Relationship with Controlling Shareholders

THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT RELATIONSHIP WITH CONTROLLING SHAREHOLDERS

OVERVIEW

Immediately following the completion of the Reorganization but prior to the [REDACTED] and the [REDACTED], Spring Snow Limited, held 90.0% of the issued share capital of our Company. As at the Latest Practicable Date, Spring Snow Limited was held as to 48.3% by Lucky Street Limited (which was wholly owned by Mr. Yu Bangping), as to 12.9% by Black Pearl Limited (which was wholly owned by Mr. Sun), as to 28.7% by Sunrise Morning Limited (which was wholly owned by Ms. Qu), as to 7.2% by Beautiful Day Limited (which was wholly owned by Mr. Yu Bangcheng), and as to the remaining 2.9% by Seasons In The Sun Limited (which was wholly owned by Mr. Wang).

Upon completion of the [REDACTED] and the [REDACTED] (assuming the [REDACTED] is not exercised and without taking into account any Shares which may fall to be issued upon the exercise of share options granted under the [REDACTED]), Spring Snow Limited, will hold [REDACTED]% of the issued share capital of our Company.

As such, Spring Snow Limited, Mr. Yu Bangping, Lucky Street Limited, Mr. Sun, Black Pearl Limited, Ms. Qu, Sunrise Morning Limited, Mr. Yu Bangcheng, Beautiful Day Limited, Mr. Wang and Seasons In The Sun Limited will together be entitled to directly or indirectly exercise or control the exercise of 30% or more of the voting rights at the general meeting of our Company immediately upon completion of the [REDACTED] and the [REDACTED], assuming the [REDACTED] is not exercised and without taking into account any Shares which may fall to be issued upon the exercise of Share Options granted under the [REDACTED]. Accordingly, these parties are considered as a group of Controlling Shareholders immediately following completion of the [REDACTED] and the [REDACTED].

Among our abovementioned group of Controlling Shareholders, Mr. Yu Bangping, Mr. Sun and Mr. Wang are our executive Directors. For more details on Mr. Yu Bangping’s, Mr. Sun’s and Mr. Wang’s biographies, please refer to the section headed “Directors and Senior Management — Executive Directors” in this document.

As at the Latest Practicable Date, our group of Controlling Shareholders do not hold shares in any listed companies to the extent subject to reporting or disclosure requirements in that jurisdiction.

As for the purpose of presentation of the historical financial information of our Group in the Accountants’ Report set out in Appendix I to this document, Mr. Yu Bangping is considered as the only controlling shareholder after taking into consideration his contractual arrangement with Ms. Qu, pursuant to which Ms. Qu follows the decisions of Mr. Yu Bangping in all shareholders’ meetings. Under such contractual arrangement, Mr. Yu Bangping is able to control our Group’s entities throughout the Track Record Period under the principles of merger accounting under Accounting Guideline 5 “Merger Accounting for Common Control Combination” issued by the Hong Kong Institute of Certified Public Accountants. Please refer to Notes 2 and 41 in the Accountants’ Report set out in Appendix I to this document for further details.

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INTEREST OF CONTROLLING SHAREHOLDERS IN GUIZHOU BANGDA

Guizhou Bangda is principally engaged in mining business comprising exploration and mining of No.25 coking coal and related coal trading business in Guizhou Province, the PRC. No.25 coking coal is a metallurgical coal suitable for use in coke production. Guizhou Bangda is a company established in the PRC on 15 November 2006 and the equity interest of which is held as to 80% by Mr. Yu Bangping, 10% by Mr. Yu Bangcheng and 10% by Mr. Wang respectively. Each of Mr. Yu Bangping and Mr. Wang is an executive Director of our Company.

Historically and prior to the 2016 Restructuring taking place, the mining rights of the two operating coal mines of our Group, namely the Hongguo Mine and the Baogushan Mine, and certain related assets were held by Guizhou Bangda and Old Songshan, a sole proprietorship enterprise owned by Mr. Yu Bangping. The Hongguo Mine and the Baogushan Mine became our operating coal mines as a result of the 2016 Restructuring. For further details of the 2016 Restructuring and of the acquisition by our Group of the Hongguo Mine and the Baogushan Mine and the transfer of certain related assets to our Group from Guizhou Bangda and Old Songshan, please refer to the paragraphs headed “The 2016 Restructuring” and “Acquisition During the Track Record Period” in the section headed “History, Reorganization and Group Structure” in this document.

As at the Latest Practicable Date, Guizhou Bangda owned the mining rights of and operated three coal mines in Guizhou Province, namely, Dongli mine (貴州邦達能源開發有限公司盤縣板橋鎮東李煤礦), Changxing mine (貴州邦達能源開發有限公司盤縣淤泥鄉昌興煤礦) and Laowadi mine (貴州邦達能源開發有限公司盤縣石橋老窪地煤礦), together the “Excluded Mines”, and the business carried on by Guizhou Bangda and the Excluded Mines is referred to in this document as the “Excluded Business”. The Excluded Mines were acquired by Guizhou Bangda in 2013 and 2014 from third parties respectively pursuant to governmental coal mines reorganization scheme initiated and led by the Guizhou Provincial Coal Mining Enterprise Merger and Reorganization Work Leading Group Office and the Energy Bureau of Guizhou Province (貴州省煤礦企業兼併重組工作領導小組辦公室及貴州省能源局). The principal coal product of the Excluded Mines is No.25 coking coal, which is different in types, quality and principal characteristics from 1/3 coking coal produced by our Group and is discussed further below in this section.

As the Latest Practicable Date, we do not have any equity interest in Guizhou Bangda and Guizhou Bangda does not have any equity or shareholding interest in any member of our Group.

