EXHIBIT 10.1

                              ACQUISITION AGREEMENT

       This ACQUISITION AGREEMENT (the "Agreement") is dated as of January 24,
2006, by and among China Natural Resources, Inc., a British Virgin Islands
company (the "Company"), Feishang Mining Holdings Limited, a British Virgin
Islands company ("Feishang") and Feishang Group Limited, a British Virgin
Islands company (the "Feishang Shareholder").

                                    RECITALS

       WHEREAS, the Feishang Shareholder owns 1 share at US$1 of Feishang,
representing 100% of the issued and outstanding capital stock (hereinafter
referred to as the "Feishang Stock");

       WHEREAS, the Company desires to acquire the Feishang Stock from the
Feishang Shareholder in exchange for (a) a total of 9,980,593 common shares of
the Company, no par value (the "Company Common Shares"), which 9,980,593 Company
Common Shares (the "Exchange Shares") shall equal, in aggregate, 86.4% of the
aggregate issued and outstanding Company Common Shares following the closing
referred to in Section 7 hereof, and (b) common share purchase warrants to
purchase an aggregate of 4,500,000 Company Common Shares, substantially in the
form attached to this Agreement as Schedule 3 (the "Exchange Warrants" and
together with the Exchange Shares, the "Exchange Consideration");

       WHEREAS, the Feishang Shareholder desires to exchange its Feishang Stock
for the Exchange Consideration, upon the terms and conditions set forth in this
Agreement;

       NOW, THEREFORE, in consideration of the premises herein contained, the
mutual covenants hereinafter set forth, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto covenant and agree as follows:

                                      TERMS

1.     Acquisition of the Feishang Stock

       Subject to the terms and conditions hereinafter set forth, at the time of
       the closing referred to in Section 7 hereof (the "Closing Date"), the
       Company will issue and deliver the Exchange Consideration to the Feishang
       Shareholder (or its nominees), in exchange for which the Feishang
       Shareholder will deliver, or cause to be delivered to the Company, the

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       Feishang Stock, free and clear of all liens, charges, encumbrances and
       security interests (the "Exchange"). The Exchange Warrants shall be
       evidenced by three separate warrant certificates. Each of the warrant
       certificates shall be identical to the others, except that (a) Exchange
       Warrants to purchase 2,000,000 Company Common Shares will be exercisable
       for two years following the Closing Date at an exercise price of $4.00
       per share, (b) Exchange Warrants to purchase 1,500,000 Company Common
       Shares will be exercisable for three years following the Closing Date at
       an exercise price of $4.50 per share and (c) Exchange Warrants to
       purchase 1,000,000 Company Common Shares will be exercisable for four
       years following the Closing Date at an exercise price of $5.00 per share.

2.     Representations and Warranties by Feishang and Feishang Shareholder

       Feishang and Feishang Shareholder jointly and severally represent and
       warrant to the Company that, as of the date hereof and as of the Closing
       Date:

(a)       Feishang is a corporation duly organized, validly existing and in good
          standing under the laws of British Virgin Islands and has the
          corporate power to own its properties and carry on its business as now
          being conducted and as proposed to be conducted. Certified copies of
          the Certificate of Incorporation and the Memorandum and Articles of
          Association of Feishang have been furnished by Feishang to the Company
          and such documents are true and correct copies of the Certificate of
          Incorporation and the Memorandum and Articles of Association of
          Feishang and include all amendments thereto.

(b)       Feishang has an authorized capital consisting of 50,000 shares, of
          which one share is duly and validly issued and outstanding, is fully
          paid and non-assessable and is owned of record by the Feishang
          Shareholder. There are no outstanding options, rights or other
          agreements pursuant to which Feishang could become obligated to issue
          any shares of its capital stock. Feishang has not granted to any party
          registration or similar rights with respect to its capital stock.

(c)       Feishang is the beneficial owner of 100% of the issued and outstanding
          capital stock in Wuhu Feishang Mining Development Co. Ltd. ("Wuhu"), a
          company established under the laws of the People's Republic of China
          ("PRC"). Wuhu is owned of record 90% by Feishang and 10% by Wuhu


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          Feishang Enterprises Development Limited, as trustee under a
          Declaration of Trust dated April 27, 2005 (the "Trust"), in each case
          free and clear of all liens, charges, encumbrances and security
          interests. The sole beneficiary of the Trust is Feishang. Feishang has
          paid its capital contribution in Wuhu in full, in accordance with the
          provisions of all applicable laws and regulations of the PRC, and no
          portion of such capital contribution is due and owing on the date
          hereof and on the Closing Date.

(d)       Wuhu is a corporation duly organized, validly existing and in good
          standing under the applicable laws, rules and regulations of the PRC
          and has the corporate power to own its properties and carry on its
          business as now being conducted and as proposed to be conducted.
          Copies of the articles of association, approval certificates, letters
          and business licenses and all amendments thereto of Wuhu have been
          supplied to the Company, and such copies are complete and accurate in
          all respects and all legal and procedural requirements and all other
          formalities concerning the said documents have been duly and properly
          complied with in all material respects. There are no outstanding
          options, rights or other agreements pursuant to which Wuhu could
          become obligated to issue any shares of its capital stock.

(e)       The execution, delivery and performance of this Agreement have been
          duly authorized by all necessary corporate action on the part of
          Feishang. This Agreement constitutes the valid and binding obligations
          of Feishang enforceable in accordance with their respective terms,
          except as the enforceability thereof may be limited by applicable
          bankruptcy, insolvency or similar laws affecting creditor's rights and
          by general principles of equity.

(f)       The execution, delivery and performance by Feishang of this Agreement
          and the consummation of the transactions contemplated by this
          Agreement (i) do not and will not require the authorization, consent,
          permit or approval of, or declaration to or filing with, any court,
          regulatory or public body or governmental authority not already
          obtained or made, or result in the creation of any lien, security
          interest, charge or encumbrance upon the capital stock or assets of
          Feishang or Wuhu, and (ii) will not violate or cause a default, with
          or without the passage of time, under (A) any provision of law, rule
          or regulation applicable to Feishang or Wuhu, (B) any order of any
          court or other governmental agency with jurisdiction over Feishang or
          Wuhu, (C) the Memorandum and Articles of Association of Feishang, the
          organizational documents of Wuhu or (D) any indenture, agreement or
          other instrument to which Feishang or Wuhu is a party, or by which any
          of their respective properties are bound.

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(g)       The balance sheet of Feishang as at December 31, 2004, and the
          statement of income of Feishang for the period from September 3, 2004
          (date of incorporation) to December 31, 2004, prepared by Feishang,
          are attached hereto as Schedule 1(a). The balance sheets of Wuhu for
          each of the years ended December 31, 2003 and 2004 and the statements
          of income, changes in stockholders' equity and cash flows of Wuhu for
          the year ended December 31, 2002, the four months ended April 30,
          2003, the eight months ended December 31, 2003 and the year ended
          December 31, 2004, prepared by Feishang and audited by GHP Horwath,
          P.C., are attached hereto as Schedule 1(b). The financial statements
          of Feishang and Wuhu described in this paragraph are sometimes
          hereinafter collectively referred to as the "Feishang Financial
          Statements." Feishang and Wuhu are sometimes collectively referred to
          herein as the "Feishang Mining Group." The Feishang Financial
          Statements fairly present, as of such dates the financial condition of
          the Feishang Mining Group and the results of operations, and in the
          case of Wuhu, changes in stockholders equity and cash flows, for the
          periods then ended. There are no liabilities or obligations of the
          Feishang Mining Group, whether direct or indirect, contingent,
          absolute or otherwise, except as set forth on the Feishang Financial
          Statements, other than liabilities or obligations incurred in the
          ordinary course of business subsequent to the date of the most recent
          Feishang Financial Statements.

(h)       Since December 31, 2004, the Feishang Mining Group has experienced no
          material adverse changes with respect to its business or financial
          condition, results of operations, assets, liabilities or prospect
          taken as a whole. Without limiting the generality of the foregoing;

              (i)   Neither Feishang nor Wuhu has issued any shares of its
                    capital stock or any security convertible into shares of
                    capital stock, or entered into any agreement under which
                    Feishang or Wuhu could become obligated to issue shares of
                    its capital stock;

              (ii)  The financial year-end of Feishang and Wuhu is and continues
                    to be, and has not changed from, December 31;

              (iii) No event has occurred which would entitle any third party
                    (with or without the giving of notice, the lapse of time, or
                    both) to call for the repayment of indebtedness prior to its
                    stated maturity date;

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              (iv)  The business of the Feishang Mining Group has been carried
                    on in the ordinary and usual course and in the same manner
                    (including nature and scope) as in the past; no fixed asset
                    or stock has been written up nor any debt of an aggregate
                    amount more than US$100,000 written off, and no contract has
                    been entered into by the Feishang Mining Group except in the
                    ordinary course of its business as heretofore conducted
                    during the preceding 12 months;

              (v)   No asset of the Feishang Mining Group has been acquired or
                    disposed of, or has been agreed to be acquired or disposed
                    of, otherwise than in the ordinary course of business and
                    there has been no disposition or parting with possession of
                    any of its property, assets (including know-how) or stock in
                    trade or any payments by the Feishang Mining Group, and no
                    contract involving capital expenditures by it has been
                    entered into by the Feishang Mining Group, and no liability
                    has been created or has otherwise arisen (all other than in
                    the ordinary course of business as heretofore conducted
                    during the preceding 12 months);

              (vi)  There has been no disposition of any asset (including stock)
                    or supply of any service or business facility of any kind
                    (including a loan of money or the letting, hiring or
                    licensing of any property whether tangible or intangible)
                    under circumstances where the consideration actually
                    received or receivable for such disposition or supply was
                    less than the consideration which could be deemed to have
                    been received for tax purposes;

              (vii) No event has occurred which gives rise to a tax liability to
                    the Feishang Mining Group or deemed (as opposed to actual)
                    income, profits or gains or which results in the Feishang
                    Mining Group becoming liable to pay or bear a tax liability
                    directly or primarily chargeable against or attributable to
                    another person or entity, other than in the ordinary course
                    of business or in connection with the transactions
                    contemplated by this Agreement; and

              (viii) No remuneration (including bonuses) or benefit payable to
                    any officer or employee of the Feishang Mining Group has
                    been increased nor has any member of the Feishang Mining
                    Group undertaken any obligation to increase any such
                    remuneration at any future date with or without
                    retrospective effect other than in the ordinary course of
                    business as heretofore conducted during the preceding 12
                    months.

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(i)       Feishang and Wuhu have each complied, in all material respects, with
          the terms and provisions of all agreements to which it is a party and
          all laws, rules, regulations and orders or to which it or its assets
          are subject.

(j)       Except for matters that would not, individually or in the aggregate,
          have or reasonably be expected to result in a material adverse effect
          on the Feishang Mining Group, taken as a whole, Feishang and Wuhu have
          each filed all necessary tax returns and has paid or accrued all taxes
          shown as due thereon, and neither Feishang nor the Feishang
          Shareholder has knowledge of a tax deficiency which has been asserted
          or threatened against Feishang or Wuhu.

(k)       Neither Feishang nor Wuhu has provided any guarantees to any third
          party except as disclosed in the Feishang Financial statements.

(l)       Except as otherwise disclosed in the Feishang Financial Statements,
          neither Feishang nor Wuhu is a party to any pension plan, profit
          sharing plan, or stock-purchase plan for the benefit of any of its
          employees.

(m)       Neither Feishang nor Wuhu is a party to any pending litigation which
          could reasonably be foreseen to materially and adversely affect the
          Feishang Mining Group taken as a whole, which has not been provided
          for or described in the Feishang Financial Statements, and there are
          no facts or circumstances known to Feishang or the Feishang
          Shareholder which could reasonably be foreseen to give rise to any
          such litigation; and there are no unsatisfied judgments or court
          orders against any member, manager, officer or director of the
          Feishang or Wuhu.

(n)       Feishang and Wuhu have good and marketable title to their respective
          properties owned by them, free and clear of all liens, security
          interests, charges, encumbrances and defects, except for such liens,
          security interests, charges, encumbrances and defects as are disclosed
          in the Feishang Financial Statements, and that could not reasonably be
          foreseen to have a material adverse effect on the Feishang Mining
          Group taken as a whole.



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(o)       Feishang and Wuhu each maintains a system of internal accounting
          controls sufficient to provide reasonable assurance that (i)
          transactions are executed in accordance with management's general or
          specific authorizations, (ii) transactions are recorded as necessary
          to permit preparation of financial statements in conformity with GAAP
          and to maintain asset accountability, (iii) access to assets is
          permitted only in accordance with management's general or specific
          authorization, and (iv) the recorded accountability for assets is
          compared with the existing assets at reasonable intervals and
          appropriate action is taken with respect to any differences.

(p)       Neither Feishang nor Wuhu (i) is in default under or in violation of
          (and no event has occurred that has not been waived that, with notice
          or lapse of time or both, would result in a default by Feishang or
          Wuhu under), nor has Feishang or Wuhu received notice of a claim that
          it is in default under or that it is in violation of, any indenture,
          loan or credit agreement or any other agreement or instrument to which
          it is a party or by which it or any of its properties is bound
          (whether or not such default or violation has been waived), (ii) is in
          violation of any order of any court, arbitrator or governmental body,
          or (iii) is or has been in violation of any statute, rule or
          regulation of any governmental authority, including without limitation
          all laws applicable to its business except in each case as could not
          have a material adverse effect on the Feishang Mining Group taken as a
          whole. Feishang and Wuhu possess all certificates, authorizations and
          permits issued by the appropriate federal, state, local or foreign
          regulatory authorities necessary to conduct their respective
          businesses as now being conducted and as proposed to be conducted,
          except where the failure to possess such permits could not have or
          reasonably be expected to result in a material adverse effect on the
          Feishang Mining Group, taken as a whole, and neither Feishang nor Wuhu
          has received any notice of proceedings relating to the revocation or
          modification of any license, permit or authorization applicable to its
          business.

(q)       No brokerage or finder's fees or commissions are or will be payable by
          Feishang or Wuhu to any broker, financial advisor or consultant,
          finder, placement agent, investment banker, bank or other person
          relating to the transactions contemplated by the this Agreement and
          the Company shall have no obligation with respect to any fees or with
          respect to any claims made by or on behalf of other persons for fees
          of a type contemplated in this Section that may be due in connection
          with the transactions contemplated by this Agreement.

(r)       Feishang and the Feishang Shareholder understand and confirm that the
          Company will rely on the foregoing representations and covenants in
          issuing the Exchange Consideration. The representations and warranties
          of Feishang and the Feishang Shareholder are true and correct and do
          not contain any untrue statement of a material fact or omit to state


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          any material fact necessary in order to make the statements made
          therein, in light of the circumstances under which they were made, not
          misleading.

3.     Representations and Warranties by Feishang Shareholder

       Feishang Shareholder represents and warrants to the Company that, as of
       the date hereof and as of the Closing Date:

(a)      The Feishang Shareholder is a corporation duly organized, validly
         existing and in good standing under the laws of the British Virgin
         Islands and has the corporate power to own its properties and carry on
         its business as now being conducted and as proposed to be conducted.

(b)      The execution, delivery and performance of this Agreement have been
         duly authorized by all necessary corporate action on the part of the
         Feishang Shareholder. This Agreement constitutes the valid and binding
         obligations of the Feishang Shareholder enforceable in accordance with
         their respective terms, except as the enforceability thereof may be
         limited by applicable bankruptcy, insolvency or similar laws affecting
         creditor's rights and by general principles of equity.

