China Daye Non Ferrous Metals Mining : VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION CAPITAL CONTRIBUTION AGREEMENT AND NOTICE OF SPECIAL GENERAL MEETING

October 24, 2019 at 09:50 am

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)

VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION

CAPITAL CONTRIBUTION AGREEMENT

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 5 to 20 of this circular. A letter from the Independent Board Committee is set out on page 21 of this circular. A letter from the Independent Financial Adviser is set out on pages 22 to 36 of this circular. A notice convening the SGM to be held at Imperial Room I, Mezzanine Floor, Towers Wing, Royal Pacific Hotel, China Hong Kong City, 33 Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong on Monday, 11 November 2019 at 10:00 a.m. is set out on pages SGM-1 to SGM-2 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.

25 October 2019

		CONTENTS
			Page
Definitions . . . .	. . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . .	21
Letter from the Independent Financial Adviser . . . . . . . . . . . . . . . . . . . . . . . . . .	22
Appendix I	-	Financial Information of the Group . . . . . . . . . . . . . . . . .	I-1
Appendix II	-	Management Discussion and Analysis of the Group . . . . .	II-1
Appendix III	-	General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	III-1
Notice of SGM	. . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	SGM-1

- i -

DEFINITIONS

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

"Announcement"	the announcement of the Company dated 30 August 2019
	in relation to, among other things, the Capital
	Contribution Agreement
"Board"	the board of Directors
"Capital Contribution Agreement"	the capital contribution agreement dated 28 August 2019
	entered into by and among Daye Metal, China No. 15
	Metallurgical, Huangshi Xingang and Huangshi State-
	owned Assets Management in relation to the
	establishment of the JV Company
"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 of the
	Company
"close associate(s)"	has the meaning ascribed to it under the Listing Rules
"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 of
	the Company
"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
"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

- 1 -

	DEFINITIONS
"Enlarged Group"	the Group as enlarged following the establishment of the
	JV Company pursuant to the Capital Contribution
	Agreement
"Group"	the Company and its subsidiaries
"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 Development Co., Ltd.* (黃石新港開
	發有限公司), a limited liability company established in
	the PRC
"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 Capital Contribution Agreement and
	the transactions contemplated thereunder
"Independent Financial Adviser"	TC Capital International Limited, a corporation licensed
or "TC Capital"	to carry 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 in respect of the Capital Contribution
	Agreement and the transactions contemplated thereunder
"Independent Shareholders"	the Shareholders other than China Times, the Parent
	Company, CNMC and their respective associates
"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

- 2 -

	DEFINITIONS
"Latest Practicable Date"	22 October 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
"mu"	mu (畝), unit of measurement of land area in the PRC,
	equivalent to approximately 666.67 square meters
"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 incorporated in the PRC and a
	controlling shareholder of the Company
"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 announcement, excludes Hong Kong, the Macau
	Special Administration of the People's Republic of China
	and Taiwan
"Production Plant"	a high purity copper cathode production plant proposed
	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 1,500 mu
"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 I, Mezzanine Floor, Towers
	Wing, Royal Pacific Hotel, China Hong Kong City, 33
	Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong on
	Monday, 11 November 2019 at 10:00 a.m. to consider,
	and if thought fit, approve the resolution contained in the
	notice convening the SGM, which is set out on pages
	SGM-1 to SGM-2, or any adjournment thereof
"Share(s)"	the share(s) of the Company

- 3 -

DEFINITIONS

"Shareholder(s)"	holder(s) of the Share(s)
"Stock Exchange"	The Stock Exchange of Hong Kong Limited
"%"	per cent
*For identification purpose only

- 4 -

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
	25 October 2019
To the Shareholders
Dear Sir or Madam,

VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION

CAPITAL CONTRIBUTION AGREEMENT

INTRODUCTION

Reference is made to the Announcement, whereby the Board announced that on 28 August 2019, Daye Metal (a non-wholly owned subsidiary of the Company), China No. 15 Metallurgical, Huangshi Xingang and Huangshi State-owned Assets Management, entered into the Capital Contribution Agreement, pursuant to which Daye Metal has agreed to contribute RMB1.3 billion to the capital of the JV Company, representing 52% of the equity interests in the JV Company.

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

further details of the Capital Contribution Agreement and the transactions contemplated thereunder;

- 5 -

LETTER FROM THE BOARD

a letter from the Independent Board Committee to the Independent Shareholders containing its recommendation in respect of the Capital Contribution Agreement and the transactions contemplated thereunder;
a letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders containing its recommendation in respect of the Capital Contribution Agreement and the transactions contemplated thereunder;
the financial and other information of the Group; and
the notice of SGM.

At the SGM, a resolution will be proposed to approve the Capital Contribution Agreement and the transactions contemplated thereunder.

CAPITAL CONTRIBUTION AGREEMENT

The principal terms of the Capital Contribution Agreement are as follows:

Date:	28 August 2019
Parties:	(1)	Daye Metal
	(2)	China No. 15 Metallurgical
	(3)	Huangshi Xingang
	(4)	Huangshi State-owned Assets Management
Subject matter:	The parties agreed to establish the JV Company pursuant
	to the terms and conditions of the Capital Contribution
	Agreement. No separate shareholder agreement is or is
	currently proposed to be entered into by the parties in
	respect of the JV Company. The management of the JV
	Company would be governed in accordance with the
	relevant terms of the Capital Contribution Agreements in

respect of the composition of the board of directors and supervisory committee of the JV Company (as further detailed in the section headed "II. Capital Contribution Agreement - Composition of the board of directors and supervisory committee" below) and the articles of association of the JV Company.

- 6 -

LETTER FROM THE BOARD

Scope of business: Subject to the final approval by the relevant industry and commerce authorities of the PRC, the scope of business of the JV Company shall consist of, among other things, smelting and processing of non-ferrous metals, processing of gold and silver products and trading of non-ferrous metals.

The JV Company will construct and operate the Production Plant, being a high purity copper cathode production plant proposed 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 1,500 mu. The JV Company will identify a suitable piece of land for construction in Huangshi Xingang (Logistics) Industrial Park for the construction and operation of the Production Plant and it is proposed that the JV Company will acquire the land use right of such land through public bidding and auction in Huangshi. It is currently estimated that the cost for the acquisition of such land use rights will amount to approximately RMB84 million, which was determined with reference to the prevailing market price of comparable lands in the vicinity and certain investment incentives for encouraging investments in Huangshi provided by the Huangshi local government. Further announcement in relation to, among other things, the acquisition of land use rights by the JV Company will be made by the Company in accordance with the requirements under the Listing Rules as and when appropriate. It is expected that the completion of construction of the Production Plant and the commencement of production of copper cathode will take place in the first half of 2021. As at the Latest Practicable Date, (i) the JV Company had not identified the piece of land for construction in Huangshi Xingang (Logistics) Industrial Park for the construction and operation of the Production Plant; (ii) the relevant government authorities in Huangshi were in the course of carrying out initial preparation work for the public bidding and auction of the land use rights of certain lands in Huangshi Xingang (Logistics) Industrial Park; and (iii) construction work and operation of the Production Plant had not commenced. The JV Company will study the lands to be made available for public bidding and auction by the relevant government authorities in Huangshi and once a suitable piece of land for construction is identified, the JV Company will participate in the public bidding and auction to acquire the land use right of such land.

- 7 -

LETTER FROM THE BOARD

	It is estimated that the total amount of investment to be
	made by the JV Company in connection with the
	construction and operation of the Production Plant will
	amount to approximately RMB5.7 billion, of which fixed
	asset investments will amount to approximately RMB4.4
	billion and working capital requirements will amount to
	approximately RMB1.3 billion. It is currently proposed
	that the aforementioned capital requirements of the JV
	Company will be satisfied partly by the capital
	contributions by the parties in the aggregate amount of
	RMB2.5 billion, with the remaining amount of
	approximately RMB3.2 billion be satisfied by external
	bank borrowings of the JV Company.
Registered capital and	The registered capital of the JV Company is proposed to be
capital contribution:	RMB2.5 billion, of which:
	(a) Daye Metal shall contribute RMB1.3 billion,
	representing 52% of the registered capital of the JV
	Company;
	(b) China No. 15 Metallurgical shall contribute RMB600
	million, representing 24% of the registered capital of
	the JV Company;
	(c) Huangshi Xingang shall contribute RMB400 million,
	representing 16% of the registered capital of the JV
	Company; and
	(d) Huangshi State-owned Assets Management shall
	contribute RMB200 million, representing 8% of the
	registered capital of the JV Company.

- 8 -

LETTER FROM THE BOARD

The capital contribution shall be made in cash by each of the parties in four instalments in the following manner:

				Huangshi
		China		State-owned
	Daye	No. 15	Huangshi	Assets
	Metal	Metallurgical	Xingang	Management
Within 15 working days
after the date of the
establishment of the	RMB130	RMB60	RMB40	RMB20
JV Company:	million	million	million	million
Within 15 working days
after the expiry of three
months after the date of
the establishment of the	RMB260	RMB120	RMB80	RMB40
JV Company:	million	million	million	million
Within 15 working days
after the expiry of nine
months after the date of
the establishment of the	RMB390	RMB180	RMB120	RMB60
JV Company:	million	million	million	million
Within 15 working days
after the expiry of
12 months after the date
of the establishment of	RMB520	RMB240	RMB160	RMB80
the JV Company:	million	million	million	million

The amount of the capital contribution to be made by the parties was determined after arm's length negotiations between the parties with reference to, among other things, the expected capital requirements of the JV Company in connection with the construction and operation of the Production Plant.

- 9 -

LETTER FROM THE BOARD

Future financing:

Composition of the board of directors and supervisory committee:

The capital contribution to be made by Daye Metal will be funded by the internal resources and the external borrowings of the Group, of which it is currently expected that 60% of the aforementioned capital contribution, being approximately RMB780 million, will be funded by the internal resources of the Group and 40% of the aforementioned capital contribution, being approximately RMB520 million, will be funded by the external borrowings of the Group. As disclosed in the interim report of the Company for the six months ended 30 June 2019, the cash and bank balances of the Group as at 30 June 2019 amounted to approximately RMB1,663.8 million. As disclosed in the section headed "3. Working Capital Sufficiency of the Enlarged Group" in Appendix I to this circular, on the assumption that the majority of the existing bank loans will be successfully renewed upon maturity, the Directors are of the opinion that the Enlarged Group will have sufficient working capital for the next 12 months notwithstanding the payment of the capital contribution.

If, in the future, the JV Company requires the provision of guarantees by its shareholders in respect of its external bank borrowings and/or further financing by way of shareholders' loan, the shareholders of the JV Company shall provide the required guarantee and/or shareholder's loan in proportion to their equity interests in the JV Company, failing which, the relevant shareholder shall be liable for an amount equivalent to 3% of the shortfall between (i) the required amount of guarantee and/or shareholder's loan and (ii) the amount actually provided by that shareholder.

The Company shall comply with all the relevant requirements under the Listing Rules in respect of such provision of guarantees and/or provision of shareholder's loan as and when appropriate.

The board of directors of the JV Company shall comprise five directors, of which Daye Metal shall nominate three directors, China No. 15 Metallurgical shall nominate one director and Huangshi Xingang shall nominate one director. The board of directors of the JV Company shall have one chairman, who shall be nominated by Daye Metal and subject to election by the board of directors.

- 10 -

LETTER FROM THE BOARD

The supervisory committee of the JV Company shall comprise three supervisors, of which each of Daye Metal, China No. 15 Metallurgical and Huangshi State-owned Assets Management shall nominate one supervisor. The supervisory committee of the JV Company shall have one chairman, who shall be nominated by Daye Metal and subject to election by the supervisory committee.

Payment and transfer of After the JV Company records a profit, the JV Company

dividends:shall, subject to its operation conditions and the agreement of the shareholders, conduct dividend distribution. Taking into account the funding need for repayment of bank borrowings for fixed asset investments by the JV Company, the total dividend distribution to the shareholders for a given year shall not be more than 50% of the distributable profit of the JV Company in that given year.

After the amount of dividends transferred to Daye Metal reaches the aforementioned caps (being the aggregated amount of RMB100 million), Huangshi Xingang and Huangshi State-owned Assets Management shall be entitled to receive dividends from the JV Company in accordance with their equity interests in the JV Company.

- 11 -

LETTER FROM THE BOARD

	The abovementioned obligations of Huangshi Xingang
	(which is a non-wholly-owned subsidiary of Huangshi
	State-owned Assets Management) and Huangshi State-
	owned Assets Management (which is wholly owned by the
	State-owned Assets Supervision and Administration
	Commission	of	Huangshi	Municipal	People's
	Government) for transfer of dividends to Daye Metal
	represent the provision of investment incentives for
	encouraging investments in Huangshi by the Huangshi
	local government, where Huangshi Xingang and Huangshi
	State-owned Assets Management act as the representatives
	of the Huangshi local government in the establishment of
	the JV Company in Huangshi. The aforementioned caps in
	the aggregate amount of RMB100 million were determined
	by commercial negotiation between Daye Metal, Huangshi
	Xingang and Huangshi State-owned Assets Management
	on an arm's length basis with reference to similar
	investment incentive policies offered by other cities in the
	Hubei Province and the proposed investments by the JV
	Company in Huangshi.
Transfer of equity	The Capital Contribution Agreement does not provide for
interests:	any common pre-emption rights of the parties in respect of
	transfer of equity interests in the JV Company by the other
	parties, but the parties are entitled to the pre-emption right
	as a shareholder of the JV Company under the PRC
	Company Law.

China No. 15 Metallurgical agrees that in the event of a transfer of its equity interests in the JV Company, China No. 15 Metallurgical shall only transfer such equity interests to Daye Metal and shall not transfer to other parties. Each of Huangshi Xingang and Huangshi State- owned Assets Management shall waive its pre-emption right in respect of such transfer.

- 12 -

LETTER FROM THE BOARD

After (i) the expiry of six years commencing from the date on which the registered capital of the JV Company have been fully paid up or (ii) the repayment of 80% or more of the bank borrowings for fixed asset investments by the JV Company, whichever is earlier, China No. 15 Metallurgical may request Daye Metal to acquire its equity interests in the JV Company, and Daye Metal undertakes to acquire such equity interests in accordance with the relevant requirements for transfer of PRC state-owned assets and the requirements under the relevant laws and regulations (including but not limited to the approval by the Independent Shareholders in respect of such acquisition in accordance with the Listing Rules). In the event that the aforementioned approval of the Independent Shareholders is not obtained, Daye Metal will not proceed with the acquisition as requested by China No. 15 Metallurgical and there will not be any consequences under the Capital Contribution Agreement. Daye Metal and China No. 15 Metallurgical will further discuss and negotiate on the terms and conditions of any future acquisition of the equity interests. The aforementioned undertaking provided by Daye Metal does not constitute a notifiable transaction of the Company under Chapter 14 of the Listing Rules. The future acquisition by Daye Metal of the equity interests in the JV Company held by China No. 15 Metallurgical whether or not pursuant to the aforementioned undertaking of Daye Metal, if materializes, may constitute a notifiable and connected transaction of the Company under Chapter 14 and 14A of the Listing Rules and the Company will comply with all the relevant requirements under the Listing Rules in respect of such acquisition accordingly.