In respect of the [REDACTED], Guizhou Bangda will not form part of our Group and accordingly the Excluded Business will not form part of the business of our Group, having considered the principal coal product of our Group and the Excluded Business are distinct from each other as further elaborated in this section. Furthermore, we also consider certain uncertainties and risks associated with the current expansion project of each of the Excluded Mines. From the perspective of regulatory requirements, the construction of the expansion project of the Excluded Mines requires the approvals from the Energy Bureau of Guizhou Province (貴州省能源局), the Guizhou Land and Resource Department (貴州省國土資源廳), the Guizhou Water Resource Department (貴州省水利廳),

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Our Group is principally engaged in the mining, production and sale of 1/3 coking coal (also known as “clean coal”), whereas Guizhou Bangda is principally engaged in the mining, production and sale of No. 25 coking coal. As further elaborated below, the principal coal product of our Group and the Excluded Business are distinct from each other, and coupled with the protective measures to be put in place upon [REDACTED] including but not limited to the non-competition undertakings from the Controlling Shareholders and Guizhou Bangda the details of which is disclosed in this section below, we are of the view that there is no actual or potential competition between the respective principal businesses of our Group and Guizhou Bangda’s Excluded Business.

To demonstrate that there is no actual or potential competition between our business and the Excluded Business and that our respective businesses are clearly delineated, we set forth below a detailed discussion of the differences in the business of our Group and Guizhou Bangda and our respective independent operation including but not limited to:

• distinct principal coal products;

• separate mining rights and production facilities;

• segregation of operation and management teams;

• unique market condition resulting in common customers for coking coal; and

• existence of multiple coal mines producing 1/3 coking coal and No.25 coking coal.

(a) Coal product of our Group (1/3 coking coal) and the Excluded Business (No.25 coking coal)

The clean coal produced from our Hongguo Mine and Baogushan Mine is classified as 1/3 coking coal based on the Chinese Classification of Coal. During our coal preparation process, by-products namely middling coal and sludge coal are also produced.

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According to the Frost & Sullivan Report, 1/3 coking coal is a bituminous coal but with a relatively low to moderate to relatively high volatile content. 1/3 coking coal has strong caking properties, good stability over heat and high mechanical strength. It is a higher grade metallurgical coal suitable for coke production when used alone or blended with other types of metallurgical coal such as No. 25 coking coal. Based on the Frost & Sullivan Report, No. 25 coking coal is a bituminous coal with a relatively low degree of metamorphism and a relatively low volatile content. It is a metallurgical coal suitable for coke production when blended with other types of metallurgical coals of higher grade such as 1/3 coking coal.

The difference in types, quality and principal characteristics between the 1/3 coking coal and the No. 25 coking coal was also confirmed in writing by the Energy Bureau of Liupanshui City (六盤水市能源局) and the Guizhou Coal Mine Design and Research Institute (貴州省煤礦設計研究院). According to their respective confirmations, the quality and characteristics of No. 25 coking coal of the Excluded Mines are different from the 1/3 coking coal produced from the Hongguo Mine and the Baogushan Mine of our Group. In addition, 1/3 coking coal and No. 25 coking coal are produced from different coal mines. According to a market study report titled “中國西南地區焦煤市場研究報告” (the “Coking Coal Analysis Report”) compiled by China Coal Technology & Engineering Group Nanjing Design & Research Institute Co. Ltd. (中煤科工集團南京設計研究院有限公司) (“Nanjing Design & Research Institute”) (please refer to the note below for an introduction of the Nanjing Design & Research Institute), in 2017, there were 36 operating mines producing 1/3 coking coal and 12 operating mines producing other types of coking coal (including No. 25 coking coal) in Panzhou City, Guizhou Province of the PRC.

Note:

Nanjing Design & Research Institute was established in 1964 in Shuicheng, Guizhou Province, China. It is a wholly owned subsidiary of China Coal Technology and Engineering Group Co. Ltd. (中國煤炭科工集團有限公司), which is directly managed by the State-owned Assets Supervision and Administration Commission of the State Council (國務院國有資產監督管理委員會) of the PRC. Nanjing Design & Research Institute specializes in a broad spectrum of projects, such as coal mining, coal preparation, architecture, structure, power plant, coal chemical, mechanics, plant technology, electric driving and automation, communication, power transmission and transformation, railway, highway, bridge and culvert, heating and ventilation, water supply and drainage, environment engineering, rock and earth work, engineering geology, engineering survey, computer, economic cost and etc. In particular, Nanjing Design & Research Institute offers services of exploration, design, EPC (engineering, procurement and construction) project, coal machinery, supervision, production and operation and coal testing.

According to the information available to us, Nanjing Design & Research Institute has an important role in the development of coal industry and technology system reform in China. During the past five decades, it has completed many Chinese coal industry plans, designed and constructed a batch of modern mines with business expansion from northern to southern China, which has contributed to the technological progress and development of China’s coal industry. Nanjing Design & Research Institute is strong in consultation and design of mining districts and mine projects and has completed 31 mining district overall designs and 120 mine designs, making an outstanding contribution to China’s coal industry. In addition, Nanjing Design & Research Institute is a research and consultation unit recognized by the Energy Bureau of Guizhou Province (貴州省能源局). Over the years, it has participated in a number of governmental projects, master planning of mining districts and pre-construction design and consultations in Guizhou Province, China.

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(b) Separate mining rights and mine locations, production facilities, and management centres

The mining business of our Group comprises the Hongguo Mine and the Baogushan Mine, while the Excluded Business conducted by Guizhou Bangda comprises the three Excluded Mines. As confirmed by our PRC Legal Advisers, Jiutai Bangda, one of our Group members, is the registered owner of each of the Hongguo Mine and the Baogushan Mine, while Guizhou Bangda is the registered holder of the mining right licence of each of the Excluded Mines. In other words, separate and distinct mining right licence is granted to each of our two operating coal mines and the Excluded Mines, specifying the distinct location of each of them. In terms of coal washing, which forms part of the coal preparation process whereby undesirable materials and impurities are removed from raw coal extracted from our coal mines, we have our own coal washing plant namely, the Songshan Coal Preparation Plant.

