{"url_path":"/sec/chnr/10-k/2026/item-5","section_key":"item-5","section_title":"Item 5 **","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-05-15","source_url":"https://www.sec.gov/Archives/edgar/data/793628/0001553350-26-000083-index.html","accession_number":"0001553350-26-000083","cik":"0000793628","ticker":"CHNR","issuer_name":"CHINA NATURAL RESOURCES INC","edgar_url":"https://www.sec.gov/Archives/edgar/data/793628/0001553350-26-000083-index.html","primary_entity_key":"0000793628","primary_entity_name":"CHINA NATURAL RESOURCES INC"},"word_count":4722,"has_tables":true,"body_markdown":"**ITEM 5.**\n**OPERATING AND FINANCIAL REVIEW AND PROSPECTS**\n\n \n\nThe following discussion and\nanalysis of the results of operations and the Company’s financial position should be read in conjunction with the audited consolidated\nfinancial statements and accompanying notes included elsewhere herein. The consolidated financial statements of the Company have been\nprepared in accordance with IFRS as issued by the IASB. This section contains certain “forward-looking statements” within\nthe meaning of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of our\nfuture performance or results and our actual results could materially differ from those disclosed in the forward-looking statements. In\nevaluating our business, you should carefully consider the information provided in “Item 3.D. Key\nInformation – Risk Factors.”\n\n \n\n \n**A.**\n**Operating Results**\n\n \n\n**Overview**\n\n \n\nWe are principally engaged\nin exploration for lead, silver and other metals in the Inner Mongolia Autonomous Region of the PRC and exploration of attractive opportunities\nin other sectors in the PRC. Our operating subsidiary, Bayannaoer City Feishang Mining Company Limited (“Bayannaoer Mining”)\nholds an exploration permit issued by the Land and Resources Department of Inner Mongolia Autonomous Region covering the Moruogu Tong\nMine, located in Wulatehouqi, Bayannaoer City, Inner Mongolia. The exploration permit evidences Bayannaoer Mining’s right to explore\nfor minerals at the Moruogu Tong Mine. Initial results of the exploration program indicate the presence of lead and silver, with the prospect\nthat further surveying and exploration may indicate the presence of other ores such as copper. We are also actively seeking opportunities\nof exploration and mining of other metals outside of the PRC. See, “Item 4.A. Information on the Copany – History and Development\nof the Company — Acquisition of Williams Minerals.”\n\n \n\nWe continuously pivot our\nbusiness by exploring new opportunities for growth or diversification. Between July 2021 and July 2023, we also engaged in the rural wastewater\ntreatment business in China through the acquisition of PST Technology, which held 51% equity interest of Shanghai Onway, a PRC company\nwhich is principally engaged in the development of rural wastewater treatment technologies, the provision of equipment and materials for\nrural wastewater treatment, undertaking EPC and PPP projects in relation to rural wastewater treatment, and the provision of consulting\nand professional technical services.\n\n \n\nWe ceased the wastewater treatment\nbusiness segment following the disposition of PST Technology in July 2023. See “Item 4.A. Information on the Company - History and\nDevelopment of the Company — Acquisition and Sale of PST Technology Limited.”\n\n \n\n \n\n45 \n\n \n\n \n\n**Continuing Operations**\n\n \n\n**Administrative Expenses**\n\n \n\nAdministrative expenses primarily\nconsist of salaries and staff welfare expenses, professional service fees, travel expenses, depreciation and other general corporate function\nrelated expenses.\n\n \n\n**Other Income**\n\n \n\nOther income primarily consists\nof government reimbursements, grants and tax refunds, and other non-operating income or expenses.\n\n \n\n**Fair Value Gain/(Loss) on Financial Instruments,\nnet**\n\n \n\nFair value gain or loss on\nfinancial instruments represent the net changes in fair value of warrants issued to investors.\n\n \n\n**Finance Costs**\n\n \n\nFinance costs consist primarily\nof bank charges, and foreign currency exchange differences.\n\n \n\n**Finance Income**\n\n \n\nFinance income consists primarily\nof interest income on bank deposits.