##### Table of Contents

As filed with Securities and Exchange Commission on June 29, 2010





SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 20-F







| ̈ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------------

OR



|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended December 31, 2009

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

OR



| ̈ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | -------------------------------------------------------------------------------------------

Date of event requiring this shell company report

Commission file number 001-14714





LOGO

(Exact name of Registrant as specified in its charter)

Yanzhou Coal Mining Company Limited

(Translation of Registrants name into English)





Peoples Republic of China

(Jurisdiction of incorporation or organization)

298 Fushan South Road

Zoucheng, Shandong Province

Peoples Republic of China

(Address of principal executive offices)

Zhang Baocai

298 Fushan South Road

Zoucheng, Shandong Province

Peoples Republic of China

(86537) 5382319

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)



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##### Table of Contents

Securities registered or to be registered pursuant to Section 12(b) of the Act.



|                                 |  |  |  |                                          
|-------------------------------- |  |  |  | -----------------------------------------
|Title of each class              |  |  |  | Name of each exchange on which
registered
|                                 |  | 
|American Depositary Shares       |  |  |  | New York Stock Exchange                  
|                                 |  | 
|H Shares, par value RMB1.00 each |  |  |  | New York Stock Exchange*                 



|* | Not for trading in the United States, but only in connection with the listing of the American Depositary Shares.
|- | ----------------------------------------------------------------------------------------------------------------





Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

(Title of class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

(Title of class)





Indicate the
number of outstanding shares of each of the issuers classes of capital or common stock as of the close of the period covered by the annual report.

2,960,000,000 Domestic Shares, par value RMB1.00 per share

1,958,400, 000 H Shares, par value RMB1.00 per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.    Yes  x    No   ̈

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes   ̈    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    Yes  x    No   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this Chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files.)    Yes   ̈    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See
definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large
accelerated filer  x                Accelerated filer   ̈                Non-accelerated filer   ̈

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:



|             |  |                                                                                                          |  |         
|------------ |  | -------------------------------------------------------------------------------------------------------- |  | --------
|U.S. GAAP   ̈ |  | International Financial Reporting Standards as issued
by the International Accounting Standards Board  x |  | Other   ̈

If Other has been checked in response to the previous question, indicate by check mark which financial statement item the
registrant has elected to follow.    Item 17   ̈    Item 18   ̈

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes   ̈    No  x











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##### Table of Contents

TABLE OF CONTENTS



|                                         |  |                                                                              |  |   
|---------------------------------------- |  | ---------------------------------------------------------------------------- |  | --
|                                         |  | Page                                                                        
|                                         | 
|CAUTIONARY STATEMENT                     |  | 1                                                                           
|                                         | 
|DEFINITIONS AND SUPPLEMENTAL INFORMATION |  | 1                                                                           
|                                         | 
|CONVENTIONS                              |  | 3                                                                           
|                                        
|PART I                                  
|                                         |  |                                                                             
|ITEM 1.                                  |  | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                        |  | 3 
|ITEM 2.                                  |  | OFFER STATISTICS AND EXPECTED TIMETABLE                                      |  | 3 
|ITEM 3.                                  |  | KEY INFORMATION                                                              |  | 4 
|ITEM 4.                                  |  | INFORMATION ON THE COMPANY                                                   |  | 13
|ITEM 4A.                                 |  | UNRESOLVED STAFF COMMENTS                                                    |  | 46
|ITEM 5.                                  |  | OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                 |  | 46
|ITEM 6.                                  |  | DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES                      |  | 58
|ITEM 7.                                  |  | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                            |  | 70
|ITEM 8.                                  |  | FINANCIAL INFORMATION                                                        |  | 73
|ITEM 9.                                  |  | THE OFFER AND LISTING                                                        |  | 74
|ITEM 10.                                 |  | ADDITIONAL INFORMATION                                                       |  | 76
|ITEM 11.                                 |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                   |  | 90
|ITEM 12.                                 |  | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                       |  | 93
|                                        
|PART II                                 
|                                         |  |                                                                             
|ITEM 13.                                 |  | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                              |  | 94
|ITEM 14.                                 |  | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |  | 94
|ITEM 15.                                 |  | CONTROLS AND PROCEDURES                                                      |  | 94
|ITEM 16A.                                |  | AUDIT COMMITTEE FINANCIAL EXPERT                                             |  | 95
|ITEM 16B                                 |  | CODE OF ETHICS                                                               |  | 95
|ITEM 16C.                                |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                       |  | 95
|ITEM 16D.                                |  | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                   |  | 96
|ITEM 16E.                                |  | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS       |  | 96
|                                        
|PART III                                
|                                         |  |                                                                             
|ITEM 17.                                 |  | FINANCIAL STATEMENTS                                                         |  | 96
|ITEM 18.                                 |  | FINANCIAL STATEMENTS                                                         |  | 96
|ITEM 19.                                 |  | EXHIBITS                                                                     |  | 96
|                                         | 
|SIGNATURES                               |  | 97                                                                          





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##### Table of Contents

CAUTIONARY STATEMENT

This annual report includes statements of our expectations, intentions, plans and beliefs that constitute forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 (the Securities Act) and Section 21E of the Securities Exchange Act of 1934 (the Exchange Act) and are intended to come within the
safe harbor protection provided by those sections. The statements relate to future events or our financial performance, including but not limited to, projections and estimates concerning the timing and success of specific projects and acquisitions.
We use words such as anticipate, believe, continue, could, estimate, expect, intend, may, plan, potential, predict,
project, should, will, or their negatives, or other similar expressions to identify forward-looking statements.

Without limiting the foregoing, all statements relating to our future operating results and anticipated capital expenditures, borrowings
and sources of funding are forward-looking statements and speak only as of the date of this annual report. These statements are based on assumptions made by us in light of our experience and our perception of historical trends, current conditions
and future developments, as well as other factors we believe are appropriate. While our management considers these assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks,
contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. These risks, contingencies and uncertainties relate to, among other matters, the following:



| |  |  | price volatility for our coal and other products;
| | - |  | -------------------------------------------------



| |  |  | demand for coal in domestic and overseas markets;
| | - |  | -------------------------------------------------



| |  |  | difficulty in managing our rapid growth, business diversification, geographic expansion and acquisitions;
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | changes in legislation, regulations and policies, including a proposal by the Australian federal government to implement a new resource super tax;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the recovery of the methanol industry and methanol prices;
| | - |  | ----------------------------------------------------------



| |  |  | our ability to reduce costs and compete effectively;
| | - |  | ----------------------------------------------------



| |  |  | our need for, and ability to obtain, capital to finance our future expansion plans and capital expenditures;
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | expected increases in production capacity and utilization of new facilities;
| | - |  | ----------------------------------------------------------------------------



| |  |  | intensity of competition;
| | - |  | -------------------------



| |  |  | uncertainties in estimating our proven and probable coal reserves and our ability to replace and develop coal reserves;
| | - |  | -----------------------------------------------------------------------------------------------------------------------



| |  |  | effects of land reclamation and other liabilities;
| | - |  | --------------------------------------------------



| |  |  | geologic, equipment and operational risks related to mining;
| | - |  | ------------------------------------------------------------



| |  |  | economic strength and political stability of countries in which we have operations or serve customers;
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | our ability to realize the anticipated benefits of our acquisition of Felix and Hua Ju Energy;
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | obtaining governmental permits and approvals for our operations;
| | - |  | ----------------------------------------------------------------



| |  |  | availability, timing of delivery and costs of key supplies; and
| | - |  | ---------------------------------------------------------------



| |  |  | other factors, including, but not limited to, those discussed in the section headed Risk Factors, set forth in Item 3 of this annual report.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------

All of the forward-looking statements made in this annual report are qualified by this cautionary
statement. We cannot assure you that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected effect on us, our business or operations. We caution you not to place
undue reliance on any such forward-looking statements. Unless we are required to do so under U.S. federal securities laws or other applicable laws, we do not intend to update or revise any forward-looking statements.

DEFINITIONS AND SUPPLEMENTAL INFORMATION

As used in this annual report, references to Yanzhou Coal, we, our, our Company,
the Group or us refer to Yanzhou Coal Mining Company Limited and its subsidiaries, which have been consolidated into its accounts for the purpose of the consolidated financial statements, unless the context indicates
otherwise. References to the Company refer to Yanzhou Coal on a stand-alone basis.



1



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##### Table of Contents

Yankuang Group or Controlling Shareholder refers to Yankuang Group
Corporation Limited (formerly known as Yanzhou Mining (Group) Corporation Limited).

Yulin Nenghua refers to
Yanzhou Coal Yulin Nenghua Company Limited, a wholly owned subsidiary of the Company mainly engaged in the operation of a 600,000 tonne methanol project in Shaanxi Province.

Heze Nenghua refers to Yanmei Heze Nenghua Company Limited, a 98.33% owned subsidiary of the Company that manages our
exploration for coal resources at the Juye Mine in Shandong Province.

Shanxi Nenghua refers to Yanzhou Coal
Shanxi Nenghua Company Limited, a wholly owned subsidiary of the Company that manages our investment projects in Shanxi Province.

Tianchi Energy refers to Shanxi Heshun Tianchi Energy Company Limited, an 81.31% owned subsidiary of Shanxi Nenghua mainly
engaged in the operation of Tianchi Coal Mine.

Tianhao Chemicals refers to Shanxi Tianhao Chemicals Company
Limited, a 99.89% owned subsidiary of Shanxi Nenghua mainly engaged in the operation of a 100,000 tonne methanol project in Shanxi Province.

Yancoal Australia refers to Yancoal Australia Pty Limited, a wholly owned subsidiary of the Company that manages our
investment projects in Australia.

Austar Company refers to Austar Coal Mine Pty Limited, a wholly owned
subsidiary of Yancoal Australia Pty Limited mainly engaged in the mining, processing and sale of coal.

Felix
refers to Felix Resources Limited, a wholly owned subsidiary of Yancoal Australia Pty Limited mainly engaged in the exploration, mining and sale of coal.

Hua Ju Energy refers to Shangdong Hua Ju Energy Co., Limited, a 95.14% owned subsidiary of the Company engaged in the
generation of electric power from coal gangue and coal slurry, which are by-products of our coal mining process.

Ordos
Nenghua refers to Yanzhou Coal Ordos Nenghua Company Limited, a wholly owned subsidiary of the Company mainly engaged in the construction of a 600,000 tonne methanol project in Ordos City and the development of coal resources in the Inner
Mongolia Autonomous Region.

Yushuwan Coal Mine Company refers to Shaanxi Yushuwan Coal Mine Company Limited, a
joint venture among the Company, Chia Tai Energy & Chemicals Company Limited and Yushen Coal Company Limited, of which we will hold a 41% equity interest. As of the date of this annual report, the establishment of Yushuwan Coal Mine Company
is still pending regulatory review.

Shares refers collectively to our (i) domestic invested shares listed on
the Shanghai Stock Exchange, par value RMB1.00 each (the Domestic Shares or A Shares), (ii) foreign-invested shares issued and traded in HK dollars and listed on the Hong Kong Stock Exchange, par value RMB1.00 each (the
H Shares) and (iii) American Depositary Shares (the ADSs), each of which represents 10 H Shares.

Promoter Shares refers to the domestic legal person shares held by Yankuang Group.

Directors as used herein refer to our directors as discussed in Item 6 herein.

Articles of Association refers to our Articles of Association, as amended from time to time.

Hong Kong Stock Exchange refers to The Stock Exchange of Hong Kong Limited.

As used in this annual report, Eastern China refers collectively to Shandong Province, Jiangsu Province, Anhui Province,
Zhejiang Province, Fujian Province, Jiangxi Province and Shanghai Municipality; Southern China refers to Guangdong Province and Hunan Province and Guangxi Autonomous Region; and Northern China refers to Beijing Municipality,
Tianjin Municipality, Hebei Province, Shanxi Province and the Inner Mongolia Autonomous Region.

PRC government or
State means the central government of the Peoples Republic of China (the PRC or China), including all political subdivisions (including provincial, municipal and other regional or local governmental
entities) and instrumentalities thereof.



2



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##### Table of Contents

Tonne means metric tonne, which is equivalent to 1,000 kilograms or
approximately 2,205 pounds.

Certain mining terms used in this annual report are defined in the Glossary of Mining
Terms, which was included as Appendix B to our registration statement on Form F-l that we filed with the U.S. Securities and Exchange Commission. A copy of the Glossary of Mining Terms may be obtained upon written request to the
Company.

CONVENTIONS

Unless otherwise specified, references in this annual report to U.S. dollars or US$ are to United States dollars,
references to HK dollars or HK$ are to Hong Kong dollars, references to AUD are to Australian dollars and references to RMB are to Renminbi, the lawful currency of the PRC. Our financial statements are
denominated in RMB and, except as otherwise stated, all monetary amounts in this annual report are presented in RMB.

Solely
for your convenience, certain items in this annual report contain translations of Renminbi amounts into U.S. dollars, which have been made at the rate of RMB6.8259 to US$1.00, the exchange rate as set forth in the H.10 statistical release of the
Federal Reserve Board for December 31, 2009. No representation is made that the Renminbi amounts could have been or could be converted into U.S. dollars at that rate, or at all.

In this annual report, where information has been presented in thousands or millions of units, amounts may have been rounded up or down.
Accordingly, the amounts identified as total amounts in tables may not be equal to the apparent sum of the amounts listed therein.

PART I



|ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
|------- | -----------------------------------------------------

Not applicable.



|ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE
|------- | ---------------------------------------

Not applicable.



3



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##### Table of Contents

|ITEM 3. | KEY INFORMATION
|------- | ---------------



|A. | Selected Financial Data
|-- | -----------------------

Historical Financial Data

The selected income statement and cash flow data for the years ended December 31, 2007, 2008 and 2009 and the selected balance sheet
data as of December 31, 2008 and 2009 have been derived from our audited consolidated financial statements included elsewhere in this annual report and should be read in conjunction with those financial statements and the accompanying notes.
Unless otherwise indicated, the financial statements have been prepared and presented in accordance with IFRS, as issued by the IASB. Our selected income statement and cash flow data for the years ended December 31, 2005 and 2006 and our
selected balance sheet data as of December 31, 2005, 2006 and 2007 have been derived from our audited consolidated financial statements for these periods and dates, which are not included in this annual report.



|                                                          |  |                                                 |  |           |  |           |  |            |  |            |  |          
|--------------------------------------------------------- |  | ----------------------------------------------- |  | --------- |  | --------- |  | ---------- |  | ---------- |  | ---------
|                                                          |  | As of and for the Year Ended December 31,      
|                                                          |  | 2005                                            |  | 2006      |  | 2007      |  | 2008       |  | 2009       |  | 2009     
|                                                          |  | RMB                                             |  | RMB       |  | RMB       |  | RMB        |  | RMB        |  | US$      
|                                                          |  | (in millions except per Share and per ADS data)
|INCOME STATEMENT DATA                                     |  |                                                 |  |           |  |           |  |            |  |            |  |          
|Total revenue                                             |  | 12,447.0                                        |  | 12,944.0  |  | 15,110.4  |  | 24,903.1   |  | 20,253.4   |  | 2,967.1  
|Gross sales of coal                                       |  | 12,283.6                                        |  | 12,783.6  |  | 14,906.7  |  | 24,557.5   |  | 19,537.2   |  | 2,862.2  
|Railway transportation service income                     |  | 163.4                                           |  | 160.4     |  | 203.7     |  | 247.2      |  | 258.4      |  | 37.9     
|Gross sales of electricity power                          |  |                                                |  |          |  |          |  | 59.8       |  | 185.6      |  | 27.2     
|Gross sales of methanol                                   |  |                                                |  |          |  |          |  | 38.6       |  | 258.9      |  | 37.9     
|Gross sales of heat supply                                |  |                                                |  |          |  |          |  |           |  | 13.3       |  | 1.9      
|Transportation costs of coal                              |  | (930.1)                                         |  | (936.6)   |  | (549.8)   |  | (508.7)    |  | (403.3)    |  | (59.1)   
|Cost of sales and service provided                        |  | (5,288.6)                                       |  | (6,190.1) |  | (7,331.9) |  | (11,816.8) |  | (10,170.5) |  | (1,490.0)
|Cost of electricity power                                 |  |                                                |  |          |  |          |  | (88.3)     |  | (188.9)    |  | (27.7)   
|Cost of methanol                                          |  |                                                |  |          |  |          |  | (37.8)     |  | (352.9)    |  | (51.7)   
|Cost of heat supply                                       |  |                                                |  |          |  |          |  |           |  | (7.4)      |  | (1.1)    
|                                                          |  |                                                 |  |           |  |           |  |            |  |            |  |          
|Gross profit                                              |  | 6,228.3                                         |  | 5,817.3   |  | 7,228.7   |  | 12,451.5   |  | 9,130.4    |  | 1,337.6  
|Selling, general and administrative expenses              |  | (1,918.8)                                       |  | (2,230.1) |  | (2,854.7) |  | (3,832.0)  |  | (3,820.2)  |  | (559.7)  
|Share of income (loss) of an associate                    |  |                                                |  |          |  | (2.4)     |  | (67.4)     |  | 109.8      |  | 16.1     
|Other income                                              |  | 135.0                                           |  | 165.8     |  | 198.9     |  | 351.5      |  | 311.0      |  | 45.6     
|Interest expense                                          |  | (24.6)                                          |  | (26.3)    |  | (27.2)    |  | (38.4)     |  | (45.1)     |  | (6.6)    
|                                                          |  |                                                 |  |           |  |           |  |            |  |            |  |          
|Profit before income taxes                                |  | 4,419.9                                         |  | 3,726.7   |  | 4,543.3   |  | 8,865.2    |  | 5,685.8    |  | 833.0    
|Income taxes                                              |  | (1,538.0)                                       |  | (1,354.7) |  | (1,315.5) |  | (2,385.6)  |  | (1,553.3)  |  | (227.6)  
|Profit for the year                                       |  | 2,881.9                                         |  | 2,372.0   |  | 3,227.8   |  | 6,479.6    |  | 4,132.5    |  | 605.4    
|                                                          |  |                                                 |  |           |  |           |  |            |  |            |  |          
|Profit attributable to our equity holders                 |  | 2,881.5                                         |  | 2,373.0   |  | 3,230.5   |  | 6,488.9    |  | 4,117.3    |  | 603.2    
|Earnings per Share                                        |  | 0.59                                            |  | 0.48      |  | 0.66      |  | 1.32       |  | 0.84       |  | 0.12     
|Earnings per ADS                                          |  | 5.86                                            |  | 4.82      |  | 6.56      |  | 13.19      |  | 8.37       |  | 1.23     
|Operating income per Share before income tax              |  | 0.90                                            |  | 0.76      |  | 0.92      |  | 1.80       |  | 1.16       |  | 0.17     
|Profit from continuing operation per ADS beforeincome tax |  | 8.99                                            |  | 7.58      |  | 9.24      |  | 18.02      |  | 11.56      |  | 1.69     
|                                                          |  |                                                 |  |           |  |          
|CASH FLOW DATA                                            |  |                                                 |  |           |  |           |  |            |  |            |  |          
|Net cash from operating activities                        |  | 3,939.3                                         |  | 3,767.2   |  | 4,558.6   |  | 7,095.5    |  | 6,520.1    |  | 955.2    
|Net cash used in investing activities                     |  | (2,262.5)                                       |  | (3,625.5) |  | (3,790.9) |  | (2,091.5)  |  | (24,842.9) |  | (3,639.5)
|Net cash from (used in) financing activities              |  | (1,009.3)                                       |  | (1,291.5) |  | (1,018.7) |  | (921.7)    |  | 18,503.7   |  | 2,710.8  
|                                                          |  |                                                 |  |           |  |          
|BALANCE SHEET DATA                                        |  |                                                 |  |           |  |           |  |            |  |            |  |          
|Total current assets                                      |  | 10,951.1                                        |  | 9,871.9   |  | 9,908.2   |  | 14,994.4   |  | 20,000.9   |  | 2,930.1  
|Total current liabilities                                 |  | 3,429.0                                         |  | 3,828.0   |  | 4,099.5   |  | 5,297.0    |  | 10,410.4   |  | 1,525.1  
|Net current assets                                        |  | 7,522.1                                         |  | 6,043.9   |  | 5,808.7   |  | 9,697.4    |  | 9,590.5    |  | 1,405.0  
|Property, plant and equipment                             |  | 9,318.5                                         |  | 12,139.9  |  | 13,524.6  |  | 14,149.4   |  | 18,877.1   |  | 2,765.5  
|Total assets                                              |  | 21,254.4                                        |  | 23,458.7  |  | 26,187.4  |  | 32,338.6   |  | 62,432.6   |  | 9,146.4  
|Long-term bank borrowing                                  |  |                                                |  | 330.0     |  | 258.0     |  | 176.0      |  | 20,911.7   |  | 3,063.6  
|Equity attributable to our equity holders                 |  | 17,618.6                                        |  | 18,931.8  |  | 21,417.5  |  | 26,755.1   |  | 29,151.8   |  | 4,270.8  
|                                                          |  |                                                 |  |           |  |          
|DIVIDEND PER SHARE                                        |  |                                                 |  |           |  |           |  |            |  |            |  |          
|A and H Shares                                            |  | 0.26                                            |  | 0.22      |  | 0.20      |  | 0.17       |  | 0.40       |  | 0.06     
|ADS                                                       |  | 2.60                                            |  | 2.20      |  | 2.00      |  | 1.70       |  | 4.00       |  | 0.59     



4



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##### Table of Contents

Number of Shares Outstanding



|         |  |                    |  |               |  |               |  |               |  |              
|-------- |  | ------------------ |  | ------------- |  | ------------- |  | ------------- |  | -------------
|         |  | As of December 31,
|         |  | 2005               |  | 2006          |  | 2007          |  | 2008          |  | 2009         
|         |  |                    |  |               | 
|A Shares |  | 2,960,000,000      |  | 2,960,000,000 |  | 2,960,000,000 |  | 2,960,000,000 |  | 2,960,000,000
|         |  |                    |  |               | 
|H Shares |  | 1,958,400,000      |  | 1,958,400,000 |  | 1,958,400,000 |  | 1,958,400,000 |  | 1,958,400,000
|         |  |                    |  |               | 
|ADS(1)   |  | 1,845,974          |  | 5,461,179     |  | 3,338,368     |  | 18,919,105    |  | 19,403,533   

Exchange
Rate Information

The following table sets forth information concerning exchange rates between the Renminbi and the
U.S. dollar for the periods indicated. These rates are provided solely for your convenience and are not necessarily the exchange rates that we use in this annual report or will use in the preparation of our periodic reports or any other information
to be provided to you. The source of these rates is the Federal Reserve Bank of New York for the periods through December 31, 2008 and the Federal Reserve H.10 Statistical Release for the periods beginning on or after January 1, 2009.



|                             |  |                            |  |            |  |        |  |       
|---------------------------- |  | -------------------------- |  | ---------- |  | ------ |  | ------
|Period                       |  | Period End                 |  | Average(1) |  | High   |  | Low   
|                             |  | (expressed in RMB per US$)
|                             |  |                            |  |           
|2004                         |  | 8.2765                     |  | 8.2768     |  | 8.2774 |  | 8.2764
|                             |  |                            |  |           
|2005                         |  | 8.0702                     |  | 8.1826     |  | 8.2765 |  | 8.0702
|                             |  |                            |  |           
|2006                         |  | 7.8041                     |  | 7.9723     |  | 8.0702 |  | 7.8041
|                             |  |                            |  |           
|2007                         |  | 7.2946                     |  | 7.5806     |  | 7.8127 |  | 7.2946
|                             |  |                            |  |           
|2008                         |  | 6.8225                     |  | 6.9193     |  | 7.2946 |  | 6.7800
|                             |  |                            |  |           
|2009                         |  | 6.8259                     |  | 6.8307     |  | 6.8470 |  | 6.8176
|                             |  |                            |  |           
|December                     |  | 6.8259                     |  | 6.8275     |  | 6.8299 |  | 6.8244
|                             |  |                            |  |           
|2010                         |  |                            |  |            |  |        |  |       
|                             |  |                            |  |           
|January                      |  | 6.8270                     |  | 6.8270     |  | 6.8295 |  | 6.8258
|                             |  |                            |  |           
|February                     |  | 6.8258                     |  | 6.8285     |  | 6.8328 |  | 6.8258
|                             |  |                            |  |           
|March                        |  | 6.8258                     |  | 6.8262     |  | 6.8270 |  | 6.8254
|                             |  |                            |  |           
|April                        |  | 6.8258                     |  | 6.8262     |  | 6.8270 |  | 6.8254
|                             |  |                            |  |           
|May                          |  | 6.8305                     |  | 6.8275     |  | 6.8310 |  | 6.8245
|                             |  |                            |  |           
|June (through June 25, 2010) |  | 6.7911                     |  | 6.8227     |  | 6.8323 |  | 6.7911



|(1) | Determined by averaging the rates on the last business day of each month during the respective period, except for monthly averages, which are determined by averaging
the rates on each business day of the month.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On June 25, 2010, the noon buying rate was US$1.00 =
RMB6.7911.



|B. | Capitalization and Indebtedness
|-- | -------------------------------

Not applicable.



|C. | Reasons for the Offer and Use of Proceeds
|-- | -----------------------------------------

Not applicable.



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|D. | Risk Factors
|-- | ------------

Our business and profitability are affected by global economic conditions.

The global economic downturn has adversely affected economies around the world and businesses worldwide, including those in China, and
the extent and timing of recovery are uncertain. Our revenue and profit in the first three quarters of 2009 were diminished by weak economic conditions, extreme market volatility and decreased demand for coal, particularly from industrial customers.
As a result, our coal prices and margins in 2009 were lower than in the previous year. Although economic conditions in China have improved since the fourth quarter of 2009, competition for market share and pressure on profit margins may intensify
again if there is a renewed decline in the global economy, or if confidence in economic recovery wanes. The occurrence of the foregoing may have a negative impact on our suppliers and customers, which in turn may affect our results of operations,
financial condition and cash flow.



6



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Our business and results of operations depend on the volatile domestic and
international coal markets.

As substantially all our revenue is derived from sales of coal, supply and demand for coal
in the domestic and international coal markets have a significant effect on our business and operating results. The domestic and international coal markets are cyclical and have historically experienced price volatility, which reflect PRC and global
economic conditions and fluctuations in coal demand from industries with high coal consumption, among other factors. Difficult economic conditions in 2009 caused average coal prices to decline from record high levels in 2008, which in turn
negatively affected our operational and financial performance. The average selling price of our coal products was RMB409.0, RMB640.2 and RMB507.4 per tonne in 2007, 2008 and 2009, respectively. Although demand for coal in China and worldwide has
substantially recovered, along with coal prices, since the second half of 2009 because of improvements in global macroeconomic conditions, we cannot assure you that demand for and prices of coal will not decline again, the occurrence of which may
adversely affect our results of operations.

Global coal demand correlates strongly with the global economy and the
performance of the power generation, chemical, metallurgy and construction materials industries. In addition, the availability and prices of alternative energy sources to coal, as well as international shipping costs, also affect demand for coal.
The supply of coal, on the other hand, is primarily affected by the geographical location of coal reserves, the transportation capacity of coal. Within China, coal is generally transported on railways and internationally through seaports, the level
of domestic and international coal supplies and the type, quality and price of coal from other coal producers. Developments in the international coal market may adversely affect our overseas sales, which we expect to increase following the expansion
of our Australian operations. A significant increase in global coal supply or reduction in demand for coal from key consuming industries may decrease coal prices, which in turn, may reduce our profitability and adversely affect our business and
results of operations.

Our business is dependent on short-term sales contracts and letters of intent.

Approximately 86.9%, 87.5% and 86.4% of our net sales in 2007, 2008 and 2009, respectively, were derived from
short-term sales contracts or letters of intent. These sales contracts and letters of intent generally specify the quantity and delivery schedule of purchases for a term generally not exceeding one year. Coal prices under the letters of intent are
generally determined subsequently at the time of sale to reflect prevailing market prices. If we experience a weak coal pricing environment that results in a decline in coal prices at the time of actual sale, our revenue and profitability would be
reduced.

Historically, our customers have performed a significant majority of the sales contemplated by the letters of intent
we enter into. However, a sudden and significant increase in the proportion of unperformed letters of intent or unrealized sales could have a material adverse impact on our results of operations, and we may not be able to find purchasers in the
short term to replace our lost sales. Furthermore, any changes in the cost or availability of labor, raw materials or transportation or changes in foreign exchange rates during the period between the formation and performance of these sales
contracts and letters of intent may affect our ability to perform our contractual obligations or the profitability of our sales.

Our products may be subject to governmental price control measures, which may adversely affect our profitability.

The PRC government has implemented a series of measures to overhaul historical price and supply controls on coal with
the aim to develop stronger market mechanisms in the PRC coal market. Although the PRC government continues to support the increasing market orientation of the PRC coal market, the PRC government may intervene in the domestic coal market from time
to time through the use of macroeconomic measures to stabilize the market and achieve national social and economic goals. In 2008, the National Development and Reform Commission, or NDRC, imposed temporary price caps on coal prices when coal prices
were at record highs to ensure uninterrupted operations at power plants during the peak season for electricity demand. Similarly the provincial governments of Shandong and Shaanxi implemented temporary measures in the same year to ensure the market
supply of thermal coal by strictly enforcing coal supply contracts, mandating increases in coal supplies and setting a moratoriums on thermal coal price increases.

Even though the above measures were abolished in 2008 and no similar measures were implemented in 2009, we cannot assure you that the PRC
government will not intervene in the domestic coal market in the future, which may limit the degree of control we have over certain aspects of our business and have a negative impact on our operations, pricing and profitability.



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We rely on the PRC national railway system to deliver our products.

We rely on the PRC national railway system, as well as our railway network, to deliver coal to customers.
Approximately 37.3%, 32.9% and 31.9% of our total sales volume of coal in 2007, 2008 and 2009, respectively, were transported on the PRC national railway system (coal exclusive of sales where the coal sold was transported exclusively on our own
railway network). Although the PRC government has taken steps to upgrade and expand the national railway system, its current transportation capacity is generally not sufficient to meet domestic coal transportation requirements. Even though our
domestic customers are mainly located in Eastern China, where the railway system is relatively more developed than other regions of China, our ability to deliver coal can potentially be restricted by limitations in transportation capacity. In
addition to railway transportation, we use major coal shipping ports along the coast of China to ship coal to customers located along the coastal region of China. We cannot assure you that we will continue to secure sufficient railway and port
capacity to deliver our coal or that we will not experience any material delays in deliveries or substantial increases in transportation costs as a result of insufficient railway capacity.

The coal reserve data in this annual report are only estimates, which may differ materially from actual results.

Our coal reserve data are only estimates, which may differ materially from actual reserves. Our reserve estimates may
change substantially if new information becomes available. There are inherent uncertainties in estimating reserves, which require the consideration of a number of factors, assumptions and variables, many of which may be beyond our control and cannot
be ascertained despite due investigation. Our actual results of operations may differ materially from our long-term business and operational plans, which are based on our coal reserve estimates. We cannot assure you that we will not adjust our coal
reserve estimates downward in the future, and in such event, our long-term production and the useful life of our mines may be materially and adversely affected.

Competition in the PRC and the international coal industry is intensifying, and we may not be able to maintain our competitiveness.

We face competition in all aspects of our business, including pricing, production capacity, coal quality and
specifications, transportation capacity, cost structure and brand recognition. Our coal business competes in the domestic and international markets with other large domestic and international coal producers. Ongoing consolidation in the PRC coal
industry has increased the level of competition in China. Our competitors may have higher production capacities, stronger brand names and more financial, marketing, distribution and other resources than we do.

We may not be able to maintain our competitiveness if changes or developments in the market weaken our existing competitive advantages.
The quality of our coal products positions us favorable against our competitors. However, we cannot assure you that efforts taken by our competitors to improve the quality of their coal will not erode this advantage. We also cannot assure you that
continual improvements in Chinas transportation infrastructure, particularly the national railway transportation network, will not diminish our geographic advantage of being located in Eastern China, the region in China with the highest coal
demand. We believe that we have competed favorably in terms of transportation capacity and delivery costs. Our principal competitors are located predominately in Shanxi Province, Shaanxi Province and the Inner Mongolia Autonomous Region, where there
have been occasional rail capacity shortages and the costs of transporting coal to Eastern China are more significant. However, the PRC government has constructed and plans to continue constructing additional railways to transport coal from northern
and northwestern China to Eastern China. The completion of these railway projects may increase the supply of coal that can be delivered to customers in Eastern China, increasing the effective supply of coal, which may have a material adverse impact
on our results of operations.

Our results of operations depend on our ability to continue acquiring or developing
suitable coal reserves.

The recoverable coal reserves in our existing mines decline as we produce coal. As our ability
to significantly increase our production capacity at existing mines is limited, our ability to increase our coal production will depend on our ability to increase production at our recently developed and future coal reserves and acquiring new coal
resources.

We acquired the mining rights of Zhaolou Coal Mine through Heze Nenghua in May 2008, and commenced production at
Zhaolou Coal Mine in December 2009. On December 23, 2009, we completed the acquisition of the entire equity interest in Felix, which has an equity interest in four operational mines and three exploratory mines. In December 2009, we established
Ordos Nenghua to manage our investments in the Inner Mongolia Autonomous Region, including a coal mining project. We are also in the process of establishing an associate company for a coal mining project in Yushuwan, Shaanxi Province.



8



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The acquisition of new mines by PRC coal companies, either within China or overseas, and the
procurement of related licenses and permits are subject to PRC government approval. Delays in securing or failure to secure relevant PRC government approvals, licenses or permits, as well as any adverse change in government policies may hinder our
expansion plans, which may materially and adversely affect our profitability and growth prospects. In connection with overseas acquisitions and expansion, we may encounter challenges due to our unfamiliarity with local laws and regulations, suffer
foreign exchange losses on overseas investments or face political or regulatory obstacles to acquisitions. We cannot assure you that our overseas expansion plans and investments will be successful.

We cannot assure you that we will be able to continue to identify suitable acquisition targets or acquire these targets on competitive
terms and in a timely manner. We may not be able to successfully develop new coal mines or expand our existing ones in accordance with our development plans, or at all. Failure to successfully acquire suitable targets on competitive terms, develop
new coal mines or expand our existing coal mines could have an adverse effect on our competitiveness and growth prospects.

Our operations may be affected by uncertain mining conditions.

Our operations are subject to certain risks inherent in underground mining, which may affect the safety of our workforce or cost of
producing coal. These conditions include roof collapses, deterioration in the quality or variations in the thickness of coal seams, minewater discharge, explosions from methane gas or coal dust, ground falls and other mining hazards. Additionally,
we are exposed to operational risks associated with industrial or engineering activities, such as maintenance problems or equipment failures. Although we conduct geological assessments on mining conditions and adapt our mining plans to the mining
conditions at each mine, we cannot assure you that adverse mining conditions would not endanger our workforce, increase our production costs, reduce our coal output or temporarily suspend our operations. The occurrence of any of the foregoing events
or conditions would have a material adverse impact on our business and results of operations.

We may suffer losses
resulting from mining safety incidents.

Our coal mines and operating facilities may be damaged by water, gas, fire or
cave-ins due to unstable geological structures. Like other coal mining companies, we have experienced accidents that have resulted in property damage and personal injuries. Although we have implemented safety measures at our mining sites, trained
our employees on occupational safety and maintain liability insurance for personal injuries as well as limited property damage for certain of our operations, we cannot assure you that safety incidents will not occur. Any significant accident,
business disruption or safety incident could result in substantial uninsured costs and the diversion of our resources, which could materially and adversely affect our business operations and financial condition.

We may be required to allocate additional funds for land subsidence.

Underground mining may cause the land above mining sites to subside. We may compensate inhabitants in areas surrounding our mining sites
for their relocation expenses or for any property loss or damage as a result of our mining activities. PRC regulations require us to set aside provisions to cover the costs associated with land subsidence, restoration, rehabilitation and
environmental protection. An estimated provision is deducted as an expense in our income statement based on the amount of coal actually extracted.

In 2009, RMB623.7 million of our provisions for land subsidence, restoration, rehabilitation and environmental protection was expensed.
The provision for land subsidence, restoration, rehabilitation and environmental costs is determined by our Directors based on past occurrences of land subsidence. However, the provision that we make are only estimates and may be adjusted to reflect
the actual effects of our mining activities on the land above and surrounding our mining sites. Therefore, there can be no assurance that such estimates will be accurate or that our land subsidence, restoration, rehabilitation and environmental
costs will not substantially increase in the future or that the PRC government will not impose new fees or change the basis of calculating compensation and reclamation costs in respect of land subsidence, the occurrence of any of which could
increase our costs and have a material adverse effect on our results of operations.

PRC quotas for coal exports may
adversely affect the level of our coal export sales.

