Flying Mining Initial Coverage 20171114 EN

Summary
In this research report, we will present substantial evidence Flying Mining

showing that most of the framework sales contracts Company Information
disclosed by Flying Mining Limited (Flying Mining) to be Industry Marble
highly suspicious. The identity and source of wealth of its Stock Code 1625
largest customer is doubtful and it is very likely that the Listing Place Hong Kong
largest customer is effectively controlled by Mr. Lin Hui. We Auditor Ernst & Young
conclude that Flying Mining is not suitable for listing in
Hong Kong. Our Recommendation
Rating
1. Suspicious Framework Sales Contracts
Not
We found that out of the five Flying Minings customers, Suitable
four of them have a revenue far smaller than their promised
for Listing
purchase amount from Flying Mining. These customers
have a minimal operating scale that cannot possibly support
IPO Data
the disclosed purchase amount from Flying Mining. Marble
Expected
is not a rare commodity and the relevant purchase amount 2017 Oct 31
Listing Date
is not large, and there is no commercial rationale to promise
Sponsor Guotai Junan
purchasing marble from Flying Mining in next two years.
Underwriters Guotai Junan
These irregular transactions account for 82.0% and 82.5% of
Wealth Link
Flying Minings expected revenue in 2017 and 2018
Oceanwide
respectively.
Head &
Shoulders
2. Suspicious Largest Customers Identity and Source of
Wealth
The largest customer of Flying Mining, Xiamen Hefeng, was By downloading or viewing our
just incorporated at the end of 2016. The two shareholders report, you agree to our Term of
of Xiamen Hefeng do not have any other operating Service. For full details, please
businesses and their source of wealth is doubtful. This refer to our disclaimer at the last
largest customer promised to purchase a large amount of page of this report.
marble from Flying Mining shortly after incorporation, and
the commercial rationale of such action is doubtful. We
believe that Xiamen Hefeng is effectively controlled by Mr.
Lin Hui and Mr. Huang Zhongyi instead, and its sole purpose
is to fabricate revenue for Flying Mining.
Website: www.blazing-research.com / Email: blazing.research.m@protonmail.ch

3. Physical Inspection of Xiamen Hefengs Registered Address Shows Evidence of Deceiving Sponsor
We have visited Xiamen Hefengs registered address twice in the week of Oct 16 and Oct 23
respectively. When we visited the office the first time, we found that Xiamen Hefeng seems to
have a normal operation. But when we visited again in second time, we found that the door plate
of the office has already been changed to another company called Xiamen Jinzhiyu Trading
Company and no one is at the office. Xiamen Jinzhiyu Trading Company has no relationships with
Xiamen Hefeng, showing that Xiamen Hefeng just borrowed office from other to deceive sponsor.
4. Physical Inspection of Mr. Huang Jinyuans Residential Address Shows a Poor Economic Condition
We found that the residential address of Xiamen Hefengs controlling shareholder, Mr. Huang
Jinyuan, to be No. *, Fengchuigu, Longfeng Cun, Shuitou Zhen from Huji System. We appointed
third-party inspectors to visit the place and found that the house is in an extremely poor condition
with broken parts everywhere and the stair to second floor is blocked. It indicates that the
economic condition of Mr. Huang Jinyuan is poor and cannot possibly own a company that makes
over a hundred million of purchases.
5. Xiamen Hefeng Is Effectively Controlled by Mr. Lin Hui, Mr. Huang Zhongyi and Mr. Huang Jianfu
We further found out that Xiamen Hefeng is actually an empty company and the effective
manufacturing factory is Fujian Nanan City Zhongtai Stone Limited, which is owned by Mr. Huang
Jianfu. Mr. Huang Jianfu has countless relationships with Mr. Huang Zhongyi and they hold Fujian
Panxing Group Limited together. We further confirmed that Mr. Hunag Jinyuan is not the effective
controller of Xiamen Hefeng and Xiamen Hefeng is just an empty company established by Mr. Lin
Hui and Mr. Huang Zhongyi to deceive Hong Kong Exchange.
6. Minimal Amount of Cash and Bank Balance

Flying Minings amount of cash and bank balance is minimal every year. The cash and bank
balance of it is merely RMB 140,000, RMB 39,000 and RMB 753,000 respectively at the end of
2014-2016. It is hard to believe a company with such scale can be listed on Hong Kong Main
Board.
7. Valuation Increased Over 12 Times in Just One Year

Mr. Lin Hui transferred 5% shares of Flying Mining to his friend at a consideration of mere RMB
2.5 mn at the end of 2016, indicating the valuation of Flying Mining to be merely RMB 50 mn at
that time, which is similar to Flying Minings total investment in Leishoushan Marble Mine. If Flying
Mining is successfully listed, its valuation will be as high as HKD 0.78 bn. We cannot understand
the rationale of Flying Minings valuation to increase over 12 times in just one year, and believe
the aim of above transfer is to circumvent the lock-up period of controlling shareholder.
Our report shows that most Flying Minings expected sales is highly suspicious, and the
operation scale of its disclosed customers cannot possibly support the promised purchase
amount from Flying Mining. Moreover, our physical inspection shows that Flying Mining
deceived sponsor deliberately and Mr. Huang Jinyuan to have a poor financial condition.
The identity and source of wealth of its largest customer is extremely doubtful. The aim of
share transfer prior to IPO appears to be circumventing the lock-up period only. Due to
these numerous issues, we believe that regulators should start investigation in Flying
Mining and reconsider Flying Minings suitability of listing.
Remark: The version of report that we sent to regulators on Oct 30 does not include Introduction,
Part 6, Part 7 and Valuation & Conclusion

