APPENDIX I ACCOUNTANTS’ REPORT

The following is the text of a report received from the Company’s reporting accountants,

Ernst & Young, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this

document.

[To insert the firm’s letterhead]

ACCOUNTANTS’ REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE

DIRECTORS OF FULI GEMSTONES INTERNATIONAL HOLDINGS LIMITED AND

CHINA GALAXY INTERNATIONAL SECURITIES (HONG KONG) CO., LIMITED

Introduction

We report on the historical financial information of Fuli Gemstones International Holdings

Limited (the “Company”) and its subsidiaries (together, the “Group”) set out on pages [I-4] to

[I-74], which comprises the consolidated statements of profit or loss and other comprehensive loss,

statements of changes in equity and statements of cash flows of the Group for each of the years

ended 31 December 2018, 2019 and 2020 (the “Relevant Periods”), and the consolidated

statements of financial position of the Group as at 31 December 2018, 2019 and 2020 and the

statements of financial position of the Company as at 31 December 2019 and 2020 and a summary

of significant accounting policies and other explanatory information (together, the “Historical

Financial Information”). The Historical Financial Information set out on pages [I-4] to [I-74]

forms an integral part of this report, which has been prepared for inclusion in the document of the

Company dated [Date] (the “Document”) in connection with the initial [REDACTED] of the

shares of the Company on the Main Board of The Stock Exchange of Hong Kong Limited (the

“Stock Exchange”).

Directors’ responsibility for the Historical Financial Information

The directors of the Company are responsible for the preparation of the Historical Financial

Information that gives a true and fair view in accordance with the basis of presentation and the

basis of preparation set out in notes 2.1 and 2.2 to the Historical Financial Information,

respectively, and for such internal control as the directors determine is necessary to enable the

preparation of the Historical Financial Information that is free from material misstatement, whether

due to fraud or error.

THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ INCONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX I ACCOUNTANTS’ REPORT

– I-1 –

Reporting accountants’ responsibility

Our responsibility is to express an opinion on the Historical Financial Information and to

report our opinion to you. We conducted our work in accordance with Hong Kong Standard on

Investment Circular Reporting Engagements 200 Accountants’ Reports on Historical Financial

Information in Investment Circulars issued by the Hong Kong Institute of Certified Public

Accountants (“HKICPA”). This standard requires that we comply with ethical standards and plan

and perform our work to obtain reasonable assurance about whether the Historical Financial

Information is free from material misstatement.

Our work involved performing procedures to obtain evidence about the amounts and

disclosures in the Historical Financial Information. The procedures selected depend on the

reporting accountants’ judgement, including the assessment of risks of material misstatement of the

Historical Financial Information, whether due to fraud or error. In making those risk assessments,

the reporting accountants consider internal control relevant to the entity’s preparation of the

Historical Financial Information that gives a true and fair view in accordance with the basis of

presentation and the basis of preparation set out in notes 2.1 and 2.2 to the Historical Financial

Information, respectively, in order to design procedures that are appropriate in the circumstances,

but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal

control. Our work also included evaluating the appropriateness of accounting policies used and the

reasonableness of accounting estimates made by the directors, as well as evaluating the overall

presentation of the Historical Financial Information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis

for our opinion.

Opinion

In our opinion, the Historical Financial Information gives, for the purposes of the

accountants’ report, a true and fair view of the financial position of the Group as at 31 December

2018, 2019 and 2020 and of the Company as at 31 December 2019 and 2020, and of the financial

performance and cash flows of the Group for each of the Relevant Periods in accordance with the

basis of presentation and the basis of preparation set out in notes 2.1 and 2.2 to the Historical

Financial Information, respectively.



– I-2 –

Report on matters under the Rules Governing the Listing of Securities on the Stock Exchange

and the Companies (Winding Up and Miscellaneous Provisions) Ordinance

Adjustments

In preparing the Historical Financial Information, no adjustments to the Underlying Financial

Statements as defined on page [I-4] have been made.

Dividends

We refer to note 11 to the Historical Financial Information which states that no dividends

have been paid by the Company in respect of the Relevant Periods.

No historical financial statements for the Company

As at the date of this report, no statutory financial statements have been prepared for the

Company since its date of incorporation.

[•]

Certified Public Accountants

Hong Kong

[Date]



– I-3 –

I HISTORICAL FINANCIAL INFORMATION

Preparation of Historical Financial Information

Set out below is the Historical Financial Information which forms an integral part of this

accountants’ report.

The financial statements of the Group for the Relevant Periods, on which the Historical

Financial Information is based, were audited by Ernst & Young in accordance with Hong Kong

Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants (the

“Underlying Financial Statements”).

The Historical Financial Information is presented in Renminbi (“RMB”) and all values are

rounded to the nearest thousand (RMB’000) except when otherwise indicated.



– I-4 –

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVELOSS

Year ended 31 December

2018 2019 2020

Notes RMB’000 RMB’000 RMB’000

REVENUE . . . . . . . . . . . . . . . . . . . . . . . . 5 1,123 1,154 707Cost of sales . . . . . . . . . . . . . . . . . . . . . . . (341) (378) (274)

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . 782 776 433Other income and gains. . . . . . . . . . . . . . . 5 244 443 175Selling and distribution expenses . . . . . . . (4,004) (6,419) (7,523)Administrative expenses . . . . . . . . . . . . . . (9,814) (12,932) (18,098)Other expenses . . . . . . . . . . . . . . . . . . . . . (3) — (102)Interest expenses . . . . . . . . . . . . . . . . . . . . 7 (263) (476) (784)

LOSS BEFORE TAX . . . . . . . . . . . . . . . . 6 (13,058) (18,608) (25,899)Income tax credit . . . . . . . . . . . . . . . . . . . 10 2,208 1,497 1,755

LOSS FOR THE YEAR . . . . . . . . . . . . . . (10,850) (17,111) (24,144)

Attributable to:Owners of the parent . . . . . . . . . . . . . . (10,850) (17,111) (23,738)Non-controlling interests . . . . . . . . . . . — — (406)

OTHER COMPREHENSIVEINCOME/(LOSS)

Other comprehensive income/(loss) thatmay be reclassified to profit or loss insubsequent periods:

Exchange differences on translation offoreign operations . . . . . . . . . . . . . . . . . (63) (147) 823

Other comprehensive loss that will not bereclassified to profit or loss insubsequent periods:

Exchange differences on translation of theCompany’s financial statements . . . . . . — (642) (2,048)

OTHER COMPREHENSIVE LOSS FORTHE YEAR . . . . . . . . . . . . . . . . . . . . . . (63) (789) (1,225)

TOTAL COMPREHENSIVE LOSS FORTHE YEAR . . . . . . . . . . . . . . . . . . . . . . (10,913) (17,900) (25,369)

Attributable to:Owners of the parent . . . . . . . . . . . . . . . (10,913) (17,900) (24,963)Non-controlling interests . . . . . . . . . . . . 27 — — (406)

(10,913) (17,900) (25,369)

LOSS PER SHARE ATTRIBUTABLE TOORDINARY EQUITY HOLDERS OFTHE PARENT

Basic and diluted . . . . . . . . . . . . . . . . . . . 12 (2.17) (3.41) (4.62)



– I-5 –

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

As at 31 December

2018 2019 2020


NON-CURRENT ASSETS

Property, plant and equipment . . . . . . . . . . 13 16,184 28,334 38,403

Right-of-use assets . . . . . . . . . . . . . . . . . . 14(a) 3,364 2,056 4,521

Advance payments for property, plant and

equipment . . . . . . . . . . . . . . . . . . . . . . . 155 862 475

Advance payments for leasehold land . . . . 1,300 1,300 488

Other intangible assets . . . . . . . . . . . . . . . 15 4,665 4,649 4,683

Deferred tax assets . . . . . . . . . . . . . . . . . . 24 2,156 3,653 5,408

Pledged deposits . . . . . . . . . . . . . . . . . . . . 19 252 253 254

Other non-current assets . . . . . . . . . . . . . . 18 317 397 413

Total non-current assets. . . . . . . . . . . . . . . 28,393 41,504 54,645

CURRENT ASSETS

Inventories . . . . . . . . . . . . . . . . . . . . . . . . 16 6,868 8,378 8,100

Trade receivables . . . . . . . . . . . . . . . . . . . 17 3 171 4

Prepayments, other receivables and other

assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 1,489 34,597 35,319

Cash and cash equivalents . . . . . . . . . . . . . 19 1,030 603 278

Total current assets . . . . . . . . . . . . . . . . . . 9,390 43,749 43,701

CURRENT LIABILITIES

Trade payables . . . . . . . . . . . . . . . . . . . . . 20 — 2 92

Other payables and accruals . . . . . . . . . . . 21 8,924 47,706 30,587

Other loans . . . . . . . . . . . . . . . . . . . . . . . . 22 8,328 21,957 749

Lease liabilities . . . . . . . . . . . . . . . . . . . . . 14(b) 1,323 1,429 1,101

Government grants . . . . . . . . . . . . . . . . . . 60 — 81

Total current liabilities . . . . . . . . . . . . . . . 18,635 71,094 32,610

NET CURRENT

ASSETS/(LIABILITIES) . . . . . . . . . . . (9,245) (27,345) 11,091

TOTAL ASSETS LESS CURRENT

LIABILITIES . . . . . . . . . . . . . . . . . . . . 19,148 14,159 65,736



– I-6 –

As at 31 December

2018 2019 2020



LIABILITIES . . . . . . . . . . . . . . . . . . . . 19,148 14,159 65,736

NON-CURRENT LIABILITIES

Other loans . . . . . . . . . . . . . . . . . . . . . . . . 22 — 9,822 693

Lease liabilities . . . . . . . . . . . . . . . . . . . . . 14(b) 2,086 656 277

Provision . . . . . . . . . . . . . . . . . . . . . . . . . . 23 874 916 961

Total non-current liabilities . . . . . . . . . . . . 2,960 11,394 1,931

Net assets . . . . . . . . . . . . . . . . . . . . . . . . . 16,188 2,765 63,805

EQUITY

Equity attributable to owners of the

parent

Share capital . . . . . . . . . . . . . . . . . . . . . . . 25 — 346 349

Share premium . . . . . . . . . . . . . . . . . . . . . 25 — 34,131 45,537

Other reserves . . . . . . . . . . . . . . . . . . . . . . 26 16,188 (31,712) 14,034

16,188 2,765 59,920

Non-controlling interests . . . . . . . . . . . . . . 27 — — 3,885

Total equity . . . . . . . . . . . . . . . . . . . . . . . . 16,188 2,765 63,805



– I-7 –

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Attribute to owners of the parent

Share

capital

Share

premium

Capital

reserve*

Exchange

fluctuation

reserve*

Accumulated

losses*

Total

equity

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Year ended 31 December 2018

At 1 January 2018. . . . . . . . . . . — — 30,000 — (2,899) 27,101

Loss for the year . . . . . . . . . . . — — — — (10,850) (10,850)

Exchange differences on

translation of foreign operations . — — — (63) — (63)

Total comprehensive loss for the

year . . . . . . . . . . . . . . . . . . — — — (63) (10,850) (10,913)

At 31 December 2018 . . . . . . . . — — 30,000 (63) (13,749) 16,188


At 1 January 2019. . . . . . . . . . . — — 30,000 (63) (13,749) 16,188

Loss for the year . . . . . . . . . . . — — — — (17,111) (17,111)


translation of foreign operations . — — — (147) — (147)


translation of the Company’s

financial statements . . . . . . . . — — — (642) — (642)

Total comprehensive loss for the

year . . . . . . . . . . . . . . . . . . — — — (789) (17,111) (17,900)

Acquisition of equity interest from

the then shareholders . . . . . . . — — (30,000) — — (30,000)

Capital contribution from

shareholders . . . . . . . . . . . . . 346 34,131 — — — 34,477

At 31 December 2019 . . . . . . . . 346 34,131 — (852) (30,860) 2,765



– I-8 –

Attributable to owners of the parent

Share

capital

Share

premium

Capital

reserve*

Exchange

fluctuation

reserve*

Accumulated

losses* Total

Non-

controlling

interests

Total

equity

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000


At 1 January 2020 . . . . . . . . 346 34,131 — (852) (30,860) 2,765 — 2,765

Loss for the year . . . . . . . . . — — — — (23,738) (23,738) (406) (24,144)


translation of foreign

operations. . . . . . . . . . . . — — — 823 — 823 — 823


translation of the Company’s

financial statements . . . . . . — — — (2,048) — (2,048) — (2,048)

Total comprehensive loss for

the year . . . . . . . . . . . . . — — — (1,225) (23,738) (24,963) (406) (25,369)

Capital contribution from

shareholders . . . . . . . . . . 3 11,406 — — — 11,409 — 11,409

Disposal of a subsidiary

without losing control

(note a) . . . . . . . . . . . . . — — 70,709 — — 70,709 4,291 75,000

At 31 December 2020 . . . . . . 349 45,537 70,709 (2,077) (54,598) 59,920 3,885 63,805

* These reserve accounts comprise the consolidated other reserves of RMB16,188,000, RMB(31,712,000) and

RMB14,034,000 in the consolidated statements of financial position as at 31 December 2018, 2019 and 2020,

respectively.

Note:

(a) On 30 March 2020, Yanbian Fuli Peridot Mining Industry Co., Ltd (“Yanbian Fuli”) increased its registered capital

by RMB1,578,947 from RMB30,000,000 to RMB31,578,947. Tonghua Xintong Investment Holding Group Co., Ltd

(通化信通投資控股集團有限公司) (“Tonghua Xintong”) subscribed for the entire increased registered capital at a

consideration of RMB75,000,000.



