Inner Mongolia Yitai Coal : CONTINUING CONNECTED TRANSACTION AND DISCLOSEABLE TRANSACTION IN RELATION TO THE CROSS-GUARANTEE AGREEMENT

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CONTINUING CONNECTED TRANSACTION

AND DISCLOSEABLE TRANSACTION

IN RELATION TO THE CROSS-GUARANTEE AGREEMENT

The board of directors (the "Board") of Inner Mongolia Yitai Coal Co., Ltd. (the "Company") is pleased to announce that on 30 March 2021, in order to meet the financing needs of the Company and its controlling shareholder Inner Mongolia Yitai Group Co., Ltd. ("Yitai Group") and requirements of some financial institutions on third-party guarantees when financing, the Company entered into the cross-guarantee agreement (the "Cross-guaranteeAgreement") with Yitai Group to establish a mutual guarantee system. Pursuant to which, the Company and Yitai Group and respective subsidiaries of both parties provide guarantee services in respect of their borrowings or financing from financial institutions for each other.

THE CROSS-GUARANTEE AGREEMENT

• For identification purposes only

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• The amount of guarantees provided by the Company and its subsidiaries to Yitai Group and its subsidiaries in respect of borrowings or financing from financial institutions shall not exceed RMB2 billion annually; the accumulated amount of guarantees provided by Yitai Group and its subsidiaries to the Company and its subsidiaries in respect of borrowings or financing from financial institutions shall be subject to the actual amount without cap.
• The entities of the guarantee include the Company and Yitai Group and respective subsidiaries of both parties. The subsidiaries of Yitai Group exclude the Company.
• The provision of cross guarantee services between the Company and Yitai Group and respective subsidiaries of both parties will not charge any guarantee fees from each other.
• The guarantee is a joint liability guarantee.
• The Cross-guarantee Agreement shall be valid after being signed and sealed by the legal representatives or authorized representatives of the Company and Yitai Group and being approved by both parties' authorities.
• The Cross-guarantee Agreement between Yitai Group and the Company will be effective from the date of approval at the general meeting and expire on 31 December 2023.
• Counter guarantee for the cross guarantee between the Company and Yitai Group:
• 1. The counter guarantee is provided unilaterally. Upon the Company or its subsidiaries provide guarantees for Yitai Group or its subsidiaries, Yitai Group or its subsidiaries must provide counter guarantees; however, the Company or its subsidiaries are not obliged to make any counter guarantee for the guarantees of Yitai Group or its subsidiaries. The Company or its subsidiaries will enter into a corresponding counter-guarantee agreement with Yitai Group or its subsidiaries after providing the actual guarantee.

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2) The counter guarantee is a joint liability guarantee with a term until the settlement of bank debts within the cross- guaranteed amount under the agreement or the debts settled by the guarantor on his behalf by the warrantee. It includes all obligations of the warrantee, i.e. all the amounts repaid by the guarantor, compensation (the interest of the amounts repaid by the guarantor as of the settlement date calculated at one-year benchmark lending rate of the People's Bank of China), and other expenses incurred for realization of creditor's rights to the guarantor (including but not limited to litigation costs, attorney fees, etc.).

3) Therefore, the cross guarantee between the Company and Yitai Group will be not in non-compliance with the Notice of Certain Issues in Capital Transactions between Listed Companies and Connected Parties and External Guarantees of Listed Companies (Zheng Jian Fa (2003) No. 56 Circular of the China Securities Regulatory Commission (the "CSRC")) and Notice of the CSRC and CBRC on Regulating the External Guarantees of Listed Companies (Zheng Jian Fa (2005) No. 120 Circular of the CSRC).

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Historical amounts and proposed annual caps:

Basis for annual caps:

When determining the basis for the amount of guarantees required by Yitai Group, the following factors were mainly considered:

As of the date of this announcement, the guarantee provided by the Company to Yitai Group and its subsidiaries amounted to RMB1 billion. In order to replace the original guarantee in full and considering other borrowings and financing condition of Yitai Group and its subsidiaries, it is expected that no more than RMB2 billion of guarantee will be required by Yitai Group and its subsidiaries and to be provided by the Company and its subsidiaries for each year of 2021, 2022 and 2023.