The headquarters and centres of management of our Group and Guizhou Bangda locate in different locations. Apart from our leasing to Guizhou Bangda of an area of approximately 7,192.68 square meters in our headquarter premises situating at the office building next to E’langpu Leisure Square, Hongguo Town, Pan County, Guizhou Province of the PRC, whereby Guizhou Bangda uses the aforementioned leased area as offices, each of our Group’s and Guizhou Bangda’s businesses are operated and situated in different locations. As at the Latest Practicable Date, there was no sharing of machinery, equipment, office space or coal preparation facilities between our Group and Guizhou Bangda.

Typical customers for coking coal are coking enterprises, iron and steel or chemical manufacturers possessing coke production capabilities. The production of coke requires the use of coking coal and other types of coal as raw materials. In turn, coke is a key raw material used in the production of iron and steel. Both 1/3 coking coal and No. 25 coking coal are constituent resources in the production of coke.

According to the Frost & Sullivan Report, the biggest difference between 1/3 coking coal and No.25 coking coal is the volatile, sulfur content, adhesion, etc. For different coking needs, the use of constituent coal types, including No. 25 coking coal and 1/3 coking coal ratio, may vary. Generally speaking, No. 25 coking coal has lower volatilization, higher sulfur content and higher cohesion, and 1/3 coking coal has higher volatilization, lower sulfur content and lower cohesion. According to Frost & Sullivan, No. 25 coking coal is metallurgical coal suitable for coke production only when blended with other types of metallurgical coal of higher grade such as 1/3 coking coal. Due to their different characteristics, coking plants normally require a combination of various types of coal including 1/3 coking coal and No. 25 coking coal in order to produce coke of a specified quality. As such, 1/3 coking coal and No. 25 coking coal are not interchangeable constituents in the production of coke of a specified quality and they are not substitutes for each other.

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(d) Our Group and Guizhou Bangda have own sales and procurement teams and access to customers and suppliers

Historically, prior to the completion of the Assets Transfer in August 2016 (the particulars of which are set out in the section headed “History, Reorganization and Group Structure” in this document), the Old Operating Entities sold all of their coal products to their customers through Guizhou Bangda and conducted purchases of mining materials and spare parts mainly through Longding Trading, a connected person of our Company.

Since the completion of the Assets Transfer, our Group has been entering into sale and purchase agreements with our suppliers and customers directly. We have established our own sales team who acts as the direct contact point for our customers and conducts our sales independent of Guizhou Bangda. At the same time, we have our own procurement team to maintain direct business relationships with all of our suppliers for mining materials and spare parts. The commercial terms of the sales and procurement agreements entered into between our Group and our customers and/or suppliers since the completion of the Assets Transfer are materially the same as those sales and procurement agreements entered into between Guizhou Bangda and the ultimate customers and Longding Trading and the ultimate suppliers respectively.

(e) Some of our customers for 1/3 coking coal also purchased No. 25 coking coal from Guizhou Bangda due to unique market condition

During the Track Record Period, some of our customers for 1/3 coking coal also purchased No. 25 coking coal from Guizhou Bangda (the “Common Customers”). In 2015, 2016, 2017 and the five months ended 31 May 2018, there were five, five, nine and four Common Customers, respectively. Our sales of 1/3 coking coal to the Common Customers accounted for approximately 72.5%, 75.1%, 84.7% and 83.6% of our total revenue in 2015, 2016, 2017 and the five months ended 31 May 2018, respectively. This feature of Common Customers is expected to continue in the future.

The existence of Common Customers between our Group and Guizhou Bangda during and beyond the Track Record Period is a result of the unique market condition in the southwestern region of the PRC, where the operation of our Group situates.

With reference to the Coking Coal Analysis Report compiled by Nanjing Design & Research Institute, Guizhou Province of the PRC has abundant coal resources and is an important coal production province in the southern region of the PRC. In Guizhou Province, the coking coal resources are mainly located in Guiyang (貴陽), Liuzhi (六枝), Panzhou (盤州), Shuicheng Coal Area (水城礦區) etc. Although there is an oversupply of coking coal in Panzhou City, Guizhou Province, the situation is reversed in its nearby regions, such as Chongqing, Sichuan Province and Yunnan Province and there has been an overall excess demand for coking coal in Southwest China (including, Chongqing, Sichuan Province, Yunnan Province and Guizhou Province) during 2014 to 2016. Due to its bulk commodity nature, coking coal is generally consumed regionally. Given that there is an excess demand for coking coal in southwest China, coking coal produced in Guizhou

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Province is generally sold to coking plants in Southwest China. According to the Coking Coal Analysis Report, the total coke production in southwest China amounted to approximately 31.575 million tonnes in 2016, of which, approximately 42% was produced by the top 10 coking plants in such region. The total coking coal consumed by these top 10 coking plants was approximately 18.49 million tonnes in 2016. While in 2016, the total coal production in Panzhou City, Guizhou Province was approximately 36.929 million tonnes and coking coal accounted for approximately 70%, representing approximately 25.8503 million tonnes.

According to Nanjing Design & Research Institute, during the coke production process, coking plants normally require a combination of various types of coal as constituents including (a) coking coal (which includes No. 25 coking coal), fat coal, 1/3 coking coal and gas fat coal; (b) gas coal; and (c) lean coal. As per the Coking Coal Analysis Report, although No. 25 coking coal and 1/3 coking coal are usually both required by coking plants, they are not substitutes for each other due to their difference in characteristics. Accordingly, since both coking coal (including No. 25 coking coal) and 1/3 coking coal are raw materials necessary for coke production and as per the Coking Coal Analysis Report, the total amount of coking coal consumed by the top 10 coking plants was approximately 18.49 million tonnes while the total amount of coking coal produced in Panzhou City, Guizhou Province in 2016 was approximately 25.8503 million tonnes, it is common for the customers of 1/3 coking coal producers in Panzhou City, Guizhou Province to be the same clientele as those of No. 25 coking coal producers such as Guizhou Bangda.