– I-9 –

CONSOLIDATED STATEMENTS OF CASH FLOWS


2018 2019 2020


CASH FLOWS FROM OPERATING

ACTIVITIES

Loss before tax . . . . . . . . . . . . . . . . . . . . . (13,058) (18,608) (25,899)

Adjustments for:

Interest expenses . . . . . . . . . . . . . . . . . . 7 263 476 784

Interest income . . . . . . . . . . . . . . . . . . . (1) (1) (1)

Foreign exchange differences, net . . . . . 3 — (15)

Gain on disposal of items of property,

plant and equipment . . . . . . . . . . . . . . 5 — (376) —

Gain on disposal of a subsidiary . . . . . . 28 — — (1)

Gain on lease modification . . . . . . . . . . 5 — — (7)

Covid-19-related rent concessions from

lessors . . . . . . . . . . . . . . . . . . . . . . . . 14(b) — — (229)

Depreciation of property, plant and

equipment . . . . . . . . . . . . . . . . . . . . . 1,179 1,089 1,403

Depreciation of right-of-use assets . . . . . 1,129 1,240 1,698

Amortisation of government grants . . . . — (60) —

Amortisation of other intangible assets . 15 15 16 20

(10,470) (16,224) (22,247)



– I-10 –


2018 2019 2020


Decrease/(increase) in inventories . . . . . . . (1,631) (1,400) 388

Decrease/(increase) in trade receivables . . (3) (168) 167

Increase in prepayments, other receivables

and other assets . . . . . . . . . . . . . . . . . . . (233) (245) (6,222)

Increase in other non-current assets. . . . . . (280) (80) (16)

Increase/(decrease) in trade payables . . . . . (34) 2 90

Increase/(decrease) in other payables and

accruals . . . . . . . . . . . . . . . . . . . . . . . . . 5,590 3,326 (4,158)

Increase in government grants . . . . . . . . . . 60 — 81

Cash used in operations. . . . . . . . . . . . . . . (7,001) (14,789) (31,917)

Net cash flows used in operating

activities . . . . . . . . . . . . . . . . . . . . . . . . (7,001) (14,789) (31,917)

CASH FLOWS FROM INVESTING

ACTIVITIES

Purchases of items of property, plant and

equipment . . . . . . . . . . . . . . . . . . . . . . . (13,002) (5,142) (21,247)

Repayments for right-of-use assets . . . . . . (280) — (47)

Repayments for and additions to leasehold

land . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,300) — (5,444)

Receipt of government refund for

leasehold land . . . . . . . . . . . . . . . . . . . . — — 3,041

Additions to other intangible assets . . . . . . 15 (24) — (57)

Acquisition of equity interests from the

then shareholders . . . . . . . . . . . . . . . . . . — (3,000) (3,630)

Disposal of a subsidiary . . . . . . . . . . . . . . 28 — — (51)

Decrease/(increase) in amounts due from

directors . . . . . . . . . . . . . . . . . . . . . . . . 17,090 (2,028) (4,823)

Net cash flows from/(used in) investing

activities . . . . . . . . . . . . . . . . . . . . . . . . 2,484 (10,170) (32,258)



– I-11 –


2018 2019 2020


CASH FLOWS FROM FINANCING

ACTIVITIES

Proceeds from issue of shares . . . . . . . . . . — 3,000 10,712

Disposal of a subsidiary without losing

control . . . . . . . . . . . . . . . . . . . . . . . . . . — — 75,000

New other loans . . . . . . . . . . . . . . . . . . . . 29(b) 8,292 27,732 10,253

Repayment of other loans and interest. . . . 29(b) (1,927) (4,764) (29,448)

Interest portion of lease payments . . . . . . . 29(b) (99) (139) (76)

Principal portion of lease payments . . . . . . 29(b) (1,036) (1,324) (1,498)

Payments for deferred [REDACTED]

expenses . . . . . . . . . . . . . . . . . . . . . . . . — — (1,040)

Net cash flows from financing activities . . 5,230 24,505 63,903

NET INCREASE/(DECREASE) IN CASH

AND CASH EQUIVALENTS . . . . . . . . 713 (454) (272)

Cash and cash equivalents at beginning of

year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374 1,030 603

Effect of foreign exchange rate changes,

net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (57) 27 (53)

CASH AND CASH EQUIVALENTS AT

END OF YEAR . . . . . . . . . . . . . . . . . . . 1,030 603 278

ANALYSIS OF BALANCES OF CASH

AND CASH EQUIVALENTS

Cash and bank balances . . . . . . . . . . . . . . 19 1,030 603 278

Cash and cash equivalents as stated in the

consolidated statements of cash flows

and consolidated statements of financial

position . . . . . . . . . . . . . . . . . . . . . . . . . 1,030 603 278



– I-12 –

STATEMENTS OF FINANCIAL POSITION OF THE COMPANY

As at 31 December

2019 2020

Notes RMB’000 RMB’000

NON-CURRENT ASSETS

Investment in subsidiaries . . . . . . . . . . . . . . . . . . . 3,000 3,689

Total non-current assets. . . . . . . . . . . . . . . . . . . . . 3,000 3,689

CURRENT ASSETS

Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . 18 30,835 18,675

Due from a subsidiary . . . . . . . . . . . . . . . . . . . . . . 31(b) — 21,480

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . 30,835 40,155

CURRENT LIABILITIES

Due to subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 31(b) 53 723

Total current liabilities . . . . . . . . . . . . . . . . . . . . . 53 723

NET CURRENT ASSETS . . . . . . . . . . . . . . . . . . 30,782 39,432


LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . 33,782 43,121

Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,782 43,121

EQUITY

Share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 346 349

Share premium . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 34,131 45,537

Other reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 (695) (2,765)

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,782 43,121



– I-13 –

II NOTES TO THE HISTORICAL FINANCIAL INFORMATION

1. CORPORATE AND GROUP INFORMATION

The Company is a limited liability company incorporated in the Cayman Islands on 15

February 2019. The registered office of the Company is located at the offices of Vistra (Cayman)

Limited, P.O. Box 31119 Grand Pavilion, Hibiscus Way, 802 West Bay Road, Grand Cayman,

KY1-1205 Cayman Islands.

The Company is an investment holding company. During the Relevant Periods, the

Company’s subsidiaries were principally involved in the excavation and sale of peridot gemstones

and the Group is a developing mining company at the mine site infrastructure development and

mine construction preparation stage. In the opinion of the directors of the Company, the ultimate

controlling shareholders of the Group are Mr. Yu Haiyang and Kind Modest Limited, a company

incorporated under the laws of British Virgin Islands on 12 September 2018 and wholly owned by

Mr. Yu Haiyang.

The Company and its subsidiaries now comprising the Group underwent the Reorganisation

as set out in the paragraph headed “Reorganisation” in the section headed “History, Reorganisation

and Corporate Development” in the Document. Apart from the Reorganisation, the Company has

not commenced any business or operation since its incorporation.

As at the date of this report, the Company had direct and indirect interests in its subsidiaries,

all of which are private limited liability companies (or, if incorporated outside Hong Kong, have

substantially similar characteristics to a private company incorporated in Hong Kong), the

particulars of which are set out below:

Name

Place and date of

incorporation/establishment

and place of operations

Issued ordinary/

registered share

capital

Percentage of equity attributable

to the Company

Principal activitiesDirect Indirect

Fuli International Company Limited

(note (a)) . . . . . . . . . . . .British Virgin Islands

23 October 2018

US$50,000 100% — Investment holding

Fuli Peridot Mining Industry (Hong

Kong) Limited (“Fuli HK”)

(note (b)) . . . . . . . . . . . .

Hong Kong

16 July 2018

HK$1 — 100% Sale and marketing

Fuli Mining Company limited

(“Fuli Mining”) (note (a)) . . . .British Virgin Islands

17 January 2020




– I-14 –

Name

Place and date of

incorporation/establishment

and place of operations

Issued ordinary/

registered share

capital

Percentage of equity attributable

to the Company

Principal activitiesDirect Indirect

Fuli Gemstones, Inc. (note (a)) . . . United States of America (“USA”)

4 February 2020

— — 100% Dormant

Fuli Gemstones Company Limited

(“Fuli Gemstones”) (note (a)) . .British Virgin Islands

17 January 2020


Fuli Gemstones (UK) Limited

(note (a)) . . . . . . . . . . . .United Kingdom (“UK”)

27 January 2020

UK£100 — 100% Trading of peridot

gemstones

Fuli Peridot Trading (Beijing)

Limited (“Beijing Fuli”) (富麗欖石貿易(北京)有限公司)*

(note (c)) . . . . . . . . . . .

People’s Republic of China

(“PRC”))/Mainland China

30 September 2018

RMB30,000,000 — 100% Trading of peridot

gemstones

Yanbian Fuli (延邊富麗橄欖石礦業有限公司)* (note (d)) . . . . . .

PRC/

Mainland China

27 April 2015

RMB32,223,415 — 93.1% Excavation and sales of

peridot

Notes:

(a) No audited financial statements have been prepared for these entities since their dates of

incorporation/establishment.

(b) The entity is a limited liability enterprise established under Hong Kong law. The statutory financial statements of

Fuli HK for the period from 16 July 2018 (date of incorporation) to 31 December 2019 prepared in accordance with

the Small and Medium-sized Entity Financial Reporting Standard were audited by Ian See &Co, certified public

accountants registered in Hong Kong. No audited financial statements have been prepared yet for the year ended 31

December 2020.

(c) The entity is a wholly-foreign-owned enterprise established under PRC law. The statutory financial statements of

Beijing Fuli for the years ended 31 December 2018 and 2019 prepared under PRC Generally Accepted Accounting

Principles were audited by Yanbian Chengxin Certified Public Accountants LLP (延邊誠信會計師事務所(特殊普通合夥)), certified public accountants registered in the PRC. No audited financial statements have been prepared for

the year ended 31 December 2020.

(d) The entity is a limited liability enterprise established under PRC law. No audited financial statements have been

prepared for the years ended 31 December 2018, 2019 and 2020.

* The English names of these entities registered in the PRC represent the best efforts made by the management of the

Company to directly translate their Chinese names as they did not register any official English names.



– I-15 –

2.1 BASIS OF PRESENTATION

Pursuant to the Reorganisation, as more fully explained in the paragraph headed

“Reorganisation” in the section headed “History, Reorganisation and Corporate Development” in

the Document, the Company became the holding company of the companies now comprising the

Group on 8 May 2019. As the Reorganisation only involved inserting new holding companies at

the top of an existing company and has not resulted in any change of economic substances, the

Historical Financial Information has been presented as a continuation of the existing company

using the pooling of interests method as if the group structure had been in place at the beginning

of the Relevant Periods.

The consolidated statements of profit or loss and other comprehensive loss, statements of

changes in equity and statements of cash flows of the Group for the Relevant Periods include the

results and cash flows of all companies now comprising the Group from the earliest date presented

or since the date when the subsidiaries and/or businesses were established or acquired, where this

is a shorter period. The consolidated statements of financial position of the Group as of 31

December 2018, 2019 and 2020 have been prepared to present the assets and liabilities of the

subsidiaries now comprising the Group using the existing book values. No adjustments are made to

reflect fair values, or recognise any new assets or liabilities as a result of the Reorganisation.

All intra-group transactions and balances have been eliminated on consolidation.

2.2 BASIS OF PREPARATION

The Historical Financial Information has been prepared in accordance with Hong Kong

Financial Reporting Standards (“HKFRSs”) (which include all Hong Kong Financial Reporting

Standards, Hong Kong Accounting Standards (“HKASs”) and Interpretations) issued by the

HKICPA and accounting principles generally accepted in Hong Kong and the Hong Kong

Companies Ordinance. All HKFRSs effective for the accounting period commencing from 1

January 2020, together with the relevant transitional provisions, have been early adopted on a

consistent basis by the Group in the preparation of the Historical Financial Information throughout

the Relevant Periods. The Group also early adopted Amendment to HKFRS 16 Covid-19-Related

Rent Concessions on 1 January 2020.

The Historical Financial Information has been prepared under the historical cost convention.



– I-16 –

2.3 ISSUED BUT NOT YET EFFECTIVE HONG KONG FINANCIAL REPORTING

STANDARDS

The Group has not applied the following new and revised HKFRSs, that have been issued but

are not yet effective, in the Historical Financial Information.

Amendments to HKFRS 3 Reference to the Conceptual Framework2

Amendments to HKFRS 9,

HKAS 39, HKFRS 7,

HKFRS 4 and HKFRS 16

Interest Rate Benchmark Reform — Phase 21

Amendments to HKFRS 10 and

HKAS 28 (2011)

Sale or Contribution of Assets between an Investor and its

Associate or Joint Venture4

HKFRS 17 Insurance Contracts3

Amendments to HKFRS 17 Insurance Contracts3,6

Amendments to HKFRS 1 Classification of Liabilities as Current or Non-current3,5

Amendments to HKFRS 1 Disclosure of Accounting Policies3

Amendments to HKAS 8 Definition of Accounting Estimates3

Amendments to HKAS 16 Property, Plant and Equipment: Proceeds before Intended

Use2

Amendments to HKFRS 37 Onerous Contracts — Cost of Fulfilling a Contract2

Annual Improvements to HKFRSs

2018-2020

Amendments to HKFRS 1, HKFRS 9, Illustrative Examples

accompanying HKFRS 16, and HKAS 412

1Effective for annual periods beginning on or after 1 January 2021

2 Effective for annual periods beginning on or after 1 January 20223 Effective for annual periods beginning on or after 1 January 20234 No mandatory effective date yet determined but available for adoption5 As a consequence of the amendments to HKAS 1, Hong Kong Interpretation 5 Presentation of Financial Statements

— Classification by the Borrower of a Term Loan that Contains a Repayment on Demand Clause was revised in

October 2020 to align the corresponding wording with no change in conclusion6 As a consequence of the amendments to HKFRS 17 issued in October 2020, HKFRS 4 was amended to extend the

temporary exemption that permits insurers to apply HKAS 39 rather than HKFRS 9 for annual periods beginning

before 1 January 2023

The Group is in the process of making an assessment of the impact of these new and revised

HKFRSs upon initial application. So far, the Group considers that these new and revised HKFRSs

may result in changes in accounting policies but are unlikely to have a significant impact on the

Group’s financial performance and financial position.



– I-17 –

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Subsidiaries

A subsidiary is an entity (including a structured entity), directly or indirectly, controlled by

the Company. Control is achieved when the Group is exposed, or has rights, to variable returns

from its involvement with the investee and has the ability to affect those returns through its power

over the investee (i.e., existing rights that give the Group the current ability to direct the relevant

activities of the investee).

When the Company has, directly or indirectly, less than a majority of the voting or similar

rights of an investee, the Group considers all relevant facts and circumstances in assessing whether

it has power over an investee, including:

(a) the contractual arrangement with the other vote holders of the investee;

(b) rights arising from other contractual arrangements; and

(c) the Group’s voting rights and potential voting rights.