Our export sales conducted from China (not including the sales by
Yancoal Australia) accounted for 4.3%, 0.8% and 0.2% of our net sales of coal in 2007, 2008 and 2009, respectively. The NDRC and the Ministry of Commerce sets an annual export quota for domestic coal producers and allocate the quota among authorized
coal exporters. Our export agents have historically received sufficient export quota to satisfy our export requirements. However, we are unable to predict what impact, if any, the national export quota may have on the level of our future export
sales. If the national quota for coal exports is further reduced, our future export sales could be limited, which in turn could adversely affect our results of operations.



9



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We do not have an export permit and cannot directly export our coal. All of our export sales
must be made through intermediary export agents such as China National Coal Industry Import and Export Corporation, China National Minerals Import and Export Company Limited and Shanxi Coal Import and Export Group Company. The terms of our export
sales are determined collectively by us, the export agents and our overseas customers. Although we have applied to the PRC central government for direct export rights with the assistance of the Shandong provincial government, we may not obtain such
rights and may have to continue relying on export agents to export our coal from China.

Our business operations may be
adversely affected by present or future environmental regulations.

As a PRC coal producer, we are subject to extensive
and increasingly stringent environmental protection laws and regulations. These laws and regulations:



| |  |  | impose fees for the discharge of waste substances;
| | - |  | --------------------------------------------------



| |  |  | require provisions for land reclamation and rehabilitation;
| | - |  | -----------------------------------------------------------



| |  |  | impose fines and other penalties for serious environmental offenses; and
| | - |  | ------------------------------------------------------------------------



| |  |  | authorize the PRC government to close any facility that fails to comply with environmental regulations and suspend any coal operation that causes
excessive environmental damage.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our coal mining operations produce waste water, gas emissions and solid
waste materials. The PRC government has tightened enforcement of applicable laws and regulations and adopted more stringent environmental standards. Similarly, our Australian operations are subject to Australias stringent environmental
regulations. Our budgeted amount for environmental regulatory compliance may not be sufficient, and we may need to allocate additional funds for this purpose. If we fail to comply with current or future environmental laws and regulations, we may be
required to pay penalties or fines or take corrective actions, any of which may have a material adverse effect on our business operations and financial condition.

In 2006, the PRC government released the outline of the Eleventh Five-Year Plan (2006 to 2010) for National Economic and Social
Development, which sets goals to decrease the amount of energy consumed per unit of GDP by 20% and to reduce the emission of certain major pollutants by 10%. In November 2009, the PRC government announced plans to reduce carbon emissions relative to
the size of the PRC economy by 40% to 45% using 2005 emission levels as a baseline. If efforts to increase energy efficiency and control greenhouse gas emissions result in a decrease in coal consumption, our revenue may decrease and our business may
be adversely affected.

We face pricing volatility and intense competition in our methanol operations.

We entered the PRC methanol market and commenced production of coal-based methanol at Tianhao Chemicals and Yulin
Nenghua in September 2008 and August 2009, respectively. The methanol business is a cyclical and competitive commodity industry with dynamic supply and demand fundamentals. The price of methanol in China decreased sharply in the second half of 2008
and through the first three quarters of 2009 due to overcapacity from previous years of industry expansion and weak demand from major downstream markets. Methanol prices have since increased as the global demand and economic conditions have
improved. As of May 2010, PRC benchmark methanol price increased to RMB2,240 per tonne from RMB1,970 per tonne in May 2009, representing a 13.7% increase. We expect our methanol prices to be affected by a number of factors, including, but not
limited to:



| |  |  | global and domestic methanol production;
| | - |  | ----------------------------------------



| |  |  | global energy prices;
| | - |  | ---------------------



| |  |  | methanol plant utilization rates, capacity additions and shut downs;
| | - |  | --------------------------------------------------------------------



| |  |  | global economic conditions;
| | - |  | ---------------------------



| |  |  | our cost structure, product quality, availability of raw materials and utilization of our methanol plants;
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | compliance costs and environmental risks; and
| | - |  | ---------------------------------------------



| |  |  | foreign competition from low cost methanol producers which may have greater resources.
| | - |  | --------------------------------------------------------------------------------------

As of the end of 2009, we had a total methanol production capacity of 700,000 tonnes. As with developing any new business, we may not
achieve optimal utilization of our new facilities as planned. For example, Tianhao Chemicals has not been able to procure a steady supply of key raw material from its sole supplier of coke oven waste gas and has not been able to maintain steady
operations as of the date of this annual report, which significantly curtailed its production in 2009.



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If our projections for the domestic methanol market prove incorrect or if we are unable to
otherwise compete effectively, we may not recover the capital and resources we have invested in our methanol operations and realize the intended benefits of our business expansion. In either event, our business and profitability will be adversely
affected.

Our electric power business is heavily regulated, which may affect our results of operations.

We generated RMB185.6 million of revenue from electric power sales, which represented less than 1% of our total
revenue in 2009. The significant majority of electricity that we produce is intended for our own use and only a small portion is sold externally. To the extent that we do sell electricity, any decrease in the government-set grid power prices, the
price at which power grid operators purchase electricity from power plants, including our power plants, may reduce our profitability and adversely affect our results of operations.

The operation of coal-fired power plants is subject to increasingly stringent emission standards of the PRC government, which will set
new standards for air pollutant emission in 2010 under the Emission Standard of Air Pollutants for Thermal Power Plants. As a result, our compliance costs will likely increase and the profitability of our electric power business may be reduced.

We are exposed to fluctuations in exchange rates and interest rates.

We have entered into hedging arrangements designed primarily to manage our exposure to foreign currency and interest rate fluctuations.
Fluctuations in currency exchange rates may adversely affect the value of our net assets, capital investments, earnings and any declared dividends when translated or converted into U.S. dollars or Hong Kong dollars. RMB fluctuations mainly affect
our income from exports denominated in foreign currencies, our conversion of foreign currency deposits and the cost of imported equipment and components. We face risks stemming from exchange rate fluctuations between the Australian dollar and U.S.
dollar because (1) the borrowings we incurred for the Felix acquisition are denominated in U.S. dollars and exchange rate fluctuations can result in exchange losses and (2) Yancoal Australias export sales are denominated in U.S.
dollars but its functional currency is the Australian dollar and exchange rate fluctuations can affect Yancoal Australias results of operations.

To manage uncertainty in our revenue stream and capital expenditures caused by exchange rate fluctuations, we have entered into forward
foreign exchange contracts to sell or purchase specified amounts of foreign currencies at stipulated exchange rates. We have also entered into interest rate swap contracts with banks to hedge a portion of our variable interest borrowings. As of
December 31, 2009, the fair value asset of our foreign exchange contracts was RMB37.8 million, compared with the fair value liability of our forward contracts and interest rate swap contracts of approximately RMB28.3 million. See Item 11.
Quantitative and Qualitative Disclosures about Market Risks  Foreign Currency Exchange Rate Risk for details on our hedging activities. We cannot assure that our hedging arrangements will remain effective or that our results of
operations will be not negatively affected by fluctuations in exchange rates or interest rates.

Our substantial
indebtedness could adversely affect our business, financial condition and results of operations.

As of
December 31, 2009, we had approximately RMB22,509.8 million in bank borrowings, of which RMB1,598.1 million is due within a year, RMB20,845.7 million is due after one year but within five years and RMB66.0 million is due more than five years.
Substantially all of our increase in our bank borrowings was attributable to our acquisition of Felix. This level of debt could have significant consequences on our operations, including:



| |  |  | reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general corporate purposes as a result
of our debt servicing obligations;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | limiting our flexibility in planning for, or reacting to, and increasing our vulnerability to, changes in our business, our industry and the general
economy; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | potentially limiting our ability to obtain or increasing the cost of any additional financing.
| | - |  | ----------------------------------------------------------------------------------------------

Our borrowings attributable to the Felix acquisition amounting to US$3,040.0 million is guaranteed by us and secured by a counter
guarantee from Yankuang Group. Failure by us to satisfy our repayment obligations could result in an event of a default that, if not cured or waived, could have a material adverse effect on us.

If we are not able to generate sufficient cash flow to service our debt obligations, we may need to refinance or restructure our debt,
sell assets, reduce or delay capital investments, or seek to raise additional capital. If we are unable to implement one or more of these alternatives, we may not be able to meet our payment and other obligations under our outstanding debt, which
may have a material adverse effect on our results of operations and financial condition.



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The operations of our Controlling Shareholder have a significant impact on us.

As of December 31, 2009, our Controlling Shareholder, Yankuang Group, owned 52.86% of our outstanding shares and
exerts significant influence over us. We may continue to enter into a number of connected transactions with Yankuang Group. Pursuant to the regulations of the Hong Kong Stock Exchange and the Shanghai Stock Exchange on continuing connected
transactions, we complete the necessary review and approval procedures before entering into continuing connected transactions. We have entered into five continuing connected transaction agreements with Yakuang Group, namely the Provision of
Materials Agreement, Provision of Labor and Services Supply Agreement, Provision of Insurance Fund Administrative Services Agreement, Provision of Coal Products and the Materials Agreement and Provision of Electricity and Heat Energy Supply
Agreement, each of which has a term from 2009 to 2011. In the fourth quarter of 2008, our shareholders approved the amendment and renewal of the five foregoing continuing connected agreements. Any material financial or operational developments
experienced by Yankuang Group that lead to the disruption of its operations or impairs its ability to perform its obligations under the agreements could materially affect our operations and future prospects.

Our operations are affected by a number of risks relating to the PRC.

As a significant majority of our assets and operations are located in China, we are subject to a number of risks relating to conducting
business in China, including, but not limited to, the following:



| |  |  | The central and local governments of the PRC have historically supported the development of the PRC coal industry and the continued operation of
selected coal producers. A change in current policies that are favorable to us may adversely affect our ability to expand our business operations or increase our profitability.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Under current PRC regulatory requirements, the capital expenditure we allocate to the development of new coal mine projects must be approved by the PRC
government. Failure to obtain timely approvals for our projects may adversely affect our business plans and operating results.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | China is still in the process of developing a comprehensive legal system. The enforcement of certain laws in China may still be subject to uncertainty.
In addition, the implementation of government policies, from time to time, may also affect the interpretation of existing laws and regulations.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The PRC governments ongoing reform of the PRC economic system may increase the uncertainties in our business as a number of reforms are
unprecedented or experimental and may be subject to refinement and adjustments. We may be directly affected by these reforms or indirectly affected by changes in political, economic and social factors that result from these reform measures. Our
operating results may be adversely affected by changes in economic and social conditions in China and changes in the PRC government policies related, but not limited, to inflation control, economic stimulus policies, tax policies and rates, currency
conversion restrictions and tariffs and other import restrictions.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our coal operations are
extensively regulated by the PRC and Australian government and government regulations may limit our activities and adversely affect our business operations.

Our coal operations in China are subject to extensive regulation by the PRC government. National governmental authorities, such as the
NDRC, the Ministry of Environmental Protection, the Ministry of Land and Resources, the State Administration of Coal Mine Safety and the State Bureau of Taxation, as well as corresponding provincial and local authorities and agencies exercise
extensive control over the mining and transportation (including rail and sea transport) of coal within China.

Our operations
in Australia are subject to similar laws and regulations of general application governing mining and processing, land tenure and use, environmental requirements, including site specific environmental licenses, permits and statutory authorizations,
workplace health and safety, trade and export, competition, access to infrastructure, foreign investment and taxation. These regulations may be implemented by various federal and state government departments and authorities including the Department
of Resources, Energy and Tourism, the Department of Environment, Water, Heritage and the Arts, and the National Native Title Tribunal.

Regulatory oversight from these authorities and agencies may affect the following, among others, aspects of our operations:



| |  |  | the use and grant of mining rights;
| | - |  | -----------------------------------



| |  |  | rehabilitation of mining sites and surrounding areas;
| | - |  | -----------------------------------------------------



| |  |  | mining recovery rates;
| | - |  | ----------------------



| |  |  | pricing of our transportation services for coal in China;
| | - |  | ---------------------------------------------------------



12



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| |  |  | taxes, levies and fees on our business;
| | - |  | ---------------------------------------



| |  |  | application of capital investments;
| | - |  | -----------------------------------



| |  |  | export quotas and procedures;
| | - |  | -----------------------------



| |  |  | pension fund contributions;
| | - |  | ---------------------------



| |  |  | preferential tax treatment; and
| | - |  | -------------------------------



| |  |  | environmental and safety standards.
| | - |  | -----------------------------------

As a result of the foregoing regulation, our ability to execute our business strategies or to carry out or expand our business operations
may be restricted. We may experience substantial delays in obtaining regulatory approvals, permits and licenses for our business operations. Our business may also be adversely affected by future changes in PRC or Australian regulations and policies
that affect the coal industry. The adoption of new legislation or regulations, or the new interpretation of existing legislation or regulations, may materially and adversely affect our operations, our cost structure or product demand. The occurrence
of any of the foregoing may cause us to substantially change our existing operations or incur significant compliance costs. For example, the Australia federal government announced proposals to implement a 40% resource tax on profits generated from
non-renewable resources for mining companies, which is currently scheduled to come into effect on July 1, 2012. The profitability of our operations in Australia will be substantially eroded if this tax is approved and goes into effect.

We may not realize all or any of the anticipated benefits from the acquisition of Felix.

The success of our recent acquisition of Felix will depend, in large part, on our ability to realize the anticipated benefits, namely the
increase in coal reserves, production capacity and economies of scale anticipated by us at the time of acquisition, and within the planned costs and timeframe to realize these benefits. Expanding our business through acquisitions, including our
recent acquisition of Felix, involves various inherent risks, such as:



| |  |  | uncertainties in assessing the value, strengths and potential profitability of, and identifying the potential weaknesses, risks, contingent and other
liabilities of, an acquisition target;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | increasing our cost of compliance, and exposure of non-compliance, with the laws and regulations of Australia regarding mining rights, land
reclamation, export quotas and environmental protection and work safety;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | subsequent developments in the Australian regulatory environment, which may affect our operations and the timing and desirability of our projects; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | unanticipated changes in business, industry or general economic conditions that affect the assumptions or rationale underlying the acquisition.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------

In addition, we have made a number of undertakings to the Australian government in connection with the
acquisition, see Item 4. Information on the Company  History and Development of our Company  Acquisition of Felix. If we are not able to execute our plans with respect to Felix acquisition or if there are unfavorable changes
in the assumptions underlying our acquisition, the anticipated benefits of the acquisition may not be realized fully or at all or may take longer to realize than expected.



|ITEM 4. | INFORMATION ON THE COMPANY
|------- | --------------------------



|A. | History and Development of our Company
|-- | --------------------------------------

Yanzhou Coal Mining Company Limited was established on September 25, 1997 as a joint stock company with limited liability under the
Company Law of the PRC (the Company Law). The predecessor of our Company, Yanzhou Mining Bureau, was established in 1976. Upon the approval from the former State Economic and Trade Commission and the former Ministry of Coal Industry in
1996, the predecessor was incorporated under the name Yanzhou Mining (Group) Corporation Limited and subsequently renamed Yankuang Group Corporation Limited after undergoing the reorganization in 1999.

In January 1999, we were approved by the Minister of Foreign Trade and Economic Cooperation, the predecessor of the Ministry of Commerce,
to convert to a Sino-foreign joint stock company with limited liability under the Company Law and the Sino-Foreign Joint Venture Law of the PRC.



13



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##### Table of Contents

Our contact information is:



| |  |                      |  |   |  |                                                                             
| |  | -------------------- |  | - |  | ----------------------------------------------------------------------------
| |  |    Business address |  | : |  | 298 Fushan South Road
Zoucheng, Shandong Province
Peoples Republic of China
| |  |                      | 
| |  |    Telephone number |  | : |  | (86) 537 538 2319                                                           
| |  |                      | 
| |  |    Website          |  | : |  | http://www.yanzhoucoal.com.cn                                               

Establishment of Yankuang Group Finance Company Limited

At the thirteenth meeting of the third session of the Board held on August 3, 2007, the Board approved the establishment of Yankuang
Group Finance Company Limited (Yankuang Finance), a joint venture company to be formed by us with Yankuang Group and China Credit Trust Co., Ltd. The principal activities of Yankuang Finance include handling transfers and settling funds
among members and accepting deposits from and lending funds to members. The proposed registered capital of Yankuang Finance is RMB500.0 million, of which we have contributed cash of RMB125.0 million for a 25% equity interest. The CBRC approved the
establishment of Yankuang Group Finance Company Limited on November 16, 2009.

On April 20, 2010, we entered into a
capital contribution agreement in relation to the formation of Yankuang Finance pursuant to the resolutions passed at the thirteenth meeting of the third session of the Board. The final name and business scope of Yankuang Finance are subject to
approval by the China Banking Regulatory Commission (CBRC) and registration with relevant commerce authorities. As of the date of this annual report, the procedures for establishing Yankuang Finance have not been completed.

At the fourteenth meeting of the fourth session of the Board held on April 23, 2010, the Board approved the expected connected
transactions to be entered into with Yankuang Finance after its establishment and annual caps for such transactions in 2010 and 2011.

Acquisition of Felix

As approved at the first extraordinary shareholders meeting of 2009 held on October 30, 2009, Yancoal Australia, through its
wholly owned subsidiary, Austar Company, acquired the entire issued share capital in Felix for AUD3.3328 billion. On December 23, 2009, the relevant share ownership transfer was completed, and Felix was delisted from the Australian Securities
Exchange (ASX) on December 30, 2009 pursuant to the relevant listing rules of the ASX. The entire acquisition cost of Felix was financed by bank borrowings.

Felix is a company incorporated in Brisbane, Australia whose principal activities include the exploration and production of coal. Felix
holds ownership interests in a number of operational and exploratory mines located in New South Wales and Queensland, including Ashton Coal Mine (consisting of an underground coal mine and an open-pit coal mine), Minerva Coal Mine, Yarrabee Coal
Mine and Moolarben Coal Mine (consisting of an underground coal mine and an open-pit coal mine). The total coal reserves of the mines in which Felix has an interest was approximately 2,048.0 million tonnes, of which 1,420.8 million tonnes
are attributable to Felix based on its equity interest in the respective coal mines. These mines hold approximately 513.2 million tonnes of the recoverable reserves, of which 392.7 million tonnes are attributable to Felix.

Felix entered into several joint venture agreements prior to our acquisition, which triggered the respective change of
control provision contained in the joint venture agreements for Ashton Coal Mine and Minerva Coal Mine. The total reserves of these two operational mines as of June 30, 2009 represented 24.6% of the total reserves of the operational mines in
which Felix has an ownership interest. As of the date of this annual report, we are negotiating with two joint venture partners their rights to acquire all of the equity interests in the relevant joint ventures pursuant to the joint venture
agreements and will disclose any material progress in the negotiations.

In connection with the Felix acquisition, we
undertook, among other obligations, to list Yancoal Australia on the Australian Securities Exchange by no later than the end of 2012. In addition, we undertook to, not later than the date of the foregoing listing, reduce our economic ownership of
(1) Felixs existing assets to no more than 50% and from then on to not exceed 50% and (2) Yancoal Australia to less than 70% and from then on to not exceed 70%.

The acquisition of Felix is a critical component of our long-term development strategy. The acquisition significantly increases our
reserve base, creating a solid basis for our sustainable development. We believe that the acquisition improved our asset to debt ratio and will enhance our competitiveness by increasing our operating income and production capacity. In addition to
the synergies with our existing Australian operations, the Felix acquisition is a significant milestone in our international expansion strategy.



14



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##### Table of Contents

Acquisition of Hua Ju Energy

As approved at the second extraordinary shareholders meeting of 2008 held on December 23, 2008, we acquired 74% of the equity
interest in Hua Ju Energy from Yankuang Group for RMB593.2 million on February 18, 2009. As approved at the seventh meeting of the fourth session of the Board held on July 24, 2009, we further acquired 14.21% of the equity interest in Hua
Ju Energy from Shandong Chuangye from Investment Development Company for RMB116.3 million, as well as 6.93% of the equity interest in Hua Ju Energy from two other shareholders for a total of RMB56.7 million. On July 29, 2009, we completed the
relevant procedures for the share transfers, each of which were funded with internal sources. Following the foregoing acquisitions, our equity interest in Hua Ju Energy increased to 95.14%, while Shandong Honghe Mining Group Co., Ltd. continues to
hold a 4.86% equity interest in Hua Ju Energy. We undertook the acquisition of Hua Ju Energy to decrease our connected transactions with Yankuang Group, expedite the restructuring of our business segments to optimize resource utilization and secure
a reliable and cost-effective supply of electricity for our operations.

Establishment of Ordos Nenghua and Acquisition
of Coal Chemical Project

As approved at the working meeting of the general managers held on December 1, 2009, we
established Ordos Nenghua in the Inner Mongolia Autonomous Region on December 18, 2009 using RMB500.0 million of our internal funds. Ordos Nenghua will manage our investments in the Inner Mongolia Autonomous Region, which includes a coal mining
business, a coal chemical business and a coal power project. On April 16, 2010, Ordos Nenghua acquired the entire equity interest in Inner Mongolia Rongxin Chemical Co., Ltd., Inner Mongolia Daxin Industrial Gas Co., Ltd. and Inner Mongolia
Yize Mining Investment Co., Ltd. from Kingboard Chemical Holdings Limited for RMB190.0 million and intends to establish a 600,000 tonne methanol project following these acquisitions.

The establishment of Ordos Nenghua, and the acquisitions it has made, enable us to capitalize on opportunities to develop coal resources
in the Inner Mongolia Autonomous Region, which will enhance the sustainability of our development and core competitiveness.



15



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##### Table of Contents

Increasing Investment in Heze Nenghua

In 2007, we contributed RMB876.0 million to Heze Nenghua to fund the construction of Zhaolou Coal Mine, which commenced operations in
March 2009. Pursuant to the resolution and as approved in the eleventh meeting of the fourth session of the Board held on October 27, 2009, we increased the registered capital of Heze Nenghua again by RMB1,500.0 million, which further increased
our ownership interest to 98.33%. The registration of the capital increase had been completed as of the date of this annual report.

Establishment of Shaanxi Yushuwan Coal Mine Company Limited

We entered into a joint venture agreement in 2006 to set up Yushuwan Coal Mine Company with Chia Tai Energy & Chemical Company
Limited (Chia Tai Company) and Yushen Coal Company Limited (Yushen Company). The registered capital of Yushuwan Coal Mine Company is RMB480.0 million, of which the Company, Chai Tai Company and Yushen Company is expected to
contribute RMB196.8 million, RMB192.0 million and RMB91.2 million, respectively, for a 41%, 40% and 19% equity interest in Yushuwan Coal Mine Company. Yushuwan Coal Mine Company will primarily be engaged in the construction and operation of
Yushuwan Coal Mine in Shaanxi Province. We have made a deposit of RMB118.0 million for this joint venture. As of the date of this annual report, the application for the establishment of Yushuwan Coal Mine Company was still pending regulatory review.

Capital Expenditures

Our principal source of cash in 2009 was bank borrowings and cash generated from our operating activities. Our capital expenditures in
2009 were primarily for the acquisition of Felix, investments to enhance the facilities of the Six Coal Mines and investments in Heze Nenghua.

The following table sets forth a summary of our capital expenditures in the periods indicated:



|                                      |  |                         |  |         |  |          |  |        
|------------------------------------- |  | ----------------------- |  | ------- |  | -------- |  | -------
|                                      |  | Year Ended December 31,
|                                      |  | 2007                    |  | 2008    |  | 2009     |  | 2009   
|                                      |  | RMB                     |  | RMB     |  | RMB      |  | US$    
|                                      |  | (in millions)          
|                                      | 
|Capital Expenditure                   |  |                        
|                                      |  |                         |  |        
|Coal mining                           |  | 1,234.2                 |  | 1,925.3 |  | 24,086.5 |  | 3,528.7
|                                      |  |                         |  |        
|Coal railway transportation           |  | 30.4                    |  | 29.2    |  | 11.4     |  | 1.7    
|                                      |  |                         |  |        
|Methanol, electricity and heat supply |  |                        |  | 925.1   |  | 1,220.0  |  | 178.7  
|                                      |  |                         |  |        
|Unallocated                           |  | 1,704.4                 |  |        |  |         |  |       
|                                      |  |                         |  |        
|Corporate                             |  | 24.1                    |  | 2.1     |  | 7.0      |  | 1.0    
|                                      |  |                         |  |         |  |          |  |        
|                                      |  |                         |  |        
|Total                                 |  | 2,993.1                 |  | 2,881.7 |  | 25,324.9 |  | 3,710.1
|                                      |  |                         |  |         |  |          |  |        

Our planned capital expenditure for 2010 is
approximately RMB4,085.2 million. For more information, see Item 5. Operating and Financial Review and Prospects  B. Liquidity and Capital Resources  Capital Expenditures.

Potential Takeovers by Third Parties

There were no indications of any public takeover offers by third parties in respect of our common shares in 2009.



|B. | Business Overview
|-- | -----------------

Yanzhou Coal is one of the largest coal producers in China with a rapidly growing coal mining operations in Australia. We primarily engage
in the mining, preparation and sale of coal as well as the railway transportation of coal. In recent years, we have expanded our operations to include the production of coal chemicals and generation of electricity and heat.



16



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##### Table of Contents

The Company directly owns and operates six coal mines: Nantun, Xinglongzhuang, Baodian,
Dongtan, Jining II and Jining III (collectively, the Six Coal Mines), which produce a substantial majority of our total coal output. As of December 31, 2009, the Six Coal Mines had an estimated collective in-place proven and
probable reserve base of approximately 1,831.2 million tonnes. Through our subsidiaries, we have interests in a number of coal mines in China and Australia. Yancoal Australia operates Austar Coal Mine, Yarrabee Coal Mine, Minerva Coal Mine,
Ashton Coal Mine and Moolarben Coal Mine, which collectively holds approximately 557.8 million tonnes of recoverable coal reserves. Shanxi Nenghua operates Tianchi Coal Mine, which holds 27.8 million tonnes of recoverable reserves, and
Heze Nenghua operates Zhaolou Coal Mine, which holds 105.8 million tonnes of recoverable reserves.

Our main product of coal business are thermal coal, semi-hard coking coal, semi-soft coking coal, PCI coal and1/3 coking coal which are sold to power plants,
metallurgical mills, chemical manufacturers, construction material manufacturers and fuel trading companies in Eastern China and countries such as Japan and Korea.

Coal Business

We produce premium quality, low sulfur coal that is suitable for a wide range of applications. Our products consist principally of thermal
coal and semi-soft coking coal and semi-hard coking coal, which are suitable for power generation and metallurgical production, respectively. The following table sets forth the specifications and principal applications of our coal products.



|                      |  |                |  |                                  |  |                         |  |        |  |                                                                  
|--------------------- |  | -------------- |  | -------------------------------- |  | ----------------------- |  | ------ |  | -----------------------------------------------------------------
|                      |  | Sulfur Content |  | Range of and
Average Ash
Content |  | Calorific Value         |  | Washed |  | Principal
Applications                                           
|                      |  | %              |  | %                                |  | (megajoule/
kilogram)   |  |        |  |                                                                  
|                      |  |                |  |                                  | 
|The Company           |  |                |  |                                  |  |                         |  |        |  |                                                                  
|                      |  |                |  |                                  | 
|No. 1 clean coal      |  | 0.44           |  | 7-8 average 7.79                 |  | 26-28 average 27.84     |  | Yes    |  | High quality metallurgical production                            
|                      |  |                |  |                                  | 
|No. 2 clean coal      |  | 0.49           |  | 8-9 average 8.57                 |  | 26-28 average 27.57     |  | Yes    |  | Metallurgical production, construction, liquidize coal production
|                      |  |                |  |                                  | 
|No. 3 clean coal      |  | 0.53           |  | 10-11 average 10.43              |  | 26.3-26.9 average 26.63 |  | Yes    |  | Electricity generation and coal chemical production              
|                      |  |                |  |                                  | 
|Lump coal             |  | 0.48           |  | 9-14 average 9.81                |  | 25-28 average 27.86     |  | Yes    |  | Construction, power generation, coal for oven application        
|                      |  |                |  |                                  | 
|Screened raw coal     |  | 0.6            |  | 18-27 average 25.7               |  | 20-23.5 average 21.36   |  | No     |  | Power generation                                                 
|                      |  |                |  |                                  | 
|Mixed coal            |  | 0.6            |  | 22-30 average 29.3               |  | 18-22 average 20.1      |  | Yes    |  | Power generation                                                 
|                      |  |                |  |                                  | 
|Shanxi Nenghua        |  |                |  |                                  |  |                         |  |        |  |                                                                  
|                      |  |                |  |                                  | 
|Tianchi raw coal      |  | 1.06           |  | 27-30, average 29                |  | 21-23, average 22.05    |  | No     |  | Power generation                                                 
|                      |  |                |  |                                  | 
|Heze Nenghua          |  |                |  |                                  |  |                         |  |        |  |                                                                  
|                      |  |                |  |                                  | 
|No. 2 clean coal      |  | 0.49           |  | 8-9, average 8.43                |  | 29.85                   |  | Yes    |  | Metallurgical production, construction, coal slurry              
|                      |  |                |  |                                  | 
|Mixed coal and others |  | 0.51           |  | average 25.69                    |  | average 22.25           |  | Yes    |  | Power generation                                                 
|                      |  |                |  |                                  | 
|Yancoal Australia     |  |                |  |                                  |  |                         |  |        |  |                                                                  
|                      |  |                |  |                                  | 
|Semi-hard coking coal |  | 1.30           |  | 5.0                              |  | average 33.18           |  | Yes    |  | Metallurgical production                                         
|                      |  |                |  |                                  | 
|Semi-soft coking coal |  | 0.65           |  | 9.5                              |  | average 29.82           |  | Yes    |  | Metallurgical production, construction                           
|                      |  |                |  |                                  | 
|PCI coal              |  | 0.7            |  | 9.5-10.5                         |  | average 30.66           |  | Yes    |  | Metallurgical production                                         
|                      |  |                |  |                                  | 
|Thermal coal          |  | 0.5-0.6        |  | 13.5-17.0                        |  | 27.30-27.93             |  | No     |  | Power generation                                                 



17



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##### Table of Contents

In 2009, we produced approximately 36.3 million tonnes of raw coal, including
33.4 million tonnes by the Company, 1.9 million tonnes by Yancoal Australia, 1.0 million tonnes by Shanxi Nenghua and 40,000 tonnes by Heze Nenghua.

We sold 38.0 million tonnes of coal in 2009, which consisted of 1.0 million tonnes of internal sales to Hua Ju Energy and
37.0 million tonnes of external sales, consisting of 2.1 million tonnes that we had purchased from other coal producers for resale. Our total coal sales volume in 2009 increased approximately 455,000 tonnes, or 1.2%, from 2008. We sold
36.0 million tonnes of self-produced coal, representing an increase of approximately 970,000 tonnes or 2.8%, compared to 2008. The Company sold 33.3 million tonnes of coal, representing an increase of 930,000 tonnes, or 2.9% from
2008. Shanxi Nenghua sold 990,000 tonnes of raw coal, representing decrease of approximately 110,000 tonnes or 10.3%, compared to 2008. Yancoal Australia sold 1.6 million tonnes of coal, representing an increase of approximately 140,000 tonnes
or 9.6%, compared to 2008.

The following table sets forth our principal coal products by sales volume and net sales of coal
in the indicated periods.



|                          |  |                             |  |                           |  |                             |  |                         |  |                             |  |                          
|------------------------- |  | --------------------------- |  | ------------------------- |  | --------------------------- |  | ----------------------- |  | --------------------------- |  | -------------------------
|                          |  | Year Ended December 31,    
|                          |  | 2007                        |  | 2008                      |  | 2009                       
|                          |  | Sales Volume  (000 tonnes) |  | Net Sales(RMB    million) |  | Sales Volume  (000 tonnes) |  | Net Sales(RMB  million) |  | Sales Volume  (000 tonnes) |  | Net Sales(RMB    million)
|                          |  |                             |  |                           |  |                            
|The Company               |  | 32,490                      |  | 13,451.7                  |  | 32,402                      |  | 20.337.9                |  | 33,330                      |  | 16,797.7                 
|                          |  |                             |  |                           |  |                            
|No. 1 clean coal          |  | 713                         |  | 423.4                     |  | 363                         |  | 388.3                   |  | 694                         |  | 482.7                    
|                          |  |                             |  |                           |  |                            
|No. 2 clean coal          |  | 7,260                       |  | 4,251.4                   |  | 7,431                       |  | 7,692.0                 |  | 8,362                       |  | 6,304.0                  
|                          |  |                             |  |                           |  |                            
|No. 3 clean coal          |  | 8,616                       |  | 3,931.5                   |  | 2,916                       |  | 2,513.2                 |  | 1,717                       |  | 1,100.2                  
|                          |  |                             |  |                           |  |                            
|Lump coal                 |  | 693                         |  | 390.7                     |  | 1,161                       |  | 1,089.2                 |  | 1,402                       |  | 931.1                    
|                          |  |                             |  |                           |  |                            
|Screened raw coal         |  | 11,357                      |  | 3,848.5                   |  | 17,934                      |  | 8,281.9                 |  | 17,100                      |  | 7,026.5                  
|                          |  |                             |  |                           |  |                            
|Mixed coal and others     |  | 3,851                       |  | 606.2                     |  | 2,597                       |  | 373.3                   |  | 4,055                       |  | 953.2                    
|                          |  |                             |  |                           |  |                            
|Shanxi Nenghua            |  | 1,193                       |  | 243.5                     |  | 1,099                       |  | 294.0                   |  | 986                         |  | 285.0                    
|                          |  |                             |  |                           |  |                            
|Screened raw coal         |  | 1,193                       |  | 243.5                     |  | 1,099                       |  | 294.0                   |  | 986                         |  | 285.0                    
|                          |  |                             |  |                           |  |                            
|Heze Nenghua              |  |                            |  |                          |  |                            |  |                        |  | 16                          |  | 8.1                      
|                          |  |                             |  |                           |  |                            
|No. 2 clean coal          |  |                            |  |                          |  |                            |  |                        |  | 5                           |  | 4.9                      
|                          |  |                             |  |                           |  |                            
|Screened raw coal         |  |                            |  |                          |  |                            |  |                        |  | 2                           |  | 1.1                      
|                          |  |                             |  |                           |  |                            
|Mixed coal and others     |  |                            |  |                          |  |                            |  |                        |  | 9                           |  | 2.1                      
|                          |  |                             |  |                           |  |                            
|Yancoal Australia         |  | 1,423                       |  | 661.7                     |  | 1,484                       |  | 1,527.9                 |  | 1,627                       |  | 1,087.0                  
|                          |  |                             |  |                           |  |                            
|Semi-hard coking coal     |  | 1,423                       |  | 661.7                     |  | 1,484                       |  | 1,527.9                 |  | 1,627                       |  | 1,087.0                  
|                          |  |                             |  |                           |  |                            
|Externally purchased coal |  |                            |  |                          |  | 2,576.7                     |  | 1,889.0                 |  | 2,058                       |  | 1,112.5                  
|                          |  |                             |  |                           |  |                             |  |                         |  |                             |  |                          
|                          |  |                             |  |                           |  |                            
|Total                     |  | 35,106                      |  | 14,356.9                  |  | 37,562                      |  | 24,048.8                |  | 38,017                      |  | 19,290.4                 
|                          |  |                             |  |                           |  |                             |  |                         |  |                             |  |                          



|(1) | Net sales of coal represent our invoice amount of coal sales with deductions for returns, discounts, sales taxes, port fees and various miscellaneous fees relating to a
sale, as well as transportation costs if the invoice amount includes transportation costs charged to customers.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



18



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##### Table of Contents

Sales and Marketing

A significant portion of our domestic sales in 2009 was made pursuant to sales contracts, while the remainder of our coal sales are based
on purchase orders placed by our customers from time to time. Our customers may sign letters of intent to make purchases in the short term. The contract price in sales contracts are the result of market-based negotiations between the contracting
parties. These sales contracts and letters of intent generally specify the quantity and delivery schedule of the coal to be purchased, generally for a term not exceeding one year. The contract prices for letters of intent are generally determined at
the time of sale to reflect prevailing market prices.

We have a flexible credit policy, and credit terms may vary from
customer to customer depending on each customers creditworthiness and the credit amount involved. We may allow open accounts, require acceptance bills or require cash on delivery. We rely on data from our ERP system to determine the
appropriate payment arrangement and credit terms for each customer, which generally do not exceed 180 days. We evaluate the creditworthiness of potential new customers before entering into a sales contract with them and reassess the creditworthiness
of all of our customers on an annual basis. For customers without a strong credit history, we require them to settle their accounts upon delivery. A majority of our domestic coal sales is made to power plants, metallurgical mills, chemical
manufacturers and construction material manufacturers with whom we have established long-standing and stable relationships.