The provision of guarantee services by Yitai Group and its subsidiaries to the Company and its subsidiaries in respect of borrowings or financing from financial institutions are not secured by the assets of the Company and its subsidiaries, and the relevant terms of the guarantee are on normal commercial terms or better. Thus the provision of guarantee services by Yitai Group and its subsidiaries to the Company and its subsidiaries in respect of borrowings or financing from financial institutions is fully exempt pursuant to Rule 14A.90 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules"). The accumulated amount of guarantees provided by Yitai Group and its subsidiaries to the Company and its subsidiaries in respect of borrowings or financing from financial institutions shall be subject to the actual amount without cap.

IMPLICATION UNDER THE LISTING RULES

As at the date of this announcement, Yitai Group directly and indirectly holds 58.76% of the existing issued share capital of the Company and is a controlling shareholder of the Company, and thus constitutes a connected person of the Company under the Listing Rules. Therefore, the Cross- guarantee Agreement between the Company and Yitai Group and the provision of guarantee services contemplated thereunder constitute continuing connected transaction under Chapter 14A of the Listing Rules.

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As the highest applicable percentage ratio of the annual cap in respect of provision of guarantee services by the Company and its subsidiaries to Yitai Group and its subsidiaries under the Cross- guarantee Agreement exceeds 5% but is less than 25% as defined by the Listing Rules, the provision of guarantee services by the Company and its subsidiaries to Yitai Group and its subsidiaries in respect of borrowings or financing from financial institutions contemplated under the Cross-guarantee Agreement constitutes a continuing connected transaction and a discloseable transaction at the same time, and shall be subject to the reporting, annual review, announcement and independent shareholders' approval requirements pursuant to Chapter 14 and Chapter 14A of the Listing Rules. The provision of guarantee services by Yitai Group and its subsidiaries to the Company and its subsidiaries in respect of borrowings or financing from financial institutions contemplated under the Cross-guarantee Agreement is fully exempted pursuant to Rule 14A.90 of the Listing Rules.

Our Company has formed an independent board committee comprising of all independent non- executive directors to provide advice to the independent shareholders regarding the fairness and reasonableness of the terms of provision of guarantee services by the Company and its subsidiaries to Yitai Group and its subsidiaries in respect of borrowings or financing from financial institutions. TC Capital International Limited has been appointed as the independent financial advisor of the Company to provide advice to the independent board committee and the independent shareholders in such regard.

CONFIRMATION FROM DIRECTORS

Mr. Zhang Jingquan, Mr. Liu Chunlin, Mr. Ge Yaoyong, Mr. Zhang Dongsheng, Mr. Liu Jian, Mr. Lv Guiliang and Mr. Lv Junjie, the directors of the Company, hold positions or have interests in Yitai Group, thus they have abstained from voting at the Board meeting in respect of such transaction. Save as disclosed above, none of the directors has any material interest in the Cross-guarantee Agreement entered into between Yitai Group and the Company.

The directors of the Company (including the independent non-executive directors) are of the view that the Cross-guarantee Agreement, the cross-guarantee transactions between Yitai Group and the Company and their annual caps have been entered into on normal commercial terms or better, the terms of which are fair and reasonable and in the interests of the Company and the shareholders as a whole.

INTERNAL CONTROL MEASURES

The Company has adopted the following internal control measures to ensure that connected transactions are fair and reasonable and entered into on normal commercial terms:

• The Company has adopted and implemented a management system on connected transactions. Under this system, our finance management center is responsible for conducting reviews on compliance with relevant laws, regulations, company policies and the Listing Rules in respect of connected transaction agreements. In addition, the finance management center, legal affairs

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department and other relevant departments of the Company are jointly responsible for evaluating the transaction terms under the connected transaction agreements, in particular, the fairness of the pricing terms under each agreement; and

• The independent non-executive directors of the Company have also reviewed and will continue to review the connected transaction agreements to ensure that such agreements, if applicable, are entered on normal commercial terms, fair and reasonable, and carried out pursuant to the terms thereof. The auditor of the Company will also conduct annual review on the pricing and annual caps of such agreements.

For the Cross-guarantee Agreement entered into between the Company and Yitai Group, the Company has adopted the following internal control measures to ensure that the continuing connected transactions are fair and reasonable and on normal commercial terms:

The Company has established and adopted a management system on connected transactions. According to the system, the investor relations management department and the financial management center of the Company are responsible for the information collection and monitoring of connected transactions, and conducting reviews on compliance with relevant laws, regulations, company policies and the Listing Rules in respect of the agreements for continuing connected transactions;

The financial management center, legal affairs department and other relevant departments of the Company are jointly responsible for evaluating the fairness of the transaction terms under the agreements for continuing connected transactions;

The auditor of the Company will also conduct an annual review on annual caps of such continuing connected transactions; the independent non-executive directors of the Company have also reviewed and will continue to review the connected transactions to ensure such agreements are entered into on normal commercial terms, fair and reasonable, and carried out pursuant to the terms thereof.