Introduction
Flying Mining is a marble mining and processing company in China, and submitted its listing
application twice in 2017 Mar and Sep respectively. The sponsor is Guotai Junan, and the expected
listing date is 2017 Oct 31. However, as Flying Mining received queries from regulators regarding
the content of our report, it cancelled its IPO plan and refunded all amount to investors.
We have sent our investigation result regarding Flying Mining to Hong Kong Exchange and SFC
in the afternoon of Oct 30, one day prior to the expected listing date of Flying Mining1. We are
glad that Hong Kong Exchange and SFC acted promptly to suspend the IPO of Flying Ming. To
avoid Hong Kong Exchange and SFC being blamed for the cancellation and to allow investors to
understand more about Flying Mining, we are now publishing this research report. Due to time
constraints, we have just completed all our investigation on Oct 29 and therefore the version we
sent to regulators on Oct 30 only contains Part 1 to 5. We have been further polishing this report
in last two weeks. Please refer to this finalized version when responding.
Exhibit 1: Screenshot on our email to Hong Kong Exchange
Source: Internal Documents of Blazing Research
Exhibit 2: Screenshot on our email to SFC
Source: Internal Documents of Blazing Research

Exhibit 3: Business Overview of Flying Mining
Source: Prospectus of Flying Mining, Pg. 1-2
Flying Mining has no revenue during the track record period till the end of 2016. It started its
commercial production and recorded its first revenue in 2017 Apr.

These are the introduction of Flying Mining. In this report, we will investigative Flying Mining from
multiple angles to discover the truth of its business, including the authenticity of its customers,
background of customers shareholders, authenticity of its financial statement etc. We have
conducted in-depth investigation in its customers and concluded that its largest customers
business and shareholders background to be highly suspicious. We therefore do not
consider Flying Mining to be suitable for listing in Hong Kong. If Flying Mining relaunch its
IPO plan in the future, we suggest investors to read this report before making any decisions.
1
The time in the screenshot is in UTC

1. Suspicious Framework Sales Contracts
Flying Mining has no revenue from 2014 to 2016, and has recorded a revenue of RMB 10,676,000
from 2017 Jan to Apr. It disclosed that it has entered 9 framework sales contracts with five
customers. To verify the authenticity of Flying Minings business, we retrieved the SAIC & tax
filings of these customers but found most of them to be highly irregular, casting doubts on the
authenticity of Flying Minings expected sales.
Exhibit 4: Flying Minings disclosure on its customers
Source: Flying Minings prospectus Pg. 188

Xiamen Hefeng Dimension Stone Company Limited (Xiamen Hefeng)
Xiamen Hefeng promised to purchase 1,000 m3 of marble blocks, 50,000 m2 of marble slabs and
9,000 m2 of shaped stones from Flying Mining in 2017, and 1,800 m3 of marble blocks, 70,000 m2
of marble slabs and 18,000 m2 of shaped stones from Flying Mining in 2018. Using the middle
price in the price range disclosed on Pg. 189 of Flying Minings prospectus, Xiamen Hefeng will
contribute to RMB 39,810,000 and RMB 71,429,000 of Flying Minings revenue in 2017 and 2018
respectively, and is the largest customer of Flying Mining in both 2017 and 2018, accounting for
more than 40% of Flying Minings predicted revenue based on framework sales contracts.
We have therefore retrieved the SAIC & tax filings of Xiamen Hefeng. We found that it was just
incorporated on 2016 Sep 22, and has not yet started any operations. It only has two
employees at the end of 2016. Moreover, we found that the identity and source of wealth
of its two shareholders, Mr. Huang Jinyuan and Mr. Zeng Ming, to be highly doubtful. We
do not understand how a company established by a suspicious businessman can promise to
purchase over a hundred million of purchase just shortly after incorporation. We will explain
this in details in Part 2 to 5.
The balance sheet of Xiamen Hefeng shows that it only has RMB 282 thousand of total asset
at the end of 2016, with a mere cash balance of RMB 78,604. We do not think that a company
with such a minimal operation scale can possibly purchase RMB 39,810,000 and RMB 71,420,000
of marble from Flying Mining in 2017 and 2018 respectively, and we strongly suspect that Xiamen
Hefeng is effectively controlled by Mr. Lin Hui and Mr. Huang Zhongyi instead of Mr. Huang
Jinyuan and Mr. Zeng Ming to fabricate revenue for Flying Mining.
Exhibit 5: Reported Figures of Xiamen Hefeng

2016
Xiamen Hefengs Revenue (RMB 000) 0
Xiamen Hefengs Total Tax Paid (RMB 000) 0
Xiamen Hefengs Profit Before Tax (RMB 000) -123
Xiamen Hefengs Net Profit (RMB 000) -123
Xiamen Hefengs Employee Number 2
Source: SAIC & tax filings of Xiamen Hefeng