19



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##### Table of Contents

Sales taxes include resource taxes imposed by Shandong and Shanxi Provinces. The applicable
resource tax rate is RMB3.6 per tonne for our coal mines located in Shandong Province and RMB3.2 per tonne for our coal mines in Shanxi Province. These taxes are paid to the local tax bureau. The following table sets forth a breakdown of our net
sales of coal by industry for the indicated periods:



|                       |  |                         |  |               |  |               |  |               |  |               |  |              
|---------------------- |  | ----------------------- |  | ------------- |  | ------------- |  | ------------- |  | ------------- |  | -------------
|                       |  | Year Ended December 31,
|                       |  | 2007                    |  | 2008          |  | 2009         
|                       |  | NetSales                |  | % of NetSales |  | NetSales      |  | % of NetSales |  | NetSales      |  | % of NetSales
|                       |  | (RMB
million)           |  |               |  | (RMB
million) |  |               |  | (RMB
million) |  |              
|                       |  |                         |  |               |  |              
|Power plants           |  | 3,846.6                 |  | 26.8          |  | 7,333.4       |  | 30.5          |  | 5,613.0       |  | 29.1         
|                       |  |                         |  |               |  |              
|Metallurgical mills    |  | 1,645.8                 |  | 11.5          |  | 3,369.4       |  | 14.0          |  | 1,976.6       |  | 10.2         
|                       |  |                         |  |               |  |              
|Chemical manufacturers |  | 4,158.5                 |  | 29.0          |  | 4,459.7       |  | 18.5          |  | 2,656.7       |  | 13.8         
|                       |  |                         |  |               |  |              
|Others                 |  | 4,706.1                 |  | 32.8          |  | 8,886.3       |  | 37.0          |  | 9,044.1       |  | 46.9         
|                       |  |                         |  |               |  |               |  |               |  |               |  |              
|                       |  |                         |  |               |  |              
|Total                  |  | 14,356.9                |  | 100.0         |  | 24,048.8      |  | 100.0         |  | 19,290.4      |  | 100.0        
|                       |  |                         |  |               |  |               |  |               |  |               |  |              



|(1) | Net sales of coal represent our invoice amount of coal sales with deductions for returns, discounts, sales taxes, port fees and various miscellaneous fees relating to a
sale, as well as transportation costs if the invoice amount includes transportation costs charged to customers.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our domestic coal sales are concentrated in Eastern China, particularly in Shandong Province. The following table sets forth a breakdown
of our net sales of coal by geographical region for the indicated periods:



|               |  |                         |  |               |  |               |  |               |  |               |  |              
|-------------- |  | ----------------------- |  | ------------- |  | ------------- |  | ------------- |  | ------------- |  | -------------
|               |  | Year Ended December 31,
|               |  | 2007                    |  | 2008          |  | 2009          |  |              
|               |  | Net Sales               |  | % of NetSales |  | Net Sales     |  | % of NetSales |  | Net Sales     |  | % of NetSales
|               |  | (RMB
million)           |  |               |  | (RMB
million) |  |               |  | (RMB
million) |  |              
|               |  |                         |  |               |  |              
|China          |  | 13,075.1                |  | 91.1          |  | 22,332.5      |  | 92.9          |  | 18,345.4      |  | 95.1         
|               |  |                         |  |               |  |              
|Eastern China  |  | 12,069.5                |  | 84.1          |  | 19,283.2      |  | 80.2          |  | 14,241.5      |  | 73.8         
|               |  |                         |  |               |  |              
|Southern China |  | 803.7                   |  | 5.6           |  | 1,075.0       |  | 4.5           |  | 332.9         |  | 1.7          
|               |  |                         |  |               |  |              
|Northern China |  | 196.4                   |  | 1.4           |  | 490.0         |  | 2.0           |  | 251.5         |  | 1.3          
|               |  |                         |  |               |  |              
|Other regions  |  | 5.4                     |  | 0.04          |  | 1,484.3       |  | 6.2           |  | 3,519.5       |  | 18.2         
|               |  |                         |  |               |  |              
|Japan          |  | 941.0                   |  | 6.6           |  | 1,350.3       |  | 5.6           |  | 447.1         |  | 2.3          
|               |  |                         |  |               |  |              
|Korea          |  | 218.7                   |  | 1.5           |  | 295.6         |  | 1.2           |  | 210.8         |  | 1.1          
|               |  |                         |  |               |  |              
|Australia      |  | 20.6                    |  | 0.1           |  | 15.3          |  | 0.1           |  | 40.9          |  | 0.2          
|               |  |                         |  |               |  |              
|Others         |  | 101.5                   |  | 0.7           |  | 55.1          |  | 0.2           |  | 246.2         |  | 1.3          
|               |  |                         |  |               |  |               |  |               |  |               |  |              
|               |  |                         |  |               |  |              
|Total          |  | 14,356.9                |  | 100.0         |  | 24,048.8      |  | 100.0         |  | 19,290.4      |  | 100.0        
|               |  |                         |  |               |  |               |  |               |  |               |  |              



|(1) | Net sales of coal represent our invoice amount of coal sales with deductions for returns, discounts, sales taxes, port fees and various miscellaneous fees relating to a
sale, as well as transportation costs if the invoice amount includes transportation costs charged to customers.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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As of December 31, 2009, our major customers are Huadian Power International
Corporation Limited, Yankuang Meihua Gongxiao Co., Ltd., Baoshan Iron & Steel Co., Ltd., Linyi Yehua Coking Co., Ltd., Yankuang Group Logistics Co., Ltd., among which Huadian International was our largest customer. In 2007, 2008 and 2009,
we provided 5.4 million, 8.8 million and 7.5 million tonnes of coal respectively to Huadian International, which represented 15.5%, 23.3% and 19.8% of our sales volume, respectively. A substantial portion of Huadian
Internationals coal purchases was, in turn, supplied to Zouxian Power Plant.

As of the date of this annual report, we
have entered into domestic sales contracts and letters of intent to provide a total of 40.3 million tonnes of coal, including contracts to sell 10.0 million tonnes of coal at a tax-inclusive price of RMB578.26 per tonne, representing an
increase of RMB86.75 per tonne, or 17.6%, from our average selling price in 2009. The sales price under the letters of intent will be determined at the time of sale. Yancoal Australia has entered into agreements to sell 8.12 million tonnes of
coal in 2010.

Our Companys export sales as a percentage of our total net sales of coal decreased from 0.8% in 2008 to
0.2% in 2009. We have decreased our export sales in recent years because market conditions have made domestic sales more profitable than export sales. Our major overseas markets include Japan, Korea, Australia, the United States and Switzerland.
Even though we conduct all of our export sales from the PRC through export agents, we maintain close relationships with our overseas customers.

Our sales and marketing department conducts routine customer visits and customer surveys to keep abreast on market developments, maintain
customer relationships and continually improve our business. In addition, we regularly collect market information about Eastern China and other regions, which is used by the entire Company for business planning and execution purposes.

Pricing

The pricing for our coal products is generally based on negotiation between the contracting parties that reflect market conditions.
However, a portion of our thermal coal sales may be affected by pricing guidelines announced by the PRC government from time to time or subject to temporary price controls. See Item 3. Key Information  D. Risk Factors  Our products
may be subject to governmental price control measures, which may adversely affect our profitability.

When we price our
coal products, we consider the prevailing prices in the relevant local coal markets (inclusive of transportation costs), the grade and quality of the coal being sold and our relationship with the purchaser. Customers generally bear the cost of
transportation in domestic coal sales. Our sales and marketing department has access to domestic and international market information through our data center, enabling us to closely monitor pricing developments in our principal markets. The price on
export sales from China are determined collectively by the involved exports sales company, our end-user customer and us.

Transportation

Most of our major coal customers are located in Eastern China and our remaining domestic customers are located in Southern and Northern
China. We primarily use railways and the highways to transport coal and, to a lesser extent, we also ship our coal on domestic and international shipping lanes. With our private railway network, we are able to connect to the national railway system
or deliver coal directly to our largest end-user customer, Zouxian Power Plant.

We also transport coal on the national
railway system to ports such as, Rizhao, Qingdao and Lianyungang, from which we ship coal to customers. Rizhao port is our main port for shipping coal. We also use the Beijing-Hangzhou Grand Canal to ship coal on barges to customers located in the
area serviced by the canal. In Shanxi Province, we rely on the Yangshe Railway, which intersects the Tianchi Coal Mine, and trucking to deliver coal to Hebei Province, Shandong Province and other nearby areas.

We plan to construct a privately operated railway to connect Zhaolou Coal Mine with the national railway system. Before the completion of
such plan, we will rely on trucking to deliver coal from Zhaolou Coal Mine to the national railway and certain customers.

To
transport Yancoal Australias coal products to Newcastle Port and Gladstone Port in Australia, we use Australias state railway network and private railway networks.

Mining Process

The geological characteristics of our reserves largely determine the coal mining method that we employ. We use two primary methods of
mining coal: underground mining and open-pit mining.



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Domestic Underground Mining Operations. Our domestic underground mining operations
consist of four main steps: tunneling, coal extraction, transportation and coal preparation. The tunneling process is necessary for the construction of underground roadways, which is required for the installation of mining equipment. We conduct a
majority of our tunneling using high powered headers and use this method whenever geological conditions permit. When the use of headers is not feasible, we use explosives to excavate tunnels. Coal extracted during tunneling is carried by conveyor
belts to our underground storage bunkers to be stored together with other extracted coal. Rock and other minerals produced during the excavation of roadways are separated and transported out of the mine.

The extraction process is completed by a standardized and fully mechanized longwall operation, which includes shearers that work in
conjunction with conveyers to cut and transport the coal away from the longwall work-face. For coal seams with an thickness up to 4.5 meters, we use a fully mechanized method to extract coal. For coal seams that are thicker than 4.5 meters, we add a
caving method to the fully mechanized longwall mining operation, whereby coal that is beyond the reach of our shearers collapse in a controlled manner onto our conveyers as the coal support underneath it is removed by our shearers. Coal is then
transported away from a longwall work-face by a series of conveyors positioned in front of and behind the system of roof supports. Roof supports provide continuous support for and protection along the length of the long-wall work-face and they also
move the conveyors and shearers forward after each pass of the shearers along the work-face using horizontal hydraulic rams positioned at the base of each support. Our hydraulic roof supports are manufactured in China.

The shaft hoist system equipment that we use at most of our mines is imported. Coal is transported from the coal shaft either to a
surface storage or directly to a coal preparation plant. In addition to the main coal shaft, our mines also have a service shaft and supplemental roadways and rail systems within the mines that provide a means of underground transportation for
workers and equipment.

After raw coal is carried to the surface, it undergoes a mechanized selection process that separates
coal from other mineral materials. A small portion of such selected coal is directly sold to customers as raw coal, and the remainder is transported to our coal preparation plants for further processing and classification. Each of the Six Coal Mines
and Austar Coal Mine has a coal preparation plant. In general, the coal-washing conducted in our coal preparation plants include a water bed washing and separation process by jig machines, a sink-and-float separation process and a final floating
separation process. Most of the equipment used in our coal preparation plants is automated, enabling us to control the ash content and grade of our processed coal. The aggregate recovery rate of our coal preparation plants was 78.4%, 66.6% and 69.1%
in 2007, 2008 and 2009, respectively.

Australian Mining operations. With respect to underground mines in our Yancoal
Australia mining operations, we conduct continuous tunneling, longwall operation and coal extraction by fully mechanized caving method. Open-pit mining is used when coal is found relatively close to the surface. This method involves the removal of
topsoil and overburden (earth and rock covering the coal), tunneling and extraction of coal from coal seams. The extracted coal undergoes selection and is then transported to treatment facilities for preparation. After coal is removed, we restore
the affected land by replacing the overburden and topsoil.

Materials, Water and Energy Supply

The primary materials we use to conduct our coal mining and processing operations are steel to support work-faces and underground tunnels,
cement for the construction of underground tunnels and ground structures and water used in our production process. We primarily procure steel principally from Jinan Iron & Steel Co. Ltd., Laiwu Iron & Steel Group Corp. Ltd. and
Shandong Shiheng Special Steel Group Co. Ltd. and cement from Shandong Lucheng Cement Company, Ltd. and Taishan Cement Works. We procure water primarily from Yankuang Group pursuant to the Materials Supply Agreement and its supplemental agreements,
and to a lesser extent, from local water companies. The price of materials is set at market rates or determined through negotiation. We believe that we have well-established, cooperative relationships with our suppliers, enabling us to secure
reliable supplies of materials required in our production process. We believe that a number of alternative suppliers exist for our key materials in our coal operations and, therefore, we do not foresee any difficulty in obtaining adequate supplies.

We use significant amounts of electricity in our operations. Electricity prices in China are regulated by the government.
Even though we have not experienced any material disruptions to our electricity supply in the past three years, we acquired Hua Ju Energy to secure a stable supply of energy for our Six Coal Mines and to reduce our electricity costs. In 2009, Hua Ju
Energy supplied 556.0 million kWh of electricity to our operations.

Quality Control

We have implemented a quality assurance program at each of our PRC coal mines pursuant to control quality throughout the production and
transportation of our coal. Utilizing advanced processing technology and management techniques, our coal preparation plants are able to separate both metal and non-metal impurities from coal. Our quality inspection division within our sales and
marketing department conducts spot inspections on our coal production to maintain high quality standards.



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Each of Nantun Coal Mine, Xinglongzhuang Coal Mine, Baodian Coal Mine, Dongtan Coal Mine,
Jining II Coal Mine and Jining III Coal Mine has obtained ISO 9002 quality and ISO 14000 environmental management certification. Tianchi Coal Mine has obtained ISO 9000 quality and ISO 14000 environmental management certification, and Zhaolou Coal
Mine has obtained ISO 9001 quality and ISO 14001 environmental management certification.

Yancoal Australia has hired Bureau
Veritas, Societe Generale De Surveillance and ALS Laboratory Group to supervise and inspect the quality of the coal produced from the respective mines in Australia to ensure quality control and suggest quality improvement measures.

Safety Control

In our PRC operations, we have implemented a safety control program to meet our safety targets and maintain compliance with the Coal Law
and the National Mining Safety Law in China. In Australia, our operations in New South Wales is compliant with the Coal Mine Health and Safety Act 2002 (NSW) and Occupational Health and Safety Act 2000 (NSW) and our operations in Queensland is
compliant with the Coal Mining Safety and Health Act 1999 (Qld).

Moreover, the compensation of the officers and managers of
each division reflects the divisions safety record in PRC. Each of our mines has a safety inspection unit which is responsible for the supervision and inspection of our mining activities. We also use Yankuang Groups training center to
provide safety training to our workforce. We reward employees who report unsafe conditions to encourage accident prevention.

As a result of our safety control program, we have been able to maintain a solid safety record and a zero fatality rate since 2007.

Environmental Protection

We are subject to PRC environmental protection laws and regulations which impose fees for the discharge of waste material and fine heavy
polluters. PRC regulations also authorize government agencies to close any facility that fails to comply with orders to cease, or bring into compliance with relevant laws and regulations, operations that cause environmental damage. In addition, the
operations of Yancoal Australia must comply with relevant Australian environmental protection laws and regulations.

According
to the Provision of Labor and Services Supply Agreement that we entered into with Yankuang Group, it will provide us environmental protection services. In 2009, we paid Yankuang Group a total of RMB41.7 million for such services to reduce the
effects of our operations on the environment.

Competition

The development of the PRC coal industry is influenced by the large number of small scale enterprises and the wide geographical
distribution of coal reserves. However, there are relatively few large-scale coal production enterprises in China.

Our
primary market, the PRC domestic coal market is characterized by numerous small-scale coal suppliers. The domestic coal market is segmented principally by geographical region, as a result of the wide geographical distribution of coal reserves.
However, there are a number of large-scale coal production enterprises that dominate the domestic market. We compete principally on the basis of the availability and cost of transportation, coal quality and reliability of deliveries.

Our domestic competitors primarily include a number of coal mines located in Shanxi Province, Shaanxi Province and the Inner Mongolia
Autonomous Region. Certain of our competitors from these regions have substantial reserves and favorable geological conditions. However, these competitors incur significant transportation costs when they supply to end-user customers located in
Eastern China. In addition to coal mines located in Shanxi Province, Shaanxi Province and the Inner Mongolia Autonomous Region, we also compete to a certain extent with local mines located close to our customers.

We export coal mainly to Japan, Korea, Australia, the United States and Switzerland. With respect to export sales, we compete with
certain major overseas coal mining companies, most of which are located in Australia and Indonesia.

Seasonality

Our coal business is not affected by seasonality.



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Railway Transportation Business

We own and operate a railway transportation network that connects our coal mines to the national railway system and Zouxian Power Plant.
As of the date of this annual report, our railway network spanned a total length of 204 kilometers. Our railway network provides us a greater degree of control over a major mode of transportation for our key product and the synergies of having a
consolidated coal operation that comprises coal production, sales and transportation.

In addition to transporting coal within
the Group, we offer railway transportation services to customers, including Yankuang Group. In 2009, we transported 19.9 million tonnes of coal on our railway network, representing an increase of 0.7 million tonnes, or 3.7%, from 2008. We
generated RMB258.4 million from railway transportation services in 2009, representing an increase of RMB11.2 million, or 4.5%, from 2008 due to an increase in the volume of goods transported.

Our Company has obtained ISO 9001 quality accreditation, ISO 14001 environmental management certification and GB/T19022-2003 management
certification for the operation of our railway network.

Our railway network connects us to the national railway system, such
as Jinghu railway and Yanshi railway, and provides us access to Zouxian Power Plant. We use our railway network to provide railway transportation services for our own internal use as well as to Yankuang Group and other customers. We do not face
significant competition from other railway operators. However, we compete with other ground transportation services that serve the same region as our railway network.

Coal Chemical Business

Our coal chemical business focuses on the production of methanol, a liquid commodity that can be produced from coal or natural gas. In
2009, we produced 199,000 tonnes of methanol and sold 190,000 tonnes. Yulin Nenghua produced 190,000 tonnes after commencing commercial production in August 2009 and sold 178,000 tonnes in 2009. Tianhao Chemicals, which was unable to maintain
regular operations in 2009 because of a continuing shortage in a key raw material, produced 9,000 tonnes of methanol and sold 12,000 tonnes in 2009, including methanol from inventory. In 2009, our total revenue from our coal chemical business was
RMB258.7 million.

Sales and Marketing

Our coal chemical sales are made pursuant to sales contracts that we enter into from time to time with customers. We sell our methanol
exclusively in China, predominately to chemical producers in Northern and Eastern China and methanol distributors, relying on regional highways to deliver our products.

Pricing

The pricing for our methanol product is generally based on negotiation between the contracting parties, taking into consideration
prevailing market prices, market conditions and the customers creditworthiness.

Production Process

Yulin Nenghua. We use coal as raw material to manufacture methanol at our Yulin Nenghua facility. Coal is pulverized, cleaned and
then fed to a gasifier bed where it reacts with oxygen and steam. The product is synthesized into crude methanol and then purified through distillation.

Tianhao Chemicals. We use coke oven waste gas as the primary raw material to manufacture methanol at our Tianhao Chemicals
facility. We reduce the sulphur contained in coke oven waste gas and then convert the treated gas into synthesis gas. The synthesis gas is further processed into crude methanol and then purified through distillation.

Materials, Water and Energy Supply

Coal and coke oven waste gas are the primary materials in our methanol production. Production at Tianhao Chemicals is dependent on
receiving coke oven waste gas from one supplier whose facility is connected to Tianhao Chemicals plant through transmission pipelines. This supplier has not been able to provide a steady supply of coke oven waste gas due to poor market
conditions that have affected the suppliers operations, which in turn, has severely interrupted production at Tianhao Chemicals. As of the date of this annual report, we have not been able to find an alternative supplier.



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Production at Yulin Nenghua is reliant on thermal coal, which it currently sourced from
local coal mines as our adjoining Yushuwan Coal Mine has not been registered yet. We plan to source thermal coal internally once Yushuwan Coal Mine commences operations. Yulin Nenghua sources water from a local reservoir.

Quality Control

We have implemented a series of quality control measures for our coal chemical operations to ensure product quality and have obtained AAA
measurement management system, ISO 9001 quality accreditation and ISO 14001 environmental management certification in November 2009. We perform regular inspections and maintenance on our methanol plants.

Safety Control

For our coal chemical operations, we have implemented safety control measures in compliance with the Peoples Republic of China
Production Safety Law, the Peoples Republic of China Regulations on the Safety Administration of Dangerous Chemicals and other safety guidelines for chemical manufacturers.

Competition

We compete with domestic methanol manufacturers in Shanxi and Shaanxi Provinces and the Inner Mongolia Autonomous Region. We expect to
benefit from economies of scale as Yulin Nenghuas 600,000 tonne methanol project achieves optimal utilization of its facilities and we further expand our coal chemical operations with the construction of Ordos Nenghuas methanol plant.

Seasonality

Our coal chemical operations are not affected by seasonality.

Electric Power and Heat Supply Business

We own and operate eight power plants, which generate electricity for internal use and external sales. In 2009, we generated a total of
1,201.2 million kWh of electricity, of which we sold 562.3 million kWh externally and generated RMB185.6 million in revenue. The power plants operated by Hua Ju Energy, Tianhao Chemicals and Yulin Nenghua generated 1,051.2 million
kWh, 102.9 million kWh and 47.2 million kWh, respectively. Hua Ju energy made external sales of 412.2 million kWh.

We held 95.14% of the equity interest in Hua Ju Energy as of December 31, 2009. Hua Ju Energy operates coal-fired power plants whose
main facilities consist of energy conversion CFB boilers and extraction and condensing steam turbines. The power plants at Hua Ju Energy has an installed capacity of 114 megawatt and the power plants at Yulin Nenghua and Tianhao Chemicals have an
aggregate installed capacity of 84 megawatt.

We commenced heat supply operations, which consist of the production and sale of
heat supply following our acquisition of Hua Ju Energy. In 2009, Hua Ju Energy generated 1.17 million steam tonnes of heat energy. Although the substantial majority of heat energy produced by Hua Ju Energy is intended to be consumed internally
by our coal mines, we generated net sale of RMB13.3 million from selling 0.14 million steam tonnes of heat externally.

Sales and Marketing

The electric power generated by our power plants is mainly intended for our own use and, to a lesser extent, sold to other end-users
through power grids. We consume most of the heat generated by our power plants and to the extent we have extra capacity, sell to Yankuang Group.

Pricing

The pricing and adjustments for on-grid tariff are determined by the PRC government. The pricing of our heat product is determined in
accordance with regulations set by price administration authorities.

Production Process

Yulin Nenghua. We select, break, grind and transport coal to a boiler where the coal is burned to generate steam, which is
converted by steam turbines into electricity.



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##### Table of Contents

Hua Ju Energy. We recycle by-products of our coal mining operations, such as coal
gangue and coal slurry to generate electricity. Coal gangue and coal slurry, through the conveyers belt and fuel feeding device, are fed to a CFB boiler where they are burned to generate steam, which is converted by steam turbines into electricity.
The power plants of Hua Ju Energy are cogeneration systems that are able to produce heat simultaneously with power generation. Part of the steam produced in power generation is extracted from the steam turbines and via the heat supply system
provided to the mining operations.

In both processes, we filter the exhaust gas that we produce and recycle the cinder for
future use.

Materials, Water and Energy Supply

Our power plants are all coal-fired power plants. The power plants of Hua Ju Energy generate electricity by recycling coal gangue and coal
slurry. Tianhao Chemicals and Yulin Nenghua currently source thermal coal from local coal mines.

Quality Control

Yulin Nenghua obtained AAA measurement management system, ISO 9001 quality accreditation and ISO 14001 environmental
management certification in November 2009. Hua Ju Energy has obtained ISO 9001 quality accreditation and ISO 14001 environmental management certification since November 2003. We perform regular inspections and maintenance on our power plants.

Safety Control

Safety measures for our electric power and heat supply operations were designed to meet the requirement of the Electricity Law and other
related laws.

Seasonality

Our electric power operations are not affected by seasonality. Our heat supply operations is affected by seasonality and experiences
higher demand during winter.

Regulatory Oversight of Our Group

Coal Industry  PRC Regulatory Matters

To establish a coal mining enterprise under the Coal Law of the PRC (the Coal Law), the applicant must submit an application
to the relevant department in charge of the coal industry. After obtaining approval to establish a coal mining enterprise, the applicant will be granted a mining permit by the Ministry of Land and Resources. Thereafter, the applicant must obtain a
coal production permit before it commences coal production. Coal mining enterprises that have legally obtained coal production licenses will have the right to sell coal that they produce. For establishment of a coal trading enterprise, an applicant
must apply for a different business license and may engage in coal trading only after it obtains a trading license from the administrative department of industry and commerce.

Mining activities in the PRC are also subject to the Mineral Resources Law of the Peoples Republic of China (the Mineral
Resources Law). The Mineral Resources Law regulates any matters relating to the planning or the exploration, exploitation and mining of mineral resources. According to the Mineral Resources Law, all mineral resources in China, including coal,
are owned by the State. Any enterprise planning to engage in the exploration, development and mining of mineral resources must obtain exploration rights and mining rights before commencing the relevant activities. The transfer of exploration and
exploitation rights shall be subject to governmental approval pursuant to the Coal Law, the Mineral Resources Law and other relevant regulations.

We are principally subject to the supervision and regulation by the following agencies of the PRC government:



| |  |  | the State Council, the highest level of the executive branch, which is responsible for the examination and approval of major investment projects
specified in the Catalogue of Investment Projects released by the PRC government in 2004;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | the National Development and Reform Commission, or NDRC, which formulates and implements major policies concerning Chinas economic and social
development, examines and approves investment projects exceeding certain capital expenditure amounts or in specified industry sectors, including the examination and approval of foreign investment projects and formulates industrial policies and
investment guidelines for natural resource industries, such as the coal industry. In addition, the NDRC administers coal export activities and export quotas jointly with the Ministry of Commerce. The NDRC is also responsible for the evaluation and
implementation of the pricing mechanism that links the prices of coal and power;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Ministry of Land and Resources (MLR), which has the authority to grant land use licenses and mining right permits, approve the transfer
and lease of mining rights, and review the transfer price of mining rights and reserve estimates;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the State Administration of Coal Mine Safety (SACMS), which is responsible for the implementation and supervision of the relevant safety
laws and regulations applicable to coal mines and coal mining operations;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | the Ministry of Railways (MOR), which supervises Chinas railway operations and provides strategic development plans for railway
transportation. The MOR, together with the NDRC, reviews all applications for railway construction plans, including railways designated or used for coal transportation; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the State Environmental Protection Administration of China (SEPA), which supervises and controls environmental protection and monitors
Chinas environmental system at the national level.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following is a summary of the principal laws,
regulations, policies and administrative directives to which we are subject.

Pricing

Until 2002, the production and pricing of coal have generally been subject to close control and supervision by the PRC government, which
centrally manages the production and pricing of coal. To transition from a planned economy to market economy practices, the PRC government eliminated the state guideline for coal prices on January 1, 2002 and aimed to establish pricing
mechanism that reflect market demand.

Under the Price Law of the Peoples Republic of China, the PRC government reserves
the right to intervene in price fluctuations of important commodities such as coal. The State Council and the provincial governments, autonomous regions and municipalities directly under the PRC government may adopt intervention measures, such as
restricting margins or profits, and imposing price limits. Since 2002, NDRC has executed temporary measures several times to prevent and control unusual fluctuations in thermal coal prices.

To ensure the stable supply of thermal coal and reduce pricing pressure on electric power companies, NDRC issued Announcement No. 46
on June 19, 2008 to implement, from such date until December 31, 2008, temporary price caps on thermal coal. On December 3, 2008, NDRC issued the Notice Relating to the Good Preparation for Inter Provincial Coal Production
Transportation Works (Fa Gai Yun Xing [2008] No. 3294), which announced the elimination of the price control measures implemented in June 2008. On December 30, 2008, NDRC issued an announcement (No. 67) to abolish the temporary price
intervention measures on thermal coal, which became effective on January 1, 2009. On December 14, 2009, NDRC published the Guidance on the Improvement of Linking Up Coal Manufacture, Transportation and Demand, by allowing enterprises to
choose the manner in which it transports coal. The Guidance reiterates the governments support for the market orientation of the coal industry.

We sell our coal both on the spot market and under the contract and letter of intent. We set the purchase volume and schedule in a period
of time (generally, within one year) in the sales contract and letter of intent with our customers. The purchase price in the contract is set at the time of execution of contract, however, the purchase price in the letter of intent is set at the
time of actual sales.



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Fees and Taxes

The table below sets forth material taxes and fees that are imposed upon coal producers in China, as well as reserves which we are
required to set aside.



|                                                 |  |                                              |  |                                              
|------------------------------------------------ |  | -------------------------------------------- |  | ---------------------------------------------
|Item                                             |  | Base                                         |  | Rate                                         
|                                                 |  |                                             
|Corporate income tax                             |  | Taxable income                               |  | 25%                                          
|                                                 |  |                                             
|VAT                                              |  | Sales revenue                                |  | 17%                                          
|                                                 |  |                                             
|Business tax                                     |  | Revenue from service                         |  | 3% or 5%                                     
|                                                 |  |                                             
|City construction tax                            |  | Amount of VAT and business tax               |  | 5% to 7%                                     
|                                                 |  |                                             
|Education surcharge                              |  | Amount of VAT and business tax               |  | 3%                                           
|                                                 |  |                                             
|Local education surcharge                        |  | Amount of VAT and business tax               |  | 1%                                           
|                                                 |  |                                             
|Resource tax                                     |  | Aggregate volume of raw coal sold or used(1) |  | RMB3.6 per tonne
(Shandong Province)         
|                                                 |  |                                             
|                                                 |  |                                              |  | RMB3.2 per tonne
(Shanxi Province)           
|Compensation for the depletion of coal resources |  | Revenue from coal produced by us             |  | 1%                                           
|                                                 |  |                                             
|Price adjustment fund                            |  | Volume of raw coal produced                  |  | Jining City, Shandong Province
RMB8 per tonne



|(1) | The resource tax applicable to our coal operation in Shandong and Shanxi Provinces is calculated by multiplying the aggregate volume of raw coal sold and raw coal
consumed in the production of clean coal by the applicable per tonne resource tax in the respective province.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Coal producers may be fined if they damage the environment, arable land, grasslands or forest areas. Under the Mineral Resources Law, if
a mining enterprises mining activities results in damage to arable land, grasslands or forest areas, the mining enterprise must return the land to an arable state or plant trees or grass or take other restorative measures. The Mineral
Resources Law and other applicable laws and regulations also state that anyone who causes others to suffer loss in terms of production or living standards is liable for the loss and must compensate the affected persons and remedy the situation.

Additionally, all coal producers are subject to PRC environmental protection laws and regulations which currently impose fees
for the discharge of waste substances, require the payment of fines for serious pollution and provide for the discretion of the PRC government to close any facility which fails to comply with orders requiring it to cease or cure operations causing
environmental damage.

Imports and Exports

According to the Foreign Trade Law, the Cargo Import and Export Ordinance and the Administrative Measures of Coal Export Quota, coal
exports remain subject to State control and require governmental approval.

Our company has not been authorized as a PRC coal
exporter. Our coal export is conducted through three export agents including China National Coal Industry Import and Export Corporation, Minmetals Trading Co., Ltd. and Shanxi Coal Import & Export Group Corp.

Pursuant to the Administrative Measures of Coal Export Quota, the NDRC and the Ministry of Commerce are responsible for determining
Chinas national coal export quota and allocating the quota among authorized coal exporters. Upon receiving a quota approval, authorized coal exporters may apply for coal export permits to the relevant authority designated by the MOFCOM.
Authorized coal exporters are also required to report their monthly quota usage to the NDRC.

The regulations provide that
quotas may be adjusted in the event of:



| |  |  | a major change in the international market;
| | - |  | -------------------------------------------



| |  |  | a major change in domestic coal resources;
| | - |  | ------------------------------------------



| |  |  | an imbalance in the usage of the coal export quota by an authorized coal exporter compared to its allocation of the coal export quota; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | other circumstances which require an adjustment to the coal export quotas.
| | - |  | --------------------------------------------------------------------------

The total national quota approved for 2008 and 2009 was 47.7 million and 51.0 million, respectively, and the 2010 quota is
25.5 million tonnes.

According to the Notice of the Customs Tariff Committee of the State Council on Revising the Tariff
Rates on the Export of Aluminum Alloy, Coke and Coal (Shui Wei Hui 2008 No. 25), beginning August 20, 2008, the provisional tariff rate of coke, coking coal and soft coal will be 40%, 10%, and 10% respectively. Export tariffs are generally
passed to the purchaser. Therefore, changes in export tariffs do not directly affect us.

Domestic Trading of Coal

Pursuant to the Measures for the Regulation of Coal Operations promulgated by the NDRC on December 27, 2004, the State
implemented a system to examine the qualifications of an entity to engage in coal operations, including the wholesale and retail of raw coal and processed coal products and the processing and distribution of coal for civilian use. Before an entity
can engage in coal operations, it must obtain a coal operation qualification certificate. A coal production enterprise that deals in coal products produced and processed by a third party is required to obtain a coal operation qualification.

Environmental Protection

Pursuant to the Environmental Protection Law, the State Environmental Protection Administration is authorized to formulate national
environmental quality and discharge standards and to monitor Chinas environmental system at the national level to protect the environment. Environmental protection bureaus at the county level and above are responsible for environmental
protection within their respective jurisdiction.

China has promulgated a series of laws and regulations. Through these laws
and regulations, China has established national and local environmental protection legal frameworks and issued standards applicable to emission controls, discharges of wastes and pollutants to the environment, generation, handling, storage,
transportation, treatment and disposal of waste materials by production facilities, land rehabilitation and reforestation.

The Environmental Protection Law requires any entity operating a facility that produces pollutants or may create a hazard to incorporate
environmental protection measures into its operations and to establish an environmental protection responsibility system, which must adopt effective measures to control and properly dispose waste materials.

In the environmental impact statement of a construction project, the project operator must assess the pollution and environmental hazards
the project is likely to produce and its impact on the ecosystem and measures for their prevention and control. The statement shall, after initial examination by the authorities in charge of the construction project, be submitted by specified
procedure to the competent department of environmental protection administration for approval. Facilities for the prevention and control of pollution must be designed, constructed and implemented simultaneously with the primary construction
contemplated by a project. These facilities must be inspected by the competent environmental protection authority and determined to conform with specified requirements before they can be implemented.

Enterprises that discharge pollutants must report to and register with the relevant authorities in accordance with the provisions of a
department of environmental protection administration under the State Council. Enterprises that discharge pollutants in excess of the prescribed national or local standards will be fined for excessive discharge according to State provisions and will
be responsible for eliminating and controlling the pollution.

According to the Law on Prevention and Control of Water
Pollution of the Peoples Republic of China, and the Administrative Regulations on the Levy and Use of Discharge Fees, any new construction projects, which directly or indirectly discharge pollutants to water, such as coal mines and coking
plants, must conduct an environmental impact assessment. Every new production facility must be equipped with waste water processing facilities which must be put in use together with the production facilities. Construction projects that discharge
pollutants into water shall pay a pollutant discharge fee in accordance with state regulations.

Violators of the
Environmental Protection Law and various environmental regulations may be subject to warnings, payment of damages and fines. Any entity undertaking construction work or manufacturing activities before the pollution and waste control and processing
facilities are inspected and approved by the environmental protection department may be ordered to suspend production or operations and may be fined. The violators of relevant environment protection laws and regulations may be exposed to criminal
liability if violations resulted in severe loss of property, personal injuries or death.



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The rehabilitation of mining sites is another priority of the PRC government. Under the Law
of Land Administration of the Peoples Republic of China and the Land Rehabilitation Regulations, issued by the State Council in 1988, coal producers must undertake measures to restore a mining site to its original state within a prescribed
time frame if their mining activities result in damage to arable land, grassland or forest. The rehabilitated land must meet rehabilitation standards, as required by law from time to time, and may only be subsequently used upon examination and
approval by the land authorities. A coal producers failure to comply with this requirement or its failure to return the mining site to its original state will result in the imposition of fines, rehabilitation fees and/or rejection of
applications for land use rights by the local bureau of land and resources.

In addition to the PRC environmental laws and
regulations, China is a signatory to the 1992 United Nations Framework Convention on Climate Change and the 1998 Kyoto Protocol, which propose emission targets to reduce greenhouse gas emissions. The Kyoto Protocol came into force in 2005. At
present, the Kyoto Protocol has not set any specific emission targets for certain countries, including China.

Mining
safety

On June 7, 2005, the State Council promulgated Several Opinions on Promoting the Healthy Development of the
Coal Industry (Opinions), announcing the PRC governments policies with respect to the development and restructuring of the coal industry. The Opinions reiterated the PRC governments policies with respect to the administration
of coal reserves, enhancement of coal mine safety, encouragement of industry consolidation among coal producers, acceleration of the construction of large coal production bases, improvement of mining techniques and equipment for coal production and
the organization and regulation of small coal mines.

According to the Measures for Implementing Work Safety Permits in Coal
Mine Enterprises issued by the State Administration of Work Safety and the SACMS, a coal mine enterprise without a work safety permit may not engage in coal production activities. Coal mining enterprises and their mines that do not satisfy the
safety conditions set forth in these documents, or those that violate the provisions of this document, will be punished accordingly. Coal mine enterprises that remain compliant with the requirements set in these documents may apply for
administrative approval to extend the validity period of their Work Safety Permits.