- 13 -

LETTER FROM THE BOARD

In the event of the transfer of the equity interests in the JV Company by Huangshi Xingang and/or Huangshi State- owned Assets Management, unless the transferee(s) of the equity interests to be transferred agree to be subject to the abovementioned obligations for (i) transfer of dividends (applicable for such period until the amount of dividends transferred by Huangshi Xingang and Huangshi State- owned Assets Management to Daye Metal reaches the aforementioned caps in the aggregate amount of RMB100 million) and (ii) waiver of pre-emption rights (in respect of transfer of equity interests in the JV Company by China No. 15 Metallurgical to Daye Metal), neither Huangshi Xingang nor Huangshi State-owned Assets Management may transfer its equity interests in the JV Company.

If at the time of a proposed transfer of the equity interests in the JV Company by Huangshi Xingang and/or Huangshi State-owned Assets Management, the amount of dividends transferred by Huangshi Xingang and Huangshi State- owned Assets Management to Daye Metal has already reached the relevant caps, the condition in relation to transfer of dividends would no longer be applicable but the condition in relation to waiver of pre-emption rights (in respect of transfer of equity interests in the JV Company by China No. 15 Metallurgical to Daye Metal) would still be applicable for such proposed transfer.

Effectiveness of the The Capital Contribution Agreement shall become

Capital Contribution effective after (i) due execution by the parties; (ii)

Agreement:approval by the respective supervising departments of the parties (being the relevant governing bodies within their respective organisation structure and as at the Latest Practicable Date, the approval of which has been obtained); and (iii) Daye Metal and the Company having obtained all necessary approval under relevant laws, regulations, the articles of association and the Listing Rules for the establishment of the JV Company under the Capital Contribution Agreement (including but not limited to the approval by the Independent Shareholders in accordance with the Listing Rules).

- 14 -

LETTER FROM THE BOARD

INFORMATION ON THE GROUP AND THE PARTIES
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.

Daye Metal

Daye Metal is a limited liability company established in the PRC and principally engaged in mining and processing of mineral ores and trading of metal concentrates. It is indirectly held as to 95.35% by the Company and is a non-wholly owned subsidiary of the Company.

China No. 15 Metallurgical

China No. 15 Metallurgical is a limited liability company established in the PRC and is principally engaged in general contracting for engineering construction. China No. 15 Metallurgical is a wholly-owned subsidiary of CNMC.

CNMC is a PRC state-owned enterprise directly administered by the State-owned Assets Supervision and Administration Commission of the State Council and the controlling shareholder of the Parent Company. CNMC and its subsidiaries are 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.

The Parent Company is a state-owned conglomerate in the PRC. The principal business of the Parent Company and its subsidiaries is copper mining and processing. The Parent Company and its subsidiaries have a fully integrated operation, which enables them 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

Huangshi Xingang is a limited liability company established in the PRC and is a state-owned investment and financing platform company. Huangshi Xingang is a non-wholly owned subsidiary of Huangshi State-owned Assets Management.

To the best of the knowledge, information and belief of the Directors having made all reasonable enquiries, Huangshi Xingang and its ultimate beneficial owner(s) are third parties independent of the Company and its connected persons.

- 15 -

LETTER FROM THE BOARD

Huangshi State-owned Assets Management

Huangshi State-owned Assets Management is a limited liability company established in the PRC and is principally engaged in the operation and management of state-owned assets and provision of related services for their equity transactions, financing and investments. Huangshi State-owned Assets Management is wholly owned by the State-owned Assets Supervision and Administration Commission of Huangshi Municipal People's Government.

As far as the Directors were aware, as at the Latest Practicable Date, the Parent Company was held as to 0.69% by Huangshi State-owned Assets Management. Save as disclosed above, to the best of the knowledge, information and belief of the Directors having made all reasonable enquiries, Huangshi State-owned Assets Management and its ultimate beneficial owner(s) are third parties independent of the Company and its connected persons.

IV. REASONS FOR AND BENEFITS OF THE CAPITAL CONTRIBUTION

AGREEMENT

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 JV Company will be a non-wholly owned subsidiary of the Company upon its establishment and its financial results will be consolidated into the financial statements of the Group. The proposed construction and operation by the JV Company of the Production Plant is in line with the principal business of the Group. The revenue of the Group generated from the sales of copper cathodes amounted to approximately RMB21.27 billion, RMB24.54 billion, RMB23.63 billion and RMB12.22 billion for the three years ended 31 December 2016, 2017 and 2018 and the six months ended 30 June 2019, respectively. The sales of copper cathodes has generated gross profit for the Group for the three years ended 31 December 2016, 2017 and 2018 and the six months ended 30 June 2019, respectively. While there has not been substantial increase in the revenue generated from the sales of copper cathodes, the sales of copper cathodes business has contributed a substantial amount of the revenue of the Group and remained a profitable business for the Company.

It is expected that the completion of construction of the Production Plant and the commencement of production of copper cathode will take place in the first half of 2021. Upon completion, the Production Plant is expected to generate an annual revenue exceeding RMB20 billion for the JV Company.

Through the joint venture arrangement as contemplated under the Capital Contribution Agreement, the Group will be able to leverage on the cooperation between Daye Metal and China No. 15 Metallurgical in the construction and future operation of the Production Plant, taking into account the expertise in engineering construction of China No. 15 Metallurgical. Further, the scale of production of copper cathode of the Group will also be significantly

- 16 -

LETTER FROM THE BOARD

expanded following commencement of production of the Production Plant. It is expected that the establishment of the JV Company is conducive to enhancing the overall competitiveness and potentially increase the profitability of the Group.

The Directors (including the independent non-executive Directors, after considering the advice from the Independent Financial Advisor) are of the view that while the Capital Contribution Agreement was not entered into in the ordinary and usual course of business of the Group, the Capital Contribution Agreement and the transactions contemplated thereunder are on normal commercial terms which are fair and reasonable so far as the Independent Shareholders are concerned, and are in the interests of the Company and the Shareholders as a whole.

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 abstained from voting on, the resolutions passed by the Board to approve the Capital Contribution Agreement and the transactions contemplated thereunder. Save as disclosed above, none of the Directors has any material interest in, or was required to abstain from voting on the resolutions passed by the Board to approve the Capital Contribution Agreement and the transactions contemplated thereunder.

IMPLICATIONS UNDER THE LISTING RULES

As one or more of the applicable percentage ratios calculated in accordance with the Listing Rules in respect of the Capital Contribution Agreement and the transactions contemplated thereunder exceed 100%, the Capital Contribution Agreement and the transactions contemplated thereunder constitute a very substantial acquisition of the Company.

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 of the Company 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. China No. 15 Metallurgical is a wholly owned subsidiary of CNMC and is therefore an associate of CNMC and a connected person of the Company. Therefore, the Capital Contribution Agreement and the transactions contemplated thereunder constitute a connected transaction of the Company under Chapter 14A of the Listing Rules.

Accordingly, the Capital Contribution Agreement and the transactions contemplated thereunder are subject to the reporting, announcement and independent shareholders' approval requirements under Chapter 14 and Chapter 14A of the Listing Rules.

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LETTER FROM THE BOARD

VI. FINANCIAL EFFECTS OF THE CAPITAL CONTRIBUTION AGREEMENT

Upon the establishment of the JV Company pursuant to the Capital Contribution Agreement, the JV Company will be a non-wholly owned subsidiary of the Company and its financial results will be consolidated into the financial statements of the Group.

Possible effects on assets

As the capital contribution to be made by Daye Metal is currently expected to be funded

as to 60% (being approximately RMB780 million), by the internal resources of the Group; and (ii) as to 40% (being approximately RMB520 million), by the external borrowings of the Group, it is currently expected that immediately following the establishment of the JV Company and full payment of the registered capital of the JV Company by the parties, the total assets of the Enlarged Group will increase by approximately RMB1.72 billion, representing the sum of (i) the capital contributions to be made by the other parties to the JV Company as disclosed in the section headed "II. Capital Contribution Agreement - Registered capital and capital contribution" above; and (ii) the abovementioned expected amount of external borrowings to be obtained by the Group for the purpose of funding the capital contribution to be made by Daye Metal.

Possible effects on liabilities

Possible effects on earnings

The earnings of the Enlarged Group will remain unchanged immediately following the establishment of the JV Company since the JV Company, being newly established, would not have recorded any revenue or earning. The overall effects of the establishment of the JV Company on the future earnings of the Enlarged Group will depend on, among other things, the operating results of the JV Company. It is expected that the making of such capital contribution would not have any material adverse impact on the financial position of the Enlarged Group.

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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 Capital Contribution Agreement and the transactions contemplated thereunder.

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 Capital Contribution Agreement and the transactions contemplated thereunder.

VIII. SPECIAL GENERAL MEETING

The SGM will be convened and held at Imperial Room I, Mezzanine Floor, Towers Wing, Royal Pacific Hotel, China Hong Kong City, 33 Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong on Monday, 11 November 2019 at 10:00 a.m. for the Independent Shareholders to consider and, if thought fit, approve the Capital Contribution Agreement and the transactions contemplated thereunder. The notice of SGM is set out on pages SGM-1 to SGM-2 of this circular. China Times, the Parent Company, CNMC and their respective associates will abstain from voting on the resolution approving the Capital Contribution Agreement and the transactions contemplated thereunder.

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 Capital Contribution Agreement and the transactions contemplated thereunder and therefore, no other Shareholder is required to abstain from voting at the SGM for the relevant resolution.

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 while the Capital Contribution Agreement was not entered into in the ordinary and usual course of business of the Group, the Capital Contribution Agreement and the transactions contemplated thereunder are on normal commercial terms which are fair and reasonable so far as the Independent Shareholders are concerned, and are in the interests 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 resolution to be proposed at the SGM to approve the Capital Contribution Agreement and the transactions contemplated thereunder.

ADDITIONAL INFORMATION

Your attention is drawn to (i) the letter from the Independent Board Committee set out on page 21 of this circular, containing its recommendation in respect of the Capital Contribution Agreement and the transactions contemplated thereunder; (ii) the letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders set out on pages 22 to 36 of this circular, containing its recommendation in respect of the Capital Contribution Agreement and the transactions contemplated thereunder 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

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

(Incorporated in Bermuda with limited liability)

(Stock Code: 00661)

25 October 2019

To the Independent Shareholders

Dear Sir or Madam,

VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION

CAPITAL CONTRIBUTION AGREEMENT

We refer to the circular dated 25 October 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 Capital Contribution Agreement and the transactions contemplated thereunder, details of which are set out in the "Letter from the Board" in the Circular. TC Capital 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 5 to 20 of the Circular; (ii) the "Letter from the Independent Financial Adviser" set out on pages 22 to 36 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 while the Capital Contribution Agreement was not entered into in the ordinary and usual course of business of the Group, the Capital Contribution Agreement and the transactions contemplated thereunder are on normal commercial terms which are fair and reasonable so far as the Independent Shareholders are concerned, and are 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 resolution to be proposed at the SGM to approve the Capital Contribution Agreement and the transactions contemplated thereunder.

Yours faithfully,

for and on behalf of the

Independent Board Committee

Wang Qihong Wang Guoqi Liu Jishun

Independent Non-executive Directors

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Set out below is the text of a letter received from TC Capital, the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the Capital Contribution Agreement and the transactions contemplated thereunder for the purpose of inclusion in this circular.

25 October 2019

The Independent Board Committee and the Independent Shareholders

China Daye Non-Ferrous Metals Mining Limited

Dear Sirs,

VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION

CAPITAL CONTRIBUTION AGREEMENT

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in relation to the Capital Contribution Agreement and the transactions contemplated thereunder, details of which are set out in the letter from the Board (the "Letter from the Board") in the circular of China Daye Non-Ferrous Metals Mining Limited (the "Company") to the Shareholders dated 25 October 2019 (the "Circular"), of which this letter forms part. Capitalised terms used in this letter have the same meanings as those defined in the Circular unless the context otherwise requires.

As stated in the Letter from the Board, as one or more of the applicable percentage ratios calculated in accordance with the Listing Rules in respect of the Capital Contribution Agreement and the transactions contemplated thereunder exceed 100%, the Capital Contribution Agreement and the transactions contemplated thereunder constitute a very substantial acquisition of the Company. In addition, 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 of the Company indirectly

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

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. China No. 15 Metallurgical is a wholly owned subsidiary of CNMC and is therefore an associate of CNMC and a connected person of the Company. Therefore, the Capital Contribution Agreement and the transactions contemplated thereunder constitute a connected transaction of the Company under Chapter 14A of the Listing Rules. Accordingly, the Capital Contribution Agreement and the transactions contemplated thereunder are subject to the reporting, announcement and independent shareholders' approval requirements under Chapter 14 and Chapter 14A of the Listing Rules.

We have been appointed as an independent financial adviser to advise the Independent Board Committee and the Independent Shareholders as to (i) whether the Capital Contribution Agreement is entered in the ordinary and usual course of business of the Company and the terms of the Capital Contribution Agreement and the transactions contemplated thereunder are on normal commercial terms and fair and reasonable so far as the Company and the Independent Shareholders are concerned; (ii) whether the entering into the Capital Contribution Agreement is in the interests of the Company and the Shareholders as a whole; and (iii) how the Independent Shareholders should vote in respect of the relevant resolution to approve the Capital Contribution Agreement and the transactions contemplated thereunder.

OUR INDEPENDENCE

As at the Latest Practicable Date, we did not have any relationships with, or have any interests in, the Company or any other parties that could reasonably be regarded as relevant to the independence of us.

BASIS OF OPINION

In formulating our recommendation, we have considered and reviewed, amongst other things, (i) the Capital Contribution Agreement; (ii) the interim report of the Company for the six months ended 30 June 2019 (the "2019 Interim Report"); (iii) the annual reports of the Company for the years ended 31 December 2016 (the "2016 Annual Report"), 31 December 2017 (the "2017 Annual Report") and 31 December 2018 (the "2018 Annual Report"); (iv) other information as set out in the Circular; and (v) relevant market data and information available from public sources. We have also relied on all relevant information, opinions and facts supplied and representations made to us by the Directors and the representatives of the Company. We have also studied the relevant market information and trends of the related industry.