Exhibit 6: Xiamen Hefengs 2016 Income Statement

Exhibit 7: Xiamen Hefengs 2016 Balance Sheet

Bizhong United (Hangzhou) Company Limited (Bizhong United)
Bizhong United promised to purchase 50,000 m2 and 70,000 m2 of marble slabs from Flying Mining
in 2017 and 2018 respectively. Using the middle price in the price range disclosed on Pg. 189 of
Flying Minings prospectus, Bizhong United will contribute to RMB 12,250,000 and RMB
17,150,000 of Flying Minings revenue in 2017 and 2018 respectively. We have also retrieved the
SAIC & tax filings of Bizhong United, and found that its revenue has been dropping every year.
Its revenue decreased from RMB 13.6 mn in 2013 to RMB 1.0 mn in 2016. It only has several
employees with a minimal amount of total tax paid, and recorded a loss every year. We do
not understand the rationale of promising to purchase RMB 30 mn of marble slabs from
Flying Mining when its 2015 and 2016 revenue is only RMB 2.6 mn and RMB 1.0 mn
respectively. We do not think that these sales framework contracts have any commercial
substances. For simplicity, we are only showing 2015 and 2016 balance sheet of Bizhong United
here.
Exhibit 8: Reported Figures of Bizhong United

2013 2014 2015 2016
Bizhong Uniteds Revenue (RMB 000) 13,603 18,635 2,580 1,018
Bizhong Uniteds Total Tax Paid (RMB 000) 104 244 291 275
Bizhong Uniteds Profit Before Tax (RMB 000) -2,395 -880 -467 -225
Bizhong Uniteds Net Profit (RMB 000) -2,395 -880 -467 -225
Bizhong Uniteds Employee Number 5 4 2 4
Source: SAIC & tax filings of Bizhong United

Exhibit 9: Bizhong Uniteds 2015 Balance Sheet

Exhibit 10: Bizhong Uniteds 2016 Balance Sheet

Quanzhou Gaoqi Dimension Stone Company Limited (Quanzhou Gaoqi)
Quanzhou Gaoqi promised to purchase 28,000 m2 and 90,000 m2 of marble slabs from Flying
Mining in 2017 and 2018 respectively. Using the middle price in the price range disclosed on Pg.
189 of Flying Minings prospectus, Quanzhou Gaoqi will contribute to RMB 6,860,000 and RMB
22,050,000 of Flying Minings revenue in 2017 and 2018 respectively. We have also retrieved the
SAIC & tax filings of Quanzhou Gaoqi, and found that Quanzhou Gaoqi has no operation from
2013 to 2015, and only has a minimal revenue of RMB 5.59 mn in 2016 and an insignificant
profit. It only has 12 employees as of the end of 2016. We are highly suspicious that how
Quanzhou Gaoqi can promise to purchase an amount that is much higher than its current
sales from Flying Mining.
According to the framework sales contracts, Quanzhou Gaoqi needs to pay a liquidated damage
if it fails to make the minimum purchase agreed in any year. We do not think that a normal
company will agree to such term and purchase at an amount that is much larger than the current
sales. We have also consulted industry expert, who pointed out that marble is not any rare
commodities and the purchase amount of Quanzhou Gaoqi is insignificant, therefore it can
find numerous sellers in the market easily without making such promise in advance. We do
not think that these sales framework contracts have any commercial substances. For simplicity, we
are only showing 2016 income statement of Quanzhou Gaoqi here.
Exhibit 11: Reported Figures of Quanzhou Gaoqi

2013 2014 2015 2016
Quanzhou Gaoqis Revenue (RMB 000) 0 0 0 5,593
Quanzhou Gaoqis Total Tax Paid (RMB 000) 0 0 0 114
Quanzhou Gaoqis Profit Before Tax (RMB 000) 0 0 0 125
Quanzhou Gaoqis Net Profit (RMB 000) 0 0 0 39
Quanzhou Gaoqis Employee Number 5 5 12 12
Source: SAIC & tax filings of Quanzhou Gaoqi

Exhibit 12: Quanzhou Gaoqis 2016 Income Statement
Source: SAIC & tax filings of Quanzhou Gaoqi

Fujian Nanan Xiangtai Dimension Stone Company Limited (Nanan Xiangtai)
Nanan Xiangtai promised to purchase 1,000 m3 of marble blocks and 50,000 m2 of marble slabs
in 2017, and 1,800 m3 of marble blocks and 90,000 m2 of marble slabs in 2018 respectively. Using
the middle price in the price range disclosed on Pg. 189 of Flying Minings prospectus, Nanan
Xiangtai will contribute to RMB 16,500,000 and RMB 29,700,000 of Flying Minings revenue in
2017 and 2018 respectively. We have also retrieved the SAIC & tax filings of Nanan Xiangtai, and
found that its revenue is significantly lower than the disclosed figures in prospectus (which
is above RMB 50 mn). Its revenue dropped from RMB 37.28 mn in 2013 to RMB 22.19 mn
in 2015, indicating a deteriorating business. Similar to Quanzhou Gaoqi, we do not
understand why Nanan Xiangtai has to promise to purchase an amount similar or higher
than its current sales level when it can easily find other suppliers in the market. We do not
think that these sales framework contracts have any commercial substances. We suspect that
in order to persuade Hong Kong Exchange and sponsor that these framework sales contracts have
commercial rationale, Flying Mining colluded with Nanan Xiangtai to claim that its revenue is
higher than RMB 50 mn so as to be classified as a large-sized company in prospectus. But the
reality is that Nanan Xiangtais revenue has never met RMB 50 mn. For simplicity, we are only
showing 2014 to 2016 income statement of Nanan Xiangtai here.
Exhibit 13: Reported Figures of Nanan Xiangtai