In order to minimize the risk in relation to the guarantees provided by the Company to Yitai Group and its subsidiaries, the audit committee of the Board (all members are independent non-executive Directors) shall, during the cross-guarantee period:

1. review the guarantee under the Cross-guarantee Agreement. The audit committee has the right to fully understand the business operations and financial position of the borrower before approving the guarantee under the Cross-guarantee Agreement. It would not constitute a breach of the Cross-guarantee Agreement in the event that the audit committee considers it is inappropriate to approve such guarantee after reviewing the financial position of the borrower. To facilitate such review process, Yitai Group and its subsidiaries shall provide their financial

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statements and other relevant information as requested by the audit committee of as soon as possible. The audit committee will take into account the following factors for approving such guarantee:

1. 1. No guarantee shall be granted to a borrower with negative consolidated equity attributable to owners; and
   2. No guarantee shall be granted to a borrower where an event occurs that may constitute an event of default under any of its existing loan agreements;
2. monitor the implementation of each individual guarantee provided by the Company under the Cross-guarantee Agreement;
3. consider the suitability of the guaranteed company;
4. periodically review the management accounts, relevant financial information and books and records of Yitai Group; and
5. periodically review and examine any material adverse changes on the business, properties, assets or operations of Yitai Group, or its ability to perform any of its obligations under the Cross-guarantee Agreement.

The directors of the Company are of the view that the terms of the Cross-guarantee Agreement are fair and reasonable, entered into after arm's length negotiation between both parties on normal commercial terms or better, and in the interests of the Company and the shareholders as a whole. In particular, the Company has considered the following factors: (1) up to now, no single default event occurred with respect to the loans provided to Yitai Group and its subsidiaries; (2) according to the tracking rating on the credit status of Yitai Group in 2020 made by Dagong Global Credit Rating Co., Ltd., the long-term credit rating of the subject entities of Yitai Group maintained at AA+, and the rating outlook remains stable; (3) Yitai Group and its subsidiaries shall provide additional security against counter guarantees for the guarantees provided by the Company. As the default risk under the guarantees provided by the Company is relatively low, based on the benefits of the guarantees of Yitai Group and the additional security provided by Yitai Group and its subsidiaries, the directors of the Company are of the view that the risks associated with the guarantees provided by the Company are reasonable and controllable.

GENERAL INFORMATION

Information on the Company

The Company is a joint stock company incorporated in the PRC with limited liability on 23 September 1997, which is one of the largest coal enterprises in the PRC. The principal businesses of the Company include coal operations, transportation operations, coal related chemical operations and other operations.

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Information on Yitai Group

Yitai Group is one of the Company's controlling shareholders, which is a limited company duly incorporated in the PRC. Yitai Group is a large-scale clean energy enterprise integrating railway and coal-related chemical industry with coal production, transportation and sales as the basis and ecological restoration, organic agriculture and other non-coal industries as the complementation. The ultimate beneficial owner of Yitai Group is Inner Mongolia Yitai Investment Co., Ltd.

DESPATCH OF CIRCULAR

A circular containing, inter alia, (i) details on entering into the Cross-guarantee Agreement with Yitai Group and the transaction that the Company and its subsidiaries provide guarantee services in respect of the borrowings or financing of Yitai Group and its subsidiaries from financial institutions contemplated thereunder; (ii) a letter from the independent financial adviser containing its recommendation to the independent board committee and the independent shareholders in respect of the transaction; and (iii) a letter from the independent board committee containing its recommendation in respect of the transaction, as well as the notice of the shareholders' general meeting, is expected to be despatched on or before 5 May 2021 as the Company requires additional time to finalise certain information to be included in the circular.

By order of the Board

Inner Mongolia Yitai Coal Co., Ltd.*

Zhang Jingquan

Chairman

Inner Mongolia, the PRC, 30 March 2021

As at the date of this announcement, the executive directors of the Company are Mr. Zhang Jingquan, Mr. Liu Chunlin, Mr. Ge Yaoyong, Mr. Zhang Dongsheng, Mr. Liu Jian, Mr. Lv Guiliang and Mr. Lv Junjie; and the independent non-executive directors of the Company are Mr. Zhang Zhiming, Mr. Huang Sujian, Mr. Wong Hin Wing and Ms. Du Yingfen.

* For identification purpose only

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