(c)      The execution, delivery and performance by the Feishang Shareholder of
         this Agreement and the consummation of the transactions contemplated by
         this Agreement (i) do not and will not require the authorization,
         consent, permit or approval of, or declaration to or filing with, any
         court, regulatory or public body or governmental authority not already
         obtained or made, or result in the creation of any lien, security
         interest, charge or encumbrance upon the capital stock or assets of the
         Feishang Shareholder, and (ii) will not violate or cause a default,
         with or without the passage of time, under (A) any provision of law,
         rule or regulation applicable to the Feishang Shareholder, (B) any
         order of any court or other governmental agency with jurisdiction over
         the Feishang Shareholder, (C) the charter or other organization
         documents of the Feishang Shareholder, or (D) any indenture, agreement
         or other instrument to which the Feishang Shareholder is a party, or by
         which any of its properties are bound.

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<PAGE>

(d)      The Feishang Shareholder is the sole owner of the Feishang Stock and on
         the Closing Date, will deliver to the Company good and marketable title
         to the Feishang Stock, free and clear of any and all liens, charges,
         encumbrances and security interests.

(e)      The Feishang Shareholder hereby acknowledges that neither the Exchange
         Consideration to be issued by the Company in the Exchange, nor the
         Company Common Shares issuable upon exercise of the Exchange Warrants
         (the "Warrant Shares," and together with the Exchange Consideration,
         the "Exchange Securities") have been registered under the Securities
         Act of 1933, as amended (the "Securities Act") or the laws of any other
         jurisdiction and is subject to restrictions on its transfer and resale
         under applicable law. The Feishang Shareholder understands that in
         agreeing to issue the Exchange Securities, the Company is relying upon
         an exemption from registration under the Securities Act, which relates
         to private offerings of securities. The Feishang Shareholder is
         acquiring the Exchange Securities for its own account, for investment
         purposes only, and not with a view to the sale, pledge, hypothecation,
         or other distribution or disposition thereof or of any interest
         therein. The Feishang Shareholder understands that resale or transfer
         of the Exchange Securities may be prohibited indefinitely unless resale
         of the Exchange Securities is registered under the Securities Act or an
         exemption from such registration is available, and such resale or
         transfer will not otherwise violate applicable securities laws.

(f)      The Company has made available to the Feishang Shareholder and its
         representative, if any, the opportunity to ask questions of and receive
         answers from the Company concerning the terms and conditions of the
         Exchange and to obtain any additional information desired by the
         Feishang Shareholder concerning the Company. The Feishang Shareholder
         has received all information requested by it pursuant to the preceding
         sentence. The Feishang Shareholder has relied solely upon the
         representations and warranties contained in this Agreement and the
         written materials and investigations made by the Feishang Shareholder
         in making the decision to consummate the Exchange, and has not relied
         upon any other representations of the Company.

(g)      The Feishang Shareholder understands and confirms that the Company will
         rely on the foregoing representations and covenants in delivering the
         Exchange Consideration to the Feishang Shareholder. The representations
         and warranties of the Feishang Shareholder are true and correct and do
         not contain any untrue statement of a material fact or omit to state
         any material fact necessary in order to make the statements made
         therein, in light of the circumstances under which they were made, not
         misleading.

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4.     Representations and Warranties by the Company

       The Company represents and warrants to the Feishang Shareholder that,
except as otherwise set forth in reports filed by the Company (the "SEC
Filings") with the United States Securities and Exchange Commission (the "SEC")
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
information in such SEC Filings qualifying the following representations and
warranties, as of the date hereof and as of the Closing Date:

(a)       The Company is a corporation duly organized, validly existing and in
          good standing under the laws of British Virgin Islands and has the
          corporate power to own its properties and carry on its business as now
          being conducted and as proposed to be conducted. Certified copies of
          the Certificate of Incorporation and the Memorandum and Articles of
          Association of the Company have been furnished by the Company to
          Feishang and such documents are true and correct copies of the
          Certificate of Incorporation and the Memorandum and Articles of
          Association of the Company and include all amendments thereto.

(b)       The Company has an authorized capital consisting of (i) 200,000,000
          shares of Company Common Shares, 1,247,823 shares of Company Common
          Shares are duly and validly issued and outstanding, fully paid and
          non-assessable and (ii) 10,000,000 shares of preferred shares of no
          par value (the "Company Preferred Shares"), 320,000 shares of Company
          Preferred Shares are duly and validly issued and outstanding, fully
          paid and non-assessable. There are no outstanding options, rights or
          other agreements pursuant to which Feishang could become obligated to
          issue any shares of its capital stock. The Company has not granted to
          any party registration or similar rights with respect to its capital
          stock

(c)       The execution, delivery and performance of this Agreement have been
          duly authorized by all necessary corporate action on the part of the
          Company. This Agreement constitutes the valid and binding obligations
          of the Company enforceable in accordance with their respective terms,
          except as the enforceability thereof may be limited by applicable
          bankruptcy, insolvency or similar laws affecting creditor's rights and
          by general principles of equity.

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<PAGE>

(d)       The execution, delivery and performance by the Company of this
          Agreement and the consummation of the transactions contemplated by
          this Agreement (i) do not and will not require the authorization,
          consent, permit or approval of, or declaration to or filing with, any
          court, regulatory or public body or governmental authority not already
          obtained or made, or result in the creation of any lien, security
          interest, charge or encumbrance upon the capital stock or assets of
          the Company, and (ii) will not violate or cause a default, with or
          without the passage of time, under (A) any provision of law, rule or
          regulation applicable to the Company, (B) any order of any court or
          other governmental agency with jurisdiction over the Company, (C) the
          Memorandum and Articles of Association of the Company, or (D) any
          indenture, agreement or other instrument to which the Company is a
          party, or by which any of its properties are bound.

(e)       The Exchange Shares deliverable hereunder will, upon their delivery in
          accordance with the terms hereof, be duly authorized, validly issued,
          fully paid and non-assessable and will comprise 86.4% of the issued
          and outstanding Company Common Shares as at the Closing Date. The
          Exchange Warrants deliverable hereunder will, upon their delivery in
          accordance with the terms hereof, be duly authorized, validly issued,
          fully paid and non-assessable. The Warrant Shares have been duly
          authorized and reserved and, upon delivery in accordance with the
          terms of the Exchange Warrants, will be validly issued, fully paid and
          non-assessable.

(f)       The Company Common Shares are currently listed for trading on the
          Nasdaq SmallCap Market, and the Company has received no notice that
          its Common Shares are subject to being delisted therefrom.

(g)       The consolidated balance sheets of the Company and its consolidated
          subsidiaries (the "Company Group") prepared by the Company and audited
          by GHP Horwath, P.C., as at December 31, 2003 and 2004, and the
          consolidated statements of operations and cash flow for each of the
          years ended December 31, 2002, 2003 and 2004, and the consolidated
          statements of changes in shareholders' equity for each of the years
          ended December 31, 2002, 2003 and 2004 attached hereto as Schedule 2
          (the "Company Financial Statements"), present fairly as of such dates
          the consolidated financial condition of the Company Group and the
          results of the operations for the periods then ended. The audited
          consolidated financial statements of the Company have been prepared in
          accordance with US GAAP. There are no liabilities or obligations of
          the Company Group, whether direct or indirect, contingent, absolute or
          otherwise, except as set forth on the Company Financial Statements,
          other than liabilities or obligations incurred in the ordinary course


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          of business subsequent to the date of the most recent Company
          Financial Statements.

(h)       Since December 31, 2004, the Company Group has experienced no material
          adverse changes with respect to its business or financial condition,
          results of operations, assets, liabilities or prospect taken as a
          whole. Without limiting the generality of the foregoing;

              (i)   The Company Group has not declared, paid or made nor is
                    proposing to declare, pay or make any dividend or other
                    distribution of capital, surplus or profits, in redemption
                    of its outstanding shares or otherwise; the Company Group
                    has not issued any shares of its capital stock or any
                    security convertible into shares of capital stock, or
                    entered into any agreement under which the Company Group
                    could become obligated to issue shares of its capital stock;

              (ii)  The financial year-end of the Company is and continues to
                    be, and has not changed from, December 31;

              (iii) No event has occurred which would entitle any third party
                    (with or without the giving of notice, the lapse of time, or
                    both) to call for the repayment of indebtedness prior to its
                    stated maturity date;

              (iv)  The business of the Company Group has been carried on in the
                    ordinary and usual course and in the same manner (including
                    nature and scope) as in the past; no fixed asset or stock
                    has been written up nor any debt of an aggregate amount more
                    than US$100,000 written off, and no contract has been
                    entered into by the Company Group except in the ordinary
                    course of its business as heretofore conducted during the
                    preceding 12 months;

              (v)   No asset of the Company Group has been acquired or disposed
                    of, or has been agreed to be acquired or disposed of,
                    otherwise than in the ordinary course of business and there
                    has been no disposition or parting with possession of any of
                    its property, assets (including know-how) or stock in trade
                    or any payments by the Company Group, and no contract
                    involving capital expenditures by it has been entered into
                    by the Company, and no liability has been created or has
                    otherwise arisen (all other than in the ordinary course of
                    business as heretofore conducted during the preceding 12
                    months);

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<PAGE>

              (vi)   There has been no disposition of any asset (including
                     stock) or supply of any service or business facility of any
                     kind (including a loan of money or the letting, hiring or
                     licensing of any property whether tangible or intangible)
                     under circumstances where the consideration actually
                     received or receivable for such disposition or supply was
                     less than the consideration which could be deemed to have
                     been received for tax purposes;

              (vii)  No event has occurred which gives rise to a tax liability
                     to the Company Group or deemed (as opposed to actual)
                     income, profits or gains or which results in the Company
                     Group becoming liable to pay or bear a tax liability
                     directly or primarily chargeable against or attributable to
                     another person or entity, other than in the ordinary course
                     of business or in connection with the transactions
                     contemplated by this Agreement; and

              (viii) No remuneration (including bonuses) or benefit payable to
                     any officer or employee of the Company Group has been
                     increased nor has any member of the Company Group
                     undertaken any obligation to increase any such remuneration
                     at any future date with or without retrospective effect
                     other than in the ordinary course of business as heretofore
                     conducted during the preceding 12 months.

(i)       The Company Group has each complied, in all material respects, with
          the terms and provisions of all agreements to which it is a party and
          all laws, rules, regulations and orders or to which it or its assets
          are subject.

(j)       Except for matters that would not, individually or in the aggregate,
          have or reasonably be expected to result in a material adverse effect
          on the Company Group, taken as a whole, the Company has filed all
          necessary tax returns and has paid or accrued all taxes shown as due
          thereon, and the Company has no knowledge of a tax deficiency which
          has been asserted or threatened against the Company Group.

(k)       The Company Group has not provided any guarantees to any third party
          except as disclosed in the Company Financial Statements.

(l)       Except as otherwise disclosed in the Company Financial Statements, the
          Company Group is not a party to any pension plan, profit sharing plan,
          or stock-purchase plan for the benefit of any of its employees.

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<PAGE>

(m)       The Company Group is not a party to any pending litigation which could
          reasonably be foreseen to materially and adversely affect the Company
          Group taken as a whole, which has not been provided for or described
          in the Company Financial Statements, and there are no facts or
          circumstances known to the Company which could reasonably be foreseen
          to give rise to any such litigation; and there are no unsatisfied
          judgments or court orders against any member, manager, officer or
          director of the Company Group.

(n)       The Company Group has good and marketable title to its properties,
          free and clear of all liens, security interests, charges, encumbrances
          and defects, except for such liens, security interests, charges,
          encumbrances and defects as are disclosed in the Company Financial
          Statements, and that could not reasonably be foreseen to have a
          material adverse effect on the Company Group taken as a whole.

(o)       The Company maintains a system of internal accounting controls
          sufficient to provide reasonable assurance that (i) transactions are
          executed in accordance with management's general or specific
          authorizations, (ii) transactions are recorded as necessary to permit
          preparation of financial statements in conformity with GAAP and to
          maintain asset accountability, (iii) access to assets is permitted
          only in accordance with management's general or specific
          authorization, and (iv) the recorded accountability for assets is
          compared with the existing assets at reasonable intervals and
          appropriate action is taken with respect to any differences.

(p)       The Company Group (i) is not in default under or in violation of (and
          no event has occurred that has not been waived that, with notice or
          lapse of time or both, would result in a default by the Company
          under), nor has the Company Group received notice of a claim that it
          is in default under or that it is in violation of, any indenture, loan
          or credit agreement or any other agreement or instrument to which it
          is a party or by which it or any of its properties is bound (whether
          or not such default or violation has been waived), (ii) is in
          violation of any order of any court, arbitrator or governmental body,
          or (iii) is or has been in violation of any statute, rule or
          regulation of any governmental authority, including without limitation
          all foreign, federal, state and local laws applicable to its business
          except in each case as could not have a material adverse effect on the
          Company Group taken as a whole. The Company Group possess all
          certificates, authorizations and permits issued by the appropriate
          federal, state, local or foreign regulatory authorities necessary to
          conduct their respective businesses as now being conducted and as


                                       14
<PAGE>

          proposed to be conducted, except where the failure to possess such
          permits could not have or reasonably be expected to result in a
          material adverse effect on the Company Group, taken as a whole, and
          the Company has received no notice of proceedings relating to the
          revocation or modification of any license, permit or authorization
          applicable to its business.

(q)       No brokerage or finder's fees or commissions are or will be payable by
          the Company Group to any broker, financial advisor or consultant,
          finder, placement agent, investment banker, bank or other person
          relating to the transactions contemplated by the this Agreement and
          the Feishang Mining Group shall have no obligation with respect to any
          fees or with respect to any claims made by or on behalf of other
          persons for fees of a type contemplated in this Section that may be
          due in connection with the transactions contemplated by this
          Agreement.

(r)       Except for its shares of capital stock in its subsidiaries and its
          investment in Hainan Sundiro Motorcycle Co., Ltd., the Company does
          not have any subsidiary or hold directly or indirectly any equity
          security or interest in any third party.

(s)       The Company is a "private foreign issuer" within the meaning of the
          Exchange Act and is current in its filings thereunder. All of the
          Company's SEC Filings comply with the requirements thereof and the
          rules and regulations of the SEC thereunder. None of the SEC Filings
          made by the Company make any untrue statement of a material fact or
          omit to state a material fact necessary in order to make the
          statements made, in light of the circumstances under which they were
          made, not misleading.

(t)       Except as disclosed in the Company Financial Statements, the Company
          has no contracts, agreements, leases, licenses, arrangements,
          commitments or other undertakings (collectively, the "Company
          Contracts") to which the Company is party or to which it or its
          property is subject. The Company is not in material default, or
          alleged to be in material default, under any Company Contract and no
          other party to any Company Contract to which the Company is a party is
          in default thereunder nor, to the knowledge of the Company, does there
          exist any condition or event which, after notice or lapse of time or
          both, would constitute a default by any party to any such Company
          Contract.

(u)       There are no contracts, agreements, arrangements or other transactions
          between the Company and any officer, director, or any shareholder who


                                       15
<PAGE>

          owns at least 5% of the Company's currently issued and outstanding
          stock (a "5% shareholder"), a member of any such officer, director or
          5% shareholder's family, or any affiliate of any such officer,
          director or 5% shareholder which will continue to subsist after the
          Closing Date.

(v)       The Company hereby acknowledges that the Feishang Stock to be
          exchanged for the Exchange Consideration is not registered under the
          Securities Act or the laws of any other jurisdiction and are subject
          to restrictions on their transfer and resale under applicable law. The
          Company understands that in agreeing to transfer the Feishang Stock to
          the Company in the Exchange, the Feishang Shareholder is relying upon
          an exemption from registration under the Securities Act, which relates
          to private resales of securities. The Company is acquiring the
          Feishang Stock for its own account, for investment purposes only, and
          not with a view to the sale, pledge, hypothecation, or other
          distribution or disposition thereof or of any interest therein.