Prior to the completion of the Assets Transfer in August 2016, the Common Customers generally entered into one-year coal purchase framework agreement with Guizhou Bangda covering both 1/3 coking coal produced from the Hongguo Mine and the Baogushan Mine and No. 25 coking coal produced from the Excluded Mines. The framework agreement specified the price and quality specification for each of 1/3 coking coal and No. 25 coking coal. During the term of the framework agreement, the Common Customers placed purchase orders with Guizhou Bangda indicating the exact quantity of 1/3 coking coal or No. 25 coking coal required, the delivery schedule and location and price as and when their need for such type of coal arise. In addition, supplemental agreement(s) were entered into by the parties when there was a change in price. Given the distinct quality and characteristics between 1/3 coking coal and No. 25 coking coal, purchase orders were generally separately placed for 1/3 coking and No. 25 coking coal and Guizhou Bangda generally deliver these two types of coal to the same Common Customer separately in accordance with the relevant purchase order. This is because the timing of delivery and quantity required depends on the needs of the customers.

After the completion of the Assets Transfer, the Common Customers enter into separate coal purchase contracts with each of Jiutai Bangda of our Group and Guizhou Bangda separately as and when their respective needs for 1/3 coking coal and No. 25 coking coal arise.

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(f) Industry phenomenon that coal mines operate independently from each other

According to Nanjing Design & Research Institute, in 2017, there were 36 operating mines producing 1/3 coking coal and 12 operating mines producing other types of coking coal (including No. 25 coking coal) in Panzhou City, Guizhou Province. The existence of operating coal mines producing different coal types demonstrated that it is an industry phenomenon that coal mines generally operate independently from each other and other coal mines producing 1/3 coking coal in Panzhou City, Guizhou Province are able to operate independently and sustain on its own without any reliance on other coal mines, including mines producing No. 25 coking coal.

Prior to the acquisition by Guizhou Bangda of the Excluded Mines, the Excluded Mines were owned by third parties independent of Mr. Yu Bangping and our connected persons. In other words, the Excluded Mines historically operated independently from the Hongguo Mine and the Baogushan Mine, and vice versa, prior to the abovementioned coal mines reorganization whereby Guizhou Bangda became the ultimate owner of the Excluded Mines, the Hongguo Mine and the Baogushan Mine.

As disclosed above, each of our Group and Guizhou Bangda has independent access and sales to the customers and we have established our own sales team to carry out independent sales function. In addition, each of our Group and Guizhou Bangda has the independent rights to negotiate the price in respect of the sales of the respective coal products to the customers without any need to consult or interact with each other.

Based on the statistics available to Nanjing Design & Research Institute, the market share of our Hongguo Mine and Baogushan Mine is approximately 5.2% in terms of the total 1/3 coking coal production in Panzhou City, Guizhou Province in 2017 and the market share of the Excluded Mines is approximately 5.3% in terms of the total principal coking coal (including No. 15, 24 and 25 coking coal) production in Panzhou City, Guizhou Province in 2017.

As further supported by the Coking Coal Analysis Report, coking plants are free to decide from whom they would purchase the different types of coals. As advised by our PRC Legal Advisers, there are currently no laws or regulations in effect at neither the national nor the regional level which regulate users of coal products in respect of their choice of coal product suppliers. As purchase orders for 1/3 coking coal and No. 25 coking coal are placed separately, the decision to simultaneously purchase 1/3 coking coal and No. 25 coking coal from us and Guizhou Bangda, respectively, is entirely a commercial decision of the Common Customers which is made at their free will.

(g) Dedicated Board and segregate senior management team of our Group independent from Guizhou Bangda

Our Group and Guizhou Bangda have different management teams in their respective operations. Our Board comprises nine Directors, of which five are executive Directors and four are independent non-executive Directors. Please refer to the section headed “Directors and Senior Management” in this document for the biographies of our

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Directors and senior management. Our Group has a number of experienced personnel in senior management positions that are distinguished from personnel employed by Guizhou Bangda. Each of our two coal mines and the Excluded Mines is under the management and supervision of a separate and distinct team comprising principally, chief of mine (礦長), chief engineer (總工程師), head of production (生產礦長), head of machinery and equipment (機電礦長) and head of production safety (安全礦長), and each of our coal mines and the Excluded Mines has its own mining workers and staff to carry out the day-to-day operations.

Guizhou Bangda and us have core management teams that function independently from each other. The table below sets forth the composition of our Board and the directors and supervisor of Guizhou Bangda immediately upon the [REDACTED]:

Our Company Guizhou Bangda

Executive Mr. Yu Bangping Mr. Yu Bangping Directors (Chairman) (Note 1) (Chairman) (Note 1) Mr. Wang Shize (Note 1) Mr. Yu Bangcheng Mr. Sun Dawei (Note 1) Ms. Wang Bo (Note 2) Mr. Li Xuezhong Mr. Lam Chik Shun, Marcus

Independent Mr. Fong Wai Ho N/A Non-executive Mr. Punnya Niraan De Silva Directors Ms. Cheung Suet Ting, Samantha Mr. Wang Hongchuan

Supervisor N/A Ms. Zhu Jiahui

Notes:

1. Mr. Yu Bangping is also the respective legal representative of each of Jiutai Bangda, an operating member of our Group and the registered owner of our Hongguo Mine and Baogushan Mine, and Guizhou Bangda. As at the Latest Practicable Date, Mr. Yu Bangping, Mr. Wang Shize and Mr. Sun Dawei are the directors of Jiutai Bangda.