The Special Regulations by the State
Council on Preventing Work Safety Related Accidents in Coal Mines were promulgated and entered into effect on September 3, 2005. This regulation specifies that coal mine enterprises are responsible for preventing coal mine work safety-related
accidents. If a coal mine has not obtained, in accordance with the law, a mining right permit, work safety permit, coal production permit or business license and if the mine manager has not obtained, in accordance with the law, a mine manager
qualification certificate and a mine manager safety qualification certificate, the coal mine may not engage in production. Coal mining enterprises should establish a sound system for the detection, elimination, treatment and reporting of latent work
safety-related dangers. If a major latent work safety-related danger as specified exists in a coal mine, the enterprise should immediately suspend production and eliminate the latent danger. Coal mining enterprises should provide their personnel
working underground and their special operation personnel with safety education and training in accordance with relevant state regulations. The person in charge of a coal mine and the production and operation management personnel should go into
mines and act as foremen on a rotating basis in accordance with state regulations, while a file recording their entry into the mine should be maintained.

In addition, the State Administration of Work Safety issued five sets of supplemental measures: (i) the Measures for Determining
Major Latent Work Safety Related Dangers in Coal Mines (for Trial Implementation); (ii) the Implementing Measures for the Detection and Elimination of Latent Dangers in Coal Mines and the Rectification and Closure of Such Mines (for Trial
Implementation); (iii) the Measures for the Supervision and Inspection of Coal Mine Safety Training (for Trial Implementation); (iv) the Guiding Opinions on Persons in Charge of Coal Mines and Production and Operation Management Personnel
Going into Mines as Foremen; (v) the Measures for Rewarding the Reporting of Major Latent Work Safety Related Dangers in, and Violations of the Law by, Coal Mines (for Trial Implementation).

Coal Industry  Australian Regulatory Matters

Our mining operations in Australia are regulated by Australian federal and state governments with respect to environmental issues such as
water quality, air quality, dust impacts, noise impacts, planning issues (such as approvals to expand existing mines or to develop new mines), and health and safety issues. Industrial relations are regulated under both federal and state laws.
Australian state governments also require coal companies to post deposits or give other security against land which is being used for mining and exploration, with those deposits being returned or security released after satisfactory reclamation is
completed.



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Environmental

Each state and territory in Australia has its own legal regime regarding environment and planning and there is a Commonwealth environment
regime in respect of matters of national environmental significance. In addition, each state and territory also has a legal regime dealing with mining in particular. The mining legislation in each state and territory generally operates concurrently
with environment and planning legislation. The mining legislation governs exploration and mining licenses, including the restoration of land following the completion of mining activities.

The particular provisions of the various state and territory environment and planning legal regimes vary depending upon the jurisdiction.
Despite variation in details, each state and territory has a system involving broadly at least two major phases. First, obtaining major environment/planning developmental approval addressing planning and significant environmental issues; and second,
obtaining pollution control approvals, regarding pollution control issues such as emissions to the atmosphere; emissions in waters; noise impacts, impacts from blasting; dust impacts; the generation, handling, storage and transportation of waste.

The Commonwealth environment regime will apply if matters of national environmental significance are likely to be
significantly impacted. If so, Commonwealth approval will be required.

Occupational Health and Safety

The combined effect of various state and federal statutes requires an employer to ensure that persons employed in a mine are safe from
injury by providing a safe working environment and systems of work; safety machinery; equipment, plant and substances; and appropriate information, instruction, training and supervision.

In recognition of the specialized nature of mining and mining activities, specific occupational health and safety obligations have been
mandated under law and legislation that deals specifically with the coal mining industry. Mining employers, owners, directors and managers, persons in control of work places, mine managers, supervisors and employees are all subject to these duties.
The federal government is currently conducting a review of health and safety legislation with a view to harmonizing requirements across the country.

It is mandatory for an employer to have insurance coverage with respect to the compensation of injured workers; similar coverage is in
effect throughout Australia which is of a no fault nature and which provides for benefits up to a prescribed level. The specific benefits vary by jurisdiction, but generally include the payment of weekly compensation to an injured employee, together
with payment of medical, hospital and related expenses. The injured employee may have a right to sue his or her employer for further damages if a case of negligence can be established (but on the condition that the injured employee waives his
or her right to the insurance coverage).

Carbon Pollution Reduction Scheme

The Federal Labor government ratified the Kyoto Protocol in December 2007. Under the treaty, Australia has a target of restricting
greenhouse gas emissions to 108% of 1990 levels during the 2008 to 2012 commitment period. The government has also committed to a 60% reduction in emissions by 2050, from 2000 levels. To assist in meeting these targets, the Australian Federal
government has announced that it intends to establish a cap and trade emissions trading scheme by 2013, named the Carbon Pollution Reduction Scheme. This scheme will impose costs on greenhouse gas emissions that will affect our business 
however, the government is likely to provide some support for the coal industry for the first few years of the scheme. If Carbon Pollution Reduction Scheme starts to implement and we will need to buy the volume of energy greenhouse gas emissions,
our revenue may decrease and our business may be adversely affected.

Foreign Investment

No specific restrictions apply in relation to foreign investment in Australias coal industry. However, under Australian law and the
Australian governments foreign investment policy, certain acquisitions must be notified to obtain the prior approval of the Treasurer before proceeding. These include acquisitions of substantial interests in an Australian business where the
value of the business total assets is, or the proposal value is, above US$100.0 million. It also includes (a) proposals to establish new businesses involving a total investment of US$10.0 million or more; (b) offshore takeovers of a
foreign company whose Australian subsidiaries or assets are valued at more than US$200.0 million, and account for less than 50% of the target companys global assets (different thresholds apply to U.S. investors); (c) acquisition of shares
in a company or trust which holds more than 50% of its assets in Australian urban land (regardless of the value of that acquisition); and (d) all direct investments in an Australian foreign business by foreign governments or their agencies
(irrespective of the size of that Australian business or value of that acquisition and made either directly or through a company that is owned 15% or more by a foreign government).



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Power Generation Industry

The Electric Power Law and the Electric Power Regulatory Ordinance

The Electric Power Law of the Peoples Republic of China (the Electric Power Law) sets out the regulatory framework of
the power industry. The Electric Power Law encourages power plant operators to focus on environmental protection and adopt new technology to decrease waste discharge.

In 2005, the State Council promulgated the Electric Power Regulatory Ordinance. The Electric Power Regulatory Ordinance sets forth
regulatory requirements for many aspects of the power industry, including, among others, the issuance of electric power business permit, the regulatory inspections of power generators and grid companies and the legal liabilities from violations of
the regulatory requirements.

Approvals and Licenses for Power Plants

Applications for all new coal-fired power plants are required to be submitted to the NDRC for approval, as well as the State Council for
significant power plant projects. According to the Provisions on the Administration of Electric Power Business Licenses, applicants are also required to obtain requisite permits, including an Electric Power Business for Power Generation and
approvals related to plant site, land use rights, construction and the environment.

Pricing

Since 1996, the Electric Power Law has set forth general principles for determining power tariffs. The Interim Provisions for the
Administration of Grid Power Price promulgated by NDRC states that tariffs are to be formulated to provide reasonable compensation for costs and a reasonable return on investment, to share expenses fairly and to promote the construction of power
projects. With the exception of grid power prices set by governmental bids or power plans that produce alternative energy, grid power prices of new power plants within the same region should be uniform. The on-grid tariffs for planned output and
excess output are subject to a review and approval process involving the NDRC and the provincial price bureaus. In 2004, the NDRC, with the approval of the State Council, issued a policy to link thermal coal and power prices. This policy allows
on-grid tariffs to increase if the average price of coal increases by more than 5% within a six-month period.

Safety

In accordance with the Measures for Supervising the Safety Production of Electricity, issued by the SERC, power plants are
responsible for maintaining their safety operations in accordance with requirements set by the regional grid in which they are located. Power plants are required to report to the SERC and relevant local government authorities worker fatalities or
serious or extraordinary accidents.

Coal Chemical Processing Industry

The State announced in the Coal Law its encouragement and support for coal mining enterprises and other enterprises to produce both coal
and electricity, coking coal and coal chemicals. The NDRC issued the Notice of Strengthening the Administration of Coal Chemical Processing Industry and Improving the Healthy Development of the Industry, which was aimed at strengthening the coal
chemical processing industry through the promotion of transportation safety, risk prevention and management standardization. According to the Enterprise Income Tax Law and its implementation regulations, enterprises that produce products using
resources encouraged by industrial policies of the State are eligible for preferential tax treatment. If an enterprise uses any of the materials that are listed in the Catalogue of Income Tax Preference for Enterprises of Comprehensive Utilization
of Resources as a major raw material in its product, the total income derived from such product for tax purposes will be reduced by 90%. Coke oven waste gas, one of the primary raw materials at one of our methanol production facilities, is one of
the materials listed on in the catalogue.



|C. | Organizational Structure
|-- | ------------------------

As of December 31, 2009, our Company consisted of 17 departments, namely the Secretariat of the Board of Directors, Audit Department
of the Board of Directors, Department of Coordination, Department of Human Resources, Department of Financial Planning, Enterprise Management Department, Information Management Department, Enterprise Development Department, Risk Management
Department, General Control Center, Department of Production Technology, Department of Safety Inspection, Electrical Engineering and Power Department, Ventilation and Dust Elimination Department, Geological Survey Department, Office of Community
Relationship and Technical Center.



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The diagram below sets forth our organization as of December 31, 2009:

LOGO

| |  |  |  |                  |  | 
| |  |  |  | ---------------- |  | 
| |  |  |  | subsidiaries     |  | 
| |  |  |  | production units |  | 



33



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|(1) | with the exception of Yancoal Australia Pty Limited and its subsidiaries, which are incorporated in Australia, all of our other subsidiaries are incorporated in the PRC
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | indirectly held by Felix through wholly-owned subsidiaries
|--- | ----------------------------------------------------------

|(3) | subsequent to December 31, 2009, our equity interest in Heze Nenghua and Tianhao Chemicals was increased to 98.33% and 99.89%, respectively
|--- | -------------------------------------------------------------------------------------------------------------------------------------------



|D. | Property, Plants and Equipment
|-- | ------------------------------

Real Property and Leasehold Property

As of December 31, 2009, the net book value of our property, plant and equipment was RMB18,877.1 million. The properties for which we
own land use rights in China occupy an area of approximately 7,133.5 thousand square meters, while the coalfields to which we possess mining rights in Australia occupy an area of approximately 1,717,220.0 thousand square meters. Under PRC
law, our land use rights for properties in China during the validity of the grant are granted for 50 years commencing from the respective grant dates of such land use rights and are freely transferable. In addition, the land ownership rights held by
Yancoal Australia are held in perpetuity pursuant to Australia law.

Coal Mines and Coal Production
Facilities

The Six Coal Mines currently operated by us are all located in the southwestern part of Shandong
Province. All of these mines are connected by our railway network, which provides direct access to our customers or indirectly through the PRC national railway or highway system. We acquired Austar Coal Mine in 2004 and subsequently acquired Shanxi
Nenghua, which operates Tianchi Coal Mine, in 2006. We own 98.33% of Heze Nenghua, which operates Zhaolou Coal Mine. Zhaolou Coal Mine commenced commercial operations in December 2009.

In December 2009, we acquired the entire equity interest in Felix through Yancoal Australia. Felix is a company incorporated in Australia
whose principal activities include the mining, sales and exploration of coal. The major coal assets currently owned by Felix are located in New South Wales and Queensland. As of the date of this annual report, Felix has an ownership interest in the
following operational coal mines: Ashton Coal Mine (consisting of an underground coal mine and an open-pit coal mine), Minerva Coal Mine, Yarrabee Coal Mine and Moolarben Coal Mine (consisting of an underground coal mine and an open-pit coal mine).
Felix also holds ownership interests in three exploratory mines and a 15.4% equity interest in Newcastle Coal Infrastructure Group, a joint venture that is responsible for constructing and operating the third export terminal at Newcastle Port.



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The map below shows the location of the Six Coal Mines in Shandong Province and our railway
system:

LOGO

The map below shows the location of Austar Coal Mine and coal mines owned by Felix:

LOGO



35



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##### Table of Contents

The map below shows the location of Tianchi Coal Mine:

LOGO



36



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##### Table of Contents

The map below shows the location of Zhaolou Coal Mine:

LOGO



37



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##### Table of Contents

The following table sets forth information about each of the Six Coal Mines, which are
directly owned and operated by the Company:



|                                                           |  |          |  |           |  |          |  |          |  |           |  |            |  |        
|---------------------------------------------------------- |  | -------- |  | --------- |  | -------- |  | -------- |  | --------- |  | ---------- |  | -------
|                                                           |  |          |  | Xinglong- |  |          |  |          |  |           |  |            |  |        
|                                                           |  | Nantun   |  | zhuang    |  | Baodian  |  | Dongtan  |  | Jining II |  | Jining III |  | Total  
|Background data:                                           |  |          |  |           |  |          |  |          |  |           |  |            |  |        
|                                                           |  |          |  |           |  |          | 
|Commencement of construction                               |  | 1966     |  | 1975      |  | 1977     |  | 1979     |  | 1989      |  | 1993       |  | N/A    
|                                                           |  |          |  |           |  |          | 
|Commencement of commercial production                      |  | 1973     |  | 1981      |  | 1986     |  | 1989     |  | 1997      |  | 2000       |  | N/A    
|                                                           |  |          |  |           |  |          | 
|Coalfield area(square kilometers)                          |  | 35.2     |  | 59.81     |  | 36.4     |  | 60.0     |  | 87.1      |  | 105.1      |  | 383.61 
|                                                           |  |          |  |           |  |          | 
|Reserve
data:(1)
(millions tonnes as of December 31, 2009) |  |          |  |           |  |          |  |          |  |           |  |            |  |        
|                                                           |  |          |  |           |  |          | 
|Total in-place proven and probable
reserves(2)(3)          |  | 118.20   |  | 326.13    |  | 288.36   |  | 457.47   |  | 413.42    |  | 227.54     |  | 1,831.2
|                                                           |  |          |  |           |  |          | 
|Mining recovery rate (%)                                   |  | 80.75    |  | 80.58     |  | 82.57    |  | 84.02    |  | 65.27     |  | 81.59      |  | N/A    
|                                                           |  |          |  |           |  |          | 
|Coal preparation plant recovery rate
(%)(4)                |  | 83.54    |  | 61.69     |  | 77.05    |  | 69.10    |  | 51.90     |  | 73.68      |  | 69.10  
|                                                           |  |          |  |           |  |          | 
|Depth of mine(meters underground)                          |  | 397.0    |  | 429.2     |  | 474.7    |  | 710.0    |  | 593.0     |  | 556.0      |  | N/A    
|                                                           |  |          |  |           |  |          | 
|Average thickness of main coal seam(meters)                |  | 8.60     |  | 8.29      |  | 8.81     |  | 8.41     |  | 6.78      |  | 6.20       |  | N/A    
|                                                           |  |          |  |           |  |          | 
|Type of coal                                               |  | steam    |  | steam     |  | steam    |  | steam    |  | steam     |  | steam      |  | N/A    
|                                                           |  |          |  |           |  |          | 
|Leased/owned                                               |  | owned    |  | owned     |  | owned    |  | owned    |  | owned     |  | owned      |  | N/A    
|                                                           |  |          |  |           |  |          | 
|Assigned/unassigned(5)                                     |  | assigned |  | assigned  |  | assigned |  | assigned |  | assigned  |  | assigned   |  | N/A    
|                                                           |  |          |  |           |  |          | 
|Average calorific value(Kcal/kg)                           |  | 5,572    |  | 5,881     |  | 5,890    |  | 5,586    |  | 5,467     |  | 5,412      |  | N/A    
|                                                           |  |          |  |           |  |          | 
|Sulfur content (%)                                         |  | 0.74     |  | 0.47      |  | 0.52     |  | 0.60     |  | 0.56      |  | 0.52       |  | N/A    
|                                                           |  |          |  |           |  |          | 
|Production data:(million tonnes)                           |  |          |  |           |  |          |  |          |  |           |  |            |  |        
|                                                           |  |          |  |           |  |          | 
|Designed raw coal production capacity                      |  | 2.4      |  | 3.0       |  | 3.0      |  | 4.0      |  | 4.0       |  | 5.0        |  | 21.4   
|                                                           |  |          |  |           |  |          | 
|Designed coal preparation input capacity                   |  | 1.8      |  | 3.0       |  | 3.0      |  | 4.0      |  | 3.0       |  | 5.0        |  | 19.8   
|                                                           |  |          |  |           |  |          | 
|Raw coal production                                        |  |          |  |           |  |          |  |          |  |           |  |            |  |        
|                                                           |  |          |  |           |  |          | 
|2000                                                       |  | 4.5      |  | 6.2       |  | 5.3      |  | 6.7      |  | 4.8       |  |           |  | 27.5   
|                                                           |  |          |  |           |  |          | 
|2001                                                       |  | 4.9      |  | 6.6       |  | 6.2      |  | 7.1      |  | 4.1       |  | 5.1        |  | 34.0   
|                                                           |  |          |  |           |  |          | 
|2002                                                       |  | 3.6      |  | 7.1       |  | 6.4      |  | 8.1      |  | 5.2       |  | 8.0        |  | 38.4   
|                                                           |  |          |  |           |  |          | 
|2003                                                       |  | 4.7      |  | 7.0       |  | 7.3      |  | 8.2      |  | 6.0       |  | 10.1       |  | 43.3   
|                                                           |  |          |  |           |  |          | 
|2004                                                       |  | 4.1      |  | 7.4       |  | 7.0      |  | 8.5      |  | 4.9       |  | 7.3        |  | 39.2   
|                                                           |  |          |  |           |  |          | 
|2005                                                       |  | 4.0      |  | 6.6       |  | 5.0      |  | 7.5      |  | 4.5       |  | 7.0        |  | 34.6   
|                                                           |  |          |  |           |  |          | 
|2006                                                       |  | 3.9      |  | 7.2       |  | 5.6      |  | 8.0      |  | 4.0       |  | 6.8        |  | 35.5   
|                                                           |  |          |  |           |  |          | 
|2007                                                       |  | 3.9      |  | 6.8       |  | 5.8      |  | 7.6      |  | 3.4       |  | 5.3        |  | 32.8   



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|                                                       |  |        |  |                      |  |         |  |         |  |           |  |            |  |      
|------------------------------------------------------ |  | ------ |  | -------------------- |  | ------- |  | ------- |  | --------- |  | ---------- |  | -----
|                                                       |  | Nantun |  | Xinglong-     zhuang |  | Baodian |  | Dongtan |  | Jining II |  | Jining III |  | Total
|                                                       |  |        |  |                      |  |         | 
|2008                                                   |  | 3.5    |  | 6.6                  |  | 6.0     |  | 7.0     |  | 3.9       |  | 6.1        |  | 33.1 
|                                                       |  |        |  |                      |  |         | 
|2009                                                   |  | 3.8    |  | 6.6                  |  | 5.7     |  | 7.5     |  | 3.6       |  | 6.2        |  | 33.4 
|                                                       |  |        |  |                      |  |         | 
|Cumulative raw coal production as of December 31, 2009 |  | 63.5   |  | 95.0                 |  | 84.3    |  | 104.8   |  | 50.8      |  | 61.9       |  | 460.3



|(1) | Our estimates of total in-place proven and probable reserves are reported after deduction of actual production volume and non-accessible reserves up to
December 31, 2009. Non-accessible reserves are defined as the portion of identified resources estimated to be not accessible by application of one or more accessibility factors within an area.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | In-place reserves refer to coal in-situ prior to the deduction of pillars of support, barriers or constraints for longwall mining.
|--- | ----------------------------------------------------------------------------------------------------------------------------------

|(3) | See the individual description of each mine for relevant mining methods used.
|--- | -----------------------------------------------------------------------------

|(4) | Coal preparation plant recovery rate refers to the wash plant recovery rate of raw coal used during the production of our clean coal products.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Assigned reserves refer to coal which has been committed to a particular mining complex (mine shafts, mining equipment, and plant facilities), and all coal
which has been leased by the company to others. Unassigned reserves refer to coal which has not been committed, and which would require new mineshafts, mining equipment, or plant facilities before operations could begin on the property.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Nantun Coal Mine. Nantun is located in the southern portion of our coalfield. Nantun began commercial
production initially in 1973 with a designed annual raw coal production capacity of 1.5 million tonnes of coal. In 1993, the designed annual production capacity for Nantun was increased to 2.4 million tonnes after the completion of a
renovation project. The main coal seam of Nantun is divided into two leaves. The thickness of the upper leaf averages 5.35 meters and the thickness of the lower leaf averages 3.21 meters. As of December 31, 2009, the total in-place proven and
probable reserves on the main coal layer were approximately 118.2 million tonnes. At this mine, we generally use the fully-mechanized sublevel caving mining method to extract coal from the upper layer of the coal seam and use a fully-mechanized
longwall system to mine the lower layer of the coal seam. As of December 31, 2009, Nantun produced coal from three work-faces.

Nantuns coal preparation plant produces mainly No. 2 and No. 3 Clean Coal and employs only jig machines. Most of the
equipment used in the Nantun coal preparation plant was manufactured in the PRC.

Xinglongzhuang Coal Mine.
Xinglongzhuang is located in the northern portion of our coalfield. The main coal seam of Xinglongzhuang is concentrated in one leaf with an average thickness of 8.3 meters. As of December 31, 2009, the total in-place proven and probable
reserves on the main coal layer were approximately 326.1 million tonnes. At this mine, we principally use the fully-mechanized sublevel caving method to extract coal from the coal seam of Xinglongzhuang Coal Mine. Xinglongzhuang produced coal
from two work-faces as of December 31, 2009.

The Xinglongzhuang coal preparation plant produces No. 1, No. 2
and No. 3 Clean Coal. The principal pieces of equipment in the Xinglongzhuang coal preparation plant, including its jig machines, sink-and-float separation machines and floating separation machines, were imported.

Baodian Coal Mine. Baodian is located in the central western portion of our coalfield. Certain sections of the main coal seam of
Baodian are concentrated in one leaf, with an average thickness of 8.81 meters. The remaining sections are divided into two leaves with an average thickness of 5.74 meters for the upper leaf and 3.38 meters for the lower leaf. As of
December 31, 2009, the total in-place proven and probable reserves on the main coal layer were approximately 288.4 million tonnes. At this mine, we generally use the fully-mechanized sublevel caving method to extract coal from the upper
layer of the coal seam and use mechanized longwall faces to mine the lower layer of the coal seam. Baodian Coal Mine maintained two work-face as of December 31, 2009.

The original design of the Baodian coal preparation plant is similar to that of the Nantun coal preparation plant. Subsequently, we
remodeled the jig machines and added a modified sink-and-float separation processing system at the Baodian coal preparation plant. Most of the equipment used in the Baodian coal preparation plant was manufactured in the PRC. The principal products
of Baodians coal preparation plant are No. 2 and No. 3 Clean Coal.

Dongtan Coal Mine. Dongtan is
located in the central eastern portion of our coalfield. Certain sections of the main coal seam consist of one layer with an average thickness of 8.41 meters, and the remaining sections are divided into two layers, with an average thickness of 5.38
meters for the upper layer and 3.22 meters for the lower layer. As of December 31, 2009, the main coal layer held approximately 457.5 million tonnes of in-place proven and probable reserves. At this mine, we generally use the
fully-mechanized sublevel caving method to extract coal from the sections of the coal seam with one layer of coal and the upper layer in the sections with two layers of coal. Dongtan Coal Mine maintained two work-faces as of December 31, 2009.



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Most of the equipment used at the Dongtan coal preparation plant, including the jig
machines, a modified sink-and-float separation processing system, was manufactured in the PRC. The principal products of Dongtans coal preparation plant are No. 2 and No. 3 Clean Coal.

Jining II Coal Mine. Jining II is located in the northern portion of the Jining coalfield. Certain sections of the main coal seam
of Jining II are concentrated in one layer, with an average thickness of 6.78 meters. The remaining sections are divided into two layers, with an average thickness of 2.1 meters for the upper leaf and an average thickness of 4.68 meters for the
lower leaf. As of December 31, 2009, the total in-place proven and probable reserves on the main coal layer were approximately 413.4 million tonnes. At this coal mine, we use mainly the fully-mechanized sublevel caving method to extract
coal from the upper layer of the coal seam and use mechanized longwall faces to mine the lower layer of the coal seam. Jining II Coal Mine produced coal from two work-faces as of December 31, 2009.

The main equipment used in Jining II is jig machines, most of which are manufactured in the PRC. The principal products of the coal
preparation plant of Jining II are No. 2 and No. 3 Clean Coal.

Jining III Coal Mine. Jining III is located
in the southern portion of the Jining coalfield and covers an area of 105.0 square kilometers. Jining III commenced commercial production in 2000 with a designed annual raw coal production capacity of 5 million tonnes. As of December 31,
2009, the total in-place proven and probable reserves on the main coal layer were approximately 227.5 million tonnes. The average thickness of the main coal seam of Jining III is 6.2 meters. We mainly rely on the fully-mechanized sublevel
caving method to extract coal from three work-faces in Jining III Coal Mine as of December 31, 2009.

The main pieces of
equipment used in Jining III are jig machines, which were imported from Germany. The principal products of the coal preparation plant of Jining III are No. 2 and No. 3 Clean Coal.

The following table sets forth information about Tianchi Coal Mine and Zhaolou Coal Mine, our coal mines in China that are operated by
subsidiaries of the Company:



|                                                           |  |          |  |                 |  |       
|---------------------------------------------------------- |  | -------- |  | --------------- |  | ------
|                                                           |  | Tianchi  |  | Zhaolou         |  | Total 
|                                                           |  |          | 
|Background data:                                           |  |          |  |                 |  |       
|                                                           |  |          | 
|Commencement of
construction(1)                            |  | 2004     |  | 2004            |  | N/A   
|                                                           |  |          | 
|Commencement of commercial
production(1)                   |  | 2006     |  | 2009            |  | N/A   
|                                                           |  |          | 
|Coalfield area(square kilometers)                          |  | 20.0     |  | 143.36          |  | 163.36
|                                                           |  |          | 
|Reserve
data:(2)
(millions tonnes as of December 31, 2009) |  |          |  |                 |  |       
|                                                           |  |          | 
|Recoverable
reserves(3)(4)                                 |  | 27.73    |  | 105.79          |  | 133.52
|                                                           |  |          | 
|Mining recovery rate (%)                                   |  | 78.04    |  | 80.15           |  | N/A   
|                                                           |  |          | 
|Coal preparation plant recovery rate
(%)(5)                |  | N/A      |  | 73              |  | N/A   
|                                                           |  |          | 
|Depth of mine(meters underground)                          |  | 225      |  | 905             |  | N/A   
|                                                           |  |          | 
|Average thickness of main coal seam(meters)                |  | 4.56     |  | 5.15            |  | N/A   
|                                                           |  |          | 
|Type of coal                                               |  | Steam    |  | 1/3 coking coal |  | N/A   
|                                                           |  |          | 
|Leased/owned                                               |  | owned    |  | owned           |  | N/A   
|                                                           |  |          | 
|Assigned/unassigned(6)                                     |  | assigned |  | assigned        |  | N/A   
|                                                           |  |          | 
|Average calorific value(Kcal/kg)                           |  | 5,177    |  | 6,937           |  | N/A   
|                                                           |  |          | 
|Sulfur content (%)                                         |  | 0.90     |  | 0.53            |  | N/A   
|                                                           |  |          | 
|Production data:(million tonnes)                           |  |          |  |                 |  |       
|                                                           |  |          | 
|Designed raw coal production capacity                      |  | 1.2      |  | 3.0             |  | 4.2   



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|                                                       |  |         |  |         |  |      
|------------------------------------------------------ |  | ------- |  | ------- |  | -----
|                                                       |  | Tianchi |  | Zhaolou |  | Total
|                                                       |  |         | 
|Designed coal preparation input capacity               |  |        |  |        |  |     
|                                                       |  |         | 
|Raw coal production                                    |  |         |  |         |  |      
|                                                       |  |         | 
|2006                                                   |  | 0.1     |  |        |  | 0.1  
|                                                       |  |         | 
|2007                                                   |  | 1.2     |  |        |  | 1.2  
|                                                       |  |         | 
|2008                                                   |  | 1.1     |  |        |  | 1.1  
|                                                       |  |         | 
|2009                                                   |  | 1.0     |  | 0.04    |  | 1.04 
|                                                       |  |         | 
|Cumulative raw coal production as of December 31, 2009 |  | 3.4     |  | 0.04    |  | 3.44 



|(1) | With respect to Tianchi Coal Mine, the commencement of construction refers to capacity expansion and technology upgrade undertaken after our 2006
acquisition; the commencement of commercial production refers to the resumption of production after completion of the foregoing expansion and upgrade.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Our estimates of recoverable reserves are reported after deduction of actual production volume and non-accessible reserves up to December 31, 2009. Non-accessible
reserves are defined as the portion of identified resources estimated to be not accessible by application of one or more accessibility factors within an area.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Recoverable reserves refer to the amount of proven and probable reserves that can be recovered after taking into account all mining and preparation losses that occur
during the processing of coal after it is mined.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | See the individual description of each mine for relevant mining methods used.
|--- | -----------------------------------------------------------------------------

|(5) | Coal preparation plant recovery rate refers to the wash plant recovery rate of raw coal used during the production of our coal products.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------

|(6) | Assigned reserves refer to coal which has been committed to a particular mining complex (mine shafts, mining equipment, and plant facilities), and all coal
which has been leased by the company to others. Unassigned reserve refers to coal which has not been committed, and which would require new mineshafts, mining equipment, or plant facilities before operations could begin on the property.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Tianchi Coal Mine. Tianchi Coal Mine is an underground mine located in Heshun County of Shanxi Province,
with an area of approximately 20 square kilometers. Tianchi Coal Mine commenced commercial production in 2006 and the designed production capacity of Tianchi Coal Mine was increased to 1.2 million tonnes per annum in the same year.

Tianchi Coal Mine is operated by inclined shaft development, and it produces mostly lean coal and meager lean coal. The average thickness
of this target coal seam is 4.56 meters. As of December 31, 2009, the total recoverable reserves of Tianchi Coal Mine were approximately 27.8 million tonnes. We principally used the longwall caving mining method to extract coal from one
work-face at Tianchi Coal Mine as of December 31, 2009.

Tianchi Coal Mine underwent a technological upgrade and installed a
sink-and-float separation processing system and started trial production in April 2009. The primary piece of equipment in this system are slanted wheel separators, which are manufactured in China. Tianchi Coal Mine primarily produces thermal coal.

We do not employ mining contractors at Tianchi Coal Mine. The operations at Tianchi Coal Mine are powered by electricity from
local power grids. We ship coal products from the Tianchi Coal Mine to Hebei Province and surrounding areas on the Yangshe Railway as well as the national railway network.

Zhaolou Coal Mine. Zhaolou Coal Mine is an underground longwall mine located in the central portion of Juye Coal Field in Shandong
Province. Zhaolou Coal Mine covers an area of approximately 145 square kilometers, and is accessible by roadway and railway.

Zhaolou Coal Mine commenced commercial production in December 2009 and has a designed annual raw coal production capacity of three
million tonnes. Zhaolou Coal Mine produces 1/3 coking coal. The average thickness of the main coal seam of Zhaolou Coal Mine is 5.15 meters. The total recoverable reserves of Zhaolou Coal Mine were approximately 105.8 million tonnes as of
December 31, 2009. We principally used the longwall caving mining method to extract coal from the one work-face at Zhaolou Coal Mine as of December 31, 2009.

The coal preparation plant at Zhaolou Coal Mine commenced commercial production in September 2009. The main equipment used in the coal
preparation plant are slanted wheel separators and heavy-medium cyclone machine, which are mainly produced in China. The main product of Zhaolous coal preparation plant is No. 2 Clean Coal.

We do not employ mining contractors at Zhaolou Coal Mine. The operations at Zhaolou Coal Mine are powered by electricity from local power
grids. We ship coal products to Hebei Province and surrounding areas by trucks.



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##### Table of Contents

The following table sets forth information about our operational and exploratory coal mines
in Australia, which are held directly or indirectly by Yancoal Australia:



|                                                          |  |                        |  |          |  |              |  |                        |  |              |  |              |  |                  |  |            |  |         
|--------------------------------------------------------- |  | ---------------------- |  | -------- |  | ------------ |  | ---------------------- |  | ------------ |  | ------------ |  | ---------------- |  | ---------- |  | --------
|                                                          |  | Austar                 |  | Yarrabee |  | Minerva      |  | Ashton                 |  | Moolarben    |  | Athena       |  | Harry-brandt     |  | Wilpeena   |  | Total   
|Background data:                                          |  |                        |  |          |  |              |  |                        |  |              |  |              |  |                  |  |            |  |         
|Commencement
ofconstruction(1)                            |  | 1998                   |  | 1981     |  | 2004         |  | 2003                   |  | 2009         |  | N/A          |  | N/A              |  | N/A        |  | N/A     
|Commencement
ofcommercialproduction(1)(2)                 |  | 2000                   |  | 1982     |  | 2005         |  | 2004                   |  | 2010         |  | N/A          |  | N/A              |  | N/A        |  | N/A     
|Coalfield area (squarekilometers)                         |  | 97.49                  |  | 33.95    |  | 1,558        |  | 10.38                  |  | 17.4         |  | 782.73       |  | 40.4             |  | 34.65      |  | 2,540.51
|Reserve
data:(3)
(millions tonnes as ofDecember 31, 2009) |  |                        |  |          |  |              |  |                        |  |              |  |              |  |                  |  |            |  |         
|Resources                                                 |  | 129                    |  | 146.5    |  | 74.6         |  | 437.27                 |  | 706.4        |  | 560          |  | 96               |  | 27.2       |  | 2,176.97
|Recoverablereserves(4)(5)                                 |  | 44.6                   |  | 39.1     |  | 25.2         |  | 92.07                  |  | 356.8        |  | N/A          |  | N/A              |  | N/A        |  | 557.77  
|Depth of mine (metersunderground)                         |  | 300                    |  | N/A      |  | N/A          |  | 190-280                |  | N/A          |  | N/A          |  | N/A              |  | N/A        |  | N/A     
|Type of coal                                              |  | semi-hard  coking coal |  | PCI      |  | thermal coal |  | semi-soft  coking coal |  | thermal coal |  | thermal coal |  | anthracite  coal |  | PCI        |  | N/A     
|Leased/owned                                              |  |                        |  |          |  |              |  |                        |  |              |  |              |  |                  |  | owned      |  | N/A     
|                                                          |  | owned                  |  | owned    |  | owned        |  | owned                  |  | owned        |  | owned        |  | owned            |  |            |  |         
|Assigned/unassigned(6)                                    |  | assigned               |  | assigned |  | assigned     |  | assigned               |  | assigned     |  | unassigned   |  | unassigned       |  | unassigned |  | N/A     
|Average calorific value(Kcal/kg)                          |  | 6,196                  |  | 7,300    |  | 6,500        |  | 7,100                  |  | 6,650        |  | N/A          |  | N/A              |  | N/A        |  | N/A     
|Sulfur content (%)                                        |  | 1.30                   |  | 0.70     |  | 0.60         |  | 0.65                   |  | 0.50         |  | N/A          |  | N/A              |  | N/A        |  | N/A     
|Production data: (milliontonnes)                          |  |                        |  |          |  |              |  |                        |  |              |  |              |  |                  |  |            |  |         
|Designed raw coal productioncapacity                      |  | 2.0                    |  | 1.7      |  | 2.8          |  | 5.6                    |  | 16.0         |  | N/A          |  | N/A              |  | N/A        |  | 28.1    
|Designed coal preparationinput capacity                   |  | 2.0                    |  | 1.7      |  | N/A          |  | 6.5                    |  | 16.0         |  | N/A          |  | N/A              |  | N/A        |  | 26.2    
|Raw coal production                                       |  |                        |  |          |  |              |  |                        |  |              |  |              |  |                  |  |            |  |         
|2006                                                      |  | 0.4                    |  |         |  |             |  |                       |  |             |  |             |  |                 |  |           |  | 0.4     
|                                                          |  |                        |  |          |  |              |  |                        | 
|2007                                                      |  | 1.6                    |  |         |  |             |  |                       |  |             |  |             |  |                 |  |           |  | 1.6     
|                                                          |  |                        |  |          |  |              |  |                        | 
|2008                                                      |  | 1.9                    |  |         |  |             |  |                       |  |             |  |             |  |                 |  |           |  | 1.9     
|                                                          |  |                        |  |          |  |              |  |                        | 
|2009                                                      |  | 1.9                    |  |         |  |             |  |                       |  |             |  |             |  |                 |  |           |  | 1.9     
|                                                          |  |                        |  |          |  |              |  |                        | 
|Cumulative raw coalproduction as ofDecember 31, 2009      |  | 5.8                    |  |         |  |             |  |                       |  |             |  |             |  |                 |  |           |  | 5.8     



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|(1) | Austar Coal Mine was closed in 2003 as the result of a fire. We acquired Austar Coal Mine in 2004 and implemented a production expansion and technology upgrade in 2005.
Austar Coal Mine resumed part or its operations in October 2006. Each of Ashton Coal Mine and Moolarben Coal Mine has an open-pit coal mine and an underground coal mine, and the commencement of commercial production indicates the time
when the open-pit mines, the earlier of the two types of mines, commenced commercial production.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Our estimates of recoverable reserves are reported after deduction of actual production volume and non-accessible reserves up to December 31, 2009. Non-accessible
reserves are defined as the portion of identified resources estimated to be not accessible by application of one or more accessibility factors within an area.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Recoverable reserves refer to the amount of proven and probable reserves that can be recovered after taking into account all mining and preparation losses that occur
during the processing of coal after it is mined.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | See the individual description of each mine for relevant mining methods used.
|--- | -----------------------------------------------------------------------------

|(5) | Ashton Coal Mine and Moolarben Coal Mine have both the open-pit coal mine and underground coal mine. The depth of mine indicates the depth of the underground mines.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Assigned reserves refer to coal which has been committed to a particular mining complex (mine shafts, mining equipment, and plant facilities), and all coal
which has been leased by the company to others. Unassigned reserve refers to coal which has not been committed, and which would require new mineshafts, mining equipment, or plant facilities before operations could begin on the property.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Austar Coal Mine.Austar Coal Mine is an underground mine located in Hunter Valley, New South Wales,
Australia and is accessible by railway. Austar Coal Mine covers an area of 63.0 square kilometers. Austar Coal Mine was constructed in 1998 and commenced commercial production in 2000.