2013 2014 2015 2016
Nanan Xiangtais Revenue (RMB 000) 37,277 34,441 22,189 25,406
Nanan Xiangtais Total Tax Paid (RMB 000) 610 907 499 919
Nanan Xiangtais Profit Before Tax (RMB 000) 2,439 1,358 -519 -1,845
Nanan Xiangtais Net Profit (RMB 000) 1,829 794 -880 -2,374
Nanan Xiangtais Employee Number 100 110 120 120
Source: SAIC & tax filings of Nanan Xiangtai

Exhibit 14: Nanan Xiangtais 2014 Income Statement



Quanzhou Xinxing Dimension Stone Crafts Company Limited (Quanzhou Xinxing)
Quanzhou Xinxing promised to purchase 1,000 m3 of marble blocks and 50,000 m2 of marble slabs
in 2017, and 1,800 m3 of marble blocks and 90,000 m2 of marble slabs in 2018 respectively. Using
the middle price in the price range disclosed on Pg. 189 of Flying Minings prospectus, Quanzhou
Xinxing will contribute to RMB 16,500,000 and RMB 29,700,000 of Flying Minings revenue in 2017
and 2018 respectively. We have also retrieved the SAIC & tax filings of Quanzhou Xinxing, and
found that its revenue indeed is much larger than its promised purchase from Flying Mining.
However, this is the only customer of Flying Mining that has a decent operating scale and
the amount of revenue generated from Quanzhou Xinxing is also limited. It does not change
our conclusion that the majority of these framework sales contracts are highly suspicious.
Exhibit 17: Reported Figures of Quanzhou Xinxing

2013 2014 2015 2016
Quanzhou Xinxings Revenue (RMB 000) 115,354 114,204 86,345 89,678
Quanzhou Xinxings Total Tax Paid (RMB 000) 8,439 2,631 1,789 1,587
Quanzhou Xinxings Profit Before Tax (RMB 000) -1,491 -11,285 -4,958 -11,047
Quanzhou Xinxings Net Profit (RMB 000) -1,491 -13,153 -6,210 -11,829
Quanzhou Xinxings Employee Number 452 350 475 325
Source: SAIC & tax filings of Quanzhou Xinxing
We have already conducted thorough analysis on the five customers of Flying Mining, and
found that except Quanzhou Xinxing, all other sales are highly irregular and do not seems
to have any commercial substance. Such irregular transaction accounts for 82.0% and 82.5%
of Flying Minings expected revenue in 2017 and 2018 respectively. After excluding these
irregular business, the remaining revenue of Flying Mining is minimal and cannot reach the
standard of a company listed on Hong Kongs Main Board. We hope that Hong Kong
Exchange and SFC to reconsider Flying Minings suitability of listing. The revenue of RMB
10,676,000 recorded by Flying Mining from 2017 Jan to Apr comes from Quanzhou Gaoqi, Nanan
Xiangtai and Quanzhou Xinxing. We have already shown that the revenue from Quanzhou Gaoqi
and Nanan Xiangtai to be highly irregular and we will not repeat here.
Exhibit 18: Portion of Flying Minings irregular transaction

2017 2018
Xiamen Hefeng (RMB 000) 39,810 71,420
Bizhong United (RMB 000) 12,250 17,150
Quanzhou Gaoqi (RMB 000) 6,860 22,050
Nanan Xiangtai (RMB 000) 16,500 29,700
Total of Flying Minings Irregular Transaction (RMB 000) 75,420 140,320
Expected Revenue of Flying Mining (RMB 000) 91,920 170,020
Portion of Irregular Transaction 82.0% 82.5%
Source: Flying Minings prospectus and above analysis
Remark: Expected revenue is estimated using the middle price in the price range disclosed on Flying
Minings prospectus Pg. 189

2. Suspicious Largest Customers Identity and Source of Wealth
As stated in our first part, we found that the identity and source of wealth of Xiamen Hefengs two
shareholders, Mr. Huang Jinyuan and Mr. Zeng Ming, to be highly doubtful. Mr. Huang Jinyuan
owns 90% shares of Xiamen Hefeng. Using the ID No. of Mr. Huang Jinyuan, we found that the
only company he holds besides Xiamen Hefeng is Xiamen Fuxin Trading Company (Xiamen
Fuxin), of which he owns 90% shares. We have retrieved the SAIC filings of Xiamen Fuxin, and
found that it was incorporated on 2014 June 23, with no business since incorporation and
only has three employees. It shows that Mr. Huang Jinyuan, at the age of 60, does not have any
profit-generating businesses. It is hard to believe that the first company with real business owned
by Mr. Huang Jinyuan manage to promise purchase over RMB 100 mn of products from Flying
Mining within a few months of incorporation.
Exhibit 19: Reported Figures of Xiamen Hefeng