2. Ms. Wang Bo is the daughter of Mr. Wang Shize.

Upon [REDACTED], save for Mr. Yu Bangping, who will remain as an executive director and legal representative of Guizhou Bangda and an Executive Director of our Company, none of our Executive Directors or senior management of our Group is a director or holds a senior management role in Guizhou Bangda or is responsible for the management of the mines owned by Guizhou Bangda. We believe that Mr. Yu Bangping, being the common director between our Board and Guizhou Bangda, will not affect the management independence of our Group for the following reasons:

(i) Mr. Yu Bangping, as the Chairman, Executive Director and Chief Executive Officer of our Company, will be responsible for the overall management and strategic planning and business development of our Group as well as day-to-day business management, overseeing sales and marketing matters

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and managing external relationships with business partners. In respect of Guizhou Bangda and the Excluded Business, Mr. Yu Bangping, as the chairman of Guizhou Bangda, is responsible for the overall strategic planning and business development of Guizhou Bangda but will leave the day-to-day business management of Guizhou Bangda to the other directors and senior management of Guizhou Bangda;

(ii) upon [REDACTED], Mr. Yu Bangping will dedicate sufficient time and attention in managing the affairs of our Group and as such his role as legal representative and chairman of Guizhou Bangda will not affect the management independence of our Group;

(iii) as advised by our PRC Legal Advisers, pursuant to PRC company law and the articles of association of Guizhou Bangda, only an executive director, chairman and general manager of a company is entitled to become the company’s legal representative and a legal representative has to hold his/her position as legal representative in conjunction with the position of executive director, chairman and/or manager. Since Mr. Yu Bangping is the only shareholder of Guizhou Bangda who holds the Coal Mine Safety Qualification (as defined below), he is the only individual among the shareholders possessing the necessary academic and training qualifications in coal mine safety to act as the legal representative of Guizhou Bangda. Given the academic and training qualifications of Mr. Yu Bangping and his role as founder and majority shareholder of Guizhou Bangda, Mr. Yu Bangping remains as an appropriate person to be the legal representative and chairman of Guizhou Bangda;

(iv) according to the《國家煤礦安監局辦公室關於做好煤礦企業主要負責人和安全生產管理人員安全考核工作的通知》(transliterated as Notification of State Administration of Coal Mine Safety Office on Handling the Work of Coal Mining Enterprise Person-in-Charge and Safe Production Management Personnel Safety Test), the persons-in-charge of a coal mining business are required to participate in an occupational safety and management capability test to obtain a《煤礦安全資格證書》(transliterated as Coal Mine Safety Qualification Certificate) (the “Coal Mine Safety Qualification”). According to the《國家煤礦安監局綜合司關於報送煤礦安全生產基層基礎管理工作有關情況的通知》(transliterated as Notification of State Administration of Coal Mine Safety Comprehensive Bureau on Reporting on the Basic Management Situation of Coal Mines Safe Production at Primary Level), persons-in-charge of a coal mining business include legal representative, chairman, general manager and chief of mine etc. Among the three shareholders of Guizhou Bangda, Mr. Yu Bangping is also the only shareholder who holds the Coal Mine Safety Qualification. Accordingly, if Mr. Yu Bangping resigns from his positions as a legal representative and chairman of Guizhou Bangda, it would take onerous period time and effort to identify a suitable and competent person who has the Coal Mine Safety Qualification to assume his responsibilities. Hence, Mr. Yu Bangping remains as an appropriate person to act as the legal representative and chairman of Guizhou Bangda; and

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(v) a candidate is required to (A) undergo no less than 48 academic hours of training before he/she could sit for the Coal Mine Safety Qualification test; and (B) (i) for managing coal mines with an annual production capacity of 300,000 tonnes or above, such candidate shall possess coal mining related vocational education qualification or above and with two years or more experience in coal mine safety work; or (ii) for managing coal mines with an annual production capacity of less than 300,000 tonnes, such candidate shall possess high school education qualification or above and with two or more years of experience in coal mine safety work. The Coal Mine Safety Qualification test only takes place several times per year, hence, if Mr. Yu Bangping resigns from his positions as a legal representative and chairman of Guizhou Bangda, it would take time to locate a person with appropriate academic and training qualifications in coal mine safety to replace Mr. Yu Bangping as the legal representative and chairman of Guizhou Bangda.

(h) Selected financial information of the Excluded Business

For information purpose only, set forth below are the historical revenues, profits and net asset values of each of our Group and the Excluded Business for the periods or as at the dates indicated:

For the financial year ended 31 December 2015 2016 Excluded Excluded Our Group Business Our Group Business RMB’000 RMB’000 RMB’000 RMB’000 (Audited) (Unaudited) (Audited) (Unaudited) (Note) (Note)

Revenue 467,938 650,960 397,261 633,310 Gross profit 159,695 315,377 151,876 309,253 Gross profit margin 34.1% 48.4% 38.2% 48.8% Earnings before interest and tax 109,175 124,958 118,831 116,206 Profit for the year 60,210 18,400 98,955 17,595

Note: Prior to the completion of the Assets Transfer on 31August 2016, the mining business of the Old Operating Entities were operated by Guizhou Bangda and Old Songshan. For the purpose of information to be included in this section in relation to the financial information of the Excluded Business, Richard Poon & Partners (C.P.A.) Limited was engaged by our Company to conduct a review on the financial statements of Guizhou Bangda and Old Songshan for the two financial years ended 31 December 2016 pursuant to the Hong Kong Standard on Review Engagements 2400 (Engagements to Review Historical Financial Statements).

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In the above table, the net profit of the Excluded Business for the years ended 31 December 2015 and 2016 were significantly less than those of our Group during the same periods mainly due to the incurring by the Excluded Business of approximately RMB85.4 million and RMB91.6 million of finance cost for the years ended 31 December 2015 and 2016 respectively. Such finance cost was incurred in relation to the significant amount of bank borrowings of the Excluded Business as a result of the acquisition of the Excluded Mines in 2013 and 2014 and also for the working capital needs of the Excluded Business.

As at 31 December 2015 2016 Excluded Excluded Our Group Business Our Group Business RMB’000 RMB’000 RMB’000 RMB’000 (Audited) (Unaudited) (Audited) (Unaudited) (Note) (Note)

Total assets 784,101 3,014,564 797,997 3,541,153 Net assets 194,744 839,618 277,008 857,217

On the above basis, our Directors are of the view that there is no actual or potential competition in business between our Group and Guizhou Bangda and there is a clear delineation of business between our Group and Guizhou Bangda. In order to minimize the effect of any actual or potential competition between our Group and Guizhou Bangda, if any, each of our Controlling Shareholders and Guizhou Bangda has provided a non-competition undertaking for the benefit of our Company (for ourselves and on behalf of our subsidiaries). For further details, please see the paragraph headed “Non-Competition Undertakings” below.