\n\n \n\n**Income Tax Expense**\n\n \n\nThe Company is not subject to taxes in the United\nStates.\n\n \n\nUnder the current laws of\nthe BVI, dividends and capital gains arising from the Company’s investments in the BVI are not subject to income or capital gains\ntaxes and no withholding tax is imposed on payments of dividends to the Company.\n\n \n\nThe Company’s subsidiaries\nin Hong Kong are subject to the Hong Kong Profits Tax rate of 16.5%, while foreign-derived income is exempted from income tax. There is\nno withholding tax in Hong Kong on the remittance of dividends.\n\n \n\nThe Company’s subsidiaries\nin the PRC are subject to a PRC enterprise income tax rate of 25% applicable to both foreign invested enterprises and domestic companies.\n\n \n\n**Discontinued Operations**\n\n \n\n**Revenue**\n\n \n\nRevenue from our discontinued operations primarily\nconsists of revenue from construction contracts, operation and maintenance services, operation services and construction services for\nthe Wujiang Project, which we refer to as the “service concession arrangement.”\n\n \n\n**Cost of Sales**\n\n \n\nCost of sales of our discontinued\noperations primarily consists of costs relating to the construction of water treatment facilities, such as raw materials, spare parts,\nconsumables, and outsourced costs charged by subcontractors.\n\n \n\n**Selling and Distribution Expenses**\n\n \n\nSelling and distribution expenses\nprimarily consist of business development expenses, payroll, travel expenses and related expenses for employees involved in selling and\ndistribution activities.\n\n****\n\n \n\n**Profit/(loss) for the year from discontinued\noperations, net of tax**\n\n \n\nProfit/(loss) for the year from discontinued operations, net of\ntax represents operating results from PST Technology and its subsidiaries until its disposition on July 28, 2023.\n\n \n\n \n\n46 \n\n \n\n \n\n**Results of Operations**\n\n \n\nThe following table sets out our consolidated\nresults of operations for the periods indicated:\n\n \n\n  \nYear\nEnded December 31, \n\n  \n(Amounts\nin thousands, except per share data) \n\n  \n2023  \n2024  \n2025  \n2025 \n\n  \nCNY  \nCNY  \nCNY  \nUS$ \n\n**Consolidated Statements of Profit or Loss Data**\n\n** **\n\nCONTINUING OPERATIONS\n \n   \n   \n   \n  \n\nAdministrative expenses \n (12,883) \n (7,199) \n (3,299) \n (472)\n\nOther income \n 3,742  \n 2  \n 34  \n 5 \n\nFair value gain on financial instruments, net \n 847  \n 3,996  \n 2,077  \n 297 \n\nFinance costs \n (48) \n (28) \n (44) \n (6)\n\nFinance income \n 5  \n 69  \n 1  \n — \n\n  \n    \n    \n    \n   \n\nLOSS BEFORE INCOME TAX \n (8,337) \n (3,160) \n (1,231) \n (176)\n\n  \n    \n    \n    \n   \n\nIncome tax expense \n —  \n —  \n —  \n — \n\n  \n    \n    \n    \n   \n\nLOSS FOR THE YEAR FROM CONTINUING OPERATIONS \n (8,337) \n (3,160) \n (1,231) \n (176)\n\n DISCONTINUED OPERATIONS \n    \n    \n    \n   \n\nLoss for the year from discontinued operations, net of tax \n (4,106) \n —  \n —  \n — \n\n  \n    \n    \n    \n   \n\nLOSS FOR THE YEAR \n (12,443) \n (3,160) \n (1,231) \n (176)\n\n  \n    \n    \n    \n   \n\nATTRIBUTABLE TO: \n    \n    \n    \n   \n\nOwners of the Company \n    \n    \n    \n   \n\nFrom continuing operations \n (8,337) \n (3,160) \n (1,231) \n (176)\n\nFrom discontinued operations \n (5,504) \n —  \n —  \n — \n\nNon-controlling interests \n    \n    \n    \n   \n\n    From continuing operations \n —  \n —  \n —  \n — \n\n    From discontinued operations \n 1,398  \n —  \n —  \n — \n\n  \n (12,443) \n (3,160) \n (1,231) \n (176)\n\n  \n    \n    \n    \n   \n\nLOSS PER SHARE ATTRIBUTABLE TO OWNERS OF THE COMPANY: \n    \n    \n    \n   \n\nBasic and diluted \n    \n    \n    \n   \n\n- For loss from continuing operations \n (8.11)* \n (2.62)* \n (0.98) \n (0.14)\n\n- For loss from discontinued operations \n (5.35)* \n —  \n —  \n — \n\nLoss per share \n (13.46)* \n (2.62)* \n (0.98) \n (0.14)\n\n \n\n ***** Retrospectively restated for effect of the 8-to-1 share\ncombination effective on June 13, 2025, see Note 19(a).\n\n \n\n47 \n\n \n\n \n\n \n\n**Years Ended December 31, 2025 and 2024**\n\n \n\n**Administrative Expenses.