2014 2015 2016
Xiamen Hefengs Revenue (RMB 000) 0 0 0
Xiamen Hefengs Total Tax Paid (RMB 000) 0 0 0
Xiamen Hefengs Profit Before Tax (RMB 000) 0 0 0
Xiamen Hefengs Net Profit (RMB 000) 0 0 0
Xiamen Hefengs Total Asset (RMB 000) 0 0 0
Xiamen Hefengs Total Liability (RMB 000) 0 0 0
Xiamen Hefengs Equity (RMB 000) 0 0 0
Xiamen Hefengs Employee Number 3 3 3
Source: SAIC filings of Xiamen Hefeng
Mr. Zeng Ming holds 10% shares of Xiamen Hefeng. Using the ID No. of Mr. Zeng Ming, we found
that the only company he controls is Xiamen Fengzhi Trading Company (Xiamen Fengzhi). Mr.
Zeng Ming holds 51% shares of Xiamen Fengzhi. We have also retrieved the SAIC filings of Xiamen
Fengzhi, and found that it has a minimal revenue and has never paid any tax. It records a loss
every year and has only few employees. The total asset of it is insignificant and its operating
scale is minimal.
Exhibit 20: Reported Figures of Xiamen Fengzhi

2013 2014 2015 2016
Xiamen Fengzhis Revenue (RMB 000) 0 279 58 0
Xiamen Fengzhis Total Tax Paid (RMB 000) 0 0 0 0
Xiamen Fengzhis Profit Before Tax (RMB 000) 0 -142 -204 0
Xiamen Fengzhis Net Profit (RMB 000) 0 -142 -204 0
Xiamen Fengzhis Total Asset (RMB 000) 0 409 411 0
Xiamen Fengzhis Total Liability (RMB 000) 0 790 996 0
Xiamen Fengzhis Equity (RMB 000) 0 -381 -585 0
Xiamen Fengzhis Employee Number 0 4 5 4
Source: SAIC filings of Xiamen Fengzhi

Besides Xiamen Fengzhi, Mr. Zeng Ming also holds 10% shares in Xiamen Lixinde Environmental
Technology Engineering Company (Xiamen Lixinde). We have also retrieved the SAIC filings of
Xiamen Lixinde, and found that its revenue is merely RMB 2 to 3 mn with a loss every year
and its operating scale is much less than the promised purchase amount of Xiamen Hefeng.
Exhibit 21: Reported Figures of Xiamen Lixinde

2013 2014 2015 2016
Xiamen Lixindes Revenue (RMB 000) 0 3,067 2,282 3,130
Xiamen Lixindes Total Tax Paid (RMB 000) 0 102 146 114
Xiamen Lixindes Profit Before Tax (RMB 000) 0 -127 1 -929
Xiamen Lixindes Net Profit (RMB 000) 0 -127 -67 -929
Xiamen Lixindes Total Asset (RMB 000) 0 5,869 5,952 5,334
Xiamen Lixindes Total Liability (RMB 000) 0 5,074 5,223 5,675
Xiamen Lixindes Equity (RMB 000) 0 796 729 -341
Xiamen Lixindes Employee Number 0 12 10 12
Source: SAIC filings of Xiamen Lixinde
Xiamen Lixinde also holds 51% shares of Xiamen Lixinde Guanye Company (Lixinde Guanye), but
Lixinde Guanye has no business since incorporation.
Exhibit 22: Reported Figures of Lixinde Guanye

2014 2015 2016
Lixinde Guanyes Revenue (RMB 000) 0 0 0
Lixinde Guanyes Total Tax Paid (RMB 000) 0 0 0
Lixinde Guanyes Profit Before Tax (RMB 000) 0 0 0
Lixinde Guanyes Net Profit (RMB 000) 0 0 0
Lixinde Guanyes Total Asset (RMB 000) 0 0 0
Lixinde Guanyes Total Liability (RMB 000) 0 0 0
Lixinde Guanyes Equity (RMB 000) 0 0 0
Lixinde Guanyes Employee Number 0 0 0
Source: SAIC filings of Lixinde Guanye
We have already shown that the background of the two shareholders of Flying Minings largest
customer, Xiamen Hefeng. It is obvious that the controlling shareholder of Xiamen Hefeng is
merely a nominal shareholder and has no real businesses besides Xiamen Hefeng. It defies
common sense that Xiamen Hefeng, which was established by Mr. Huang Jinyuan, can
promise to purchase large amount of products from Flying Mining shortly after
incorporation. The minority shareholder of Xiamen Hefeng, Mr. Zeng Ming, also has no other
businesses with a decent operating scale. It further shows that the source of wealth of Xiamen
Hefengs two shareholders to be highly suspicious. It leads us to suspect whether Mr. Huang
Jinyuan and Mr. Zeng Ming merely hold shares on behalf of Mr. Lin Hui and Mr. Huang Zhongyi
so as to persuade Hong Kong Exchange to grant listing approval.

