Inner Mongolia Yitai Coal : COAL MINES ENTRUSTED MANAGEMENT AGREEMENTS AND THEIR SUPPLEMENTAL AGREEMENTS AND SUPPLEMENTARY NOTICE OF EGM

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

If you are in doubt as to any aspect of this circular or as to the action you should take, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountants or other professional adviser.

If you have sold or transferred all your shares in Inner Mongolia Yitai Coal Co., Ltd., you should at once hand this circular and the accompanying proxy form and the reply slip to the purchaser(s) or transferee(s) or to the bank, stockbroker or other agent through whom the sale or the transfer was effected for transmission to the purchaser(s) or transferee(s).

COAL MINES ENTRUSTED MANAGEMENT AGREEMENTS AND THEIR

SUPPLEMENTAL AGREEMENTS

AND

SUPPLEMENTARY NOTICE OF EGM

A letter from the Board is set out on pages 3 to 18 of this circular.

A notice convening the Extraordinary General Meeting (the "EGM") to be held at Room 1, Conference Center, Building of Inner Mongolia Yitai Coal Co., Ltd., Ordos, Inner Mongolia, the People's Republic of China (the "PRC") at 3:00 p.m. on Friday, 6 March 2020 (the "Notice of EGM") was dispatched to the Shareholders of the Company on 17 January 2020. The supplementary notice of the EGM (the "Supplementary Notice") is set out on pages 19 to 20 of this Circular.

Whether or not you propose to attend the EGM, you are requested to complete the enclosed revised form of proxy (the "Revised Form of Proxy") in accordance with the instruction printed thereon and return it to the Hong Kong H share registrar of the Company, Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong as soon as possible but in any event no later than 24 hours before the time appointed for the holding of the EGM or any adjournment thereof. Completion and return of the Revised Form of Proxy will not preclude the Shareholders from attending and voting in person at the EGM or any adjournment thereof if they so wish.

Shareholders who intend to attend the EGM in person or by proxy should complete and return the reply slip of the EGM dispatched on 17 January 2020 to the Company's H Share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited, in accordance with the instructions printed thereon on or before Friday, 14 February 2020.

20 February 2020

* For identification purpose only

	CONTENTS
	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
LETTER FROM THE BOARD . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
SUPPLEMENTARY NOTICE OF EGM .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19

- i -

DEFINITIONS

In this circular, unless the context otherwise requires, the following expressions have the following meanings:

"Board"	the board of directors of the Company
"Coal Mines Entrusted Management	the Coal Mines Overall Entrusted Management Agreements entered
Agreements"	into between each of the Entrusting Parties and Zhongtai Energy on
	15 January 2020
"Company"	Inner Mongolia Yitai Coal Co., Ltd. (內蒙古伊泰煤炭股份有限公
	司), a joint stock limited company incorporated in the PRC on 23
	September 1997, whose H shares are listed on the Stock Exchange
	under the stock code of 3948 and whose B shares are listed on the
	Shanghai Stock Exchange under the stock code of 900948
"connected person"	has the meaning ascribed to it under the Listing Rules
"Director(s)"	the director(s) of the Company
"EGM"	the 2020 first extraordinary general meeting of the Company to be
	held at Room 1, Conference Center, Building of Inner Mongolia
	Yitai Coal Co., Ltd., Ordos, Inner Mongolia, the PRC at 3:00 p.m.
	on Friday, 6 March 2020
"Entrusted Management"	the Entrusting Parties entrusted the Six Coal Mines to Zhongtai
	Energy as a whole for management and paid the management fees
	accordingly pursuant to the Coal Mines Entrusted Management
	Agreements
"Entrusting Parties"	The Company, Suancigou Mining, Yitai Baoshan Coal and Yitai
	Dadi Coal
"Group"	the Company and its subsidiaries
"Hong Kong"	the Hong Kong Special Administrative Region of the PRC
"Latest Practicable Date"	17 February 2020, being the latest practicable date prior to the
	printing of this circular for ascertaining certain information herein
"Listing Rules"	the Rules Governing the Listing of Securities on The Stock
	Exchange of Hong Kong Limited
"RMB"	Renminbi, the lawful currency of the PRC
"Shareholder(s)"	the shareholder(s) of the Company

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	DEFINITIONS
"Six Coal Mines"	Talahao Mine, Kaida Mine, Hongjingta No.1 Mine of the Company,
	Dadijing Mine of Yitai Dadi Coal, Baoshan Mine of Yitai Baoshan
	Coal and Suancigou Mine of Suancigou Mining
"Stock Exchange"	The Stock Exchange of Hong Kong Limited
"Suancigou Mining"	Inner Mongolia Yitai Jingyue Suancigou Mining Co., Ltd. (內蒙古
	伊泰京粵酸刺溝礦業有限公司), a limited liability company
	incorporated under the PRC law on 18 September 2007
"subsidiary" or "subsidiaries"	has the meaning ascribed to it under the Listing Rules
"Supplemental Agreements"	the Supplemental Agreements to the Coal Mines Overall Entrusted
	Management Agreements entered into between each of the
	Entrusting Parties and Zhongtai Energy on 20 January 2020
"PRC"	the People's Republic of China, which for the purposes of this
	circular excludes Hong Kong, the Macau Special Administrative
	Region of the People's Republic of China and Taiwan
"Yitai Baoshan Coal"	Inner Mongolia Yitai Baoshan Coal Co., Ltd. (內蒙古伊泰寶山煤
	炭有限責任公司), a limited liability company incorporated in the
	PRC on 10 April 2006
"Yitai Dadi Coal"	Inner Mongolia Yitai Dadi Coal Co., Ltd. (內蒙古伊泰大地煤炭有
	限公司), a limited liability company incorporated in the PRC on 12
	June 2019
"Zhongtai Energy"	Inner Mongolia Zhongtai Energy Co., Ltd. (內蒙古仲泰能源有限
	公司), a limited liability company incorporated in the PRC on 19
	December 2019
"%"	per cent.

