China Natural Resources (CHNR) Risk Analysis

Pursuant to the HFCAA, the SEC will identify an issuer as a Commission-Identified Issuer if the issuer has filed an annual report containing an audit report issued by a registered public accounting firm that the PCAOB has determined it is unable to inspect or investigate completely, and will then impose a trading prohibition on an issuer after it is identified as a Commission-Identified Issuer for two consecutive years. On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong. In June 2022, we were identified by the SEC as a "Commission-Identified Issuer" in their conclusive list of issuers identified under the HFCAA. On December 15, 2022, the PCAOB issued a report vacating the previous determinations dated December 16, 2021. Our current auditor, HYYH, the independent registered public accounting firm that issued the audit report included elsewhere in this annual report, is headquartered in Baltimore, Maryland, the United States, and has been subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. HYYH is not subject to the determinations announced by the PCAOB in December 2021. Accordingly, until such time as the PCAOB issues any new determination, we are not at risk of having our securities subject to a trading prohibition under the HFCAA because we do not expect to be identified as a Commission-Identified Issuer for a second consecutive year. However, the PCAOB may change its determinations under the HFCAA at any point in the future. We cannot assure you that the PCAOB will always have complete access to inspect and investigate our auditor, or that we will not be identified as a Commission-Identified Issuer again in the future. Whether the PCAOB will continue to be able to conduct inspections of our auditor is subject to substantial uncertainty and depends on a number of factors out of our, and our auditor's, control. A trading prohibition would substantially impair your ability to sell or purchase our common shares when you wish to do so, and the risk and uncertainty associated with delisting would have a negative impact on the price of our common shares.

You may experience dilution to the extent that our common shares are issued upon the exercise of our outstanding warrants, and if we issue additional equity securities, or there are any issuances and subsequent exercises of stock options issued in the future. Up to 139,488 Common shares may be issued with the exercise of warrants at a per share exercise price of $24.00 issued to the investors and up to 9,300 Common shares may be issued with the exercise of warrants at a per share exercise price of $17.60 issued to the placement agent in a private placement (the "Private Placement") in connection with a registered offering of 1,487,870 Common shares to the same investors at a price of $2.20 per Common Share (the "Registered Offering") in February 2024. See, "Item 10.C. Additional Information - Material Contracts."

Sales of our common shares in the public market, or the perception that these sales could occur, could cause the market price of our common shares to decline. As of the date of this annual report, we have 1,256,388 (as adjusted) Common shares issued and outstanding. On February 16, 2024, the Company entered into a securities purchase agreement with certain institutional investors (the "Investors"), pursuant to which the Company agreed to issue and sell, (i) in a registered direct offering, up to an aggregate of 1,487,870 of common shares, no par value of the Company at a per Share purchase price of $2.20, and (ii) in a concurrent private placement, warrants initially exercisable for the purchase of an aggregate of 1,115,903 (139,488 as adjusted) common shares of the Company (the "Investors Warrants"), for gross proceeds of approximately $3.27 million, before deducting fees to the placement agent and other estimated offering expenses payable by the Company. In connection will the Registered Offering and Private Placement pursuant to the terms of a placement agency agreement, dated February 16, 2024 between the Company and Placement Agent (the "Placement Agent Agreement"), the Company agreed to issue to the Placement Agent warrants to purchase an aggregate of up to 74,394 (9,300 as adjusted) Common shares at a per share exercise price of $2.20 ($17.6 as adjusted) (the "Placement Agent Warrants", and together with the Investors Warrants, the "Warrants"). Assuming exercise of all of the Warrants by cash and without adjustment, a maximum of 1,190,297 (148,788 as adjusted) Common shares underlying the Warrants will be offered for sale, subject to any restrictions as applicable under the Securities Act.

Certain of our Selling Shareholders may purchase their respective common shares at prices lower than the market prices in the future and may therefore experience a positive rate of return on their investment, even if our public shareholders experience a negative rate of return on their investment. As a result, the Selling Shareholders are able to recognize a greater return on their investment than shareholders that acquired Common shares in the public market. Up to 1,115,903 (139,488 as adjusted) Common shares may be issued with the exercise of the Investor Warrants at a per share exercise price of $3.00 ($24.0 as adjusted) and up to 74,394 (9,300 as adjusted) Common shares may be issued with the exercise of the Placement Agent Warrants at a per share exercise price of $2.20 ($17.6 as adjusted). Furthermore, the Selling Shareholders may earn a positive rate of return even if the price of the Common shares declines significantly. As a result, the Selling Shareholders may be willing to sell their shares at a price less than shareholders that acquired their Common shares in the public market or at higher prices than the price paid by such Selling Shareholders, the sale of which would result in the Selling Securityholder realizing a significant gain even if other CHNR shareholders experience a negative rate of return.

