Majestic’s mining licenses are located in proximity to three major northeast-southwest trending faults and are underlain by both Archean and Proterozoic basement and granite intrusions reminiscent of some of the world’s largest gold producing camps. The deposits of the Jiaodong Peninsula form one of the largest provinces of granitoid-hosted lode-gold deposits in the world and host some of China’s largest gold producers.

Gold occurrences on the Jiaodong Peninsula are of vein-type as well as disseminated and stockwork styles. The veins typically occur within second and third-order faults cutting Mesozoic granitoids and are relatively continuous, measuring from a few centimeters to several meters in thickness by as much as five kilometers in strike. The stockworks occur along regional faults and are surrounded by broad alteration halos. The vein type mineralization is described as mesothermal; the disseminated and stockwork style have some aspects of epithermal mineralization but are both spatially and genetically associated with the vein-type mineralization. The Songjiagou gold mine is a moderate temperature hydrothermal filling and metasomatic conglomerate type gold deposit with no clear boundary between wall rocks and ore. As a result, assay analysis is required to determine ore grades before mining is undertaken.

The Songjiagou underground mine is situated approximately 405 metres northeast of the Company’s existing open pit operation. The formed concrete portal entrance provides access to a spiral ramp whose dimensions are 4.5 × 4.0 metres at a slope gradient ranging from 10-15% with the exception of curved portions which are slopped at 5% for safety reasons.

The ramp is sized to facilitate the use of trackless mining equipment including ore haulage to the surface process plant. The ramp was collared at an elevation of 80 meters a.s.l (above sea level) and is designed to achieve a total length of 2,075 meters in the first phase of development.

Underground mining operations are highly mechanized and include high efficiency, rapid- penetrating, hydraulic jumbo drills for development work, rotary drilling equipment employing extension steel for inclined medium and longer holes, 20 tonne dump trucks for ore haulage to surface via the ramp, and electric scrapers to facilitate ore recovery and loading in work areas.

The Company employs a mix of mining methods which are based on mining and geological conditions that are expected to be quite variable. Where warranted by ground conditions, mined out areas will be backfilled with tailings which - in addition to providing good ground support - reduces output into the surface tailings disposal area.

Ore blocks are typically 50-60 metres in length, with the thickness of the ore blocks determined by mining to an assayed rock face at a specific cutoff grade. One of the more common mining methods employed at Songjiagou is shrinkage stope mining whereby one third of the broken ore is drawn from the stope following blasting. The "swell factor" (broken ore expands by about one third when it's blasted) allows miners to work from a solid floor to facilitate ongoing mining.

Ventilation is provided by high capacity axial fans through air ducts secured by hangers on the side of mine passageways, while compressed air and water are introduced to the mine through metal pipes sized to accommodate fluctuating demand. Pumping stations have been installed underground to deal with water inflows - which are common in most underground mines – and the lifting system for the service shaft utilizes a multi-rope friction hoist with dual cages for transporting miners and their gear.

There are three fully operational processing plants at Songjiagou. Two plants with a processing capacity of 200 tpd and 1,200 tpd respectively commenced operations in 2006. Another plant with a capacity of 6,000 tpd was put into production in May 2011, bringing the aggregate processing capacity at Songjiagou to 7,400 tpd.

The Songjiagou processing plant 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.