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In 2003, an underground fire occurred at Austar Coal Mine when it was still owned by
Southland Coal Pty Limited, resulting in the closure of the mine. On December 24, 2004, we acquired the entire interest in the Austar Coal Mine for approximately AUD32.0 million from Southland Coal Pty Limited, an independent third party.

We invested approximately AUD230.3 million in the reconstruction, capacity expansion and technology upgrade of Austar Coal
Mine in 2005, which included funding for equipment and machinery. After we completed the foregoing investment in Austar Coal Mine, the mine resumed commercial production in October 2006.

Austar Coal Mine produces semi-hard coking coal. The average thickness of the main coal seam of Austar Coal Mine is 5.30 meters. As of
December 31, 2009, the mines total recoverable reserves were approximately 44.6 million tonnes. we principally use the fully-mechanized caving method to extract coal from one work-face.

The main equipment used in Austar Coal Mine is the heavy-medium cyclone machine. These heavy-medium cyclone machines are manufactured in
Australia.

We have not contracted the mining operations at Austar to a third-party mining contractor. The operations at
Austar Coal Mine are powered by electricity from local power grids. We ship the coal products from the Austar Coal Mine to Newcastle Port via railway.

Yarrabee Coal Mine.Yarrabee Coal Mine is an open pit mine located in Bowen Basin, Queensland, Australia and is accessible by
railway. Yarrabee Coal Mine covers an area of 34 square kilometers. Yarrabee Coal Mine was constructed in 1981 and commenced commercial production in 1982.

Felix wholly owns Yarrabee Coal Mine. The designed annual capacity of Yarrabee Coal Mine is 1.7 million tonnes. Yarrabee Coal Mine
mainly produces PCI. The average thickness of the main coal seam of Yarrabee Coal Mine is 3.2 to 4 meters. As of December 31, 2009, the mines total recoverable reserves were approximately 39.1 million tonnes. We use shearers to
conduct surface mining at Yarrabee Coal Mines.

Yarrabee Coal Mine has a coal preparation plant. The main pieces of equipment
used in the coal preparation plant are heavy-medium cyclone machines and floating separation machines, which are manufactured in Australia.

We have not contracted the mining operations at Yarrabee Coal Mine to third-party mining contractors. The operations at Yarrabee Coal
Mine are powered by electricity from local power grids. We ship the coal products from the Yarrabee Coal Mine to Gladstone Port via railway.

Minerva Coal Mine.Minerva Coal Mine is an open pit mine located in Bowen Basin, Queensland, Australia and is accessible by
railway. Minerva Coal Mine covers an area of 1,558 square kilometers. Minerva Coal Mine was constructed in 2004 and commenced commercial production in 2005.

Felix holds 51% of the equity interest in Minerva Coal Mine through Proserpina Coal Pty Ltd. The designed annual capacity of Minerva Coal
Mine is 2.8 million tonnes. Minerva Coal Mine mainly produces thermal coal. The average thickness of the main coal seam of Minerva Coal Mine is 0.6 to 3.2 meters. As of December 31, 2009, the mines total recoverable reserves were
approximately 25.2 million tonnes, of which approximately 12.9 million tonnes was attributable to us pursuant to our shareholding percentage. We use shearers to conduct surface mining at Minerva Coal Mine.

Minerva Coal Mine does not have a coal preparation plant. We separate raw coal and then transport it to customers. We have not contracted
the mining operations at Minerva Coal Mine to a third-party mining contractor. The operations at Minerva Coal Mine are powered by electricity from local power grids. We ship the coal products from the Minerva Coal Mine to Gladstone Port via railway.

Ashton Coal Mine.Ashton Coal Mine has both an underground mine and an open pit mine located in Hunter Valley, New
South Wales, Australia and is accessible by railway. Ashton Coal Mine covers an area of 10.38 square kilometers. The open-pit and underground mines of Ashton Coal Mine were constructed in 2003 and commenced commercial production in 2004.

Felix holds 60% of the equity interest in Ashton Coal Mine through White Mining (NSW) Pty Limited. The designed annual capacity of Ashton
Coal Mine is 5.6 million tonnes, of which the annual capacity of the underground mine is 3.0 million tonnes and the annual capacity of the open-pit mine is 2.7 million tonnes. Ashton Coal Mine mainly produces semi-soft coking coal.
The average thickness of the main coal seam of the open-pit mine and the underground mine of Ashton Coal Mine are 2.14 to 2.26 and 1.7 to 2.4 meters, respectively. As of December 31, 2009, the mines total recoverable reserves were
approximately 92.1 million tonnes, of which approximately 55.2 million tonnes was attributable to us pursuant to our shareholding percentage. We principally use the longwall operation to extract coal from the underground coal seam and
shearers to conduct surface mining at the open-pit mine of Ashton Coal Mine.



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The main pieces of equipment used in the coal preparation plant of Ashton Coal Mine are
heavy-medium cyclone machines and floating separation machines, which are manufactured in Australia. We have not contracted the mining operations at Ashton Coal Mine to a third-party mining contractor. The operations at Ashton Coal Mine are powered
by electricity from local power grids. We ship the coal products from the Ashton Coal Mine to Newcastle Port via railway.

Moolarben Coal Mine.Moolarben Coal Mine has both an underground mine and an open pit mine located in Hunter Valley, New South
Wales, Australia and is accessible by railway. Moolarben Coal Mine covers an area of 17.4 square kilometers. The open-pit mine of Moolarben Coal Mine was constructed in 2009 and commenced commercial production in May 2010, while the construction of
the underground mine of Moolarben Coal Mine will be completed in 2012 and commence commercial production in 2013.

Felix holds
80% of the equity interest in Moolarben Coal Mine through Moolarben Coal Mines Pty Limited. The designed annual capacity of Moolarben Coal Mine is 16.0 million tonnes, of which the annual capacity of the underground mine is 12.0 million
tonnes and the annual capacity of the open-pit mine is 4.0 million tonnes. Moolarben Coal Mine mainly produces thermal coal. The average thickness of the main coal seam of the open-pit mine of Moolarben Coal Mine is 5.5 to 11.66 meters. As of
December 31, 2009, the mines total recoverable reserves were approximately 356.8 million tonnes, of which approximately 258.4 million tonnes was attributable to us pursuant to our shareholding percentage. We principally use the
longwall operation to extract coal from the underground coal seam and shearers to conduct surface mining at the open-pit mine of Moolarben Coal Mine.

Moolarben Coal Mine has a coal preparation plant. The main pieces of equipment used in the coal preparation plant are heavy-medium
cyclone machines and floating separation machines, which are manufactured in Australia.

We have not contracted the mining
operations at Moolarben Coal Mine to a third-party mining contractor. The operations at Moolarben Coal Mine are powered by electricity from local power grids. We ship the coal products from the Moolarben Coal Mine to Newcastle Port via railway.

Mining Rights

Mining Rights for Nantun, Xinglongzhuang, Baodian, Dongtan and Jining II

According to the approval from the State-owned Supervision Department and the Coal Industry Supervision Department that was obtained at
the establishment of the Company, the Mining Agreement entered into with Yankuang Group in 1997 and its supplemental agreement, we undertook to make ten annual payments of approximately RMB13.0 million to Yankuang Group beginning 1997 as
compensation for the depletion of the coal resources at the coal mines at Nantun, Xinglongzhuang, Baodian, Dongtan and Jining II. If the State implements new regulations after the initial ten years, the compensation would be adjusted accordingly. By
2007, we had made total payments of RMB130.0 million.

In September 2006, the State Council approved the Implementation Plan
for the Compensation System Reform Testing in relation to Deepening Coal Resources as jointly promulgated by the Finance Department, Ministry of Land and Resources and the National Development and Reform Commission. According to the implementation
plan, enterprises that obtain mining rights as a result of state-funded exploration must pay mining right fees based on the valuation of the remaining reserves. Shandong Province is subject to this mining right fee. As of the date of this annual
report, there remains uncertainty on the detailed rules of the implementation plan regarding the use of mining rights in Shandong Province.

Since 2008, we have made provisions of RMB5 per tonne of coal extracted to cover any resource compensation fees that may arise from the
mining rights of the five foregoing coal mines, in anticipation of Shandong Provinces implementation of detailed rules for resource compensation fees. For the year ended December 31, 2009, our provisions for resource compensation fees for
the five mines was approximately RMB135.8 million.

Jining III Coal Mine

Pursuant to the Jining III Coal Mine Acquisition Agreement dated August 4, 2000 that we entered into with Yankuang Group, the
consideration for the mining right of Jining III Coal Mine is approximately RMB132.5 million, which will be paid to Yankuang Group in ten equal interest-free annual installments commencing from 2001. During 2009, we paid RMB13.2 million to Yankuang
Group.

Austar Coal Mine

We obtained an exploration license for Austar Coal Mine from the NSW Department of Primary Industries in 2005. Pursuant to the underlying
Asset Sale Agreement, we are obligated to pay AUD4.0 million after obtaining the exploration license to the new exploration site adjacent to the Austar Coal Mine.



45



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##### Table of Contents

Tianchi Coal Mine

We acquired Shanxi Nenghua for RMB748.3 million, of which RMB136.6 million was consideration for the mining right of Tianchi Coal Mine.

Zhaolou Coal Mine

We purchased the mining rights of Zhaolou Coal Mine for RMB747.3 million in 2008.

Felix Coal Mines

We acquired the entire equity interest in Felix for RMB20,428.0 million. The fair market value of our attributable reserves and
attributable resources was AUD2,845.2 million.

Railway Assets

The assets in our railway transportation business, consist of 13 diesel locomotives, 18 steam locomotives, 362 rail cars, and
approximately 204 kilometers of railway tracks constructed for coal transportation that connect most of our coal mines with Yankuang Group and Zouxian Power Plant, which is located in Jining City, Shandong Province. The railway network also connects
to two of major national railways, namely, the Beijing-Shanghai Railway and Yanzhou-Shijiugang Railway. As of December 31, 2009, our railway transportation business employed approximately 4,000 employees.

Methanol and Cogeneration Power Plants

Yulin Nenghua. We have constructed a 600,000 tonne methanol plant in Shaanxi Province, which is operated by our subsidiary, Yulin
Nenghua. The primary pieces of equipment at the methanol plant include boilers, steam turbines, air compressors and booster set, GEA air-cooler exchangers, gasifiers and gasification compressors, synthetic compressors, methanol synthetic gas cold
reactor, methanol synthetic water cold reactor and propylene refrigeration compressors. Yulin Nenghua also operates a supporting power plant with an installed capacity of 60 megawatts.

Tianhao Chemicals. We have constructed a 100,000 tonne methanol plant and a supporting power plant in Xiaoyi City of Shanxi
Province through our subsidiary, Tianhao Chemicals. The primary pieces of equipment in the methanol plant include low pressure wet type spiral gas cabinets, coke oven gas compressors, reformers and converters.

Hua Ju Energy. Hua Ju Energy is headquartered in Zoucheng City, Shandong Province. Hua Ju Energy owns and operates six
cogeneration power plants, each of which is able to supply electric power and heat to our coal mine in its proximity. The power plants consist of Nantun power plant, Xinglongzhuang power plant, Baodian power plant, Dongtan power plant, Jining II
power plant and Jidongxincun power plant. The aggregate installed capacity of these six power plants is 144 megawatts and the annual power generation capacity and heat supply capacity are 1.0 to 1.1 billion kilowatt-hours and 1.0 to 1.2 million
steam tonnes, respectively. The main pieces of equipment used at Hua Ju Energy includes energy conversion CFB boilers and extraction and condensing steam turbines.



|ITEM 4A. | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------

There are no unresolved staff comments from the Securities Exchange Commission.



|ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS
|------- | --------------------------------------------

The following discussion and analysis should be read in conjunction with the information set forth in our consolidated financial
statements, together with the related notes, included in this annual report.



|A. | Operating Results
|-- | -----------------

During
the period covered by this annual report, our five business segments consist of:



| |  |  | coal business;
| | - |  | --------------



| |  |  | railway transportation business;
| | - |  | --------------------------------



| |  |  | coal chemical business;
| | - |  | -----------------------



| |  |  | electric power business; and
| | - |  | ----------------------------



| |  |  | heat supply business.
| | - |  | ---------------------



46



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##### Table of Contents

Coal Business

We are primarily engaged in the production of coal, which involves the mining, preparation and processing of coal. Our high quality coal
products primarily include steam coal used by power plants and coking and pulverized coal for blast furnace injections at metallurgical mills. Our domestic customers are predominately power plants, metallurgical mills and chemical manufacturers
located in the economically more developed Eastern China. We also export a portion of our coal from our PRC and Australian operations to international customers located in Japan, Korea and other countries.

In 2009, we produced 36.3 million tonnes of raw coal, and sold 38.0 million tonnes of coal, which included approximately 2.1
millions tonnes of coal that was purchased externally for trading. Our net sales of coal in 2007, 2008 and 2009 were RMB14,656.9 million, RMB24,048.8 million and RMB19,133.9 million, representing 98.6%, 98.6% and 96.4% of our total net sales,
respectively. Domestic net sales of coal accounted for 89.8%, 91.1% and 92.4% and overseas net sales of coal conducted by Yancoal Australia or through export agents in China accounted for 8.8% 7.5%, and 5.7% of our total net sales during 2007, 2008
and 2009, respectively. In 2009, our inter-segment coal sales amounted to RMB169.2 million, which primarily consisted of sales to our power plants. For more information on segment revenues, inter-segment eliminations and segment balance sheet items,
see Note 6 to our financial statements.

Our invoice amount of coal sold includes returns, discounts, sales related taxes,
port fees and other fees and, in certain cases, transportation costs payable by customers. Gross sales of coal equals the amount of coal sold less returns, discounts and sales related taxes. Net sales of coal represent gross sales less port fees and
other fees, and any transportation costs payable by customers. Sales taxes and other fees consist primarily of business tax paid at 5% of our revenue and city construction tax and education surcharge calculated at 7% and 3%, respectively, on the
total amount of our VAT payable and business tax payable. We also pay a local resource tax based on our coal consumption at the rate of RMB3.6 per tonne in Shandong Province and RMB3.2 per tonne in Shanxi Province to the local tax bureau.

Railway Transportation Business

We also own a railway network spanning over 200 kilometers, which we use primarily to transport coal. To facilitate our production and
sales of coal, we provide railway transportation services to our customers, Yankuang Group and other independent parties. In 2009, we transported a total of 19.9 million tonnes of goods on our railway network, compared to 19.2 million
tonnes in 2008 and 17.9 million tonnes in 2007.

Our railway transportation service income represents revenue generated
for the delivery of (i) coal purchased from us on an ex-mine basis, an arrangement where customers separately bear the transportation cost of coal and (ii) goods other than coal on behalf of customers who engage us exclusively for our
railway transportation services. In 2009, our railway transportation service income totaled RMB258.4 million, of which inter-segment sales to our coal mining segment amounted to RMB61.5 million.

Coal Chemical Business

Our coal chemical operations consist primarily of the production and sale of methanol. The 600,000 methanol plant of Yulin Nenghua
commenced operations in August 2009 and produced 190,000 tonnes of methanol in 2009, of which 178,000 tonnes were sold to generate net sales of RMB239.6 million.

Production at the 100,000 tonne methanol plant of Tianhao Chemicals was significantly curtailed in 2009 because its exclusive third-party
supplier of a coke oven waste gas, a key raw material that is supplied via transmission pipelines, could not provide a steady supply of the raw material. In 2009, Tianhao Chemicals produced 9,000 tonnes and sold 12,000 tonnes of methanol, including
inventory from the prior year, generating net sales of RMB19.2 million.

Electric Power Business

We own and operate eight power plants, which generate electric power primarily for internal use and, to a lesser extent, external sales.
The cogeneration power plants operated by Hua Ju Energy are able to generate both electric power and heat. In 2009, Hua Ju Energy, Yulin Nenghua and Shanxi Nenghua generated a total of 1,201.2 million kWh of electricity and sold
562.3 million kWh of the same in external sales. In 2009, our electric power business generated RMB185.6 million in revenue.

Heat Supply Business

We commenced our heat supply business, which consists of the production and sale of heat supply following our acquisition of Hua Ju
Energys cogeneration power plants in 2009. Although the substantial majority of heat energy produced by Hua Ju Energy is intended to be consumed internally by our coal mines, we generated net sale of RMB13.3 million from selling approximately
0.1 million steam tonnes of heat to third-party customers.



47



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The following table sets forth our income statement and the percentage of each line item to
our total revenue:



|                                             |  |            |   |  |       |   |  |            |   |  |       |   |  |            |   |  |       |  
|-------------------------------------------- |  | ---------- | - |  | ----- | - |  | ---------- | - |  | ----- | - |  | ---------- | - |  | ----- | -
|                                             |  | 2007       |   |  | 2008  |   |  | 2009       |  
|                                             |  | RMBmillion |   |  | %     |   |  | RMBmillion |   |  | %     |   |  | RMBmillion |   |  | %     |  
|Total revenue                                |  | 15,110.5   |   |  | 100.0 |   |  | 24,903.1   |   |  | 100.0 |   |  | 20,253.4   |   |  | 100.0 |  
|Gross sales of coal                          |  | 14,906.7   |   |  | 98.7  |   |  | 24,557.5   |   |  | 98.6  |   |  | 19,537.2   |   |  | 96.5  |  
|Railway transportation service income        |  | 203.7      |   |  | 1.3   |   |  | 247.2      |   |  | 1.0   |   |  | 258.4      |   |  | 1.3   |  
|Gross sales of electric power                |  |           |   |  |      |   |  | 59.8       |   |  | 0.2   |   |  | 185.6      |   |  | 0.9   |  
|Gross sales of methanol                      |  |           |   |  |      |   |  | 38.6       |   |  | 0.2   |   |  | 258.9      |   |  | 1.3   |  
|Gross sale of heat supply                    |  |           |   |  |      |   |  |           |   |  |      |   |  | 13.3       |   |  | 0.1   |  
|Transportation costs of coal                 |  | (549.8     | ) |  | (3.6  | ) |  | (508.7     | ) |  | (2.0  | ) |  | (403.3     | ) |  | (2.0  | )
|Cost of sales and service provided           |  | (7,331.9   | ) |  | (48.5 | ) |  | (11,816.8  | ) |  | (47.5 | ) |  | (10,170.5  | ) |  | (50.2 | )
|Cost of electric power                       |  |           |   |  |      |   |  | (88.3      | ) |  | (0.4  | ) |  | (188.9     | ) |  | (0.9  | )
|Cost of methanol                             |  |           |   |  |      |   |  | (37.8      | ) |  | (0.2  | ) |  | (352.9     | ) |  | (1.7  | )
|Cost of heat supply                          |  |           |   |  |      |   |  |           |   |  |      |   |  | (7.4       | ) |  | 0.0   |  
|                                             |  |            |   |  |       |   |  |            |   |  |       |   |  |            |   |  |       |  
|Gross profit                                 |  | 7,228.7    |   |  | 48.5  |   |  | 12,451.5   |   |  | 50.0  |   |  | 9,130.4    |   |  | 45.2  |  
|Selling, general and administrative expenses |  | (2,854.7   | ) |  | (18.9 | ) |  | (3,832.0   | ) |  | (15.4 | ) |  | (3,820.2   | ) |  | (18.9 | )
|Share of income (loss) of an associate       |  | (2.4       | ) |  | (0.02 | ) |  | (67.4      | ) |  | (0.2  | ) |  | 109.7      |   |  | 0.5   |  
|Other income                                 |  | 198.9      |   |  | 1.3   |   |  | 351.5      |   |  | 1.4   |   |  | 311.0      |   |  | 1.5   |  
|Interest expense                             |  | (27.2      | ) |  | (0.2  | ) |  | (38.4      | ) |  | (0.2  | ) |  | (45.1      | ) |  | (0.2  | )
|                                             |  |            |   |  |       |   |  |            |   |  |       |   |  |            |   |  |       |  
|Profit before income taxes                   |  | 4,543.3    |   |  | 30.1  |   |  | 8,865.2    |   |  | 35.6  |   |  | 5,685.8    |   |  | 28.1  |  
|Income taxes                                 |  | (1,315.5   | ) |  | (8.7  | ) |  | (2,385.6   | ) |  | (9.6  | ) |  | (1,553.3   | ) |  | (7.7  | )
|                                             |  |            |   |  |       |   |  |            |   |  |       |   |  |            |   |  |       |  
|Profit for the year                          |  | 3,227.8    |   |  | 21.4  |   |  | 6,479.6    |   |  | 26.0  |   |  | 4,132.5    |   |  | 20.4  |  
|                                             |  |            |   |  |       |   |  |            |   |  |       |   |  |            |   |  |       |  

Year Ended December 31, 2009 Compared with Year Ended December 31, 2008

Total revenue

Our total revenue in 2009 decreased RMB4,649.7 million, or 18.7%, to RMB20,253.4 million. Our gross sales of coal, which accounted for
96.5% of our revenue in 2009, decreased RMB5,020.3 million, or 20.4%, to RMB19,537.2 million in 2009. The decrease in gross sales of coal was primarily due to a decrease in the average selling price of our coal products partly offset by a slight
increase in sales volume. The average price of our Companys coal products decreased 20.7% in 2009 compared with our average price in 2008 as a result of weak market conditions in China and worldwide. The decrease in average selling prices
resulted in a RMB4,553.2 million decline in net sales. Our sales volume of coal products increased 1.2% from 37.6 million tonnes in 2008 to 38.0 million tonnes in 2009.

Our railway transportation service income was RMB258.4 million in 2009, representing an increase of RMB11.2 million, or 4.5%, reflecting
a 0.7 million tonne, or 3.7%, increase in the volume of goods transported. We ramped up production significantly in our electric power and coal chemical operations and generated RMB185.6 million and RMB258.9 million from these businesses,
respectively in 2009. The increase in coal chemical sales was attributable to Yulin Nenghuas methanol plant, which commenced production in August 2009 and generated net sales of RMB239.6 million. The acquisition of Hua Ju Energy significantly
increased our external sales of electricity, which generated revenue of RMB150.4 million in 2009. We also began the production and sale of heat supply in 2009 and generated 13.3 million from this new business in the same year.



48



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Transportation costs of coal

Transportation costs of coal primarily consist of railway, waterway and roadway transportation costs charged by carriers who deliver our
coal products to our customers. Our transportation costs of coal decreased RMB105.4 million, or 20.7%, to RMB403.3 million in 2009. The decrease was primarily due to a decrease in the volume of coal that was shipped through ports to domestic and
overseas customers, both of which involve the incurrence of port fees and railway transportation costs for using the PRC national railway network to deliver coal to ports.

Cost of sales and service provided

Our cost of sales and service provided represents the costs of our coal business and railway transportation business, which primarily
consists of materials, wages and employee benefits, depreciation and amortization expenses, land subsidence, restoration, rehabilitation and environmental costs and cost of traded coal. In 2009, our total cost of sales and service provided decreased
RMB1,646.3 million, or 13.9%, to RMB10,170.5 million.

The decrease was primarily due to a decrease in land subsidience,
restoration, rehabilitation and environmental costs of RMB1,541.4 million and a RMB732.8 million decrease in the amount of coal that we purchased for trading purposes, partly offset by a RMB656.8 million increase in wages and employee benefits and a
RMB379.0 million increase in depreciation expenses, which is in line with our increase in plant, property and equipment.

Cost of electric power

Our cost of electric power operations primarily represents raw material and labor costs. 2009 marked the first full year of operations of
our electric power business, which commenced operations in September 2008. Our cost of power generation increased significantly from RMB88.3 million in 2008 to RMB188.9 million in 2009, primarily due to costs of RMB121.5 million associated with Hua
Ju Energys external sales of electric power.

Cost of methanol

Our cost of methanol primarily represents raw materials, labor costs and other manufacturing overhead. We commenced production at a
600,000 tonne methanol plant in August 2009, which increased our production capacity and volume significantly. Our cost of methanol production increased more than eightfold from RMB37.8 million in 2008 to RMB352.9 million in 2009, reflecting the
significant growth in our production volume.

Cost of heat supply

The primary costs in our heating business consists of raw materials and labor. We incurred RMB7.4 million in costs for our heat supply
business.

Selling, general and administrative expenses

Our selling, general and administrative expenses was RMB3,820.2 million in 2009, representing a decrease of RMB11.8 million, or 0.3%, from
RMB3,832.0 million in 2008. Our selling, general and administrative expenses were reduced because we did not have any foreign exchange losses in 2009, the effects of which were offset by (i) an increase in property management fees of RMB91.7
million, (ii) an increase in depreciation of RMB53.9 million and (iii) an increase in repair and maintenance of RMB49.5 million.

Share of income of an associate

Our share of income from our investment in Huadian Zouxian Power Generation Company Limited was RMB109.8 million, compared with our share
of loss of RMB67.4 million in 2008. Our associated companys profitability were primarily the result of decrease in steam coal prices in 2009.

Other income

Our other income decreased RMB40.5 million, or 11.5%, to RMB311.0 million in 2009. In 2008, we had a one-off recovery of RMB132.2 million
in interest income from a legal proceeding. Our decrease in other income in 2009 was partly offset by an increase in interest income from bank deposits of RMB44.6 million and an increase in government grants of RMB26.3 million.



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Interest expenses

Our interest expenses increased RMB6.7 million, or 17.4%, from RMB38.4 million in 2008 to RMB45.1 million in 2009. The increase was
primarily due to an increase in interest expenses of RMB13.6 million on discounted bills receivable and a decrease in interest expenses of RMB6.2 million on bank borrowings.

Profit before income tax

As a result of the foregoing, our profit before income taxes decreased RMB3,179.4 million, or 35.9%, from RMB8,865.2 million in 2008 to
RMB5,685.8 million in 2009.

Income tax expenses

Our income tax expenses decreased RMB832.3 million, or 34.9%, to RMB1,553.3 million in 2009. The decrease primarily reflected a decrease
in our taxable income.

Profit for the year

As a result, our profit for the year decreased RMB2,347.1 million, or 36.2%, from RMB6,479.6 million in 2008 to RMB4,132.5 million in
2009.

Year Ended December 31, 2008 Compared with Year Ended December 31, 2007

Total revenue

Our total revenue in 2008 increased RMB9,792.6 million, or 64.8%, to RMB24,903.1 million, primarily due to the increase in the revenue
from coal products segment. In addition, the increase in our railway transportation service income and, to a lesser extent, our gross sales of methanol and electricity power also contributed to the increase in our total revenue.

Our gross sales of coal increased RMB9,650.8 million, or 64.7%, to RMB24,557.5 million in 2008. The increase in gross sales of coal was
primarily due to the increased average selling price of our coal products as well as, to a lesser extent, the increase in the sales volume of coal. The average price of our Companys coal products increased 56.6% in 2008 compared with our
average price in 2007. The increase in the average selling price of our coal product reflected the increase in domestic coal prices, which was consistent with the significant price increases in the international coal market in the first three
quarters of 2008 and strong domestic demand growth. Total sales volume of our coal products increased 7.0% from 35.1 million tonnes to 37.6 million tonnes, which primarily consisted of the coal products we purchased from external sources
for resale purposes, due to strong market demand. Prior to the significant increase in our revenue generated from the sales of externally purchased coal in 2008, which amounted to approximately RMB1,889.0 million, we record such revenue under other
income in our income statement. The amount of gross sales of externally purchased coal in 2007 and 2006 were approximately RMB395.8 million and RMB347.9 million, respectively. No reclassification for previous periods has been made because of
immateriality.

Our railway transportation service income was RMB247.2 million in 2008, representing an increase of RMB43.5
million, or 21.3%, from RMB203.7 million in 2007. The increase was primarily due to an approximate 2.1 million tonne increase in the coal transported on our railway network for coal sales where transportation expenses were borne by customers.

In 2008, we generated RMB38.6 million and RMB59.8 million from our new methanol and electric power businesses, respectively.
Revenue from these two businesses collectively did not represent a significant portion of our total revenue in 2008. However, we did not commence methanol production until the last quarter of 2008 and expect methanol sales to increase in future
periods when the domestic methanol market recovers.

Transportation costs of coal

Transportation costs of coal primarily consist of railway, waterway and roadway transportation costs charged by carriers who deliver our
coal products to our customers. Our transportation costs of coal decreased RMB41.1 million, or 7.5%, from RMB549.8 million in 2007 to RMB508.7 million in 2008. The decrease was primarily due to the decrease in our export sales conducted from China,
for which we bear the transportation costs of delivering our coal products on the PRC national railway network to ports.

In
transactions where the invoice amount includes transportation costs payable by customers, such transportation costs are deducted from the invoice price to calculate net sales of coal. Net sales of coal increased RMB9,691.9 million, or 67.5%, to
RMB24,048.8 million in 2008 primarily due to the increase in our gross sales of coal and the decrease in transportation costs of coal.



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Cost of sales and service provided

Our cost of sales and service provided represents the direct costs of our coal production and transportation services, which primarily
consists of materials costs, wages and employee benefits, depreciation and amortization expenses, land subsidence, restoration, rehabilitation and environmental costs and cost of traded coal. In 2008, our total cost of sales and service provided
increased RMB4,484.9 million, or 61.2%, to RMB11,816.8 million.

The increase in our cost of sales and service provided was
primarily due to (i) the significant increase in land subsidies, restoration, rehabilitation and environmental costs; (ii) an addition of RMB1,810.3 million as cost of traded coal, which represented the amount we paid for externally
purchased coal; and (iii) the increase in cost of materials due to the increase in commodity prices. The increase was partly offset by the allocation of repair and maintenance expenses to selling, general and administrative expenses, which was
previously charged to cost of sales. Repair and maintenance expenses in 2008 represented mainly repairs to general property, plant and equipment not directly related to mining equipment and were not directly related to our coal sales. The amounts
reclassified were immaterial individually and collectively in relation to our income statement as a whole, so previous periods were not adjusted.

The cost per tonne of the Companys coal products based on the net sales of coal was RMB274.4 in 2008, representing an increase of
RMB78.4, or 40.0%, compared with RMB196.0 in 2007. This increase in cost per tonne of coal sold was mainly attributable to (i) the increase in land subsidence ground structure compensation expenses due to government policy changes in 2008 that
increased the basis for calculating compensation and reclamation costs and enlarged the area surrounding our mining sites that is subject to reclamation and (ii) the increase in restoration and rehabilitation costs and ancillary compensation,
such as the costs of relocating inhabitants and compensating them for their property losses. See  G. Critical Accounting Policies  Provision for Land Subsidence, Restoration, Rehabilitation and Environmental Costs. Our cost
per tonne of coal also increased because of the increase in cost of materials resulting from higher commodity prices and the increase in employee wages.

Cost of electric power

Our cost of electric power operations primarily represents raw material and labor costs. In 2008, when we commenced the operation of power
generation business, our cost of power generation was RMB88.3 million.

Cost of methanol

Our cost of methanol primarily represents raw materials, labor costs and other manufacturing overhead. In 2008, when we commenced the
methanol production business, our cost of methanol production was RMB37.8 million.

Selling, general and administrative
expenses

Our selling, general and administrative expenses was RMB3,832.0 million in 2008, representing an increase of
RMB977.4 million, or 34.2%, from RMB2,854.7 million in 2007. The increase in our selling, general and administrative expenses was primarily due to (i) an addition of RMB390.4 million in repair and maintenance expenses that resulted from a
change in accounting practice to charge repair and maintenance expenses (which was previously charged to our cost of sales and services provided) to selling, general and administrative expenses in 2008, (ii) the increase in wage and employee
benefit expenses for our sales and administrative staffs of RMB281.0 million that resulted from the increase in the average salaries as well as the number of our marketing and administrative staff member, (iii) the loss of approximately
RMB198.5 million with respect to book value of the liabilities of Yancoal Australia denominated in US dollar, which was primarily due to the depreciation of Australian dollars against U.S. dollar and (iv) provisions for coal price adjustment
funds at RMB8 per tonne that are levied by the government of Jining City, Shandong Province since August 2007.

Share of
loss of an associate

Our share of loss of an associate was RMB67.4 million in 2008, representing an significant increase
of RMB64.9 million, from RMB2.4 million in 2007. The increase was primarily due to our share of loss of approximately RMB67.4 million in Huadian Zouxian Power Generation Company Limited, which was primarily due to the significant increase of steam
coal price in the first three quarters of 2008, based on our relative ownership interest in the associate company.

Other
income

Our other income increased RMB152.6 million, or 76.7%, to RMB351.5 million in 2008 from RMB198.9 million in 2007.
The increase was primarily due to the RMB132.2 million increase in interest income we recovered from a defaulted entrusted loan and the RMB39.4 million increase in interest income from bank deposits. Our other income in 2007 included the net profit
of our sales of externally purchased coal in 2007, calculated by gross sales of externally purchased coal net of cost for externally purchased coal and other relevant costs and expenses, was approximately RMB20.0 million. Sales of externally
purchased coal in 2008 included in gross sales of coal. See  Total revenue above.



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Interest expenses

Our interest expenses increased RMB11.1 million, or 40.9%, from RMB27.2 million in 2007 to RMB38.4 million in 2008. The increase was
primarily due to the interest payments of approximately RMB12.0 million for bank borrowings of Yancoal Australia, which was repaid before December 31, 2008.

Profit before income tax

As a result of the foregoing, our profit before income taxes increased RMB4,321.9 million, or 95.1%, from RMB4,543.3 million in 2007 to
RMB8,865.2 million in 2008.

Income tax expenses

Our income tax expenses increased RMB1,070.1 million, or 81.3%, to RMB2,385.6 million in 2008 despite the enactment of a new income tax
law on January 1, 2008 that lowered our tax rate from 33% to 25%. The increase primarily reflected a 95.1% increase in our taxable income. The increase has been partially offset by an increase in deferred tax assets arising from an increase in
temporary difference in respect of unpaid provision of salaries and wages and provision of compensation fees for mining rights and land subsidence, restoration, rehabilitation and environment costs, which were charged but not paid as of the end of
the year.

Profit for the year

As a result, our profit for the year increased RMB3,251.8 million, or 100.7%, to RMB6,479.6 million in 2008 from RMB3,227.8 million in
2007.



|B. | Liquidity and Capital Resources
|-- | -------------------------------

Our principal sources of liquidity in 2009 were bank borrowings and the cash generated from our operating activities. In 2009, we
primarily used cash to fund our acquisitions of Felix and Hua Ju Nenghua, construction of Zhaolou Coal Mine and Yulin Nenghuas methanol plant, establishment of Ordos Nenghua, purchases of property, plant and equipment, working capital and
distribution of dividends to shareholders.

Cash Flows

The following table sets forth a summary of our cash flow for the indicated periods:



|                                                      |  |                         |   |  |            |   |  |             |  
|----------------------------------------------------- |  | ----------------------- | - |  | ---------- | - |  | ----------- | -
|                                                      |  | Year Ended December 31, |  
|                                                      |  | 2007                    |   |  | 2008       |   |  | 2009        |  
|                                                      |  |                         |   |  | (RMB000)  |   |  |             |  
|Net cash from operating activities                    |  | 4,558,649               |   |  | 7,095,477  |   |  | 6,520,131   |  
|Net cash used in investing activities                 |  | (3,790,945              | ) |  | (2,091,489 | ) |  | (24,842,938 | )
|Net cash from (used in) financing activities          |  | (1,018,699              | ) |  | (921,668   | ) |  | 18,503,741  |  
|Net increase/ (decrease) in cash and cash equivalents |  | (250,995                | ) |  | 4,082,320  |   |  | 180,934     |  
|Cash and cash equivalents as of end of year           |  | 4,424,561               |   |  | 8,439,578  |   |  | 8,522,399   |  

Cash
Flow From Operating Activities

Net cash from operating activities represents cash generated from operations after income
taxes, interest and dividend income. Cash generated from operations consisted of profit before income taxes adjusted for certain non-cash items, including depreciation, certain interest expenses and income, amortization and our share of investment
in an associate company and cash generated from other activities.

