Announcement in relation to consideration and approval of the merger plan of holding subsidiaries

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ANNOUNCEMENT IN RELATION TO CONSIDERATION AND APPROVAL

OF THE MERGER PLAN OF HOLDING SUBSIDIARIES

The Resolution Regarding the Merger Plan of Holding Subsidiaries was considered and approved at the twenty-eighth meeting of the seventh session of the board of directors of Inner Mongolia Yitai Coal Co., Ltd. (the "Company") held on 7 November 2019. It was agreed that Inner Mongolia Yitai Huzhun Railway Co., Ltd. (內蒙古伊泰呼准鐵路有限公司) ("Yitai Huzhun Railway" or the "Merging Party"), a holding subsidiary of the Company, would merge with Inner Mongolia Yitai Zhundong Railway Co., Ltd. (內蒙古伊泰准東鐵路有限責任公司) ("Yitai Zhundong Railway" or the "Merged Party") by way of absorption and merger (the "Merger"). Unless otherwise stated, the amounts stated in this announcement are expressed in Renminbi.

1. OVERVIEW OF THE MERGER PLAN
   As the surviving party of the Merger, Yitai Huzhun Railway inherits and undertakes all the assets, liabilities, business, personnel and all other rights and obligations of Yitai Zhundong Railway; as the Merged Party of the Merger, Yitai Zhundong Railway will deregister its qualification as a legal person. The name of the surviving company after the Merger will change from "Inner Mongolia Yitai Huzhun Railway Co., Ltd. (內蒙古伊泰呼准鐵路有限責任公司)" to "Inner Mongolia Yitai Hudong Railway Co., Ltd. (內蒙古伊泰呼東鐵路有限責任公司)" (the final name is subject to the approval of the industrial and commercial department).

1. OVERVIEW OF THE TWO SUBSIDIARIES TO BE MERGED
2. 1. Yitai Zhundong Railway

Yitai Zhundong Railway was established in 1998 with a registered capital of RMB1,554 million. It was held 71.27%, 25% and 3.73% equity interests by Inner Mongolia Yitai Coal Co., Ltd., Yanzhou Coal Ordos Neng Hua Transportation and Sale Co., Ltd. and

• For identification purposes only

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Inner Mongolia State-owned Capital Management Co., Ltd., respectively. As of 31 December 2018, its total assets and total liabilities amounted to RMB7.117 billion and RMB1.369 billion, respectively. It recorded an operating income and a net profit of RMB1.917 billion and RMB782 million, respectively, in 2018.

1. 1. Yitai Huzhun Railway
      Yitai Huzhun Railway was established in 2003 with a registered capital of RMB2,074,598,000. It was held 76.99%, 16.67%, 5.03% and 1.30% equity interests by Inner Mongolia Yitai Coal Co., Ltd., Inner Mongolia Mengtai Buliangou Coal Co., Ltd., Datang Electric Power Fuel Co., Ltd. and Hohhot Railway Bureau, respectively. As of 31 December 2018, its total assets and total liabilities amounted to RMB6.055 billion and RMB3.9 billion, respectively. It recorded an operating income and a net profit of RMB495 million and RMB-101 million, respectively, in 2018.
2. NECESSITY OF THE MERGER OF THE TWO HOLDING SUBSIDIARIES
3. 1. It is a need for internal resource integration. The absorption and merger of Yitai Zhundong Railway by Yitai Huzhun Railway will integrate the advantages of the two railways to a maximum, enable them to jointly exert the road network effect, revitalize the capacity of railways of the Company effectively, and solve the problems such as insufficient supply, single flow and shortage of funds of railway companies of Yitai to the maximum extent, which will in turn fundamentally solve the survival and sustainability issues that railway companies will face in the future.

1. The Merger will bring synergies and form complementary advantages. Yitai Zhundong Railway and Yitai Huzhun Railway are both holding subsidiaries of Inner Mongolia Yitai Coal Co., Ltd., both railway transportation enterprises, and their geographical location is relatively close. After the Merger, superior resources, high-quality assets and outstanding talents will be unified to the Company, and the resource advantages will be more obvious. At the same time, the industry layout of railway sector of the Company will be rationally optimized, transportation efficiency will be improved, investment and financing and anti- risk capabilities will be improved.