There are currently approximately 567,894 of our common shares in the public float and, in general, there has not been an active trading market for our shares. Our shares tend to trade along with other shares of public companies whose operations are based in the PRC, and, at times, in tandem with other natural resource companies. These shares tend to exhibit periods of extreme volatility and price fluctuations, even when there are no events peculiar to the Company that appear to warrant price changes. We cannot assure you that price volatility will not continue in the future or, as a result thereof, that market prices will reflect actual values of our company. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our shareholders may disproportionately influence the price of those shares in either direction. The share price could, for example, decline precipitously in the event that a large number of shares are sold on the market without commensurate demand. As a consequence of this enhanced risk, more risk-adverse investors may, due to the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be in the case of the stock of a seasoned issuer, negatively impacting the trading price of our common shares.

The price at which the common shares are quoted on Nasdaq may increase or decrease due to a number of factors. These factors may cause the common shares to trade at prices above or below the prices at which the common shares were first offered without regard to our operations and financial performance. Some of the factors which may affect the price of the common shares include: -   fluctuations in the domestic and international market for listed stocks; -   general economic conditions, including interest rates, inflation rates, exchange rates, commodity and oil prices; -   changes to government fiscal, monetary or regulatory policies, legislation or regulation; -   inclusion in or removal from market indices; -   acquisition and dilution; -   climate change and pandemic risk; -   the nature of the markets in which we operate; and -   general operational and business risks. Other factors which may negatively affect investor sentiment and influence the Company, specifically or the stock market more generally include acts of terrorism, an outbreak of international hostilities or tensions, fires, floods, earthquakes, labor strikes, civil wars, natural disasters, outbreaks of disease or other man-made or natural events. In addition, during 2025, prolonged geopolitical conflicts, elevated interest rates across major economies, and ongoing Sino-US tensions continued to weigh on the global economy and businesses and have disrupted the global commodity market. In addition, tensions in the Middle East, particularly between the United States and Iran, have escalated in recent years and may continue to pose risks to our business. See "Item 3.D. Risk Factors - Risks Relating to Our Mine Exploration Activities in Inner Mongolia - Volatility in the market prices of metals may adversely affect the results of our operations." We have limited ability to insure against some of the risks mentioned above.

Mr. Li Feilie, beneficial owner of a majority of our outstanding common shares, beneficially owns approximately 53.44% of our outstanding common shares, and as a result, Mr. Li is and will continue to be able to influence the outcome of shareholder votes on various matters, including the election of directors and extraordinary corporate transactions such as business combinations. Through his related companies, Mr. Li also provides funding to support the Company's operating expenses and holds a substantial amount of the Company's debt (see "Item 7.B. Major Shareholders and Related Party Transactions – Related Party Transactions," below). Mr. Li's interests may differ from those of other shareholders. Additional information relating to the beneficial ownership of our securities is contained elsewhere in this annual report under "Item 6.E. Directors, Senior Management and Employees – Share Ownership."

Our directors have the power to take certain actions without shareholder approval, including the amendment of our Amended and Restated Memorandum of Association (the "Memorandum") and our Articles of Association (the "Articles") (save and except that such amendments may not restrict the rights or power of our shareholders to amend the Memorandum or the Articles, and may not change the percentage of shareholders required to pass a resolution to amend the Memorandum or the Articles, and further that our directors may not amend the Memorandum or the Articles in circumstances where they may not be amended by our shareholders), and also including an increase or reduction in the maximum number of shares which our company is authorized to issue, which would require shareholder approval under the laws of most jurisdictions in the United States. In addition, the directors of a BVI company, subject in certain cases to court approval but without shareholder approval, may, among other things, implement a reorganization, certain mergers or consolidations with a subsidiary, the sale, transfer, exchange or disposition of any assets, property, part of the business, or securities of the company, or any combination of the foregoing, if they determine it is in the best interests of the company. Our ability to amend our Memorandum and Articles without shareholder approval could allow our directors to implement provisions to those documents that have the effect of delaying, deterring or preventing a change in our control without any further action by the shareholders, including a tender offer to purchase our common shares at a premium over then current market prices, as could the ability of our directors to issue blank check preferred shares.

We are a BVI company, all of our directors are located outside the United States in Hong Kong, all of our assets and officers are located outside the United States in the PRC, and our operations are conducted in the PRC. We do not maintain a business presence in the United States. Therefore, it may not be possible to effect service of process on such persons in the United States, and it may be difficult to enforce any judgments rendered against us or them. Moreover, there is doubt whether courts in the BVI, the PRC or Hong Kong would enforce (a) judgments of United States courts against us, our directors or officers based on the civil liability provisions of the securities laws of the United States or any state, or (b) in original actions brought in the BVI, the PRC or Hong Kong, liabilities against us or any nonresidents based upon the securities laws of the United States or any state.