(w)       Feishang has made available to the Company and its representative, if
          any, the opportunity to ask questions of and receive answers from
          Feishang concerning the terms and conditions of the Exchange and to
          obtain any additional information desired by the Company concerning
          Feishang. The Company has received all information requested by it
          pursuant to the preceding sentence. The Company has relied solely upon
          the representations and warranties contained in this Agreement and the
          written materials and investigations made by the Company in making the
          decision to effect the Exchange, and has not relied upon any other
          representations of Feishang or Feishang Shareholder.

(x)       The Company understands and confirms that Feishang will rely on the
          foregoing representations and covenants in delivering the Feishang
          Stock to the Company. The representations and warranties of the
          Company are true and correct and do not contain any untrue statement
          of a material fact or omit to state any material fact necessary in
          order to make the statements made therein, in light of the
          circumstances under which they were made, not misleading.

5.     Conditions to the Obligations of the Company

       The obligation of the Company to consummate the Exchange pursuant to
       Section 1 is subject to the satisfaction of the following conditions as
       of the Closing Date:

                                       16
<PAGE>

       (a)    The representations and warranties made by the Feishang
              Shareholder and Feishang shall be accurate in all material
              respects as of the date hereof and as of the Closing Date and the
              terms and conditions of this Agreement to be performed and
              complied with by the Feishang Shareholder on or prior to the
              Closing Date shall have been performed and complied with by the
              Feishang Shareholder on or prior to the Closing Date;

       (b)    Feishang and Feishang Shareholder shall have received all
              corporate regulatory and other third party approvals and
              authorizations necessary to consummate the Exchange;

       (c)    No material adverse change shall have taken place with respect to
              Feishang, and no event shall have occurred, that could result in a
              material adverse effect on the Company, taken as a whole.

       (d)    Feishang and the Feishang Shareholder shall have paid all of their
              respective costs and expenses associated with the sale of the
              Feishang Stock to the Company;

       (e)    Feishang and the Feishang Shareholder shall have delivered
              evidence reasonably satisfactory to the Company regarding the
              approval of the Exchange and the transactions contemplated by this
              Agreement by the board of directors and, if required the
              shareholders, of Feishang.

6.     Conditions to the Obligations of Feishang and Feishang Shareholder

       The obligation of Feishang Shareholder to consummate the Exchange
       pursuant to Section 1 is subject to the satisfaction of the following
       conditions as of the Closing Date:

       (a)    The representations and warranties made by the Company shall be
              accurate in all material respects as of the date hereof and as of
              the Closing Date and the terms and conditions of this Agreement to
              be performed and complied with by the Company on or prior to the
              Closing Date shall have been performed and complied with by the
              Company on or prior to the Closing Date;

       (b)    The Company shall have received all of the regulatory, shareholder
              and other third party approvals and authorizations necessary to
              consummate the Exchange;

                                       17
<PAGE>

       (c)    The Company shall have paid all of its own costs and expenses
              associated with the acquisition of the Feishang Stock by the
              Company;

       (d)    No material adverse change shall have taken place with respect to
              Feishang, and no event shall have occurred, that could result in a
              material adverse effect on the Company, taken as a whole;

       (e)    The Company shall have delivered evidence reasonably satisfactory
              to Feishang and Fieshang Shareholder regarding the approval of the
              Exchange and the transactions contemplated by this Agreement by
              the board of directors of the Company.

       (f)    Winsland Capital Limited shall have exchanged the 320,000
              preferred shares of the Company owned by it for 320,000 Company
              Common Shares.

7.     Closing Date

       The Closing shall take place on, or prior, to February 3, 2006 at Room
       2105, West Tower, Shun Tak Centre, 200 Connaught Road Central, Sheung
       Wan, Hong Kong, or at such other time and place as the parties hereto
       shall mutually agree ("Closing Date").

8.     Actions at Closing

       On the Closing Date, the Company and the Feishang Shareholder will each
       deliver, or cause to be delivered to the other, certificates representing
       the Exchange Shares, the Exchange Warrants and Feishang Stock (including
       any Feishang Stock beneficially owned by the Feishang Shareholder, as to
       which the record owner is the nominee of the Feishang Shareholder) to be
       exchanged in accordance with Section 1 respectively, and each party shall
       pay any and all taxes required to be paid in connection with the issuance
       and delivery of its own securities. All share certificates shall be in
       the name of the party to which the same are deliverable or its nominees
       except the Feishang Stock, which will be accompanied by an instrument of
       transfer executed in favor of the Company.

       In addition, the Company will deliver to the Feishang Shareholder:

(1)           copies of all corporate resolutions and other corporate
              proceedings taken by the Company to authorize the execution,
              delivery and performance of this Agreement;

                                       18
<PAGE>

(2)           copies of resolutions of the directors of the Company electing or
              appointing (as the case may be) such number of new directors and
              officers of the Company as may be designated by the Feishang
              Shareholder;

(3)           the written resignations of all directors and such officers of the
              Company required by the Feishang Shareholder, which resignations
              will contain an acknowledgment from each of them that they have no
              claims against the Company for loss of office, unpaid
              compensation, or otherwise; and

(4)           all registration certificates, statutory books, minute books and
              common seal of the Company, all account books and all documents
              and papers in connection with the affairs of the Company and all
              documents of title relating to the Company's assets (unless
              already in the possession of the Feishang Shareholder) as are
              reasonably required by the Feishang Shareholder.

              Feishang and the Feishang Shareholder will deliver to the Company
              (a) copies of all corporate resolutions and other corporate
              proceedings taken by their respective board of directors and
              shareholders, if necessary, to authorize the execution, delivery
              and performance of this Agreement, (b) the corporate record books
              of Feishang and (c) the corporate record books of Wuhu, including
              all registration certificates, statutory books, minute books and
              common seal of Feishang and Wuhu, all account books and all
              documents and papers in connection with the affairs of Feishang
              and Wuhu and all documents of title relating to the assets of
              Feishang and Wuhu (unless already in the possession of the
              Company) as are reasonably required by the Feishang Shareholder.

              Feishang Shareholder will deliver to the Company copies of all
              corporate resolutions and other corporate proceedings taken by
              their respective boards of directors to authorize the execution,
              delivery and performance of its obligations under this Agreement.

9.    Undertaking by Feishang Shareholder

       Feishang Shareholder hereby irrevocably undertakes to the Company that it
       will not, within 2 years from the Closing Date, sell, transfer, pledge,


                                       19
<PAGE>

       mortgage or otherwise dispose of any of the Exchange Shares received by
       Feishang Shareholder in accordance with the provisions of this Agreement.

10.   Continuing Obligations Under the Exchange Act

       Feishang and the Feishang Shareholder acknowledge that consummation of
       the transactions contemplated by this Agreement will require the Company
       to make certain filings with the SEC under the Exchange Act and Feishang
       and the Feishang Shareholder hereby covenant and agree to cause all such
       information to be prepared and filed with the SEC on a timely basis so
       that the Company continues to comply with its obligations under the
       Exchange Act. In addition, Feishang and the Feishang Shareholder hereby
       covenant and agree that, following the Closing and for a period of at
       least three years thereafter, it (a) will cause the Company to file all
       reports required to be filed by the Company under the Exchange Act and
       (b) will use its reasonable best efforts to cause the Company's
       securities to continue to be listed on the Nasdaq SmallCap market.

11.   Confidential Information; Delivery; Return; Non-Disclosure

      (a)   Delivery of Information. Until the earlier of the Closing Date or
            the termination of this Agreement (such date hereinafter the
            "Termination Date"), pursuant to the terms of this Agreement:

            (1)   Feishang will provide the Company and its officers, directors,
                  employees, agents, counsel, accountants, financial advisors,
                  consultants and other representatives (together "Company
                  Representatives") with reasonable access, upon reasonable
                  prior notice, to all officers, employees and accountants of
                  Feishang and Wuhu and to their assets, properties, contracts,
                  books, records and all such other information and data
                  concerning the business and operations of Feishang or Wuhu as
                  the Company Representatives reasonably may request in
                  connection with such investigation, but only to the extent
                  that such access does not unreasonably interfere with the
                  business and operations of Feishang or Wuhu.

            (2)   The Company will provide the Feishang Shareholder and Feishang
                  and their officers, directors, employees, agents, counsel,
                  accountants, financial advisors, consultants and other
                  representatives (together "Feishang Representatives") with
                  reasonable access, upon reasonable prior notice, to all


                                       20
<PAGE>

                  officers, employees and accountants of the Company and to its
                  assets, properties, contracts, books, records and all such
                  other information and data concerning the business and
                  operations of the Company as the Feishang Representatives
                  reasonably may request in connection with such investigation.

      (b)   Acknowledgements; Definitions:

            (1)   The Company has been and, pursuant to the terms of this
                  Section, shall continue to be privy to certain proprietary and
                  confidential information of Feishang, Wuhu and/or the Feishang
                  Shareholder (the "Feishang Confidential Information"). As used
                  herein, the term "Feishang Confidential Information" shall
                  include, but not be limited to, any and all information or
                  documentation whatsoever which has been disclosed or made
                  available to the Company Representatives by Feishang, the
                  Feishang Shareholder or Wuhu, regarding their products,
                  services, techniques, manufacturing or other processes,
                  activities, businesses, properties, operations, clients,
                  customers, prospective clients, price lists, suppliers,
                  business associates equipment, Trade Secrets (as defined
                  herein), computer software, scientific discoveries,
                  experiments, data, equipment designs, training, devices,
                  charts, manuals, payroll, financial statements and
                  improvements thereto and any other information or materials
                  disclosed or delivered to the Company Representatives which
                  the disclosing party may from time to time designate and treat
                  as confidential, proprietary or as a trade secret, including
                  without limitation all information relating (directly or
                  indirectly) to the material set forth in the Feishang business
                  plan delivered or to be delivered to the Company
                  Representatives.

            (2)   Feishang and/or the Feishang Shareholder have been and,
                  pursuant to the terms of this Section, shall continue to be
                  privy to certain proprietary and confidential information of
                  the Company (the "Company Confidential Information"). As used
                  herein, the term "Company Confidential Information" shall
                  include, but not be limited to, any and all information or
                  documentation whatsoever which has been disclosed or made
                  available to Feishang Representatives by the Company regarding
                  its products, services, techniques, manufacturing or other
                  processes, activities, businesses, properties, operations,
                  clients, customer, prospective clients, price lists,
                  suppliers, business associates, equipment, Trade Secrets (as
                  defined herein), computer software, scientific discoveries,
                  experiments, data, equipment designs, training devices,
                  charts, manuals, payroll, financial statements and


                                       21
<PAGE>

                  improvements thereto and any other information or materials
                  disclosed or delivered to Feishang Representatives which the
                  disclosing party may from time to time designate and treat as
                  confidential, proprietary or as a trade secret.

            (3)   Reference to "Confidential Information" herein shall include
                  and relate to both Feishang Confidential Information and the
                  Company Confidential Information.

            (4)   As used herein, the term "Trade Secret" shall mean the whole
                  or any portion of any formula, pattern, device, combination of
                  devices, or compilation of information which is for use, or is
                  used in the operation of the other party's businesses and
                  which provides such party's business as advantage, or an
                  opportunity to obtain an advantage, over those who do not know
                  or use it. For purposes of interpretation hereunder the
                  following shall apply:

                  Irrespective of novelty, invention, patentability, the state
                  of the prior art, and the level of skill in the business, art
                  or field to which the subject matter pertains, when the owner
                  thereof takes measures to prevent it from becoming available
                  to persons other than those selected by the owner to have
                  access thereto for limited purposes, a trade secret is
                  considered to be a secret, of value, for use or in use by the
                  business, and of advantage to the business, or providing an
                  opportunity to obtain an advantage, over those who do not know
                  or use it.

                  In addition, a "Trade Secret" shall include information (not
                  readily compiled from publicly available sources) which has
                  been made available by Feishang, Wuhu and/or the Feishang
                  Shareholder to the Company Representatives or by the Company
                  to the Feishang Representatives, as the case may be, during
                  the course of their involvement with each other, including but
                  not limited to the names, addresses, telephone numbers,
                  qualifications, education, accomplishments, experience and
                  resumes of all persons who have applied or been recruited for
                  employment, for either or both permanent and temporary jobs,
                  job order specifications and the particular characteristics
                  and requirements of persons generally hired by the disclosing
                  party, as well as specific job listings from companies with
                  whom the disclosing party does, or attempts to do, business,
                  as well as mailing lists, computer runoffs, financial or other
                  information not generally available to others.



                                       22
<PAGE>

      (c)   Non-Disclosure; the Company:

            (1)   The Company, for itself, its officers, employees, directors,
                  agents, affiliates, subsidiaries, independent contractors, and
                  related parties, (all of whom are to be deemed included in any
                  reference herein to the Company) agrees that it will not at
                  any time during or after the termination or expiration of this
                  Agreement, except as authorized or directed herein or in
                  writing by Feishang and/or the Feishang Shareholder, use for
                  the Company's own benefit, copy, reveal, sell, exchange or
                  give away, disclose, divulge or make known or available in any
                  manner to any person, firm, corporation or other entity
                  (whether or not the Company receives any benefit therefrom),
                  any Feishang Confidential Information.

            (2)   The Company will take all actions necessary to ensure that the
                  Feishang Confidential Information is maintained as secret and
                  confidential and its disclosure shall only be made to the
                  extent necessary, to a limited group of the Company's
                  employees, officers and/or directors who are actually engaged
                  in the evaluation of the Feishang Confidential Information;
                  provided however, the Company acknowledges and agrees that it
                  shall be responsible and held liable for the actions or
                  inactions of such employees, officers and directors
                  (regardless whether or not such actions or inactions are
                  within their scope of employment) with respect to the
                  maintenance of the secrecy and confidentiality of the Feishang
                  Confidential Information.

            (3)   The Company understands that if it discloses to others, use
                  for its own benefit (other than as part of an agreement with
                  Feishang and the Feishang Shareholder, which expressly
                  provides for such use) or for the benefit of any person or
                  entity other than Feishang and/or the Feishang Shareholder,
                  copies or makes notes of any such Feishang Confidential
                  Information, such conduct will constitute a breach of the
                  confidence and trust bestowed upon the Company by Feishang and
                  the Feishang Shareholder and will constitute a breach of this
                  Agreement and render the Company responsible for any and all
                  damages suffered by Feishang and/or the Feishang Shareholder
                  as a result thereof.

            (4)   Provided, however, notwithstanding the foregoing, the terms of
                  this subsection (c) shall not be applicable to any information
                  which the Company is compelled to disclose by judicial or
                  administrative process or by other requirements of law
                  (including, without limitation, in connection with obtaining
                  the necessary approvals of governmental or regulatory
                  authorities for the Exchange), except that the Company shall
                  procure the confidential treatment of any Feishang
                  Confidential Information which it is compelled to disclose by
                  this Section 11(c)(4) and that access thereto shall be
                  strictly restricted to persons to whom such judicial and


                                       23
<PAGE>

                  administrative process requires. In the event of any such
                  disclosure of any Feishang Confidential Information, Feishang
                  and the Feishang Shareholder shall have the right to petition
                  any court of competent jurisdiction for any remedy or order
                  (interim or otherwise) for the protection of confidentiality
                  of such Feishang Confidential Information.

      (d)   Non-Disclosure: Feishang and the Feishang Shareholder:

            (1)   Feishang and the Feishang Shareholder, for themselves, their
                  officers, employees, directors, agents, affiliates,
                  subsidiaries, independent contractors, and related parties
                  (all of whom are to be deemed included in any reference herein
                  to Feishang and the Feishang Shareholder) severally (but not
                  jointly) agree that they will not at any time during or after
                  the termination or expiration of any agreement or negotiations
                  for an agreement with the Company, except as authorized or
                  directed herein or in writing by the Company, use for Feishang
                  and the Feishang Shareholder's own benefit, copy, reveal,
                  sell, exchange or give away, disclose, divulge or make known
                  or available in any manner to any person, firm, corporation or
                  other entity (whether or not Feishang and the Feishang
                  Shareholder receives any benefit therefrom), any Company
                  Confidential Information.