1. The Merger will reduce operating costs and enhance the ability to continue as a going concern. The Merger is an important strategic measure for adjusting the industrial structure, transforming the development pattern, breaking the bottleneck and strengthening the development potential in the development process of the Company, which is conducive to optimize the transportation environment, integrate high-quality assets and resources, optimize the management structure, reduce management level and accounting level, improve management efficiency and reduce management costs.

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IV. MAIN CONTENT OF THE MERGER PLAN

1. The Consideration of the Merger
   Beijing Zhuoxin Dahua Appraisal Co. Ltd. (北京卓信大華資產評估有限公司) conducted a valuation on assets of the Merging Party and the Merged Party, and issued the Assets Appraisal Report (Zhuoxin Dahua Ping Bao Zi [2019] No. 3004, Zhuoxin Dahua Ping Bao Zi [2019] No. 3005). The appraised total equity values of shareholders of the Merging Party and of shareholders of the Merged Party on the valuation benchmark date (i.e. 31 December 2018) were RMB2,863,536,200 and RMB8,949,871,800, respectively.
2. Way of Equity Conversion of the Merger
   The equity of the Merger will be converted based on the method of converting the capital contribution and the proportion of capital contribution in the merged company of each of the original shareholders in accordance with the appraised net assets, that is, the capital contribution of shareholders after the Merger = the proportion of capital contribution of shareholders in the original company × the appraised net assets of the original company × the registered capital of the merged company/the total net assets of the merged company (Note: the registered capital of the merged company = the sum of the registered capital of the two parties; the total net assets of the merged company= the sum of the appraised net assets of the two parties).
3. Shareholders of the Parties Involved before the Merger and Their Capital Contribution
   3.1 The Merging Party

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1. The Registered Capital of the Surviving Company After the Merger
   The registered capital of the surviving company after the Merger is the sum of the capital contributions paid by all the shareholders registered with the company registration authority by the parties involved, and does not change with the changes in the assets of the surviving company without the statutory procedures. The registered capital of the surviving company after the Merger is RMB3,628,598,000, which is the sum of the original registered capital of Yitai Huzhun Railway (RMB2,074,598,000) and Yitai Zhudong Railway (RMB1,554,000,000).
2. Shareholding Ratio of Shareholders after the Merger
   The consideration is determined based on the total equity value of shareholders of the Merging Party and the Merged Party as set out in the Assets Appraisal Report. The shareholders, capital contribution and shareholding ratio of the merged company are as follows:

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1. Name, Residence and Legal Representative of the Merged Company
   The information on the name, residence and legal representative of the surviving company after the Merger is as follows:
   Company Name: Inner Mongolia Yitai Hudong Railway Co., Ltd. (內蒙古伊泰呼東鐵路 有限責任公司) (the final name is subject to the approval of the industrial and commercial department)
   Company Residence: Yitai Building, North Tianjiao Road, Dongsheng District, Ordos City, Inner Mongolia Autonomous Region
   Legal Representative: Ji Yanlin
2. Business Scope of the Surviving Company After the Merger
   The business scope of the surviving company after the Merger includes: construction of and investment in Hudong Railway and its ancillary facilities; railway passenger and freight transport; railway dangerous freight (gasoline, diesel) transport; raw coal washing and sales; railway operation, management and service and cargo extension service; motor vehicle and line maintenance; warehousing services; railway equipment, platforms, venues, housing and ancillary facilities rental services; sales of railway materials and waste materials; sales of building materials, chemical products (excluding dangerous goods, easy-to-manufacture drugs); technology development, technology transfer, technical services, technical consulting, technical training consulting; catering services, accommodation services, own house leasing. (Businesses that are subject to approval by laws, administrative regulations, and decisions of the State Council are forbidden without permission)

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1. IMPLICATION OF THE MERGER ON THE LISTED COMPANY
   The Merger will facilitate to integrate the resources of the railway sector of the Company, improve efficiency, reduce management costs and promote the overall development of the Company. The Merger does not affect the interests and overall performance of the Company. Both companies involved are holding subsidiaries of the Company. The absorption and merger will not affect the normal operation of the Company, and it is in line with the Company's development ideas and will not harm the interests of the Company and shareholders.

The Company has not signed a merger agreement for the above transaction. Upon the official signing of the merger agreement, the Company will perform its disclosure obligations in a timely manner in accordance with the relevant provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

By order of the Board

Inner Mongolia Yitai Coal Co., Ltd.*

Liu Jian

Executive Director

Inner Mongolia, the PRC, 7 November 2019

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

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