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LETTER FROM THE BOARD

Executive Directors:	Registered Office:
Zhang Jingquan	Yitai Building, North Tianjiao Road
Liu Chunlin	Dongsheng District, Ordos
Ge Yaoyong	Inner Mongolia, China
Zhang Dongsheng
Liu Jian	Principal place of business in Hong Kong:
Lv Guiliang	40/F, Sunlight Tower
Lv Junjie	248 Queen's Road East
	Wanchai
Independent non-executive Directors:	Hong Kong
Zhang Zhiming
Huang Sujian
Wong Hin Wing
Du Yingfen
To the Shareholders
Dear Sir or Madam,

COAL MINES ENTRUSTED MANAGEMENT AGREEMENTS AND THEIR

SUPPLEMENTAL AGREEMENTS

AND

SUPPLEMENTARY NOTICE OF EGM

INTRODUCTION

The purpose of this circular, of which this letter forms a part, is to give you the supplementary notice of the EGM and all reasonably necessary information to enable you to make an informed decision on whether to vote for or against those resolutions at the EGM.

References are made to the announcements dated 15 January 2020 and 20 January 2020, in relation to the Coal Mines Entrusted Management Agreements and their Supplemental Agreements.

At the EGM, ordinary resolutions will be proposed to consider and approve (1) the Coal Mines Entrusted Management Agreements entered into by the Company and its holding subsidiaries, respectively; and (2) the Supplemental Agreements entered into by the Company and its holding subsidiaries, respectively.

* For identification purpose only

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LETTER FROM THE BOARD

COAL MINES ENTRUSTED MANAGEMENT AGREEMENTS AND SUPPLEMENTAL AGREEMENTS

1. Background
   On 15 January 2020, each of the Company and its holding subsidiaries, namely Suancigou Mining, Yitai Baoshan Coal and Yitai Dadi Coal, entered into the Coal Mines Entrusted Management Agreements with Zhongtai Energy, pursuant to which, the Company and its holding subsidiaries, namely Suancigou Mining, Yitai Baoshan Coal and Yitai Dadi Coal, entrusted the Six Coal Mines to Zhongtai Energy as a whole for management
   On 20 January 2020, each of the Company and its holding subsidiaries, namely Suancigou Mining, Yitai Baoshan Coal and Yitai Dadi Coal, entered into the Supplemental Agreements.
2. Coal Mines Entrusted Management Agreements
   The principal terms of the Coal Mines Entrusted Management Agreements are as follows:

Parties	:	(1)	The Company, Suancigou Mining, Yitai Baoshan Coal and Yitai
			Dadi Coal (each as one of the Entrusting Parties);

1. Zhongtai Energy (as the entrusted party).

To the best of the Director's knowledge, information and belief after making all reasonable enquiries, Zhongtai Energy and its ultimate beneficial owner, Mr. Liu Yun1, are third parties independent of the Company and its connected persons.

Date

:

15 January 2020

Note: 1. Before being the ultimate beneficial owner of Zhongtai Energy, Mr. Liu Yun was the executive deputy general manager of former Ordos Jiatai Mining Co., Ltd. (鄂爾多斯市嘉泰礦業有限責任公司) ("Jiatai Mining"). He is familiar with the coal industry and has extensive management experience.

The business scope of Jiatai Mining includes general contracting of mining engineering and construction, raw coal production and transportation, roadway exploration and tunnelling work, building decoration and construction, pipeline installation work, retracement of comprehensive coal mining equipment, installation and electromechanical equipment installation work, engineering and construction work of geological disaster management, engineering surveying, sales of supporting materials and electromechanical equipment and accessories, equipment leasing, technology development, technical consultation, construction electromechanical installation, and construction and labour services. Jiatai Mining and the Company remain a stable and sound business cooperation relationship in coal production. Apart from the business cooperation relationship, to the best of the Directors' knowledge, information and belief having made all reasonable enquiries, Jiatai Mining is a third party independent from the Company, its connected persons and their respective associates.

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		LETTER FROM THE BOARD
Term	:	Three years commencing from the effective date of the Coal Mines
		Entrusted Management Agreements;
		If the term of the agreement needs to be extended or shortened due to
		significant changes in manufacturing process and mining conditions, or
		the requirement of the overall integrity of work, a supplementary
		agreement may otherwise be signed in accordance with the principles of
		the Coal Mines Entrusted Management Agreements2.
Conditions	:	The Coal Mines Entrusted Management Agreements shall become
precedent		effective when they are signed by the legal representatives or authorized
		representatives of the parties with their company seals affixed thereto, and
		considered and approved by the shareholders' general meeting of the
		parties.
Principle of	:	1.	Zhongtai Energy shall, under circumstance of understanding and
entrusted			accepting the current status, relevant licenses, technical data, and
management			mine construction of the Six Coal Mines, voluntarily cooperate
			with the Entrusting Parties on the safety, production, technology
			and management of the Six Coal Mines, and sign the Coal Mines
			Entrusted Management Agreements.
		2.	Zhongtai Energy committed to obtain relevant licenses and permits
			and other various government approvals, filing and registration

documents (collectively referred to as the "Licenses") for overall entrusted management of coal mines, and these Licenses are legal and valid3. It has professional operation and management experience and performance in coal mine production, and is in line with the overall entrusted management conditions of coal mines. It has a safety production management unit, equipped with a team of professional and technical personnel, a skilled workforce, and special-purpose operating technicians. Each of the Entrusting Parties voluntarily sign the Coal Mines Entrusted Management Agreements with Zhongtai Energy.