The results of subsidiaries are included in the Company’s profit or loss to the extent of

dividends received and receivable.

The Group reassesses whether or not it controls an investee if facts and circumstances

indicate that there are changes to one or more of the three elements of control described above. A

change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an

equity transaction.

If the Group loses control over a subsidiary, it derecognises (i) the assets (including

goodwill) and liabilities of the subsidiary, (ii) the carrying amount of any non-controlling interest

and (iii) the cumulative translation differences recorded in equity; and recognises (i) the fair value

of the consideration received, (ii) the fair value of any investments retained and (iii) any resulting

surplus or deficit in profit or loss. The Group’s share of components previously recognised in other

comprehensive income is reclassified to profit or loss or retained profits, as appropriate, on the

same basis as would be required if the Group had directly disposed of the related assets or

liabilities.



– I-18 –

Impairment of non-financial assets

Where an indication of impairment exists, or when annual impairment testing for an asset is

required (other than inventories, deferred tax assets, financial assets and non-current assets), the

asset’s recoverable amount is estimated. An asset’s recoverable amount is the higher of the asset’s

or cash-generating unit’s value in use and its fair value less costs of disposal, and is determined

for an individual asset, unless the asset does not generate cash inflows that are largely independent

of those from other assets or groups of assets, in which case the recoverable amount is determined

for the cash-generating unit to which the asset belongs.

An impairment loss is recognised only if the carrying amount of an asset exceeds its

recoverable amount. In assessing value in use, the estimated future cash flows are discounted to

their present value using a pre-tax discount rate that reflects current market assessments of the

time value of money and the risks specific to the asset. An impairment loss is charged to the

consolidated statements of profit or loss and other comprehensive income in the period in which it

arises in those expense categories consistent with the function of the impaired asset.

An assessment is made at the end of each of the Relevant Periods as to whether there is an

indication that previously recognised impairment losses may no longer exist or may have

decreased. If such an indication exists, the recoverable amount is estimated. A previously

recognised impairment loss of an asset other than goodwill is reversed only if there has been a

change in the estimates used to determine the recoverable amount of that asset, but not to an

amount higher than the carrying amount that would have been determined (net of any

depreciation/amortisation) had no impairment loss been recognised for the asset in prior years. A

reversal of such an impairment loss is credited to the consolidated statements of profit or loss and

other comprehensive income in the period in which it arises.

Related parties

A party is considered to be related to the Group if:

(a) the party is a person or a close member of that person’s family and that person

(i) has control or joint control over the Group;

(ii) has significant influence over the Group; or

(iii) is a member of the key management personnel of the Group or of a parent of the

Group;



– I-19 –

or

(b) the party is an entity where any of the following conditions applies:

(i) the entity and the Group are members of the same group;

(ii) one entity is an associate or joint venture of the other entity (or of a parent,

subsidiary or fellow subsidiary of the other entity);

(iii) the entity and the Group are joint ventures of the same third party;

(iv) one entity is a joint venture of a third entity and the other entity is an associate of

the third entity;

(v) the entity is a post-employment benefit plan for the benefit of employees of either

the Group or an entity related to the Group;

(vi) the entity is controlled or jointly controlled by a person identified in (a);

(vii) a person identified in (a)(i) has significant influence over the entity or is a member

of the key management personnel of the entity (or of a parent of the entity); and

(viii) the entity, or any member of a group of which it is a part, provides key

management personnel services to the Group or to the parent of the Group.

Property, plant and equipment and depreciation

Property, plant and equipment, other than construction in progress, are stated at cost less

accumulated depreciation and any impairment losses. The cost of an item of property, plant and

equipment comprises its purchase price and any directly attributable costs of bringing the asset to

its working condition and location for its intended use.

Expenditure incurred after items of property, plant and equipment have been put into

operation, such as repairs and maintenance, is normally charged to the consolidated statements of

profit or loss and other comprehensive income in the period in which it is incurred. In situations

where the recognition criteria are satisfied, the expenditure for a major inspection is capitalised in

the carrying amount of the asset as a replacement. Where significant parts of property, plant and

equipment are required to be replaced at intervals, the Group recognises such parts as individual

assets with specific useful lives and depreciates them accordingly.



– I-20 –

Depreciation of items of property, plant and equipment, other than mining infrastructure is

calculated on the straight-line basis to write off the cost of each item of property, plant and

equipment to its residual value over its estimated useful life. The principal annual rates used for

this purpose are as follows:

Leasehold improvements Over the shorter of the lease terms and 20%

Machinery equipment 10.0%

Office equipment 20.0%~33.0%

Motor vehicles 25.0%

Depreciation of mining infrastructure is calculated using the Units of Production (“UOP”)

method to write off the cost of the assets proportionate to the extraction of the proved and

probable mineral reserves.

Where parts of an item of property, plant and equipment have different useful lives, the cost

of that item is allocated on a reasonable basis among the parts and each part is depreciated

separately. Residual values, useful lives and the depreciation method are reviewed, and adjusted if

appropriate, at least at each financial year end.

An item of property, plant and equipment including any significant part initially recognised is

derecognised upon disposal or when no future economic benefits are expected from its use or

disposal. Any gain or loss on disposal or retirement recognised in the consolidated statements of

profit or loss and other comprehensive income in the year the asset is derecognised is the

difference between the net sales proceeds and the carrying amount of the relevant asset.

Construction in progress represents items of property, plant and equipment under

construction, which is stated at cost less any impairment losses, and is not depreciated. Cost

comprises the direct costs of construction during the period of construction. Construction in

progress is reclassified to the appropriate category of property, plant and equipment when

completed and ready for use.

Intangible assets (other than goodwill)

Intangible assets acquired separately are measured on initial recognition at cost. The cost of

intangible assets acquired in a business combination is the fair value at the date of acquisition. The

useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with

finite lives are subsequently amortised over the useful economic life and assessed for impairment

whenever there is an indication that the intangible asset may be impaired. The amortisation period

and the amortisation method for an intangible asset with a finite useful life are reviewed at least at

each financial year end.



– I-21 –

Software and trademarks

Software and trademarks are stated at cost less any impairment loss and is amortised on the

straight-line basis over their estimated useful life of 3 to 10 years.

Mining right

Mining rights are stated at cost less accumulated amortisation and any impairment losses.

Mining rights include the cost of acquiring mining licenses, exploration and evaluation costs

transferred from exploration rights and assets upon determination that an exploration property is

capable of commercial production, and the cost of acquiring interests in the mining reserves of

existing mining properties. The mining rights are amortised over the estimated useful lives of the

mines, in accordance with the production plans of the entities concerned and the proved and

probable reserves of the mines using the UOP method. Mining rights are written off to profit or

loss if the mining property is abandoned.

Leases

The Group assesses at contract inception whether a contract is, or contains, a lease. A

contract is, or contains, a lease if the contract conveys the right to control the use of an identified

asset for a period of time in exchange for consideration.

Group as a lessee

The Group applies a single recognition and measurement approach for all leases, except for

short-term leases and leases of low-value assets. The Group recognises lease liabilities to make

lease payments and right-of-use assets representing the right to use the underlying assets.

(a) Right-of-use assets

Right-of-use assets are recognised at the commencement date of the lease (that is the date the

underlying asset is available for use). Right-of-use assets are measured at cost, less any

accumulated depreciation and any impairment losses, and adjusted for any remeasurement of lease

liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial

direct costs incurred, and lease payments made at or before the commencement date less any lease

incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of

the lease terms and the estimated useful lives of the assets as follows:

Leasehold land 28 years

Office premises 2-3 years



– I-22 –

If ownership of the leased asset transfers to the Group by the end of the lease term or the

cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful

life of the asset.

(b) Lease liabilities

Lease liabilities are recognised at the commencement date of the lease at the present value of

lease payments to be made over the lease term. The lease payments include fixed payments

(including in-substance fixed payments) less any lease incentives receivable, variable lease

payments that depend on an index or a rate, and amounts expected to be paid under residual value

guarantees. The lease payments also include the exercise price of a purchase option reasonably

certain to be exercised by the Group and payments of penalties for termination of a lease, if the

lease term reflects the Group exercising the option to terminate the lease. The variable lease

payments that do not depend on an index or a rate are recognised as an expense in the period in

which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, the Group uses its incremental borrowing

rate at the lease commencement date because the interest rate implicit in the lease is not readily

determinable. After the commencement date, the amount of lease liabilities is increased to reflect

the accretion of interest and reduced for the lease payments made. In addition, the carrying amount

of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in

lease payments (e.g., a change to future lease payments resulting from a change in an index or

rate) or a change in assessment of an option to purchase the underlying asset.

The Group’s lease liabilities are presented separately in the statements of financial position.

(c) Short-term leases

The Group applies the short-term lease recognition exemption to its short-term leases of

office premises and vehicles (that is those leases that have a lease term of 12 months or less from

the commencement date and do not contain a purchase option). Lease payments on short-term

leases are recognised as an expense on a straight-line basis over the lease term.

Investments and other financial assets

Initial recognition and measurement

Financial assets are classified, at initial recognition, as subsequently measured at amortised

cost, fair value through other comprehensive income, and fair value through profit or loss.



– I-23 –

The classification of financial assets at initial recognition depends on the financial asset’s

contractual cash flow characteristics and the Group’s business model for managing them. With the

exception of trade receivables that do not contain a significant financing component or for which

the Group has applied the practical expedient of not adjusting the effect of a significant financing

component, the Group initially measures a financial asset at its fair value plus in the case of a

financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do

not contain a significant financing component or for which the Group has applied the practical

expedient are measured at the transaction price determined under HKFRS 15 in accordance with

the policies set out for “Revenue recognition” below.

In order for a financial asset to be classified and measured at amortised cost or fair value

through other comprehensive income, it needs to give rise to cash flows that are solely payments

of principal and interest (“SPPI”) on the principal amount outstanding. Financial assets with cash

flows that are not SPPI are classified and measured at fair value through profit or loss, irrespective

of the business model.

The Group’s business model for managing financial assets refers to how it manages its

financial assets in order to generate cash flows. The business model determines whether cash flows

will result from collecting contractual cash flows, selling the financial assets, or both. Financial

assets classified and measured at amortised cost are held within a business model with the

objective to hold financial assets in order to collect contractual cash flows, while financial assets

classified and measured at fair value through other comprehensive income are held within a

business model with the objective of both holding to collect contractual cash flows and selling.

Financial assets which are not held within the aforementioned business models are classified and

measured at fair value through profit or loss.

All regular way purchases and sales of financial assets are recognised on the trade date, that

is, the date that the Group commits to purchase or sell the asset. Regular way purchases or sales

are purchases or sales of financial assets that require delivery of assets within the period generally

established by regulation or convention in the marketplace.

Subsequent measurement

The subsequent measurement of financial assets depends on their classification as follows:

Financial assets at amortised cost (debt instruments)

Financial assets at amortised cost are subsequently measured using the effective interest

method and are subject to impairment. Gains and losses are recognised in the consolidated

statements of profit or loss and other comprehensive income when the asset is derecognised,

modified or impaired.



– I-24 –

Derecognition of financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar

financial assets) is primarily derecognised (i.e., removed from the Group’s consolidated statements

of financial position) when:

• the rights to receive cash flows from the asset have expired; or

• the Group has transferred its rights to receive cash flows from the asset or has assumed

an obligation to pay the received cash flows in full without material delay to a third

party under a “pass-through” arrangement; and either (a) the Group has transferred

substantially all the risks and rewards of the asset, or (b) the Group has neither

transferred nor retained substantially all the risks and rewards of the asset, but has

transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset or has entered

into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risk and

rewards of ownership of the asset. When it has neither transferred nor retained substantially all the

risks and rewards of the asset nor transferred control of the asset, the Group continues to recognise

the transferred asset to the extent of the Group’s continuing involvement. In that case, the Group

also recognises an associated liability. The transferred asset and the associated liability are

measured on a basis that reflects the rights and obligations that the Group has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is

measured at the lower of the original carrying amount of the asset and the maximum amount of

consideration that the Group could be required to repay.

Impairment of financial assets

The Group recognises an allowance for expected credit losses (“ECLs”) for all debt

instruments not held at fair value through profit or loss. ECLs are based on the difference between

the contractual cash flows due in accordance with the contract and all the cash flows that the

Group expects to receive, discounted at an approximation of the original effective interest rate.

The expected cash flows will include cash flows from the sale of collateral held or other credit

enhancements that are integral to the contractual terms.



– I-25 –

General approach

ECLs are recognised in two stages. For credit exposures for which there has not been a

significant increase in credit risk since initial recognition, ECLs are provided for credit losses that

result from default events that are possible within the next 12 months (a 12-month ECL). For those

credit exposures for which there has been a significant increase in credit risk since initial

recognition, a loss allowance is required for credit losses expected over the remaining life of the

exposure, irrespective of the timing of the default (a lifetime ECL).

At each reporting date, the Group assesses whether the credit risk on a financial instrument

has increased significantly since initial recognition. When making the assessment, the Group

compares the risk of a default occurring on the financial instrument as at the reporting date with

the risk of a default occurring on the financial instrument as at the date of initial recognition and

considers reasonable and supportable information that is available without undue cost or effort,

including historical and forward-looking information.

The Group considers a financial asset in default when contractual payments are 90 days past

due. However, in certain cases, the Group may also consider a financial asset to be in default when

internal or external information indicates that the Group is unlikely to receive the outstanding

contractual amounts in full before taking into account any credit enhancements held by the Group.

A financial asset is written off when there is no reasonable expectation of recovering the

contractual cash flows.

Debt investments at fair value through other comprehensive income and financial assets at

amortised cost are subject to impairment under the general approach and they are classified within

the following stages for measurement of ECLs except for trade receivables which apply the

simplified approach as detailed below.

Stage 1 — Financial instruments for which credit risk has not increased significantly

since initial recognition and for which the loss allowance is measured at an

amount equal to 12-month ECLs

Stage 2 — Financial instruments for which credit risk has increased significantly since

initial recognition but that are not credit-impaired financial assets and for

which the loss allowance is measured at an amount equal to lifetime ECLs

Stage 3 — Financial assets that are credit-impaired at the reporting date (but that are not

purchased or originated credit-impaired) and for which the loss allowance is

measured at an amount equal to lifetime ECLs



– I-26 –

Simplified approach

For trade receivables and that do not contain a significant financing component or when the

Group applies the practical expedient of not adjusting the effect of a significant financing

component, the Group applies the simplified approach in calculating ECLs. Under the simplified

approach, the Group does not track changes in credit risk, but instead recognises a loss allowance

based on lifetime ECLs at each reporting date. The Group has established a provision matrix that

is based on its historical credit loss experience, adjusted for forward-looking factors specific to the

debtors and the economic environment.