We have assumed that all such information, opinions, facts and representations, which have been provided to us by the Directors or the representatives of the Company are true, accurate and complete in all respects at the date thereof. The Directors have jointly and severally accepted full responsibility for the accuracy of the information contained in the Circular and have also confirmed that opinions expressed in the Circular have been arrived at

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

after due and careful consideration and there are no material facts not contained in the Circular, the omission of which would make any statement in the Circular misleading. We have no reason to suspect that any material information has been withheld by the Company or is misleading. Therefore, we have no reason to doubt the truth or accuracy of the information provided to us, or to believe that any material information has been omitted or withheld.

We consider that we have reviewed sufficient information currently available to reach an informed view on and to provide a reasonable basis for our recommendation. We have not, however, carried out any independent verification of the information provided by the Directors and the representatives of the Company, nor have we conducted any form of in-depth independent investigation into the business, affairs, operations, financial position or future prospects of each of the Group, Daye Metal, China No. 15 Metallurgical, Huangshi Xingang, Huangshi Stated-owned Assets Management and any of their respective subsidiaries and associates.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion and recommendation in respect of the Capital Contribution Agreement and the transactions contemplated thereunder, we have taken into consideration the following principal factors and reasons:

1. Information on the Group, the parties to the Capital Contribution Agreement and the JV Company

Information of the Group

As stated in the Letter from the Board, the Group is principally engaged in the exploitation of mineral resources, the mining and processing of mineral ores and the trading of metal products.

Set forth below are certain financial information of the Group for the years ended 31 December 2016, 31 December 2017 and 31 December 2018 ("FY2016", "FY2017" and "FY2018", respectively) as extracted from the 2016 Annual Report, 2017 Annual Report and 2018 Annual Report and for the six months ended 30 June 2018 and 30 June 2019 ("HY2018" and "HY2019", respectively) as extracted from the 2019 Interim Report.

	FY2016	FY2017	FY2018	HY2018	HY2019
	RMB'	RMB'	RMB'	RMB'	RMB'
	million	million	million	million	million
	(audited)	(audited)	(audited)	(unaudited)	(unaudited)
Revenue	38,915.7	33,529.0	30,749.0	16,354.0	17,377.4
Gross profit	677.0	927.2	942.7	349.7	442.3
(Loss)/profit for
year/period	(164.8)	(91.2)	(86.6)	(59.3)	3.9

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

	FY2016	FY2017	FY2018		HY2018	HY2019
	RMB'	RMB'	RMB'		RMB'	RMB'
	million	million	million		million	million
	(audited)	(audited)	(audited)	(unaudited)	(unaudited)
Sales of goods:
- Copper cathodes	21,273.3		24,538.6		23,633.4	12,900.7	12,224.9
- Other copper products	1,062.4		694.6		274.0	119.7	521.9
- Gold and other gold
products	10,592.7		3,825.0		2,699.1	1,395.1	2,032.1
- Silver and other silver
products	5,432.8		3,820.3		3,417.3	1,649.5	2,275.5
- Sulphuric acid and
sulphuric concentrate	107.9		198.0		228.2	93.6	119.4
- Iron ores	117.1		112.7		135.7	57.6	62.1
- Others	291.8		266.9		306.3	115.5	119.7

	38,878.0		33,456.1		30,694.0	16,331.7	17,355.6
Rendering of services:

- Copper processing	32.6		61.4		44.2	17.1	15.7
- Others	5.1		11.5		10.8	5.2	6.1

	37.7		72.9		55.0	22.3	21.8

Total revenue	38,915.7		33,529.0		30,749.0	16,354.0	17,377.4

We noted from the tables above that the Group's revenue is primarily generated from goods sold or services provided in relation copper products, which accounts for approximately 57.5%, 75.4% and 77.9% of total revenue for FY2016, FY2017 and FY2018, respectively; and approximately 79.7% and 73.4% of the total revenue for HY2018 and HY2019, respectively. In addition, as advised by the representative of the Company, the revenue generated from the sales of goods includes the revenue attributable from manufacturing as well as trading. As illustrated above, the Group's revenue decreased by approximately 13.8% to approximately RMB33,529.0 million for FY2017 from approximately RMB38,915.7 million for FY2016. Such decrease was mainly attributable to the decline in sales volume of gold and silver and the decrease in trading volume of copper cathodes, gold and silver for FY2017. The Group's revenue further decreased by approximately 8.3% to approximately RMB30,749 million for FY2018. Such decrease was mainly attributable to the decrease in trading volume of copper cathodes. In HY2019, revenue amounted to approximately RMB17,377.4 million, representing an increase of approximately 6.3% as compared to that for HY2018. Such increase was mainly attributable to the increase in sales of other copper products, gold and other gold products, and silver and other silver products.

The gross profit of the Group increased by approximately 37.0% to approximately RMB927.2 million for FY2017 from approximately RMB677.0 million for FY2016, which was mainly due to the increase in copper price during FY2017. The gross profit of the Group further increased by approximately 1.7% to approximately RMB942.7 million for FY2018, which was mainly due to the improvement of cost control measures during FY2018. The Group's gross profit for HY2019 increased to approximately RMB442.3 million, representing an increase of approximately 26.5% as compared to that for HY2018, which was mainly due to the increase in sales volume for HY2019.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Group recorded a net loss of approximately RMB91.2 million for FY2017, representing a decrease of approximately 44.7% as compared to a net loss of approximately RMB164.8 million for FY2016, which was mainly attributable to the one-off withdrawal of retirement benefits due to the implementation of the internal early retirement scheme. The Group recorded a net loss of approximately RMB86.6 million for FY2018, representing a decrease of approximately 5.0% as compared to that of FY2017. The Group turned its net loss of approximately RMB59.3 million for HY2018 to a profit of approximately RMB3.9 million for HY2019. As advised by the representative of the Company, the turnaround from a loss for HY2018 to a profit for HY2019 was primarily attributable to the improvement in gross profit, which was mainly due to the increase in sales volume for HY2019.

Set forth below are certain financial information of the Group as at 31 December 2016, 31 December 2017, 31 December 2018 and 30 June 2019, as extracted from the 2016 Annual Report, 2017 Annual Report, 2018 Annual Report and the 2019 Interim Report, respectively.

		As at 31 December		As at 30 June
	2016	2017	2018	2019
	RMB' million	RMB' million	RMB' million	RMB' million
	(audited)	(audited)	(audited)	(unaudited)
Total assets	16,096.1	15,872.5	16,971.9	16,829.6
Total liabilities	13,477.0	13,344.6	14,555.9	14,409.7
Net assets	2,619.1	2,527.9	2,416.0	2,419.9
Cash and bank balances	1,116.8	957.1	861.6	1,663.8

Total assets of the Group mainly comprised property, plant and equipment, inventories, trade and bills receivables, prepayments and other receivables, and cash and bank balances. The total assets of the Group as at 31 December 2017 decreased by approximately 1.4% as compared to the total assets as at 31 December 2016. The total assets of the Group as at 31 December 2018 increased by approximately 6.9% as compared to the total assets as at 31 December 2017, mainly due to an increase in prepayments and other receivables. Total assets of the Group as at 30 June 2019 slightly decreased by approximately 0.8% as compared to the total assets as at 31 December 2018.

Total liabilities of the Group mainly comprised trade and bills payables, bank and other borrowings, promissory note and convertible note. The total liabilities of the Group as at 31 December 2017 amounted to approximately RMB13,344.6 million, representing a decrease of approximately 1.0% as compared to approximately RMB13,477.0 million as at 31 December 2016. The total liabilities of the Group as at 31 December 2018 amounted to approximately RMB14,555.9 million, representing an increase of approximately 9.1% as compared to that as at 31 December 2017. Such increase was mainly due to an increase in bank and other borrowings, which were partially offset by a decrease in trade and bills payables. The total liabilities of the Group as at 30 June 2019 amounted to approximately RMB14,409.7 million, representing a decrease of approximately 1.0% as compared to approximately RMB14,555.9 million as at 31 December 2018.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The cash and bank balances of the Group as at 31 December 2017 amounted to approximately RMB957.1 million, representing a decrease of approximately 14.3% as compared to approximately RMB1,116.8 million as at 31 December 2016. The cash and bank balances of the Group as at 31 December 2018 amounted to approximately RMB861.6 million, representing a decrease of approximately 10.0% as compared to that as at 31 December 2017. The cash and bank balances of the Group then increased by approximately 93.1% to approximately RMB1,663.8 million as at 30 June 2019, which was mainly due to combined effect of an increase in revenue for HY2019 and a decrease in inventories.

As a result of the aforesaid, the Group's net assets as at 31 December 2017 amounted to approximately RMB2,527.9 million, representing a decrease of approximately 3.5% as compared to that of approximately RMB2,619.1 million as at 31 December 2016. The Group's net assets as at 31 December 2018 further decreased by approximately 4.4% to approximately RMB2,416.0 million. The net assets of the Group increased by approximately 0.2% to approximately RMB2,419.9 million as at 30 June 2019.

Information of Daye Metal

As stated in the Letter from the Board, Daye Metal is a limited liability company established in the PRC and is principally engaged in mining and processing of mineral ores and trading of metal concentrates. It is indirectly held as to 95.35% by the Company and is a non-wholly owned subsidiary of the Company.

Information of China No. 15 Metallurgical

As stated in the Letter from the Board, China No. 15 Metallurgical is a limited liability company established in the PRC and is principally engaged in general contracting for engineering construction. China No. 15 Metallurgical is a wholly-owned subsidiary of CNMC, which is a PRC state-owned enterprise directly administered by the State-owned Assets Supervision and Administration Commission of the State Council and the controlling shareholder of the Parent Company. CNMC and its subsidiaries are 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.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Information of Huangshi Xingang

As stated in the Letter from the Board, Huangshi Xingang is a limited liability company established in the PRC and is a state-owned investment and financing platform company. Huangshi Xingang is a non-wholly owned subsidiary of Huangshi State-owned Assets Management.

Information of Huangshi State-owned Assets Management

As stated in the Letter from the Board, Huangshi State-owned Assets Management is a limited liability company established in the PRC and is principally engaged in the operation and management of state-owned assets and provision of related services for their equity transactions, financing and investments. Huangshi State-owned Assets Management is wholly owned by the State-owned Assets Supervision and Administration Commission of Huangshi Municipal People's Government.

As far as the Directors were aware, as at the Latest Practicable Date, the Parent Company was held as to 0.69% by Huangshi State-owned Assets Management. Save as disclosed above, to the best of the knowledge, information and belief of the Directors having made all reasonable enquiries, Huangshi Xingang, Huangshi State-owned Assets Management and their respective ultimate beneficial owner(s) are third parties independent of the Company and their respective connected persons.

Information of the JV Company

As stated in the Letter from the Board, the registered capital of the JV Company is proposed to be RMB2.5 billion, of which 52%, 24%, 16% and 8% shall be contributed by Daye Metal, China No. 15 Metallurgical, Huangshi Xingang and Huangshi State-owned Assets Management, respectively. Subject to the final approval by the relevant industry and commerce authorities of the PRC, the scope of business of the JV Company shall consist of, among other things, smelting and processing of non-ferrous metals, processing of gold and silver products and trading of non-ferrous metals.

As stated in the Letter from the Board, the JV Company will construct and operate the Production Plant, being a high purity copper cathode production plant proposed 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 1,500 mu. Please refer to the "Scope of business" under the paragraph headed "II. CAPITAL CONTRIBUTION AGREEMENT" in the Letter from the Board for more information of the JV Company.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

2. Reasons for the entering into the Capital Contribution Agreement

As stated in the paragraph headed "Information of the Group" above, the Group is principally engaged in the exploitation of mineral resources, the mining and processing of mineral ores and the trading of metal products and approximately 57.5%, 75.4%, 77.9% and 73.4% of the total revenue are related to copper products for FY2016, FY2017, FY2018 and HY2019, respectively. As stated in 2019 Interim Report, in the second half of 2019, 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.

As stated in the appendix I to the Circular, with the rapid development of economy of the PRC, the domestic demand for copper has been gradually increasing. Although the capacity of copper smelting has also improved rapidly, the current capacity of copper smelting in the PRC still can hardly meet the needs of copper, and the volume of metallic copper is still seriously insufficient. With the economy and society of the PRC entering a new era of high-quality and sustainable development, the volume of copper consumption demand will continue to grow steadily. According to a fact sheet namely "Made in China 2025 Could Boost Copper Annual Demand by 232,000 tonnes by 2025" published by the International Copper Association ("ICA") in October 2017 (https://copperalliance.org), following the launch of "Made in China 2025" (中國製造 2025) by the State Council of the PRC on 8 May 2015, Chinese government encourages China's manufacturing industry to upgrade their production through building smart factories so as to achieve higher efficiency and better environmental performance. Consequently, copper intensity is projected to increase in markets mainly including electric power and transportation and future copper demand will grow by 232,000 tonnes by 2025. On the other hand, according to another fact sheet namely "Modern Silk Road to Increase Copper Demand 22% by 2027", published by ICA in October 2018, the construction of highways, railroads and power grids, which is resulted from the launch of "Belt and Road Initiative" (一帶一路), has increased demand for copper across the region and new research, and since approximately 1.25 million tonnes of copper were used on infrastructure development in the first five year of the Belt and Road Initiative (2013-2017), copper demand across the countries involved expects to increase to 6.5 million tonnes by 2027, a 22% increase on 2017 levels. According to the website of ICA, its 39 members and the alliance of national and regional associations responsible for program development and implementation with ICA's more than 500 current program partners around the world bring together the global copper industry to develop and defend markets for copper and to make a positive contribution to society's sustainable-development goals.

As stated in the appendix I to the Circular, the production scale of copper smelting of the Group has remained the same for many years and the Group's influence in the industry has been declining year by year. As advised by the representative of the Company, the utilisation rate of the production plant which is currently operated by the Group is closed to its maximum capacity for the production of copper cathodes. As stated in the Letter from the Board, the

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Production Plant, which proposes to be constructed and operated by the JV Company, will be a high purity copper cathode production plant with a production capacity of 400,000 tonnes per year. As advised by the representative of the Company, the Production Plant mainly produces copper cathodes.

As stated in the Letter from the Board, it is expected that the completion of construction of the Production Plant and the commencement of production of copper cathodes will take place in the first half of 2021. As the JV Company will be a non-wholly owned subsidiary of the Company upon its establishment, the financial results of the JV Company will be consolidated into the financial statements of the Group. The representative of the Company believes that the production scale of copper cathodes will be expanded after the commencement of operation of the Production Plant and the establishment of the JV Company is conducive to enhancing the overall competitiveness of the Enlarged Group.

As mentioned in the paragraph headed "Information of China No. 15 Metallurgical" above, China No. 15 Metallurgical is principally engaged in general contracting for engineering construction. As stated in the Letter from the Board, through the joint venture arrangement as contemplated under the Capital Contribution Agreement, the Group will be able to leverage on the cooperation between Daye Metal and China No. 15 Metallurgical in the construction and future operation of the Production Plant, taking into account the expertise in engineering construction of China No. 15 Metallurgical.