Notes: 2. The main terms of the supplementary agreement will remain the same in the Coal Mines Entrusted Management Agreements, and only the term and management fees shall be adjusted accordingly according to the actual situation. If the cap of comprehensive unit price of management fees shall be increased based on the actual situation, for an increase within 10% of cap of the comprehensive unit price of management fees, the adjustment shall be submitted to the Board as authorized by the general meeting of the Company for consideration and approval; for an increase exceeds 10%, the adjustment shall be submitted to the general meeting of the Company for consideration and approval.

3. As of the Latest Practicable Date, Zhongtai Energy has obtained the most important Licenses such as the Business License and Safety Production License required for the overall entrusted management of coal mines. The Company expects that Zhongtai Energy will obtain all other relevant Licenses by 1 April 2020.

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LETTER FROM THE BOARD

		3.	Under the principles of ensuring the asset ownership, the property
			right relationship, the main responsibilities of ensuring safety
			production and the decision-making power for major matters of the
			Entrusting Parties unchanged, the Entrusting Parties entrust the
			management of safety production work of the Six Coal Mines to
			Zhongtai Energy as a whole.
			Under the principles of ensuring safety production, realizing asset
			preservation and appreciation of the Entrusting Parties, and
			maximizing the interests of both parties, Zhongtai Energy shall
			implement the all-round management for the mines' safety
			production within the entrusted management scope of the
			Entrusting Parties.
		4.	The Entrusting Parties shall ensure the legal operation of the Six
			Coal Mines, and all Licenses being complete and effective; and
			Zhongtai Energy shall ensure that the management concepts and
			technical levels are advanced during the production safety process
			of the Six Coal Mines.
Scope of	:	The	Entrusting Parties entrusted Zhongtai Energy with the all-round
entrusted		management of all assets and safety production systems within relevant
management		scope and area of safety production in both surface and underground
		mines of the Six Coal Mines, and the office and living areas of Zhongtai
		Energy, including but not limited to:
		1.	the production systems from underground to raw coal warehouse,
			including: fully mechanized mining, drivage, hoisting, mechanical
			transportation, ventilation and prevention, power supply, water
			supply, water prevention and control, ant scouring, auxiliary
			transportation management and other systems, mining
			engineering, maintenance of six major systems, measurement,
			working face relocation, primary caving and other services.
		2.	the ground production systems, including: production command
			center, safety monitoring room, anti-scouring monitoring system,
			hoisting machine room, transformer substation, ventilator room,
			compressor house, fire grouting station, explosive device
			warehouse, turnover material warehouse, fire material warehouse,
			machine repair workshop, garage, high-level pool and etc.
		3.	the ground supporting systems, including: boiler room, water
			treatment, property, canteen, plant greening maintenance, fire water
			supply facility maintenance, river cleaning, sporadic maintenance
			and management of other ground production and living facilities
			and etc.

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LETTER FROM THE BOARD

		4.	the ground coal yards, including: weighing, checking tickets, onsite
			management (excluding loading), antifreeze spraying, dust removal
			spray, cleaning and maintenance of silos and weight houses, on-site
			gangue disposal business and etc.
		5.	the supply, repair and inspection of materials and parts needed for
			various equipment (including special equipment) and instruments
			and apparatus within the above scope and system.
		6.	carrying out the construction of standardization of production
			safety (including, but not limited to, risk classification and control,
			potential hazard inspection and management, and safety quality
			benchmarking).
Methods of	:	1.	The Entrusting Parties entrusted the overall entrusted management
entrusted			of the Six Coal Mines to Zhongtai Energy. Zhongtai Energy
management			implements management at its discretion of production safety and
			relevant work of the Six Coal Mines within the scope of entrusted
			management by the Entrusting Parties.
		2.	Zhongtai Energy is responsible for the organization,
			implementation and management of all production safety
			activities of the Entrusting Parties that meet national requirements
			and industry standards, such as coal mining and production safety
			management.
		3.	Zhongtai Energy is responsible for the technical solution
			optimization and technical management during mine production
			and operation management period of the Entrusting Parties.
		4.	Zhongtai Energy is responsible for the production safety
			management and safety system construction of main production
			systems of underground and surface mines of the Entrusting
			Parties.
		5.	Upon the Coal Mines Entrusted Management Agreements are
			entered into and take effect, Zhongtai Energy is fully responsible

for the unified management of safety, production and technology of the Six Coal Mines and is responsible for setting up a mine organization, forming a management team, assigning enough personnel and formulating a management system.

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LETTER FROM THE BOARD

1. Entrusted by the Entrusting Parties, Zhongtai Energy is fully responsible for the management of mine safety, production, technology, personnel and labor, administrative office, entrustment costs, assets and other aspects, involving coal mining, tunnelling, electromechanics, transportation, one ventilation and three prevention, geological survey, water prevention and control, communication system, safety monitoring and other systems, and the comprehensive management during the process of plan reporting and on-site implementation. Zhongtai Energy operates and manages independently within the scope of the entrusted management, and has the right to manage various professional services, various engineering construction, material procurement and salary distribution, and the right to sign contracts in the name of Zhongtai Energy.
2. The Entrusting Parties are responsible for assigning various targets which Zhongtai Energy is responsible for performing. The targets include commercial coal production, coal quality indicators, tunnelling footage, unit price of entrustment, standardization of mine production safety and other plans. The annual plans are fixed annually.
3. The process of entrusted management of Zhongtai Energy is the entire process of coal mine production safety. The basic settlement basis of monthly management fees includes the total amount of monthly completed commercial coal, the amount of completed tunnelling work by Zhongtai Energy and the unit price of entrustment.
4. Zhongtai Energy shall complete other safety production matters necessary for the overall entrusted management of safety production and requested by the Entrusting Parties.

Rights and

:

1.

