The eastern Shandong (“Jiaodong”) gold district is divided from west to east into the Zhaoyuan- Yexian, Qixia, and Muping-Rushan gold belts. The Songjiagou Property is located within the MupingRushan gold belt situated in the eastern part of the Jiaobei Terrane, which contains about 20% of the gold reserves of the Shandong Peninsula. Gold mineralization is characterized as either vein-filling or as disseminated structures/stockwork.

Project area. A ductile shear zone and ductile brittle fault zone are major geological structures in the area. Major magmatic activity is represented by monzonite granite. Other veins include diabase, diorite, hornblende porphyrite, and lamprophyre.

Palaeoproterozoic metamorphic rocks of the Jingshan Group are mainly distributed to the north of the Project area near Tanjia village, and are comprised of biotite granulite, graphite-bearing gneiss, leucogranulite, and marble. These strata generally dip southeast with angles varying from 15° to 50°.

Cretaceous-age rocks are predominately represented by the Lisishan Formation, part of the Laiyang Group and comprised of conglomerate and sandstone. The Lisishan Formation in the Project area has an overall northeast strike and dips southeast with an angle of 20° to 40°. The formation is dividable into two conformably contacted sections according to the clast size. The first section of Lisishan Formation consists of relatively larger clasts with grain sizes of about 3 cm – 20 cm and is predominately composed of monzonitic granite and quartz; marble, gneiss, schist and granulite are occasionally visible in this section. The second section is characterized by more fine grained and rounded clasts made of sandstone and siltstone.

Gold mineralization of Songjiagou Project is hosted within the Cretaceous-age pyritic- sericitic conglomerate of the Laiyang Group Linsishan Formation. Gold enrichment occurs as veins as well as in disseminated and stockwork distributions. The vein-type mineralization is appropriately described as mesothermal; the disseminated and stockwork mineralizations have some aspects of epithermal mineralization but are both spatially and genetically associated with the vein-type, and so can be considered a variant of that type.

The Songjiagou Project’s conglomerate type gold deposit is believed to be associated with mesothermal filling activities and followed by alterations and metasomatism.

Wall rocks are generally consistent with the host rocks, comprised of conglomerate and occasional lamprophyre. Wall rocks and internal waste contain small quantities of gold, usually less than 0.10 g/t. The boundaries between wall rock, internal waste, and the host rocks are not visually obvious, and must be determined by chemical analysis.

Songjiagou mine is currently in production from the Open Pit.

Mining inventory is loaded by excavator and then transported to the processing plant by truck.

In order to effectively control the grade and match excavator capacities, block sizes in the resource model were set at 10 m × 10 m × 5 m. Two benches were combined into one during optimization, and the final bench heihgt is 10 m.

There are three processing plants operating in Songjiagou mine. Two processing plants with a capacity of 200 tpd and 1,200 tpd commenced operations in 2006; another processing plant, with a capacity of 6,000 tpd, was put into production in May 2011. The current processing capacity of Songjiagou gold mine is 7,400 tonnes per day (“tpd”).

The Songjiagou processing plant technology includes conventional three-stage crushing within a closed circuit, grinding within a closed circuit, and flotation consisting of one stage of roughing, one stage of cleaning, and two stages of scavenging.

Haul trucks deliver the mining inventory from the open pit to the primary crushing workshop for grid screening, the underflow of which is sent to the mining inventory bin. Inventory with particle sizes less than 500 mm are fed to the jaw crusher by a heavy apron feeder, and the jaw crusher’s discharge is subjected to secondary crushing.

A vibrating feeder feeds the primary crushing product to the cone crusher for secondary crushing. The crusher’s discharge is delivered to the vibrating screen for classification.

The screen oversize is conveyed to the cone crusher for tertiary crushing, and its discharge is conveyed back to the vibrating screen for classification. Particles passing the screen (-20 mm) are sent to the fine ore bin.

The fine ore (-20 mm) is conveyed by the belt feeders to the ball mills. Each ball mill and its respective spiral classifier form a closed circuit for grinding. Ball mill discharge is classified by a spiral classifier. The continuously revolving spirals carry the settled sands up and discharge the sands into the mill feed chute. Overflow from the classifier flows to the flotation conditioning tank.

The flotation process includes one stage of roughing, one stage of cleaning, and two stages of scavenging.

The slurry, mixed with sodium butyl xanthogenate (“SBX”) and frother (No. 2 oil) in the agitation tank, flows to the head cell of the roughing. The flotation tailings flow to the first scavenger flotation cells for further gold recovery. The rougher flotation concentrate is sent to cleaner flotation for upgrading; The cleaning flotation tailings go back to rougher flotation. The cleaning concentrate is pumped to dewatering facilities. Concentrates from the first and second scavenging are returned to the flotation circuit and tailings flow to tailings pump station.

The collector, SBX, No.2 oil, and lime are added to the flotation circuits where required.

The gold concentrate is thickened in a conventional thickener. The thickener underflow is pumped to ceramic disc filters to further reduce water content. The dewatered concentrate is transported to the smelters.

All the reagents are prepared and stored separately. The collector and frother are added at appropriate points by metering pumps. Lime slurry is pumped to the addition points by slurry pumps.

The mine operates three TSF’s. Two TSF’s are located south of the processing plants; one of them is abandoned while the other one has completed its service life. Part of this tailings storage area has been revegetated. The third TSF is located 2.5 km southeast of the processing plants and is in operation. Its total capacity is 9.47 million cubic metres (“m3”) for an effective capacity of about 7.11 million m3. This tailing dam has been operating for two (2) years. Based on the Songjiagou Project’s designed processing capacity of 2,850 tpd, the life of this tailings dam is expected to be 10.2 years. However, considering that the Project’s processing capacity has been upgraded to 7,400 tpd, its service life is expected to be reduced to about four (4) years. Based on the average processing capacity of 5,039 tpd after May 2011, the life of the tailing dam is expected to be about five (5) years.