            (2)   Feishang and the Feishang Shareholder severally (but not
                  jointly) agree to take all actions necessary to ensure that
                  the Company Confidential Information is maintained as secret
                  and confidential and its disclosure shall only be made, to the
                  extent necessary, to a limited group of Feishang and/or the
                  Feishang Shareholder' own employees, officers, directors
                  and/or professional advisors who are actually engaged in the
                  evaluation of the Company Confidential Information; provided,
                  however, Feishang and the Feishang Shareholder severally (but
                  not jointly) acknowledge and agree that they shall be
                  responsible and held liable for the actions or inactions of
                  such employees, officers, directors and/or professional
                  advisors (regardless whether or not such actions or inactions
                  are within their scope of employment) with respect to the
                  maintenance of the secrecy and confidentiality of the Company
                  Confidential Information.

            (3)   Feishang and the Feishang Shareholder understand that if they
                  disclose to others, use for their own benefit (other than as


                                       24
<PAGE>

                  part of an agreement with the Company, which contemplates such
                  use) or for the benefit of any person or entity other than the
                  Company, copies or make notes of any such Company Confidential
                  Information, such conduct will constitute a breach of the
                  confidence and trust bestowed upon Feishang and the Feishang
                  Shareholder by the Company and will constitute a breach of
                  this Agreement and render Feishang and the Feishang
                  Shareholder severally (but not jointly) responsible for any
                  and all damages suffered by the Company as a result thereof.

            (4)   Provided, however, notwithstanding the foregoing, the terms of
                  this subsection (d) shall not be applicable to (i) any
                  information which Feishang and/or the Feishang Shareholder are
                  compelled to disclose by judicial or administrative process or
                  by other requirements of law (including, without limitation,
                  in connection with obtaining the necessary approvals of
                  governmental or regulatory authorities for the Exchange), (ii)
                  information that is publicly available, (iii) information
                  previously in the possession of Feishang and/or the Feishang
                  Shareholder, (iv) information obtained independently from
                  third parties and (v) with respect to the Feishang
                  Shareholder, information that is disclosed for inter-fund
                  reporting purposes.

      (e)   Return of Information:

            (1)   At any time after the Termination Date, upon request of
                  Feishang or any Feishang Shareholder, the Company will, and
                  will cause the Company Representatives to promptly (and in no
                  event later than five days after such request) redeliver or
                  cause to be redelivered to Feishang or the Feishang
                  Shareholder (as applicable) all Feishang Confidential
                  Information and destroy or cause to be destroyed all notes,
                  memoranda, summaries, analyses, compilations and other
                  writings relating thereto or based thereon prepared by the
                  Company or any Company Representative. Such destruction shall
                  be certified in writing to Feishang and the Feishang
                  Shareholder by an authorized officer supervising such
                  destruction.

            (2)   At any time after the Termination Date, upon request of the
                  Company, the Feishang Shareholder and/or Feishang will, and
                  will cause the Feishang Representatives to, promptly (and in
                  no event later than five days after such request) redeliver or
                  cause to be redelivered to the Company all Company
                  Confidential Information, and destroy or cause to be destroyed
                  all notes, memoranda, summaries, analyses, compilations and
                  other writings relating thereto or based thereon prepared by


                                       25
<PAGE>

                  Feishang or the Feishang Shareholder or any Feishang
                  Representative. Such destruction shall be certified in writing
                  to Feishang and the Feishang Shareholder by an authorized
                  officer supervising such destruction.

12.    Equitable Relief.

       The Company, Feishang and the Feishang Shareholder agree that money
       damages would not be a sufficient remedy for any breach or threatened
       breach of any provision set forth in Sections 11, 13(b) or 14 by the
       other, and that, in addition to all other remedies which any party hereto
       may have, each party will be entitled to specific performance and
       injunctive or other equitable relief as a remedy for any such breach or
       threatened breach. No failure or delay by any party hereto in exercising
       any right, power or privilege hereunder will operate as a waiver thereof,
       nor will any single or partial exercise thereof preclude any other or
       further exercise thereof or the exercise of any right, power or privilege
       hereunder.

13.    Conduct and Business.

       (a)    Between the date hereof and the Closing Date, Feishang shall
              conduct its business and the business of all members of the
              Feishang Mining Group in substantially the same manner in which it
              has heretofore been conducted, and the Feishang Shareholder will
              not permit any member of the Feishang Mining Group to: (1) enter
              into any contracts, agreements or arrangements, other than in the
              ordinary course of business, (2) declare or make any distribution
              of any kind to the Feishang Shareholder or (3) take any action
              that causes any the representations or warranties of Feishang or
              the Feishang Shareholder to become inaccurate in any material
              respect, or causes Feishang or the Feishang Shareholder to fail to
              perform any of their respective obligations under this Agreement,
              or could adversely affect the benefits to be received by the
              Company under this Agreement or consummation of the transactions
              contemplated hereby.

       (b)    Between the date hereof and the Closing Date, the Company shall
              conduct its business in substantially the same manner in which it
              has heretofore been conducted, and the Company will not; (1) enter
              into any contracts, agreements or arrangements, other than in the
              ordinary course of business, (2) declare or make any distribution


                                       26
<PAGE>

              of any kind to the shareholders of the Company. Further, also
              during such time period, the Company hereby agrees that neither
              the Company nor any of its affiliates or associates (as such terms
              are defined in Rule12b-2 under the Exchange Act) will, and the
              Company and they will not assist or encourage others to, directly
              or indirectly, except as expressly permitted by this Agreement (A)
              sell or dispose of or agree, offer, seek or propose to sell or
              dispose of (or request permission to do so from any person)
              ownership (including, but not limited to beneficial ownership as
              defined in Rule 13d-3 under the Exchange Act) of (a) any of the
              assets or business of the Company, (B) any securities of the
              Company (whether outstanding or to be issued) or (C) any rights or
              options to acquire such ownership (including to or from a person
              other than the Company), or (B) enter into any discussions,
              negotiations, arrangements or understandings with any person or
              entity with respect to any of the foregoing save and except for
              the Disposal Agreement or (3) take any action that causes any the
              representations or warranties of the Company to become inaccurate
              in any material respect, or causes the Company to fail to perform
              any of its obligations under this Agreement, or could adversely
              affect the benefits to be received by Feishang or the Feishang
              Shareholder under this Agreement or consummation of the
              transactions contemplated hereby .

14.    No Public Disclosure.

       (a)    Feishang and the Feishang Shareholder hereby acknowledge that they
              are aware (and that the Feishang Representatives who have been
              apprised of this Agreement and the Feishang Shareholder's
              consideration of the Exchange have been, or upon becoming so
              apprised will be advised) of the restrictions imposed by federal
              and state securities laws on a person possessing material
              non-public information about a company with a class of securities
              registered under the Exchange Act. In this regard, Feishang
              Shareholder agrees that while it is in possession of material
              non-public information with respect to the Company and its
              subsidiaries, Feishang Shareholder will not purchase or sell any
              securities of the Company, or communicate such information to any
              third party, in violation of any such laws.

       (b)    Without the prior written consent of the other, neither the
              Feishang Shareholder or Feishang, on the one hand, nor the
              Company, on the other, will, and will each cause their respective
              representatives not to, make any release to the press or other
              public disclosure with respect to either the fact that discussions


                                       27
<PAGE>

              or negotiations have taken place concerning the Exchange, the
              existence or contents of this Agreement or any prior
              correspondence relating to this transaction, except for such
              public disclosure as may be necessary, in written opinion of
              outside counsel (reasonably satisfactory to the other party) for
              the party proposing to make the disclosure not to be in violation
              of or default under my applicable law, regulation or governmental
              order. If either party proposes to make any disclosure based upon
              such an opinion, that party will deliver a copy of such opinion to
              the other party, together with the text of the proposed
              disclosure, as far in advance of its disclosure as is practicable,
              and will in good faith consult with and consider the suggestions
              of the other party concerning the nature and scope of the
              information it proposes to disclose.

15.    Brokerage Fee.

       Each party hereto represents that no brokers have been employed in this
transaction.

16.    Agreement to Indemnify.

       Subject to the terms and conditions of this Agreement, the Company herby
       agrees to indemnify, defend and hold the Feishang Shareholder harmless
       from and against all demands, claims, actions or causes of action,
       assessments, losses, damages, liabilities, costs and expenses, including
       without limitation, interest, penalties, court costs and reasonable
       attorneys' fees (including paralegal and law clerk fees and other legal
       expenses and costs) and expenses, asserted against, relating to, imposed
       upon or incurred by the Feishang Shareholder by reason of or resulting
       from (i) a breach of any agreement set forth in this Agreement by the
       Company or the Company Representatives, or (ii) a breach of any
       representation or warranty given by the Company contained in or made
       pursuant to this Agreement; provided that, in the case of clause (ii),
       notice of such breach of representation or warranty is given to the
       Company within two years of the Closing Date, except with respect to the
       representations and warranties contained in Sections 4(a) through 4(d),
       4(k) and 4(l), which shall survive without limitation.

       Subject to the terms and conditions of this Agreement, each of Feishang
       and the Feishang Shareholder hereby agrees, severally and not jointly, to
       indemnify, defend and hold the Company harmless from and against all
       demands, claims, actions or causes of action, assessments, losses,
       damages, liabilities, costs and expenses, including without limitation,


                                       28
<PAGE>

       interest, penalties, court costs and reasonable attorneys' fees
       (including paralegal and law clerk fees and other legal expenses and
       costs) and expenses, asserted against, relating to, imposed upon or
       incurred by the Company by reason of or resulting from a breach of (i)
       any agreement set forth in this Agreement by Feishang or Feishang
       Shareholder, or (ii) any representation or warranty given by Feishang or
       Feishang Shareholder contained in or made pursuant to this Agreement,
       provided that notice of such breach of representation or warranty is
       given to Feishang or Feishang Shareholder within two years of the Closing
       Date, except with respect to the representations and warranties contained
       in Section 2(a) - 2(b), 3(a) and 3(b), which shall survive without
       limitation. All of the foregoing are hereinafter collectively referred to
       as "Claims" and singularly as a "Claim."

       (a)    Conditions of Indemnification

              The obligations and liabilities of the Feishang Shareholder,
              Feishang and the Company, with respect to Claims resulting from
              the assertion of liability by any of them, shall be subject to the
              following terms and conditions:

              (1)    The party hereto seeking indemnification (the "Indemnitee")
                     will give the other party hereto from whom indemnification
                     is sought (the "Indemnitor") notice of any such Claim
                     reasonably promptly after the Indemnitee receives notice
                     thereof, and the Indemnitor will have the right to
                     undertake the defense thereof by representatives of its own
                     choosing. The failure of any Indemnitee to give notice as
                     provided herein shall not relieve the Indemnitor of its
                     obligations under Section 14 above, except to the extent
                     that the Indemnitor is prejudiced by the failure to give
                     such notice. When the Indemnitor undertakes the defense of
                     any claim, the Indemnitee shall have the right to
                     participate in contesting such claim at its own costs and
                     expense.

              (2)    In the event that the Indemnitor, within ten (10) business
                     days after notice of any such Claim, fails to defend such
                     Claim, the Indemnitee will (upon giving written notice to
                     the Indemnitor) have the right, but not the obligation, to
                     undertake the defense, compromise or settlement of such
                     Claim on behalf of and for the account and risk of the
                     Indemnitor, subject to the right of the Indemnitor to
                     assume the defense of such Claim at any time prior to
                     settlement, compromise or final determination thereof.

              (3)    The Indemnitor shall not, without the Indemnitee's written
                     consent, settle or compromise any Claim or consent to entry
                     of any judgment which does not include an unconditional
                     release from all liability in respect of such Claim, other
                     than liability specified in the settlement, from the
                     claimant or plaintiff to the Indemnitee. To the greatest
                     extent reasonably possible, the parties shall attempt to
                     obtain general releases from such plaintiff or claimant.

                                       29
<PAGE>

17.    Cost and Expenses.

       Each party hereto shall pay its own costs and expenses incident to the
       negotiation and preparation of this Agreement and to the consummation of
       the transactions contemplated herein and therein, provided that if the
       transactions contemplated by this Agreement are not completed because (i)
       Feishang and the Feishang Shareholder cannot deliver to the Company any
       of the documents mentioned in Section 2(d) or any of the Feishang
       representations and warranties in Section 2 is not accurate in all
       material respects, Feishang shall forthwith indemnify and reimburse the
       Company for the costs and expenses incurred by the Company; provided that
       the aggregate liability of Feishang and Feishang Shareholder shall not
       exceed HK $600,000 or (ii) the Company cannot satisfy any of the
       conditions contemplated by Section 6 hereof or any of the Company
       representations and warranties in Section 4 is not accurate in all
       material respects, the Company shall forthwith indemnify and reimburse
       Feishang and Feishang Shareholder collectively for the costs and expenses
       incurred in relation to this Agreement provided that the aggregate
       liability of the Company hereunder shall not exceed HK $600,000. Such
       amounts shall constitute liquidated damages and, upon receipt of such
       amount, the parties shall be released from any further liability and
       obligation hereunder.

18.    Miscellaneous.

       (a)    Waiver; Strict Construction:

              No change or modification of this Agreement shall be valid unless
              the same is in writing and signed by all the parties hereto. No
              waiver of any provision of this Agreement shall be valid unless in
              writing and signed by the person against whom sought to be
              enforced. The failure of any party at any time to insist upon
              strict performance of any condition, promise, agreement or
              understanding set forth herein shall not be construed as a waiver
              of relinquishment of the right to insist upon strict performance
              of the same condition, promise, agreement or understanding at a
              future time.

       (b)    Entire Agreement.

              This Agreement, together with all schedules and exhibits hereto
              sets forth all of the promises, agreements, conditions,


                                       30
<PAGE>

              understandings, warranties and representations among the parties
              hereto, and there are no promises, agreements, conditions,
              understandings, warranties or representations, oral and written,
              express or implied, among them other than as set forth herein.
              This Agreement is, and is intended by the parties to be, an
              integration of any and all prior agreements or understandings,
              oral and written.

       (c)    Headings.

              The headings in this Agreement are inserted for
              convenience of reference only and are not to be used in construing
              or interpreting the provisions of this Agreement.

       (d)    Counterparts

              This Agreement may be executed in two or more identical
              counterparts, each of which will be deemed an original and all of
              which will constitute one instrument.

       (e)    Construction. Unless the context clearly otherwise requires the
              use of the singular will include the plural and the use of the
              plural will include the singular, and the use of any gender will
              include the other two genders.

       (f)    Severability.

              If a covenant or provision provided in this Agreement is deemed to
              be contrary to law, that covenant or provision will be deemed
              ineffective and will not affect the validity, interpretation, or
              effect of the other provisions of either this Agreement or any
              agreement executed pursuant to it or the application of that
              covenant or provision to other circumstances not contrary to law.

       (g)    Computation of Time. Whenever the last day for the exercise of any
              privilege or the discharge of any duty hereunder falls upon
              Saturday, Sunday, or any public or legal holiday, the party having
              the privilege or duty will have until 5:00 p.m. Hong Kong Time on
              the next succeeding regular business day to exercise the privilege
              or discharge the duty.

       (h)    Interpretation.

              No provision of this Agreement will be construed against or
              interpreted to the disadvantage of any party by any court or other
              governmental or judicial authority by reason of such party having
              or being deemed to have structured or dictated such provision.