Rights and obligations of the Entrusting Parties

obligations of

the Parties

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LETTER FROM THE BOARD

The Entrusting Parties are responsible for coal sales, financial management of the legal entity, mine excavation planning, planning and budgeting for production and operation, land acquisition and demolition, well field inspection, subsidence area management, public relations, project cost, signing and settlement of production service contracts, supervision and inspection on safety production technology of mines and the operation of electromechanical equipments, management, supervision and appraisal of Zhongtai Energy's utilisation of the Entrusting Parties' assets4, and management and appraisal of production and operation indicators.

		2.	Rights and obligations of Zhongtai Energy
			Zhongtai Energy is responsible for various management tasks such
			as safety management of mines, production management,
			electromechanical management, technology management, quality
			management, environmental	management, comprehensive
			management, Zhongtai Energy's cost management, Zhongtai
			Energy's financial management as agreed under the Coal Mines
			Entrusted Management Agreements as well as all its production
			activities.
Management	:	The formula for the settlement price of the management fees to be paid by
fees and		the Entrusting Parties to Zhongtai Energy every month is: the settlement
settlement		price = settlement fee per ton of coal × settlement amount + total fixed
		expense + fixed settlement cost + appraisal rewards and punishments. Of
		which, the settlement amount of the settlement fee per ton of coal refers to
		the amount of commercial coal, and the measurement shall be carried out
		in accordance with the Administrative Measures for Coal Measurement of
		Inner Mongolia Yitai Coal Co., Ltd. 《(	內蒙古伊泰煤炭股份有限公司煤
		炭計量管理辦法》).

The Entrusting Parties shall settle the management fees to Zhongtai Energy on a monthly basis. Zhongtai Energy will issue a full value added tax invoice before the 10th day of each month; provided that the issuance of invoice specifically used for value-added tax by Zhongtai Energy is delayed, the payment by the Entrusting Parties shall be deferred accordingly.

Note: 4. According to the actual needs of Zhongtai Energy, the Company will lease related assets and equipments, mainly including coal mining machines and excavating equipments, to Zhongtai Energy at market prices. As at the Latest Practicable Date, the Company didn't lease any asset or equipment to Zhongtai Energy.

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LETTER FROM THE BOARD

Appraisal : The coal production management department of the Company will appraise the actual production and operation of the Six Coal Mines on a quarterly or yearly basis, including cost appraisal, tunneling appraisal, appraisal of lump coal rate, coal quality and recovery ratio, engineering quality appraisal, electromechanical management appraisal, safety management appraisal and environmental protection management appraisal. Based on the appraisal results, the Entrusting Parties will adjust the management fees accordingly.

1. Cost appraisal
   The Administrative Measures for Coal Production Cost of Inner Mongolia Yitai Coal Co., Ltd. 《( 內蒙古伊泰煤炭股份有限公司煤 炭生產成本管理辦法》) is implemented.
2. Tunneling appraisal
   The Administrative Measures for Tunneling Works of Inner Mongolia Yitai Coal Co., Ltd. 《( 內蒙古伊泰煤炭股份有限公司 掘進工程管理辦法》) is implemented.
3. Appraisal of lump coal rate, coal quality and recovery ratio
   The Administrative Measures for Coal Production Quality of Inner Mongolia Yitai Coal Co., Ltd. 《( 內蒙古伊泰煤炭股份有限公司煤 炭生產質量管理辦法》) is implemented.
4. Engineering quality appraisal
   The Administrative Measures for Underground Engineering Quality of Inner Mongolia Yitai Coal Co., Ltd. 《( 內蒙古伊泰煤炭股份有 限公司井下工程質量管理辦法》) is implemented.
5. Electromechanical management appraisal
   The Administrative Measures for Electromechanical Equipment of Inner Mongolia Yitai Coal Co., Ltd. 《( 內蒙古伊泰煤炭股份有限 公司機電設備管理辦法》) is implemented.

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LETTER FROM THE BOARD

1. Safety management appraisal
   The Classification Appraisal Measures for Safety Management of Inner Mongolia Yitai Coal Co., Ltd. 《( 內蒙古伊泰煤炭股份有限 公司安全管理水平分級評價考核辦法》) and the Reward and Punishment Measures for Safety Production of Inner Mongolia Yitai Coal Co., Ltd. 《( 內蒙古伊泰煤炭股份有限公司安全生產獎 懲辦法》) are implemented.
2. Environmental protection management appraisal
   The Administrative Measures for Environmental Protection of Inner Mongolia Yitai Coal Co., Ltd. 《( 內蒙古伊泰煤炭股份有限公司環 境保護管理辦法》) is implemented.

3. Supplemental Agreements

The main content of the Supplemental Agreements is as follows:

As the management fees contain many items, using the settlement fee per ton of coal, total fixed expenses, fixed settlement cost and appraisal rewards and punishments as the basis and method of calculation, the caps of comprehensive unit price of management fees are consolidated as follows according to accounting basis under China Accounting Standards for Business Enterprises (all prices set out below are exclusive of tax):

The cap of comprehensive unit price of management fees for Talahao Mine is RMB52.56/ton, of which: the production cost is RMB46.51/ton (materials: RMB5.89/ton, labor: RMB20.22/ton, manufacturing expenses: RMB20.40/ton), and the management fees are RMB6.05/ton.

The cap of comprehensive unit price of management fees for Hongjingta No. 1 Mine is RMB109.11/ton, of which: the production cost is RMB91.41/ton (materials: RMB7.36/ton, labor: RMB31.38/ton, manufacturing expenses: RMB52.67/ton), and the management fees are RMB17.70/ton.

The cap of comprehensive unit price of management fees for Kaida Mine is RMB88.74/ton, of which: the production cost is RMB80.56/ton (materials: RMB9.02/ton, labor: RMB37.31/ton, manufacturing expenses: RMB34.23/ton), and the management fees are RMB8.18/ton.