In relation to the existing continuing connected transactions between our Group and Guizhou Bangda, our Company will comply with the relevant reporting, annual review, announcement and independent shareholders’ approval requirements (where applicable) under Chapter 14A of the Listing Rules.

NON-COMPETITION UNDERTAKINGS

Pursuant to the non-competition undertakings set out in the deed of non-competition dated 15 November 2018, each person and corporate entity comprised in the group of our Controlling Shareholders and Guizhou Bangda (the “Covenantors,” each an “Covenantor”) has undertaken to our Company (for ourselves and on behalf of our subsidiaries) that during the period commencing from the [REDACTED] and ending on the occurrence of the earliest of the following events or circumstances (as the case maybe) (i) the day on which our Shares cease to be [REDACTED]onthe[REDACTED] or other

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• each of them shall not, whether on his/her/its own or together with his/her/its respective close associates and/or persons to whom each of the Covenantors provides financial assistance to set up and operate businesses (the “Controlled Persons”) and/or any companies in the equity capital of which each of the Covenantor, his/her family interests (in the case of the individual Covenantors) and/or any trustee interests taken together are interested (directly or indirectly) so as to exercise or control the exercise of 30% or more of the voting power at general meetings, or companies in which each of the Covenantors, his/her family interests (in the case of the individual Covenantors) and/or any trustee interests controls the composition of a majority of the board of directors of such companies (the “Controlled Companies”) and/or Independent Third Party; and he/she/it shall procure that none of his/her/its respective close associates and Controlled Persons shall except through his/her/its interests in our Company, whether as principal or agent and whether undertaken directly or indirectly through any person, body corporate, partnership, joint venture or other contractual arrangement and whether for profit or otherwise, participate, acquire or hold any right or interest or otherwise be interested, involved or engaged in or concerned with, directly or indirectly, any business which is in any respect in competition with or similar to or is likely to be in competition with any business of our Group as described in this document, namely, the exploration, mining and refining of 1/3 coking coal, or any business proposed to be carried on by our Group as disclosed in this document and any other business from time to time conducted by any member of our Group or in which any member of our Group is engaged or has invested in, or entered into any of intent or memorandum of understanding to enter into, or which any member of our Group has otherwise publicly announced its intention to enter into, engage in or invest in (whether as principal or agent and whether undertaken directly or through any body corporate, partnership, joint venture, or other contractual or other arrangement) within the PRC or any of the territories where any member of our Group carries and/or will carry on business from time to time (the “Restricted Business”);

• he/she/it shall not and shall procure that none of his/her/its respective close associates and/or Controlled Persons and/or Controlled Companies shall (i) at any time induce or attempt to induce any director, manager or employee or consultant of any member of our Group to terminate his or her employment or consultancy (as appropriate) with our Group, whether or not such act of that person would constitute a breach of that person’s contract of employment or consultancy (as appropriate); (ii) at any time employ any person who has been a director, manager, employee of or consultant to any member of our Group

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who is or may be likely to be in possession of any confidential information or trade secrets relating to the Restricted Business; or (iii) alone or jointly with any other person, or as manager, advisor, consultant, employee or agent for or shareholder in any firm or company, in competition with any member of our Group, canvass, or solicit or accept orders from or do business with any person with whom any member of our Group has done business or solicit or persuade any person who has dealt with our Group or is in the process of negotiating with our Group in relation to the Restricted Business to cease to deal with our Group or reduce the amount of business which the person would normally do with our Group or seek to improve their terms of trade with any member of our Group.

• he/she/it shall (i) keep our Company informed and shall procure his/her/its respective close associates, Controlled Persons and Controlled Companies to keep our Company informed, of new business opportunities and to provide all information reasonably required by the independent non-executive directors of our Company to assist them in their (a) consideration of any new business opportunity; and (b) review, at least on an annual basis, on the compliance of each of the Controlling Shareholders with the terms of the deed of non-competition; and (ii) provide an annual confirmation to our Company for inclusion in its annual report that he/she/it has complied with the terms of the deed of non-competition.

• in the event that he/she/it and/or any of his/her/its respective close associates, and/or any of his/her/its Controlled Persons, and/or any of the Controlled Companies is offered or becomes aware of any potential business opportunity directly or indirectly to engage or become interested in a Restricted Business, he/she/it (i) shall promptly notify our Company in writing and refer such business opportunity to our Company for consideration and provide such information as may be reasonably required by our Company in order to make an informed assessment of such business opportunity; and (ii) shall not and shall procure that his/her/its close associates and/or Controlled Persons and/or Controlled Companies shall not, invest or participate in any such project or business opportunity unless such project or business opportunity shall have been rejected by our Company and the principal terms of which each of the Covenantors or his/her/its close associates and/or Controlled Persons and/or Controlled Companies invest(s) or participate(s) are no more favourable than those made available to our Company.

• our Group will have the first right of refusal to exploit any business opportunity in connection with the exploration, mining and refining of 1/3 coking coal business that could be exploited by each of the Covenantors.

In addition, each of Mr. Yu Bangping, Mr. Sun and Mr. Wang has undertaken to our Company (for ourselves and on behalf of our subsidiaries) that he will devote sufficient time and efforts to discharge his fiduciary duties and responsibilities as a Director.

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Further, each of Mr. Yu Bangping, Mr. Yu Bangcheng, Mr. Wang and Guizhou Bangda has undertaken to our Company (for ourselves and on behalf of our subsidiaries) that, with effect from the [REDACTED], (i) in the event that he/it and/or any of his/its respective close associates, and/or any of his/its Controlled Persons, and/or any of the Controlled Companies is offered an opportunity to sell his/its/their interest (whether all or partial interest held by him/it/them) in the Excluded Business or becomes aware of any such potential opportunity, each of Mr. Yu Bangping, Mr. Yu Bangcheng, Mr. Wang and/or Guizhou Bangda shall provide our Group with the first right of refusal to acquire his/its/their interest in the Excluded Business on such terms which are no less favourable than those made available to any third party; and (ii) our Group will have the first right of refusal to acquire any equity interest in Guizhou Bangda, and any interest in the Excluded Business and/or the Excluded Mines, on the same terms as offered by the proposed purchaser of Guizhou Bangda, the Excluded Business and/or the Excluded Mines (where relevant), as and when such opportunity arisen.