Given that (i) demand for copper is increasing domestically resulting from supportive national polices; (ii) current utilisation rate of the production plant of the Group for copper cathodes is closed to its maximum capacity; (iii) the Production Plant will enhance the Group's production scale of copper cathodes; and (iv) the construction and operation of the Production Plant is in line with the Group's principal business and business strategy and can leverage on the cooperation between Daye Metal and China No. 15 Metallurgical in the construction and future operation of the Production Plant, we are of the view that, although the entering into the Capital Contribution Agreement is not in the ordinary and usual course of business of the Company, the entering into the Capital Contribution Agreement is fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Company and the Independent Shareholders as a whole.

3. The Capital Contribution Agreement and the JV Company

As stated in the Letter from the Board, on 28 August 2019, Daye Metal (a non-wholly owned subsidiary of the Company), China No. 15 Metallurgical, Huangshi Xingang and Huangshi State-owned Assets Management, entered into the Capital Contribution Agreement. The principal terms of the Capital Contribution Agreement and the details of the JV Company and the Production Plant have been set out in the Letter from the Board. Please refer to the paragraph headed "II. CAPITAL CONTRIBUTION AGREEMENT" in the Letter from the Board for more information of the Capital Contribution Agreement and the JV Company.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Registered capital and total amount of investment of the JV Company and the capital

contribution by the parties to the JV Company

Pursuant to the Capital Contribution Agreement, the registered capital of the JV Company is proposed to be RMB2.5 billion. The amount of the capital contribution to be made by the parties was determined after arm's length negotiations between the parties with reference to, among other things, the expected capital requirements of the JV Company in connection with the construction and operation of the Production Plant.

Daye Metal has agreed to contribute RMB1.3 billion to the registered capital of the JV Company, representing 52% of the equity interests in the JV Company. Regarding the capital contributions of RMB1.3 billion to be made by Daye Metal, as stated in the Letter from the Board, approximately RMB780 million will be funded by the internal resources of the Group and approximately RMB520 million will be funded by the external borrowings of the Group. As stated in the 2019 Interim Report, the cash and bank balances of the Group was recorded approximately RMB1,663.8 million as at 30 June 2019. We noted that the aforesaid capital contribution by internal resources accounts for approximately 46.9% of the cash and bank balances of the Group as at 30 June 2019. As advised by the representative of the Company, the aforesaid funding arrangement by internal resources and external borrowings is to maintain the level of working capital available to the Group and to facilitate its development plan in the future.

As stated in the Letter from the Board, it is estimated that the total amount of investment to be made by the JV Company in connection with the construction and operation of the Production Plant will amount to approximately RMB5.7 billion, consisting of fixed assets investment of approximately RMB4.4 billion and working capital of approximately RMB1.3 billion. Amongst the total investment of RMB5.7 billion, the amount of RMB2.5 billion will be satisfied by the capital contributions by the parties while the remaining amount of approximately RMB3.2 billion will be satisfied by external bank borrowings of the JV Company. Since the remaining amount of approximately RMB3.2 billion will be satisfied by external bank borrowings of the JV Company, the JV Company may require the provision of guarantees by its shareholders in respect of its external bank borrowings and/or further financing by way of shareholders' loan in the future, and the relevant shareholder(s) (the "Relevant Shareholder") shall be liable for an amount equivalent to 3% of the shortfall between (i) the required amount of guarantee and/or shareholder's loan; and (ii) the amount actually provided by such shareholder(s) (the "Shortfall"), if such relevant shareholder(s) fails to provide the required guarantee and/or shareholder's loan in proportion to their equity interests in the JV Company. As advised by the representative of the Company, the rate of 3% (the "3% Rate") on the Shortfall was determined after arm's length negotiations with reference to the Group's internal policy on guarantee. According to the Group's internal policy on guarantee, if the Group provides any guarantee to its subsidiary in exceed of its proportion to its equity interests in the subsidiary, the Group is allowed to receive a rate of 3% (the "Internal Rate") on the excess from the subsidiary.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As advised by the representative of the Company, the Shortfall is expected to be settled by the shareholders of the JV Company, other than the Relevant Shareholder. If Daye Metal fails to provide the required amount of guarantee and/or shareholder's loan, Daye Metal would be liable for the 3% Rate on the Shortfall. As stated in the 2018 Annual Report, effective interest rates of the Group's borrowings ranged from 1.20% to 6.15% for FY2018, hence, the 3% Rate is within the range of the Group's borrowings and no less favourable than effective interest rate of the Group's borrowings.

On the other hand, if any shareholder to the JV Company, other than Daye Metal, fails to provide the required amount of guarantee and/or shareholders' loan and such Shortfall would be settled by Daye Metal, the Group would receive an amount calculated based on the 3% Rate on the Shortfall. The representative of the Company advised that the Group did not provide any loans to independent third party as at the Latest Practicable Date and surplus cash will be deposited in authorised institutions in Hong Kong and the PRC. As noted from the 2018 Annual Report, as at 31 December 2018, the cash and bank balance, which were placed with Daye Nonferrous Metals Group Finance Co., Ltd. (the "Daye Finance Company", being a fellow subsidiary of the Company) as saving deposits, bear interest at rates ranging from 0.53% to 1.50% per annum; and the remaining bank balances carry interest at rates ranging from 0.35% to 1.38% per annum. As the 3% Rate is higher than interest rates provided by Daye Finance Company and the banks, we are of the view that the 3% Rate is more favourable to the Group.

As (i) the 3% Rate is no less favourable than the Internal Rate; (ii) the 3% Rate is within the range of effective interest rates of the Group's borrowings in the case that Daye Metal is liable to the 3% Rate; and (iii) the 3% Rate is higher than the deposit interest rates of the Group in the case that Daye Metal receives the 3% Rate; we concur that the arrangement of the 3% Rate on the Shortfall is fair and reasonable and on normal commercial terms.

Having considered (i) the funding arrangement of the capital contributions of RMB1.3 billion to be made by Daye Metal enables the Group to maintain the level of working capital available to the Group and facilitate its development in the future; (ii) the future funding and provision of guarantees arrangement enables the JV Company to construct and operate the Production Plant; and (iii) the arrangement of the 3% Rate on the Shortfall is fair and reasonable, we consider that the abovementioned arrangement is favourable to the Company.

Dividend distribution

As stated in the Letter from the Board, after the JV Company records a profit, the JV Company shall, subject to its operation conditions and the agreement of the shareholders, conduct dividend distribution. Taking into account the funding need for repayment of bank borrowings for fixed asset investments by the JV Company, the total dividend distribution to the shareholders for a given year shall not be more than 50% of the distributable profit of the JV Company in that given year. As at least 50% of the distributable profit will be remained in the JV Company in that given year, we consider that the above arrangement allows the JV Company to have sufficient funds for its future development.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In the event that the JV Company conducts dividend distributions, Huangshi Xingang and Huangshi State-owned Assets Management shall transfer the dividends to which they are entitled, up to an aggregated cap of RMB100 million, to Daye Metal for its contribution to the operation of the JV Company in Huangshi (being the assumption of a leading role in the management of the JV Company as well as the construction and operation of the Production Plant by the JV Company). After the amount of dividends transferred to Daye Metal reaches the aforementioned caps (being the aggregated amount of RMB100 million), Huangshi Xingang and Huangshi State-owned Assets Management shall be entitled to receive dividends from the JV Company in accordance with their equity interests in the JV Company. Such arrangement is reflective of the proposal that Daye Metal will take an active management role in the operation of the JV Company, where the other parties will only have minimal participation in the operation of the JV Company and China No. 15 Metallurgical, on the other hand, will provide engineering construction advice to the JV Company. The representative of the Company advised that the aforementioned arrangement was determined on an arm's length negotiations with reference to similar investment incentive policies in Hubei Province. We have reviewed two investment incentive policies in Hubei Province, which were provided by the Company, and noted that there are certain supports provided by the city governments in Hubei Province to investments made by enterprises.

Having considered that the abovementioned arrangement provides a reward to Daye Metal for its taking an active management role in the operation of the JV Company as well as its investment in Huangshi, Hubei Province, we consider that the above arrangement is favourable to the Company.

Composition of the board of directors and supervisory committee

As stated in the Letter from the Board, the board of directors of the JV Company shall comprise five directors, of which Daye Metal shall nominate three directors, China No. 15 Metallurgical shall nominate one director and Huangshi Xingang shall nominate one director. The board of directors of the JV Company shall have one chairman, who shall be nominated by Daye Metal and subject to election by the board of directors. The supervisory committee of the JV Company shall comprise three supervisors, of which each of Daye Metal, China No. 15 Metallurgical and Huangshi State-owned Assets Management shall nominate one supervisor. The supervisory committee of the JV Company shall have one chairman, who shall be nominated by Daye Metal and subject to election by the supervisory committee. As advised by the representative of the Company, the candidates of board of directors and supervisory committee of the JV Company to be nominated by Daye Metal based on candidates' personal background and relevant experience.

Having considering that Daye Metal, being the major shareholders of the JV Company, shall have the right to nominate suitable candidates to take up the key management positions of the JV Company, we consider that the above arrangement is fair and reasonable so far as the Company and the Independent Shareholders are concerned.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Transfer of equity interests

As stated in the Letter from the Board, the Capital Contribution Agreement does not provide for any common pre-emption rights of the parties in respect of transfer of equity interests in the JV Company by the other parties, but the parties are entitled to the pre-emption right as a shareholder of the JV Company under the PRC Company Law. China No. 15 Metallurgical agrees that in the event of a transfer of its equity interests in the JV Company, China No. 15 Metallurgical shall only transfer such equity interests to Daye Metal and shall not transfer to other parties. Each of Huangshi Xingang and Huangshi State-owned Assets Management shall waive its pre-emption right in respect of such transfer.

After (i) the expiry of six years commencing from the date on which the registered capital of the JV Company has been fully paid up; or (ii) the repayment of 80% or more of the bank borrowings for fixed asset investments by the JV Company, whichever is earlier, China No. 15 Metallurgical may request Daye Metal to acquire its equity interests in the JV Company, and Daye Metal undertakes to acquire such equity interests in accordance with the relevant requirements for transfer of PRC state-owned assets and the requirements under the relevant laws and regulations (including but not limited to the approval by the Independent Shareholders in respect of such acquisition in accordance with the Listing Rules). The terms and conditions of any future acquisition of the equity interests will be determined after arm's length negotiations among Daye Metal and China No. 15 Metallurgical.

Given that (i) Daye Metal is entitled to the pre-emption right as a shareholder of the JV Company under the PRC Company Law; and (ii) Daye Metal may be required to acquire China No. 15 Metallurgical's interests in the JV Company in the future in accordance with the relevant requirements including but not limited to the Independent Shareholders' approval being obtained, we consider aforementioned arrangement in relation to transfer of equity interests is favourable to the Company.

Based on the above, we are of the view that the terms of the Capital Contribution Agreement are on normal commercial terms and are fair and reasonable so far as the Company and the Independent Shareholders are concerned.

4. Possible financial effects of entering into the Capital Contribution Agreement

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Possible effects on assets

As the capital contribution to be made by Daye Metal is currently expected to be funded

as to 60% (being approximately RMB780 million) by the internal resources of the Group; and (ii) as to 40% (being approximately RMB520 million) by the external borrowings of the Group, it is currently expected that immediately following the establishment of the JV Company and full payment of the registered capital of the JV Company by the parties, the total assets of the Enlarged Group will increase by approximately RMB1.72 billion, representing the sum of (i) the capital contributions to be made by the other parties to the JV Company as disclosed in the "Registered capital and capital contribution" under the paragraph headed "II. CAPITAL CONTRIBUTION AGREEMENT" in the "Letter from the Board"; and (ii) the abovementioned expected amount of external borrowings to be obtained by the Group for the purpose of funding the capital contribution to be made by Daye Metal.

Possible effects on liabilities

It is expected that immediately following the establishment of the JV Company and full payment of the registered capital of the JV Company by the parties, the total liabilities of the Enlarged Group will increase by approximately RMB520 million, representing the abovementioned expected amount of external borrowings to be obtained by the Group for the purpose of funding the capital contribution to be made by Daye Metal. The gearing ratio, which is calculated on net debts divided by equity attributable to owners of the Company, was approximately 404.3% as at 30 June 2019, and would increase to approximately 427.5% after borrowing external loan for payment of the registered capital of the JV Company. Thus, the external borrowings for payment of the registered capital of the JV Company would increase the gearing ratio of the Enlarged Group. Shareholders should note that, as mentioned in the paragraph headed "3. WORKING CAPITAL SUFFICIENCY OF THE ENLARGED GROUP" in appendix I to the Circular, the Board is of the opinion that the Enlarged Group will have sufficient working capital to meet its present requirement for at least 12 months from the date of the Circular in the absence of unforeseeable circumstances based on the assumption that the majority of the existing bank loans will be successfully renewed. Given abovementioned, the Shareholders should note the Enlarged Group may be exposed to uncertainties in obtaining external financing for the Capital Contribution Agreement and the transactions contemplated thereunder.

Possible effects on earnings

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Although there is an increase of approximately 23.2% in gearing ratio of the Group immediately following the establishment of the JV Company and there may be uncertainties in obtaining external financing for the Capital Contribution Agreement and the transactions contemplated thereunder, having taken into account that, (a) total assets of the Enlarged Group will increase upon the establishment of the JV Company; (b) the operation of the Production Plant will generate income to the Enlarged Group in the future; (c) the Group can develop its business by financing; (d) the Directors' view that the Enlarged Group will have sufficient working capital to meet its present requirements for at least 12 months from the date of the Circular in the absence of unforeseeable circumstances based on the assumption that the majority of the existing bank loans will be successfully renewed; and (e) the historical average loans renewal rate of the Group of around 85% to 100% in the past two years, we consider the entering into the Capital Contribution Agreement has no material adverse impact on the Group immediately following the establishment of the JV Company.

It should be noted that the aforementioned analysis is for illustrative purpose only and does not purport to represent how the financial position of the Group will be upon the establishment of the JV Company.

RECOMMENDATION

Having considered the factors and reasons discussed above, we are of the view that although the entering into the Capital Contribution Agreement is not in the ordinary and usual course of business of the Group, the terms of the Capital Contribution Agreement and the transactions contemplated thereunder are on normal commercial terms and fair and reasonable so far as the Company and the Independent Shareholders are concerned and the entering into the Capital Contribution Agreement is in the interests of the Company and the Shareholders as a whole. Accordingly, we would recommend (i) the Independent Board Committee to advise the Independent Shareholders; and (ii) the Independent Shareholders to vote in favour of the resolution to be proposed at the SGM in this regard.