The cap of comprehensive unit price of management fees for Baoshan Mine is RMB111.55/ton, of which: the production cost is RMB98.84/ton (materials: RMB8.35/ton, labor: RMB40.52/ton, manufacturing expenses: RMB49.97/ton), and the management fees are RMB12.71/ton.

The cap of comprehensive unit price of management fees for Dadijing Mine is RMB111.52/ton, of which: the production cost is RMB98.46/ton (materials: RMB12.61/ton, labor: RMB37.60/ton, manufacturing expenses: RMB48.25/ton), and the management fees are RMB13.06/ton.

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LETTER FROM THE BOARD

The cap of comprehensive unit price of management fees for Suancigou Mine is RMB40.26/ton, of which: the production cost is RMB35.31/ton (materials: RMB6.22/ton, labor: RMB13.86/ton, manufacturing expenses: RMB15.23/ton), and the management fees are RMB4.95/ton.

The above caps of comprehensive unit price of management fees are calculated based on the scope of entrusted management, the actual data over the years and excavation continuation plan of the Entrusting Parties, and the actual settlement shall follow the provisions of the Coal Mines Entrusted Management Agreements. In case of changes in geological conditions, the parties shall otherwise enter into a supplemental agreement.

The Supplemental Agreements shall become effective when they are signed by the legal representatives or authorized representatives of the parties with their company seals affixed thereto, and considered and approved by the shareholders' general meeting of the parties.

The Supplemental Agreements shall be proposed to the EGM for consideration and approval, and it is proposed to the EGM for authorizing the Board to enter into a supplemental agreement with Zhongtai Energy subsequently within the range of 10% increase in the caps of comprehensive unit price of management fees, which term is stipulated under the Supplemental Agreements.

4. Basis for Determining Management Fees

The management fees of the Entrusted Management are determined after arm's length negotiation of the parties. The management fees include the settlement fee per ton of coal, total fixed expenses, fixed settlement cost and appraisal rewards and punishments. The settlement fee per ton of coal and the total fixed expense will be determined annually based on the mining continuation plan reviewed by the Entrusting Parties and the actual consumption of the previous years5; the fixed settlement cost is settled based on the Entrusting Parties' quota and Zhongtai Energy's actual completed project volume; the appraisal reward and punishment will be implemented based on the appraisal result. If the geological conditions change, both parties shall further negotiate to enter into a supplementary agreement.

The settlement fee per ton of coal includes the cost of materials and accessories during the production process, the wages and welfare surcharges for piecework within the scope of entrusted management, technical service and management fees, safety risk fees and other expenditures; the total fixed expenses include the hourly wages and welfare surcharges within the scope of entrusted management, operating costs of six major systems, boiler room service costs, water treatment service costs, R&D expenditures, equipment repair costs, equipment inspection cost, daily expenses of daily safety production standardization, vehicle expenses and management costs, etc.; the fixed settlement costs include working face relocation costs, roadway excavation costs and mining engineering costs, etc.. In terms of the pricing of the above fees, the Company will use the market prices determined by reference to the quotations of three to five independent third parties obtained from public tenders or

Note: 5. The coal output of the Group over the past five years are: 2014: 43,207,620.31 tons; 2015: 34,336,842.60 tons;

2016: 36,882,605.10 tons; 2017: 47,289,625.64 tons; 2018: 47,686,914.35 tons, respectively.

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LETTER FROM THE BOARD

inquiries as the basis. If there is no market price for reference, the Company will negotiate for pricing with Zhongtai Energy mainly based on the historical prices. The Board is of view that the above pricing mechanism is fair and reasonable and is on normal commercial terms.

5. Annual Caps and Calculation Basis of Management Fees

The estimated management fees are calculated based on the annual production plan. In case of changes in actual output and geological conditions, the comprehensive unit price of management fees changes, and the annual caps of management fees will also change. Under certain geological conditions, if the actual output is larger, the comprehensive unit price of the management fees will be lower. The caps of comprehensive unit price of management fees are calculated based on the settlement fee per ton of coal, total fixed expenses, fixed settlement cost and appraisal rewards and punishments in the above calculation formula for the settlement price of the management fees and the estimates for each component of fees according to accounting basis under China Accounting Standards for Business Enterprises.

The proposed annual caps of management fees for the years 2020, 2021 and 2022 are RMB2.164 billion, RMB2.3804 billion and RMB2.3804 billion, respectively. The proposed annual cap of management fees for the year 2020 is calculated based on the annual production plan and geological conditions in 2020. In subsequent years, the cap of comprehensive unit price of management fees shall be recalculated based on factors such as the production plan and geological conditions of the year, and in turn the annual caps of management fees shall be further determined. During the term of the Coal Mines Entrusted Management Agreements, in the subsequent years, if the comprehensive unit price of management fees shall be increased based on changes in geological conditions or the production plan for the year, for an increase within 10% of the caps of comprehensive unit price of management fees as agreed in the Supplemental Agreements, the adjustment shall be submitted to the Board as authorized by the general meeting of the Company for consideration and approval, and a supplemental agreement shall be entered into; for an increase exceeds 10%, the adjustment shall be submitted to the general meeting of the Company for consideration and approval, and a supplemental agreement shall be entered into. If no adjustment is required, it will be executed in accordance with the comprehensive unit price of management fees as agreed in the Supplemental Agreements.