Financial liabilities

Initial recognition and measurement

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value

through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging

instruments in an effective hedge, as appropriate.

All financial liabilities are recognised initially at fair value and, in the case of loans and

borrowings and payables, net of directly attributable transaction costs.

The Group’s financial liabilities include trade and other payables, other loans and lease

liabilities.

Subsequent measurement

The subsequent measurement of financial liabilities depends on their classification as follows:

Financial liabilities at amortised cost (loans and borrowings)

After initial recognition, interest-bearing loans and borrowings are subsequently measured at

amortised cost, using the effective interest rate method unless the effect of discounting would be

immaterial, in which case they are stated at cost. Gains and losses are recognised in profit or loss

when the liabilities are derecognised as well as through the effective interest rate amortisation

process.

Amortised cost is calculated by taking into account any discount or premium on acquisition

and fees or costs that are an integral part of the effective interest rate. The effective interest rate

amortisation is included in finance costs in profit or loss.



– I-27 –

Derecognition of financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or

cancelled, or expires.

When an existing financial liability is replaced by another from the same lender on

substantially different terms, or the terms of an existing liability are substantially modified, such

an exchange or modification is treated as a derecognition of the original liability and a recognition

of a new liability, and the difference between the respective carrying amounts is recognised in

profit or loss.

Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the

statements of financial position if there is a currently enforceable legal right to offset the

recognised amounts and there is an intention to settle on a net basis, or to realise the assets and

settle the liabilities simultaneously.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined on the

weighted average basis and, in the case of work in progress and finished goods, comprises direct

materials, direct labour and an appropriate proportion of overheads. Net realisable value is based

on estimated selling prices less any estimated costs to be incurred to completion and disposal.

Cash and cash equivalents

For the purpose of the consolidated statements of cash flows, cash and cash equivalents

comprise cash on hand and demand deposits, and short-term highly liquid investments that are

readily convertible into known amounts of cash, are subject to an insignificant risk of changes in

value, and have a short maturity of generally within three months when acquired, less bank

overdrafts which are repayable on demand and form an integral part of the Group’s cash

management.

For the purpose of the consolidated statements of financial position, cash and cash

equivalents comprise cash on hand and at banks, including term deposits, and assets similar in

nature to cash, which are not restricted as to use.



– I-28 –

Provisions

A provision is recognised when a present obligation (legal or constructive) has arisen as a

result of a past event and it is probable that a future outflow of resources will be required to settle

the obligation, provided that reliable estimate can be made of the amount of the obligation.

When the effect of discounting is material, the amount recognised for a provision is the

present value at the end of the reporting period of the future expenditures expected to be required

to settle the obligation. The increase in the discounted present value amount arising from the

passage of time is included in finance costs in profit or loss.

Provisions for the Group’s obligations for rehabilitation are based on estimates of the

required expenditure at the mines in accordance with the rules and regulations of the People’s

Republic of China (the “PRC”). The obligation generally arises when the asset is installed or the

ground environment is disturbed at the production location. The Group estimates its liabilities for

final rehabilitation and mine closure based upon detailed calculations of the amount and timing of

the future cash expenditure to perform the required work. Spending estimates are escalated for

inflation, then discounted at a discount rate that reflects current market assessments of the time

value of money and the risks specific to the liability such that the amount of provision reflects the

present value of the expenditures expected to be required to settle the obligation. When the

liability is initially recognised, the present value of the estimated cost is capitalised by increasing

the carrying amount of the related mining infrastructure.

Over time, the discounted liability increases for the change in present value based on the

appropriate discount rate. The periodic unwinding of the discount is recognised within “Interest

expenses” in profit or loss. The asset is depreciated using the unit-of-production method over its

expected life and the liability is accreted to the projected expenditure date. Additional disturbances

or changes in estimates (such as mine plan revisions, changes in estimated costs, or changes in

timing of the performance of reclamation activities) will be recognised as additions or charges to

the corresponding assets and rehabilitation liabilities when they occur at the appropriate discount

rate.

Income tax

Income tax comprises current and deferred tax. Income tax relating to items recognised

outside profit or loss is recognised outside profit or loss, either in other comprehensive income or

directly in equity.



– I-29 –

Current tax assets and liabilities are measured at the amount expected to be recovered from or

paid to the taxation authorities, based on tax rates (and tax laws) that have been enacted or

substantively enacted by the end of each of the Relevant Periods, taking into consideration

interpretations and practices prevailing in the countries in which the Group operates.

Deferred tax is provided, using the liability method, on all temporary differences at the end

of each of the Relevant Periods between the tax bases of assets and liabilities and their carrying

amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences, except:

• when the deferred tax liability arises from the initial recognition of goodwill or an asset

or liability in a transaction that is not a business combination and, at the time of the

transaction, affects neither the accounting profit nor taxable profit or loss; and

• in respect of taxable temporary differences associated with investments in subsidiaries,

when the timing of the reversal of the temporary differences can be controlled and it is

probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, and the

carryforward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to

the extent that it is probable that taxable profit will be available against which the deductible

temporary differences, and the carryforward of unused tax credits and unused tax losses can be

utilised, except:

• when the deferred tax asset relating to the deductible temporary differences arises from

the initial recognition of an asset or liability in a transaction that is not a business

combination and, at the time of the transaction, affects neither the accounting profit nor

taxable profit or loss; and

• in respect of deductible temporary differences associated with investments in

subsidiaries, deferred tax assets are only recognised to the extent that it is probable that

the temporary differences will reverse in the foreseeable future and taxable profit will

be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at the end of each of the Relevant

Periods and reduced to the extent that it is no longer probable that sufficient taxable profit will be

available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax



– I-30 –

assets are reassessed at the end of each of the Relevant Periods and are recognised to the extent

that it has become probable that sufficient taxable profit will be available to allow all or part of

the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to

the period when the asset is realised or the liability is settled, based on tax rates (and tax laws)

that have been enacted or substantively enacted by the end of each of the Relevant Periods.

Deferred tax assets and deferred tax liabilities are offset if and only if the Group has a legally

enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets

and deferred tax liabilities relate to income taxes levied by the same taxation authority on either

the same taxable entity or different taxable entities which intend either to settle current tax

liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously,

in each future period in which significant amounts of deferred tax liabilities or assets are expected

to be settled or recovered.

Government grants

Government grants are recognised at their fair value where there is reasonable assurance that

the grant will be received and all attaching conditions will be complied with. When the grant

relates to an expense item, it is recognised as income on a systematic basis over the periods that

the costs, for which it is intended to compensate, are expensed.

Revenue recognition

Revenue from contracts with customers

Revenue from contracts with customers is recognised when control of goods or services is

transferred to the customers at an amount that reflects the consideration to which the Group

expects to be entitled in exchange for those goods or services.

When the consideration in a contract includes a variable amount, the amount of consideration

is estimated to which the Group will be entitled in exchange for transferring the goods or services

to the customer. The variable consideration is estimated at contract inception and constrained until

it is highly probable that a significant revenue reversal in the amount of cumulative revenue

recognised will not occur when the associated uncertainty with the variable consideration is

subsequently resolved.



– I-31 –

When the contract contains a financing component which provides the customer with a

significant benefit of financing the transfer of goods or services to the customer for more than one

year, revenue is measured at the present value of the amount receivable, discounted using the

discount rate that would be reflected in a separate financing transaction between the Group and the

customer at contract inception. When the contract contains a financing component which provides

the Group with a significant financial benefit for more than one year, revenue recognised under the

contract includes the interest expense accreted on the contract liability under the effective interest

method. For a contract where the period between the payment by the customer and the transfer of

the promised goods or services is one year or less, the transaction price is not adjusted for the

effects of a significant financing component, using the practical expedient in HKFRS 15.

Sales of goods

The Group is mainly involved in the sale of peridot gemstones. Revenue from the sale of

goods is recognised at the point in time when control of the assets is transferred to the customers,

generally on delivery of the goods.

Other income

Interest income is recognised on an accrual basis using the effective interest method by

applying the rate that exactly discounts the estimated future cash receipts over the expected life of

the financial instrument or a shorter period, when appropriate, to the net carrying amount of the

financial asset.

Contract liabilities

A contract liability is recognised when a payment is received or a payment is due (whichever

is earlier) from a customer before the Group transfers the related goods or services. Contract

liabilities are recognised as revenue when the Group performs under the contract (i.e., transfers

control of the related goods or services to the customer).

Employee benefits

Pension schemes

Contributions made to the government retirement benefit fund under defined contribution

retirement plans are charged to profit or loss as incurred.

The Group participates in the national pension schemes as defined by the laws of the

countries in which it has operations.



– I-32 –

The employees of the Group’s subsidiaries which operate in Mainland China are required to

participate in central pension schemes operated by the local municipal government and the central

government, respectively. These subsidiaries are required to contribute a certain percentage of

payroll costs to the central pension schemes. The contributions are charged to profit or loss as they

become payable in accordance with the rules of the central pension schemes.

Dividends

Final dividends are recognised as a liability when they are approved by the shareholders in a

general meeting.

Foreign currencies

The Historical Financial Information is presented in RMB, which is different than the

Company’s functional currency, the United States dollar (“USD”). As the major revenues and

assets of the Group are derived from operations in Mainland China, RMB is chosen as the

presentation currency for the presentation of the Historical Financial Information. Each entity in

the Group determines its own functional currency and items included in the financial statements of

each entity are measured using that functional currency. Foreign currency transactions recorded by

the entities in the Group are initially recorded using their respective functional currency rates

prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign

currencies are translated at the functional currency rates of exchange ruling at the end of each of

the Relevant Periods. Differences arising on settlement or translation of monetary items are

recognised in profit or loss.

Non-monetary items that are measured in terms of historical cost in a foreign currency are

translated using the exchange rates at the dates of the initial transactions. Non-monetary items

measured at fair value in a foreign currency are translated using the exchange rates at the date

when the fair value was measured. The gain or loss arising on translation of a non-monetary item

measured at fair value is treated in line with the recognition of the gain or loss on change in fair

value of the item (i.e., translation difference on the item whose fair value gain or loss is

recognised in other comprehensive income or profit or loss is also recognised in other

comprehensive income or profit or loss, respectively).

In determining the exchange rate on initial recognition of the related asset, expense or income

on the derecognition of a non-monetary asset or non-monetary liability relating to an advance

consideration, the date of initial transaction is the date on which the Group initially recognises the

non-monetary asset or non-monetary liability arising from the advance consideration. If there are

multiple payments or receipts in advance, the Group determines the transaction date for each

payment or receipt of the advance consideration.



– I-33 –

The functional currencies of certain overseas subsidiaries are currencies other than RMB. As

at the end of each of the Relevant Periods, the assets and liabilities of these entities are translated

into RMB at the exchange rates prevailing at the end of each of the Relevant Periods and their

profits or losses are translated into RMB at the weighted average exchange rates for the year.

The resulting exchange differences are recognised in other comprehensive income and

accumulated in the exchange fluctuation reserve. On disposal of a foreign operation, the

component of other comprehensive income relating to that particular foreign operation is

recognised in the consolidated statements of profit or loss and other comprehensive income.

Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments

to the carrying amounts of assets and liabilities arising on acquisition are treated as assets and

liabilities of the foreign operation and translated at the closing rate.

3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES

The preparation of the Group’s Historical Financial Information requires management to

make judgements, estimates and assumptions that affect the reported amounts of revenues,

expenses, assets and liabilities, and their accompanying disclosures, and the disclosure of

contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes

that could require a material adjustment to the carrying amounts of the assets or liabilities affected

in the future.

Estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at

the end of each of the Relevant Periods, that have a significant risk of causing a material

adjustment to the carrying amounts of assets and liabilities within the next financial year, are

described below.

Leases — Estimating the incremental borrowing rate

The Group cannot readily determine the interest rate implicit in a lease, and therefore, it uses

an incremental borrowing rate (“IBR”) to measure lease liabilities. The IBR is the rate of interest

that the Group would have to pay to borrow over a similar term, and with a similar security, the

funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic

environment. The IBR therefore reflects what the Group “would have to pay”, which requires

estimation when no observable rates are available (such as for subsidiaries that do not enter into

financing transactions) or when it needs to be adjusted to reflect the terms and conditions of the



– I-34 –

lease (for example, when leases are not in the subsidiary’s functional currency). The Group

estimates the IBR using observable inputs (such as market interest rates) when available and is

required to make certain entity-specific estimates (such as the subsidiary’s stand-alone credit

rating).

Net realisable value of inventories

Net realisable value of inventories is the estimated selling price in the ordinary course of

business, less estimated costs to be incurred to completion and disposal. These estimates are based

on the current market condition and the historical experience of selling products of similar nature.

Management reassesses these estimates at the end of each reporting periods. The carrying amounts

of inventories as of 31 December 2018, 2019 and 2020 were RMB6,868,000, RMB8,378,000, and

RMB8,100,000, respectively.

Provision for rehabilitation

Provision for rehabilitation is based on estimates of future expenditures incurred by

management to undertake rehabilitation and restoration work which were discounted at a rate of

4.9% at the end of each of the Relevant Periods to reflect the term and nature of the obligation to

their present value. Significant estimates and assumptions are made in determining the provision

for rehabilitation as there are numerous factors that will affect the ultimate liability payable. These

factors include estimates of the extent and costs of rehabilitation activities, technological changes,

regulatory changes, cost increases and changes in the discount rate. Those uncertainties may result

in future actual expenditure differing from the amounts currently provided. The provision at the

end of the reporting period represents management’s best estimate of the present value of the

future rehabilitation costs required. Changes to estimated future costs are recognised in the

consolidated statement of financial position by adjusting the rehabilitation asset and liability.

Further details are given in note 23 to the Historical Financial Information.