                                       31
<PAGE>

       (i)    Governing Law.

              This Agreement and the obligations of the parties hereunder will
              be interpreted, construed, and enforced in accordance with the
              Laws of the British Virgin Islands.

       (j)    Attorneys' Fees.

              In the event a lawsuit is brought by any party to enforce or
              interpret the terms hereof, or for any dispute arising out of this
              transaction, the party prevailing in any such lawsuit shall be
              entitled to recover from the non-prevailing party its costs and
              expenses thereof, including its legal fees in reasonable amount
              and prejudgment and post-judgment interest at the highest rate
              allowable under British Virgin Islands law.

       (k)    Assignment.

              This Agreement shall not be assignable by any party without the
              prior written consent of the other.

       (l)    Notices.

              All notices, requests, instructions or other documents to be given
              hereunder shall be in writing and sent by registered mail or
              overnight courier:

                  If to Feishang and Feishang Shareholder, then:
                  26/F., Securities Building,
                  5020 Binhe Road, Futian District,
                  Shenzhen, PRC
                  Attn: Mr. Li Feilie

                  If to the Company, then:
                  Room 2105, West Tower,
                  Shun Tak Centre, Connaught Road C.,
                  Sheung Wan, Hong Kong
                  Attn: Mr. Tam Cheuk Ho

       (m)    Benefit and Burden.

              This Agreement shall inure to the benefit of, and shall be binding
              upon, the parties hereto and their legatees, distributes, estates,
              executors or administrators, successors and assigns, and personal
              and legal representatives.

                                       32
<PAGE>

       IN WITNESS WHEREOF, on the date first written above, the parties hereto
have duly executed this Agreement and the Company and Feishang have caused their
corporate seals to be affixed hereto as of the date and year first above
written.


China Natural Resources, Inc.

By:           /s/ Tam Cheuk Ho
              ----------------
Name:         Tam Cheuk Ho
Its:          Director


Feishang Mining Holdings Limited

By:           /s/ Li Feilie
              -------------
Name:         Li Feilie
Its:          Director


Feishang Group Limited

By:           /s/ Li Feilie
              -------------
Name:         Li Feilie
Its:          Director

                                       33
<PAGE>

                                  Schedule 1(a)

            Financial Statements of Feishang Mining Holdings Limited


                                  BALANCE SHEET
                            As at 31st December 2004
                             (in Hong Kong Dollars)


CURRENT ASSET
Bank balance                                                           90,280

CURRENT LIABILITY
Due to a director                                                     103,192
                                                                     --------

NET LIABILITY                                                         (12,912)
                                                                     ========

DEFICIENCY IN ASSETS
Share capital                                                               8
Accumulated loss                                                      (12,920)
                                                                     --------
                                                                      (12,912)
                                                                     ========


<PAGE>

                               STATEMENT OF INCOME

     For the period from 3rd September 2004 (date of incorporation) to
                   31st December 2004 (in Hong Kong Dollars)

General and administrative expenses and
   Loss for the period                                                   12,920
                                                                         ======


<PAGE>

                                  Schedule 1(b)


        Financial Statements of Wuhu Feishang Mining Development Co. Ltd.



<PAGE>




                   WUHU FEISHANG MINING DEVELOPMENT CO., LTD.

                              FINANCIAL STATEMENTS
                          YEAR ENDED DECEMBER 31, 2002
                        FOUR MONTHS ENDED APRIL 30, 2003
                      EIGHT MONTHS ENDED DECEMBER 31, 2003
                          YEAR ENDED DECEMBER 31, 2004

<PAGE>

                   WUHU FEISHANG MINING DEVELOPMENT CO., LTD.

                          INDEX TO FINANCIAL STATEMENTS

                          YEAR ENDED DECEMBER 31, 2002
                        FOUR MONTHS ENDED APRIL 30, 2003
                      EIGHT MONTHS ENDED DECEMBER 31, 2003
                          YEAR ENDED DECEMBER 31, 2004

                                                                     Pages
                                                                     -----

Report of independent registered public accounting firm               F-1

Statements of operations                                              F-2

Balance sheets                                                        F-3

Statements of equity                                                  F-4

Statements of cash flows                                           F-5 - F-6

Notes to financial statements                                     F-7 - F-20





<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders

Wuhu Feishang Mining Development Co., Ltd.

We have audited the accompanying balance sheets of Wuhu Feishang Mining
Development Co., Ltd. (Successor Company) (note 1) as of December 31, 2003 and
2004, and the related statements of operations, equity, and cash flows for the
eight months ended December 31, 2003 and the year ended December 31, 2004
(Successor Company Period); and we have audited the statements of operations,
equity and cash flows of Anhui Fanchang Zinc and Iron Mine (Predecessor Company)
(note 1) for the year ended December 31, 2002 and the four months ended April
30, 2003 (Predecessor Company Period). These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Wuhu Feishang Mining
Development Co., Ltd. at December 31, 2003 and 2004, and the results of its
operations and its cash flows for the Successor Company Period and the results
of operations and cash flows of Anhui Fanchang Zinc and Iron Mine for the
Predecessor Company Period, in conformity with accounting principles generally
accepted in the United States of America.

As discussed in note 1 to the financial statements, the Predecessor Company was
acquired on May 1, 2003. The financial statements of the Successor Company
reflect the impact of adjustments to reflect the fair values of assets acquired
and liabilities assumed under the purchase method of accounting. As a result,
the financial statements of the Successor Company are presented on a different
basis from those of the Predecessor Company and, therefore, are not comparable
in all respects.


GHP Horwath, P.C.
Denver, Colorado

September 15, 2005, except for Note 10(b) and (c) as to which
   the date is November 30, 2005

                                      F-1
<PAGE>

                   WUHU FEISHANG MINING DEVELOPMENT CO., LTD.

                            STATEMENTS OF OPERATIONS

                          YEAR ENDED DECEMBER 31, 2002
                        FOUR MONTHS ENDED APRIL 30, 2003
                      EIGHT MONTHS ENDED DECEMBER 31, 2003
                          YEAR ENDED DECEMBER 31, 2004

                             (AMOUNTS IN THOUSANDS)


The statements of operations for the year ended December 31, 2002 and for the
four months ended April 30, 2003 reflect operations of the Predecessor Company
(see note 1 to the financial statements)
<TABLE>
<CAPTION>
                                                             Predecessor         |               Successor
                                                             -----------                         ---------
                                                                          Four   |         Eight
                                                              Year      months   |        months                Year
                                                             Ended       ended   |         ended               ended
                                                      December 31,   April 30,   |  December 31,        December 31,
                                               Notes          2002        2003   |          2003                2004
                                                               RMB         RMB   |           RMB       RMB       US$
                                                                                 |
<S>                                            <C>         <C>         <C>               <C>        <C>        <C>
NET SALES                                                   36,129      10,439   |        31,893    77,939     9,413
                                                                                 |
COST OF SALES                                              (27,757)    ( 7,402)  |       (19,892)  (29,667)  ( 3,583)
                                                             -----       -----   |         -----     -----     -----
                                                                                 |
GROSS PROFIT                                                 8,372       3,037   |        12,001    48,272     5,830
                                                                                 |
SELLING, GENERAL AND                                                             |
   ADMINISTRATIVE EXPENSES                                  (7,943)    ( 2,154)  |       ( 4,541)  ( 6,435)   (  777)
                                                             -----       -----   |         -----     -----     -----
                                                                                 |
INCOME FROM OPERATIONS                                         429         883   |         7,460    41,837     5,053
                                                                                 |
INTEREST INCOME                                                 21          13   |            44       162        20
                                                                                 |
INTEREST EXPENSE                                           (   405)   (     51)  |         (  22)        -         -
                                                                                 |
OTHER INCOME/(EXPENSE), NET                         5     (     87)     (   67)  |      (     22)        6         1
                                                             -----       -----   |         -----     -----     -----
                                                                                 |
INCOME/(LOSS) FROM CONTINUING                                                    |
  OPERATIONS BEFORE INCOME TAXES                            (   42)        778   |         7,460    42,005     5,074
                                                                                 |
INCOME TAXES                                        6            -     (    25)  |             -         -         -
                                                             -----       -----   |         -----     -----     -----
                                                                                 |
INCOME/(LOSS) FROM CONTINUING OPERATIONS                    (   42)        753   |         7,460    42,005     5,074
                                                                                 |
DISCONTINUED OPERATIONS                                                          |
  Income/(loss) from discontinued                                                |
    bleaching earth segment                        4       ( 1,825)    (   159)  |       (    72)       12        1
                                                             -----       -----   |         -----     -----     -----
                                                                                 |
NET INCOME/(LOSS)                                          ( 1,867)        594   |         7,388    42,017     5,075
                                                             =====       =====   |         =====     =====      =====
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                      F-2
<PAGE>

                   WUHU FEISHANG MINING DEVELOPMENT CO., LTD.

                                 BALANCE SHEETS

                           DECEMBER 31, 2003 AND 2004

                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                        December 31,
                                                                            2003               2004             2004
                                                             Notes           RMB                RMB              US$
<S>                                                          <C>          <C>                <C>              <C>
ASSETS

CURRENT ASSETS
Cash and cash equivalents                                                 10,519             19,229            2,322
Trade receivables, net of allowance of RMB66 in
  2003 and RMB215 in 2004                                                  3,417                712               86
Bills receivable                                                             350              1,047              126
Other receivables, deposits and prepayments                                  845                419               51
Amount due from related companies                              10              -             41,122            4,966
Amount due from a shareholder                                  10          9,000              9,000            1,087
Inventories                                                     7          4,285              3,518              425
                                                                          ------             ------           ------

TOTAL CURRENT ASSETS                                                      28,416             75,047            9,063

PROPERTY AND EQUIPMENT, NET                                     8         34,377             34,250            4,137

ASSETS HELD FOR SALE                                            4          9,101                  -                -
                                                                          ------             ------           ------

TOTAL ASSETS                                                              71,894            109,297           13,200
                                                                          ======             ======           ======


LIABILITIES AND EQUITY

CURRENT LIABILITIES
Accounts payable                                                           1,822              1,350              163
Other payables                                                  9         14,775             15,579            1,882
Advances from suppliers                                                    8,111              2,200              265
Accrued liabilities                                                        1,375              1,506              182
Amount due to a shareholder                                    10         25,183             25,115            3,033
Taxes payable                                                              1,248              2,150              260
                                                                          ------             ------           ------

TOTAL LIABILITIES - ALL CURRENT                                           52,514             47,900            5,785
                                                                          ------             ------           ------

EQUITY
Registered capital                                             13         12,000             12,000            1,449
Retained earnings                                                          7,380             49,397            5,966
                                                                          ------             ------           ------


TOTAL EQUITY                                                              19,380             61,397            7,415
                                                                          ------             ------           ------

TOTAL LIABILITIES AND EQUITY                                              71,894            109,297           13,200
                                                                          ======             ======           ======
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                      F-3
<PAGE>

                   WUHU FEISHANG MINING DEVELOPMENT CO., LTD.

                              STATEMENTS OF EQUITY

                          YEAR ENDED DECEMBER 31, 2002
                        FOUR MONTHS ENDED APRIL 30, 2003
                      EIGHT MONTHS ENDED DECEMBER 31, 2003
                          YEAR ENDED DECEMBER 31, 2004

                             (AMOUNTS IN THOUSANDS)

The statements of equity for the year ended December 31, 2002 and for the four
months ended April 30, 2003 reflect equity of the Predecessor Company (see note
1 to the financial statements)

<TABLE>
<CAPTION>
                                             Predecessor           Registered      Retained earnings/
                                                  equity              capital   (accumulated deficit)          Total
                           -----------------------------------------------------------------------------------------
THE PREDECESSOR:                                     RMB                  RMB                     RMB            RMB
<S>                                               <C>                  <C>                     <C>            <C>
Balances at January 1, 2002                       23,003                    -                       -         23,003
Net loss for the year ended
  December 31, 2002                              ( 1,867)                   -                       -        ( 1,867)
                                                   -----                -----                   -----          -----
Balances at December 31, 2002                     21,136                    -                       -         21,136

Net income for the four months
  ended April 30, 2003                               594                    -                       -            594
                                                   -----                -----                   -----          -----
Balances at April 30, 2003                        21,730                    -                       -         21,730
                                                   =====                =====                   =====          =====


THE SUCCESSOR:

Balances at inception, May 1, 2003                                     12,000               (       8)        11,992
Net income for the eight months ended
  December 31, 2003                                                         -                   7,388          7,388

                                                                        -----                   -----          -----
Balances at December 31, 2003                                          12,000                   7,380         19,380

Net income for the year ended
  December 31, 2004                                                         -                  42,017         42,017
                                                                        -----                   -----          -----
Balances at December 31, 2004                                          12,000                  49,397         61,397
                                                                        =====                   =====          =====

US$                                                                     1,449                   5,966          7,415
                                                                        =====                   =====          =====
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                      F-4
<PAGE>

                   WUHU FEISHANG MINING DEVELOPMENT CO., LTD.

                            STATEMENTS OF CASH FLOWS

                          YEAR ENDED DECEMBER 31, 2002
                        FOUR MONTHS ENDED APRIL 30, 2003
                      EIGHT MONTHS ENDED DECEMBER 31, 2003
                          YEAR ENDED DECEMBER 31, 2004

                             (AMOUNTS IN THOUSANDS)

The statements of cash flows for the year ended December 31, 2002 and for the
four months ended April 30, 2003 reflect cash flows of the Predecessor Company
(see note 1 to the financial statements)

<TABLE>
<CAPTION>
                                                             Predecessor         |               Successor
                                                             -----------                         ---------
                                                                          Four   |         Eight
                                                              Year      months   |        months                Year
                                                             Ended       ended   |         ended               ended
                                                      December 31,   April 30,   |  December 31,        December 31,
                                                              2002        2003   |          2003                2004
                                                               RMB         RMB   |           RMB       RMB       US$
<S>                                                       <C>              <C>             <C>      <C>        <C>
OPERATING ACTIVITIES                                                             |
Net income/(loss)                                         (  1,867)        594   |         7,388    42,017     5,075
Adjustments to reconcile net income/(loss) to net                                |
    cash provided by operating activities:                                       |
       Depreciation                                          2,395         715   |         1,018     1,715       207
       Amortization of mining rights                             -           -   |           207       312        37
       Loss on disposal of property and equipment                -          38   |             -       255        31
                                                                                 |
Changes in operating assets and liabilities: |
    Trade receivables                                          730       1,666   |      (  1,260)    2,705       327
    Bills receivable                                             -           -   |       (   350) (    697) (     84)
    Inventories                                              2,108      (  458)  |         1,544       767        93
    Other receivables, deposits and prepayments              3,970    (     68)  |           713       426        51
    Accounts payable                                            11       1,170   |          (242)  (   472)  (    57)
    Other payables                                             130       1,418   |       ( 7,621)      724        88
    Advances from suppliers                                      -           -   |         8,111   ( 5,911)  (   714)
    Accrued liabilities                                          -           -   |         1,375       131        16
    Taxes payable                                          (   120)     (  769)  |      (    773)      902       109
    Discontinued operations                                     62      (  675)  |           454       886       106
                                                             -----       -----   |         -----     -----     -----
                                                                                 |
Net cash provided by operating activities                    7,419       3,631   |        10,564    43,760     5,285
                                                             -----       -----   |         -----     -----     -----
                                                                                 |
INVESTING ACTIVITIES                                                             |
    Advances to related companies                                -           -   |             -   (33,069)  ( 3,994)
    Advances to a shareholder                                    -           -   |       ( 9,000)        -         -
    Purchases of property and equipment                    ( 2,988)    (    38)  |      (    391)  ( 1,981)  (   239)
    Cash paid for business acquisition                           -           -   |       (11,313)        -         -
    Discontinued operations                                (   219)          -   |             -         -         -
                                                             -----       -----   |         -----     -----     -----
                                                                                 |
Net cash used in investing activities                      ( 3,207)    (    38)  |       (20,704)  (35,050)  ( 4,233)
                                                             -----       -----   |         -----      ----      ----
                                                                                 |
FINANCING ACTIVITIES                                                             |
    Initial capital contribution                                 -           -   |        12,000         -         -
                                                             -----       -----   |         -----     -----     -----
                                                                                 |
Net cash provided by financing activities                        -           -   |        12,000         -         -
                                                             -----       -----   |          ----     -----      ----
</TABLE>



                                   (Continued)

                                      F-5
<PAGE>

                   WUHU FEISHANG MINING DEVELOPMENT CO., LTD.