Each Covenantor further undertakes, jointly and severally, to indemnify and keep indemnified our Company (for ourselves and on behalf of our subsidiaries) against any damage, loss or liability suffered by our Company or any other member of our Group arising out of or in connection with any breach of covenants and undertakings and/or any of the obligations of the Covenantors under the deed of non-competition, including any costs and expenses incurred as a result of such breach.

The implementation of the deed of non-competition will be governed and monitored as follows:

• our independent non-executive Directors will be responsible for deciding, without attendance by any executive Director (except as invited by our independent non-executive Directors to assist them or provide any relevant information but in no circumstances shall the executive Director(s) participate in such meeting be counted towards the quorum or allowed to vote in such meeting), whether or not to take up a new business opportunity referred to us under the terms of the deed of non-competition;

• our independent non-executive Directors will be granted full access of financial information and other information they request from the managers of our Company and Covenantors in order to make an informed decision. Our independent non-executive Directors will make each decision based on any factors they consider appropriate and which they consider is beneficial to our Group;

• our independent non-executive Directors may employ an independent financial advisor as they consider necessary to advise them on the terms of any new business opportunity;

• our independent non-executive Directors will also review, on an annual basis, the implementation of the deed of non-competition, the compliance of the non-competition undertakings under the deed of non-competition and any decisions in relation to new business opportunities referred to us, and state their basis and reasons in our Company’s annual report;

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• our Directors will continue to disclose details of any potential competing interests in our annual reports to the Shareholders after the [REDACTED]; and

• our Directors will disclose any new detail concerning any potential competition disclosed in this document in our annual reports to the Shareholders.

In carrying out their duties and responsibilities as detailed above in respect of the implementation of the deed of non-competition, in particular, in assessing and deciding whether or not to take up any new business opportunity referred to our Group under the deed of non-competition and whether or not our Company should exercise the first right of refusal thereunder, we believe that the independent non-executive Directors of our Company will be able to fulfil their respective fiduciary duties towards our Company, exercise their impartial judgement and make their informed decisions in the best interest of our Company and our Shareholders as a whole on the basis that they will be provided with the adequate and sufficient information and materials including but not limited to those related to the financial and operational aspects as considered necessary and relevant for their assessment and consideration and such other additional information as requested by them from time to time. Where required, our independent non-executive Directors will always have access to our management team and make unfettered enquiries as considered necessary by them. Our independent non-executive Directors shall also have the unrestricted right to request for and engage external independent professional advisers to assist them in their deliberation and decision-making process. Our independent non-executive Directors have diversed and balanced business and professional background, experience and financial literacy covering safety control and operation of mining business, corporation operation, audit and internal control, and financial/capital management. In particular, Mr. Wang Hongchuan has over 20 years of experience in coal mining industry in Guizhou Province, the PRC and has good understanding of the industry environment where our Group operates its business. Mr. Fong Wai Ho, a certified public accountant currently operating his own accountancy and audit firm, has solid experience in serving listed companies (including their subsidiaries) in Hong Kong including annual audit, internal control review and annual report review, and matters relating to Listing Rules compliance. All of our independent non-executive Directors have also received training conducted by our legal advisers as to Hong Kong laws, and they understand the responsibilities of our Company and Directors under the Listing Rules, the SFO and other applicable laws and regulations in performing their duties. In view of the above, we believe that despite majority of the independent non-executive Directors does not have individual participation in the coal mining industry in China, they will be capable of fulfilling their duties and responsibilities in respect of the deed of non-competition effectively.

In the event that our Company decides not to proceed with any particular projects or business opportunities and that the Covenantors or his/her/its Controlled Persons and/or Controlled Companies decide to proceed with such a project or business opportunity, we shall announce such decision by way of an announcement setting out therein the basis for us not taking the project or business opportunity.

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DEED OF INDEMNITY

Each person and corporate entity comprised in the group of our Controlling Shareholders has entered into a deed of indemnity in favour of our Group. For more details, please refer to the section headed “Appendix VI — Statutory and General Information — E. Other information — 2. Deed of indemnity” in this document.

INDEPENDENCE FROM OUR CONTROLLING SHAREHOLDERS

Our Directors believe that our Group is capable of carrying on our business independent of, and does not place reliance on, our group of Controlling Shareholders or their respective close associates, taking into consideration the following factors:

Financial Independence

Our Group has an independent financial system and makes financial decisions according to our own business needs. We have our own internal control and accounting systems, accounting and finance department, independent treasury function for cash receipts and payment and independent access to third-party financing. Prior to the completion of the Assets Transfer on 31 August 2016, each of the Old Operating Entities has its own designated accounts personnel to prepare and maintain separate books and records and we have been preparing and maintaining separate books and records independent of any third party at all times.

Any non-trade balances due to Guizhou Bangda and/or any related parties will be settled in full prior to the [REDACTED]. No personal guarantee and/or pledge has been provided by our Controlling Shareholders. All outstanding amounts due to Spring Snow Limited and Gain Resources Limited have been settled in full by way of loan capitalization issue prior to the [REDACTED]. Please refer to the section headed “History, Reorganization and Group Structure — Our Group’s Reorganization — Loan capitalization” in this document for further details. We will not rely on our Controlling Shareholders for financing after the [REDACTED]aswe have sufficient working capital to operate our business independently.

Accordingly, our Directors are of the view that we are financially independent of our Controlling Shareholders and their respective close associates.