Impairment of non-financial assets (other than goodwill)

The Group assesses whether there are any indicators of impairment for all non-financial

assets (including the right-of-use assets) at the end of each of the Relevant Periods. All

non-financial assets of the Group are tested for impairment when there are indicators that the

carrying amounts may not be recoverable. An impairment exists when the carrying value of an

asset or a cash-generating unit exceeds its recoverable amount, which is the higher of its fair value

less costs of disposal and its value in use. The calculation of the fair value less costs of disposal is

based on available data from binding sales transactions in an arm’s length transaction of similar

assets or observable market prices less incremental costs for disposing of the asset. When value in



– I-35 –

use calculations are undertaken, management must estimate the expected future cash flows from

the asset or cash-generating unit and choose a suitable discount rate in order to calculate the

present value of those cash flows.

Deferred tax assets

Deferred tax assets are recognised for unused tax losses to the extent that it is probable that

taxable profit will be available against which the losses can be utilised. Significant management

judgement is required to determine the amount of deferred tax assets that can be recognised, based

upon the likely timing and level of future taxable profits together with future tax planning

strategies. The carrying values of deferred tax assets relating to recognised tax losses at 31

December 2018, 2019 and 2020 were RMB2,039,000, RMB2,961,000 and RMB4,325,000,

respectively. The amounts of unrecognised tax losses at 31 December 2018, 2019 and 2020 were

RMB8,519,000, RMB17,931,000 and RMB28,906,000, respectively. Further details are contained

in note 24 to the Historical Financial Information.

4. OPERATING SEGMENT INFORMATION

For management purposes, the Group is not organised into business units based on their

products and only has one reportable operating segment. Management monitors the operating

results of the Group’s operating segment as a whole for the purpose of making decisions about

resource allocation and performance assessment.

Geographical information

(a) Revenue from external customers

All of the Group’s revenue was generated from customers located in Mainland China during

the Relevant Periods, except for sales in 2018 with an amount of RMB15,000 generated from a

customer located in the European Union.

(b) Non-current assets

As at 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000

Hong Kong . . . . . . . . . . . . . . . . . . . . . . . . . 11 877 927Mainland China . . . . . . . . . . . . . . . . . . . . . . 25,657 36,324 47,122Other countries . . . . . . . . . . . . . . . . . . . . . . — — 521

25,668 37,201 48,570



– I-36 –

The non-current asset information above is based on the locations of the assets and excludes

financial instruments and deferred tax assets.

Information about major customers

Revenue from each major customer which accounted for 10% or more of the Group’s revenue

during the Relevant Periods is set out below:


2018 2019 2020

RMB’000 RMB’000 RMB’000

Customer 1 . . . . . . . . . . . . . . . . . . . . . . . . . 427 269 N/A*Customer 2 . . . . . . . . . . . . . . . . . . . . . . . . . N/A* N/A* 111Customer 3 . . . . . . . . . . . . . . . . . . . . . . . . . N/A* N/A* 82

* Less than 10%

5. REVENUE, OTHER INCOME AND GAINS

An analysis of revenue is as follows:


2018 2019 2020

RMB’000 RMB’000 RMB’000

Revenue from contracts with customers . . . . 1,123 1,154 707

Revenue from contracts with customers

(i) Disaggregated revenue information


2018 2019 2020

RMB’000 RMB’000 RMB’000

Types of goodsRough gemstones . . . . . . . . . . . . . . . . . . . . 6 4 1Cut-and-polished gemstones . . . . . . . . . . . . 348 310 185Jewellery . . . . . . . . . . . . . . . . . . . . . . . . . . . 769 840 521

Total revenue from contracts withcustomers. . . . . . . . . . . . . . . . . . . . . . . . . 1,123 1,154 707



– I-37 –


2018 2019 2020

RMB’000 RMB’000 RMB’000

Timing of revenue recognitionGoods transferred at a point in time . . . . . . 1,123 1,154 707

(ii) Performance obligations

Sale of goods

The performance obligation is satisfied upon delivery of goods and payment is generally duewithin one month from delivery.

An analysis of other income and gains is as follows:


2018 2019 2020

RMB’000 RMB’000 RMB’000

Bank interest income . . . . . . . . . . . . . . . . . . 4 1 8Government grants* . . . . . . . . . . . . . . . . . . 240 66 144Gain on disposal of items of property, plant

and equipment . . . . . . . . . . . . . . . . . . . . . — 376 —Gain on disposal of a subsidiary . . . . . . . . . — — 1Gain on lease modification . . . . . . . . . . . . . — — 7Foreign exchange gain . . . . . . . . . . . . . . . . — — 15

244 443 175

* The government grants mainly represent incentives awarded by the local governments to support the Group’s

operation. Government grants received for which related expenditure has not yet been undertaken are included in

government grants in the statements of financial position. There were no unfulfilled conditions or contingencies

relating to these grants.



– I-38 –

6. LOSS BEFORE TAX

The Group’s loss before tax is arrived at after charging/(crediting):


2018 2019 2020


Cost of inventories sold . . . . . . . . . . . . . . 341 378 274Depreciation of property, plant and

equipment * . . . . . . . . . . . . . . . . . . . . . . 13 1,462 1,629 1,924Depreciation of right-of-use assets * . . . . . 14(a) 1,197 1,308 1,823Amortisation of other intangible assets *. . 15 15 16 20Lease payments not included in the

measurement of lease liabilities . . . . . . . 14(c) 178 246 155Auditor’s remuneration . . . . . . . . . . . . . . . 19 29 30[REDACTED] expenses . . . . . . . . . . . . . . — — 5,932Employee benefit expense (excluding

directors’ and chief executive’sremuneration (note 8)):

Wages and salaries . . . . . . . . . . . . . . . . . . 4,101 4,689 5,612Pension scheme contributions . . . . . . . . . . 439 354 75Staff welfare expenses. . . . . . . . . . . . . . . . 1,091 684 690

5,631 5,727 6,377

Bank interest income . . . . . . . . . . . . . . . . . (4) (1) (8)Government grants . . . . . . . . . . . . . . . . . . (240) (66) (144)Gain on disposal of items of property,

plant and equipment . . . . . . . . . . . . . . . — (376) —Gain on disposal of a subsidiary . . . . . . . . 28 — — (1)Foreign exchange differences, net . . . . . . . 3 — (15)

* The amortisation of other intangible assets and the deprecation of property, plant and equipment and right-of-use

assets are included in “Inventories”, “Construction in progress”, “Cost of sales”, “Selling and distribution

expenses” and “Administrative expenses” in the profit or loss.



– I-39 –

7. INTEREST EXPENSES

An analysis of interest expenses is as follows:


2018 2019 2020

RMB’000 RMB’000 RMB’000

Interest on other loans. . . . . . . . . . . . . . . . . 123 295 663Interest on unwinding of a discount . . . . . . 41 42 45Interest on lease liabilities. . . . . . . . . . . . . . 99 139 76

263 476 784

8. DIRECTORS’ AND CHIEF EXECUTIVE’S REMUNERATION

Directors’ and chief executive’s remuneration for the Relevant Periods is as follows:


2018 2019 2020

RMB’000 RMB’000 RMB’000

Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 7 161

Other emoluments:Salaries, bonuses allowances and benefits

in kind . . . . . . . . . . . . . . . . . . . . . . . . . . . 377 392 1,275Pension scheme contributions . . . . . . . . . . . 28 28 92

405 420 1,367

405 427 1,528

(a) Independent non-executive directors

The fees paid to independent non-executive directors during the Relevant Periods were asfollows:


2018 2019 2020

RMB’000 RMB’000 RMB’000

Ren Shuangkui . . . . . . . . . . . . . . . . . . . . . . — 7 120Li Shupai . . . . . . . . . . . . . . . . . . . . . . . . . . — — 21Shen Hsi Tien . . . . . . . . . . . . . . . . . . . . . . . — — 20

— 7 161

There were no other emoluments payable to the independent non-executive directors duringthe Relevant Periods.



– I-40 –

(b) Executive directors and the chief executive

Salaries, bonuses,

allowances

and benefits

in kind

Pension

scheme

contributions

Total

remuneration

RMB’000 RMB’000 RMB’000


Executive director:

Chi Yongxi . . . . . . . . . . . . . . . . . . . . . . . . . 377 28 405

Salaries, bonuses,

allowances

and benefits

in kind

Pension

scheme

contributions

Total

remuneration

RMB’000 RMB’000 RMB’000


Executive director:

Chi Yongxi . . . . . . . . . . . . . . . . . . . . . . . . . 392 28 420

Salaries, bonuses,

allowances

and benefits

in kind

Pension

scheme

contributions

Total

remuneration

RMB’000 RMB’000 RMB’000


Executive directors:

Yu Haiyang . . . . . . . . . . . . . . . . . . . . . . . . . 44 — 44

Chi Yongxi . . . . . . . . . . . . . . . . . . . . . . . . . 363 2 365

Pia Tonna . . . . . . . . . . . . . . . . . . . . . . . . . . 868 90 958

1,275 92 1,367

There was no fees and other emoluments payable to the executive director and chief

executive, Jiang Yingliang, during the Relevant Periods.

There was no arrangement under which a director or the chief executive waived or agreed to

waive any remuneration during the Relevant Periods.

During the Relevant Periods, no remuneration was paid by the Group to the directors as an

inducement to join or upon joining the Group or as compensation for loss of office.



– I-41 –

9. FIVE HIGHEST PAID EMPLOYEES

The five highest paid employees during the Relevant Periods included one, one and two

directors, respectively, details of whose remuneration are set out in note 8 above. Details of the

remuneration for the remaining four, four and three highest paid employees, respectively, who are

neither a director nor chief executive of the Company for the Relevant Periods are as follows:


2018 2019 2020

RMB’000 RMB’000 RMB’000

Salaries, bonuses, allowances and benefits

in kind . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,028 1,999 1,992

Pension scheme contributions . . . . . . . . . . . 40 87 48

1,068 2,086 2,040

The number of non-director and non-chief executive highest paid employees whose

remuneration fell within the following bands is as follows:

Number of employees


2018 2019 2020

Nil to HK$1,000,000 . . . . . . . . . . . . . . . . . . 4 3 2

HK$1,000,000 to HK$1,500,000 . . . . . . . . . — 1 1

During the Relevant Periods, no remuneration was paid by the Group to the non-director and

non-chief executive highest paid employee as an inducement to join or upon joining the Group or

as compensation for loss of office.

10. INCOME TAX

The Group is subject to income tax on an entity basis on profits arising in or derived from

the jurisdictions in which members of the Group are domiciled and operate.

Pursuant to the rules and regulations of the Cayman Islands and the British Virgin Islands,

the Company and its subsidiaries are not subject to any income tax in the Cayman Islands and the

British Virgin Islands.



– I-42 –

The statutory tax rate for the subsidiary in Hong Kong is 16.5%. No Hong Kong profits taxon this subsidiary has been provided as there was no assessable profit arising in Hong Kong duringthe Relevant Periods.

The statutory tax rate for the subsidiary in the USA is 21%. No corporation income tax onthis subsidiary has been provided as there was no assessable profit arising in the United States ofAmerica during the Relevant Periods.

The statutory tax rate for the subsidiary in the UK is 19%. No corporation tax on thissubsidiary has been provided as there was no assessable profit arising in the United Kingdomduring the Relevant Periods.

The provision for current income tax in Mainland China is based on the statutory rate of 25%of the assessable profits of certain PRC subsidiaries of the Group as determined in accordancewith the PRC Corporate Income Tax Law, which was approved and became effective on 1 January2008, except for certain subsidiaries of the Group in Mainland China which are granted taxconcession and are taxed at preferential tax rates.

Beijing Fuli is entitled to a preferential income tax rate of 5% for the taxable income lessthan or equal to RMB1,000,000 during the year ended 31 December 2019 and 2020.


2018 2019 2020

RMB’000 RMB’000 RMB’000

Deferred (note 24). . . . . . . . . . . . . . . . . . . . (2,208) (1,497) (1,755)

A reconciliation of the tax expense applicable to loss before tax at the statutory rates for thejurisdictions in which the Company and the majority of its subsidiaries are domiciled to the taxexpense at the effective tax rates is as follows:


2018 2019 2020

RMB’000 RMB’000 RMB’000

Loss before tax . . . . . . . . . . . . . . . . . . . . . . (13,058) (18,608) (25,899)

Tax at the statutory tax rate . . . . . . . . . . . . (3,117) (4,106) (5,595)Lower tax rate enacted by local authority . . — 692 992Income not subject to tax . . . . . . . . . . . . . . — — (24)Expenses not deductible for tax. . . . . . . . . . 568 508 1,273Tax losses/deductible temporary differences

not recognised . . . . . . . . . . . . . . . . . . . . . 341 1,409 1,599

Tax credit at the Group’s effective tax rate . (2,208) (1,497) (1,755)



– I-43 –

11. DIVIDENDS

No dividends have been paid or declared by the Company since its incorporation.

12. LOSS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE

PARENT

The calculation of the basic loss per share amounts is based on the loss attributable to

ordinary equity holders of the parent, and the weighted average number of ordinary shares of

5,000,000, 5,023,618 and 5,133,695 in issue during the Relevant Periods, respectively, on the

assumption that 5,000,000 ordinary shares were deemed to have been issued by way of

capitalisation from 1 January 2018.