The proposed annual cap of management fees is fixed. The proposed annual caps of the management fees for the years 2021 and 2022 have taken into account a possible 10% increase of the caps of comprehensive unit price of management fees. For the annual settlement fee not to exceed the proposed annual cap of management fees, the Company determines whether the accumulated monthly settlement management fees exceed the product of the cap of comprehensive unit price of management fees and the cumulative settlement amount in settlement. If exceed, the Company will negotiate with Zhongtai Energy to deduct the excess; if not, the settlement amount will not be adjusted, and the Company will settle the management fees based on the actual amount calculated by the formula for the settlement price of the management fees above. If it is determined that the annual settlement fee would exceed the proposed annual cap of management fees and the excess could not be deducted through negotiation with Zhongtai Energy, the Company shall submit the revised proposed annual cap of management fees to the general meeting of the Company for the shareholders' consideration and approval.

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LETTER FROM THE BOARD

6. Reasons for and Benefits of the Entrusted Management

In 2006, the coal mines of the Group commenced to conduct technical transformation, and the production process changed from the traditional blasting procedures to the modern comprehensive mechanized coal mining procedures. Considering the Group's weakness in coal technology, the shortage of related professional and technical personnel, different duration of services of the mines and a huge staff burden after the mine resources dried up under the premise of adopting the proprietary model, the Group decided to adopt a production professional service mode (that is, a labour outsourcing mode) and introduced a number of professional service units with rich production experience to provide professional services for part of production operations of the Group's coal mines. The above-mentioned professional service units with rich production experience include Jiatai Mining, Ordos Taipu Mining Engineering Co., Ltd. (鄂爾多斯市泰普礦業工程有限責任公司), Shanxi Anchang Construction Engineering Co., Ltd. (山西安暢建築工程有限公司), Shaanxi Tongxing Construction Engineering Co., Ltd. (陝西同興建工有限公司), Inner Mongolia Ronggui Mining Engineering Co., Ltd. (內蒙古榮貴礦業工程有限責任公司), Shanxi Kaiyuan Yitong Mining Technology Engineering Co., Ltd. (山西開源益通礦業科技工程有限公司), Mizhi Yujiang Construction Engineering Co., Ltd. (米脂縣榆江建築工程有限公司), Inner Mongolia Jieyiheng Mining Co., Ltd. (內蒙古杰一恒礦業有限責任公司), Inner Mongolia Yintai Construction Installation Co., Ltd. (內蒙古胤泰建築安裝有限責任公司), Shaanxi Hongbenshun Construction Engineering Co., Ltd. (陝西弘本順建築工程有限公司), Yulin Dehou Mining Construction Co., Ltd. (榆林市德厚 礦業建設有限公司), Ordos Huadun Technology Co., Ltd. (鄂爾多斯市華盾科技有限公司), Inner Mongolia HAPH High-Tech Co., Ltd. (內蒙古華安普惠高新技術有限公司) and Weifang Huaguang Communication Co., Ltd. (濰坊華光通訊股份有限公司).

On 6 December 2019, the State Administration of Coal Mine Safety (國家煤礦安全監察局) issued the Administrative Measures for Coal Mine Overall Entrusted Management Safety (Trial) 《( 煤礦整體 託管安全管理辦法（試行）》) (the "Entrusted Management Measures"), which will come into effect on 1 April 2020. According to the provisions of the Entrusted Management Measures, "the entrusted management of mines must adopt the method of overall entrusted management, and the mining surface or roadway maintenance operation shall not be illegally outsourced as an independent work. The overall entrusted management shall cover all underground production systems and ground dispatching rooms, safety monitoring rooms, hoisting rooms, substations, ventilator rooms, compressor rooms, gas drainage and pumping stations and other ground production systems that directly serve the coal production, as well as all production activities" and "a coal mine that has formed a trusteeship fact before the publication of these Measures must meet the various requirements specified before these Measures are formally implemented". Therefore, the Entrusted Management is an inevitable choice for the Group to strictly implement the Entrusted Management Measures and conduct production and operation activities in accordance with laws and regulations. Currently, the Group's underground coal mines adopt a production model of cooperating with professional service units for labour outsourcing, which is not in compliance with the relevant provisions of the Entrusted Management Measures. In order to strictly implement the national policies, the Group chooses to entrust the Six Coal Mines in general.

Besides the Six Coal Mines, the Group also directly owns Nalinmiao Mine No. 1, Baijialiang Mine and Nalinmiao Mine No. 2. Among which, for Nalinmiao Mine No. 1, the underground mining has been completed and disaster management (that is, remediation of coal mines that have already been

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LETTER FROM THE BOARD

mined, which does not belong to underground mining) is being carried out within the coalfield to further recover coal resources; for Baijialiang Mine, it has been changed to open-pit mining; for Nalinmiao Mine No. 2, underground mining is expected to be completed in March 2020, and follow- up disaster management will be carried out in the coalfield to further recover coal resources. According to the above-mentioned provisions of the Entrusted Management Measures, the Entrusted Management Measures are only applicable to underground mining of coal mines, and there is no provision for production management forms involving disaster management projects and open-pit mining coal mines. In addition, the Entrusted Management Measures will be implemented from 1 April 2020. Therefore, Nalinmiao Mine No. 1, Baijialiang Mine and Nalinmiao Mine No. 2 do not need to conduct overall entrusted management according to the Entrusted Management Measures. After the Entrusted Management, the Group will fully comply with the provisions of the Entrusted Management Measures.

In the Entrusted Management, according to the Coal Mines Entrusted Management Agreements, the Entrusting Parties entrusted the production systems of the Six Coal Mines, such as fully mechanized mining, drivage, hoisting, mechanical transportation, ventilation and prevention, power supply, water supply, water prevention and control, auxiliary transportation management to Zhongtai Energy as a whole, and the Group is responsible for resource management, asset management, license application, mining planning, safety production supervision, coal sales and other matters. On condition that the Group's mining rights, ownership and shareholding relationship of the Six Coal Mines remain unchanged, the Entrusted Management will not cause substantial changes in the coal business model of the Group and will not have a significant adverse impact on the financial position the Group. The production mode of the Six Coal Mines has been transformed from labour outsourcing to overall entrusted management, which can reduce management levels and the workload of organization and coordination, being conducive to unified scheduling, unified command, unified coordination, unified training and improving production efficiency.