Net cash from operating activities was RMB6,520.1 million
in 2009 and consisted of profit before income taxes of RMB5,685.8 million, adjustments for non-cash items of RMB1,652.3 million and cash provided by working capital and other activities of RMB621,000. Adjustments for non-cash items primarily
consisted of depreciation of property, plant and equipment of RMB1,793.3 million, partially offset by interest income of RMB187.6 million and our share of income of an associate of RMB109.8 million. In addition, changes in working capital activities
primarily consisted of (i) an increase in movement in land subsidence, restoration, rehabilitation and environmental cost of RMB1,109.7 million and (ii) an increase in other payables and accrued expenses of RMB622.1 million. These
increases were partially offset by an increase in bills and accounts receivable of RMB1,416.6 million due to an increase in coal purchases settled through acceptance bills.



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Net cash from operating activities was RMB7,095.5 million in 2008 and consisted of profit
before income taxes of RMB8,865.2 million, adjustments for non-cash items of RMB1,285.3 million and cash used in working capital and other activities of RMB1,093.9 million. Adjustments for non-cash items primarily consisted of depreciation of
property, plant and equipment of RMB1,140.8 million, partially offset by interest income of RMB275.2 million. In addition, changes in working capital activities primarily consisted of (i) an increase in prepayments and other current assets of
RMB1,242.0 million, (ii) an increase in inventories of RMB405.2 million, and (iii) an increase in bills and accounts receivable of RMB217.0 million. These increases were partially offset by an increase in movement in land subsidence,
restoration, rehabilitation and environmental cost of RMB431.3 million and an increase in bills and account payable of RMB263.8 million.

Cash Flows From Investing Activities

Net cash used in investing activities was RMB24,842.9 million in 2009. Net cash used in investing activities primarily consisted of
(i) our acquisition of Felix for cash of RMB19,558.5 million, (ii) capital expenditures of RMB2,133.7 million in property, plant and equipment, (iii) an increase in term deposits of RMB1,971.4 million and (iv) our purchase of
equity interest in Hua Ju Energy for RMB761.7 million.

Net cash used in investing activities was RMB2,091.5 million in 2008.
Net cash used in investing activities primarily consisted of capital expenditures of RMB2,027.0 million for property, plant and equipment and RMB747.3 million for our acquisition of mining right in Zhaolou Coal Mine. Cash used in investing
activities was partially offset by a decrease in other loan receivables of RMB640.0 million resulting from our recovery of the principal amount of the entrusted loan that was in default and a decrease in term deposits of RMB141.6 million.

Cash Flows From Financing Activities

Net cash from financing activities in 2009 was RMB18,503.7 million and primarily consisted of bank borrowings of RMB20,757.7 million that
we obtained to fund the acquisition of Felix, partially offset by cash dividend payments of RMB1,967.4 million.

Net cash
used in financing activities in 2008 was RMB921.7 million, reflecting primarily dividend payments of RMB836.1 million and the repayment of bank borrowings of RMB72.0 million.

Working Capital and Liabilities

We have historically maintained sufficient working capital for our operations. Our principal source of cash in 2009 was bank borrowings to
fund a significant acquisition and cash generated from operating activities.

As of December 31, 2009, our current assets
exceed our current liabilities by RMB9,590.5 million. Our current assets increased by RMB5,006.6 million primarily as a result of a RMB2,063.3 million, or 178.9%, increase in term deposits and a RMB1,746.7 million increase in bills and accounts
receivable because of an increase in coal purchases settled through acceptance bills. Our current liabilities increased by RMB5,113.4 million from RMB5,297.0 million in 2008 to RMB10,410.4 million in 2009. The significant increase in current
liabilities was primarily due to the increase in other payables and accrued expenses of RMB1,743.6 million, the increase in borrowing due within a year of RMB1,516.1 million and the increase in provisions for land subsidence, restoration,
rehabilitation and environmental costs of RMB1,113.1 million.

As of December 31, 2009 and 2008, we had cash and cash
equivalents of RMB8,522.4 million and RMB8,439.6 million, respectively. As of December 31, 2009, our total cash and cash equivalent denominated in Renminbi amounted to RMB6,723.2 million and our total cash and cash equivalent denominated in
U.S. dollars, Hong Kong dollars, Australian dollars, Pound Sterling and Euro amounted to RMB1,799.2 million.

As of
December 31, 2009, our outstanding bank borrowings increased significantly to RMB22,509.8 million from RMB258.0 million as of December 31, 2008. The increase primarily reflected loans amounting to RMB20,757.7 million (USD3,040.0 million)
that we obtained for the acquisition of Felix. The maturity profile of our bank borrowings as of the indicated dates was as follows:



|                     |  |                    |  |           
|-------------------- |  | ------------------ |  | ----------
|                     |  | As of December 31,
|                     |  | 2008               |  | 2009      
|                     |  | (RMB000)         
|Less than one year   |  | 82,000             |  | 1,598,113 
|One to three years   |  | 44,000             |  | 8,347,091 
|Three to five years  |  | 44,000             |  | 12,498,637
|More than five years |  | 88,000             |  | 66,000    
|Total                |  | 258,000            |  | 22,509,841



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As of December 31, 2009, the interest rate relating to our bank borrowings ranges from
4.02% to 7.6% per annum, which will be subject to adjustment based on the interest rate set by the Peoples Bank of China (PBOC), LIBOR and BBSY. As of the date of this annual report, our bank borrowings were denominated in
Renminbi and U.S. dollars. The interest expenses and exchange rate fluctuations associated with our bank borrowings may impair our future profitability.

We expect that cash from operations, which is expected to increase following our integration of the coal resources owned by Felix, and
bank borrowings will be sufficient to meet our operating cash flow requirements, although certain events that materially and adversely affect our operating results may also have a negative impact on our liquidity.

Capital Expenditure

Our principal capital expenditure, which was incurred for the purchase and construction of property, plant and equipment increased by
RMB4,321.6 million, or 209.2%, from RMB2,066.2 million in 2008 to RMB6,387.8 million in 2009. Our investments were primarily for the coal mines of Felix and the power plants of Hua Ju Energy in which we invested RMB3,546.9 million and RMB755.2
million, respectively.

Our estimated capital expenditure for 2010 is RMB4,085.2 million, which consist primarily of
approximately RMB2,110.1 million for investment in the construction of Austar Coal Mine and the coal mines of Felix in Australia and approximately RMB1,174.6 million for purchases and the construction of property, machinery and equipment for our Six
Coal Mines and railway transportation operations. We also plan to spend approximately RMB800.5 million on other development projects as follows: (i) RMB319.9 million for Zhaolou Coal Mine in Shandong Province; (ii) RMB302.8 million for the
construction of Ordos Nenghuas 600,000 tonne methanol facility; (iii) approximately RMB79.3 million for the power generating facilities of Hua Ju Energy; (iv) RMB72.7 million for Yulin Nenghuas 600,000 tonne methanol facility
in Shaanxi Province; and (v) approximately RMB25.8 million for Tianhao Chemicals 100,000 tonne methanol facility and Tianchi Energys coal mine in Shanxi Province. Considering the sufficiency in our cash flow and capital sources, we
believe that we will have sufficient capital to satisfy our operational and development needs.



|C. | Research and Development, Patents and Licenses, Etc.
|-- | ----------------------------------------------------

One of our core strategies is to maintain our competitiveness through technology and innovation. We established 14 research and
development teams, completed 81 technology projects, obtained 19 patents and were awarded with 88 technology advance prizes in 2009. At the same time, we focused on strengthening our environmental protection capabilities and improving our energy
conservation technologies. As a result, we have achieved the environmental protection and energy conservation objectives stated in the 11th Five-Year Plan (2006 to 2010) one year in advance. Our expenditures for research and development were RMB79.0
million, RMB106.5 million and RMB46.3 million, in 2007, 2008 and 2009, respectively, accounting for 0.5%, 0.4% and 0.2%, respectively, of our total revenue for the same periods.

Our research and development efforts on mining technology have contributed to increases in our production. Our predecessor first adopted
the longwall caving mining method in 1992. Thereafter, our research and development personnel concentrated on modifying and updating this method, taking into account the distinct geological conditions of our mining operations with a view to
maximizing production. Largely because of our research and development personnels efforts, we have been able to:



| |  |  | increase production efficiency by utilizing mining extracting equipment with improved technology;
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | extend the length of certain longwall work-faces to approximately 300 meters, thereby reducing our costs for tunneling and supports;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  |  | reduce the number of coal pillars required to support mining areas and enhance our recovery rate for coal mining and thereby increase our coal
production;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | improve the roof support and auxiliary coal transportation systems of our mining systems to reduce costs; and
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | Complete two national technologically innovative projects entitled Research on the equipment supply and technology for fully mechanized top-coal
caving work face with annual production of six million tonnes and Research on the technology to increase efficiency and scale of fully mechanized mining and the key equipment, respectively, as well as one key project entitled Research
on the integrated equipment and technology of fully-automated information-based mechanized top-coal caving work face with annual production of six million tonnes, which successfully developed a two-pillar hydraulic shield support for a top-coal
caving process. Our industry-leading technology for longwall caving mining is patented in the PRC, Australia and South Africa. We believe the use of our longwall caving extraction technology reduces the per tonne production cost of our
operations.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Our principal strategy is to further strengthen our competitive advantage in core
technologies. We intend to upgrade and improve our longwall caving extraction technology, fully-mechanized caving operations and related equipment as well as mining methods for medium and thick coal seams.



|D. | Trend Information
|-- | -----------------

Integration of Felix

The acquisition Felix is a key component of our growth and international expansion strategy. Following the integration of Felixs
business and assets with our pre-existing Australia operations, we intend to ramp up production at our Australian operations. Going forward, our Australian operations is expected to make substantial contributions to our total production volume and
results of operations. Our ability to achieve our sales goals for our Australian operations will largely depend on our degree of success in realizing the anticipated benefits and synergies of the Felix acquisition.

Outlook for the Coal Market

Benefiting from the recovering global economy, demand for coal in 2010 will gradually increase and supply and demand will remain balanced
in the domestic and international coal markets. The supply of coal available in China has generally been sufficient to satisfy demand, although coal supplies may be constrained in certain regions of China during particular periods. The combination
of stable economic growth, the continuous implementation of a proactive fiscal policy and the generally relaxed monetary policy of the PRC will drive the strong growth of major coal consumption industries, which in turn will increase domestic coal
demand at a stable pace. The gradual commencement of production at new coal mines combined with integrated mines in Shanxi Province, among other factors, will increase domestic coal supplies. Although coal transportation capacity has increased in
recent years, effective supply of coal is still subject to the structural contradiction among production, transportation and demand.

The coal resources tax reform, environmental protection and energy saving guidance and acceleration of the restructuring of coal
enterprises in specific provinces will provide strong support for coal prices. The integration of coal resources and the rapid formation of coal conglomerates will further accelerate the coal industrys consolidation and enhance the
competitiveness of large coal enterprises. With a gradual increase of demand in the international coal market and limited supply growth, coal prices are expected to increase. As the world economy continues to recover, energy demand is expected to
increase steadily. India, Japan, Korea, Taiwan and other regions are expected to increase their import of coal. As China remains a net importer of coal, demand for coal in the Asia Pacific region will increase slightly. Among the major coal
exporting countries in the world, Indonesia has increased its coal production capacity and its export volume continues to rise, while the coal production capacity and export volume of Vietnam has decreased. Due to the restrictions of port
infrastructures, the growth of export capacity in Australia and South Africa has been limited. It is estimated that the supply of and demand for coal in the Asia Pacific will experience moderate growth, with demand increasing slightly faster than
supply. Influenced by supply and demand dynamics, international coal price will remain current high levels and may continue to increase.

Our average selling price of coal is expected to increase in 2010 as compared with 2009. As of the date of this annual report, the
Company has entered into sales contracts and letters of intent for 40.3 million tonnes of domestic coal sales, which included sales contracts for 10.0 million tonnes of coal with an average tax-inclusive price that represented an increase
of 17.6% compared our average selling price in 2009. The remaining coal to be sold pursuant to the letters of intent will be priced based on prevailing market prices at the time of sale.

Outlook for the PRC Methanol Market

In 2010, we expect that supply will continue to exceed demand in the domestic methanol market, making material increases in methanol
prices unlikely. The gradual increase in production capacities of existing methanol facilities and the construction of new methanol facilities in China coupled with an increase in the import of low-cost prime methanol, will further increase the
domestic supply of methanol. Although demand for downstream methanol products such as dimethylether and acetic acid has increased, overall demand in the methanol market remains moderate. The methanol market is expected to remain stable as PRC
government has accelerated plans to stimulate the petrochemical industry, which aims to eliminate outdated methanol facilities and promotes the use of methanol in fuel vehicles, together with measures that restrict the production capacity of
methanol production enterprises. The increase in prices of input raw materials including coal and natural gas will provide strong support for methanol prices. Our methanol sales target for 2010 is 610,000 tonnes.



|E. | Off-balance Sheet Arrangements
|-- | ------------------------------

As of December 31, 2009, other than capital expenditure commitments, discussed in B. Liquidity and Capital Resources
above, and contractual obligations, discussed in F. Contractual Obligations below, we did not have any off-balance sheet arrangements.



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|F. | Contractual Obligations
|-- | -----------------------

The following table summarizes our contractual obligations and commercial commitments as of December 31, 2009:



|                                                            |  |                        |  |                 |  |              |  |              |  |                 
|----------------------------------------------------------- |  | ---------------------- |  | --------------- |  | ------------ |  | ------------ |  | ----------------
|                                                            |  | Payments Due by Period
|                                                            |  | Total                  |  | Less than1 Year |  | 1 to 3 years |  | 3 to 5 years |  | More than5 years
|                                                            |  |                        |  |                 |  | (RMB000)    |  |              |  |                 
|Contractual Obligations                                     |  |                        |  |                 |  |              |  |              |  |                 
|Unsecured bank borrowings                                   |  | 176,000                |  | 22,000          |  | 44,000       |  | 44,000       |  | 66,000          
|Secured bank borrowings                                     |  | 21,677,138             |  | 919,410         |  | 8,303,091    |  | 12,454,637   |  |                
|Finance leases                                              |  | 656,703                |  | 656,703         |  |             |  |             |  |                
|Capital commitments for the acquisition of assets           |  | 716,196                |  | 716,196         |  |             |  |             |  |                
|Amounts due to Controlling Shareholder and its subsidiaries |  | 757,882                |  | 757,882         |  |             |  |             |  |                
|                                                            |  |                        |  |                 |  |              |  |              |  |                 
|Total                                                       |  | 23,983,919             |  | 3,072,191       |  | 8,347,091    |  | 12,498,637   |  | 66,000          
|                                                            |  |                        |  |                 |  |              |  |              |  |                 

During 2006, we entered into a joint venture agreement
with Chia Tai Company and Yushen Company to establish Yushuwan Coal Mine Company for the construction and operation of Yushuwan Coal Mine in Shaanxi Province. We will invest approximately RMB196.8 million to obtain a 41% equity interest in Yushuwan
Coal Mine Company. As of December 31, 2009, we have made a deposit of RMB118.0 million in relation to this joint venture, and we are committed to investing a further RMB78.8 million.

Secured Bank Borrowings

In 2009, we incurred secured bank borrowings amounting to RMB20,757.7 million (USD3,040.0 million) for the acquisition of Felix. These
borrowings are guaranteed by us and secured by a counter guarantee by Yankuang Group, see Note 36 to financial statements for more information on our secured borrowings.

Amounts due to Controlling Shareholder and its Subsidiaries

We acquired Jining III Coal Mine on January 1, 2001 pursuant to the Acquisition Agreement of Jining III Coal Mine, which we entered
into with the Controlling Shareholder on August 4, 2000. Pursuant to the Jining III Acquisition Agreement, we agreed to purchase the mining rights of Jining III for approximately RMB132.5 million. This amount is to be paid to the Controlling
Shareholder in ten interest-free equal annual installments beginning 2001. In 2009, we paid approximately RMB13.2 million to the Controlling Shareholder for the mining rights of Jining III Coal Mine.

Unsecured Bank Borrowings

Our RMB176.0 million balance of unsecured bank loan as of December 31, 2009 represented a borrowing obtained by Tianchi Energy, a
subsidiary of Shanxi Nenghua, prior to our acquisition of Shanxi Nenghua. Tianchi Energy entered into a long-term loan agreement with the State Development Bank in 2006 to borrow RMB220.0 million. The initial interest rate on the loans was
6.12% per annum, which is subject to adjustments based on interest rates set by the PBOC. The outstanding balance as of December 31, 2008 carried an interest rate of 5.94% per annum. From 2008, the principal for the loan became
payable in 20 installments over a period of 117 months, with each installment amounting to RMB11.0 million. Interest is calculated on a quarterly basis. The repayment of this loan is also guaranteed by Yankuang Group.



|G. | Critical Accounting Policies
|-- | ----------------------------

We prepare our consolidated financial statements in accordance with IFRS. The preparation of these financial statements requires us to
make estimates and assumptions about the carrying amounts of items in the financial statements that cannot be measured accurately. These judgments, estimates and assumptions are based on the historical experience of our management as well as other
relevant factors. Actual results may differ from these estimates. We review the foregoing judgments, estimates and assumptions regularly on a going concern basis. Revisions to accounting estimates are recognized in the period in which the estimate
is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.



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The following are the critical estimates that we have made in the process of applying the
accounting policies and that have the most significant effect on the amounts recognized in financial statements.

Depreciation

The cost of mining structures is depreciated using the units of production method based on the estimated production volume for which the
structure was designed. Management exercises its judgment in estimating the useful lives of the depreciable assets and the production volume of each mine. The estimated coal production volume of each mine is updated on a regular basis and takes into
account recent production and technical information of each mine. These changes are considered a change in estimate for accounting purposes and is reflected on a prospective basis in related depreciation rates. Estimates of the production volumes
are inherently imprecise and represent only approximate amounts because of the subjective judgments involved in developing such information.

Amortization of Assets

Coal reserves, coal resources and rail access rights are amortized on a straight line basis or unit of production basis over the shorter
of their useful lives and the contractual period. The expensing of overburden removal costs is based on saleable coal production over the estimated economically recoverable reserves. The useful lives are estimated on the basis of the total proven
and probable reserves of a coal mine. Proven and probable coal reserve estimates are updated at regular basis and take into account each mines recent production and technical information.

Provision for Land Subsidence, Restoration, Rehabilitation and Environmental Costs

The provision for land subsidence, restoration, rehabilitation and environmental costs is reviewed regularly to verify that it properly
reflects the remaining obligation arising from the current and past mining activities. Provisions for land subsidence, restoration, rehabilitation and environmental costs are determined by our management based on past experience, its estimate of the
current and future costs and predictions for government policies.

Impairment of Goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has
been allocated. The determination of value in use requires the Company to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the present value. As of December 31,
2009, the carrying amount of goodwill was approximately RMB1,305.3 million. Cash flow projections during the budget period for each of the above units are based on the budgeted revenue and expected gross margins during the budget period and the raw
materials price inflation during the budget period. Expected cash inflows/outflows have been determined based on past performance and managements market development expectations.

Estimated Impairment of Property, Plant and Equipment

When there is impairment indicator, the Company takes into consideration the estimation of future cash flows. The amount of the impairment
loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows. When actual future cash flows are less than expected, a material impairment loss may arise. In estimating the future
cash flows, management take into account the recent production and technical advancements. As price and cost levels change from year to year, the estimate of future cash flows also changes. Notwithstanding that management has considered all the
available information in making their impairment assessment, inherent uncertainty exists as to the conditions of mines and the environment, and actual write-offs may be higher than the estimated amount. As of December 31, 2009, the carrying
amount of property, plant and equipment was approximately RMB18,877.1 million. In 2009, RMB14.2 million of construction in progress was written off as expenses.

Recent Changes in Accounting Pronouncements

In the current year, we have applied, for the first time, a number of new standards and interpretations, amended and revised standards and
interpretations (new IFRSs) issued by the IASB and the International Financial Reporting Interpretations Committee (the IFRIC) of the IASB which are effective for our fiscal year beginning January 1, 2009:



|                            |  |                                                                              
|--------------------------- |  | -----------------------------------------------------------------------------
|IFRSs (Amendments)          |  | Improvements to IFRSs 2008                                                   
|IAS 1 (Revised)             |  | Presentation of Financial Statements                                         
|IAS 23 (Revised)            |  | Borrowing Costs                                                              
|IFRS 1& IAS 27 (Amendments) |  | Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate
|IFRS 7 (Amendment)          |  | Improving Disclosures about Financial Instruments                            
|IFRS 8                      |  | Operating Segments                                                           



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The adoption of the New IFRS had no material effect on how the results and the financial
position for the current or prior accounting years have been prepared. Accordingly, no prior period adjustment is required.

We have not applied the following new and revised standards, amendments or interpretations that have been issued but are not effective as
of the date of this annual report.



|                   |  |                                                
|------------------ |  | -----------------------------------------------
|IFRSs (Amendments) |  | Improvements to IFRSs 20091                    
|IAS 24 (Revised)   |  | Related Party Disclosures2                     
|IAS 27 (Revised)   |  | Consolidated and Separate Financial Statements3
|IAS 39 (Amendment) |  | Eligible Hedged Items3                         
|IFRS 3 (Revised)   |  | Business Combinations3                         
|IFRS 9             |  | Financial Instruments4                         
|IFRSs (Amendments) |  | Improvements to IFRSs 20105                    



|(1) | Effective for annual periods beginning on or after July 1, 2009 and January 1, 2010, as appropriate
|--- | ---------------------------------------------------------------------------------------------------

|(2) | Effective for annual periods beginning on or after January 1, 2011
|--- | ------------------------------------------------------------------

|(3) | Effective for annual periods beginning on or after July 1, 2009
|--- | ---------------------------------------------------------------

|(4) | Effective for annual periods beginning on or after January 1, 2013
|--- | ------------------------------------------------------------------

|(5) | Effective for annual periods beginning on or after July 1, 2010 and January 1, 2011 as appropriate
|--- | --------------------------------------------------------------------------------------------------

The adoption of IFRS 3 (Revised) may affect the accounting for business combination for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after July 1, 2009. IAS 27 (Revised) will affect the accounting treatment for changes in a parents ownership interest in a subsidiary that do not result in a loss of control,
which will be accounted for as an equity transaction.

IFRS 9 Financial Instruments introduces new requirements for the
classification and measurement of financial assets and will be effective from January 1, 2013, with earlier application permitted. The standard requires all recognized financial assets that are within the scope of IAS 39 Financial Instruments:
Recognition and Measurement to be measured at either amortized cost or fair value. Specifically, debt investments that (i) are held within a business model whose objective is to collect the contractual cash flows and (ii) have contractual
cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortized cost. All other debt investments and equity investments are measured at fair value.

IAS 24 (Revised) clarifies and simplifies the definition of related party. It introduces certain exemptions on disclosure requirements in
respect of transactions between government-related entities and government, and other government related entities.

Except for
the abovementioned standards or interpretations, the Directors are evaluating the impact of application of other standards or interpretations on the Groups future results and financial statements.



|ITEM 6. | DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES
|------- | -------------------------------------------------------



|A. | Directors, Supervisors and Senior Management
|-- | --------------------------------------------

The following table sets forth selected information concerning our board of directors (Board of Directors or
Board), board of supervisors and executive officers as of the date of this annual report. Pursuant to our Articles of Association, our Board of Directors consists of 13 directors, including one chairman, two vice chairmen, four
independent directors and one employee director. All Directors serve three-year terms beginning their respective election date until the election of their respective successor.

As more than 50% of our voting power is held by the Controlling Shareholder, we are not required to have a majority of our Board be
comprised of independent directors in reliance on the exemption provided under Section 303A of the NYSE Listing Rules.



58



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The following table sets forth information on our directors, supervisors and executive
officers:



|                                    |  |     |  |                                                  |  |                             
|----------------------------------- |  | --- |  | ------------------------------------------------ |  | ----------------------------
|Name                                |  | Age |  | Position at the Company                          |  | Date Term ofOffice 
Expires1
|Directors                           |  |     |  |                                                  |  |                             
|                                    |  |     | 
|WANG Xin                            |  | 52  |  | Chairman                                         |  | June 2011                   
|GENG Jiahuai                        |  | 59  |  | Vice Chairman                                    |  | June 2011                   
|LI Weimin                           |  | 49  |  | Vice Chairman and General Manager                |  | June 2011                   
|SHI Xuerang                         |  | 55  |  | Director                                         |  | June 2011                   
|CHEN Changchun                      |  | 57  |  | Director                                         |  | June 2011                   
|WU Yuxiang                          |  | 48  |  | Director and Chief Finance Officer               |  | June 2011                   
|WANG Xinkun                         |  | 57  |  | Director and Deputy General Manager              |  | June 2011                   
|ZHANG Baocai                        |  | 43  |  | Director and Secretary of the Board of Directors |  | June 2011                   
|DONG Yunqing                        |  | 55  |  | Director                                         |  | June 2011                   
|                                    |  |     | 
|Independent Non-executive Directors |  |     |  |                                                  |  |                             
|PU Hongjiu                          |  | 73  |  | Director                                         |  | June 2011                   
|ZHAI Xigui                          |  | 67  |  | Director                                         |  | June 2011                   
|LI Weian                            |  | 53  |  | Director                                         |  | June 2011                   
|WANG Junyan                         |  | 39  |  | Director                                         |  | June 2011                   
|                                    |  |     | 
|Supervisors                         |  |     |  |                                                  |  |                             
|SONG Guo                            |  | 55  |  | Chairman of Supervisory Committee                |  | June 2011                   
|ZHOU Shoucheng                      |  | 57  |  | Deputy Chairman of Supervisory Committee         |  | June 2011                   
|ZHANG Shengdong                     |  | 53  |  | Supervisor                                       |  | June 2011                   
|ZHEN Ailan                          |  | 46  |  | Supervisor                                       |  | June 2011                   
|WEI Huanmin                         |  | 53  |  | Employee Supervisor                              |  | June 2011                   
|XU Bentai                           |  | 51  |  | Employee Supervisor                              |  | June 2011                   
|                                    |  |     | 
|Other Management Team               |  |     |  |                                                  |  |                             
|JIN Tai                             |  | 59  |  | Deputy General Manager                           |  | June 2011                   
|ZHANG Yingmin                       |  | 56  |  | Executive Deputy General Manager                 |  | June 2011                   
|HE Ye                               |  | 52  |  | Deputy General Manager                           |  | June 2011                   
|LAI Cunliang                        |  | 49  |  | Deputy General Manager                           |  | June 2011                   
|QU Tianzhi                          |  | 47  |  | Deputy General Manager                           |  | June 2011                   
|TIAN Fengze                         |  | 53  |  | Deputy General Manager                           |  | June 2011                   
|SHI Chengzhong                      |  | 47  |  | Deputy General Manager                           |  | June 2011                   
|NI Xinghua                          |  | 53  |  | Chief Engineer                                   |  | June 2011                   



|(1) | The expiration of the term of office is generally the date of the shareholders meeting when a new session of the Board will be elected. Executives who retire in
the interim are replaced at the next Board meeting.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Executive Directors

WANG Xin, a researcher in engineering technique application with a doctorate degree in engineering technology and an EMBA degree,
has served as chairman of our Board since 2004. Mr. Wang is actively involved in Yankuang Group and serves as the vice chairman of the board, the general manager and the party committee deputy secretary for Yankuang Group. Mr. Wang joined
the Companys predecessor in 1982 and became a vice general manager of Yankuang Group in 2000. He was appointed a board director and vice general manager in 2002 and was promoted to the vice chairman of the board of directors and the general
manager of Yankuang Group in 2003. Since 2007, he has been the party committee deputy secretary of Yankuang Group. He is a graduate of China University of Mining and Technology and Nankai University.

GENG Jiahuai, a researcher in engineering technique application with an EMBA degree, has served as a Director since 2002 and a
vice chairman of our Board since 2004 and, at the same time, is the chairman of the board and the party committee secretary of Yankuang Group. From 1985 to 2002, Mr. Geng acted as the deputy director of Zibo Mining Bureau, the head of the Zibo
Safety and Supervision Bureau and the director general of Zibo Mining Bureau. Mr. Geng joined Yankuang Group in 2002 and became the general manager and served as the vice chairman of the board of directors and the party committee deputy
secretary of Yankuang Group. Mr. Geng was promoted to the chairman of the board of the directors and the party committee secretary of Yankuang Group in 2003. He is a graduate of Nankai University.



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LI Weimin, a researcher in engineering technique applications and doctor of mining
engineering and holder of an EMBA degree. Mr. Li has served as our general manager since July 2009 and was appointed the vice chairman of our Board in February 2010. Mr. Li joined the predecessor of the Company in 1982. In November 2002,
Mr. Li was appointed as the manager of the Jining Coal Mine III. In August 2006, Mr. Li was appointed as the deputy chief engineer and the deputy head of the Safety and Supervision Bureau of Yankuang Group. In December 2007, Mr. Li
was promoted to be the head of the Safety and Supervision Bureau of Yankuang Group. In May 2009, Mr. Li was appointed as the deputy general manager of Yankuang Group. He is a graduate of China University of Mining and Technology and Nankai
University.

SHI Xuerang, a senior engineer with an EMBA degree, is a Director of our Board and deputy general manager
of Yankuang Group. From 2001 to 2003, Mr. Shi acted as the deputy general manager of Xinwen Coal Mining Group Company Limited. He joined Yankuang Group as a deputy general manager in 2003 and was appointed a Director of the Company in 2005. He
is a graduate of Nankai University.

CHEN Changchun, a senior accountant, has served as a Director of our Board since
2005 and a director, the chief accountant and the chief legal advisor of Yankuang Group. Mr. Chen joined the Companys predecessor in 1984 and became the chief accountant and a board director of Yankuang Group in 1998 and 2004,
respectively. Mr. Chen was appointed the chief legal advisor of Yankuang Group in 2006. He is a graduate of Beijing Coal Cadre Institute.

WU Yuxiang, a senior accountant with a master degree in accounting, has served as a Director and the chief financial officer of
the Company since 2002. Mr. Wu joined the Companys predecessor in 1981 and was promoted to the chief accountant of the finance department in 1996 and the Companys manager of the finance department in 1997. He is a graduate of the
Party School of Shandong Provincial Communist Committee.

WANG Xinkun, a senior economist with a master degree, has
served as a Director and a deputy general manager of the Company since 2004 and 2002, respectively. Mr. Wang joined the Companys predecessor in 1977 and became the Companys manager of the coal transportation and sales department in
2000. He is a graduate of Tianjin University.

ZHANG Baocai, a senior accountant with an EMBA degree, has served as a
Director and the board secretary of the Company since 2006. Mr. Zhang joined the Companys predecessor in 1989 and was appointed as the head of the planning and finance department of the Company in 2002. Mr. Zhang is a graduate of
Nankai University.

DONG Yunqing, a professor-level senior administrative officer, has served as a Director and the
chairman of the labor union of the Company since 2002. Mr. Dong joined the Companys predecessor in 1981 and was the vice chairman of the labor union of Yankuang Group from 1996 to 2002. He is a graduate of Central Communist Party School
Correspondence Institute.

Independent Non-executive Directors

PU Hongjiu, a professor-level senior engineer, has served as an independent non-executive Director of the Company since 2005. He is
currently the vice chairman of the China Coal Industry Association, the chairman of Coal Industry Association of China International Association and the chairman of China Coal Society. Mr. Pu served as deputy minister of the Ministry of Coal
Industry and from 1997-2002 was a member of the Communist Party of China Central Commission of Discipline Inspection. Mr. Pu was a party group member and the head of disciplinary inspection unit of the State Administration of Work Safety and
State Administration of Coal Mine Safety in 2001. He has been the chairperson of China Coal Academy since 2001 and the first vice-chairman of the China Coal Industry Association from 2003 to 2009 and is currently the honorary chairman. In 2007, he
was appointed as the deputy director of National Energy Experts Advisory Committee. He is a graduate of Hefei Mining Institute.

ZHAI Xigui, a senior auditor, was appointed an independent non-executive Director of the Company in 2008.
Mr. Zhai is currently the president of the China Audit Society. Mr. Zhai was the deputy chief auditor of the National Audit Office in 1996 and the vice secretary of the party group of the National Audit Office in 1999. He was elected as
the deputy to the 10thSession of the National
Peoples Congress of the PRC and a member of the Finance and Economics Committee in the same congressional session in 2003. Mr. Zhai was appointed as the president of China Audit Society in 2005. He is a graduate of Central University of
Finance and Economics.

LI Weian, was appointed an independent non-executive Director of the Company in 2008 and is a
professor at Nankai University holding doctorate degrees in management and economics. Mr. Li has been the Dean of the Business School of Nankai University since 1997 and became one of the first group of National distinguished professors in Arts
appointed under the Cheung Kong Scholars Program in 2004. He is also a director of the Corporate Management Research Center, a part-time member of the Science Counseling Team of the Degree Committee of the State Council and a deputy director of the
Business Administration Teaching Direction Committee of the Ministry of Education, enjoying the special government allowance. Mr. Li is a graduate of Nankai University and Keio University.



60



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WANG Junyan, was appointed an independent non-executive director of the Company in
2008 and holds a master degree in finance. Mr. Wang has served as the chairman of the board and the investment director of Shanghai Investment and Management Co., Ltd. since 2007 and was appointed the managing director general manager and an
investment director of CITIC Securities International Investment and Management (Hong Kong) Co., Ltd. in 2008. He was also appointed the managing director of Shanghai First Finance Group Co., Ltd. in 1997. Mr. Wang is a graduate of the
University of Hong Kong.

Supervisors

SONG Guo, a professor-level senior administrative officer with an EMBA degree, is the chairman of the supervisory committee of the
Company and a deputy secretary of the party committee of Yankuang Group. In 2002, Mr. Song was the officer-in-charge of the office of Coal Management Bureau of Shandong Province. He joined Yankuang Group in 2003 and served as the secretary of
the disciplinary inspection committee from 2003 to 2007. He was appointed as a deputy secretary of the party committee of Yankuang Group in 2004 and the vice chairman of the supervisory committee of the Company in 2005. In 2008, Mr. Song was
promoted to the chairman of the supervisory committee of the Company. He is a graduate of Nankai University.

ZHOU
Shoucheng, a professor-level senior administrative officer with a master degree, was appointed the vice chairman of the supervisory committee of the Company in 2008 and has served as the secretary of the disciplinary inspection committee and the
chairman of the labor union of Yankuang Group since 2007. Mr. Zhou joined the predecessor of the Company in 1979 and has held the posts of the secretary of the Youth League committee of Yankuang Group, the secretary of the party committee of
Beisu Coal Mine and the secretary of the party committee and the vice manager of Xinglongzhuang Coal Mine successively from 1984 to 2002. He was the chairman of the labor union of Yankuang Group from 2002 to 2007. Mr. Zhou is a graduate of
Central Communist Party School Correspondence Institute.

ZHANG Shengdong, a senior accountant, has been a supervisor
of the Company since 2002. He is also the assistant to the general manager, the deputy chief accountant and the head of the finance department of Yankuang Group. Mr. Zhang joined the Companys predecessor in 1981 and became the head
of the finance of Yankuang Group in 2002. He also became the deputy chief accountant of Yankuang Group, a supervisor of the Company, the head of the finance company preparatory office of Yankuang Group in 2002. Mr. Zhang was appointed as the
assistant to the general manager of Yankuang Group in 2008. He is a graduate of China University of Mining and Technology.

ZHEN Ailan, a senior accountant and senior auditor, was appointed a supervisor of the Company in 2008. She has served as the
deputy director of the audit department at Yankuang Group since 2005. After joining the Companys predecessor in 1980, she was appointed to the deputy chief of the audit division of Yankuang Group in 2002 and subsequently promoted to the deputy
director of the audit department in 2005. Ms. Zhen is a graduate of Northeastern University of Finance and Economics.

WEI Huanmin, a professor-level senior administrative officer, was appointed the supervisor and the secretary of the disciplinary
inspection committee of the Company in 2008 and 2006, respectively. Mr. Wei joined the Companys predecessor in 1984, and served as the Companys deputy secretary of the disciplinary inspection committee and the chief of the division
of inspection from 2002 until being promoted to the secretary of the disciplinary inspection committee in 2006. Mr. Wei is a graduate of Central Communist Party School Correspondence Institute.