**Administrative expenses decreased by CNY3.90 million (US$0.56 million) from CNY7.20 million for the year ended December 31,\n2024 to CNY3.30 million (US$0.47 million) for the year ended December 31, 2025. The decrease was mainly caused by the decrease\nof professional fees (mainly legal and audit fees) as a result of expense control.\n\n \n\n**Other Income.**Other\nincome increased by CNY0.03 million (US$0.01 million) from CNY2.00 thousand for the year ended December 31, 2024 to CNY0.03\nmillion (US$0.01 million) for the year ended December 31, 2025. The increase in other income was mainly due to the gain on disposal\nof a vehicle.\n\n \n\n**Fair Value Gain on Financial\nInstruments, net.**Fair value gain on financial instruments, net decreased by CNY1.92 million (US$0.27 million) from CNY4.00 million\nfor the year ended December 31, 2024 to CNY2.08 million (US$0.30 million) for the year ended December 31, 2025. The decrease\nwas caused by the fluctuation of fair values of the Company’s outstanding warrants.\n\n \n\n**Net Loss.**As a result of the\nforegoing, our net loss decreased by CNY1.93 million (US$0.28 million), from CNY3.16 million for the year ended December 31, 2024 to CNY1.23\nmillion (US$0.18 million) for the year ended December 31, 2025.\n\n \n\n**Years Ended December 31, 2024 and 2023**\n\n \n\n****\n\n**Administrative Expenses.**Administrative expenses decreased by CNY5.68 million from CNY12.88 million for the year ended December 31, 2023\nto CNY7.20 million for the year ended December 31, 2024. The decrease was mainly caused by the decrease of professional fees\n(mainly legal and audit fees) as a result of expense control.\n\n \n\n**Other Income.**Other\nincome decreased by CNY3.74 million from CNY3.74 million for the year ended December 31, 2023 to CNY2.00 thousand for the\nyear ended December 31, 2024. The decrease in other income was mainly caused by government compensation received in 2023 for termination\nof 5 mine exploration rights in Dengkou County, Inner Mongolia Autonomous Region.\n\n \n\n**Fair Value Gain on Financial\nInstruments, net.**Fair value gain on financial instruments, net increased by CNY3.15 million from CNY0.85 million for\nthe year ended December 31, 2023 to CNY4.00 million for the year ended December 31, 2024. The increase was caused by the fluctuation\nof fair values of the Company’s outstanding warrants.\n\n \n\n**Loss for the year from\ndiscontinued operations, net of tax**. The loss for the year from discontinued operations, net of tax decreased by CNY4.11 million\nfrom CNY4.11 million for the period ended July 31, 2023 to nil for the year ended December 31, 2024. The decrease was a result of the\ndisposal of PSTT in 2023.\n\n \n\n**Net Loss.**As\na result of the foregoing, our net loss decreased by CNY9.28 million, from CNY12.44 million for the year ended December 31, 2023\nto CNY3.16 million for the year ended December 31, 2024.\n\n****\n\n \n\n \n\n48 \n\n \n\n \n\n \n\n****\n\n**Impact of Government Policies on the Company’s Operations**\n\n \n\nIn 2025, the government tightened\nthe precision of its macroeconomic management, implementing an active fiscal policy alongside a moderately accommodative monetary stance\nto stabilize growth and nurture new sources of momentum. Throughout the year, the government focused on nurturing new quality productive\nforces and accelerating the development of a modern industrial system, while the digital economy and high-tech manufacturing sectors continued\nto expand rapidly. Macroeconomic policies will largely impact economic cycles, growth rates, inflation and interest rates, and eventually\nresult in changes in supply and demand dynamics and price fluctuations in the markets we intend to serve. Industrial policies will more\ndirectly impact specific industries and to some extent determine market access, market potential, intensity of competition and profitability.