3. Physical Inspection of Xiamen Hefengs Registered Address Shows Evidence of Deceiving
Sponsor
We appointed third-party investigators to visit the registered address of Xiamen Hefeng, Unit
01A, 3/F, 2nd Building, Free Trade Phase Square, Xiangxing Fourth Road, Xiamen Free Trade Zone,
Fujian in the week of Oct 16. We found that Xiamen Hefeng seems to have a normal
operation and we believe sponsor should also have visited this office during due diligence.
Exhibit 23: Unit 01A, 3/F, 2nd Building, Free Trade Phase Square (In the week of Oct 16)
Source: Physical Inspection

To further confirm the authenticity of Xiamen Hefengs business, we appointed third-party
investigator to visit Xiamen Hefengs registered address again in the week of Oct 23, and found
that the door plate of Xiamen Hefeng has already been changed to another company called
Xiamen Jinzhiyu Trading Company (Xiamen Jinzhiyu) with no one at the office. Xiamen
Jinzhiyu is owned by Mr. Hong Zujia and Ms. Zhang Baoyun, and has no relationships with
Mr. Huang Jinyuan. It shows that Xiamen Hefeng just borrowed the office from Xiamen
Jinzhiyu so as to handle sponsors due diligence. Xiamen Hefeng actually does not have any
real businesses.
Exhibit 24: Unit 01A, 3/F, 2nd Building, Free Trade Phase Square (In the week of Oct 23)

4. Physical Inspection of Mr. Huang Jinyuans Residential Address Shows a Poor Economic
Condition
To further confirm on our conclusion in Part 2, we have retrieved the details of Mr. Huang Jinyuan
from Fujian Huji System. We found that Mr. Huang Jinyuan and his family lives in No. *, Fengchuigu,
Longfeng Cun, Shuitou Zhen, Nanan City, Fujian2.
Exhibit 25: Photo of Mr. Huang Jinyuan
Source: Huji System
We have therefore appointed third-party investigator to visit No. *, Fengchuigu, Longfeng Cun,
Shuitou Zhen. We found that the house is in an extremely poor condition with broken parts
everywhere. The stair between first and second floor is blocked and the second floor is
inaccessible. This indicates that the economic condition of Mr. Huang Jinyuan is poor and
cannot possibly own a company that makes over a hundred million of purchases.
Exhibit 26: No. *, Fengchuigu, Longfeng Cun, Shuitou Zhen (Mr. Huang Jinyuans Residential Address)

2
To protect the privacy of Mr. Huang Jinyuan, we have masked his exact address in the public version of
this report

5. Xiamen Hefeng Is Effectively Controlled by Mr. Lin Hui, Mr. Huang Zhongyi and Mr.
Huang Jianfu
Our third-party investigators have further communicated with the employees of Xiamen Hefeng
during physical inspection, and were informed that Xiamen Hefeng is actually an empty
company and the effective manufacturing factory is Fujian Nanan City Zhongtai Stone
Limited. The legal representative of Fujian Nanan City Zhongtai Stone Limited is Mr. Huang
Jianfu and Mr. Huang Jianfu owns 95% of the company, with the remaining 5% owned by Mr.
Xu Quanfu.
After further investigation, we found that Mr. Huang Jianfu and Mr. Huang Zhongyi hold Fujian
Panxing Group Limited together (Mr. Huang Zhongyi holds 95% shares and Mr. Huang Jianfu
holds 5% shares), and has numerous overlapping roles in many companies, showing that they
have a very close relationship:
Exhibit 27: Companies in which Mr. Huang Jianfu and Mr. Huang Zhongyi have overlapping roles
Role of Mr.
Company Role of Mr. Huang Zhongyi
Huang Jianfu
Fujian Nanan Guotai Stone Company Supervisor Executive Director & General Manager
Fujian Nanan Xinjiajia Stone Company Supervisor Executive Director & General Manager
Xiamen Panxing Import and Export
General Manager Executive Director
Trading Ltd.,
Fujian Nanan Zhongxiang Stone
Supervisor Executive Director & General Manager
Company
Fujian Nanan Guojing Stone Company Supervisor Executive Director & General Manager
Fujian Nanan Qifa Stone Company Supervisor Executive Director & General Manager
Fujian Nanan Jingtai Stone Company Supervisor Executive Director & General Manager
Fujian Nanan Jinzhi Stone Company Supervisor Executive Director & General Manager
Fujian Nanan Yixiang Stone Company Supervisor Executive Director & General Manager
Source: National Enterprise Credit Information Publicity System
As disclosed by prospectus, Mr. Lin Hui is also the shareholder of Xiamen Panxing Import and
Export Trading Ltd., and has a close relationship with Mr. Huang Zhongyi. All the above evidence
show that Mr. Huang Jinyuan is not the effective controller of Xiamen Hefeng, but just a nominal
shareholder directed by Mr. Lin Hui, Mr. Huang Zhongyi and Mr. Huang Jianfu. This further
confirms our conclusion: The source of wealth of Xiamen Hefengs two shareholders is highly
doubtful, and it leads us to suspect that Mr. Huang Jinyuan and Mr. Zeng Ming are only
nominal shareholder who hold shares on behalf of Mr. Lin Hui and Mr. Huang Zhongyi so
as to persuade Hong Kong Exchange in granting listing approval.

