferry Terminal, 33 Canton Road, Kowloon, Hong Kong.
2. The Hong Kong branch share registrar and transfer office of the Company is Tricor Investor Services Limited at Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong.
3. The company secretary of the Company is Mr. Li Ka Fai, who obtained a bachelor's degree of Business Administration (Hon) in Accountancy Programme from the City University of Hong Kong in 2008 and is a member of the Hong Kong Institute of Certified Public Accountants.
4. This circular is in both English and Chinese. If there is any inconsistency, the English text shall prevail.
DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be made available for inspection during normal business hours on Mondays to Fridays (other than public holidays) at the Company's principal place of business in Hong Kong at Suite No. 10B, 16/F, Tower 3, China Hong Kong City, China Ferry Terminal, 33 Canton Road, Kowloon, Hong Kong from the date of this circular up to the date of the SGM:

the memorandum of association and bye-laws of the Company;
the material contract referred to in the paragraph headed "8. Material Contract" in this appendix;
the Parent Group Sales Framework Agreement;

- II-4 -

APPENDIX II

GENERAL INFORMATION

the Huangshi Xingang Sales Framework Agreement;
the Zhongse Aobote Sales Framework Agreement;
the Parent Group Purchase and Production Services Framework Agreement;
the Hubei Gold Purchase Framework Agreement;
the CNMC Group Purchase and Production Services Framework Agreement;
the Combined Ancillary Services Framework Agreement;
the CNMC Financial Services Framework Agreement;
the Land Lease Framework Agreement;
the letter from the Independent Board Committee, the text of which is set out in this circular;
the letter from the Independent Financial Adviser, the text of which is set out in this circular;
the written consent from the Independent Financial Adviser referred to in the paragraph headed "9. Qualifications of Expert and Consent" in this appendix;
the annual reports of the Company for the three financial years ended 31 December 2016, 2017 and 2018 respectively;
the interim report of the Company for the six months ended 30 June 2019;
the circular of the Company dated 25 October 2019 in relation to, among other things, the Capital Contribution Agreement; and
this circular.

- II-5 -

NOTICE OF SPECIAL GENERAL MEETING

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this notice, make no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this notice.

(Incorporated in Bermuda with limited liability)

(Stock Code: 00661)

NOTICE OF SPECIAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that a special general meeting (the "SGM") of China Daye Non-Ferrous Metals Mining Limited (the "Company") will be held at Imperial Room III, Mezzanine Floor, Towers Wing, Royal Pacific Hotel, China Hong Kong City, 33 Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong on Wednesday, 15 January 2020 at 10:00 a.m. (or at any adjournment thereof) for the purpose of considering and, if thought fit, passing, with or without modifications, the following resolutions. Unless otherwise defined, capitalised terms used in this notice shall have the same meanings as those defined in the circular of the Company dated 27 December 2019.

ORDINARY RESOLUTIONS

1. "THAT:

the CNMC Financial Services Framework Agreement dated 22 November 2019 entered into between the Company and CNMC be and is hereby approved, confirmed and ratified; and
the Proposed Annual Caps for the deposit services to be provided by the CNMC Group to the Group under the CNMC Financial Services Framework Agreement in the amounts of RMB2,681,869,000, RMB2,885,041,000 and RMB3,110,325,000 for each of the three years ending 31 December 2020, 2021 and 2022, respectively, and the transactions contemplated thereunder be and are hereby approved; and
the Proposed Annual Caps for the bills acceptance and settlement and foreign exchange settlement and sales services to be provided by the CNMC Group to the Group under the CNMC Financial Services Framework Agreement in the amounts of RMB6,120,300,000, RMB11,090,900,000 and RMB16,502,900,000 for each of the three years ending 31 December 2020, 2021 and 2022, respectively, and the transactions contemplated thereunder be and are hereby approved; and