Operational Independence

We have established our own organizational structure, and each department is assigned to specific areas of responsibilities. We are also in possession of all necessary relevant licences, approvals and certificates to carry on and operate our business, and we have sufficient operational capacity in terms of capital and employees to operate and manage independently. Save for the continuing connection transactions as disclosed in the sections headed “Connected Transactions — Fully exempt continuing connected transactions” and “Connected Transactions — Non-exempt continuing connected transactions” in this document, we do not rely on our Controlling Shareholders or their respective close associates

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for our operations. We have access to suppliers, customers and an independent management team to function independently. We have our own headcount of employees for our operations and management of human resources.

Our Directors are of the view that there is no operational dependence by us on our Controlling Shareholders and our Group is able to operate independently from our Controlling Shareholders after the [REDACTED].

Management Independence

Our Company maintains an independent Board to oversee our Group’s business. Our Board is responsible for contemplating and approving business plans and strategies of our Group, monitoring the implementation of business plans and strategies and supervising the management of our Group. We take into account the diversed professional background and work experience of our Directors in the composition of our Board for the long term growth and development of our Group after [REDACTED]. Our executive Directors Mr. Yu Bangping, Mr. Sun and Mr. Wang, and our independent non-executive Director Mr. Wang Hongchuan, have extensive experience in coal mining industry in China. With their respective years of experience as senior management in different PRC enterprises and established network in the PRC, our executive Directors can advise on corporate management and investor relation development of our Group. Our executive Director Mr. Lam Chik Shun, Marcus, and our independent non-executive Director Mr. Punnya Niraan De Silva, will help provide expertise and knowledge related to investing, financial planning and management, which will greatly complement the skillset of the other Directors. In particular, our independent non-executive director Mr. Punnya Niraan De Silva has previously worked at different regional offices of the Bank of America Merrill Lynch, a global investment bank including those in Australia, the United States, Hong Kong and Singapore. In his current position as a consultant for Ho Chi Minh City Development Joint Stock Commercial Bank in Vietnam, Mr. De Silva acts as an adviser to the board of directors of the bank and his main responsibility is to provide consulting services and quality assurance on investment projects to the bank including identification of issues during project design, project implementation and completion as well as provision of proposed solutions therefor. With his global exposure coupled with his advisory experience, it is expected that Mr. De Silva will be able to provide practical advice to our Board from a global perspective and share with other members of the Board his business knowledge and experience accumulated from his prior positions in the Bank of America Merrill Lynch and his current advisory role. In addition to her finance background, Ms. Cheung Suet Ting, Samantha, our independent non-executive Director has acted as senior executives for different corporations and startups, and will help our Company stay on top of the latest operating approaches, key performance indicators (KPIs) and trends, etc. so that we can continue to improve our operating efficiencies going forward. Further, with her experience in private equity investments and mergers and acquisitions, as well as experience in corporate finance and investment services, it is expected that Ms. Cheung will be particularly well positioned to advise our Board in identifying, assessing and evaluating potential expansion and acquisition opportunities. Mr. Fong Wai Ho, our

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independent non-executive Director and chairperson of our audit committee, is a certified public accountant with 14 years of experience in auditing (including listed companies in Hong Kong) and business advisory services, will take the lead in advising on the audit and compliance matters of our Group upon [REDACTED].

Although Mr. Yu Bangping, our Chairman, executive Director and Chief Executive Officer, is also an executive director and legal representative of Guizhou Bangda, a business in which he owns 80% equity interest in, our Group has an independent board of directors with four other executive Directors who only serve at our Group and four independent non-executive Directors who oversee our Board’s independence. Our Group also has an independent management team, which is led by a team of senior management with extensive experience and expertise in our business, to implement our Group’s business plans and strategies in the daily operations. Positions at Guizhou Bangda and the predecessor Hongguo Mine and Baogushan Mine are no longer held by any members of our Group’s senior management.

Our Board consists of nine Directors, of which five are executive Directors and four are independent non-executive Directors. Our independent non-executive Directors represent more than one-third of the members of our Board, which is in line with and exceed the current corporate governance best practices in Hong Kong according to the Listing Rules. One of our independent non-executive Directors is a Certified Public Accountant and all our independent non-executive Directors are experienced in different business areas including coal mining industry in the PRC, and audit and financial management and advisory experience on local and regional bases. They have been appointed in compliance with the requirements under the Listing Rules to ensure that the decisions of our Board will be made only after due consideration of independent and impartial opinion. Our independent non-executive Directors are also expected to oversee our Board’s independence from Mr. Yu Bangping, Mr. Sun and Mr. Wang, and to ensure there is no potential conflict of interest or competition between our Board and our Controlling Shareholders. Our Controlling Shareholders only form a minority of our Board. Therefore, our Directors believe that the current composition of our Board will provide a balanced and diverse view in the benefit of our Group’s future business decisions. Please refer to the section headed “Directors and Senior Management” in this document for details.

Each of our Directors is aware of his/her fiduciary duties as a director of our Company, which require him/her to act for the benefit and in the best interests of our Company and does not allow any conflict between his/her position as a Director and personal interest to arise. In the event that there is potential conflict of interest arising from any transaction to be entered into between our Company and our Directors and/or their respective close associates, the interested Director(s), in accordance with the Articles of Association of our Company, shall abstain from voting and not form a quorum on such transactions at the relevant Board meeting of our Company.

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Our Controlling Shareholders, including Mr. Yu Bangping, Mr. Sun and Mr. Wang who are also our Directors have executed the deed of non-competition in favour of our Company (for ourselves and on behalf of our subsidiaries). Each of Mr. Yu Bangping, Mr. Sun and Mr. Wang has undertaken to us that he will devote sufficient time and efforts to discharge his fiduciary duties and responsibilities as our Director. For details, please refer to the above paragraph headed “Non-competition undertakings” in this section.

Save for Mr. Yu Bangping who is an executive director and legal representative of Guizhou Bangda, none of our Directors or senior management members holds any position in any of the companies in which our Controlling Shareholders and their respective associates are interested other than those within our Group.

Having considered the above factors, our Directors are satisfied that they are able to perform their roles in our Company independently. Our Directors are also of the view that our Group is capable of managing its business independently from our Controlling Shareholders and their respective close associates after the [REDACTED].

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