\n\n \n\n \n\nOur metals exploration activities\nare subject to government regulations in various aspects, including but not limited to laws, rules and regulations relating to exploration\nactivities; environmental protection; the use and preservation of dangerous substances; employment practices; as well as land use laws\nand a variety of local business laws and rules. Our failure to comply with applicable government regulations could adversely affect our\noperations and subject us to fines and other penalties including suspension or termination of our business permits. For further details\nof the impact of governmental policies on our metals exploration activities, please refer to “Item 3.D. KEY INFORMATION –\nRisk Factors – Risks Relating to Our Mine Exploration Activities in Inner Mongolia – We are subject to government regulations\nin various aspects of our exploration activities and our failure to comply with applicable government regulations could adversely affect\nus,” “Item 4.B. INFORMATION ON THE COMPANY – Business Overview – Government Regulation of Mineral Exploration\nActivities,” and “Item 5.D. – OPERATING AND FINANCIAL REVIEW AND PROSPECTS – Trend Information”.\n\n \n\nSimilarly, if we are successful\nin completing the acquisition of Williams Minerals, which holds the lithium mine in Zimbabwe, our ability to realize the anticipated benefits\nof it may be affected by changes in the overall economic, political and regulatory environment, including but not limited to applicable\ntax regimes, fluctuations in prices and foreign exchange rates, import and export regulations, local rules and regulations in relation\nto exploration and mining activities, and a variety of other local business laws and rules. Our failure to comply with applicable government\nregulations could adversely affect our operations and subject us to fines and other penalties including suspension or termination of our\nbusiness permits.\n\n \n\n**Non-GAAP Financial Measures**\n\n \n\nNot applicable.\n\n \n\n49 \n\n \n\n  \n\n \n**B.**\n**Liquidity and Capital\nResources**\n\n \n\nThe Company’s primary\nliquidity needs are to fund operating expenses, capital expenditures and acquisitions. During the years ended December 31, 2024 and 2025,\nthe Company financed its working capital requirements and capital expenditures through internally generated cash from prior years, non-interest-bearing\nloans from the Related-Party Debtholders, funds provided pursuant to the Cooperation Agreement, and the sale of 3,960,000 common\nshares and associated warrants to purchase up to 1,487,870 common shares at an offering price of US$2.20 per share in February 2024. See\n“Item 10.C. ADDITIONAL INFORMATION – Material Contracts.” In view of the cessation of the wastewater treatment business\nand the pre-revenue exploration stage of the Moruogu Tong Mine, the Company expects that the availability of internally generated funds\nto sustain operations will decrease for the foreseeable future. As we are actively exploring new business opportunities in lithium resources\nin Zimbabwe, we may face growing shortage of working capital in the near future. Although we believe that our working capital is sufficient\nfor our present requirements and to continue our current operations over the next 12 months, we envisage engaging in further capital-raising\nactivities in pursuit of other business opportunities in the PRC to diversify our operations as we move into our next phase of growth.\n\n \n\nWe have received letters from\nFeishang Group and Feishang Enterprise, entities controlled by Mr. Li Feilie, the principal beneficial shareholder of the Company,\nwhich state that Feishang Group and Feishang Enterprise will provide continuous financial support to the Group in relation to the going\nconcern of its operations, and will not recall any amounts due to them until the Group has sufficient liquidity to finance its operations,\nand that Feishang Enterprise will pay debts on behalf of the Group when needed. As such, we believe that we will be able to obtain adequate\namounts of cash to meet our requirements beyond the next 12 months.\n\n \n\nThe revenue and\nexpenses of our PRC subsidiaries are denominated in Renminbi. We pay our corporate expenses in either Hong Kong dollars or U.S. Dollars.\nThe conversion of Renminbi into other currencies is strictly regulated by the PRC government. See “Item 3.D. – KEY INFORMATION\n– Risk Factors” and “Item 10.D. ADDITIONAL INFORMATION – Exchange Controls” for discussion of exchange controls\nin the PRC.