Yours faithfully,

For and on behalf of

TC Capital International Limited

Edward Wu

Chairman

Note: Mr. Edward Wu has been a responsible officer of Type 6 (advising on corporate finance) regulated activities under the Securities and Futures Ordinance since 2005. He has participated in and completed various advisory transactions in respect of connected transactions of listed companies in Hong Kong.

The English translation of the Chinese name(s) in this letter, where indicated with * is included for information purpose only and should not be regarded as the official English name(s) of such Chinese names.

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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 3 to 10) https://www1.hkexnews.hk/listedco/listconews/sehk/2019/0924/2019092400783.pdf

2. STATEMENT OF INDEBTEDNESS

At the close of business on 31 August 2019, being the latest practicable date for the purpose of this indebtedness statement prior to the date of this circular, the Group had outstanding borrowings of approximately RMB10,282,034,000, comprising:

unsecured and unguaranteed bank borrowings of approximately RMB4,907,851,000;
secured and unguaranteed bank borrowings of approximately RMB77,967,000 which were secured by bank deposits;
unsecured and guaranteed bank borrowings of approximately RMB775,493,000, which were guaranteed by a local government authority or an intermediate holding company;

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

unsecured and unguaranteed loans from a fellow subsidiary of approximately RMB385,200,000;
unsecured and unguaranteed loans from an intermediate holding company of RMB41,677,000;
unsecured and guaranteed other loans of approximately RMB496,500,000 which were guaranteed by an intermediate holding company;
unsecured and unguaranteed gold loans with banks in relation to gold bullion borrowed of approximately RMB2,258,974,000;
unsecured and unguaranteed amounts due to fellow subsidiaries, a joint venture, an intermediate holding company and the immediate holding company of approximately RMB294,784,000, RMB15,444,000, RMB30,757,000 and RMB502,000, respectively; and
unsecured and unguaranteed promissory note to the immediate holding company with a carrying amount of approximately RMB996,885,000 and with a principal amount of RMB891,537,000.

At 31 August 2019, the Group had lease liabilities of RMB144,593,000 in relation to the remaining lease terms of certain lease contracts, which are unsecured and unguaranteed.

Save as aforesaid and apart from intra-group liabilities and normal trade, bills and other payables in the ordinary course of business of the Group, at the close of business on 31 August 2019, the Group did not have any debt securities authorised or created but unissued, issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities under acceptances (other than normal trade bills) or acceptance credits, mortgages, charges, debentures, hire purchase or finance lease obligations, guaranteed, unguaranteed, secured and unsecured borrowings and debts, or other material contingent liabilities.

The Directors confirmed that there is no material change in the indebtedness and contingent liabilities of the Group since 31 August 2019 up to the Latest Practicable Date.

3. WORKING CAPITAL SUFFICIENCY OF THE ENLARGED GROUP

After taking into account the cash flow impact of the proposed very substantial acquisition and connected transaction, the present financial resources available to the Enlarged Group, including internally generated funds and the available facilities, the Board is of the opinion that the Enlarged Group will not have sufficient working capital to meet its present requirement for at least 12 months from the date of this circular. Notwithstanding the foregoing, based on the historical average loans renewal rate of the Group of around 85% to 100% in the past two years, the Board estimated that an aggregate amount of bank loans of RMB4,924 million will be renewed upon maturity. Based on the assumption that the majority

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

of the existing bank loans will be successfully renewed, the Board is of the opinion that the Enlarged Group will have sufficient working capital to meet its present requirements for at least 12 months from the date of this circular, in the absence of unforeseeable circumstances.

4. 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.

5. FINANCIAL AND TRADING PROSPECTS OF THE ENLARGED GROUP

With the rapid development of economy of the PRC, the domestic demand for copper has been gradually increasing. Although the capacity of copper smelting has also improved rapidly, the current capacity of copper smelting in the PRC still can hardly meet the needs for copper, and the volume of metallic copper is still seriously insufficient. With the economy and society of the PRC entering a new era of high-quality and sustainable development, the volume of copper consumption demand will continue to grow steadily.

The revenue of the Group generated from the sales of copper cathodes amounted to approximately RMB21.27 billion, RMB24.54 billion, RMB23.63 billion and RMB12.22 billion for the three years ended 31 December 2016, 2017 and 2018 and the six months ended 30 June 2019, respectively. The sales of copper cathodes has generated gross profit for the Group for the three years ended 31 December 2016, 2017 and 2018 and the six months ended 30 June 2019, respectively. While there has not been substantial increase in the revenue generated from the sales of copper cathodes, the sales of copper cathodes business has contributed a substantial amount of the revenue of the Group and remained a profitable business for the Company.

The production scale of copper smelting of the Group has remained the same for many years and our influence in the industry has been declining year by year. In the next three years, the Enlarged Group will further improve the capacity and distribution of copper smelting, as well as to increase the profitability of smelting. It is planned that by 2021, the production capacity of copper cathodes will enter the forefront of the industry.

The Enlarged Group will continue to engage in the exploration and development of ore resources, the exploitation and processing of ore, as well as the trading of metal products. The production scale of copper cathodes will be largely expanded after the commencement of operation of the production plant. It is expected that the establishment of the JV Company will enhance the overall competitiveness of the Enlarged Group and potentially increase profitability of the Enlarged Group.

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APPENDIX II

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

1. FOR THE YEAR ENDED 31 DECEMBER 2016

Set out below is the management discussion and analysis of the operation results and business review of the Group as extracted from the annual report of the Company for the year ended 31 December 2016. Capitalised terms used hereafter shall have the same meanings as those defined in the annual report of the Company for the year ended 31 December 2016.

Business Overview

Revenue for the year ended 31 December 2016 amounted to approximately RMB38,915,713,000 (2015: RMB39,361,792,000), representing a year-on-year decline of approximately 1.13%. Loss for the year was approximately RMB164,752,000 (2015: RMB1,190,225,000), representing a year-on-year decrease of approximately 86.16%, mainly attributable to the significant decrease in the recognition of write-down of inventories and impairment of assets for the year ended 31 December 2016.

During the year, a total of approximately 27,100 tonnes of mined copper was produced by the Group, down by 4.58% from the previous year. The Group also produced approximately 429,000 tonnes of copper cathode, down by 8.84% from the previous year; approximately 1,149.95 tonnes of precious metals (including approximately 20.18 tonnes of gold, approximately 1,113.3 tonnes of silver, approximately 12 kg of platinum, approximately 158 kg of palladium and approximately 16.30 tonnes of tellurium), up by 4.35% year-on-year; approximately 1,001,700 tonnes of chemical products (including approximately 1,000,000 tonnes of sulphuric acid, approximately 607 kg of ammonium perrhenate, approximately 392 tonnes of nickel sulphate, approximately 1,086 tonnes of copper sulfate and approximately 184 tonnes of crude selenium), down by 2.94% year-on-year; approximately 242,000 tonnes of iron concentrate, down by 6.42% year-on-year; and approximately 86 tonnes of molybdenum concentrate, down by 22.52% year-on-year.

Despite various challenges including the industry slowdown and fluctuation of market price in 2016, we managed to maintain our strategic positioning and achieved steady progress in active compliance with new requirements on safety and environment:

1. Operating quality was steadily improved against the backdrop of industry slowdown through quality and efficiency enhancement

Long-termhigh-efficient production was achieved for high-return systems equipped with advanced technologies. Reasonable arrangement on production and infrastructure construction for the purpose to achieve higher efficiency has driven a sustainable development of mines.

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APPENDIX II

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

2. Resource exploitation and mine construction proceeded steadily

Throughout the year, the Group fulfilled its drilling depth plan of internal mines, with a new progress made in deep prospecting in Tonglvshan Mine. Mine construction also progressed well. The mining work of No. XI ore body of Tonglvshan Mine passed inspection. Construction of the new tailings storage facility of Tongshankou Mine was completed. The reconstruction projects of underground ventilation and trackless maintenance system of Sareke Copper Mine were put into operation in succession respectively. Mechanisation and automisation of the Group's mine system were further improved.

3. Smelting system was further improved

The fugitive gas collection project was implemented and the acid waste sludge landfill put into operation. Construction of compliance project on waste water and gas emission of rare and precious metal plant was completed. Smelting systems have undergone green transformation. Plant environment got obvious improvement. Capacity expansion of silver electrolysis system in rare and precious metal plant was completed, enhancing the productivity and stability of the system.

Operating Objectives and Strategies In 2017

The main production targets of the Group for 2017 include producing 30,900 tonnes of mined copper, 482,500 tonnes of copper cathode, 20 tonnes of gold, 1,000 tonnes of silver, 1,040,000 tonnes of sulphuric acid, 240,000 tonnes of iron concentrate, 12 kg of platinum, 180 kg of palladium, 380 tonnes of nickel sulfate (containing metal), 190 tonnes of crude selenium, 20 tonnes of tellurium, 1,000 tonnes of copper sulfate, 600 kg of ammonium perrhenate and 84 tonnes of molybdenum concentrate.

In order to achieve the above targets, the Group will implement various working measures, which mainly include the following aspects:

1. To make persistent efforts to promote the first and foremost strategy of exploring resources

The Group will strengthen cooperation in mineral exploitation and resource exploitation, enhance the support capability of resource and accelerate the construction and development of mines with the aim to turn resource superiority into favorable economic conditions, thus intensifying the solid support of improving quality and effectiveness.

The Group will pay special attention to the project of resource exploitation by advancing the mine exploration of fringe and in-depth of its mines, in order to increase the resource reserves. The Group will step up its efforts in mine exploration for mine production for the purpose of increasing the minable ore, while upgrading the reserve category of such mines.

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APPENDIX II

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

The Group will focus on the construction of mining infrastructure by accelerating the construction of the development of No. XI ore body of Tonglvshan Mine and the development of ramps in in-depth of southern edges of Fengshan Copper Mine, so as to ensure that the work progress is satisfactory. Besides, the Group will speed up the development of Sareke Copper Mine, thereby facilitating the steady and continued production of the mines.

2. To make persistent efforts to promote the development of Green Daye (環保有色)

The Group will adhere to the concept "to be in compliance with laws and regulations, to promote green development, to implement energy conservation and emission reduction as well as promoting cleaner production" so as to respond to additional changes and requirements of environmental protection in an active manner. By accurately grasping the above importance and difficulty, the Group strives to make further breakthrough in developing Green Daye (環保有色).

The Group will accelerate the construction of energy conservation and emission reduction works. In this regard, we will make sure that the centralized scrap copper recycling project with a capacity of 200,000 tonnes is completed during the year. The Group will focus on the environment control and transformation. Specifically, it will further consolidate the basis of emission control work for smelting plant and accelerate the projects including smoke and gas discharge control of converter to make sure that the emission is up to standards, while reinforcing online monitoring and management to guarantee that the indicator of each discharge point is immediately available. Meanwhile, the Group will pay great attention to the reduction work of waste discharge by enhancing the management on water balance, so as to control the discharge of water to areas outside smelting plant to below 1,500 tonnes/day.

3. To make persistent efforts to promote technological innovation

The Group will intensify its efforts in the development of key technologies, and then make full use of its achievement and popularize its application, so that technological innovation will play a more important role in improving quality and effectiveness.

Financial Review

Revenue

For the year ended 31 December 2016, the Group recorded revenue of approximately RMB38,915,713,000 (2015: RMB39,361,792,000), representing a decrease of approximately 1.13% from the previous year. The decrease was mainly attributable to the decline of quantity sold of copper cathodes.

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APPENDIX II

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

Cost of sales and services rendered

For the year ended 31 December 2016, the cost of sales and services rendered of the Group amounted to approximately RMB38,238,717,000 (2015: RMB39,308,260,000), representing a decrease of approximately 2.72% from the previous year, which was primarily due to the decrease in the quantity of purchase of raw materials.

Gross profit

Gross profit increased by RMB623,464,000 to RMB676,996,000, compared with RMB53,532,000 in the same period of 2015. This increase in gross profit was mainly due to the decrease in write-down of inventories for the year ended 31 December 2016. There was a write-down of inventories amounting to approximately RMB612,280,000 due to a significant decline in copper price for the year ended 31 December 2015.

Write-down of inventories of RMB14,110,000 (2015: RMB612,280,000), which is included in cost of inventories in the year ended 31 December 2016, is mainly attributable to the decline in the price of certain raw materials. The materials are written down to net realisable value when the costs of the finished products are expected to exceed their net realisable values.

Other income

Other income for the year ended 31 December 2016 amounted to approximately RMB95,516,000 (2015: RMB107,036,000), representing a decrease of approximately 10.76% from the previous year. The decrease was primarily due to the decrease in government grants recognised.

Administrative expenses

Administrative expenses for the year ended 31 December 2016 amounted to approximately RMB355,127,000 (2015: RMB337,119,000), representing an increase of approximately 5.34% from the previous year. The increase was primarily due to the increase in the repairs and maintenance expense when compared with the previous year.

Other gains and losses

Other gains and losses for the year ended 31 December 2016 amounted to a net loss of approximately RMB66,183,000 (2015: a net loss of RMB779,006,000), representing a decrease of approximately 91.50% from the previous year. The decrease was primarily due to the decrease in the recognition of impairment of assets when compared with the previous year.

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APPENDIX II

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

Finance costs

Finance costs for the year ended 31 December 2016 amounted to approximately RMB416,556,000 (2015: RMB461,799,000), representing a decrease of approximately 9.80% from the previous year. The Company redeemed the outstanding principal amount of the convertible bonds of RMB684,000,000 in full on 30 May 2016. The interest expense derived from the convertible bonds decreased significantly when compared with the previous year, which caused the decrease in finance costs.

Income tax (expense)/credit

Income tax expense for the year ended 31 December 2016 amounted to approximately RMB48,004,000 (2015: an income tax credit of RMB262,330,000). The income tax credit in the prior year mainly represented the deferred tax credit relating to write-down of inventories. The change mainly reflects the decrease in the write-down of inventories in the current year.

Loss for the year

As a result of the foregoing factors, loss for the year ended 31 December 2016 amounted to approximately RMB164,752,000 (2015: RMB1,190,225,000).

Loss per share

For the year ended 31 December 2016, basic loss per share amounted to RMB0.91 fen (2015: RMB5.52 fen).

Financial Management and Treasury Policy

The Group adopts a conservative approach for cash management and investment on uncommitted funds. We place cash and cash equivalents (which are mostly held in RMB) in short term deposits with authorized institutions in Hong Kong and the PRC.

During the year, the Group's receipts and payments were mainly denominated in RMB.