XU Bentai, a professor-level senior administrative officer with a master degree, has been the employee supervisor of the Company
since 2002 and the chairman of the labor union of Jining III Coal Mine since 1999. Mr. Xu joined the Companys predecessor in 1978 and is a graduate of the Party School of Shandong Provincial Communist Committee.

Other Executive Officers

JIN Tai, a researcher in engineering technique application with a master degree, has served as a deputy general manager of the
Company since 2004. Mr. Jin joined the Companys predecessor in 1968, and became the deputy general manager of Yankuang Group in 2000. He became the head of Xinglongzhuang Coal Mine in 1998. Mr. Tai is a graduate of China University
of Mining and Technology.

ZHANG Yingmin, a researcher in engineering technology application with an EMBA degree, has
been the executive deputy general manager of the Company and a director of Yankuang Group since 2002 and 2004, respectively. Mr. Zhang joined the Companys predecessor in 1971, appointed as the director of the division of production
technology of Yankuang Group in 1996 and became the head of Baodian Coal Mine in 2000. He was also appointed deputy general manager of Yankuang Group in 2003 and the chief of the safety supervision bureau of the Company from 2004 to 2007.
Mr. Zhang is a graduate of Nankai University.

HE Ye, a researcher in engineering technology application, with a
doctorate degree in engineering, has served as a deputy general manager of the Company since 2004. Mr. He joined the Companys predecessor in 1993 and became the head of Jining II Coal Mine in 1999. In 2002, he was appointed the executive
deputy general manager of an industrial company that is a subsidiary of Yankuang Group in 2002. Mr. He is a graduate of China University of Mining and Technology.



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LAI Cunliang, a senior engineer with a master degree in mining engineering and an
executive MBA degree, has served as a deputy general manager of the Company since 2005. Mr. Lai joined the Companys predecessor in 1980 and became the head of Xinglongzhuang Coal Mine in 2000. He has been a director and the general
manager of Yancoal Australia Pty since 2004. He is a graduate of China University of Mining and Technology and Nankai University.

QU Tianzhi, a researcher in engineering technique application, with a doctorate degree in engineering, has served as a deputy
general manager of the Company since 2006. Mr. Qu joined the Companys predecessor in 1985 and became the head of Dongtan Coal Mine in 2000. Mr. Xu is a graduate of China University of Mining and Technology.

TIAN Fengze, a senior economist with a master degree, has served as a deputy general manager of the Company since 2002.
Mr. Tian joined the Companys predecessor in 1976 and became the head of Beisu Coal Mine in 1991. Mr. Tian is a graduate of Party School of Shandong Provincial Communist Committee.

SHI Chengzhong, a researcher in engineering technique application with an EMBA degree and the master degree of mining engineer,
has served as a deputy general manager of the Company since 2002. Mr. Shi joined the Companys predecessor in 1983 and became a deputy chief engineer of Yankuang Group in 2000. Mr. Shi is a graduate of Northeastern University and
Nankai University.

NI Xinghua, a researcher in engineering technique application with a master degree, has been the
chief engineer of the Company since 2002. Mr. Ni joined the Companys predecessor in 1975 and became a deputy chief engineer of Yankuang Group in 2000. Mr. Ni is a graduate of Tianjin University.

Appointment of the General Manager

Reaching the age of retirement, Mr. Yang Deyu, the former general manager of the Company, tendered a letter of resignation to the
Board on July 23, 2009 to resign from his position as general manager. At the seventh meeting of the fourth session of the Board held on July 24, 2009, Mr. Li Weimin was appointed the Companys general manager to fill the
vacancy.

Appointment of Director and Vice Chairman of the Board

Mr. Yang Deyu, the former Vice Chairman of the Board, tendered his resignation to the Board on December 31, 2009, resigning from
his positions as a Director and Vice Chairman of the Company. At the first extraordinary general meeting of 2010 of the Company and the thirteenth meeting of the fourth session of the Board held on February 26, 2010, Mr. Li Weimin was
elected as non-independent director and vice chairman of the fourth session of the Board.



62



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|B. | Compensation
|-- | ------------

The
Directors, supervisors and executive officers who are our employees receive compensation in the form of salaries, housing allowances and other allowances and benefits, including pension contributions. The aggregate amount of cash remuneration paid
by us in 2009 to Directors, supervisors and executive officers was RMB4.3 million. In addition, Directors and supervisors receive other benefits, such as subsidized or free health insurance and transportation, which are customarily provided by PRC
enterprises to their senior-level employees. We did not pay any discretionary bonus during the reporting period of this annual report to our Directors, supervisors or executive officers. Details of each of the directors and supervisors
salaries and benefits are as follows:



|                                    |  |                                      |  |                                             |  |                                     |  |        
|----------------------------------- |  | ------------------------------------ |  | ------------------------------------------- |  | ----------------------------------- |  | -------
|                                    |  | For the Year Ended December 31, 2009
|                                    |  | Fees                                 |  | Salaries,allowance andother benefitsin kind |  | Retirementbenefit plancontributions |  | Total  
|                                    |  | RMB000                              |  | RMB000                                     |  | RMB000                             |  | RMB000
|Independent Non-Executive Directors |  |                                      |  |                                             |  |                                     |  |        
|                                    |  |                                      |  |                                            
|Pu Hongjiu                          |  | 109                                  |  |                                            |  |                                    |  | 109    
|                                    |  |                                      |  |                                            
|Zhai Xigui                          |  | 109                                  |  |                                            |  |                                    |  | 109    
|                                    |  |                                      |  |                                            
|Li Weian                            |  | 109                                  |  |                                            |  |                                    |  | 109    
|                                    |  |                                      |  |                                            
|Wang Junyan                         |  | 109                                  |  |                                            |  |                                    |  | 109    
|                                    |  |                                      |  |                                             |  |                                     |  |        
|                                    |  | 436                                  |  |                                            |  |                                    |  | 436    
|                                    |  |                                      |  |                                             |  |                                     |  |        
|Directors                           |  |                                      |  |                                             |  |                                     |  |        
|                                    |  |                                      |  |                                            
|Wang Xin                            |  |                                     |  |                                            |  |                                    |  |       
|                                    |  |                                      |  |                                            
|Geng Jiahuai                        |  |                                     |  |                                            |  |                                    |  |       
|                                    |  |                                      |  |                                            
|Yang Deyu                           |  |                                     |  | 148                                         |  | 29                                  |  | 177    
|                                    |  |                                      |  |                                            
|Shi Xuerang                         |  |                                     |  |                                            |  |                                    |  |       
|                                    |  |                                      |  |                                            
|Chen Changchun                      |  |                                     |  |                                            |  |                                    |  |       
|                                    |  |                                      |  |                                            
|Wu Yuxiang                          |  |                                     |  | 220                                         |  | 44                                  |  | 264    
|                                    |  |                                      |  |                                            
|Wang Xinkun                         |  |                                     |  | 250                                         |  | 50                                  |  | 300    
|                                    |  |                                      |  |                                            
|Zhang Baocai                        |  |                                     |  | 220                                         |  | 44                                  |  | 264    
|                                    |  |                                      |  |                                            
|Dong Yunqing                        |  |                                     |  | 220                                         |  | 44                                  |  | 264    
|                                    |  |                                      |  |                                             |  |                                     |  |        
|                                    |  |                                     |  | 1,058                                       |  | 211                                 |  | 1,269  
|                                    |  |                                      |  |                                             |  |                                     |  |        
|Supervisors                         |  |                                      |  |                                             |  |                                     |  |        
|                                    |  |                                      |  |                                            
|Song Guo                            |  |                                     |  |                                            |  |                                    |  |       
|                                    |  |                                      |  |                                            
|Zhang Shengdong                     |  |                                     |  |                                            |  |                                    |  |       
|                                    |  |                                      |  |                                            
|Zhou Shoucheng                      |  |                                     |  |                                            |  |                                    |  |       
|                                    |  |                                      |  |                                            
|Zhen Ailan                          |  |                                     |  |                                            |  |                                    |  |       
|                                    |  |                                      |  |                                            
|Wei Huanmin                         |  |                                     |  | 220                                         |  | 44                                  |  | 264    
|Xu Bentai                           |  |                                     |  | 259                                         |  | 52                                  |  | 311    
|                                    |  |                                      |  |                                             |  |                                     |  |        
|                                    |  |                                     |  | 479                                         |  | 96                                  |  | 575    
|                                    |  |                                      |  |                                             |  |                                     |  |        



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|                            |  |                                      |  |                                             |  |                                     |  |        
|--------------------------- |  | ------------------------------------ |  | ------------------------------------------- |  | ----------------------------------- |  | -------
|                            |  | For the Year Ended December 31, 2009
|                            |  | Fees                                 |  | Salaries,allowance andother benefitsin kind |  | Retirementbenefit plancontributions |  | Total  
|                            |  | RMB000                              |  | RMB000                                     |  | RMB000                             |  | RMB000
|Other Members of Management |  |                                      |  |                                             |  |                                     |  |        
|                            |  |                                      |  |                                            
|Li Weimin                   |  |                                     |  | 61                                          |  | 12                                  |  | 73     
|                            |  |                                      |  |                                            
|Jin Tai                     |  |                                     |  | 61                                          |  | 13                                  |  | 74     
|                            |  |                                      |  |                                            
|Zhang Yingmin               |  |                                     |  | 61                                          |  | 12                                  |  | 73     
|                            |  |                                      |  |                                            
|He Ye                       |  |                                     |  | 61                                          |  | 12                                  |  | 73     
|                            |  |                                      |  |                                            
|Tian Fengze                 |  |                                     |  | 221                                         |  | 44                                  |  | 265    
|                            |  |                                      |  |                                            
|Shi Chengzhong              |  |                                     |  | 250                                         |  | 50                                  |  | 300    
|                            |  |                                      |  |                                            
|Qu Tianzhi                  |  |                                     |  | 250                                         |  | 50                                  |  | 300    
|                            |  |                                      |  |                                            
|Lai Cunliang                |  |                                     |  | 540                                         |  |                                    |  | 540    
|                            |  |                                      |  |                                            
|Ni Xinghua                  |  |                                     |  | 250                                         |  | 50                                  |  | 300    
|                            |  |                                      |  |                                             |  |                                     |  |        
|                            |  |                                     |  | 1,755                                       |  | 243                                 |  | 1,998  
|                            |  |                                      |  |                                             |  |                                     |  |        
|Total                       |  | 436                                  |  | 3,292                                       |  | 550                                 |  | 4,278  
|                            |  |                                      |  |                                             |  |                                     |  |        



|C. | Board Practices
|-- | ---------------

Board of Directors

Directors are elected to serve three year terms. We have adopted cumulative voting for the election of new Board of Directors.

Pursuant to our Articles of Association, the Board of Directors is accountable to shareholders in general meeting and exercises the
following functions and powers:



| | (i) | convening shareholders meetings and reporting on the work of the Board of Directors at such meetings;
| | --- | ------------------------------------------------------------------------------------------------------



| | (ii) | implementing resolutions passed by the shareholders in general meetings;
| | ---- | ------------------------------------------------------------------------



| | (iii) | determining our business plans and investment proposals;
| | ----- | --------------------------------------------------------



| | (iv) | formulating our annual preliminary and final budgets;
| | ---- | -----------------------------------------------------



| | (v) | formulating our profit distribution proposal and loss recovery proposals;
| | --- | -------------------------------------------------------------------------



| | (vi) | formulating proposals for the increase or reduction of our registered capital and the issuance of our debentures or other forms of securities;
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------



| | (vii) | drawing up plans for our merger, division, dissolution or change of corporate structure;
| | ----- | ----------------------------------------------------------------------------------------



| | (viii) | deciding on our internal management structure;
| | ------ | ----------------------------------------------



| | (ix) | appointing or removing our general manager, deputy general manager(s) and other senior officers, based on the recommendation of the general manager, and determining
their remuneration;
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (x) | formulating our basic management system;
| | --- | ----------------------------------------



| | (xi) | formulating proposals for any amendment of the Articles of Association;
| | ---- | -----------------------------------------------------------------------



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##### Table of Contents

| | (xii) | deciding on our business involving overseas investments, acquisition and disposal of assets, mortgages of assets and other guarantees, financial management and
connected transactions within the authority conferred by the general meeting;
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (xiii) | managing the disclosure of information regarding us;
| | ------ | ----------------------------------------------------



| | (xiv) | making recommendations on the appointment or replacement of the Companys independent auditors to shareholders at shareholders general meetings;
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------



| | (xv) | reviewing managements performance based on the working report submitted by management;
| | ---- | ---------------------------------------------------------------------------------------



| | (xvi) | approving an aggregate amount of provision for impairment of assets not more than 10% of our latest audited consolidated net asset value, clearing an amount of
provision for impairment of assets not more than 5% of our latest audited consolidated net asset value, and executing and clearing any provision of impairment of assets involving connected transactions in compliance with relevant connected
transaction regulations; and
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (xvii) | exercising any other powers specified by the law, administrative regulations, departmental rules, the Articles of Association and conferred by shareholders in a general
meeting.
| | ------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Except for matters specified in (vi), (vii) and (xi), which require the affirmative vote of more
than two-thirds of all of the Directors, resolutions in respect of the above listed matters can be approved by a simple majority of the Directors.

The Board of Directors makes decisions on the companys scope of authority and inspection and decision making procedures with
respect to company matters relating to asset sales and purchases, foreign investment, mortgages, guarantee provisions, entrusted asset management and connected transactions and, if a major investment involved, should appoint experts and
professionals to make an assessment and submit such assessment to the shareholders meeting for approval.

With the
approval of over two-thirds of all Directors, the Board of Directors may make decisions on the following matters:



| | (1) | transactions falling within the following limit with respect to asset sales and purchases, foreign investment (including entrusted financial management and entrusted
loans), financial assistance provisions, entrusted or trusted asset or business management, license agreements, and research and development projects:
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a. | the total assets involved in a single transaction is more than 5% and below 25% of the Companys latest audited total asset value;
| | -- | ----------------------------------------------------------------------------------------------------------------------------------



| | b. | a single investment representing more than 5% and below 25% of the Companys latest audited net asset value;
| | -- | ------------------------------------------------------------------------------------------------------------



| | c. | a single transaction involving more than 5% and less than 25% of the Companys latest audited income from principal operations for the latest financial year; and
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | d. | a single transaction representing more than 5% and less than 25% of the Companys latest audited net profit for the latest financial year.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------

The above transactions that involve a public offer of securities, which requires the approval of the China
Securities Regulatory Commission, shall be subject to a vote in the shareholders general meeting;



| | (2) | a single loan representing less than 10% of the Companys most recently audited net asset value if the debt ratio to the Companys assets remains under 60%
after such financing;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | mortgages or pledges of assets so long as the cumulative outstanding amount is less than 30% of the Companys most recently audited net asset value;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------



| | (4) | external guarantees that do not require the approval of the shareholders pursuant to the Articles of Association; and
| | --- | ---------------------------------------------------------------------------------------------------------------------



| | (5) | connected transactions, which must be conducted in accordance with the relevant regulations of competent securities authorities and the listing rules of applicable
stock exchanges.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The transactions referred to in (1) that involve the provision of financial assistance
and entrusted financial management, is calculated on an accrued basis for twelve consecutive months according to the transaction categories and applicable approval limit proportion of the Board of Directors. When the Company conducts transactions
other than the provision of financial assistance and entrusted financial management, applicable approval limit proportion of the Board of Directors regarding each transaction which is under the same category shall be calculated on the principle of
accrued basis for twelve consecutive months. Transactions already approved by the Company in accordance with the principle of accrued basis shall not be included in the scope of accrual calculation.

Provision of regulatory authorities the Company is subject to within and outside the PRC that is of a stricter standard than this Article
of Association shall apply accordingly.



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In addition to obligations imposed by laws, administrative regulations or the listing rules
of the stock exchanges on which our Shares are listed, the Articles of Association place on each Director, supervisor, general manager, deputy general manager and any other senior officer a duty to each shareholder, in the exercise of his or her
functions and powers entrusted to such person:



| |  |  | to act honestly in our best interests;
| | - |  | --------------------------------------



| |  |  | not to expropriate our property in any way, including (without limitation) usurpation of opportunities which benefit us; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



| |  |  | not to expropriate the individual rights of shareholders, including (without limitation) rights to distributions and voting rights, save and except
pursuant to our restructuring which has been submitted to the shareholders for their approval in accordance with the Articles of Association.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Articles of Association further place on each Director, supervisor, general manager, deputy general manager and senior officer:



| |  |  | a duty to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances in the discharge of his or
her duties;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a fiduciary obligation not to have interests that conflict with the Companys;
| | - |  | ------------------------------------------------------------------------------



| |  |  | a duty not to direct a person or entity related or connected to the Director, supervisor, general manager, deputy general manager or senior officer in
certain relationships enumerated in the Articles of Association to act in a manner which such person is prohibited from doing; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a duty not to cause us to exceed the scope of business stipulated in our business license;
| | - |  | ------------------------------------------------------------------------------------------

Subject to compliance with relevant laws and administrative regulations, the shareholders in a general meeting may by ordinary resolution
remove any Director before the expiration of his term of office. Subject to certain qualifications, a Director, supervisor, general manager, deputy general manager or other senior officer of the Company may be relieved of liability for a specific
breach of his or her duties by the informed consent of shareholders in a general meeting.

Directors
Decision-making Risk Fund

As approved by our shareholders in the 2004 annual shareholders general meeting, we
established a Directors Decision-making Risk Fund (Risk Fund) to compensate the Directors, supervisors, executive officers and other applicable personnel for personal economic losses resulting from their performance of duties in
accordance with the laws, regulations or our Articles of Association or while attempting to procure legitimate benefits for our Company.

Directors, Supervisors and Managements Indemnification

As approved in the 2009 general meeting that was held on June 25, 2010, we continued to purchase liability insurance for our
Directors, supervisors and senior officers with an coverage of up to US$15 million.

Audit Committee of the Board of
Directors

As approved at the first meeting of the fourth session of the Board held on June 27, 2008, the Company
set up our audit committee of the fourth session of the Board. The audit committee comprises four independent non-executive Directors, namely Mr. Pu Hongjiu, Mr. Zhai Xigui, Mr. Li Weian and Mr. Wang Junyan, and two non-executive
Directors, namely Mr. Chen Changchun and Mr. Dong Yunqing. Mr. Zhai Xigui serves as the Chairman of the audit committee.

The audit committee is mainly responsible for ensuring the independence of the companys independent auditors to maintain the
integrity of audits, proposing the appointment or replacement of independent audit agencies; reviewing the accounting policies of the Company, the disclosure of the financial information and the procedures for preparing financial reports; and
reviewing the Companys internal control and risk management systems. The details of the responsibilities of the audit committee can be found on our Companys website.

The members of the audit committee of our Board of Directors are:



|           |  |     |  |                                    |  |                   
|---------- |  | --- |  | ---------------------------------- |  | ------------------
|Name       |  | Age |  | Position                           |  | Ownershipof Shares
|           |  |     | 
|ZHAI Xigui |  | 67  |  | Independent non-executive director |  | 0                 
|           |  |     | 
|PU Hongjiu |  | 73  |  | Independent non-executive director |  | 0                 
|           |  |     | 
|LI Weian   |  | 53  |  | Independent non-executive director |  | 0                 



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##### Table of Contents

|               |  |     |  |                                    |  |                   
|-------------- |  | --- |  | ---------------------------------- |  | ------------------
|Name           |  | Age |  | Position                           |  | Ownershipof Shares
|               |  |     | 
|WANG Junyan    |  | 39  |  | Independent non-executive director |  | 0                 
|               |  |     | 
|CHEN Changchun |  | 57  |  | Affiliated director                |  | 0                 
|               |  |     | 
|DONG Yunqing   |  | 55  |  | Employee director                  |  | 0                 

As a foreign private
issuer, we rely on the exemption under Section 303A.00 of the NYSE Listed Company Manual as well as affiliated director and employee director exemptions as provided under Rule 10A-3 of the Exchange Act to be in compliance with the audit
committee standards set out in Section 303A.06 of the NYSE Listed Company Manual. See Item 16D. Exemptions from the Listing Standards For Audit Committees.

Compensation Committee

The Compensation Committee of the fourth session of the Board was set up following approval from the Board at the first meeting of the
fourth session of the Board held on June 27, 2008. Our compensation committee consists of three members: two independent non-executive directors, namely Mr. Li Weian and Mr. Wang Junyan and one employee director, namely Mr. Dong
Yunqing. Mr. Li Weian was elected to serve as the chairman of the compensation committee. The primary duties of our compensation committee as set out in the committee charter include drafting and establishing a compensation policy for our
Directors, supervisors, and the senior officers and making recommendations on the compensation for our Directors, supervisors and the senior officers. Further details on the responsibilities of the compensation committee can be found on our website.

Supervisory Committee

Our supervisory committee consists of six members, two of whom are employee representatives. Supervisors serve a term of three years and
attend Board meetings. The supervisory committee is accountable to shareholders and exercises the following duties accordance with law:



| |  |  | review our periodic reports as prepared by the Board of Directors and provide written comments;
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | review our financial position;
| | - |  | ------------------------------



| |  |  | supervise the Directors, general manager, deputy general managers and other senior officers to ensure that they do not act in contravention of any law,
regulation or our Articles of Association and recommend the dismissal of those who do;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | demand any Director, general manager, deputy general manager or any other senior officer who acts in a manner which is harmful to our interest to
rectify such behavior;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | verify financial information such as financial reports, business reports and profit distribution plans to be submitted by the Board of Directors to
shareholders general meetings and, if necessary, authorize the audit or examination of such financial information;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | propose the convening of shareholders extraordinary general meetings and extraordinary board meetings;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | make proposals at the shareholders general meetings;
| | - |  | -----------------------------------------------------



| |  |  | represent the Company in negotiations with or in bringing actions against a Director or senior officers;
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | conduct investigation into any identified irregularities in the Companys operations; and
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | other functions and powers specified in our Articles of Association.
| | - |  | --------------------------------------------------------------------

Nomination and Corporate Governance

As of December 31, 2009 the Yankuang Group held 2,600,000,000 Shares, representing 52.86% of our total shares on the same day. As
Yankuang Group holds more than 50% of our voting power, we are a controlled company under Section 303A.00 of the NYSE Listed Company Manual. As a result, we are not required to establish a Nomination Committee or Corporate
Governance Committee under Sections 303A.04 and 303A.05 of the NYSE listing rules and have not done so.

Arrangement to
Purchase Equity or Debt Securities and Other Arrangements

At no time during the year ended December 31, 2009,
were we, our Controlling Shareholder or any of Yankuang Groups subsidiaries a party to any arrangement that enabled our Directors or supervisors to acquire benefits through the acquisition of any securities, including our equity or debt
securities, with the exception of the A Shares issued to certain of our Directors, supervisors and senior management.



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There is no arrangement or understanding between any Director and any major shareholder,
customer or supplier in connection with the selection of such Director.

Service Contracts of Directors and Supervisors

Each of the Directors and supervisors has entered into a service contract with us. Under such contracts, each
executive director will receive a salary and a discretionary year-end bonus, which is proposed by the Board of Directors and approved by our shareholders in general meetings. The discretionary year-end bonuses paid to our executive directors and
other employees (including, but not limited to, our other Directors, supervisors and executive officers) in any given year may not, in aggregate, exceed 1% of our net profit after taxation and extraordinary losses but before extraordinary gains for
that year.

No Director or supervisor has entered into any service contract with our Company which cannot be terminated by us
within one year without payment other than statutory compensation.



|D. | Employees
|-- | ---------

General

The table below sets forth the number of our employees by function as of the periods indicated:



|                                        |  |                    |  |        |  |       
|--------------------------------------- |  | ------------------ |  | ------ |  | ------
|                                        |  | As of December 31,
|                                        |  | 2007               |  | 2008   |  | 2009  
|Coal production employees               |  | 28,098             |  | 32,297 |  | 34,516
|                                        |  |                    | 
|Engineers and technicians               |  | 1,599              |  | 1,662  |  | 1,816 
|                                        |  |                    | 
|Management and administrative personnel |  | 2,732              |  | 2,895  |  | 3,595 
|                                        |  |                    | 
|Support staff                           |  | 10,354             |  | 10,535 |  | 9,706 
|                                        |  |                    |  |        |  |       
|                                        |  |                    | 
|Total                                   |  | 42,783             |  | 47,389 |  | 49,633
|                                        |  |                    |  |        |  |       

The table below sets forth the number of our employees
by location as of December 31, 2009:



|          |  |           |  |           
|--------- |  | --------- |  | ----------
|Location  |  | Employees |  | % of Total
|PRC       |  |           |  |           
|Shandong  |  | 49,093    |  | 98.92%    
|Shaanxi   |  | 196       |  | 0.39%     
|Shanxi    |  | 318       |  | 0.64%     
|Australia |  | 26        |  | 0.05%     
|          |  |           |  |           
|Total     |  | 49,633    |  | 100.0%    
|          |  |           |  |           

The total remuneration of our employees includes wages
and allowance. We paid our employees an aggregate of approximately RMB2,005.4 million, RMB2,448.8 million and RMB2,985,5 million in wages and allowance in the years ended December 31, 2007, 2008 and 2009, respectively. The compensation of an
employee directly involved in underground mining is based on the employees productivity, as well as the productivity of the employees mining team. Our employees and their families also receive certain social welfare benefits and
education and health services indirectly through the Yankuang Group. These benefits are provided in some cases by the Yankuang Group as required by PRC laws, rules and regulations. We, in turn, make payments to the Yankuang Group for such benefits.

According to the Provision of Insurance Fund Administrative Services Agreement, Yankuang Group will provide free management
services for the contributions that we make to an endowment insurance fund, basic medical insurance fund, supplementary medical insurance fund, unemployment insurance fund and maternity insurance fund for our employees. We paid RMB838.8 million to
these insurance funds in 2009.

In 2007, 2008 and 2009, we paid pension contributions for our Directors, supervisors, executive
officers and senior management of approximately RMB378,000, RMB509,000 and RMB550,000 respectively. In addition, each of our employee currently pays a percentage of his or her salary as additional pension contribution. Upon retirement, our
employees are entitled pension payments under the pension plan.

As of the date of this annual report, all of our employees are
employed under employment contracts that specify the employees position, responsibilities, remuneration and permissible grounds for termination. We have a labor union that protects employees rights, assists us to achieve in the
achievement of our economic objectives, encourages employee participation in management decisions and assists in mediating disputes between union members and us. Each of our operating units has a labor union. We have not experienced any strikes or
other labor disturbances that has interfered with our operations, and we believe that we maintain strong relationships with our employees.



68



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All employees who are unable to work due to illness or disability are entitled to certain
benefits during the period of their absence from the work. In addition, the PRC government requires us to provide casualty and life insurance for each employee who works underground in mining sites through work injury funds. We contribute an amount
to the work injury fund equivalent to 2% of each employees total remuneration the prior year.

Medical Insurance
Plan

In accordance with the relevant regulations of the Shandong Provincial Peoples government, since 2002, we
have established a basic medical insurance plan for employees, which comprises basic medical insurance and supplementary medical insurance plans.

In 2009, we set aside 6% and 4% of the total wages of each employee to a basic medical insurance fund and a supplementary medical
insurance, respectively. The supplementary medical insurance of production staff was recorded in our statement of income as wages and employee benefits under cost of sale and service provided, while that of management and
administrative personnel was recorded under selling, general and administrative expenses.

Housing Plan

Under the Labor and Service Supply Agreement, the Controlling Shareholder is partly responsible for providing housing
accommodations to our employees. We and the Controlling Shareholder share the incidental expenses relating to the provision of housing accommodation on a pro rata basis based on our respective number of employees and other negotiations. Such
expenses amounted to RMB86.3 million, RMB86.2 million and RMB140.0 million for 2007, 2008 and 2009, respectively.

Since 2002,
we have paid to our employees a housing allowance, which is calculated based on a fixed percentage of each employees wage to assist employees in their purchase of residential housing. In 2007, 2008 and 2009, we paid housing allowances to
employees that amounted to RMB176.2 million, RMB193.6 million and RMB238.5 million, respectively.



|E. | Share Ownership
|-- | ---------------

No
Director, supervisor or member of senior management who received compensation as described in subsection B above owns more than one percent of our outstanding Shares. See Item 6. Directors, Supervisors, Senior Management and Employees
 A. Directors, Supervisors and Senior Management.

We have not granted and have no plan to grant options for our
shares or other equity-linked securities to our employees. We have not and have no plan to implement any share bonus scheme for employees.



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|ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
|------- | -------------------------------------------------



|A. | Major Shareholders
|-- | ------------------

As of
December 31, 2009, Yankuang Group owned 52.86% of our share capital. As a majority shareholder, Yankuang Group is able to make most of the decisions reserved for shareholders.

The following table sets forth certain information regarding ownership of our capital stock as of December 31, 2009 by all persons
who are known by us to own beneficially more than 5% of our capital stock.



|                                                   |  |                             |  |                                     |  |                                             |  
|-------------------------------------------------- |  | --------------------------- |  | ----------------------------------- |  | ------------------------------------------- | -
|Title of Class                                     |  | Identity of Person or Group |  | Shares Owned as ofDecember 31, 2009 |  | Percentage of Shares as ofDecember 31, 2009 |  
|                                                   |  |                             | 
|Ordinary Shares in the form of legal person shares |  | Yankuang Group              |  | 2,600,000,000                       |  | 52.86                                       | %
|                                                   |  |                             | 
|Ordinary Shares in the form of H Shares            |  | HKSCC Nominee 
Limited(1)   |  | 1,954,155,146                       |  | 39.73                                       | %



|(1) | As the nominee of the clearing and settlement agent for our H Shares, HKSCC Nominee Limited is the record holder of our H Shares.
|--- | ---------------------------------------------------------------------------------------------------------------------------------

Except as described in the table above, we are not aware of any holder of more than 5% of any class of our shares. Our major shareholders
do not have voting rights different from those of other shareholders. All of our ordinary shareholders enjoy equal voting rights for each share that they hold.

To our knowledge, other than Yankuang Group, which owns 52.86% of our Shares, we are not owned or controlled, directly or indirectly, by
any other corporation, government, or other natural or legal person or persons, jointly or severally. We are not aware of any arrangement which may at a subsequent date result in a change of control over us.



|B. | Related Party Transactions
|-- | --------------------------

Our connected transactions were mainly made with Yankuang Group (together with its subsidiaries) for the provision of materials and
services, giving rise to continuing connected transactions described below, and asset purchase transactions.

Financial
Services

In 2007, the Board approved the joint establishment of Yankuang Finance among Yankuang Group, China Credit
Trust Co., Ltd. and us. Yankuang Finance is intended to facilitate financial transactions among member companies by accepting deposits from and making loans to members and handling transfers and settling funds among member companies. The China
Banking Regulatory Commission approved the establishment of Yankuang Finance on November 16, 2009, and the Company entered into a capital contribution agreement with Yankuang Group and China Credit Trust Co., Ltd. on April 20, 2010. The
proposed registered capital of the company is RMB500.0 million, of which we have contributed RMB125.0 million in cash, representing an equity interest of 25%. As of the date of this annual report, the procedures for establishing Yankuang Finance
have not been completed.

Our Board approved the continuing connected transactions that may take place in connection with
Yankuang Finance after its establishment and set the annual caps for such transactions as follows:



| |  |  | deposit services for each of 2010 and 2011 is RMB1.4 billion;
| | - |  | -------------------------------------------------------------



| |  |  | loan services for each of 2010 and 2011 is RMB1.0 billion; and
| | - |  | --------------------------------------------------------------



| |  |  | other financial service such as note discounts and account settlement is RMB23.5 million for 2010 and RMB28.54 million for 2011.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------

Approval of Continuing Connected Transaction Agreements and the Annual Caps for 2009, 2010 and 2011

As required by the rules of the Hong Kong Stock Exchange and Shanghai Stock Exchange on continuing connected
transactions, we completed the necessary review and approval procedures for our continuing connected transactions and entered into five new continuing connected transaction agreements in the fourth quarter of 2008. The term for each of these
agreements is from January 1, 2009 to December 31, 2011. The new continuing connected transaction agreements include the Provision of Materials Supply Agreement, Provision of Labor and Services Supply Agreement, Provision of Insurance Fund
Administrative Services Agreement, Provision of Coal Products and Materials Agreement and Provision of Electricity and Heat Agreement. We also determined the annual caps for each of these agreements for 2009, 2010 and 2011.



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##### Table of Contents

Continuing Connected Transactions

The continuing connected transactions between our Company and the Controlling Shareholder for the year 2009 included the following:

Continuing Connected Transaction of Supply of Products and Services

Details of arrangement to supply products and services between our Company and Yankuang Group in 2009 are shown in the following table.



|                                                    |  |                                                    |  |                             |  |                                    
|--------------------------------------------------- |  | -------------------------------------------------- |  | --------------------------- |  | -----------------------------------
|Connected Transactions                              |  | Agreement                                          |  | Annual capfor 2009(RMB000) |  | Transactionamount for 2009(RMB000)
|                                                    |  |                                                    | 
|Materials and facilities provided by Yankuang Group |  | Provision of Materials Supply Agreement            |  | 600,000                     |  | 598,498                            
|                                                    |  |                                                    | 
|Labor and services provided by Yankuang Group       |  | Provision of Labor and Services Supply Agreement   |  | 1,972,410                   |  | 1,545,700                          
|                                                    |  |                                                    | 
|Coal and material provided to Yankuang Group        |  | Provision of Coal Products and Materials Agreement |  | 3,700,000                   |  | 2,404,021                          
|                                                    |  |                                                    | 
|Electricity and heat provided to Yankuang Group     |  | Provision of Electricity and Heat Agreement        |  | 310,000                     |  | 204,061                            

Continuing
Connected Transaction of Pension Fund

As approved by our shareholders and according to the Provision of Insurance Fund
Administrative Services Agreement, Yankuang Group will provide free management services for contributions that we make to the endowment insurance fund, basic medical insurance fund, supplementary medical insurance fund, unemployment insurance fund
and maternity insurance fund. We contributed RMB838.8 million to the foregoing insurance funds in 2009.

Opinions of the
Independent Non-executive Directors

Our independent non-executive Directors have reviewed the continuing connected
transactions that took place in 2009 and confirmed that all such connected transactions have been: (i) entered into by us in the ordinary and usual course of our business, (ii) conducted either on normal commercial terms, or where there
are not sufficient comparable transactions to judge whether they are on normal commercial terms, on terms no less favorable to us than terms available to or from independent third parties, and (iii) entered into in accordance with the relevant
agreements governing them on terms that are fair and reasonable and in the interests of the Shareholders as a whole. The independent Directors also determined that the value of the connected transactions in respect of the supply of materials
and services stated under Continuing Connected Transaction of Supply of Products and Services above did not exceed the annual cap for 2009 approved by independent shareholders.

Pursuant to applicable regulations, the Directors engaged our auditors to perform certain agreed procedures in respect of our continuing
connected transactions. The auditors have reported their findings following the procedures to the Directors.



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The table below sets forth the continuing connected transactions that we conducted with
Yankuang Group or its subsidiary during the periods indicated:



|                                            |  |                         |  |           |  |          
|------------------------------------------- |  | ----------------------- |  | --------- |  | ---------
|                                            |  | Year Ended December 31,
|                                            |  | 2007                    |  | 2008      |  | 2009     
|                                            |  |                         |  | (RMB000) |  |          
|Income                                      |  |                         |  |           |  |          
|Sales of coal                               |  | 1,014,963               |  | 1,384,415 |  | 2,086,542
|Sales of auxiliary materials                |  | 595,143                 |  | 550,986   |  | 317,479  
|Sales of heat and electricity               |  |                        |  |          |  | 204,061  
|Total                                       |  | 1,610,106               |  | 1,935,401 |  | 2,608,082
|Expenditure                                 |  |                         |  |           |  |          
|Utilities and facilities                    |  | 377,074                 |  | 376,288   |  | 39,069   
|Annual fee for mining rights                |  | 12,980                  |  |          |  |         
|Purchases of supply materials and equipment |  | 454,469                 |  | 471,768   |  | 598,498  
|Repair and maintenance services             |  | 215,102                 |  | 253,864   |  | 388,917  
|Social welfare and support services         |  | 313,062                 |  | 255,265   |  | 769,561  
|Technical support and training              |  | 20,000                  |  | 20,000    |  | 26,000   
|Road transportation services                |  | 60,718                  |  | 86,671    |  | 79,560   
|Construction services                       |  | 316,801                 |  | 294,938   |  | 242,593  
|Total                                       |  | 1,770,206               |  | 1,758,794 |  | 2,144,198

Acquisition
from Connected Parties

Acquisition of Equity Interest in Hua Ju Energy

We acquired the 74% equity interest in Hua Ju Energy held by Yankuang Group for RMB593.2 million on February 18, 2009. Subsequently,
we acquired an additional 21.1% of the equity interest in Hua Ju Energy from unrelated third parties for a total of RMB173.0 million. Following the completion of these acquisitions on July 29, 2009, our equity interest in Hua Ju Energy
increased to 95.14%.