6. Minimal Amount of Cash and Bank Balance
Flying Minings amount of cash and bank balance is minimal every year. The cash and bank
balance of it is merely RMB 140,000, RMB 39,000 and RMB 753,000 respectively at the end
of 2014-2016. It is hard to believe a company with such scale can be listed on Hong Kong Main
Board. We do not understand how Flying Mining can maintain its daily exploration work with such
a minimal amount of cash and we think that it is abnormal in commercial sense. Although Flying
Mining may largely depend on funds from Mr. Lin Hui, Mr. Lin Hui should at least deposit more
funds in Flying Minings bank accounts for daily operations if it was a normal business.
Exhibit 28: Flying Minings disclosure on its bank and cash balance
Source: Flying Minings prospectus Pg. I-33

7. Valuation Increased Over 12 Times in Just One Year
It has brought to our attention that the Flying Mining acquired Leishoushan Marble Mine at a
mere consideration of RMB 2.18 mn in 2012, and the capital expenditure in the marble mine from
2014 to 2016 is merely RMB 46,037,000 (2014: RMB 31,198,00; 2015: RMB 10,645,000; 2016: RMB
4,194,000; Please refer to the Purchase of items of property, plant and equipment prospectus of
its consolidated statements of cash flows on Pg. I-9 of Flying Minings prospectus). Therefore,
the total cost of the mine is less than RMB 50 mn.
Exhibit 29: Disclosure on Acquisition of Leishoushan Marble Mine
On 2016 Nov 24 (within one year before Flying Minings expected listing date), Mr. Lai Ching Hsun,
a friend of Mr. Lin Hui, acquired 5% shares of Flying Mining from Mr. Lin Hui at a consideration of
RMB 2.5 mn, indicating that the valuation of Flying Mining is merely RMB 50 mn, similar to
the total cost of the mine we mentioned above.
Exhibit 30: Disclosure on Mr. Lin Hui transferring 5% shares to Mr. Lai Ching Hsun
However, if Flying Mining is listed with the offering price of HKD 0.5 per share according
to the original plan, the market capitalization of Flying Mining is as high as HKD 0.78 bn
(around RMB 0.67 bn), 12 times higher than the valuation of Flying Mining one year ago
or the total investment cost. We cannot understand how the valuation of Flying Mining

can increase over 12 times within just a year. We believe that Mr. Lin Hui sold 5% shares to
Mr. Lai Ching Hsun with the sole purpose of circumventing lock-up period such that Mr. Lai
Ching Hsun can quickly dispose his shares after listing. As Mr. Lai Ching Hsuns shareholding
after listing is lower than 5%, no disclosure of interests is required and therefore can hide
this disposal from public.
Flying Mining has once explained that the mine reserve was not confirmed at the time of transfer,
and Mr. Lai Ching Hsun has to bear substantial risks due to the uncertain reserve, therefore the
valuation is relatively low at that time. According to the prospectus, Flying Mining has already
appointed Gansu Geological Team to conduct geological exploration in 2015 Nov and the
geological exploration was finished in 2016 Mar. If Mr. Lai Ching Hsun has concerns over the
uncertainty of mining reserve, why not wait for the completion of geological exploration to
determine a fair consideration before entering into the agreement instead of entering into the
agreement in 2016 Jan hastily, just two months before the completion of geological exploration?
As the geological exploration had already been finished by half in 2016 Jan, is it really possible
that Mr. Lin Hui knows nothing about the sudden substantial appreciation of his mines valuation
and continued to enter into the agreement? Why does Mr. Lai Ching Hsun need eleven months
till the preparation of Flying Minings IPO to pay a mere RMB 2.5 mn? Is the date of entering into
the equity transfer agreement really 2016 Jan 8?
Exhibit 31: Disclosure on geological exploration conducted by Gansu Geological Team

Valuation and Conclusion
We have already presented detailed evidence showing that the majority of framework sales
contracts disclosed by Flying Mining to be highly irregular and have no commercial substance.
The identity and source of wealth of its largest customers controlling shareholders is highly
doubtful. The office of Xiamen Hefeng becomes empty immediately after Flying Mining passing
hearing, just like an end of a drama. It will definitely set a record if a four-year drama with a cost
of less than RMB 50 mn (capital expenditure accounts for most of it) could yield a Hong Kong
Main Boards shell.
Based on the large amount of evidence we presented, we do not consider Flying Mining to be
suitable for listing in Hong Kong, and therefore no valuation is needed.
We believe that sponsor has conducted physical inspection on Xiamen Hefeng during due
diligence and visited its registered address, but did not know that Flying Mining restored the
registered address and returned the office to Xiamen Jinzhiyu shortly after visiting. We suggest
Guotai Junan to carefully consider whether it is suitable to continue act as the sponsor of Flying
Mining after taking our reports contents into consideration. If Guotai Junan believe that the
relevant issues can be resolved, we hope Guotai Junan to state the due diligence done in details
and to confirm explicitly on the accuracy of the response in supplemental prospectus, such that
we can have further response.
In preparing this report, we have engaged various third parties to assist us (including but not
limited to site visits). These parties worked independently of each other and were unaware of the
nature of the final report.
To us, it is of utmost importance to protect our sources and those who have assisted us. We are
in possession of certain information, which we have decided not to publish in this report given its
sensitive nature. The information has been encrypted and stored properly. If we feel the safety
and anonymity of any party has been jeopardized, we will release all sensitive information we
possess.