Liquidity and Financial Resources

As at 31 December 2016, the Group had restricted deposits and bank balances, bank and other deposits, bank balances and cash of approximately RMB1,191,443,000 (2015: RMB1,843,135,000), of which the majority were denominated in Renminbi. The Group's current ratio was approximately 1.02 (2015: 1.01), based on current assets of approximately RMB6,810,935,000 (2015: RMB7,577,245,000) divided by current liabilities of approximately RMB6,644,835,000 (2015: RMB7,467,210,000). The Group's gearing ratio as at 31 December 2016 was approximately 345.36% (2015: 326.33%), based on net debts (which included bank and other borrowings and convertible note/bonds less restricted bank deposits, restricted deposits (excluding other deposits held in futures exchanges and certain financial institutions

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

as security for the commodities derivative, gold forward contracts and currency forward contracts) and bank balances, bank and other deposits, bank balances and cash) of approximately RMB8,499,169,000 (2015: RMB8,564,240,000) divided by equity attributable to owners of the Company of approximately RMB2,460,959,000 (2015: RMB2,624,443,000). The increase in gearing ratio was attributable to the decrease in equity attributable to owners of the Company due to the effect of the loss for the year.

As at 31 December 2016, the Group had sufficient funding to pay off all its outstanding liabilities and meet its working capital requirement.

Borrowings

As at 31 December 2016, the Group's total debts (which comprise non-current and current bank and other borrowings and convertible note) amounted to approximately RMB9,662,171,000 (2015: RMB10,269,119,000). The decrease in debts was primarily due to the redemption by the Company of the outstanding principal amount of the convertible bonds of RMB684,000,000 in full on 30 May 2016.

As at 31 December 2016, the Group had bank and other borrowings of approximately RMB2,488,269,000 (2015: RMB3,579,419,000) and RMB6,293,293,000 (2015: RMB5,259,341,000) which was due within one year and after one year respectively. The majority of the Group's bank and other borrowings were denominated in Renminbi. Included in bank and other borrowings of RMB41,000,000 (2015: RMB93,361,000) were advances from banks and Daye Nonferrous Metals Group Finance Co., Ltd. for discounted bills with the same amount. The majority of the Group's bank and other borrowings were at fixed interest rate.

Employees and Remuneration Policy

As at 31 December 2016, the Group had 7,705 employees (2015: 8,345). The Group's total staff costs for the year was approximately RMB631,442,000 (2015: RMB741,760,000). The remuneration package of staff consists of basic salary, mandatory provident fund, insurances and other benefits as considered appropriate.

Remuneration of the employees of the Group is determined by reference to the market, individual performance and their respective contribution to the Group.

The emoluments of the Directors are subject to the recommendations of the remuneration committee of the Company and the Board's approval. Other emoluments including discretionary bonuses, are determined by the Board with reference to the Directors' duties, abilities, reputation and performance.

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

Foreign Exchange Risk

The Group operates in the PRC with most of its transactions settled in RMB except for certain purchases from international market that are conducted in United States dollars (US$) and certain borrowings that are denominated in US$.

Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the entities' functional currency. The Group is exposed to foreign exchange risk primarily with respect to US$.

The Group manages its foreign exchange risk by performing regular reviews of the Group's net foreign exchange exposures and may enter into currency forward contracts, when necessary, to manage its foreign exchange exposure. During the year, certain currency forward contracts had been entered by the Group.

Material Acquisition and Disposal Of Subsidiaries, Associates and Joint Ventures

The Group did not make any material acquisition or disposal of subsidiaries, associates and joint ventures during the year ended 31 December 2016.

Charges on Assets

As at 31 December 2016, other deposits which amounted to RMB28,441,000 (2015: RMB138,256,000) were held in futures exchanges and certain financial institutions as security for the commodities derivative, gold forward contracts and currency forward contracts, and other financing were secured by bank deposits and balances amounting to RMB46,250,000 (2015: RMB410,980,000).

Contingent Liabilities

As at 31 December 2016, the Group issued financial guarantees to a bank in respect of banking facilities for letter of credits granted to a joint venture with an aggregate amount of RMB150,000,000 (2015: nil), which represented the amount that could be required to be paid if guarantees were called upon in entirety, of which RMB145,500,000 had been utilised by the joint venture as at 31 December 2016.

2. FOR THE YEAR ENDED 31 DECEMBER 2017

Set out below is the management discussion and analysis of the operation results and business review of the Group as extracted from the annual report of the Company for the year ended 31 December 2017. Capitalised terms used hereafter shall have the same meanings as those defined in the annual report of the Company for the year ended 31 December 2017.

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

Business Review

Revenue for the year ended 31 December 2017 amounted to approximately RMB33,529,012,000 (2016: RMB38,915,713,000), representing a year-on-year decline of approximately 13.84%. Loss for the year was approximately RMB91,191,000 (2016: RMB164,752,000), including a decrease of RMB140,025,000 in net profit as a result of the one-off withdrawal of retirement benefits due to the implementation of the internal early retirement scheme, representing a year-on-year decrease of approximately 44.65%.

On 12 March 2017, a partial dam failure occurred at the northwestern corner of the tailings pond at Tonglvshan Mine (the "Tonglvshan Mine Accident"). Upon investigation, it was revealed that the Tonglvshang Mine Accident was primarily caused by the illegal entry and exploitation of the mineral resources of the tailings pond at Tonglvshan Mine by Daye Quantang Dam No. 3 Delafossite Mine* (大冶市泉塘村三號壩銅鐵礦), a collective ownership of Quantang Village, Daye City. The Group overcame the impact of the Tonglvshan Mine Accident and seized the favorable opportunity of rising market price and organized production for the purpose to achieve higher efficiency. During the year, a total of approximately 30,000 tonnes of mined copper was produced by the Group, up by 10.7% from the previous year. The Group also produced approximately 477,100 tonnes of copper cathode, up by 11.2% from the previous year; approximately 902.22 tonnes of precious metals (including approximately 13.61 tonnes of gold, approximately 861.81 tonnes of silver, approximately 13 kg of platinum, approximately 202 kg of palladium and approximately 26.59 tonnes of tellurium), down by 21.5% year-on-year; approximately 1,044,000 tonnes of chemical products (including approximately 1,040,100 tonnes of sulphuric acid, approximately 276 kg of ammonium perrhenate, approximately 412 tonnes of nickel sulphate, approximately 3,061 tonnes of copper sulfate and approximately 162 tonnes of crude selenium), up by 4.2% year-on-year; approximately 225,600 tonnes of iron concentrate, down by 6.8% year-on-year; and approximately 90 tonnes of molybdenum concentrate, up by 4.7% year-on-year.

In 2017, the Group made great efforts to achieve its general task of "improving quality and effectiveness" (提質增效攻堅). In line with the main subject of "stabilizing production, targeting on the benchmark, strict management, promoting reform, strengthening principal businesses and creating a civilized culture" (穩生產、抓對標、嚴管理、促改革、強主業、創文明), production and operation were running smoothly, with improved quality and efficiency. The reform and development made steady progress and the management level continued to improve.

1. New achievements have been made in technological innovation

In order to improve quality and effectiveness and make technological progress, the Group organized and implemented 18 key scientific research projects, of which one won the first prize of China Nonferrous Metals Industry Science and Technology Award, and was granted 11 patents throughout the year.

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

2. Resource exploitation has showed certain effects

The Group actively promoted deep prospecting and capacity upgrade at mines, and new copper resources were identified at Tonglvshan Mine.

3. New progress has been made in project construction

The major construction of the integrated recycling project with a capacity of 200,000 tonnes of scrap copper for the smelting plant was basically completed, with gradual improvement of the "Urban Minerals" (城市礦產) project to promote the recycling of resources.

4. Safe and green development further proceeded

A number of hidden perils such as the project for closing the tailings storage facility of Tongshankou Mine have been addressed, further strengthening the safety development of the mines. Such treatment projects as exhaust gases system transformation project for smelting plant were successfully completed, which further reduced the emission of sulfur dioxide. The emission of ammonia was reduced by certain measures at rare and precious metal plant, including control of ammonia input by adjusting process indicators and filter press transformation.

Operating Objectives and Strategies In 2018

The main production targets of the Group for 2018 include producing 29,800 tonnes of mined copper, 496,400 tonnes of copper cathode, 10 tonnes of gold, 1,000 tonnes of silver, 1,000,000 tonnes of sulphuric acid, 217,000 tonnes of iron concentrate, 13 kg of platinum, 200 kg of palladium, 370 tonnes of nickel sulfate (containing metal), 175 tonnes of crude selenium, 25 tonnes of tellurium, 900 tonnes of copper sulfate, 370 kg of ammonium perrhenate, 84 tonnes of molybdenum concentrate.

In order to achieve the above targets, the Group will implement various working measures, which mainly include the following aspects:

1. To strengthen resources development and enhance resource reserves

The Group will continue to advance the in-depth mine exploration to the west of the base line of Tonglvshan Mine with an aim to make new progress, and commence the prospecting work of the Southern mine of Sareke Copper Mine to increase the resource reserves. The Group will step up its efforts in mine exploration for mine production for the purpose of increasing the minable reserves. The Group will accelerate its application for deep mining license to expand mining coverage of its mines, and complete reserves verification at Fengshan Mine and Tongshankou Mine. The Group will speed up the development of the -545m to -605m middle portion of Tonglvshan Mine, the installation

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

of underground water pump room and power distribution cabinet for the -280m middle portion of Tongshankou Mine, and the construction of the main ramps for -440m to -740m of southern edges and the development of the -440m middle portion of Fengshan Mine.

2. To align with the market and improve operating quality

Focusing on process restructuring, the Group will endeavour to align itself with the selected industrial-leading enterprises with respect to staff, process and components in a comprehensive way in order to improve its cash cost control to a leading position in the industry gradually and further improve its efficiency. It will continue to optimize the structure of human resources based on the principle of business capability and high-efficiency, aiming for over 30% increase in labor productivity by the end of the 13th Five-Year Plan.

3. To accelerate the informatization construction and promote the integration of informatization and industrialization

The Group will coordinate its informatization construction, and develop detailed construction planning and implementation plan of informatization system. The Group will comprehensively implement an operational control model of unattended remote control and regular inspection for those positions in charge of air blowers, water pumps and etc., so as to improve the automation level of the production system.

4. To highlight independent innovation and continuously enhance technology to support business development

Based on the strategic development demand and the actual production and operation, the Group will strengthen the transformation and application of technological innovation and scientific achievements to provide technical support for improving quality and effectiveness. The Group will promote the application of mine engineering software system to achieve standardization, regulation and refinement of reserves management and enhance the level of mine informatization construction of the Group. Patent applications and science and technology awards applications will be carried out, the Group strives to achieve great breakthrough on scientific and technological achievements in 2018.

Financial Review

Revenue

For the year ended 31 December 2017, the Group recorded revenue of approximately RMB33,529,012,000 (2016: RMB38,915,713,000), representing a decrease of approximately 13.84% from the previous year. The decrease was mainly attributable to the decline of sales volume of gold and silver and the decrease in trading volume.

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

Cost of sales and services rendered

For the year ended 31 December 2017, the cost of sales and services rendered of the Group amounted to approximately RMB32,601,797,000 (2016: RMB38,238,717,000), representing a decrease of approximately 14.74% from the previous year, which was primarily due to the decrease in trading volume when compared with the previous year.

Gross profit

Gross profit increased by RMB250,219,000 to RMB927,215,000, compared with RMB676,996,000 in the same period of 2016. The increase in gross profit was mainly due to the increase in copper price during the year ended 31 December 2017.

Other income

Other income for the year ended 31 December 2017 amounted to approximately RMB81,528,000 (2016: RMB95,516,000), representing a decrease of approximately 14.64% from the previous year, which was primarily due to the decrease in interest income from banks and other companies.

Other operating expenses

Other operating expenses increased by RMB188,310,000 to RMB198,591,000, compared with RMB10,281,000 in the same period of 2016. The increase was primarily due to additional provision for early retirement obligations of RMB186,700,000 which was recorded and charged to other operating expenses during the current year.

Income tax expenses

Income tax expense for the year ended 31 December 2017 amounted to approximately RMB21,661,000 (2016: RMB48,004,000), representing a decrease of approximately 54.88% from the previous year, which was primarily due to the decrease in deferred tax expense when compared with the previous year.

Loss for the year

As a result of the foregoing factors, loss for the year ended 31 December 2017 amounted to approximately RMB91,191,000 (2016: RMB164,752,000).

Loss per share

For the year ended 31 December 2017, basic loss per share amounted to RMB0.54 fen (2016: RMB0.91 fen).

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

Financial Management and Treasury Policy

During the year ended 31 December 2017, the Group's receipts and payments were mainly denominated in RMB.

Liquidity and Financial Resources

As at 31 December 2017, the Group had restricted bank deposits, restricted deposits and bank balances, bank and other deposits and cash of approximately RMB1,177,511,000 (2016: RMB1,191,443,000), the majority of which were denominated in Renminbi. The Group's current ratio was approximately 1.02 (2016: 1.02), based on current assets of approximately RMB6,805,400,000 (2016: RMB6,810,935,000) divided by current liabilities of approximately RMB6,666,410,000 (2016: RMB6,644,835,000). The Group's gearing ratio as at 31 December 2017 was approximately 338.41% (2016: 345.36%), based on net debts (which included bank and other borrowings and promissory note less restricted bank deposits, restricted deposits (excluding other deposits held in futures exchanges and certain financial institutions as security for the commodities derivative and gold forward contracts) and bank balances, bank and other deposits and cash) of approximately RMB7,998,949,000 (2016: RMB8,499,169,000) divided by equity attributable to owners of the Company of approximately RMB2,363,712,000 (2016: RMB2,460,959,000). The decrease in gearing ratio was attributable to the decrease in bank and other borrowings of the Group.

As at 31 December 2017, the Group had sufficient funding to pay off all its outstanding liabilities and meet its working capital requirement.

Borrowings

As at 31 December 2017, the Group's total debts (which comprise non-current and current bank and other borrowings and promissory note) amounted to approximately RMB9,035,046,000 (2016: RMB9,662,171,000).

As at 31 December 2017, the Group had bank and other borrowings of approximately RMB3,058,032,000 (2016: RMB2,488,269,000) and RMB5,085,477,000 (2016: RMB6,293,293,000) which was due within one year and after one year respectively. The majority of the Group's bank and other borrowings were denominated in Renminbi. The majority of the Group's bank and other borrowings were at fixed interest rate.

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

Employees and Remuneration Policy

As at 31 December 2017, the Group had 7,253 employees (2016: 7,705). The Group's total staff costs for the year was approximately RMB815,432,000 (2016: RMB631,442,000). The remuneration package of staff consists of basic salary, mandatory provident fund, insurances and other benefits as considered appropriate.

Remuneration of the employees of the Group is determined by reference to the market, individual performance and their respective contribution to the Group.

Foreign Exchange Risk

The Group operates in the PRC with most of its transactions settled in Renminbi except for certain purchases from international market that are conducted in United States dollars ("US$") and certain borrowings that are denominated in US$.

