1. Overview of the incident Hong Kong Hong Kong Investment Co., Ltd., a wholly-owned subsidiary of Shenzhen Guangzhong Investment Co., Ltd., intended to transfer 100% of the shares of Madagascaro-AFRICARESOURCESHOLDINGSLIMTED (MADAGASCARO-AFRICARESOURCES HOLDINGSSAU) held by SINO-AFRICARESOURCES HOLDINGSLIMTED (SINO-AFRICARESOURCES HOLDINGSLIMTED) and signed a framework agreement. After the equity transfer is completed, the company will indirectly hold 100% of the shares and interests in MADAGASCARSINO-AFRICARESOURCESHOLDINGSSAU (MADAGASCARSINO-AFRICARESOURCESHOLDINGSSAU). After the completion of this acquisition, Madagascarsino-AFRICARESOURCES HOLDINGSSAU (MADAGASCARSINO-AFRICARESOURCES HOLDINGSSAU) will indirectly become a wholly-owned subsidiary of the company, and the company will then indirectly control Hongqiao Mining (mainly engaged in the production and operation of Malaysia's niobium and tantalum resources). 2. Analysis and judgment The company is involved in the 100-square-kilometer high-grade tantalum-niobium mine in Malaysia, and has obtained an environmental license to mine. After the completion of this acquisition, Hongqiao (Africa) Mining Co., Ltd., which is indirectly controlled by the company, is mainly engaged in the production and processing of tantalum-niobium ore in Malaysia. Hongqiao Mining has obtained relevant qualifications corresponding to current business activities. It has 4 prospecting rights, and the exploration area has reached 100 square kilometers (256 square mine grids with a side length of 625 meters). Compared with the average grade of Ta2O5 in China, which does not exceed 0.02%, and the grade in Australia and Africa can reach 20% or more, the high grade of Malaysian tantalum ore is a probable event. In August 2012, Hongqiao Mining obtained an intermediate environmental protection license and took a big step towards obtaining mining rights. Tantalum-niobium mining benefits from China's aerospace and military high-end equipment manufacturing policies. Its value is comparable to that of medium and heavy rare earth tantalum-niobium. It is an essential additive element in aerospace, military equipment, advanced communication base station capacitors, automobile weight reduction, and offshore steel structure manufacturing materials. For example, 22% of tantalum is used in aerospace and military industry, 24% is used in capacitors for computers and high-end communication base stations, while niobium plays an irreplaceable role in military steel, steel for oil and gas networks, offshore steel structures, and automobile weight reduction. Furthermore, the price of metallurgical grade tantalum powder is as high as 2.5 million yuan/t, which is comparable to the price of medium to heavy rare earths, and the gross profit is amazing. Looking forward to the Hongqiao Mining Survey Report, the Guangdong Material Testing Center has prepared the “Angelabé Niobium and Tantalum Uranium Ore Exploration Plan in the Republic of Madagascar”, and on-site work began in August 2012. The first phase of the survey has been basically completed, and the relevant report will be submitted in the near future. The fixed increase of 14.55 yuan/share to the majority shareholders and the underwriting of titanium concentrate formed a safe margin of performance and showed confidence. The 500,000 ton EPS contract is expected to reach 0.71 yuan. According to the terms of the underwriting contract, we conservatively estimate that the freight volume for the second half of the year will be over 100,000 tons, and the optimistic estimate is 30-400,000 tons. According to the interim report, the net profit of a ton of titanium ore is about 320 yuan (there are price concessions during the market development period), then the 2012 EPS is conservatively estimated to be about 0.18 yuan, and the optimistic estimate is about 0.51 yuan for EPS. If 500,000 tons of titanium ore are underwritten in 2013 and the net profit reaches 400 yuan/ton, EPS is expected to reach 0.71 yuan (assuming the increase is completed). 3. Profit Forecast and Investment Proposals The 5-year underwriting contract can still help evaluate the company from a relative valuation perspective. It is estimated that the 2013 EPS bottom line for relatively safe performance is about 0.71 yuan (maintaining 500,000 tons of titanium ore sales). Give a “Highly Recommended” rating. 4. Risk warning: 1. The contract was forced to be rescinded; 2. Renewal of prospecting rights and mining rights could not be obtained.