                      STATEMENTS OF CASH FLOWS (CONTINUED)

                          YEAR ENDED DECEMBER 31, 2002
                        FOUR MONTHS ENDED APRIL 30, 2003
                      EIGHT MONTHS ENDED DECEMBER 31, 2003
                          YEAR ENDED DECEMBER 31, 2004

                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                             Predecessor         |               Successor
                                                             -----------                         ---------
                                                                          Four   |         Eight
                                                              Year      months   |        months                Year
                                                             Ended       ended   |         ended               ended
                                                      December 31,   April 30,   |  December 31,        December 31,
                                                              2002        2003   |          2003                2004
                                                               RMB         RMB   |           RMB       RMB       US$
                                                                                 |
                                                                                 |
<S>                                                          <C>         <C>               <C>       <C>       <C>
NET INCREASE IN CASH AND                                     4,212       3,593   |         1,860     8,710     1,052
  CASH EQUIVALENTS                                                               |
                                                                                 |
CASH AND CASH EQUIVALENTS, BEGINNING                           854       5,066   |         8,659    10,519     1,270
                                                             -----       -----   |         -----     -----     -----
                                                                                 |
CASH AND CASH EQUIVALENTS, ENDING                            5,066       8,659   |        10,519    19,229     2,322
                                                             =====       =====   |         =====     =====     =====
                                                                                 |
                                                                                 |
Supplemental disclosure of cash flow information:                                |
  Cash paid for:                                                                 |
   Interest                                                    403          50   |            20         -         -
                                                             =====       =====   |         =====     =====     =====
   Income taxes                                                203         500   |             -         -         -
                                                             =====       =====   |         =====     =====     =====
                                                                                 |
Supplemental disclosure of non-cash investing and financing activities:          |
  Amount due from related company for sale of assets                             |
    of discontinued operations                                   -           -   |             -     8,050       972
                                                             =====       =====   |         =====     =====     =====
                                                                                 |
  Offset other receivables against amount due to a
     shareholder                                                 -           -   |             - (      68)(       8)
                                                             =====       =====   |         =====     =====     =====
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                      F-6
<PAGE>
                   WUHU FEISHANG MINING DEVELOPMENT CO., LTD.

                          NOTES TO FINANCIAL STATEMENTS

                          YEAR ENDED DECEMBER 31, 2002
                        FOUR MONTHS ENDED APRIL 30, 2003
                      EIGHT MONTHS ENDED DECEMBER 31, 2003
                          YEAR ENDED DECEMBER 31, 2004

                             (AMOUNTS IN THOUSANDS)

1.       ORGANIZATION AND PRINCIPAL ACTIVITIES

         In May 2003, Anhui Fanchang Zinc and Iron Mine, a stated-owned
         enterprise (the "Predecessor Company") underwent a corporate
         reorganization (the "Reorganization"). Pursuant to the Reorganization,
         the Predecessor Company sold its entire business to an unrelated
         entity, Wuhu Feishang Mining Development Co., Ltd. (the "Company" or
         "WFM" or the "Successor"). WFM was established as a Sino-foreign joint
         venture company in the People's Republic of China ("PRC") with the
         venturers being Wuhu Feishang Enterprise Development Limited ("WFE")
         ("50%") and Feishang International Holdings Limited ("FIH") ("50%") on
         June 21, 2002 with a tenure of 20 years from the date of the business
         license. Mr. Li Feilie is the majority owner of WFE and FIH. The tenure
         can be extended by agreement between the joint venture partners with
         the necessary approval from the relevant government agencies. The
         registered capital of WFM is RMB12,000 (US$1,449), of which RMB6,000
         (US$725) was each contributed by WFE and FIH.

         The financial statements for the Predecessor Period for the year ended
         December 31, 2002 and the four months ended April 30, 2003 were
         prepared using the historical basis of accounting. As a result of the
         Reorganization, WFM applied purchase accounting and a new basis of
         accounting began on May 1, 2003. WFM has reflected a Predecessor Period
         for the year ended December 31, 2002 and the four months ended April
         30, 2003 and a Successor Period from May 1, 2003 through December 31,
         2003 and the year ended December 31, 2004. Accordingly, the results of
         operations of the Predecessor and the Successor are not comparable in
         all respects.

         The principal activity of the Company is the mining of zinc, iron,
         activated bleaching earth, metallurgy bentonite and other minerals for
         distribution in the PRC. In early 2004, the Company sold its mining
         business in activated bleaching earth and metallurgy bentonite to Wuhu
         Feishang Non-Metal Material Co. Ltd. ("WFNM"), a related party, for
         consideration of RMB8,050 (US$972). The Company owns the mining rights
         to two mines: Yang-chong Mine contains iron and zinc minerals and
         Zao-yun Mine contains mainly iron minerals. The cash flows and
         profitability of the Company's current operations are significantly
         affected by the market price of zinc and iron. These commodity prices
         can fluctuate widely and are affected by factors beyond the Company's
         control.

                                      F-7
<PAGE>
                   WUHU FEISHANG MINING DEVELOPMENT CO., LTD.

                          NOTES TO FINANCIAL STATEMENTS

                          YEAR ENDED DECEMBER 31, 2002
                        FOUR MONTHS ENDED APRIL 30, 2003
                      EIGHT MONTHS ENDED DECEMBER 31, 2003
                          YEAR ENDED DECEMBER 31, 2004

                             (AMOUNTS IN THOUSANDS)

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         (a)      Accounting principles

                  The financial statements of the Company are prepared in
                  accordance with accounting principles generally accepted in
                  the United States of America ("US GAAP").

         (b)      Use of estimates

                  The preparation of the financial statements in conformity with
                  US GAAP requires management to make estimates and assumptions
                  that affect the reported amounts of assets and liabilities and
                  disclosure of contingent assets and liabilities at the date of
                  the financial statements and the reported amounts of revenues
                  and expenses during the reporting year. Actual results could
                  differ from those estimates.

         (c)      Cash and cash equivalents

                  The Company considers all highly liquid investments and cash
                  deposits with financial institutions with original maturities
                  of three months or less to be cash equivalents.

         (d)      Inventories

                  Inventories are stated at the lower of average cost or net
                  realizable value. For products, we determine net realizable
                  value by estimating value based on current metals prices, less
                  cost to convert stockpiled and in-process inventories to
                  finished products. Major types of inventories include:

                    Raw materials consists of raw ore extracted and auxiliary
                    material - costs are limited to those directly related to
                    mining

                    Work in progress consists of semi-finished iron and zinc ore
                    - valued at the cost of production through the point at
                    which inventory has been processed

                    Finished goods - valued at the lower of full cost of
                    production or net realizable value based on current metal
                    prices


                                      F-8
<PAGE>
                   WUHU FEISHANG MINING DEVELOPMENT CO., LTD.

                          NOTES TO FINANCIAL STATEMENTS

                          YEAR ENDED DECEMBER 31, 2002
                        FOUR MONTHS ENDED APRIL 30, 2003
                      EIGHT MONTHS ENDED DECEMBER 31, 2003
                          YEAR ENDED DECEMBER 31, 2004

                             (AMOUNTS IN THOUSANDS)

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         (e)      Property and equipment

                  Property and equipment are stated at cost less accumulated
                  depreciation. Expenditures for routine repairs and maintenance
                  are expensed as incurred.

                  Depreciation is calculated on the straight-line basis to write
                  off the cost less estimated residual value of each asset over
                  its estimated useful life.

                  In April 2004, the FASB issued FASB Staff Position ("FSP") FAS
                  141-1 and FAS 142-1 "Interaction of FASB Statements No. 141,
                  Business Combinations, and No. 142, Goodwill and Other
                  Intangible Assets, and Emerging Issues Task Force ("EITF")
                  Issue 04-2, "Whether Mineral Rights are Tangible or Intangible
                  Assets". This FSP amends SFAS Nos. 141 and 142 and requires
                  mineral rights to be accounted for as tangible assets based on
                  the consensus reached in EITF 04-2.

                  The Company has determined that the mining rights acquired
                  from the Predecessor are mineral rights, and accordingly are
                  classified as property and equipment.

                  Mining rights are stated at cost less accumulated amortization
                  and any impairment losses. The mining rights are amortized
                  based on actual units of production over the proven and
                  probable reserves of the mines, not to exceed 20 years. The
                  weighted average amortization period for these reserves is 18
                  years as of December 31, 2004. Reserves designated as proven
                  and probable are supported by a study indicating that the
                  reserves have had the requisite geological, technical and
                  economic work performed, and are legally extractable at the
                  time of reserve determination. The Company's rights to extract
                  minerals are contractually limited by time. However, the
                  Company believes that it will be able to extend licenses, as
                  it has in the past, without incurring substantial costs, and
                  therefore, believes that assigned lives are appropriate. All
                  costs, other than acquisition costs, are expensed prior to the
                  establishment of proven and probable reserves. Once proven and
                  probable reserves are established, all development and other
                  site specific costs are capitalized, including general and
                  administrative charges for actual time and expenses incurred
                  in connection with site supervision.

                  Estimated useful lives are as follows:

                  Buildings and mine development                   15 - 35 years
                  Machinery and equipment                           6 - 15 years
                  Motor vehicles                                         8 years
                  Mining rights                                         18 years

                                      F-9
<PAGE>
                   WUHU FEISHANG MINING DEVELOPMENT CO., LTD.

                          NOTES TO FINANCIAL STATEMENTS

                          YEAR ENDED DECEMBER 31, 2002
                        FOUR MONTHS ENDED APRIL 30, 2003
                      EIGHT MONTHS ENDED DECEMBER 31, 2003
                          YEAR ENDED DECEMBER 31, 2004

                             (AMOUNTS IN THOUSANDS)

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         (e)      Property and equipment (continued)

                  Management assesses the carrying values of its long-lived
                  assets for impairment when circumstances warrant such a
                  review. Generally, long-lived assets are considered impaired
                  if the estimated fair value is less than the assets' carrying
                  values. If an impairment is indicated, the loss is measured
                  based on the amounts by which the carrying values of the
                  assets exceed their fair values.

         (f)      Revenue recognition

                  Revenue from product sales is recognized when title passes to
                  the customer in accordance with the sales agreement, generally
                  upon product acceptance by the customer.

                  Freight and handling costs paid to third party carriers are
                  recorded as cost of sales.

         (g)      Income taxes

                  Deferred tax assets and liabilities are recognized for the
                  estimated future tax consequences attributable to differences
                  between the financial statement carrying amounts of existing
                  assets and liabilities and their respective tax bases.
                  Deferred tax assets and liabilities are measured using enacted
                  tax rates expected to apply to taxable income in the years in
                  which those temporary differences are expected to be recovered
                  or settled.

         (h)      Foreign currency translation

                  The functional currency of all the operations of the Company
                  is the Renminbi ("RMB"), the national currency of the PRC.

                  Transactions denominated in currencies other than the RMB are
                  translated into RMBs at the applicable rates of exchange
                  prevailing at the dates of the transactions. Monetary assets
                  and liabilities denominated in other currencies have been
                  translated into RMBs at the rate of exchange at the balance
                  sheet date. The resulting exchange gains or losses are
                  credited or charged to the consolidated statements of
                  operations.

                  The financial statements are stated in RMB. The translation of
                  amounts from RMB into US$ is included solely for the
                  convenience of the reader and has been made at the rate of
                  exchange quoted by the People's Bank of China on December 31,
                  2004 of US$1.00 = RMB8.28. No representation is made that the
                  RMB amounts could have been, or could be, converted into US$
                  at that rate on December 31, 2004 or at any other date.

         (i)      Interest income

                  Interest on bank balances is recorded when earned.

                                      F-10
<PAGE>
                   WUHU FEISHANG MINING DEVELOPMENT CO., LTD.

                          NOTES TO FINANCIAL STATEMENTS

                          YEAR ENDED DECEMBER 31, 2002
                        FOUR MONTHS ENDED APRIL 30, 2003
                      EIGHT MONTHS ENDED DECEMBER 31, 2003
                          YEAR ENDED DECEMBER 31, 2004

                             (AMOUNTS IN THOUSANDS)

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         (j)      Recently issued accounting pronouncements

                  In December 2004, the Financial Accounting Standards Board
                  ("FASB") issued SFAS No. 123 (R) "Share Based Payment" which
                  addresses the accounting for share-based payment transactions.
                  SFAS No. 123 (R) eliminates the ability to account for
                  share-based compensation transactions using APB No. 25, and
                  generally requires instead that such transactions be accounted
                  and recognized in the statement of income based on their fair
                  values. SFAS No. 123 (R) will be effective for public
                  companies that file as small business issuers as of the first
                  interim period in fiscal years that begin after December 15,
                  2005. The Company is evaluating the provisions of SFAS No. 123
                  (R). Depending upon the numbers and terms of options that may
                  be granted in future periods, the implementation of this
                  standard could have a material impact on the Company's
                  financial position and results of operations.

                  In March 2005, the Emerging Issues Task Force ("EITF") issued
                  EITF 04-6, "Accounting for Stripping Costs Incurred during
                  Production in the Mining Industry". EITF 04-6 requires that
                  stripping costs incurred during the production phase of a mine
                  should be included in the cost of inventory produced during
                  the period the stripping costs are incurred. EITF 04-6 is
                  effective for the first reporting period in fiscal years
                  beginning after December 15, 2005, with initial adoption being
                  accounted for in a manner similar to a cumulative-effect
                  adjustment. Management is assessing the impact that the
                  adoption of EITF 04-6 will have on its financial statements.

3.       BUSINESS ACQUISITION

         In May 2003, the Company acquired assets and assumed liabilities of
         Anhui Fanchang Mining Co., for total consideration of RMB11,310,000
         (US$1,366,000). The acquisition has been accounted for as a purchase.

         The following table summarizes the estimated fair values of the assets
         acquired and the liabilities assumed at the date of the acquisition.

                                      F-11
<PAGE>
                   WUHU FEISHANG MINING DEVELOPMENT CO., LTD.