\n\n \n\nUnder PRC laws and regulations, we are subject\nto various restrictions on intercompany fund transfers and foreign exchange controls. See “Item 3.D. KEY INFORMATION – Transfers\nof Cash and Assets Between Our Company and Our Subsidiaries” for further details of impacts on liquidity and capital resources as\na result of cash and assets transfer restrictions and limitations. As of December 31, 2025, the breakdown of cash (in thousands)\nheld in different currencies is as follows:\n\n \n\n**Currency and\nAmount**\n \n**CNY\nEquivalent**\n \n \n**US$\nEquivalent**\n \n\nCNY341\n \n \n341\n \n \n \n49\n \n\nHK$111\n \n \n100\n \n \n \n14\n \n\nUS$5\n \n \n34\n \n \n \n5\n \n\nTotal\n \n \n475\n \n \n \n68\n \n\n \n\nThe Company expects to maintain\na balanced portfolio of foreign currencies in order to meet its cash obligations in different currencies for its expenses, capital expenditures\nand acquisitions. Management does not anticipate the payment of dividends or any similar profit distribution from the Company’s\nPRC subsidiaries in the foreseeable future.\n\n \n\n**Cash Flows**\n\n \n\nThe following table sets\nforth the Company’s cash flows (in thousands) for each of the three years ended December 31, 2023, 2024, and 2025:\n\n \n\n  \nYears Ended December 31, \n\n  \n2023  \n2024  \n2025 \n\n  \nCNY  \nCNY  \nCNY  \nUS$ \n\nCash and cash equivalents at beginning of year \n 31,695  \n 4,753  \n 3,082  \n 441 \n\nNet cash from/(used in) operating activities \n 13,328  \n (7,417) \n (5,725) \n (817)\n\nNet cash (used in)/from investing activities \n (1,054) \n 1  \n 50  \n 7 \n\nNet cash (used in)/from financing activities \n (37,930) \n 15,111  \n (319) \n (46)\n\nNet (decrease)/ increase in cash and cash equivalents \n (25,656) \n 7,695  \n (5,994) \n (856)\n\nEffect of exchange rate changes on cash \n (1,286) \n (9,366) \n 3,387  \n 483)\n\nCash and cash equivalents at end of year \n 4,753  \n 3,082  \n 475  \n 68 \n\n \n\n \n\n** **\n\n50 \n\n \n\n \n\n**Operating Activities**\n\n** **\n\nNet cash used in operating\nactivities was CNY5.73 million (US$0.82 million) in 2025, compared CNY7.42 million in 2024. The cash outflows were mainly attributable\nto decreased operating loss in 2025.\n\n \n\nNet cash used in operating\nactivities was CNY7.42 million in 2024, compared to net cash inflow of CNY13.33 million in 2023. The cash outflows were mainly attributable\nto settlements of other payables and accruals in 2024.\n\n \n\n**Investing Activities**\n\n** **\n\nNet cash from investing activities\nwas CNY50 thousand (US$7 thousand) in 2025, compared CNY1.00 thousand in 2024. The cash inflows in 2025 mainly represents proceeds from\ndisposal of a vehicle.\n\n \n\nNet cash from investing activities\nwas CNY1.00 thousand in 2024, compared to net cash outflows of CNY1.05 million in 2023. The cash inflows in 2024 mainly represents proceeds\nfrom disposal of property, plant and equipment.\n\n \n\n**Financing Activities**\n\n** **\n\nNet cash used in financing\nactivities was CNY0.32 million (US$0.05 million) in 2025, compared to net cash inflow of CNY15.11 million in 2024. The cash outflows in\n2025 mainly represent net repayments to related companies.\n\n \n\nNet cash from financing activities\nwas CNY15.11 million in 2024, compared to net cash outflow of CNY37.93 million in 2023. The cash inflows in 2024 mainly represent net\nproceeds received from private placement on February 21, 2024.\n\n \n\n**Equity Financing**\n\n \n\nOn February 21, 2024, we raised\napproximately US$3.01 million in net proceeds through our registered direct offering of common shares and private placement of warrants\nafter deducting placement agent’s fees and other fees and expenses. On January 20, 2021, we raised approximately US$6.37 million\nin net proceeds through our registered direct offering of common shares and private placement of warrants after deducting placement agent’s\nfees and other fees and expenses. See “Item 10.C. ADDITIONAL INFORMATION – Material Contracts.”