- SGM-1 -

NOTICE OF SPECIAL GENERAL MEETING

1. any one Director be and is hereby authorised for and on behalf of the Company to execute all such other documents, instruments and agreements and to take all steps necessary and expedient to implement and/or give effect to the CNMC Financial Services Framework Agreement."
"THAT:
1. the Parent Group Sales Framework Agreement dated 22 November 2019 entered into between the Company and the Parent Company be and is hereby approved, confirmed and ratified; and
2. the Proposed Annual Caps for the Parent Group Sales Framework Agreement in the amounts of RMB7,207,373,000, RMB10,802,160,000 and RMB14,383,651,000 for each of the three years ending 31 December 2020, 2021 and 2022, respectively, and the transactions contemplated thereunder be and are hereby approved; and
3. any one Director be and is hereby authorised for and on behalf of the Company to execute all such other documents, instruments and agreements and to take all steps necessary and expedient to implement and/or give effect to the Parent Group Sales Framework Agreement."
"THAT:
1. the Huangshi Xingang Sales Framework Agreement dated 22 November 2019 entered into between the Company and Huangshi Xingang be and is hereby approved, confirmed and ratified; and
2. the Proposed Annual Caps for the Huangshi Xingang Sales Framework Agreement in the amounts of RMB15,000,000, RMB40,000,000 and RMB75,000,000 for each of the three years ending 31 December 2020, 2021 and 2022, respectively, and the transactions contemplated thereunder be and are hereby approved; and
3. any one Director be and is hereby authorised for and on behalf of the Company to execute all such other documents, instruments and agreements and to take all steps necessary and expedient to implement and/or give effect to the Huangshi Xingang Sales Framework Agreement."
"THAT:
1. the Zhongse Aobote Sales Framework Agreement dated 22 November 2019 entered into between the Company and Zhongse Aobote be and is hereby approved, confirmed and ratified; and

- SGM-2 -

NOTICE OF SPECIAL GENERAL MEETING

1. the Proposed Annual Caps for the Zhongse Aobote Sales Framework Agreement in the amounts of RMB2,832,000,000, RMB2,976,000,000 and RMB2,976,000,000 for each of the three years ending 31 December 2020, 2021 and 2022, respectively, and the transactions contemplated thereunder be and are hereby approved; and
2. any one Director be and is hereby authorised for and on behalf of the Company to execute all such other documents, instruments and agreements and to take all steps necessary and expedient to implement and/or give effect to the Zhongse Aobote Sales Framework Agreement."
"THAT:
1. the Parent Group Purchase and Production Services Framework Agreement dated 22 November 2019 entered into between the Company and the Parent Company be and is hereby approved, confirmed and ratified; and
2. the Proposed Annual Caps for the Parent Group Purchase and Production Services Framework Agreement in the amounts of RMB2,176,535,000, RMB2,567,932,000 and RMB3,121,564,000 for each of the three years ending 31 December 2020, 2021 and 2022, respectively, and the transactions contemplated thereunder be and are hereby approved; and
3. any one Director be and is hereby authorised for and on behalf of the Company to execute all such other documents, instruments and agreements and to take all steps necessary and expedient to implement and/or give effect to the Parent Group Purchase and Production Services Framework Agreement."
"THAT:
1. the Hubei Gold Purchase Framework Agreement dated 22 November 2019 entered into between the Company and Hubei Gold be and is hereby approved, confirmed and ratified; and
2. the Proposed Annual Caps for the Hubei Gold Purchase Framework Agreement in the amounts of RMB69,029,000, RMB77,755,000 and RMB91,893,000 for each of the three years ending 31 December 2020, 2021 and 2022, respectively, and the transactions contemplated thereunder be and are hereby approved; and
3. any one Director be and is hereby authorised for and on behalf of the Company to execute all such other documents, instruments and agreements and to take all steps necessary and expedient to implement and/or give effect to the Hubei Gold Purchase Framework Agreement."