Disclaimer
This document is for distribution only as may be permitted by law. It is not directed to, or intended for distribution
to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other
jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or
would subject Blazing Research to any registration or licensing requirement within such jurisdiction. It is published
solely for information purposes; it is not an advertisement nor is it a solicitation or an offer to buy or sell any
financial instruments or to participate in any particular trading strategy. No representation or warranty, either
expressed or implied, is provided in relation to the accuracy, completeness or reliability of the information
contained in this document ("the Information"). The Information is not intended to be a complete statement or
summary of the securities, markets or developments referred to in the document. Blazing Research does not
undertake to update or keep current the Information. Any opinions expressed in this document may change
without notice. Any statements contained in this report attributed to a third party represent Blazing Research's
interpretation of the data, and such use and interpretation have not been reviewed by the third party.
Nothing in this document constitutes a representation that any investment strategy or recommendation is
suitable or appropriate to an investors individual circumstances or otherwise constitutes a personal
recommendation. Investments involve risks, and investors should exercise prudence and their own judgement in
making their investment decisions. The financial instruments described in the document may not be eligible for
sale in all jurisdictions or to certain categories of investors. Options, derivative products and futures are not
suitable for all investors, and trading in these instruments is considered risky.
The value of any investment or income may go down as well as up, and investors may not get back the full (or
any) amount invested. Past performance is not necessarily a guide to future performance. Neither Blazing
Research nor any of its employees or agents accepts any liability for any loss (including investment loss) or
damage arising out of the use of all or any of the Information.
Blazing Research currently does not, and will not, have any long or short positions on Flying Mining, and therefore
Blazing Research is unable to realize any gain by changes in share price of Flying Mining.
This document and the Information are provided to you solely for general background information. Blazing
Research has no regard to the specific investment objectives, financial situation or particular needs of any specific
recipient. In no circumstances may this document or any of the Information be used for any of the following
purposes:
(i) valuation or accounting purposes;

(ii) to determine the amounts due or payable, the price or the value of any financial instrument or financial
contract; or
(iii) to measure the performance of any financial instrument.
By receiving this document and the Information you will be deemed to represent and warrant to Blazing Research
that you will not use this document or any of the Information for any of the above purposes or otherwise rely
upon this document or any of the Information.
Research will initiate, update and cease coverage solely at the discretion of Blazing Research, which will also have
sole discretion on the timing and frequency of any published research product. The analysis contained in this
document is based on numerous assumptions which may not be necessarily realistic.

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Summary

In this research report, we will present substantial evidence Flying Mining

Website: www.blazing-research.com / Email: blazing.research.m@protonmail.ch

6. Minimal Amount of Cash and Bank Balance

7. Valuation Increased Over 12 Times in Just One Year

Website: www.blazing-research.com / Email: blazing.research.m@protonmail.ch

Exhibit 1: Screenshot on our email to Hong Kong Exchange

Source: Internal Documents of Blazing Research

Exhibit 2: Screenshot on our email to SFC

Source: Internal Documents of Blazing Research

Website: www.blazing-research.com / Email: blazing.research.m@protonmail.ch

Source: Prospectus of Flying Mining, Pg. 1-2

Website: www.blazing-research.com / Email: blazing.research.m@protonmail.ch

Website: www.blazing-research.com / Email: blazing.research.m@protonmail.ch

Exhibit 4: Flying Minings disclosure on its customers

Source: Flying Minings prospectus Pg. 188

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Exhibit 5: Reported Figures of Xiamen Hefeng

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Source: SAIC & tax filings of Xiamen Hefeng

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Source: SAIC & tax filings of Xiamen Hefeng

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Exhibit 8: Reported Figures of Bizhong United

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Source: SAIC & tax filings of Bizhong United

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Source: SAIC & tax filings of Bizhong United

Website: www.blazing-research.com / Email: blazing.research.m@protonmail.ch

Exhibit 11: Reported Figures of Quanzhou Gaoqi

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Source: SAIC & tax filings of Quanzhou Gaoqi

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Exhibit 13: Reported Figures of Nanan Xiangtai

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Source: SAIC & tax filings of Nanan Xiangtai

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Source: SAIC & tax filings of Nanan Xiangtai

Website: www.blazing-research.com / Email: blazing.research.m@protonmail.ch

Source: SAIC & tax filings of Nanan Xiangtai

Website: www.blazing-research.com / Email: blazing.research.m@protonmail.ch

Exhibit 17: Reported Figures of Quanzhou Xinxing

Exhibit 18: Portion of Flying Minings irregular transaction

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Exhibit 19: Reported Figures of Xiamen Hefeng

Exhibit 20: Reported Figures of Xiamen Fengzhi

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Exhibit 21: Reported Figures of Xiamen Lixinde

Exhibit 22: Reported Figures of Lixinde Guanye

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Source: Physical Inspection

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Source: Physical Inspection

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Exhibit 25: Photo of Mr. Huang Jinyuan

Source: Huji System

Website: www.blazing-research.com / Email: blazing.research.m@protonmail.ch

Website: www.blazing-research.com / Email: blazing.research.m@protonmail.ch

Website: www.blazing-research.com / Email: blazing.research.m@protonmail.ch

Source: Flying Minings prospectus Pg. I-33

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Exhibit 29: Disclosure on Acquisition of Leishoushan Marble Mine

Source: Flying Minings prospectus Pg. 144

Source: Flying Minings prospectus Pg. 125