\n\n \n\n**Capital Expenditures**\n\n \n\nOur\ncapital expenditures were incurred primarily in connection with the purchase of property, plant and equipment for office use. Our capital\nexpenditures were CNY0.01 million, CNY3,680 and nil in 2023, 2024 and 2025, respectively. We will continue to make capital expenditures\nto meet the expected growth of our operations and expect cash generated from internally generated cash from prior years, non-interest-bearing\nloans from the Related-Party Debtholders, and the proceeds from private placements in 2021 and 2024 will continue to meet our capital\nexpenditure needs in the foreseeable future. However, as we are actively exploring new business opportunities in lithium resources in\nZimbabwe, we may face growing shortage of working capital in the near future, and we envisage engaging in further capital-raising activities\nin pursuit of other business opportunities in the PRC to diversify our operations as we move into our next phase of growth. In addition,\nFeishang Group Limited and Feishang Enterprise Group Company Limited, related parties which have\nprovided non-interest-bearing loans, have confirmed they will not recall any amounts due to them until the Group is in a position to settle\nthe amounts due without having a detrimental impact on the financial resources of the Group.\n\n \n\n**Material Cash Requirement**\n\n \n\nOther than the ordinary cash\nrequirements for our operations and capital expenditures, our material cash requirements as of December 31, 2025 primarily include our\ncontractual obligations.\n\n \n\nIn February 2023, the Company\nentered into the Zimbabwe SPA with Feishang Group, Top Pacific, Mr. Li Feilie and Mr. Yao Yuguang to acquire Williams Minerals, which\nowns the mining permit for a Zimbabwean lithium mine for maximum consideration of US$1.75 billion (subject to the terms and conditions\nof the Zimbabwe SPA). The Company does not have the adequate cash to pay for the purchase consideration. In addition to the promissory\nnote payment arrangement as contemplated by the Zimbabwe SPA, the Company may issue restricted or non-restricted CHNR shares at a discount\nto the market price if market sentiment permits.\n\n \n\n \n\n51 \n\n \n\n \n\n**Contractual Obligations**\n\n \n\nThe following table summarizes our contractual\nobligations (in thousands) as of December 31, 2025:\n\n \n\n \n \n**Payments due by period**\n \n\n \n \n**Total**\n \n \n**Within 1 year**\n \n \n**1 to 3 years**\n \n \n**3 to 5 years**\n \n \n**Thereafter**\n \n\n \n \n**CNY**\n \n \n**CNY**\n \n \n**CNY**\n \n \n**CNY**\n \n \n**CNY**\n \n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\nLease liabilities\n \n \n—\n \n \n \n—\n \n \n \n—\n \n \n \n—\n \n \n \n—\n \n\nLong-term debt obligations, including current portion  \n \n \n—\n \n \n \n—\n \n \n \n—\n \n \n \n—\n \n \n \n—\n \n\n \n \n \n—\n \n \n \n—\n \n \n \n—\n \n \n \n—\n \n \n \n—\n \n\n \n\nOur primary lease liabilities are composed of\nmotor vehicles and office and warehouse rent expenses. For details about our long-term debt obligations, see “Item 7.B. –\nMAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS – Related Party Transactions.” \n\n \n\n \n\n**Other Known Contractual and Other Obligations**\n\n \n\nPlease refer to “Item\n7.B. – MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS – Related Party Transactions” for a discussion of amounts due\nto and from our affiliates.\n\n \n\nExcept as disclosed\nabove and discussed under “Item 7.B. – MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS – Related Party\nTransactions – Acquisition and Sale of PST Technology,” and “Item 7.B. – MAJOR SHAREHOLDERS AND RELATED\nPARTY TRANSACTIONS – Related Party Transactions – Acquisition of Williams Minerals,” there have been no\nsignificant changes in the Company’s financial condition and liquidity during the years ended December 31, 2023, 2024 and\n2025.\n\n \n\nUnder the Cooperation Agreement,\nJijincheng Mining, rather than the Company, is the party to any contracts relating to exploratory work relating to the northern part of\nMoruogu Tong Mine. In the event we determine to pursue a mining permit and thereafter engage in mining at the Moruogu Tong Mine, we will\nbe required, among other things, for mine construction and development, to build roads and make provision for water and electricity at\nthe mine site. There will be significant capital expense for these and other projects. We intend to fund those capital expenditures from\nthe proceeds of loans from our Related-Party Debtholders, if available, payments pursuant to the Cooperation Agreement and, to the extent\ndeemed necessary, bank borrowings.