                          NOTES TO FINANCIAL STATEMENTS

                          YEAR ENDED DECEMBER 31, 2002
                        FOUR MONTHS ENDED APRIL 30, 2003
                      EIGHT MONTHS ENDED DECEMBER 31, 2003
                          YEAR ENDED DECEMBER 31, 2004

                             (AMOUNTS IN THOUSANDS)

3.       BUSINESS ACQUISITION (continued)

         Net assets acquired                                              RMB
             Cash                                                       8,659
             Accounts receivable                                          853
             Inventories                                                7,987
             Prepaid and other assets                                   1,648
             Property and equipment                                    34,361
             Mining rights                                              9,229
             Exploration right                                            255
             Accounts payable and accrued expenses                    (24,475)
             Amount due to a shareholder                              (25,183)
             Income tax provision                                      (2,021)
                                                                        -----
             Net assets acquired                                       11,313
             Less: cash acquired                                      ( 8,659)
                                                                        -----
             Cash paid for business acquisition                         2,654
                                                                        =====

4.       DISCONTINUED OPERATIONS

         Pursuant to a January 1, 2004 agreement, the Company disposed of its
         interest in the mining of activated bleaching earth operation to a
         related party, Wuhu Feishang Non-Metal Material Co. Ltd. ("WFNM") for
         total consideration of RMB8,050 (US$972), which has been included as an
         amount due from a related company at December 31, 2004. The assets of
         the activated bleaching earth segment have been classified as assets
         held for sale as of December 31, 2003, and consisted of fixed assets of
         RMB8,050 (US$972). Inventories of the bleaching earth segment with a
         carrying value of RMB796 (US$96) were not sold to WFNM and were sold by
         the Company to unrelated third parties in 2004. The sale price of the
         bleaching earth segment equaled its carrying value and accordingly
         there was no gain or loss on the sale. As a result of the disposition,
         the Company has ceased its activated bleaching earth operations. The
         results of the activated bleaching earth segment have been
         retroactively restated as discontinued operations. Revenues from the
         discontinued activated bleaching earth segment were RMB6,047 (US$730),
         RMB1,088 (US$131), RMB7,146 (US$863) and RMB808 (US$98), respectively,
         for the year ended December 31, 2002, the four months ended April 30,
         2003, the eight months ended December 31, 2003 and year ended December
         31, 2004. Income/(loss) before income taxes from the discontinued
         activated bleaching earth segment was (RMB1,825) (US$220), (RMB159)
         (US$19), (RMB72) (US$9) and RMB12 (US$1), respectively, for the year
         ended December 31, 2002, the four months ended April 30, 2003, the
         eight months ended December 31, 2003 and year ended December 31, 2004.

         Also included in assets held for sale is RMB255 (US$31) relating to
         mine exploration rights acquired from the Predecessor and sold to an
         unrelated third party in December 2004.

                                      F-12
<PAGE>
                   WUHU FEISHANG MINING DEVELOPMENT CO., LTD.

                          NOTES TO FINANCIAL STATEMENTS

                          YEAR ENDED DECEMBER 31, 2002
                        FOUR MONTHS ENDED APRIL 30, 2003
                      EIGHT MONTHS ENDED DECEMBER 31, 2003
                          YEAR ENDED DECEMBER 31, 2004

                             (AMOUNTS IN THOUSANDS)

5.       OTHER INCOME/ (EXPENSE), NET

         Other income/ (expense), net represents:
<TABLE>
<CAPTION>
                                                             Predecessor         |               Successor
                                                             -----------                         ---------
                                                                          Four   |         Eight
                                                              Year      months   |        months                Year
                                                             Ended       ended   |         ended               ended
                                                      December 31,   April 30,   |  December 31,        December 31,
                                                              2002        2003   |          2003                2004
                                                               RMB         RMB   |           RMB       RMB       US$
                                                                                 |
<S>                                                        <C>         <C>               <C>             <C>       <C>
         Loss on disposal of property & equipment                -       (  38)  |             -         -         -
         Other                                             (    87)    (    29)  |       (    22)        6         1
                                                             -----       -----   |         -----     -----     -----
                                                                                 |
                                                           (    87)    (    67)  |       (    22)        6         1
                                                             =====       =====   |         =====     =====     =====
</TABLE>

6.       INCOME TAXES

         Pre-tax income (loss) for the years ended December 31, 2002, 2003 and
         2004 was taxable in the PRC.

         The reconciliation of income taxes/ (tax benefit) computed at the PRC
         federal statutory tax rate applicable to foreign investment enterprises
         operating in Anhui in the PRC, to income tax expense is as follows:
<TABLE>
<CAPTION>
                                                             Predecessor         |               Successor
                                                             -----------                         ---------
                                                                          Four   |         Eight
                                                              Year      months   |        months                Year
                                                             Ended       ended   |         ended               ended
                                                      December 31,   April 30,   |  December 31,        December 31,
                                                              2002        2003   |          2003                2004
                                                               RMB         RMB   |           RMB       RMB       US$
                                                                                 |
<S>                                                             <C>        <C>             <C>      <C>        <C>
         PRC Federal statutory tax rate                         30%         30%  |            30%       30%       30%
                                                                                 |
         Computed expected income tax expense                    -      (  225)  |        (2,075)  (12,798)   (1,546)
         Non-deductible expenses                                 -         200   |             -         -         -
         Preferential tax treatment                              -           -   |         2,075   (12,798)   (1,546)
                                                             -----       -----   |         -----     -----     -----
                                                                                 |
                                                                 -     (    25)  |             -         -         -
                                                             =====       =====   |         =====     =====     =====
</TABLE>

         The Company is governed by the Income Tax Laws of the PRC. Being a
         Sino-foreign joint venture, the Company is exempt from income taxes for
         a period of two years commencing from its first profitable year and is
         entitled to a preferential income tax rate of 15% for three consecutive
         years commencing from its third profitable year. Thereafter, the
         profits will be charged at the full rate of 30%.

                                      F-13
<PAGE>
                   WUHU FEISHANG MINING DEVELOPMENT CO., LTD.

                          NOTES TO FINANCIAL STATEMENTS

                          YEAR ENDED DECEMBER 31, 2002
                        FOUR MONTHS ENDED APRIL 30, 2003
                      EIGHT MONTHS ENDED DECEMBER 31, 2003
                          YEAR ENDED DECEMBER 31, 2004

                             (AMOUNTS IN THOUSANDS)

7.       INVENTORIES

         At December 31, 2003 and 2004, inventories consisted of:
<TABLE>
<CAPTION>
                                                                                       December 31,
                                                                          2003               2004               2004
                                                                           RMB                RMB                US$
<S>                                                                      <C>                <C>                  <C>
         Raw materials                                                   2,500              2,208                267
         Work in progress                                                  219                123                 15
         Finished goods                                                  1,566              1,187                143
                                                                        ------             ------             ------

                                                                         4,285              3,518                425
                                                                        ======             ======             ======
</TABLE>

8.       PROPERTY AND EQUIPMENT

         At December 31, 2003 and 2004, property and equipment consisted of:
<TABLE>
<CAPTION>
                                                                                       December 31,
                                                                          2003               2004               2004
                                                                           RMB                RMB                US$
<S>                                                                     <C>                <C>                 <C>
         At cost:
            Buildings and mine development                              22,330             22,943              2,771
            Machinery and equipment                                      3,877              4,095                494
            Motor vehicles                                                 166                901                109
            Mining rights                                                9,229              9,229              1,115
                                                                        ------             ------             ------

                                                                        35,602             37,168              4,489

         Accumulated depreciation and depletion                        (  1,225)        (   2,918)          (    352)
                                                                        ------             ------             ------

                                                                        34,377             34,250              4,137
                                                                        ======             ======             ======
</TABLE>

          At December 31, 2003 and 2004, accumulated depreciation and depletion
          included accumulated depletion of mining rights of RMB207 and RMB519,
          respectively.

                                      F-14
<PAGE>
                   WUHU FEISHANG MINING DEVELOPMENT CO., LTD.

                          NOTES TO FINANCIAL STATEMENTS

                          YEAR ENDED DECEMBER 31, 2002
                        FOUR MONTHS ENDED APRIL 30, 2003
                      EIGHT MONTHS ENDED DECEMBER 31, 2003
                          YEAR ENDED DECEMBER 31, 2004

                             (AMOUNTS IN THOUSANDS)

9.       OTHER PAYABLES

         At December 31, 2003 and 2004, other payables consisted of:
<TABLE>
<CAPTION>
                                                                                       December 31,
                                                                          2003               2004               2004
                                                                           RMB                RMB                US$
<S>                                                                      <C>                <C>                  <C>
         Anhui Investment Group Co. Ltd (a)                              2,350              2,350                284
         China Huarong Asset Management Co. Ltd. (a)                     1,116              1,116                135
         Fanchang County Economic Development
           Department (b)                                                2,257              2,257                273
         Natural resources fee (c)                                       1,978              3,186                385
         Staff compensation fund (d)                                     4,711              4,398                531
         Other                                                           2,363              2,272                274
                                                                        ------             ------             ------

                                                                        14,775             15,579              1,882
                                                                        ======             ======             ======
</TABLE>

             (a)    These balances represented liabilities assumed by the
                    Company upon acquisition of the entire business of the
                    Predecessor and were settled pursuant to settlement
                    agreements on February 2, 2005 and March 29, 2005,
                    respectively.

             (b)    This balance represents a liability assumed by the Company
                    upon acquisition of the entire business of the Predecessor.

             (c)    Natural resources fee represents fees payable to the PRC
                    Government and is calculated as a percentage of sales. The
                    Company has no asset retirement obligations in connection
                    with its mining operations.

             (d)    The staff compensation fund represents a PRC government
                    required contribution to a fund established to compensate
                    employees for the loss of their state-sponsored pension and
                    post employment benefits as a result of the Reorganization.
                    The fund will be distributed to employees at the termination
                    of their employment with the Company. The Company is not
                    required to make any additional contributions to the fund.

                                      F-15
<PAGE>
                   WUHU FEISHANG MINING DEVELOPMENT CO., LTD.

                          NOTES TO FINANCIAL STATEMENTS

                          YEAR ENDED DECEMBER 31, 2002
                        FOUR MONTHS ENDED APRIL 30, 2003
                      EIGHT MONTHS ENDED DECEMBER 31, 2003
                          YEAR ENDED DECEMBER 31, 2004

                             (AMOUNTS IN THOUSANDS)

10.      RELATED PARTY BALANCES AND TRANSACTIONS

         At December 31, 2003 and 2004, amounts due from related companies and
         to and from a shareholder comprise:
<TABLE>
<CAPTION>
                                                                                       December 31,
                                                                          2003               2004               2004
                                                                           RMB                RMB                US$
<S>                                                                     <C>                <C>                 <C>
         Due from related companies
            Wuhu Hengxin Copper Co. Ltd. ("Hengxin")                         -             30,000              3,623
            Wuhu Feishang Non-Metal Material Co. Ltd.
              ("WFNM")                                                       -             11,122              1,343
                                                                        ------             ------             ------

                                                                             -             41,122              4,966
                                                                        ======             ======             ======

         Due from a shareholder:
            Wuhu Feishang Enterprise Development
               Co. Ltd. ("WFE")                                          9,000              9,000              1,087
                                                                        ======             ======             ======

         Due to a shareholder:
            Wuhu Feishang Enterprise Development
               Co. Ltd. ("WFE")                                         25,183             25,115              3,033
                                                                        ======             ======             ======
</TABLE>

             (a)    The amounts due from Hengxin and WFE represented advances
                    made to them by the Company. The amount due from WFNM
                    represented consideration for assets sold by the Company and
                    expenses paid on behalf of WFNM. These amounts were settled
                    subsequent to December 31, 2004 (see note 10(b)). The amount
                    due to WFE represented liabilities assumed by the Company
                    upon acquisition of the entire business of the Predecessor.

             The balances with the above related companies and shareholder are
             unsecured, interest-free and are repayable on demand.

                                      F-16
<PAGE>
                   WUHU FEISHANG MINING DEVELOPMENT CO., LTD.

                          NOTES TO FINANCIAL STATEMENTS

                          YEAR ENDED DECEMBER 31, 2002
                        FOUR MONTHS ENDED APRIL 30, 2003
                      EIGHT MONTHS ENDED DECEMBER 31, 2003
                          YEAR ENDED DECEMBER 31, 2004

                             (AMOUNTS IN THOUSANDS)

10.      RELATED PARTY BALANCES AND TRANSACTIONS (continued)

         The transactions with related companies are summarized as follows:
<TABLE>
<CAPTION>
                                                                                 Year ended December 31,
                                                                         2002         2003        2004         2004
                                                                    -----------------------------------
                                                                          RMB          RMB         RMB          US$
<S>                                                                       <C>          <C>       <C>            <C>
         Sales of finished goods to WFNM                                    -            -         428           52
         Sales of finished goods to Pingxing Steel Co. Ltd.
           ("Pingxing")                                                     -            -          57            7
         Purchases of raw materials from WFNM                               -            -          82           10
         Sale of property and equipment to WFNM                             -            -       8,050          972
         Expenses paid on behalf of WFNM                                    -            -       2,670          322
                                                                       ======       ======      ======       ======
</TABLE>

         Both Hengxin and Pingxing are controlled by Mr. Li Feilie who is also
         the majority owner of the Company.

         (b)  WFNM's obligation to the Company was assumed by WFE. On November
              30, 2005, the Company and WFE agreed to offset this amount against
              the RMB25,115 owed by WFM to WFE.

         (c)  On September 25, 2003, the Company advanced RMB9,000 to WFE, a
              company controlled by Mr. Li Feilie. On February 4, 2005, the
              Company advanced RMB25,000 to Pingxing, a company controlled by
              Mr. Li Feilie. On February 28, 2005, the board of directors of WFM
              declared dividends of RMB44,005. On October 31, 2005 and November
              30, 2005, the advances of RMB34,000 were offset against dividends
              payable to Mr. Li Feilie.

                                      F-17
<PAGE>
                   WUHU FEISHANG MINING DEVELOPMENT CO., LTD.

                          NOTES TO FINANCIAL STATEMENTS

                          YEAR ENDED DECEMBER 31, 2002
                        FOUR MONTHS ENDED APRIL 30, 2003
                      EIGHT MONTHS ENDED DECEMBER 31, 2003
                          YEAR ENDED DECEMBER 31, 2004

                             (AMOUNTS IN THOUSANDS)

11.      CONCENTRATION OF RISK

         Concentration of credit risk:

         Financial instruments that potentially subject the Company to
         significant concentration of credit risk consist principally of cash
         deposits, trade receivables and bills receivable.

         (i)   Cash and cash deposits

                The Company maintains its cash and cash deposits primarily with
                various PRC State-owned banks. The Company performs periodic
                evaluations of the relative credit standing of those financial
                institutions.

         (ii)   Trade receivables

                The Company sells zinc and iron products to companies in the
                PRC. Management considers that the Company's current customers
                are generally creditworthy and credit is extended based on an
                evaluation of the customers' financial conditions and,
                therefore, generally collateral is not required. At December 31,
                2003 and 2004, the largest five customers accounted for 84% and
                95% trade receivables, respectively. During the year ended
                December 31, 2002, two customers accounted for 51% and 16%,
                respectively, of the Company's sales. During the four months
                ended April 30, 2003, two customers accounted for 60% and 33%,
                respectively, of the Company's sales. During the eight months
                ended December 31, 2003, one customer accounted for 66% of the
                Company's sales. During the year ended December 31, 2004, three
                customers accounted for 47%, 24% and 10%, respectively, of the
                Company's sales.

          (iii) Bills receivable

                Bills receivable represent letters of credit obtained by the
                customers of the Company to finance purchases which have been
                presented to banks for payment after delivery of goods to
                customers. As of December 31, 2004, bills receivable amounted to
                RMB350 (2003: RMB1,047) and their collectability was guaranteed
                by banks. The bills receivable have normal terms of maturity of
                six months.

                                      F-18
<PAGE>
                   WUHU FEISHANG MINING DEVELOPMENT CO., LTD.

                          NOTES TO FINANCIAL STATEMENTS

                          YEAR ENDED DECEMBER 31, 2002
                        FOUR MONTHS ENDED APRIL 30, 2003
                      EIGHT MONTHS ENDED DECEMBER 31, 2003
                          YEAR ENDED DECEMBER 31, 2004

                             (AMOUNTS IN THOUSANDS)

12.      FAIR VALUE OF FINANCIAL INSTRUMENTS

         The following methods and assumptions were used by the Company in
         estimating the fair value of its financial instruments:

         (i)    Cash and cash equivalents

                The carrying amount reported in the consolidated balance sheet
                for cash and cash equivalents approximate their fair value.