13. PROPERTY, PLANT AND EQUIPMENT

Leasehold

improvements

Machinery

equipment

Office

equipment

Motor

vehicles

Construction

in progress Total


31 December 2018

At 1 January 2018:

Cost . . . . . . . . . . . . . . . . . . . 1,756 153 370 1,532 1,855 5,666

Accumulated depreciation . . . . . . (324) (32) (87) (180) — (623)

Net carrying amount . . . . . . . . . 1,432 121 283 1,352 1,855 5,043

At 1 January 2018, net of

accumulated depreciation . . . . . 1,432 121 283 1,352 1,855 5,043

Additions . . . . . . . . . . . . . . . . 979 3,534 266 1,206 6,618 12,603

Depreciation provided during the

year . . . . . . . . . . . . . . . . . . (460) (126) (131) (745) — (1,462)

At 31 December 2018, net of

accumulated depreciation . . . . . 1,951 3,529 418 1,813 8,473 16,184

At 31 December 2018:

Cost . . . . . . . . . . . . . . . . . . . 2,735 3,687 636 2,738 8,473 18,269

Accumulated depreciation . . . . . . (784) (158) (218) (925) — (2,085)

Net carrying amount . . . . . . . . . 1,951 3,529 418 1,813 8,473 16,184



– I-44 –

Leaseholdimprovements

Machineryequipment

Officeequipment

Motorvehicles

Constructionin progress Total


31 December 2019At 1 January 2019:Cost . . . . . . . . . . . . . . . . . . . 2,735 3,687 636 2,738 8,473 18,269Accumulated depreciation . . . . . . (784) (158) (218) (925) — (2,085)


At 1 January 2019, net ofaccumulated depreciation . . . . . 1,951 3,529 418 1,813 8,473 16,184

Additions . . . . . . . . . . . . . . . . — 36 356 520 13,398 14,310Disposals . . . . . . . . . . . . . . . . — — — (545) — (545)Depreciation provided during the

year . . . . . . . . . . . . . . . . . . (654) (352) (176) (447) — (1,629)Exchange realignment . . . . . . . . — — 5 9 — 14

At 31 December 2019, net ofaccumulated depreciation . . . . . 1,297 3,213 603 1,350 21,871 28,334

At 31 December 2019:Cost . . . . . . . . . . . . . . . . . . . 2,735 3,723 997 1,996 21,871 31,322Accumulated depreciation . . . . . . (1,438) (510) (394) (646) — (2,988)


Leaseholdimprovements

Machineryequipment

Officeequipment

Motorvehicles

Constructionin progress Total


31 December 2020At 1 January 2020:Cost . . . . . . . . . . . . . . . . . . . 2,735 3,723 997 1,996 21,871 31,322Accumulated depreciation . . . . . . (1,438) (510) (394) (646) — (2,988)


At 1 January 2020, net ofaccumulated depreciation . . . . . 1,297 3,213 603 1,350 21,871 28,334

Additions . . . . . . . . . . . . . . . . — — 2,046 847 9,145 12,038Depreciation provided during the

year . . . . . . . . . . . . . . . . . . (634) (354) (420) (516) — (1,924)Exchange realignment . . . . . . . . — — (21) (24) — (45)

At 31 December 2020, net ofaccumulated depreciation . . . . . 663 2,859 2,208 1,657 31,016 38,403

At 31 December 2020:Cost . . . . . . . . . . . . . . . . . . . 2,150 3,723 3,017 2,811 31,016 42,717Accumulated depreciation . . . . . . (1,487) (864) (809) (1,154) — (4,314)

Net carrying amount . . . . . . . . . 663 2,859 2,208 1,657 31,016 38,403



– I-45 –

14. LEASES

The Group as a lessee

The Group has lease contracts for office premises used in its operations. Lump sum payments

were made upfront to acquire the leased land with lease periods of 28 years, and no ongoing

payments will be made under the terms of these land leases. Leases of office premises generally

have lease terms between 2 and 3 years. Generally, the Group is restricted from assigning and

subleasing the leased assets outside the Group.

(a) Right-of-use assets

Leasehold land Office premises Total

RMB’000 RMB’000 RMB’000

As at 1 January 2018 . . . . . . . . . . . . . . . . . — 1,197 1,197

Additions . . . . . . . . . . . . . . . . . . . . . . . . . . — 3,364 3,364

Depreciation charge (note 6) . . . . . . . . . . . . — (1,197) (1,197)

As at 31 December 2018 and

at 1 January 2019 . . . . . . . . . . . . . . . . . . — 3,364 3,364

Depreciation charge (note 6) . . . . . . . . . . . . — (1,308) (1,308)

As at 31 December 2019 and

at 1 January 2020 . . . . . . . . . . . . . . . . . . — 2,056 2,056

Additions . . . . . . . . . . . . . . . . . . . . . . . . . . 3,215 1,228 4,443

Exchange realignment . . . . . . . . . . . . . . . . . — (10) (10)

Depreciation charge (note 6) . . . . . . . . . . . . (57) (1,766) (1,823)

Revision of a lease term arising

from a change in the non-cancellable

period of a lease . . . . . . . . . . . . . . . . . . . — (145) (145)

At 31 December 2020 . . . . . . . . . . . . . . . . . 3,158 1,363 4,521



– I-46 –

(b) Lease liabilities

The carrying amount of lease liabilities and the movements during the Relevant Periods are

as follows:


2018 2019 2020

RMB’000 RMB’000 RMB’000

Carrying amount at 1 January . . . . . . . . . . . 1,361 3,409 2,085

New leases . . . . . . . . . . . . . . . . . . . . . . . . . 3,084 — 1,181

Accretion of interest recognised during the

year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 139 76


lessors . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (229)

Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,135) (1,463) (1,574)

Revision of a lease term arising from a

change in the non-cancellable period of a

lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (152)

Exchange realignment . . . . . . . . . . . . . . . . . — — (9)

Carrying amount at 31 December . . . . . . . . 3,409 2,085 1,378

Analysed into:

Current portion . . . . . . . . . . . . . . . . . . . . . . 1,323 1,429 1,101

Non-current portion . . . . . . . . . . . . . . . . . . . 2,086 656 277

The maturity analysis of lease liabilities is disclosed in note 34 to the Historical Financial

Information.

As disclosed in note 2.2 to the Historical Financial Information, the Group has early adopted

the amendment to HKFRS 16 and applied the practical expedient to all eligible rent concessions

granted by the lessors for leases of certain office premises during the year ended 31 December

2020.



– I-47 –

(c) The amounts recognised in profit or loss in relation to leases are as follows:


2018 2019 2020

RMB’000 RMB’000 RMB’000

Interest on lease liabilities. . . . . . . . . . . . . . 99 139 76

Depreciation charge of right-of-use assets . . 1,129 1,240 1,698

Expenses relating to short term leases

(included in administrative expenses) . . . 178 246 155


lessors . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (229)

Total amount recognised in profit or loss . . 1,406 1,625 1,700

(d) The total cash outflow for leases is disclosed in note 29(c) to the Historical Financial

Information.

15. OTHER INTANGIBLE ASSETS

Software and

trademarks Mining right Total

RMB’000 RMB’000 RMB’000

31 December 2018

At 1 January 2018:

Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 4,579 4,673

Accumulated amortisation . . . . . . . . . . . . . . (7) (10) (17)

Net carrying amount . . . . . . . . . . . . . . . . . . 87 4,569 4,656

Cost at 1 January 2018, net of accumulated

amortisation . . . . . . . . . . . . . . . . . . . . . . . 87 4,569 4,656

Addition . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 — 24

Amortisation provided during the year . . . . (15) — (15)

At 31 December 2018 . . . . . . . . . . . . . . . . . 96 4,569 4,665


Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118 4,579 4,697





– I-48 –

Software and


RMB’000 RMB’000 RMB’000

31 December 2019

At 1 January 2019:

Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118 4,579 4,697




amortisation . . . . . . . . . . . . . . . . . . . . . . . 96 4,569 4,665


At 31 December 2019 . . . . . . . . . . . . . . . . . 80 4,569 4,649


Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118 4,579 4,697



Software and


RMB’000 RMB’000 RMB’000

31 December 2020

At 1 January 2020:

Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118 4,579 4,697




amortisation . . . . . . . . . . . . . . . . . . . . . . . 80 4,569 4,649

Addition . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 — 57


Exchange realignment . . . . . . . . . . . . . . . . . (3) — (3)

At 31 December 2020 . . . . . . . . . . . . . . . . . 114 4,569 4,683


Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172 4,579 4,751





– I-49 –

16. INVENTORIES

As at 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000

Raw materials . . . . . . . . . . . . . . . . . . . . . . . 1,419 1,590 1,729

Work in progress . . . . . . . . . . . . . . . . . . . . . 252 464 553

Finished goods . . . . . . . . . . . . . . . . . . . . . . 5,197 6,324 5,818

6,868 8,378 8,100

17. TRADE RECEIVABLES

As at 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000

Trade receivables . . . . . . . . . . . . . . . . . . . . 3 171 4

The trade receivables are due when goods are sold. The Group seeks to maintain strict control

over its outstanding receivables. Overdue balances are reviewed regularly by senior management.

The Group does not hold any collateral or other credit enhancements over tis trade receivable

balances. Trade receivables are non-interest-bearing.

Included in the Group’s trade receivables are amounts due from related parties of RMB3,000,

RMB17,000 and RMB4,000 as at 31 December 2018, 2019 and 2020, respectively. Details of the

amounts due from related parties are included in note 31(b) to the Historical Financial

Information.

An ageing analysis of the trade receivables as at the end of each of the Relevant Periods,

based on the invoice date and net of loss allowance, is as follows:

As at 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000

Within 3 months . . . . . . . . . . . . . . . . . . . . . 3 2 —

3 to 12 months . . . . . . . . . . . . . . . . . . . . . . — 166 4

Over 12 months. . . . . . . . . . . . . . . . . . . . . . — 3 —

3 171 4



– I-50 –

An impairment analysis is performed as at the end of each of the Relevant Periods using a

provision matrix to measure expected credit losses. The Group applies the simplified approach to

provide for expected credit losses prescribed by HKFRS 9, which permits the use of the lifetime

expected loss provision for all trade receivables. To measure the expected credit losses, trade

receivables have been grouped based on shared credit risk characteristics and the days past due.

The calculation reflects the probability-weighted outcome, the time value of money and reasonable

and supportable information that is available at the end of each of the Relevant Periods about past

events, current conditions and forecasts of future economic conditions. The expected credit loss

rate was reviewed, and adjusted if appropriate, as at the end of each of the Relevant Periods. The

provision matrix is initially based on the historical observed default rates from listed companies in

the same sector. The Group calibrates the matrix to adjust the historical credit loss experience with

forward-looking information. As at 31 December 2018, 2019 and 2020, the loss allowance was

assessed to be minimal.

18. PREPAYMENTS, OTHER RECEIVABLES AND OTHER ASSETS

Group

As at 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000

Prepayments . . . . . . . . . . . . . . . . . . . . . . . . 167 113 4,904

Deferred [REDACTED] expenses . . . . . . . . — — 1,843

Deductible input value-added tax . . . . . . . . 1,109 1,345 2,447

Due from directors (Note 31(c)) . . . . . . . . . 60 2,395 7,192

Deposits and other receivables . . . . . . . . . . 470 31,141 19,346

1,806 34,994 35,732

Less: Non-current portion included in

deposits and other receivables . . . . 317 397 413

1,489 34,597 35,319



– I-51 –

Company

As at 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000

Due from directors (Note 31(c)) . . . . . . . . . — 307 287

Other receivables (Note (a)) . . . . . . . . . . . . — 30,528 18,388

— 30,835 18,675

Note:

(a) Other receivables represent primarily receivables arising from the issuance of Shares during the Reorganisation.

An impairment analysis was performed at the end of each of the Relevant Periods. The Group

has applied the general approach to provide for expected credit losses for non-trade other

receivables under HKFRS 9. The Group considered the historical loss rate and adjusted for

forward-looking macroeconomic data in calculating the expected credit loss rate.

The financial assets included in the above balances are non-interest-bearing, unsecured and

repayable on demand and relate to receivables for which there was no recent history of default and

past due amounts. As at 31 December 2018, 2019 and 2020, the Group estimated that the expected

loss rate for deposits and other receivables was minimal under the 12-month expected loss method.

19. CASH AND CASH EQUIVALENTS

As at 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000

Cash and bank balances . . . . . . . . . . . . . . . 1,030 603 278

Time deposits . . . . . . . . . . . . . . . . . . . . . . . 252 253 254

1,282 856 532

Less: Pledged time deposits:

Pledged for rehabilitation . . . . . . . 252 253 254

Cash and cash equivalents . . . . . . . . . . . . . . 1,030 603 278



– I-52 –

The RMB is not freely convertible into other currencies, however, under Mainland China’s

Foreign Exchange Control Regulations and Administration of Settlement, Sale and Payment of

Foreign Exchange Regulations, the Group is permitted to exchange RMB for other currencies

through banks authorised to conduct foreign exchange business.

Cash at banks earns interest at floating rates based on daily bank deposit rates. Short term

time deposits are made for varying periods of between one day and three months depending on the

immediate cash requirements of the Group, and earn interest at the respective short term time

deposit rates. The bank balances are deposited with creditworthy banks with no recent history of

default.

20. TRADE PAYABLES

An ageing analysis of the trade payables as at the end of each of the Relevant Periods, based

on the invoice date, is as follows:

As at 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000

Within 3 months . . . . . . . . . . . . . . . . . . . . . — 2 92

The trade payables are non-interest-bearing and have no fixed terms of payment.

21. OTHER PAYABLES AND ACCRUALS

As at 31 December

2018 2019 2020


Other payables . . . . . . . . . . . . . . . . . . . . . (a) 3,281 17,201 5,953

Due to related parties . . . . . . . . . . . . . . . . 31(b) 98 — —

Due to directors . . . . . . . . . . . . . . . . . . . . 31(c) 4,237 29,330 23,401

Other tax payables . . . . . . . . . . . . . . . . . . 32 6 138

Payroll and welfare payable . . . . . . . . . . . 1,276 1,169 1,095

8,924 47,706 30,587

Note:

(a) Other payables are non-interest-bearing and repayable on demand.



– I-53 –

22. OTHER LOANS

As at 31 December

2018 2019 2020


Other interest-bearing payables . . . . . . . . . (a) 1,036 8,631 998

Due to related parties . . . . . . . . . . . . . . . . 31(b) — 2,461 —

Due to directors . . . . . . . . . . . . . . . . . . . . 31(c) 7,292 20,687 444

8,328 31,779 1,442

Less:

Non-current portion included in other

interest-bearing payables . . . . . . . . . . — 7,511 693

Non-current portion included in due to

related parties. . . . . . . . . . . . . . . . . . . — 2,311 —

8,328 21,957 749

Analysed into:

Other interest-bearing payables:

Within one year or on demand . . . . . . 1,036 1,120 305

In the second year . . . . . . . . . . . . . . . — — 392

In the third to fifth years, inclusive . . (b) — 7,511 301

1,036 8,631 998

Due to related parties:

Within one year or on demand . . . . . . — 150 —

In the third to fifth years, inclusive . . (b) — 2,311 —

— 2,461 —

Due to directors:

Within one year or on demand . . . . . . 7,292 20,687 444

8,328 31,779 1,442

Notes:

(a) Other interest payables are unsecured and bore interest at a rate between 6% and 17%.

(b) On 30 November 2020, some lenders entered into a deed of loan confirmation and loan capitalisation with the

Company in full and final settlement of all repayment obligations of the Company to each of the lenders.