The Group manages its foreign exchange risk by performing regular reviews of the Group's net foreign exchange exposures and may enter into currency forward contracts and currency option contracts, when necessary, to manage its foreign exchange exposure. During the year, certain currency forward contracts and currency option contracts had been entered by the Group.

Material Acquisition and Disposal of Subsidiaries, Associates and Joint Ventures

The Group did not make any material acquisition or disposal of subsidiaries, associates and joint ventures during the year ended 31 December 2017.

Charges on Assets

As at 31 December 2017, other deposits which amounted to RMB141,414,000 (2016: RMB28,441,000) were held in futures exchanges and certain financial institutions as security for the commodities derivative and gold forward contracts, and other financing were secured by bank deposits and balances amounting to RMB78,985,000 (2016: RMB46,250,000).

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

Contingent Liabilities

As at 31 December 2017, the Group provided guarantees to banks in favour of a joint venture of the Group in respect of the banking facilities provided by the banks to that joint venture. As at 31 December 2017, the aggregate amount of guarantees was RMB100,000,000 (2016: RMB150,000,000), which represented the amount that could be required to be paid if guarantees were called upon in entirety, of which RMB100,000,000 had been utilised by the joint venture as at 31 December 2017 (2016: RMB145,500,000).

3. FOR THE YEAR ENDED 31 DECEMBER 2018

Set out below is the management discussion and analysis of the operation results and business review of the Group as extracted from the annual report of the Company for the year ended 31 December 2018. Capitalised terms used hereafter shall have the same meanings as those defined in the annual report of the Company for the year ended 31 December 2018.

Business Review

Revenue for the year ended 31 December 2018 amounted to approximately RMB30,749,010,000 (2017: RMB33,529,012,000), representing a year-on-year decline of approximately 8.29%. Loss for the year was approximately RMB86,602,000 (2017: RMB91,191,000), representing a year-on-year decrease of approximately 5.03%. The decrease was primarily due to the increase in the gross profit of precious metals.

In 2018, the Group produced a total of approximately 30,000 tonnes of mined copper, substantially remaining at the same level over the same period last year; approximately 500,400 tonnes of copper cathode, an increase of approximately 4.88% over the same period last year; approximately 1,094.19 tonnes of precious metals (including approximately 9.97 tonnes of gold, approximately 1,053.90 tonnes of silver, approximately 26.50 kg of platinum, approximately 237.00 kg of palladium and approximately 30.06 tonnes of tellurium), an increase of approximately 21.28% over the same period last year; approximately 1,021,600 tonnes of chemical products such as the production of sulphuric acid (including approximately 1,016,500 tonnes of sulphuric acid, approximately 629.26 tonnes of nickel sulphate, approximately 4,252.73 tonnes of copper sulfate and approximately 168.79 tonnes of crude selenium), a decrease of approximately 2.15% over the same period last year; approximately 245,500 tonnes of iron concentrate, an increase of approximately 8.82% over the same period last year; and approximately 82.76 tonnes of molybdenum concentrate, a decrease of approximately 8.04% over the same period last year.

With a broad vision and a liberal mindset, the Group laid out its work agendas in 2018 to fully align with market mechanism and deepened reforms in all areas. Through these initiatives, the Group managed to gain new progress on all tasks.

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

1. Continuously enhanced risk management

The official termination procedure of the project for tackling hidden peril in the Tongshankou Mine tailings storage facility close-down under listed supervision was completed. The water management project for smelting plant also achieved substantial progress. The goal of exceeding 96.5% in the reuse rate of industrial water for smelting production has been achieved. Operational risk and environmental risk were also put under efficient control.

2. Aligned with the market for enhancing operational efficiency

Through efforts in revamping production process to achieve higher efficiencies, there witnessed a significant growth in the turnout of products with good efficiencies. Through raising technical and economic indices, the Tongshankou Mine realised major breakthrough in the recovery rate of copper concentrator, whereas the total recovery rate from the smelting process also reached historic high.

3. Proactively promoted all of the Group's projects

The Group had completed a series of key projects such as the ore grinding and flotation transformation of Tongshankou Mine and the integrated recycling project with a capacity of 200,000 tonnes of scrap copper for the smelting plant, to further improve the competitiveness of the Group.

Operating Objectives and Strategies in 2019

The production volume targets of the Group for 2019 include producing 28,610 tonnes of mined copper, 515,000 tonnes of copper cathode, 10 tonnes of gold, 1,000 tonnes of silver, 1,050,000 tonnes of sulphuric acid, 210,000 tonnes of iron concentrate, 25 kg of platinum, 225 kg of palladium, 550 tonnes of nickel sulfate (containing metal), 165 tonnes of crude selenium, 30 tonnes of tellurium, 1,400 tonnes of copper sulfate and 80 tonnes of molybdenum concentrate.

The Group would satisfactorily fulfill all objectives including the following:

1. To enhance operational efficiency by leveraging market-oriented operation mechanism

On mine production, the Group will seek to achieve reasonable production scheduling and optimise its production organisation to achieve balance in mining reserves and production capacity, and the balance between mining and filling and between exploration and mining, in consideration of its overall objectives such as costs, efficiency and employees' salaries.

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

In terms of smelting production, the Group will seek to enhance facility management to ensure that its facilities operate in a steady and efficient manner. In addition, the Group aims at repair and maintenance no-go within the year for its Ausmelt furnace, to further enhance furnace maintenance as well as fully utilise its capacity.

The Group seeks to refine its precious and rare metal production by raising indices, cutting costs and optimising the management. The Group will also step up its efforts in metal balance management to further raise the recovery rate of all metal types.

2. To closely monitor the progress in mines replacement

The Group is looking to carry out its design for the development of -665m to -725m IV ore bodies at the northern edges of Tonglvshan Mine. The Group will also accelerate the in-depth mining works at -440m to -540m at the southern edges of Fengshan Mine, and strengthen its research on the open pit ecological restoration project, and to resolve issues relating to the discharges of tailings on the later stages of production. The Group is also looking to speed up the development of the middle portion of the Tongshankou Mine at -220m to -280m, the geological exploration of the southern mine at the Sareke Copper Mine and the research on the preliminary stages of development.

3. To strengthen technological breakthrough

The Group will improve the research on and development of safe mining technology and strengthen its core technologies with an emphasis on copper production chain. The Group will also devote greater efforts to the transformation and application of technological breakthroughs and scientific achievements to optimise the smelting production system. The Group is also enhancing its technological innovation works to provide technical support to the Group's production and operation.

Financial Review

Revenue

For the year ended 31 December 2018, the Group recorded revenue of approximately RMB30,749,010,000 (2017: RMB33,529,012,000), representing a decrease of approximately 8.29% from the previous year. The decrease was mainly attributable to the decrease in trading volume.

Cost of sales and services rendered

For the year ended 31 December 2018, the cost of sales and services rendered of the Group amounted to approximately RMB29,806,274,000 (2017: RMB32,601,797,000), representing a decrease of approximately 8.57% from the previous year, which was primarily due to the decrease in trading volume when compared with the previous year and the improvement of cost control measures during the year ended 31 December 2018.

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APPENDIX II

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

Gross profit

Gross profit increased by approximately RMB15,521,000 to approximately RMB942,736,000, compared with approximately RMB927,215,000 in the same period of 2017. The increase in gross profit was mainly due to the improvement of cost control measures during the year ended 31 December 2018.

Other income

Other income for the year ended 31 December 2018 amounted to approximately RMB75,704,000 (2017: RMB81,528,000), representing a decrease of approximately 7.14% from the previous year, which was primarily due to the decrease in interest income from banks.

Other operating expenses

Other operating expenses decreased by approximately RMB87,103,000 to approximately RMB111,488,000, compared with approximately RMB198,591,000 in the same period of 2017. The decrease was primarily due to the decline in additional provision for early retirement obligations.

Other gains and losses

Other gains and losses for the year ended 31 December 2018 amounted to a net loss of approximately RMB121,132,000 (2017: a net loss of RMB39,956,000), representing an increase of approximately 203.16% from the previous year. The increase was primarily due to the effect of exchange losses and loss on disposal of assets.

Income tax expenses

Income tax expense for the year ended 31 December 2018 amounted to approximately RMB40,152,000 (2017: RMB21,661,000), representing an increase of approximately 85.37% from the previous year, which was primarily due to the increase in deferred tax expense when compared with the previous year.

Loss for the year

As a result of the foregoing factors, loss for the year ended 31 December 2018 amounted to approximately RMB86,602,000 (2017: RMB91,191,000).

Loss per share

For the year ended 31 December 2018, basic loss per share amounted to RMB0.56 fen (2017: RMB0.54 fen).

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APPENDIX II

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

Financial Management and Treasury Policy

During the year ended 31 December 2018, the Group's receipts and payments were mainly denominated in RMB.

Liquidity and Financial Resources

As at 31 December 2018, the Group had restricted and pledged bank deposits, and cash and bank balances of approximately RMB928,275,000 (2017: RMB1,036,097,000), the majority of which were denominated in Renminbi. The Group's current ratio was approximately 1.03 (2017: 1.02), based on current assets of approximately RMB8,364,655,000 (2017: RMB6,805,400,000) divided by current liabilities of approximately RMB8,083,411,000

(2017: RMB6,666,410,000). The Group's gearing ratio as at 31 December 2018 was

approximately 449.43% (2017: 339.88%), based on net debts (which included bank and other borrowings and promissory note less restricted and pledged bank deposits, and cash and bank balances) of approximately RMB10,055,826,000 (2017: RMB8,033,756,000) divided by equity attributable to owners of the Company of approximately RMB2,237,461,000 (2017: RMB2,363,712,000). The increase in gearing ratio was attributable to the increase in net debts and the effect of the loss for the year.

As at 31 December 2018, the Group had sufficient funding to pay off all its outstanding liabilities and meet its working capital requirement.

Borrowings

As at 31 December 2018, the Group's total debts (which comprised non-current and current bank and other borrowings and promissory note) amounted to approximately RMB10,984,101,000 (2017: RMB9,069,853,000).

As at 31 December 2018, the Group had bank and other borrowings of approximately RMB5,178,212,000 (2017: RMB3,058,032,000) and approximately RMB4,837,197,000 (2017: RMB5,085,477,000) which was due within one year and after one year respectively. The majority of the Group's bank and other borrowings were denominated in Renminbi. The majority of the Group's bank and other borrowings were at fixed interest rate.

Employees and Remuneration Policy

As at 31 December 2018, the Group had 6,723 employees (2017: 7,253). The decrease in the number of employees was mainly attributable to (i) the natural loss of employees due to retirement; and (ii) the improvement of enterprise efficiency, which in turn reduced the numbers of employees required and streamlined the employment structure. The Group has

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APPENDIX II

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

adopted an internal retirement policy in line with the early retirement policy of the state, implemented competitive recruitment and offered job-transfer trainings for the surplus employees, thereby reducing the numbers of employees retained by the Group and in turn optimizing the age and skills structure of the human resources and improving the labor productivity of the Group. The Group's total staff costs for the year was approximately RMB714,250,000 (2017: RMB815,432,000). The remuneration package of staff consists of basic salary, mandatory provident fund, insurances and other benefits as considered appropriate.

Remuneration of the employees of the Group is determined by reference to the market, individual performance and their respective contribution to the Group.

Foreign Exchange Risk

Material Acquisition and Disposal of Subsidiaries, Associates and Joint Ventures

The Group did not make any material acquisition or disposal of subsidiaries, associates and joint ventures during the year ended 31 December 2018.

Charges on Assets

As at 31 December 2018, other deposits which amounted to approximately RMB69,095,000 (2017: RMB141,414,000) were held in futures exchanges and certain financial institutions as security for the commodities derivative and gold forward contracts, and other financing were secured by bank deposits and balances amounting to approximately RMB66,659,000 (2017: RMB78,985,000).

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

Contingent Liabilities

As at 31 December 2018, the Group had no contingent liabilities.

4. FOR THE SIX MONTHS ENDED 30 JUNE 2019

Set out below is the management discussion and analysis of the operation results and business review of the Group as extracted from the interim report of the Company for the six months ended 30 June 2019. Capitalised terms used hereafter shall have the same meanings as those defined in the interim report of the Company for the six months ended 30 June 2019.

Business Review

In the first half of 2019, China Daye Non-Ferrous Metals Mining Limited (the "Company") and its subsidiaries (collectively, the "Group") focused on work objectives throughout the year, striving to enhance the quality of its business development by aligning with the market expectations and implementing comprehensive in-depth reforms.

In the first half of 2019, the Group produced a total of approximately 13,184 tonnes of mined copper, an increase of 2.7% over the same period last year; approximately 269,308 tonnes of copper cathode, an increase of 5.8% over the same period last year; approximately

tonnes of precious metals (including approximately 6.64 tonnes of gold, approximately

tonnes of silver, approximately 11 kg of platinum, approximately 130 kg of palladium and approximately 18.22 tonnes of tellurium), an increase of 27.1% over the same period last year; approximately 595,656 tonnes of chemical products (including approximately 593,415 tonnes of sulphuric acid, approximately 1,894 tonnes of copper sulfate, approximately 251 tonnes of nickel sulphate (containing metal) and approximately 96 tonnes of crude selenium), an increase of 8.1% over the same period last year; approximately 85,500 tonnes of iron concentrate, a decrease of 22.7% over the same period last year; and approximately 40 tonnes of molybdenum, a decrease of 11.1% over the same period last year.

Improvement of technical and economic indices

The ore grade, mining loss rate, dilution rate and recovery rate of copper concentrator, as well as the smelting recovery rate of copper, gold and silver and the direct recovery rate of gold and silver of the Group had continuously improved.

Orderly progression of mines replacement

Explorations of the III and IV ore bodies of Tonglvshan Mine, the southern edge of Fengshan Mine and the middle portion of Tongshankou Mine have generally met the time schedule requirements. Progressions in the integrated utilisation of tailings pond and the development and utilisation of non-metal resources of Tongshankou Mine had also been accelerated.

- II-20 -

APPENDIX II

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

Further expansion into the circular economy industry

Exerting the synergy effect of the smelting systems, the Group stepped up its efforts in handling used scrap printed circuit boards. With the storing-sorting-treating process further enhanced in the first half of the year, the Group handled 1,000 tonnes of used circuit boards.

Outlook

In the second half of 2019, 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.