         (ii)   Trade receivables, bills receivable, other receivables, accounts
                payable and other payables

                The carrying amounts reported in the balance sheet for trade
                receivables, bills receivable, other receivables, accounts
                payable and other payables approximate their fair values due to
                their short maturities.

         (iii)  Amounts due from/to related parties

         The fair values of amounts due from/to the related parties cannot be
         determined due to the related party nature of those balances.

13.      REGISTERED CAPITAL, RESERVES AND DISTRIBUTION OF PROFITS

         The registered capital of the Company is RMB12 million, being WFE's and
         FIH's initial contributions of RMB6 million each upon the formation of
         the Company.

         In accordance with the relevant PRC regulations and the Articles of
         Association of the Company (the "Articles of Association"),
         appropriations of net income as reflected in its statutory financial
         statements is to be allocated to each of the general reserve,
         enterprise expansion reserve and staff bonus and welfare reserve,
         respectively, as determined by the resolution of the Board of Directors
         annually.

         On February 28, 2005, the Board of Directors approved appropriations of
         RMB1,956, RMB1,956 and RMB978 to the general reserve, the enterprise
         expansive reserve and the staff bonus and welfare reserve,
         respectively. The Board of Directors also declared dividends of
         RMB44,005.

                                      F-19
<PAGE>
                   WUHU FEISHANG MINING DEVELOPMENT CO., LTD.

                          NOTES TO FINANCIAL STATEMENTS

                          YEAR ENDED DECEMBER 31, 2002
                        FOUR MONTHS ENDED APRIL 30, 2003
                      EIGHT MONTHS ENDED DECEMBER 31, 2003
                          YEAR ENDED DECEMBER 31, 2004

                             (AMOUNTS IN THOUSANDS)

14.      FOREIGN CURRENCY EXCHANGE

         The RMB is not freely convertible into foreign currencies.

         From January 1, 1994 through July 2, 2005, a single rate of exchange
         was quoted daily by the People's Bank of China (the "Unified Exchange
         Rate"). Beginning July 23, 2005, the rate of exchange was revalued by
         2.1% and the RMB is now to fluctuate according to the value of a group
         of currencies (the "managed float"). However, the unification or
         managed float of the exchange rates does not imply convertibility of
         RMB into US$ or other foreign currencies. All foreign exchange
         transactions continue to take place either through the Bank of China or
         other banks authorized to buy and sell foreign currencies at the
         exchange rates quoted by the People's Bank of China.

                                      F-20
<PAGE>
                                   Schedule 2

       Consolidated Financial Statements of China Natural Resources, Inc.


 Incorporated by Reference to the Audited Consolidated Financial Statements for
    China Natural Resources, Inc., as filed with the Securities and Exchange
                  Commission in its Annual Report on Form 20-F
                      for the Year Ended December 31, 2004


<PAGE>

                                   Schedule 3

                            Form of Exchange Warrant


<PAGE>

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE
OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.

Warrant No.                                               Number of Shares:_____
Date of Issuance:  January __, 2006 (the "ISSUE DATE")    (subject to adjustment
                                                          pursuant to Section 2)

                          CHINA NATURAL RESOURCES, INC.

                         COMMON SHARES PURCHASE WARRANT

         China Natural Resources, Inc., a British Virgin Islands company (the
"COMPANY"), for value received, hereby certifies that Feishang Group Limited, or
its registered assigns (the "REGISTERED HOLDER"), is entitled, subject to the
terms set forth below, to purchase from the Company, at any time after the date
hereof and on or before the Expiration Date (as defined in Section 5 below), up
to ________ Common Shares of the Company, at a purchase price of $____ per share
(each as adjusted from time to time pursuant to the provisions of this Warrant).
The shares purchasable upon exercise of this Warrant and the purchase price per
share, as adjusted from time to time pursuant to the provisions of this Warrant,
are sometimes hereinafter referred to as the "WARRANT SHARES" and the "PURCHASE
PRICE," respectively.

         This Warrant is one of a series of warrants issued pursuant to the
terms of that certain Acquisition Agreement (the "Acquisition Agreement") dated
as of January ___, 2006, by and among the Company, Feishang Mining Holdings
Limited and Feishang Group Limited.

         1.       EXERCISE.

                  (a) MANNER OF EXERCISE. This Warrant may be exercised by the
Registered Holder, in whole or in part, by surrendering this Warrant, with the
purchase/exercise form appended hereto as Exhibit A duly executed by such
Registered Holder or by such Registered Holder's duly authorized attorney, at
the principal office of the Company, or at such other office or agency as the
Company may designate, accompanied by payment in full of the aggregate Purchase
Price payable in respect of the number of Warrant Shares purchased upon such
exercise. The Purchase Price may be paid by cash, check or wire transfer to a
bank account designated by the Company.

                  (b) EFFECTIVE TIME OF EXERCISE. Each exercise of this Warrant
shall be deemed to have been effected immediately prior to the close of business
on the day on which this Warrant shall have been surrendered to the Company as


<PAGE>

provided in Section 1(a) above. At such time, the person or persons in whose
name or names any certificates for Warrant Shares shall be issuable upon such
exercise as provided in Section 1(d) below shall be deemed to have become the
holder or holders of record of the Warrant Shares represented by such
certificates.

                  (d) DELIVERY TO HOLDER. As soon as practicable after the
exercise of this Warrant in whole or in part, and in any event within ten (10)
days thereafter, the Company at its expense will cause to be issued in the name
of, and delivered to, the Registered Holder, or as such Holder (upon payment by
such Holder of any applicable transfer taxes) may direct:

                      (i) a certificate or certificates for the number of shares
of Warrant Shares to which such Registered Holder shall be entitled, and

                      (ii) in case such exercise is in part only, a new warrant
or warrants (dated the date hereof) of like tenor, calling in the aggregate on
the face or faces thereof for the number of shares of Warrant Shares equal
(without giving effect to any adjustment therein) to the number of such shares
called for on the face of this Warrant minus the number of such shares purchased
by the Registered Holder upon such exercise as provided in Section 1(a) above.

         2.       ADJUSTMENTS.

                  (a) STOCK SPLITS AND DIVIDENDS. If outstanding shares of the
Company's Common Shares shall be subdivided into a greater number of shares or a
dividend in Common Shares shall be paid in respect of Common Shares, the
Purchase Price in effect immediately prior to such subdivision or at the record
date of such dividend shall simultaneously with the effectiveness of such
subdivision or immediately after the record date of such dividend be
proportionately reduced. If outstanding Common Shares shall be combined into a
smaller number of shares, the Purchase Price in effect immediately prior to such
combination shall, simultaneously with the effectiveness of such combination, be
proportionately increased. When any adjustment is required to be made in the
Purchase Price, the number of shares of Warrant Shares purchasable upon the
exercise of this Warrant shall be changed to the number determined by dividing
(i) an amount equal to the number of shares issuable upon the exercise of this
Warrant immediately prior to such adjustment, multiplied by the Purchase Price
in effect immediately prior to such adjustment, by (ii) the Purchase Price in
effect immediately after such adjustment.

                  (b) RECLASSIFICATION, ETC. In case of any reclassification or
change of the outstanding securities of the Company or of any reorganization of
the Company (or any other company the stock or securities of which are at the
time receivable upon the exercise of this Warrant) or any similar corporate
reorganization on or after the date hereof, then and in each such case the
holder of this Warrant, upon the exercise hereof at any time after the
consummation of such reclassification, change, reorganization, merger or
conveyance, shall be entitled to receive, in lieu of the stock or other
securities and property receivable upon the exercise hereof prior to such
consummation, the shares or other securities or property to which such holder
would have been entitled upon such consummation if such holder had exercised
this Warrant immediately prior thereto, all subject to further adjustment as
provided in Section 2(a); and in each such case, the terms of this Section 2


                                       2
<PAGE>

shall be applicable to the shares or other securities properly receivable upon
the exercise of this Warrant after such consummation.

                  (c) ADJUSTMENT CERTIFICATE. When any adjustment is required to
be made in the Warrant Shares or the Purchase Price pursuant to this Section 2,
the Company shall promptly mail to the Registered Holder a certificate setting
forth (i) a brief statement of the facts requiring such adjustment, (ii) the
Purchase Price after such adjustment and (iii) the kind and amount of shares or
other securities or property into which this Warrant shall be exercisable after
such adjustment.

         3.       TRANSFERS.

                  (a) UNREGISTERED SECURITY. Each holder of this Warrant
acknowledges that this Warrant and the Warrant Shares have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), and agrees
not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose
of this Warrant or any Warrant Shares issued upon its exercise in the absence of
(i) an effective registration statement under the Securities Act as to this
Warrant or such Warrant Shares and registration or qualification of this Warrant
or such Warrant Shares under any applicable U.S. federal or state securities law
then in effect or (ii) an opinion of counsel, satisfactory to the Company, that
such registration and qualification are not required. Each certificate or other
instrument for Warrant Shares issued upon the exercise of this Warrant shall
bear a legend substantially to the foregoing effect.

                  (b) TRANSFERABILITY. Subject to the provisions of Section 3(a)
hereof and the Acquisition Agreement, this Warrant and all rights hereunder are
transferable, in whole or in part, upon surrender of the Warrant with a properly
executed assignment (in the form of Exhibit B hereto) at the principal office of
the Company.

                  (c) WARRANT REGISTER. The Company will maintain a register
containing the names and addresses of the Registered Holder of this Warrant.
Until any transfer of this Warrant is made in the warrant register, the Company
may treat the Registered Holder of this Warrant as the absolute owner hereof for
all purposes; provided, however, that if this Warrant is properly assigned in
blank, the Company may (but shall not be required to) treat the bearer hereof as
the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary. Any Registered Holder may change such Registered Holder's address as
shown on the warrant register by written notice to the Company requesting such
change.

         4.       NO IMPAIRMENT. The Company will not, by amendment of its
charter or through reorganization, consolidation, merger, dissolution, sale of
assets or any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will (subject to Section 13
below) at all times in good faith assist in the carrying out of all such terms
and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the holder of this Warrant against impairment.

         5.       TERMINATION. This Warrant (and the right to purchase
securities upon exercise hereof) shall terminate upon the earliest to occur of


                                       3
<PAGE>

the following (the "EXPIRATION DATE"): (a) January ___, 2008 or (b) the sale,
conveyance or disposal of all or substantially all of the Company's property or
business or the Company's merger with or into or consolidation with any other
corporation (other than a wholly-owned subsidiary of the Company) or any other
transaction or series of related transactions in which more than fifty percent
(50%) of the voting power of the Company is disposed of, provided that this
Section 5(b) shall not apply to a merger effected exclusively for the purpose of
changing the domicile of the Company or to an equity financing in which the
Company is the surviving corporation.

         6.       NOTICES OF CERTAIN TRANSACTIONS.  In case:

                  (a) the Company shall take a record of the holders of its
Common Shares (or other stock or securities at the time deliverable upon the
exercise of this Warrant) for the purpose of entitling or enabling them to
receive any dividend or other distribution, or to receive any right to subscribe
for or purchase any shares of any class or any other securities, or to receive
any other right, to subscribe for or purchase any shares of any class or any
other securities, or to receive any other right, or

                  (b) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company, any consolidation or merger of the Company with or into
another corporation (other than a consolidation or merger in which the Company
is the surviving entity), or any transfer of all or substantially all of the
assets of the Company, or

                  (c) of the voluntary or involuntary dissolution, liquidation
or winding-up of the Company,

then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, or (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or such other stock or securities at the
time deliverable upon such reorganization, reclassification, consolidation,
merger, transfer, dissolution, liquidation or winding-up) are to be determined.
Such notice shall be mailed at least ten (10) days prior to the record date or
effective date for the event specified in such notice.

         7.       RESERVATION OF SHARES. The Company will at all times reserve
and keep available, solely for the issuance and delivery upon the exercise of
this Warrant, such Warrant Shares and other stock, securities and property, as
from time to time shall be issuable upon the exercise of this Warrant.

         8.       EXCHANGE OF WARRANTS. Upon the surrender by the Registered
Holder of any Warrant or Warrants, properly endorsed, to the Company at the
principal office of the Company, the Company will, subject to the provisions of
Section 3 hereof, issue and deliver to or upon the order of such Holder, at the


                                       4
<PAGE>

Company's expense, a new Warrant or Warrants of like tenor, in the name of such
Registered Holder or as such Registered Holder (upon payment by such Registered
Holder of any applicable transfer taxes) may direct, calling in the aggregate on
the face or faces thereof for the number of Common Shares called for on the face
or faces of the Warrant or Warrants so surrendered.

         9.       REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.

         10.      NOTICES. Any notice required or permitted by this Warrant
shall be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by courier, overnight delivery service or confirmed facsimile, or
forty-eight (48) hours after being deposited in the regular mail as certified or
registered mail (airmail if sent internationally) with postage prepaid,
addressed (a) if to the Registered Holder, to the address of the Registered
Holder most recently furnished in writing to the Company and (b) if to the
Company, to the address set forth below or subsequently modified by written
notice to the Registered Holder.

         11.      NO RIGHTS AS  SHAREHOLDER. Until the exercise of this Warrant,
the Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a shareholder of the Company.

         12.      NO FRACTIONAL SHARES. No fractional Common Shares will be
issued in connection with any exercise hereunder. In lieu of any fractional
shares which would otherwise be issuable, the Company shall pay cash equal to
the product of such fraction multiplied by the fair market value of one Common
Share on the date of exercise, as determined in good faith by the Company's
Board of Directors.

         13.      AMENDMENT  OR WAIVER. Any term of this Warrant may be amended
or waived only with the written consent of the Company and the Registered
Holder. Any amendment or waiver effected in accordance with this paragraph shall
be binding upon the Company and the Registered Holder.

         14.      HEADINGS. The headings in this Warrant are for purposes of
reference only and shall not limit or otherwise affect the meaning of any
provision of this Warrant.

                                       5
<PAGE>

         15.      GOVERNING LAW. This Warrant shall be governed, construed and
interpreted in accordance with the laws of the British Virgin Islands.



                                         CHINA NATURAL RESOURCES, INC.


                                         By:
                                            ------------------------
                                            Ching Lung Po, President

                                         Address: Room 2105, 21/F., West Tower,
                                                  Shun Tak Centre,
                                                  200 Connaught Road Central,
                                                  Hong Kong

                                       6
<PAGE>

                                    EXHIBIT A

                             PURCHASE/EXERCISE FORM


To:   CHINA NATURAL RESOURCES, INC.                        Dated: ____________

         The undersigned, pursuant to the provisions set forth in the attached
Warrant No. ___, hereby irrevocably elects to (a) purchase Common Shares covered
by such Warrant and herewith makes payment of $ _________, representing the full
purchase price for such shares at the price per share provided for in such
Warrant, or (b) exercise such Warrant for shares purchasable under the Warrant
pursuant to the Net Issue Exercise provisions of Section 1(c) of such Warrant.

         The undersigned acknowledges that the Common Shares to be issued upon
exercise hereof are being acquired solely for the account of the undersigned and
not as a nominee for any other party, and for investment and that the
undersigned will not offer, sell or otherwise dispose of any such Common Shares
except under circumstances that will not result in a violation of the Securities
Act of 1933, as amended, or any state securities laws..



Signature:_____________________________

Name (print):__________________________

Title (if applic.)_____________________


<PAGE>

                                    EXHIBIT B

                                 ASSIGNMENT FORM

         FOR VALUE RECEIVED, _________________________________________ hereby
sells, assigns and transfers all of the rights of the undersigned under the
attached Warrant with respect to the Common Shares covered thereby set forth
below, to:

      NAME OF ASSIGNEE             ADDRESS/FAX NUMBER             NO. OF SHARES
      ----------------             ------------------             -------------





Dated:_________________             Signature:_________________________



                                    Witness:  _________________________