- SGM-3 -

NOTICE OF SPECIAL GENERAL MEETING

"THAT:
1. the CNMC Group Purchase and Production Services Framework Agreement dated 22 November 2019 entered into between the Company and CNMC be and is hereby approved, confirmed and ratified; and
2. the Proposed Annual Caps for the CNMC Group Purchase and Production Services Framework Agreement in the amounts of RMB4,629,255,000, RMB3,780,591,000 and RMB4,140,206,000 for each of the three years ending 31 December 2020, 2021 and 2022, respectively, and the transactions contemplated thereunder be and are hereby approved; and
3. any one Director be and is hereby authorised for and on behalf of the Company to execute all such other documents, instruments and agreements and to take all steps necessary and expedient to implement and/or give effect to the CNMC Group Purchase and Production Services Framework Agreement."
"THAT:
1. the Combined Ancillary Services Framework Agreement dated 22 November 2019 entered into between the Company and the Parent Company be and is hereby approved, confirmed and ratified; and
2. the Proposed Annual Caps for the Combined Ancillary Services Framework Agreement in the amounts of RMB379,020,000, RMB385,323,000 and RMB391,613,000 for each of the three years ending 31 December 2020, 2021 and 2022, respectively, and the transactions contemplated thereunder be and are hereby approved; and
3. any one Director be and is hereby authorised for and on behalf of the Company to execute all such other documents, instruments and agreements and to take all steps necessary and expedient to implement and/or give effect to the Combined Ancillary Services Framework Agreement."
"THAT:
1. the Land Lease Framework Agreement dated 23 December 2011 entered into between the Company and the Parent Company be and is hereby approved, confirmed and ratified; and
2. the Proposed Annual Caps for the Land Lease Framework Agreement in the amounts of RMB145,171,000, RMB1,100,000 and RMB1,100,000 for each of the three years ending 31 December 2020, 2021 and 2022, respectively, and the transactions contemplated thereunder be and are hereby approved; and

- SGM-4 -

NOTICE OF SPECIAL GENERAL MEETING

any one Director be and is hereby authorised for and on behalf of the Company to execute all such other documents, instruments and agreements and to take all steps necessary and expedient to implement and/or give effect to the Land Lease Framework Agreement."

By order of the Board of

China Daye Non-Ferrous Metals Mining Limited

Wang Yan

Chairman

Hong Kong, 27 December 2019

Notes:

For more information relating to the abovementioned resolutions, please refer to announcements of the Company dated 22 November 2019 and 23 December 2019 and the circular of the Company dated 27 December 2019.
The resolutions at the SGM will be taken by poll pursuant to the Listing Rules and the results of the poll will be published on the websites of the Stock Exchange and the Company in accordance with the Listing Rules.
The record date for determining Shareholders' right to attend and vote at the SGM is Tuesday, 14 January 2020. In order to qualify for attending and voting at the said meeting, all properly completed transfer forms accompanied by the relevant share certificates must be lodged with the Company's Hong Kong branch share registrar, Tricor Investor Services Limited, at Level 54, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong, for registration, no later than 4:30 p.m. on Tuesday, 14 January 2020.
Any member of the Company entitled to attend and vote at the SGM is entitled to appoint a proxy to attend and vote instead of him/her/it. A proxy need not be a member of the Company. A member who is the holder of two or more ordinary shares of the Company may appoint more than one proxy to represent him/her/it to attend and vote on his/her/its behalf. If more than one proxy is so appointed, the appointment shall specify the number and class of shares in respect of which each such proxy is so appointed.
In order to be valid, a form of proxy together with the power of attorney or other authority, if any, under which it is signed or a certified copy of that power or authority, must be deposited at the Company's Hong Kong branch share registrar, Tricor Investor Services Limited, at Level 54, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the SGM or any adjournment thereof. Delivery of the form of proxy shall not preclude a member of the Company from attending and voting in person at the SGM and, in such event, the form of proxy shall be deemed to be revoked.

As at the date of this notice, the Board comprises four executive Directors, namely Mr. Wang Yan, Mr. Long Zhong Sheng, Mr. Yu Liming and Mr. Chen Zhimiao; and three independent non-executive Directors, namely Mr. Wang Qihong, Mr. Wang Guoqi and Mr. Liu Jishun.

- SGM-5 -

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China Daye Non-Ferrous Metals Mining Ltd. published this content on 24 December 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 24 December 2019 04:55:06 UTC

Market Closed - Hong Kong S.E. Other stock markets 04:08:17 2024-05-17 am EDT			5-day change	1st Jan Change
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Apr. 01	China Daye Non-Ferrous Swings to Loss in 2023	MT
Mar. 28	China Daye Non-Ferrous Metals Mining Limited Reports Earnings Results for the Full Year Ended December 31, 2023	CI

China Daye Non-Ferrous Metals Mining Limited

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