As to the mines, the Group will ensure that each mine is at full production capacity and achieve their annual production volume targets. Tonglvshan Mine will focus on the production volume and grades of ore supply, especially dedicated to promoting highly efficient mining method, ore prospecting at margin areas and recovering remnant ores. Fengshan Mine will revolve around its annual targets, organise the drillings of high-grade pits and mining and filling of medium deep borehole through scientific method, and speed up the progress of the exploration and cutting engineering work of the northern edge and western area, so as to ensure the balance of ore supply in the southern and northern edges. Tongshankou Mine will maintain the balance of mining and stripping of open-pit platforms to achieve stable ore supply capability. Sareke Copper Mine will improve the technology standards of mining and processing technologies, and continuously strengthen underground mining methods and optimise filling methods, so as to ensure the balance and stability of production on a continuous basis.

With respect to smelting, the Group will focus on its annual production volume targets, reasonably organise its production and ensure stable operation of the system. The maintenance and repair of equipment will be strengthened to increase the utilisation rate of running the Ausmelt furnace system to ensure that the rate is above 95% stably.

Financial Review

The Group's revenue increased by 6.26% to RMB17,377.4 million during the period over the same period last year of RMB16,354.0 million. The increase in revenue was mainly attributable to the increase in the sales of other copper products, gold and other gold products, and silver and other silver products.

Gross profit for the six months ended 30 June 2019 amounted to RMB442.3 million (six months ended 30 June 2018: RMB349.7 million), representing an increase of 26.5% from the previous period. The increase was mainly due to the increase in sales volume for the six months ended 30 June 2019.

- II-21 -

APPENDIX II

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

Finance costs for the six months ended 30 June 2019 amounted to RMB255.3 million (six months ended 30 June 2018: RMB200.7 million), representing an increase of 27.2% from the previous period. The increase was mainly due to the increase in interest on bank and other borrowings.

Financial Management and Treasury Policy

During the six months ended 30 June 2019, the Group's receipts and payments were mainly denominated in RMB.

Capital Structure, Liquidity and Financial Resources

As at 30 June 2019, the Group had restricted and pledged bank deposits, and cash and bank balances of RMB2,006.8 million (31 December 2018: RMB928.3 million), of which the majority were denominated in Renminbi ("RMB"), with a current ratio of 1.02 (31 December 2018: 1.03), based on the current assets of RMB8,282.5 million (31 December 2018: RMB8,364.7 million) and current liabilities of RMB8,121.0 million (31 December 2018: RMB8,083.4 million). The Group's gearing ratio was 404.3% (31 December 2018: 449.4%) based on the net debts (which includes bank and other borrowings and promissory note less restricted and pledged bank deposits, and cash and bank balances) of RMB9,050.7 million (31 December 2018: RMB10,055.8 million) divided by equity attributable to owners of the Company of RMB2,238.7 million (31 December 2018: RMB2,237.5 million). The decrease in gearing ratio was mainly due to the increase in cash and bank balances compared with the same period last year.

As at 30 June 2019, the Group had bank and other borrowings of RMB5,557.8 million (31 December 2018: RMB5,178.2 million) and RMB4,510.1 million (31 December 2018: RMB4,837.2 million) which will be due within one year and after one year respectively. The majority of the Group's bank and other borrowings were denominated in RMB. The majority of the Group's bank and other borrowings bear interest at fixed rates. The Group did not use derivative financial instruments to hedge its interest rate risk during the period.

The Group believes its current assets, funds and future revenue will be sufficient to finance the future expansion and working capital requirements of the Group.

Employees and Remuneration Policy

As at 30 June 2019, the Group had a total of 5,652 employees (30 June 2018: 6,309). The decrease in the number of employees was mainly attributable to (i) the natural loss of employees due to retirement; and (ii) the improvement of enterprise efficiency, which in turn reduced the numbers of employees required and streamlined the employment structure. The

- II-22 -

APPENDIX II

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

Group has adopted an internal retirement policy in line with the early retirement policy of the state, implemented competitive recruitment and offered job-transfer trainings for the surplus employees, thereby reducing the numbers of employees retained by the Group and in turn optimizing the age and skills structure of the human resources and improving the labor productivity of the Group. The Group's total staff costs for the six months ended 30 June 2019 was approximately RMB322.1 million (six months ended 30 June 2018: RMB316.9 million). The remuneration packages consist of basic salary, retirement benefits scheme contributions, medical insurance and other benefits considered as appropriate. Remuneration packages are generally structured with reference to market terms, individual qualification and performance of the employee. They are periodically reviewed based on individual merit and other market factors.

Foreign Exchange Exposure

The Group operates in the PRC with most of the transactions settled in RMB except for certain purchases from the international market that are conducted in United States dollar ("US$") and certain borrowings that are denominated in US$.

The Group manages its foreign exchange risk by performing regular reviews of the Group's net foreign exchange exposures and may enter into derivative financial instruments, when necessary, to manage its foreign exchange exposure. During the period, certain currency forward contracts, currency exchange swap contracts and currency option contracts had been entered into by the Group.

Material Acquisition and Disposal of Subsidiaries, Associates and Joint Ventures

The Group did not make any material acquisition or disposal of subsidiaries, associates or joint ventures during the six months ended 30 June 2019.

Contingent Liabilities

As at 30 June 2019, the Group had no contingent liabilities.

Charges on Assets

As at 30 June 2019, other deposits which amounted to RMB55.5 million (31 December 2018: RMB69.1 million) were held in futures exchanges and certain financial institutions as security for the commodity derivative contracts and other financing were secured by bank deposits and balances amounting to RMB343.0 million (31 December 2018: RMB66.7 million).

- II-23 -

APPENDIX III

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.

- III-1 -

APPENDIX III

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. SUBSTANTIAL SHAREHOLDERS' INTERESTS AND SHORT POSITIONS IN THE SHARES OF THE COMPANY

As at the Latest Practicable Date, so far as was known to the Directors and chief executives of the Company, the following persons (other than Directors and chief executives of the Company) had interests or short positions in the Shares and underlying shares of the Company, which were required to be notified to the Company pursuant to the provisions of Divisions 2 and 3 of Part XV of the SFO, or which were recorded in the register required to be kept by the Company pursuant to Section 336 of the SFO:

			Percentage
		Number of Shares/	of issued
Name of Shareholder	Capacity	underlying shares	Shares
			(%) (Note 5)
China Times Development	Beneficial owner	11,962,999,080(L)	66.85
Limited
Daye Nonferrous Metals Group	Interest in a controlled	11,962,999,080(L)	66.85
Holdings Company Limited	corporation	(Note 2)
China Nonferrous Metal Mining	Interest in a controlled	11,962,999,080(L)	66.85
(Group) Co., Ltd	corporation	(Note 3)
China Cinda (HK) Asset	Beneficial owner	936,953,542(L)	5.24
Management Co., Limited
China Cinda Asset Management	Interest in a controlled	936,953,542(L)	5.24
Co., Limited	corporation	(Note 4)

Notes:

1. The letter "L" denotes a long position in the Shares.

- III-2 -

APPENDIX III

GENERAL INFORMATION

These Shares were held by China Times Development Limited, the entire issued capital of which were beneficially owned by Daye Nonferrous Metals Group Holdings Company Limited.
These Shares were held by China Times Development Limited. 57.99% of the equity interest in Daye Nonferrous Metals Group Holdings Company Limited were beneficially owned by China Nonferrous Metal Mining (Group) Co., Ltd.
These shares were held by China Cinda (HK) Asset Management Co., Limited, the entire issued capital of which were beneficially owned by China Cinda Asset Management Co., Limited.
The shareholding percentage was calculated based on 17,895,579,706 Shares as at the Latest Practicable Date.

Save as disclosed above, as at the Latest Practicable Date, the Directors were not aware of any other persons (other than the Directors and chief executive of the Company) who had interests or short positions in the Shares and underlying shares of the Company, which were required to be notified to the Company pursuant to the provisions of Divisions 2 and 3 of Part XV of the SFO, or which were recorded in the register required to be kept under section 336 of the SFO.

4. DIRECTORS' INTERESTS IN ASSETS OF THE ENLARGED 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 Enlarged Group since 31 December 2018, being the date to which the latest published audited accounts of the Group were made up.

5. 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 Enlarged Group.

6. 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 Enlarged Group which will not expire or is not determinable within one year without payment of compensation (other than statutory compensation).

7. 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.

- III-3 -

APPENDIX III

GENERAL INFORMATION

8. MATERIAL LITIGATION

As at the Latest Practicable Date, no member of the Enlarged 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 Enlarged Group.

9. 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 Enlarged 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 Enlarged Group within the two years immediately preceding the Latest Practicable Date.

10. 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
TC Capital International Limited	a corporation licensed 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 Enlarged Group.

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.

- III-4 -

APPENDIX III

GENERAL INFORMATION

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 Enlarged 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. Lau Pok Yuen, who obtained a bachelor's degree of Business Administration (Honours) Accounting from Hong Kong Baptist University in 2008 and is a certified public accountant 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 "9. Material Contracts" in this appendix;
the letter of the Independent Board Committee, the text of which is set out in this circular;
the letter of the Independent Financial Adviser, the text of which is set out in this circular;

- III-5 -

APPENDIX III

GENERAL INFORMATION

the written consent from the Independent Financial Adviser referred to in the paragraph headed "11. 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; and
this circular.

- III-6 -

NOTICE OF SGM

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 I, Mezzanine Floor, Towers Wing, Royal Pacific Hotel, China Hong Kong City, 33 Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong on Monday, 11 November 2019 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 resolution. Unless otherwise defined, capitalised terms used in this notice shall have the same meanings as those defined in the circular of the Company dated 25 October 2019.

ORDINARY RESOLUTION

1. "THAT:

the Capital Contribution Agreement and the transactions contemplated thereunder be and hereby approved, confirmed and ratified; and
any one Director be and is hereby authorised for and on behalf of the Company, to sign, execute and deliver or to authorise the signing, execution and delivery of all such documents (including affixing the common seal of the Company thereon) and to do all such things as he or she may in his or her absolute discretion consider necessary, expedient or desirable to implement and/or to give effect to or otherwise in connection with the Capital Contribution Agreement and the transactions contemplated thereunder."

By order of the Board of

China Daye Non-Ferrous Metals Mining Limited

Wang Yan

Chairman

Hong Kong, 25 October 2019

- SGM-1 -

NOTICE OF SGM

Notes:

For more information relating to the abovementioned resolution, please refer to announcement of the Company dated 30 August 2019 and the circular of the Company dated 25 October 2019.
The resolution 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 Friday, 8 November 2019. 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 Friday, 8 November 2019.
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-2 -

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China Daye Non-Ferrous Metals Mining Ltd. published this content on 24 October 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 24 October 2019 08:49:13 UTC

Delayed Hong Kong S.E. Other stock markets 03:40:51 24/05/2024 BST			5-day change	1st Jan Change
0.081 ^HKD	+2.53%		+14.08%	+35.00%

04-01	China Daye Non-Ferrous Swings to Loss in 2023	MT
03-28	China Daye Non-Ferrous Metals Mining Limited Reports Earnings Results for the Full Year Ended December 31, 2023	CI

China Daye Non-Ferrous Swings to Loss in 2023	04-01	MT
China Daye Non-Ferrous Metals Mining Limited Reports Earnings Results for the Full Year Ended December 31, 2023	03-28	CI
China Daye Non-Ferrous Metals Mining Limited Provides Consolidated Earnings Guidance for the Year Ended 31 December 2023	03-20	CI
Daye Non-Ferrous Metals Mining’s Auditor Steps Down; Successor Named	12-13	MT
China Daye Non-Ferrous Metals’ CEO Retires; Successor Named	27/09/23	MT
China Daye Non-Ferrous Metals Mining Limited Announces Management Changes	27/09/23	CI
China Daye Non-Ferrous Metals Mining Limited Announces Chief Executive Officer Changes	27/09/23	CI
Daye Non-Ferrous Metals Mining's H1 Attributable Profit Falls	01/09/23	MT
China Daye Non-Ferrous Metals Mining Limited Reports Earnings Results for the Half Year Ended June 30, 2023	31/08/23	CI
China Daye Non-Ferrous Metals Mining Limited Appoints Zhang Jinzhong as Executive Director	31/08/23	CI
Daye Non-Ferrous Metals Mining Sees 223% Surge in H1 Profit	22/08/23	MT
China Daye Non-Ferrous Metals Mining Limited Provides Group Earning Guidance for Six Months Ended 30 June 2023	21/08/23	CI
China Daye Non-Ferrous Metals Mining's 2022 Attributable Profit Falls	03/04/23	MT
China Daye Non-Ferrous Metals Mining Limited Reports Earnings Results for the Full Year Ended December 31, 2022	31/03/23	CI
China Daye Non-Ferrous Metals Mining Announces Resignation and Appointment of Independent Non-Executive Director and Change of Member of Board Committees	31/03/23	CI
China Daye Non-Ferrous Metals to Swing to 2022 Loss	23/03/23	MT
China Daye Non-Ferrous Metals Mining Limited Provides Earnings Guidance for the Year Ended December 31, 2022	23/03/23	CI
China Daye Non-Ferrous Metals Mining Limited Announces Change of Executive Directors	28/10/22	CI
China Daye Non-Ferrous Metals Mining Limited Reports Earnings Results for the Half Year Ended June 30, 2022	31/08/22	CI
China Daye Non-Ferrous Metals Likely to Record 80% Decline in H1 Net Profit; Shares Up 5%	24/08/22	MT
China Daye Non-Ferrous Metals Mining Limited Provides Group Earnings Guidance for the Six Months Ended 30 June 2022	23/08/22	CI
China Daye Non-Ferrous Metals Mining Limited Reports Earnings Results for the Full Year Ended December 31, 2021	31/03/22	CI
China Daye Non-Ferrous Appoints Director as Chairman Following Incumbent's Exit	08/02/22	MT
China Daye Non-Ferrous Metals Mining Limited Announces Board Changes	07/02/22	CI
China Daye Non Ferrous Metals Mining : Gold, CNMC criticised for environmental failings	06/09/21	RE

	1st Jan change	Capi.
CHINA DAYE NON-FERROUS METALS MINING LIMITED	+35.00%	188M
VSMPO-AVISMA CORPORATION	-.--%	7.3B
ZHEJIANG HUAYOU COBALT CO., LTD	-12.42%	7.03B
CHINA RARE EARTH RESOURCES AND TECHNOLOGY CO., LTD.	+3.18%	4.31B
YUNNAN COPPER CO.,LTD	+26.17%	4.09B
CHINA NONFERROUS MINING CORPORATION LIMITED	+48.54%	3.98B
PANGANG GROUP VANADIUM & TITANIUM RESOURCES CO., LTD.	-8.23%	3.95B
WESTERN SUPERCONDUCTING TECHNOLOGIES CO., LTD.	-20.68%	3.82B
AURUBIS AG	+0.46%	3.51B
ZHE JIANG HAI LIANG CO., LTD	-23.05%	2.5B

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China Daye Non Ferrous Metals Mining : VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION CAPITAL CONTRIBUTION AGREEMENT AND NOTICE OF SPECIAL GENERAL MEETING

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