– I-54 –

23. PROVISION

As at 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000

Carrying amount at 1 January . . . . . . . . . . . 833 874 916Unwinding of discount (note 7) . . . . . . . . . . 41 42 45

Carrying amount at 31 DecemberNon-current portion . . . . . . . . . . . . . . . . . . . 874 916 961

In accordance with relevant PRC rules and regulations, if any damage is caused to cultivatedland, grassland or forest as a result of exploration or mining activities, a mining enterprise mustrestore the land to a state appropriate for use by reclamation, re-planting trees or grasses or suchother measures, as appropriate, after the mining has been completed.

The Group provides for the present obligation of the cost of the restoration, which isdiscounted at a rate of 4.9%. Changes in assumptions could significantly affect these estimates.Over the time, the discounted provision is increased for the change in present value based on thediscount rate that reflects current market assessments and risks specific to the provision. Theperiodic unwinding of the discount is recognised in profit or loss as part of the interest expenses.

24. DEFERRED TAX

The movements in deferred tax assets and liabilities during the year are as follows:

Deferred tax liabilities

Right-of-useassets

Constructionin progress

Amortisationof mining right Total

RMB’000 RMB’000 RMB’000 RMB’000

At 1 January 2018 . . . . . . . . . . . . . . . . 299 189 112 600Deferred tax charged/(credited) to

profit or loss during the year . . . . . . (73) — 114 41

Gross deferred tax liabilities at31 December 2018 and 1 January2019 . . . . . . . . . . . . . . . . . . . . . . . . 226 189 226 641

Deferred tax charged/(credited) toprofit or loss during the year . . . . . . (73) — 115 42

Gross deferred tax liabilities at31 December 2019 and 1 January2020 . . . . . . . . . . . . . . . . . . . . . . . . 153 189 341 683

Deferred tax charged/(credited) toprofit or loss during the year . . . . . . (73) — 115 42

Gross deferred tax liabilities at31 December 2020 . . . . . . . . . . . . . 80 189 456 725



– I-55 –

Deferred tax assets

Lease

liabilities Provision

Advertising

expenses

Government

grants

Unused tax

loss Total


At 1 January 2018 . . . . . . . . 340 208 — — — 548

Deferred tax

credited/(charged) to

profit or loss during the

year . . . . . . . . . . . . . . . . . (78) 10 278 — 2,039 2,249

Gross deferred tax assets at

31 December 2018 and

1 January 2019 . . . . . . . . 262 218 278 — 2,039 2,797

Deferred tax



year . . . . . . . . . . . . . . . . . (82) 11 688 — 922 1,539


31 December 2019 and

1 January 2020 . . . . . . . . 180 229 966 — 2,961 4,336

Deferred tax



year . . . . . . . . . . . . . . . . . (97) 11 500 19 1,364 1,797


31 December 2020 . . . . . . 83 240 1,466 19 4,325 6,133

For presentation purposes, certain deferred tax assets and liabilities have been offset in the

statement of financial position. The following is an analysis of the deferred tax balances of the

Group for financial reporting purposes:

As at 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000

Net deferred tax assets recognised in the

consolidated statements of financial

position . . . . . . . . . . . . . . . . . . . . . . . . . . 2,156 3,653 5,408



– I-56 –

The Group has tax losses arising in Mainland China of RMB6,819,000, RMB9,989,000 and

RMB14,325,000 as at 31 December 2018, 2019 and 2020, respectively, that will expire in one to

five years for offsetting against future taxable profits.

The Group has tax losses arising in Hong Kong of RMB1,700,000, RMB7,942,000 and

RMB12,272,000 as at 31 December 2018, 2019 and 2020, respectively, that are available

indefinitely for offsetting against future taxable profits of the companies in which the losses arose.

The Group has tax losses arising in the United Kingdom of nil, nil and RMB2,305,000 as at

31 December 2018, 2019 and 2020, respectively, that are available indefinitely for offsetting

against future taxable profits of the companies in which the losses arose.

The Group also has tax losses arising in the United States of America of nil, nil and

RMB4,000 as at 31 December 2018, 2019 and 2020, respectively, that are available indefinitely for

offsetting against future taxable profits of the companies in which the losses arose.

Deferred tax assets have not been recognised in respect of these losses as they have arisen in

subsidiaries that have been loss-making for some time and it is not considered probable that

taxable profits will be available against which the tax losses can be utilised.

Deferred tax assets have not been recognised in respect of the following items:


2018 2019 2020

RMB’000 RMB’000 RMB’000

Tax losses . . . . . . . . . . . . . . . . . . . . . . . . . . 1,928 9,412 11,184

Deductible temporary differences . . . . . . . . 13 529 803

1,941 9,941 11,987

The above tax losses are available for offsetting against future taxable profits of the

companies in which the losses arose. Deferred tax assets have not been recognised in respect of

the above items as it is not considered probable that taxable profits will be available against which

the above items can be utilised.



– I-57 –

25. SHARE CAPITAL

As at 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000

Authorised:

10,000,000 ordinary shares of USD0.01

each . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 692 692

Issued:

5,154,833 (2019: 5,116,415) ordinary

shares of USD0.01 each for 2020 . . . . . . — 346 349

A summary of movements in the Company’s share capital is as follows:

Number of

shares in issue Share capital

Share

premium

Notes RMB’000 RMB’000

At 1 January 2019 . . . . . . . . . . . . . . . . . . . — — — —

Allotment . . . . . . . . . . . . . . . . . . . . . . . . . (a) 50,000 338 —

Subdivision . . . . . . . . . . . . . . . . . . . . . . . (b) 4,950,000 — —

Allotment . . . . . . . . . . . . . . . . . . . . . . . . . (b) 116,415 8 34,131

At 31 December 2019 and 1 January

2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,116,415 346 34,131

Loan capitalisation . . . . . . . . . . . . . . . . . . (c) 37,704 3 11,194

Allotment . . . . . . . . . . . . . . . . . . . . . . . . . (d) 714 — 212

At 31 December 2020 . . . . . . . . . . . . . . . . 5,154,833 349 45,537

Notes:

(a) The Company was incorporated in the Cayman Islands on 15 February 2019 as an exempted company withauthorised share capital of US$50,000 with par value of US$1 each.

(b) On 5 September 2019, the authorised share capital of the Company was increased to US$100,000 divided into100,000 shares of par value US$1.00 each, by the creation of 50,000 additional shares of par value US$1.00 each,ranking pari passu in all respects with the shares then in issue. Immediately thereafter, every issued and unissuedshare of par value US$1.00 each in the capital of the Company was subdivided into 100 shares of par valueUS$0.01 each, upon which the authorised share capital of the Company became US$100,000 divided into10,000,000 shares of par value US$0.01 each and issued 5,000,000 shares.

On the same date, 14,085 and 102,330 ordinary shares were allotted and issued for cash at par to Tegus CompanyLimited Partnership and Jiang Daiwei. On 30 November 2020, 102,330 ordinary shares were transferred from JiangDaiwei to Starry Global Enterprises Limited.



– I-58 –

(c) On 30 November 2020, the lenders entered into a deed of loan confirmation and loan capitalisation with theCompany in full and final settlement of all repayment obligations of the Company to each of the lenders. On thesame day, a total of 37,704 new shares were allotted and issued, credited as fully paid to the lenders.

(d) On 30 November 2020, Peter Chun Ming Pang, Chief financial officer and joint company secretary entered into ashare subscription agreement with the Company, pursuant to which a total of 714 new Shares were allotted andissued to Peter Chun Ming Pang for a subscription price of HK$250,000 in cash.

26. OTHER RESERVES

Group

The amounts of the Group’s reserves and the movements therein for the Relevant Periods are

presented in the consolidated statements of changes in equity of the Group.

Capital reserve

The capital reserve of the Group represents the paid-up capital of the companies comprising

the Group, details of the movements in the capital reserve are set out in the consolidated

statements of changes in equity.

Foreign exchange fluctuation reserve

The exchange fluctuation reserve is used to record exchange differences arising from the

transaction of the financial statements of entities of which the functional currencies are not RMB.

Company

Exchange

fluctuation

reserve

Accumulated

losses Total

RMB’000 RMB’000 RMB’000

At 1 January 2019 . . . . . . . . . . . . . . . . . . . . — — —

Total comprehensive loss for the year . . . . . (642) (53) (695)

At 31 December 2019 and 1 January 2020 . (642) (53) (695)

Total comprehensive loss for the year . . . . . (2,048) (22) (2,070)

At 31 December 2020 . . . . . . . . . . . . . . . . . (2,690) (75) (2,765)



– I-59 –

27. PARTLY-OWNED SUBSIDIARIES WITH MATERIAL NON-CONTROLLING

INTERESTS

Details of the Group’s subsidiaries that have material non-controlling interests are set out

below:

2020

Percentage of equity interest held by non-controlling interests:

Yanbian Fuli . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5%

2020

RMB’000

Loss for the year allocated to non-controlling interests:

Yanbian Fuli . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (406)

Accumulated balances of non-controlling interests at the reporting date:

Yanbian Fuli . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,885

The following tables illustrate the summarised financial information of the above

subsidiaries. The amounts disclosed are before any inter-company eliminations:

Yanbian Fuli

2020

RMB’000

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 789

Loss for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,198)

Total comprehensive loss for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,198)

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,506

Non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,057

Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,736)

Non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,128)

Net cash flows used in operating activities . . . . . . . . . . . . . . . . . . . . . . . . . (17,550)

Net cash flows used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . (38,754)

Net cash flows from financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,245

Net decrease in cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . (59)



– I-60 –

28. DISPOSAL OF A SUBSIDIARY

The entire equity interests of Dunhua Yiqisong Peridot Cultural & Tourism Development Co.,

Ltd (敦化意氣松橄欖石文化旅遊開發有限公司) were transferred to two individual employees of

Yanbian Fuli at nil consideration on 30 November 2020.

RMB’000

Net assets disposed of:

Cash and bank balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250

Other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (302)

(1)

Gain on disposal of a subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

An analysis of the net inflow of cash and cash equivalents in respect of the disposal of a

subsidiary is as follows:

RMB’000

Cash and bank balances disposed of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (51)

Net outflow of cash and cash equivalents in respect of the disposal of a

subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (51)

29. NOTES TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS

(a) Major non-cash transactions

During the years ended 31 December 2018, 2019 and 2020, the Group had non-cash additions

to right-of-use assets and lease liabilities of RMB3,084,000, nil and RMB1,181,000, respectively,

in respect of lease arrangements for office premises.



– I-61 –

(b) Changes in liabilities arising from financing activities

Other loans Lease liabilities

RMB’000 RMB’000

As at 1 January 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,831 1,361

Changes from financing cash flows . . . . . . . . . . . . . . . . . . . . . 6,365 (1,135)

New leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 3,084

Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123 99

Foreign exchange movement . . . . . . . . . . . . . . . . . . . . . . . . . . 9 —

At 31 December 2018 and 1 January 2019 . . . . . . . . . . . . . . . 8,328 3,409

Changes from financing cash flows . . . . . . . . . . . . . . . . . . . . . 22,968 (1,463)


Foreign exchange movement . . . . . . . . . . . . . . . . . . . . . . . . . . 188 —

At 31 December 2019 and 1 January 2020 . . . . . . . . . . . . . . . 31,779 2,085

Changes from financing cash flows . . . . . . . . . . . . . . . . . . . . . (19,195) (1,574)

New leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1,181


Covid-19-related rent concessions from lessors . . . . . . . . . . . . — (229)

Lease modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (152)

Loan capitalisation (Note 25) . . . . . . . . . . . . . . . . . . . . . . . . . (11,197) —

Foreign exchange movement . . . . . . . . . . . . . . . . . . . . . . . . . . (608) (9)

At 31 December 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,442 1,378

(c) Total cash outflow for leases

The total cash outflow for leases included in the consolidated statements of cash flows is as

follows:


2018 2019 2020

RMB’000 RMB’000 RMB’000

Within operating activities. . . . . . . . . . . . . . 178 246 155

Within financing activities. . . . . . . . . . . . . . 1,135 1,463 1,574

1,313 1,709 1,729



– I-62 –

30. COMMITMENTS

The Group had the following commitments at the end of each of the Relevant Periods:


2018 2019 2020

RMB’000 RMB’000 RMB’000

Contracted, but not provided for:

Construction in progress . . . . . . . . . . . . . 63 870 240

31. RELATED PARTY TRANSACTIONS

Details of the Company’s principal related parties are as follows:

Company Relationship with the Company

Dongyue Wandai Jewelry Design

(Beijing) Co., Ltd.

(“Wandai Zhubao”)*

An entity controlled by an ultimate controlling shareholder

Jilin Wanshu Forest Natural Food

Co., Ltd. (“Wanshu Forest”)


Ji’an Jixian Ruishubingguo

Agricultural Development Co.,

Ltd. (“Ji’an Ji Xian”)


Ji’an Jinshikai Jade Craft Co.,

Ltd. (“Ji’an Jinshikai”)


Ji’an Xinli Mining Co., Ltd.

(“Xinli Mining”)


Mr. Yu Haiyang Ultimate controlling shareholder and director

Mr. Jiang Yingliang Ultimate shareholder and director

Mr. Chi Yongxi Ultimate shareholder and director

Mr. Peter Chun Ming Pang Ultimate shareholder, chief financial officer and joint

company secretary

* The ultimate controlling shareholder transferred all of his shares of Wandai Zhubao to a third-party on 22 October

2020.



– I-63 –

(a) In addition to the transactions detailed elsewhere in the Historical Financial Information,

the Group had the following transactions with related parties during the Relevant Periods:


2018 2019 2020


Entities controlled by ultimate

shareholders:Sales of products . . . . . . . . . . . . . . . . . . (i) 2 12 111Purchases of products . . . . . . . . . . . . . . (ii) 80 88 321Purchases of property, plant and

equipment . . . . . . . . . . . . . . . . . . . . . (ii) — — 2,582Loans to the Group . . . . . . . . . . . . . . . . — 150 —

Directors:Loans to the Group . . . . . . . . . . . . . . . . 7,292 18,153 8,895

Key management personnel:Loans to the Group . . . . . . . . . . . . . . . . — 2,203 —

Notes:

(i) The sales to related parties were made according to the published prices and conditions offered to the major

customers of the Group.