\n\n \n\n**Off Balance Sheet Arrangements**\n\n \n\nThe Company has no off-balance\nsheet arrangements that have had or are reasonably likely to have a current or future effect on our financial condition, changes in financial\ncondition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that would be material to\ninvestors.\n\n \n\n \n**C.**\n**Research and Development, Patents and Licenses, Etc.**\n\n \n\nThe Company did not make any\nsignificant expenditures on Company-sponsored research and development activities during each of the last three fiscal years.\n\n \n\n \n\n \n\n52 \n\n \n\n \n\n \n**D.**\n**Trend\nInformation**\n\n \n\nWe believe that the following\nfactors which impact our various revenue and expense items (as described below) have had, and will continue to have, a significant effect\non the development of our business, financial position and results of operation.\n\n \n\nIn February 2023, the Company\nentered into the Zimbabwe SPA with Feishang Group, Top Pacific, Mr. Li Feilie and Mr. Yao Yuguang to acquire Williams Minerals, which\nowns the mining permit for a Zimbabwean lithium mine. Under the Zimbabwe SPA, it is expected that the Company will indirectly acquire\nall interests in Williams Minerals in the second fiscal quarter of 2023, and that the Company’s “ownership” (as defined\nin the Zimbabwe SPA) of the Zimbabwean lithium mine will vest cumulatively, region by region from 2024 through 2026, contingent upon the\nissuance of independent technical reports and the Company’s full settlement of the purchase consideration in cash and restricted\nshares. For each relevant region of the lithium mine, until the Company’s ownership vests, the Sellers will maintain legal possession\nand control, including the right of exploration, sale of lithium, and the revenue derived therefrom, as well as liability for operational\ncosts and third-party claims. On April 14, 2023, the Company announced that it completed its due diligence investigation with satisfactory\nresults and decided to proceed with the Acquisition. The Company paid an aggregate of $35 million by way of promissory notes (instead\nof cash) as a deposit on April 21, 2023, and will pay an aggregate of $140 million by way of promissory notes and/or cash as an initial\ninstallment. Completion of the Acquisition is contingent upon the satisfaction of a number of conditions, including, among other things,\nthe transfer of ownership interests in Williams Minerals from the Sellers to the intermediate holding company; the issuance of independent\ntechnical reports, the actual quantity of qualified lithium oxide metal resources proven or estimated to exist in each mining area covered\nby the relevant report, and the Company’s full settlement of the purchase consideration in cash and restricted shares. There is\nno guarantee that the Acquisition will close or be completed at the anticipated valuation and terms, or at all.\n\n \n\nOn December 22, 2023, the\nCompany entered into the Amendment Agreement to the Zimbabwe SPA by and among Feishang Group and Top Pacific (China) Limited (together,\nthe “Sellers”), and the respective beneficial owner of the Sellers, Mr. Li Feilie and Mr. Yao Yuguang with the parties thereto.\nAs the Sellers are still in the process of satisfying conditions precedent to the closing of the Acquisition in accordance with the Zimbabwe\nSPA, including but not limited to obtaining requisite governmental approvals, the parties entered into the Amendment Agreement to extend\nthe long stop date for closing the Acquisition from December 31, 2023 to December 31, 2024. On December 31, 2024, the Company entered\ninto a second amendment agreement to the Zimbabwe SPA to further extend the long stop date for closing the acquisition from December 31,\n2024 to December 31, 2025. On December 31, 2025, the Company entered into a third amendment agreement to further extend the long stop\ndate for closing the acquisition from December 31, 2025 to December 31, 2026.