In addition, according to the provisions of the Entrusted Management Measures, which stipulate that "the entrusted party has responsibility for safety production management of the entrusted coal mines, and is fully responsible for production, safety, technology and other tasks, as well as ensures the effective implementation of safety production, and the manager of the entrusted coal mines is the first person responsible for safety production", the Entrusted Management could reduce the safety risk and safety responsibility of the Entrusting Parties.

As the entrusted party of the Entrusted Management, Zhongtai Energy has obtained the Safety Production License issued by Inner Mongolia Coal Mine Safety Supervision Bureau (內蒙古煤礦安 全監察局). Zhongtai Energy is founded by Mr. Liu Yun and is the merged entity of Jiatai Mining, being the strongest professional service unit that cooperated with the Group and as the initiator, and other professional service units that cooperated with the Group. These professional service units6 have rich experience and capabilities in on-site management of coal mines, strong practical experience and professional underground service capabilities. Moreover, Zhongtai Energy is familiar with the geological conditions of entrusted coal mines. No run-in cycle is required in coal mining and

Note: 6. To the best of the Directors' knowledge, information and belief having made all reasonable enquiries, these professional service units and their ultimate beneficial owners are third parties independent from the Company, its connected persons and their respective associates.

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LETTER FROM THE BOARD

production management, which is conducive to ensuring the smooth continuity of overall entrusted management of coal mine production, and better guaranteeing the safe production of coal mines and improving economic benefits.

The Entrusted Management is in line with the development needs of the Group and will not harm the interests of the Company and its minority Shareholders.

1. Implications of the Listing Rules
   Having reassessed the situation and accounting treatment of the Entrusted Management, the Company now considers that the Entrusted Management falls within the provisions of Rule 14.04(1)(g) of the Listing Rules, the Entrusted Management does not constitute a notifiable transaction under Chapter 14 of the Listing Rules but is still subject to the consideration and approval of the Shareholders at the EGM in accordance with Rules 9.1 and 9.3 of the Rules Governing the Listing of Stocks on the Shanghai Stock Exchange.
   The Coal Mines Entrusted Management Agreements and Supplemental Agreements shall be proposed to the EGM for consideration and approval, and it is proposed to the EGM for authorizing the Board to enter into a supplemental agreement with Zhongtai Energy subsequently within the range of 10% increase in the caps of comprehensive unit price of management fees.
2. 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.
   Information on Suancigou Mining
   Inner Mongolia Yitai Jingyue Suancigou Mining Co., Ltd. is a limited liability company incorporated in the PRC on 18 September 2007, a holding subsidiary of the Company, in which 52% equity interests is held by the Company. Its principal businesses include coal production and sales, processing and sales of mineral products.
   Information on Yitai Baoshan Coal
   Inner Mongolia Yitai Baoshan Coal Co., Ltd. is a limited liability company incorporated in the PRC on 10 April 2006, a wholly-owned subsidiary of the Company. Its principal businesses include coal production and sales.

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LETTER FROM THE BOARD

Information on Yitai Dadi Coal

Inner Mongolia Yitai Dadi Coal Co., Ltd. is a limited liability company incorporated in the PRC on 12 June 2019, a wholly-owned subsidiary of the Company. Its principal businesses include coal production, transportation, washing and sales.

Information on Zhongtai Energy

Zhongtai Energy is a limited liability company incorporated in the PRC on 19 December 2019 and is wholly owned by Liu Yun. The main business scope of Zhongtai Energy includes general contracting of mining engineering and construction, raw coal production and transportation, roadway exploration and tunnelling work, building decoration and construction, pipeline installation work, installation and electromechanical equipment installation work, engineering and construction work of geological disaster management, engineering surveying, sales of supporting materials and electromechanical equipment and accessories, equipment leasing, construction electromechanical installation, construction and labor services (excluding labor dispatch), etc.

THE EGM

The EGM will be held by the Company for the purpose of considering and approving by the Shareholders, by way of ordinary resolutions, (1) the Coal Mines Entrusted Management Agreements entered into by the Company and its holding subsidiaries, respectively; and (2) the Supplemental Agreements entered into by the Company and its holding subsidiaries, respectively.

Votes at the EGM for all resolutions shall be taken by way of poll. As at the date of this circular, to the best of the Director's knowledge, information and belief after making all reasonable enquiries, none of the Shareholders has a material interest in the Entrusted Management and is required to abstain from voting with respect to the proposed resolutions.

The EGM will be held by the Company at Room 1, Conference Center, Building of Inner Mongolia Yitai Coal Co., Ltd., Ordos, Inner Mongolia, the PRC at 3:00 p.m. on Friday, 6 March 2020. The Notice of EGM was dispatched to the Shareholders on 17 January 2020. The Supplementary Notice is set out on pages 19 to 20 of this circular. These two notices should be read together.

Whether or not you propose to attend the EGM, you are requested to complete the Revised Form of Proxy in accordance with the instructions printed thereon and return the same to the H share registrar of the Company in Hong Kong, Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen's Road East, Wan Chai, Hong Kong as soon as possible and in any event no later than 24 hours before the time appointed for the holding of the EGM or any adjournment thereof. Completion and return of the Revised Form of Proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish.

Shareholders who intend to attend the EGM in person or by proxy should complete and return the reply slip of the EGM dispatched on 17 January 2020 to the Company's H Share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited, in accordance with the instructions printed thereon on or before Friday, 14 February 2020.