(ii) The purchases from related parties were made according to the published prices and conditions offered by the

related parties to their major customers.

(b) Outstanding balances with related parties:

Group

Due from related parties:

As at 31 December

2018 2019 2020


Wanshu Forest* . . . . . . . . . . . . . . . . . . . . . (i) 3 3 —

Xinli Mining* . . . . . . . . . . . . . . . . . . . . . . (i) — 12 4

Wandai Zhubao* . . . . . . . . . . . . . . . . . . . . (i) — 2 —

3 17 4



– I-64 –

Due to related parties:

As at 31 December

2018 2019 2020


Wanshu Forest* . . . . . . . . . . . . . . . . . . . . . (i) 98 — —Ji’an Ji Xian** . . . . . . . . . . . . . . . . . . . . . (i) — 150 —Peter Chun Ming Pang** . . . . . . . . . . . . . (ii) — 2,311 —

98 2,461 —

Company

Due from a subsidiary:

As at 31 December

2018 2019 2020

Note RMB’000 RMB’000 RMB’000

Fuli HK. . . . . . . . . . . . . . . . . . . . . . . . . . . (i) — — 21,480

Due to a subsidiary:

As at 31 December

2018 2019 2020


Fuli HK. . . . . . . . . . . . . . . . . . . . . . . . . . . (i) — 53 71Fuli Mining . . . . . . . . . . . . . . . . . . . . . . . . (i) — — 326Fuli Gemstones . . . . . . . . . . . . . . . . . . . . . (i) — — 326

— 53 723

Notes:

(i) The balances are unsecured, interest-free and have no fixed terms of payment.

(ii) The balance is unsecured, bears interest at 6% and has a due date on 31 December 2022. On 30 November 2020,Peter Chun Ming Pang entered into a deed of loan confirmation and loan capitalisation with the Company in fulland final settlement of all repayment obligations of the Company to the lender.

* The balances are trade in nature and included in notes 17 and 21 to the Historical Financial Information.

** The balances are non-trade in nature and included in note 22 to the Historical Financial Information.



– I-65 –

(c) Outstanding balances with directors:

Group

Due from directors:

As at 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000

Jiang Yingliang . . . . . . . . . . . . . . . . . . . . . . 60 130 5,673Yu Haiyang . . . . . . . . . . . . . . . . . . . . . . . . . — 2,265 1,519

60 2,395 7,192

Company

Due from directors:

As at 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000

Jiang Yingliang . . . . . . . . . . . . . . . . . . . . . . — 130 122Yu Haiyang . . . . . . . . . . . . . . . . . . . . . . . . . — 177 165

— 307 287

Due from directors, disclosed pursuant to section 383(1)(d) of the Hong Kong Companies

Ordinance and Part 3 of the Companies (Disclosure of Information about Benefits of Directors)

Regulation, are as follows:

Group

Maximum amount outstanding during

the year ended 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000

Jiang Yingliang . . . . . . . . . . . . . . . . . . . . . . 5,337 130 11,505Yu Haiyang . . . . . . . . . . . . . . . . . . . . . . . . . 11,813 2,265 3,061



– I-66 –

Company

Maximum amount outstanding during

the year ended 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000

Jiang Yingliang . . . . . . . . . . . . . . . . . . . . . . — 130 130Yu Haiyang . . . . . . . . . . . . . . . . . . . . . . . . . — 177 177

Group

Due to directors:

As at 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000

Jiang Yingliang . . . . . . . . . . . . . . . . . . . . . . 5,224 20,447 8,195Yu Haiyang . . . . . . . . . . . . . . . . . . . . . . . . . 6,305 29,570 15,636Chi Yongxi . . . . . . . . . . . . . . . . . . . . . . . . . — — 14

11,529 50,017 23,845

The balances with directors are unsecured, interest-free, non-trade in nature and have no

fixed terms of repayment and are included in notes 18, 21 and 22 to the Historical Financial

Information.

(d) Compensation of key management personnel of the Group:


2018 2019 2020

RMB’000 RMB’000 RMB’000

Salaries, allowances and benefits in kind . . 1,274 2,155 3,115

Pension scheme contributions . . . . . . . . . . . 61 86 126

Total compensation paid to key

management personnel . . . . . . . . . . . . . . . 1,335 2,241 3,241

Further details of directors’ and the chief executive’s emoluments are included in note 8 to

the Historical Financial Information.



– I-67 –

32. FINANCIAL INSTRUMENTS BY CATEGORY

The carrying amounts of each of the categories of financial instruments as at the end of each

of the Relevant Periods are as follows:

Financial assets at amortised cost

As at 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000

Trade receivables . . . . . . . . . . . . . . . . . . . . 3 171 4

Financial assets included in prepayments,

other receivables and other assets . . . . . . 530 33,536 26,538

Cash and cash equivalents . . . . . . . . . . . . . . 1,030 603 278

Pledged deposits . . . . . . . . . . . . . . . . . . . . . 252 253 254

1,815 34,563 27,074

Financial liabilities at amortised cost

As at 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000

Trade payables . . . . . . . . . . . . . . . . . . . . . . — 2 92

Lease liabilities . . . . . . . . . . . . . . . . . . . . . . 3,409 2,085 1,378

Financial liabilities included in other

payables and accruals . . . . . . . . . . . . . . . 7,616 46,531 29,354

Other loans . . . . . . . . . . . . . . . . . . . . . . . . . 8,328 31,779 1,442

19,353 80,397 32,266

33. FAIR VALUE AND FAIR VALUE HIERARCHY OF FINANCIAL INSTRUMENTS

Management has assessed that the fair values of cash and cash equivalents, trade receivables,

trade payables, financial assets included in prepayments, other receivables and other assets,

financial liabilities included in other payables and accruals, lease liabilities and other loans

approximate to their carrying amounts largely due to the short term maturities of these instruments.



– I-68 –

The fair values of the financial assets and liabilities are included at the amount at which the

instrument could be exchanged in a current transaction between willing parties, other than in a

forced or liquidation sale.

The fair values of the non-current portion of lease liabilities, other loans, financial assets

included in prepayments, other receivables and other assets and pledged deposits have been

calculated by discounting the expected future cash flows using rates currently available for

instruments with similar terms, credit risk and remaining maturities. The changes in fair value as a

result of the Group’s own non-performance risk for lease liabilities as at the end of each of the

Relevant Periods were assessed to be insignificant.

The Group did not have any financial assets and financial liabilities measured at fair value as

at the end of each of the Relevant Periods.

34. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s principal financial instruments comprise cash and cash equivalents, financial

assets included in prepayments, other receivables and other assets, financial liabilities included in

other payables and accruals and other loans. The main purpose of these financial instruments is to

raise finance for the Group’s operations. The Group has various other financial assets and

liabilities such as trade receivables, and trade payables, which arise directly from its operations.

The main risks arising from the Group’s financial instruments are foreign currency risk,

credit risk and liquidity risk. The board of directors reviews and agrees policies for managing each

of these risks and they are summarised below.

Foreign currency risk

Foreign currency risk is the risk of loss resulting from changes in foreign currency exchange

rates. Fluctuations in exchange rates between the RMB and other currencies in which the Group

conducts business may affect the Group’s financial condition and results of operations. The Group

seeks to limit its exposure to foreign currency risk by minimising its net foreign currency position.

The following table demonstrates the sensitivity at the end of each of the Relevant Periods to

a reasonably possible change in foreign currency exchange rates, with all other variables held

constant, of the Group’s profit before tax (due to changes in the fair value of monetary assets and

liabilities).



– I-69 –

Increase/

(decrease) in rate

of foreign

currency

Increase/

(decrease) in

profit before tax

Increase/

(decrease) in

equity*

% RMB’000 RMB’000

2018

If the RMB weakens against the Hong

Kong dollar . . . . . . . . . . . . . . . . . . . . . . . 5 51 (3)

If the RMB strengthens against the Hong

Kong dollar . . . . . . . . . . . . . . . . . . . . . . . (5) (51) 3

2019


Kong dollar . . . . . . . . . . . . . . . . . . . . . . . 5 56 (97)


Kong dollar . . . . . . . . . . . . . . . . . . . . . . . (5) (56) 97

If the RMB weakens against the USD . . . . . 5 — 1,542

If the RMB strengthens against the USD. . . (5) — (1,542)

2020


Kong dollar . . . . . . . . . . . . . . . . . . . . . . . 5 50 (363)


Kong dollar . . . . . . . . . . . . . . . . . . . . . . . (5) (50) 363

If the RMB weakens against the USD . . . . . 5 (18) 2,005

If the RMB strengthens against the USD. . . (5) 18 (2,005)

* Excluding retained profits

Credit risk

The Group trades mainly with recognised and creditworthy third parties. It is the Group’s

policy that all customers who wish to trade on credit terms are subject to credit verification

procedures. In addition, receivable balances are monitored on an ongoing basis.

Maximum exposure and year-end staging

The table below shows the credit quality and the maximum exposure to credit risk based on

the Group’s credit policy, which is mainly based on past due information unless other information

is available without undue cost or effort, and year-end staging classification at the end of each of

the Relevant Periods. The amounts presented are gross carrying amounts for financial assets.



– I-70 –

As at 31 December 201812-month

ECLs Lifetime ECLs

Stage 1 Stage 2 Stage 3Simplifiedapproach Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Trade receivables . . . . . . . . . . . . — — — 3 3Financial assets included in

prepayments, other receivablesand other assets— Normal* . . . . . . . . . . . . . . . 530 — — — 530

Pledged deposits . . . . . . . . . . . . .— Not yet past due . . . . . . . . . 252 — — — 252

Cash and cash equivalents— Not yet past due . . . . . . . . . 1,030 — — — 1,030

1,812 — — 3 1,815


ECLs Lifetime ECLs




prepayments, other receivablesand other assets . . . . . . . . . . . .— Normal* . . . . . . . . . . . . . . . 33,526 — — — 33,526


Cash and cash equivalents— Not yet past due . . . . . . . . . 603 — — — 603

34,392 — — 171 34,563


ECLs Lifetime ECLs




prepayments, other receivablesand other assets . . . . . . . . . . . .— Normal* . . . . . . . . . . . . . . . 26,538 — — — 26,538


Cash and cash equivalents— Not yet past due . . . . . . . . . 278 — — — 278

27,070 — — 4 27,074



– I-71 –

* The credit quality of the financial assets included in prepayments, other receivables and other assets is considered

to be “normal” when they are not past due and there is no information indicating that the financial assets had a

significant increase in credit risk since initial recognition. Otherwise, the credit quality of the financial assets is

considered to be “doubtful”.

Liquidity risk

In the management of liquidity risk, the Group monitors and maintains a level of cash and

cash equivalents deemed adequate by the management of the Group to finance the operations and

mitigate the effects of fluctuations in cash flows.

The maturity profile of the Group’s financial liabilities as at the end of each of the Relevant

Periods, based on the contractual undiscounted payments, is as follows:

As at 31 December 2018

On demand

Less than

3 months

3 to less

than

12 months

1 to 5

years

Over

5 years Total


Lease liabilities . . . . . . . . . . — 229 1,310 2,175 — 3,714Financial liabilities included

in other payables andaccruals . . . . . . . . . . . . . . 7,616 — — — — 7,616

Other loans . . . . . . . . . . . . . 7,328 15 1,025 — — 8,368

14,944 244 2,335 2,175 — 19,698


On demand

Less than

3 months

3 to less

than

12 months

1 to 5

years

Over

5 years Total


Trade payables . . . . . . . . . . 2 — — — — 2Lease liabilities . . . . . . . . . . — 76 1,423 676 — 2,175Financial liabilities included


Other loans . . . . . . . . . . . . . 21,134 159 1,520 10,735 — 33,548

67,667 235 2,943 11,411 — 82,256



– I-72 –


On demand

Less than

3 months

3 to less

than

12 months

1 to 5

years

Over

5 years Total


Trade payables . . . . . . . . . . 92 — — — — 92Lease liabilities . . . . . . . . . . — 173 948 281 — 1,402Financial liabilities included


Other loans . . . . . . . . . . . . . 444 120 360 800 — 1,724

29,890 293 1,308 1,081 — 32,572

Capital management

The primary objectives of the Group’s capital management are to safeguard the Group’sability to continue as a going concern and to maintain healthy capital ratios in order to support itsbusiness and maximise shareholders’ value.

The Group manages its capital structure and makes adjustments to it in light of changes ineconomic conditions and the risk characteristics of the underlying assets. To maintain or adjust thecapital structure, the Group may adjust the dividend payment to shareholders, return capital toshareholders or issue new shares. The Group is not subject to any externally imposed capitalrequirements. No changes were made in the objectives, policies or processes for managing capitalduring the Relevant Periods.

The Group monitors capital using a debt to equity ratio, which is total debt divided by totalequity as at the date indicated. Total debt includes other loans, lease liabilities and provision. Thegearing ratios as at the end of each of the Relevant Periods were as follows:

As at 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000

Other loans . . . . . . . . . . . . . . . . . . . . . . . . . 8,328 31,779 1,442Lease liabilities . . . . . . . . . . . . . . . . . . . . . . 3,409 2,085 1,378Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . 874 916 961

Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . 12,611 34,780 3,781Total equity . . . . . . . . . . . . . . . . . . . . . . . . 16,188 2,765 63,805

Gearing ratio . . . . . . . . . . . . . . . . . . . . . . . . 78% 1,258% 6%



– I-73 –

35. EVENTS AFTER THE RELEVANT PERIODS

Pursuant to the Capital Subscription Agreement dated 30 May 2021 entered into amongst theGroup, Tonghua Xintong (the non-controlling shareholder of Yanbian Fuli) and an independentthird party, Jilin Dunhua Development Investment Group Co., Ltd. (“Jilin Dunhua”), Yanbian Fuliincreased its registered capital by RMB644,468 which was fully subscribed by Jilin Dunhua at acash consideration of RMB34,000,000. The consideration was fully received by the Group in June2021. Subsequent to the transaction, the Group’s interest in Yanbian Fuli was diluted from 95% to93.1%.

36. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by the Company, the Group or any of thecompanies now comprising the Group in respect of any period subsequent to 31 December 2020.



– I-74 –

APPENDIX I ACCOUNTANTS’ REPORT

Documents

Transcript of APPENDIX I ACCOUNTANTS’ REPORT