\n\n \n\nOur exploration and mining\noperations are highly speculative due to the high-risk nature of our exploration and mining business, which may include the acquisition,\nfinancing, exploration, and development of mineral properties and operation of mines. There is no assurance that our current or future\nexploration programs at the Zimbabwean lithium mine, the Moruogu Tong Mine or any future acquisitions will result in the identification\nof deposits that can be mined profitably. The economic viability of a mining project may be adversely affected by many factors, including\nfailure to identify sufficient ore reserves, reduced recovery rates, a rise in production costs as a result of inflation or other technical\nproblems, and significant price fluctuations in the commodities markets. There is no guarantee that the Acquisition of the Zimbabwean\nlithium mine will close or be completed at the anticipated valuation and terms, or at all. In addition, the fact that the northern part\nof Moruogu Tong Mine is currently being explored under a Cooperation Agreement means that our share in any future profits from mineral\nextraction at the mine is effectively reduced, the details of which are still subject to negotiation. We currently do not generate revenues\nfrom our exploration and mining operations, and we will have to fund exploration expenses until we are able to generate sufficient revenue\nto pay them.\n\n \n\nDuring 2025, the global economic landscape remained volatile,\nwith persistent geopolitical tensions and ongoing trade frictions among major economies, leading to extreme fluctuations in the commodity\nmarket worldwide. Although interest rates in developed markets began to ease, they stayed relatively high, weighing on global momentum\nand posing continued challenges to China’s recovery. The Chinese government pursued a moderately accommodative monetary policy and\nrecorded the largest fiscal deficit in recent years, along with supportive industrial policies, to support stable economic performance.\nThe real estate sector remained in a phase of deep adjustment despite policies aimed at stabilizing the property market and preventing\nfurther downturn. Throughout the year, the government focused on nurturing new quality productive forces and accelerating the development\nof a modern industrial system, while the digital economy and high-tech manufacturing sectors continued to expand rapidly. China’s\nstructural economic transformation deepened further. Macroeconomic policies will largely impact economic cycles, growth rates, inflation\nand interest rates, and eventually result in changes in supply and demand dynamics and price fluctuations in the markets we intend to\nserve. Industrial policies will more directly impact specific industries and to some extent determine market access, market potential,\nintensity of competition and profitability. In the near future, we are likely to see further a series of highly supportive macroeconomic\nand industrial policies in various fields, but the extent and speed of economic recovery remains highly uncertain due to risks relating\nto the real estate sector, local government debt, escalating trade frictions, the ongoing geopolitical tensions especially the renewed\nhostilities in the Middle East in early 2026, surging oil prices, and high interest rates of major economies, which might adversely affect\nthe Chinese economy, our business operations and profitability. For further details on the impact of government policies, market uncertainties\nand high interest rates, please refer to “Item 3.D. KEY INFORMATION – Risk Factors – Risks Relating to Our Mine Exploration\nActivities in Inner Mongolia – Volatility in the market prices of metals may adversely affect the results of our operations,”\nand “Item 5.A. OPERATING AND FINANCIAL REVIEW AND PROSPECTS – Operating Results – Impact of Government Policies on the\nCompany’s Operations.”\n\n \n\nOther than as disclosed above\nand elsewhere in this annual report, the Company does not believe that there have been any other recent known trends, uncertainties, demands,\ncommitments or events that are reasonably likely to have a material effect on the Company’s revenues, income from continuing operations,\nprofitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of\nfuture operating results or financial condition.\n\n \n\n \n**E.**\n**Critical Accounting Estimates**\n\n \n\nNot applicable. \n\n \n\n**New IFRS Pronouncements**\n\n** **\n\nFor a detailed discussion\nof new accounting pronouncements, please see Notes 2.4 and 2.5 to our audited consolidated financial statements.\n\n \n\n53"}