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LETTER FROM THE BOARD

CLOSURE OF REGISTER FOR MEMBERS OF H SHARES

The register of members of H shares of the Company will be closed from Wednesday, 5 February 2020 to Friday, 6 March 2020 (both days inclusive). In order to qualify for attending and voting at the EGM, all transfer documents must be lodged by holders of H shares to the Company's H share registrar, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong before 4:30 p.m. on Tuesday, 4 February 2020.

RECOMMENDATIONS

Based on the relevant information disclosed herein, the Directors, including the independent non-executive Directors, believe that entering into the Coal Mines Entrusted Management Agreements and the Supplemental Agreements is on normal commercial terms and in the ordinary and usual course of business of the Group, and is in the interest of the Company and its Shareholders as a whole. Accordingly, the Board recommends that the Shareholders vote in favor of and approve the resolutions in relation to the Coal Mines Entrusted Management Agreements and the Supplemental Agreements to be proposed at the EGM.

By order of the Board

Inner Mongolia Yitai Coal Co., Ltd.

Zhang Jingquan

Chairman

20 February 2020

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SUPPLEMENTARY NOTICE OF EGM

SUPPLEMENTARY NOTICE OF EXTRAORDINARY

GENERAL MEETING

Reference is made to the notice of the EGM of Inner Mongolia Yitai Coal Co., Ltd. (the "Company") dated 17 January 2020 which set out the resolution to be considered by Shareholders at the EGM to be convened at Room 1, Conference Center, Building of Inner Mongolia Yitai Coal Co., Ltd., Ordos, Inner Mongolia, the People's Republic of China (the "PRC") at 3:00 p.m. on Friday, 6 March 2020. Unless indicated otherwise, capitalised terms used in this supplementary notice shall have the same meanings as those defined in the circular (the "Circular") of the Company dated 20 February 2020.

SUPPLEMENTARY NOTICE is hereby given that the EGM will be held as originally scheduled. In addition to the resolution set out in the notice of the EGM dated 17 January 2020 (the "Notice of EGM"), the following resolution will be considered and approved:

AS ADDITIONAL ORDINARY RESOLUTION

1. To consider and approve the resolution in relation to the Supplemental Agreements to the Coal Mines Overall Entrusted Management Agreements entered into by the Company and its holding subsidiaries, respectively.

References are also made to the announcements of the Company dated 15 January 2020 and 20 January 2020 (these "Announcements"). According to these Announcements, the Entrusted Management constitutes a major transaction of the Company. Having reassessed the situation and accounting treatment of the Entrusted Management, the Company now considers that the Entrusted Management falls within the provisions of Rule 14.04(1)(g) of the Listing Rules, the Entrusted Management does not constitute a notifiable transaction under Chapter 14 of the Listing Rules but is still subject to the consideration and approval of the Shareholders at the EGM according to relevant domestic provisions. Further information will be disclosed in the Circular.

By order of the Board

Inner Mongolia Yitai Coal Co., Ltd.*

Zhang Jingquan

Chairman

Inner Mongolia, the PRC, 20 February 2020

* For identification purpose only

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SUPPLEMENTARY NOTICE OF EGM

As at the date of this notice, 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.

Notes:

1. Save for the inclusion of the newly submitted resolution, there are no other changes to the resolution set out in the Notice of the EGM. For the details and other matters in relation to the other resolution(s) to be considered at the EGM, please refer to the notice of the EGM and the Circular.
2. Since the form of proxy sent together with the Circular (the "First Form of Proxy") does not contain the additional proposed resolution as set out in this supplementary notice, a new form of proxy (the "Revised Form of Proxy") has been prepared and is enclosed with this supplementary notice.
3. The Revised Form of Proxy for use at the EGM is enclosed and is also published on the website of The Stock Exchange of Hong Kong Limited (www.hkexnews.hk) and the Company's website (www.yitaicoal.com). Whether or not you intend to attend the EGM, you are requested to complete and return the enclosed Revised Form of Proxy in accordance with the instructions printed thereon not less than 24 hours before the time fixed for holding the EGM or any adjournment thereof (as the case may be). Completion and return of the Revised Form of Proxy will not preclude you from attending the EGM and voting in person if you so wish.
4. A Shareholder who has not yet lodged the First Form of Proxy in accordance with the instructions printed thereon is requested to lodge the Revised Form of Proxy if he or she wishes to appoint proxies to attend the EGM on his or her behalf. In this case, the First Form of Proxy should not be lodged.
5. A Shareholder who has already lodged the First Form of Proxy in accordance with the instructions printed thereon should note that:
6. 1. If no Revised Form of Proxy is lodged in accordance with the instructions printed thereon, the First Form of Proxy will be treated as a valid form of proxy lodged by the Shareholder if duly completed. The proxy appointed under the First Form of Proxy will also be entitled to vote in accordance with the instructions previously given by the Shareholder or at his/her discretion (if no such instructions are given) on any resolution(s) properly put to the EGM, including the additional proposed resolution as set out in this supplementary notice.
   2. If the Revised Form of Proxy is lodged in accordance with the instructions printed thereon not less than 24 hours before the time appointed to hold the EGM or any adjourned meeting (the "Closing Time"), the Revised Form of Proxy will be treated as a valid form of proxy lodged by the Shareholder if duly completed.
   3. If the Revised Form of Proxy is lodged after the Closing Time, the Revised Form of Proxy will be deemed invalid. It will not revoke the First Form of Proxy previously lodged by the Shareholder. The First Form of Proxy will be treated as a valid form of proxy if duly completed. The proxy appointed under the First Form of Proxy will also be entitled to vote in accordance with the instructions previously given by the Shareholder or at his/her discretion (if no such instructions are given) on any resolution(s) properly put to the EGM, including the additional proposed resolution as set out in this supplementary notice.
7. Shareholders are reminded that completion and return of the First Form of Proxy and/or the Revised Form of Proxy will not preclude them from attending and voting in person at the EGM or any adjournment thereof.

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