Purchase of the Mining Rights of Zhaolou Coal Mine by Heze Nenghua

In connection with our acquisition of Heze Nenghua from Yankuang Group in 2005, we obtained an option to purchase the mining rights of
Zhaolou Coal Mine.

After Yankuang Group was granted the mining right permit of Zhaolou Coal Mine from the Ministry of Land
and Resources, we exercised the option to purchase such mining rights for RMB747.3 million. On May 5, 2008, we obtained the mining rights when the relevant regulatory authorities approved the acquisition.

Installment Payment for the Mining Rights of Jining III Coal Mine

Pursuant to the Jining III Coal Mine Acquisition Agreement entered into between the Company and Yankuang Group in 2000, we agreed to
purchase the mining rights of Jining III Coal Mine for approximately RMB132.5 million. Payment is to be made in ten interest-free annual installments beginning on 2001. Accordingly, we paid RMB13.2 million to Yankuang Group in 2009.

Amounts due to the Controlling Shareholder and Its Subsidiaries

The amounts due to the Controlling Shareholder and its subsidiary companies do no bear interest and are unsecured. The amounts due include
the present value of the balance that arose from the acquisition of the mining rights of Jining III on January 1, 2001 that are discounted using the market rate of bank borrowings. The following table sets forth the amounts due to the
Controlling Shareholder and its subsidiary companies as of the dates indicated:



|                                                |  |                   |  |        
|----------------------------------------------- |  | ----------------- |  | -------
|                                                |  | As ofDecember 31,
|                                                |  | 2008              |  | 2009   
|                                                |  | (RMB000)        
|Term for Repayment                              |  |                   |  |        
|Within one year                                 |  | 706,328           |  | 757,882
|More than one year, but not exceeding two years |  | 7,253             |  |       
|                                                |  |                   |  |        
|                                                |  |                  
|Total due                                       |  | 713,581           |  | 757,882
|                                                |  |                   |  |        



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Transactions/ Balance with Other State-controlled Entities in the PRC

We operate in an economic environment currently predominated by entities directly or indirectly owned or controlled by
the PRC government (state-controlled entities). In addition, we are part of a larger group of companies under the Controlling Shareholder that is controlled by the PRC government. Apart from the transactions with the Controlling
Shareholder and fellow subsidiaries and other related parties disclosed above, we also conduct business with other state-controlled entities. Our Directors consider those state-controlled entities as independent third parties so far as our business
transactions with them are concerned.

In establishing our pricing strategies and approval process for transactions with other
state-controlled entities, we do not differentiate whether the counter party is a state-controlled entity or not. Material transactions with other state-controlled entities are as follows:



|                |  |                         |  |            |  |          
|--------------- |  | ----------------------- |  | ---------- |  | ---------
|                |  | Year Ended December 31,
|                |  | 2007                    |  | 2008       |  | 2009     
|                |  | (RMB000)              
|Trade sales     |  | 6,035,156               |  | 10,253,998 |  | 6,970,855
|Trade purchases |  | 1,056,959               |  | 1,328,958  |  | 1,191,783

Material balances
with other state-controlled entities are as follows:



|                                                 |  |                    |  |          
|------------------------------------------------ |  | ------------------ |  | ---------
|                                                 |  | As of December 31,
|                                                 |  | 2008               |  | 2009     
|                                                 |  | (RMB000)         
|Amounts due from other state-controlled entities |  | 364,420            |  | 1,101,535
|Amounts due to other state-controlled entities   |  | 294,888            |  | 359,726  

In addition, we have
entered into various transactions, including deposit placements, borrowings and other general banking facilities, with certain banks and financial institutions that are state-controlled entities in its ordinary course of business. In view of the
nature of those banking transactions, our Directors are of the opinion that separate disclosure would not be necessary.

Except
as disclosed above, our Directors are of the opinion that transactions with other state-controlled entities are not significant to our operations.

Interest of Management in Certain Transactions

None of the Directors or supervisors or executive officers had, either directly or indirectly, any material interest in any significant
material contract to which we were a party during the year ended December 31, 2009.



|ITEM 8. | FINANCIAL INFORMATION
|------- | ---------------------



|A. | Consolidated Statements and Other Financial Information
|-- | -------------------------------------------------------

You should read Item 18. Financial Statements for information regarding our audited consolidated financial statements and
other financial information.

Significant Legal Proceedings and Arbitration

We were not involved in any other significant litigation or arbitration during the reporting period.

Dividend Policy

According to our Articles of Associations, we shall maintain the continuity and stability of our profit distribution policy. We pay
dividends once a year. Shareholders shall, by way of an ordinary resolution, authorize our Board of Directors to declare and pay dividends, and pursuant to the approval of the Board and shareholders, we can distribute interim dividends. We may
distribute dividends in the form of cash or shares. Cash dividends shall account for approximately 35% of the net profit of the fiscal year after the deduction of the statutory common reserve. Pursuant to our Articles of Association, our after-tax
profit shall be allocated in the following order: (1) compensation of losses, if our statutory common reserve fund is not sufficient to compensate our losses from the previous year, we will utilize our after tax profit to compensate our losses
before making any provision for the statutory common reserve fund; (2) allocation to the statutory common reserve fund; (3) allocation to the discretionary common reserve fund upon approval by a resolution of a shareholders general
meeting; and (4) dividend payments for ordinary shares.



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|B. | Significant Changes
|-- | -------------------

We
have not experienced any significant changes since the date of the consolidated financial statements to the date of this annual report.



|ITEM 9. | THE OFFER AND LISTING
|------- | ---------------------



|A. | Offer and Listing Details
|-- | -------------------------

The follow tables set forth a summary of the issuance of our Shares:



|                 |  |                 |  |                |  |               |  |                 |  |               
|---------------- |  | --------------- |  | -------------- |  | ------------- |  | --------------- |  | --------------
|                 |  | H Shares        |  | A Shares      
|                 |  | Initialoffering |  | Secondoffering |  | Thirdoffering |  | Initialoffering |  | Secondoffering
|                 |  |                 |  |                | 
|Time of issuance |  | March 1998      |  | May 2001       |  | July 2004     |  | June 1998       |  | January 2001  
|                 |  |                 |  |                | 
|Issue amount     |  | 850,000,000     |  | 170,000,000    |  | 204,000,000   |  | 80,000,000      |  | 100,000,000   

As of
December 31, 2009, our share capital structure was as follows:



|                                                                   |  |                  |  |                           |  
|------------------------------------------------------------------ |  | ---------------- |  | ------------------------- | -
|Type                                                               |  | Number of shares |  | Percentage to totalshares |  
|                                                                   |  |                 
|Listed shares with restricted trading condition                    |  | 2,600,041,800    |  | 52.8636                   | %
|                                                                   |  |                 
|Promoter Shares                                                    |  | 2,600,000,000    |  | 52.8627                   | %
|                                                                   |  |                 
|A Shares held by our Directors, supervisors and executive officers |  | 41,800           |  | 0.0009                    | %
|                                                                   |  |                 
|Listed shares without trading condition                            |  | 2,318,358,200    |  | 47.1364                   | %
|                                                                   |  |                 
|A Shares                                                           |  | 359,958,200      |  | 7.3186                    | %
|                                                                   |  |                 
|H Shares                                                           |  | 1,958,400,000    |  | 39.8178                   | %
|                                                                   |  |                 
|Total                                                              |  | 4,918,400,000    |  | 100.0                     | %

As of
December 31, 2009, we had 2,600,041,800 listed shares that were subject to trading restrictions, substantially all of which are held by our Controlling Shareholder, Yankuang Group, and the remainder by our Directors, supervisors and executive
officers.

In 2009, the change of our listed Shares subject to trading restrictions was as follows:



|               |  |                                                                  |  |                                                        |  |                                                                |  |                                                                   |  |                                                                                                                                                                    
|-------------- |  | ---------------------------------------------------------------- |  | ------------------------------------------------------ |  | -------------------------------------------------------------- |  | ----------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Shareholders   |  | Shares subjectto tradingrestrictions asof January 1,2009(shares) |  | Shares releasedfrom tradingrestrictionsin 2009(shares) |  | Increase inShares subjectto tradingrestrictionsin 2009(shares) |  | Shares subjectto
tradingrestrictions asof December 31,2009(share) |  | Basis for
imposition of
or release from
trading
restriction                                                                                                        
|               |  |                                                                  |  |                                                        | 
|Yankuang Group |  | 2,600,000,000                                                    |  | 0                                                      |  | 0                                                              |  | 2,600,000,000                                                     |  | Share reform 
plan(1)                                                                                                                                              
|               |  |                                                                  |  |                                                        | 
|Yang Deyu      |  | 20,000                                                           |  | 0                                                      |  | 0                                                              |  | 20,000                                                            |  | Directors, supervisors and senior management staff cannot transfer the shares held by them within six months after termination of their employment with the
Company



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|             |  |                                                                  |  |                                                        |  |                                                                |  |                                                                   |  |                                                          
|------------ |  | ---------------------------------------------------------------- |  | ------------------------------------------------------ |  | -------------------------------------------------------------- |  | ----------------------------------------------------------------- |  | ---------------------------------------------------------
|Shareholders |  | Shares subjectto tradingrestrictions asof January 1,2009(shares) |  | Shares releasedfrom tradingrestrictionsin 2009(shares) |  | Increase inShares subjectto tradingrestrictionsin 2009(shares) |  | Shares subjectto
tradingrestrictions asof December 31,2009(share) |  | Basis forimposition of
or release from
tradingrestriction
|Wu Yuxiang   |  | 20,000                                                           |  | 0                                                      |  | 0                                                              |  | 20,000                                                            |  | Shares held by Directors,                                
|Song Guo     |  | 1,800                                                            |  | 0                                                      |  | 0                                                              |  | 1,800                                                             |  | supervisors, and executive officers                      
|Total        |  | 2,600,041,800                                                    |  | 0                                                      |  | 0                                                              |  | 2,600,041,800                                                     |  |                                                         



|(1) | The share reform plan was implemented April 2006 and restricted the trading of Yankuang Groups shares for 48 months beginning from the implementation of the
reform or until certain commitments are satisfied, whichever is longer. As of the date of this annual report, certain commitments have not been satisfied and, accordingly, the shares of Yankuang Group are still restricted from being traded in the
market.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Capitalization of Capital Reserve and Our Capital Structure:

During the reporting period of this annual report, our capital reserve did not change. Our shareholding structure as of the beginning and
end of 2009 was as follows:



|                                                                   |  |                                       |  |                                            |  |                                        
|------------------------------------------------------------------ |  | ------------------------------------- |  | ------------------------------------------ |  | ---------------------------------------
|                                                                   |  | Number of Shares as ofJanuary 1, 2009 |  | Increase/decrease inshares during the year |  | Number of Shares as ofDecember 31, 2009
|                                                                   |  |                                       | 
|Restricted Shares                                                  |  | 2,600,041,800                         |  |                                           |  | 2,600,041,800                          
|Promoter Shares                                                    |  | 2,600,000,000                         |  |                                           |  | 2,600,000,000                          
|A Shares held by our Directors, supervisors and executive officers |  | 41,800                                |  |                                           |  | 41,800                                 
|Unrestricted Shares                                                |  | 2,318,358,200                         |  |                                           |  | 2,318,358,200                          
|A Shares                                                           |  | 359,958,200                           |  |                                           |  | 359,958,200                            
|H Shares                                                           |  | 1,958,400,000                         |  |                                           |  | 1,958,400,000                          
|Total                                                              |  | 4,918,400,000                         |  |                                           |  | 4,918,400,000                          

The
table below sets forth certain market information relating to the H Shares, ADSs and A Shares for the periods indicated:



|                         |  |                        |  |                    |  |                        |  |       |  |       |  |      
|------------------------ |  | ---------------------- |  | ------------------ |  | ---------------------- |  | ----- |  | ----- |  | -----
|                         |  | Price per H Share(HK$) |  | Price per ADS(US$) |  | Price per A Share(RMB)
|                         |  | High                   |  | Low                |  | High                   |  | Low   |  | High  |  | Low  
|Annual highs and lows    |  |                        |  |                    |  |                        |  |       |  |       |  |      
|2005                     |  | 12.30                  |  | 4.75               |  | 15.79                  |  | 6.14  |  | 14.09 |  | 4.92 
|2006                     |  | 7.50                   |  | 4.58               |  | 9.76                   |  | 5.86  |  | 8.90  |  | 5.70 
|2007                     |  | 17.82                  |  | 6.28               |  | 23.35                  |  | 8.01  |  | 27.68 |  | 7.07 
|2008                     |  | 17.94                  |  | 2.98               |  | 22.9                   |  | 4.04  |  | 26.99 |  | 7.60 
|2009                     |  | 17.34                  |  | 4.00               |  | 22.32                  |  | 5.11  |  | 26.15 |  | 8.40 
|                         |  |                        |  |                    |  |                       
|Quarterly highs and lows |  |                        |  |                    |  |                        |  |       |  |       |  |      
|2008                     |  |                        |  |                    |  |                        |  |       |  |       |  |      
|First quarter            |  | 16.80                  |  | 8.96               |  | 21.3                   |  | 11.5  |  | 24.68 |  | 17.32
|Second quarter           |  | 17.94                  |  | 10.80              |  | 22.9                   |  | 14.38 |  | 26.99 |  | 13.75
|Third quarter            |  | 15.82                  |  | 7.50               |  | 20.24                  |  | 9.99  |  | 22.09 |  | 9.50 
|Fourth quarter           |  | 8.47                   |  | 2.98               |  | 10.72                  |  | 4.04  |  | 12.29 |  | 7.60 
|2009                     |  |                        |  |                    |  |                        |  |       |  |       |  |      
|First quarter            |  | 7.10                   |  | 4.00               |  | 9.08                   |  | 5.11  |  | 13.35 |  | 8.40 
|Second quarter           |  | 11.70                  |  | 5.55               |  | 15.00                  |  | 7.33  |  | 16.81 |  | 12.60
|Third quarter            |  | 13.00                  |  | 9.20               |  | 16.81                  |  | 11.68 |  | 23.70 |  | 14.60
|Fourth quarter           |  | 17.34                  |  | 10.48              |  | 22.32                  |  | 13.52 |  | 26.15 |  | 16.95



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|                             |  |                        |  |                    |  |                        |  |       |  |       |  |      
|---------------------------- |  | ---------------------- |  | ------------------ |  | ---------------------- |  | ----- |  | ----- |  | -----
|                             |  | Price per H Share(HK$) |  | Price per ADS(US$) |  | Price per A Share(RMB)
|                             |  | High                   |  | Low                |  | High                   |  | Low   |  | High  |  | Low  
|Monthly highs and lows       |  |                        |  |                    |  |                        |  |       |  |       |  |      
|2009                         |  |                        |  |                    |  |                        |  |       |  |       |  |      
|December                     |  | 17.34                  |  | 15.00              |  | 22.32                  |  | 20.31 |  | 26.15 |  | 21.39
|2010                         |  |                        |  |                    |  |                        |  |       |  |       |  |      
|January                      |  | 20.75                  |  | 15.00              |  | 25.65                  |  | 19.35 |  | 25.66 |  | 19.71
|February                     |  | 16.80                  |  | 14.00              |  | 21.29                  |  | 18.39 |  | 21.00 |  | 18.87
|March                        |  | 18.98                  |  | 16.20              |  | 24.36                  |  | 21.25 |  | 21.28 |  | 18.47
|April                        |  | 22.40                  |  | 18.10              |  | 28.72                  |  | 23.03 |  | 23.76 |  | 19.55
|May                          |  | 21.50                  |  | 15.52              |  | 27.10                  |  | 19.23 |  | 23.48 |  | 18.25
|June (through June 22, 2010) |  | 18.44                  |  | 15.74              |  | 23.82                  |  | 20.04 |  | 19.49 |  | 17.42

As of
December 31, 2009, a total of 1,958,400,000 H Shares were outstanding, of which approximately 194,035,300 H shares or 9.91% of the outstanding H Shares, were held in the form of 19,403,533 ADSs. The outstanding ADSs were held collectively
by 106 holders of record on May 31, 2009.

Repurchase, Sale or Redemption of H shares

The shareholders at the 2009 annual general meeting, the 2010 first domestic shareholders meeting and the 2010 first H
shareholders meeting, each of which was held on June 25, 2010, granted the Board of Directors a general mandate to repurchase H Shares up to 10% of the outstanding H Shares as of the date of the resolutions passage. During the
mandate period, the Board of Directors may exercise the mandate based on our interests and market conditions, subject to the approvals of the relevant regulatory authorities and in compliance with laws, regulations and articles of association. As of
the date of this annual report, the general mandate to repurchase H Shares has not been exercised.

The shareholder at the
2009 annual general meeting also granted the Board a general mandate to issue additional H shares not exceeding 20% of the total amount of existing issued H shares as of June 25, 2010 and make corresponding amendments to the Articles of Association
where appropriate.



|B. | Plan of Distribution
|-- | --------------------

Not
applicable.



|C. | Markets
|-- | -------

Our A Shares are
listed on the Shanghai Stock Exchange under the approval of the China Securities Regulatory Commission. The principal trading market for the H Shares is the Hong Kong Stock Exchange. The ADSs have been issued by The Bank of New York Mellon, acting
as Depositary Bank, and are listed on the New York Stock Exchange under the symbol YZC. For market price information on the exchanges on which our securities are listed, see  A. Offer and Listing Details.



|D. | Selling Shareholders
|-- | --------------------

Not
applicable.



|E. | Dilution
|-- | --------

Not applicable.



|F. | Expenses of the Issue
|-- | ---------------------

Not applicable.



|ITEM 10. | ADDITIONAL INFORMATION
|-------- | ----------------------



|A. | Share Capital
|-- | -------------

Not
applicable.



|B. | Memorandum and Articles of Association
|-- | --------------------------------------

Since our Articles of Association became effective on September 25, 1997, the PRC government and other regulatory authorities have
promulgated various rules, regulations and opinions including the Securities Laws of the PRC, the General Meeting Opinions, and the Guide for Articles of Association of Listed Companies. As a listed company, we are required to incorporate these
rules, regulations and opinions into our Articles of Associations as appropriate.



76



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Selected Summary of the Articles of Association

A copy of the English translation of our Articles of Association was filed with the Commission as an exhibit to our registration statement
on Form F-1 under the Securities Act in connection with the global offering of our H Shares and related American Depositary Shares in 1997. The following table sets forth the dates our Articles of Association have been amended or filed with the
Commission, or both:



|                                                 |  |                      
|------------------------------------------------ |  | ---------------------
|Date of Amendment to the Articles of Association |  | Filing               
|April 22, 2002                                   |  | Appendix to 2001 20-F
|June 25, 2004                                    |  | Appendix to 2003 20-F
|July 8, 2004                                     |  | Appendix to 2004 20-F
|June 28, 2005                                    |  |                      
|August 22, 2005                                  |  | Appendix to 2005 20-F
|June 28, 2006                                    |  |                      
|November 10, 2006                                |  | Appendix to 2006 20-F
|June 15, 2007                                    |  | Appendix to 2007 20-F
|January 30, 2008                                 |  |                      
|December 23, 2008                                |  | Appendix to 2008 20-F
|June 26, 2009                                    |  |                      
|June 25, 2010                                    |  |                      

Objects and Purposes

We are a joint stock limited company established in accordance with the Company Law, State Councils Special
Regulations Regarding the Issue of Shares Overseas and the Listing of Shares Overseas by Companies Limited by Share and other relevant laws and administrative regulations of the State. We were established by way of promotion with the approval
of the former State Commission for Restructuring the Economic System on September 24, 1997, as evidenced by approval document Ti Gai Sheng (1997) No. 154 of 1997. We were registered with and have obtained a business license from
Shandong Provincial Administration Bureau of Industry and Commerce on September 25, 1997. Our business license number is: 370000400001016.

According to Article 12 of our Articles of Association, as amended on June 25, 2010, our scope of business includes: selection and
sale of coal (among others, the export of coal should be made through companies with coal export right according to existing state regulations); transportation of goods through self-owned railway within the mining areas; transportation of goods
through highway; operation of ports; manufacture, sale, lease and repair of relevant mining equipments; production and sale of other mining materials; sale and lease of electronic equipments and sale of parts; sale of metallic materials, electronic
products, construction materials, timber, rubber products and methanol; provision of mining, science and technological services; property development within the mining areas, property leasing and provision of services such as dining and
accommodation; production and sale of coal residual stones as construction materials; sale of coking coal and iron ore; import and export of goods and technology; warehousing; and automotive repairs.

Board of Directors

The Board of Directors is accountable to shareholders in general meetings and exercises the powers granted to it by the Articles of
Association.

Directors who are not employee representatives are elected or removed at shareholders general meetings.
Employee directors are elected in staff representative meetings or by other democratic methods. All Directors are elected for a term of three years, which can be renewed by re-election at the expiry of the term, unless a Director is removed for
cause during his term.

We currently have four independent Directors. Independent Directors do not hold any positions in the
Company other than their role as directors and do not maintain with us or our substantial shareholders any connection that may impair their independent and objective judgment. In addition to the powers granted to Directors by the Company Law and
other relevant laws, regulations and the Articles of Association, independent Directors have the following powers:



| | (i) | a majority of the independent Directors must agree to the engagement of substantial connected transactions, as determined in accordance with the standards promulgated
from time to time by the regulatory organizations of the place where the Companys shares are listed, and the appointment of accounting firm(s) before submitting such decisions to the Board of Directors;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | a majority of the independent Directors may call an extraordinary general meeting for the Board of Directors, propose a board meeting, and publicly collect proxy votes
from shareholders before shareholders general meetings; and
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | (iii) | with the consent of a majority of the independent Directors, the independent Directors may independently engage external auditors and consultants to provide auditing
and consultation services for specific Company matters, with the Company bearing the associated costs.
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

If the
above recommendations are not accepted or the above powers cannot be exercised ordinarily, the Company shall disclose the circumstances accordingly.

Article 224 of our Articles of Association places a general prohibition on a Director from voting in respect of any contract, transaction
or arrangement in which he directly or indirectly through an associate, has a material interest. When a Director may have a conflict of interest, he must declare the nature and extent of his interest to the Board of Directors. Unless the interested
Director discloses his interests and the contract, transaction or arrangement is approved by the Board of Directors at a meeting in which the interested Director is not counted as part of the quorum nor permitted to vote, the contract, transaction
or arrangement may be voidable at the election of the Company.

Similarly, our Articles provide that when passing a resolution
in relation to connected transaction, or where any Director or any of its associates (as defined under the Listing Rules of the Stock Exchange of Hong Kong) is connected with such resolution, such connected director must recuse himself from the
Board meeting, not have any voting rights in respect thereof, and not be counted as part of the quorum of the Board of Directors meeting. If less than three disinterested Directors attend the Board of Directors meeting, the connected
transaction shall be submitted as a resolution at a shareholders general meeting of the Company.

Pursuant to Article
171, with the approval of over two-thirds of all Directors, the Board of Directors makes decisions on the following matters:



| | (1) | a single loan of less than 10% of the Companys latest audited net asset value so long as the debt ratio to the Companys assets remains under 60% after such
financing; and
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | mortgages or pledges of assets the cumulative outstanding amount of which is less than 30% of the Companys latest audited net asset value.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------

Remuneration of Directors are determined by resolution of the shareholders. The Articles of Association do not
impose a mandatory retirement age or share ownership qualification on Directors.

Description of the Shares and Shareholder
Rights

As of December 31, 2009, our share capital structure consists of 4,918,400,000 ordinary shares, comprising



| | (1) | 2,960,000,000 domestic shares, which represent 60.18% of our share capital, of which:
| | --- | -------------------------------------------------------------------------------------



| | a. | 2,600,000,000 shares, which represent 52.86% of our share capital, were held by the promoter, Yankuang Group Corporation Limited, and
| | -- | -------------------------------------------------------------------------------------------------------------------------------------



| | b. | 360,000,000 shares, which represent 7.32% of our share capital, were held by other shareholders; and
| | -- | ----------------------------------------------------------------------------------------------------



| | (2) | 1,958,400,000 foreign H shares, which represent 39.82% of our share capital, were held by the H Shares shareholders.
| | --- | --------------------------------------------------------------------------------------------------------------------

Holders of our ordinary shares are entitled to share in the Companys profits, dividends and other distributions in proportion to
the number of shares held and are not liable for making any further contribution other than the subscription amount. Our ordinary shareholders enjoy the following rights:



| | (i) | the right to receive dividends and other distributions in proportion to the number of shares held;
| | --- | --------------------------------------------------------------------------------------------------



| | (ii) | the right to demand the convening of a shareholders meeting, convene a shareholders meeting, attend or appoint a proxy to attend shareholders meetings
and to vote thereat;
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | the right of supervising management over our business operations and the right to present proposals or to raise queries;
| | ----- | ------------------------------------------------------------------------------------------------------------------------



| | (iv) | the right to transfer, grant or pledge shares so held in accordance with laws, administrative regulations and provisions of our Articles of Association;
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------



| | (v) | the right to obtain relevant information in accordance with the provisions of our Articles of Association;
| | --- | ----------------------------------------------------------------------------------------------------------



| | (vi) | in the event of our termination or liquidation, the right to participate in the distribution of our surplus assets in accordance with the number of shares held;
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (vii) | shareholders who disagree with the resolutions for the merger and separation of the Company made in a general meeting may demand the Company to purchase their shares;
and
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (viii) | other rights conferred by laws, administrative regulations and our Articles of Association.
| | ------ | -------------------------------------------------------------------------------------------



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Voting Rights

Shareholder (including proxies), when voting at a shareholders general meeting, may exercise such voting rights as are attached to
the number of voting shares that they hold. Each share represents one vote. Shares held by the Company do not have voting rights and these shares will not count as the total number of shares entitled to vote. Resolutions at shareholders
general meetings shall be divided into ordinary resolutions and special resolutions. An ordinary resolution must be passed by votes representing more than half of the voting rights represented by the shareholders (including proxies) present at the
meeting. A special resolution must be passed by votes representing more than two-thirds of the voting rights represented by the shareholders (including proxies) present at the meeting. Our Articles of Associations provide that a controlling
shareholder (as defined in the Articles) shall not exercise its voting rights to approve matters which will be prejudicial to the interests of all or some of the other shareholders.

Sources of Shareholders Rights

The rights and obligations of holders of H Shares and other provisions relating to shareholder protection are principally provided in the
Articles of Association and the PRC Company Law. The Articles of Association incorporate mandatory provisions in accordance with the Mandatory Provisions for the Articles of Association of Companies Listed Overseas promulgated by the State Council
Securities Commission and the State Restructuring Commission on August 27, 1994 (the Mandatory Provisions). We are further subject to management ordinances applicable to the listed companies in Hong Kong SAR and on the NYSE, as our
H Shares are listed on the Hong Kong Stock Exchange and the New York Stock Exchange (in the form of ADSs).

In addition, for
so long as the H Shares are listed on the Hong Kong Stock Exchange, we are subject to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the HKSE Rules), the Securities and Futures Ordinance of Hong
Kong (the SFO) and the Hong Kong Code on Takeovers and Mergers and Share Repurchases. The Listing Agreement between us and the Hong Kong Stock Exchange further provides that we may not permit amendments to certain sections of the
Articles of Association subject to the Mandatory Provisions. These sections include provisions relating to (i) varying the rights of existing share classes; (ii) voting rights; (iii) our power to repurchase our own shares;
(iv) rights of minority shareholders; and (v) procedures upon liquidation. In addition, certain amendments to the Articles of Association require the approval of relevant PRC authorities.

Merger and Acquisition

In the event of the merger or division of our Company, a plan must be presented by our Board of Directors and approved in accordance with
the procedures stipulated in our Articles of Association. Shareholders who object to the plan of merger or division will have the right to demand the Company or the shareholders who consented to the plan of merger or division to acquire their shares
at fair market price. A resolution proposing a merger or division by our company constitutes a special document, which will be available for inspection by our shareholders.

Redemption Provisions

In accordance with the procedures set out in the Articles of Association and upon obtaining approval from relevant government authorities,
we may repurchase our issued shares under the following circumstances:



| | (i) | canceling shares to reduce our capital;
| | --- | ---------------------------------------



| | (ii) | merger with another company that holds shares of our Company;
| | ---- | -------------------------------------------------------------



| | (iii) | granting employee incentive shares;
| | ----- | -----------------------------------



| | (iv) | purchasing the shares of dissenting shareholders; and
| | ---- | -----------------------------------------------------



| | (v) | other circumstances permitted by relevant laws and administrative regulations.
| | --- | ------------------------------------------------------------------------------

Apart from the above, the Company is not allowed to engage in the trading of its own shares.

We may repurchase shares in one of the following ways, with the approval of the relevant government authorities:



| | (i) | by making a general offer to repurchase shares of all our shareholders on a pro rata basis;
| | --- | -------------------------------------------------------------------------------------------



| | (ii) | by repurchasing shares through a public dealing on a stock exchange;
| | ---- | --------------------------------------------------------------------



| | (iii) | by repurchasing shares outside of the stock exchange by means of an off-market agreement; or
| | ----- | --------------------------------------------------------------------------------------------



| | (iv) | by other means as authorized by the competent securities authorities under the State Council.
| | ---- | ---------------------------------------------------------------------------------------------



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Variation of Rights

The rights attached to any class of shares may not be varied or abrogated except with the approval of a special resolution of each class
of shareholders in a general meeting, along with a resolution of more than two-thirds of the holders of the affected class of shares at a separate meeting in accordance with the Articles of Association.

Shareholders Meetings and Notices

Shareholders general meetings are divided into annual general meetings and extraordinary general meetings. Shareholders
general meetings shall be convened by the Board of Directors. Annual general meetings are held once every year and within six months from the end of the preceding financial year. The Board of Directors shall convene an extraordinary general meeting
within two months of the occurrence of any one of the following events:



| | (i) | the number of Directors is less than the number stipulated in the Company Law or two-thirds of the number specified in our Articles of Association;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | our unrecovered losses amount to one-third of the total amount of our share capital;
| | ---- | ------------------------------------------------------------------------------------



| | (iii) | shareholder(s) singly or jointly holding 10% or more of our issued and outstanding voting shares request(s) in writing for the convening of an extraordinary general
meeting;
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iv) | the Board of Directors deems necessary or the supervisory committee so requests;
| | ---- | --------------------------------------------------------------------------------



| | (v) | other cases as provided in laws, administrative regulations and the Articles of Association; or
| | --- | -----------------------------------------------------------------------------------------------



| | (vi) | whenever more than a half of the independent Directors so request.
| | ---- | ------------------------------------------------------------------

When we convene a shareholders general meeting, written notice of the meeting shall be given 45 days before the date of the meeting
(when calculating the 45 day period, the date on which the meeting is held shall not be included) to notify all of the shareholders whose names appear in the share register of the matters to be considered and the date and place of the meeting, along
with the matters to be resolved in the meeting. Shareholders who intend to attend the meeting shall deliver to us their written reply concerning their attendance at such meeting 20 days before the date of the meeting.

When we convene a shareholders general meeting, the Board of Directors, the supervisory committee and shareholder(s) individually
and jointly holding more than 5% of our shares have the right to propose resolutions to the Company. Shareholder(s) individually and jointly holding more than 5% of our shares may propose special resolutions in writing to the convenor 20 days before
the shareholders general meeting is convened. The convenor shall issue a supplementary notice of the general meeting within two days after receiving the resolutions to announce the contents of the resolutions. Apart from the above, no
amendment to the resolutions as set out in the notice of general meeting or proposal of new resolutions shall be made after the convenor has issued the notice of general meeting. The resolutions not set out in the notice of general meeting or
failing to comply with Article 81 of the Articles of Association shall be not voted and resolved in the shareholders general meeting.

Limitations on Voting and Shareholding

Holders of H Shares and Domestic Shares, with minor exceptions, are entitled to the same economic and voting rights. Consistent with PRC
law, the Articles of Association provide that the H Shares can only be traded by investors of Taiwan, Hong Kong, Macau and any country other than the PRC, while A Shares may be traded only by PRC investors and qualified foreign institutional
investors.

Ownership Threshold

There are no ownership thresholds above which shareholder ownership is required to be disclosed.

Changes in Registered Capital

The Company may change its registered share capital in accordance with the Company Law, any other relevant regulatory provisions and the
Articles of Association. Article 109 provides that any increase or reduction in share capital must be resolved by a special resolution at a shareholders general meeting.



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##### Table of Contents

Recent Amendments to the Articles of Association

During the reporting period of this annual report, we made a number of amendments to our Articles of Association. At our 2008 annual
general meeting on June 26, 2009, our shareholders approved amendments to our Articles of Association regarding our business registration number, procedures for notifying creditors, cash dividend policy and use of electronic means to
communicate with H Shareholders.

In addition, at our 2009 annual general meeting on June 25, 2010, our shareholders
approved an amendment to our business scope stated in our Articles of Association to include the sale of coking coal and iron ore; import and export of goods and technology; warehousing; and automotive repairs. This amendment is subject
to the approval of foreign trade and economic authorities.



|C. | Material Contracts
|-- | ------------------

Acquisition of Shandong Hua Ju Energy Co., Ltd.

On October 24, 2008, the Company and the Yankuang Group entered into an equity transfer agreement, pursuant to which, the Company
agreed to purchase the 74% equity interest held by the Controlling Shareholder in Hua Ju Energy for RMB593.2 million and the transfer was completed on February 18, 2009. On July 24, 2009, the Company entered into acquisition agreements
with three shareholders of Hua Ju Energy, pursuant to which, the Company agreed to acquire 21.14% equity interest in Hua Ju Energy at a consideration of RMB173.0 million.

Acquisition of Felix Resources Limited

On August 13, 2009, the Company entered into a binding Scheme Implementation Agreement with Felix Resources Limited, to make a cash
acquisition of the entire equity interest in Felix for approximately AUD3,333 million. This acquisition was completed on December 23, 2009.

Capital Contribution Agreement in Relation to the Formation of the Finance Company of the Group

On April 20, 2010, the Company entered into the Capital Contribution Agreement in relation to the formation of the Finance
Company of the Group with Yankuang Group, the dominant shareholder of the Company, and Zhongcheng Entrust Co., Ltd. The registered capital of the Finance Company is RMB500.0 million, of which the Company contributed RMB125.0 million,
representing approximately 25% of the registered capital.



|D. | Exchange Controls
|-- | -----------------

Our
Articles of Association require that we pay dividends and other distributions to holders of foreign-invested shares in accordance with relevant foreign exchange control regulations. If there is no applicable regulation, the exchange rate that we use
to convert dividends and distributions to foreign currencies will be the average exchange rate of Renminbi to the relevant foreign currency announced by the Bank of China five business days prior to the announcement of the dividend or distribution.

The Renminbi currently is not a freely convertible currency. The PRC State Administration of Foreign Exchange
(SAFE), under the authority of the Peoples Bank of China, controls the conversion of Renminbi into foreign currency. Under existing foreign exchange regulations, unless otherwise approved by the SAFE or exempted by relevant
regulations, PRC enterprises must price and sell their goods and services in the PRC in Renminbi.

Since August 1, 2008,
all foreign exchange income generated from current account transactions of PRC enterprises (including foreign-invested enterprises) may be retained by enterprises themselves or be sold to the financial institutions operating the foreign exchange
settlement or sale business in accordance with relevant regulations. Foreign exchange income from loans issued by organizations outside the territory or from the issuance of bonds and shares (for example foreign exchange income received by our
Company from the sale of shares overseas) is also not required to be sold to financial institutions operating the foreign exchange settlement or sale business, but may be deposited in foreign exchange accounts at the financial institutions operating
foreign exchange businesses.

PRC enterprises (including foreign-invested enterprises) which require foreign exchange for
transactions relating to current account items may, without the approval of SAFE, effect payment from their foreign exchange accounts at financial institutions operating foreign exchange businesses, with valid receipts and proof. Upon a board
approval, foreign-invested and PRC enterprises that need foreign currency to distribute profits to their shareholders, such as our Company, may make distributions from their foreign exchange accounts or convert RMB into foreign currencies at foreign
exchange businesses.

The conversion of foreign exchange in respect of capital account items, like direct investment and
capital contribution, is subject to registration formalities at the foreign exchange administrative department of the State Council.



81



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##### Table of Contents

We have established a limited independent foreign currency account since 2001. The primary
source of our foreign currency is revenues denominated in U.S. dollars from coal sales. We use foreign currency primarily to settle equipment and machinery purchases and pay cash dividends on our H Shares (in HK dollars). We have not experienced any
shortage of foreign currency. In addition, we can exchange Renminbi for additional foreign currency from designated banks for current account transactions by presenting relevant documents to evidence foreign currency requirements in accordance with
relevant regulations.



|E. | Taxation
|-- | --------

The following
summary of certain tax provision does not address all of the tax considerations that may be relevant to each investor and is based on the tax laws, notices and treaties of the relevant jurisdictions as of the date of this annual report, all of which
are subject to amendments or changes in interpretation, possibly with retroactive effect. This discussion does not deal with all possible tax consequences relating to an investment in the H Shares or ADSs. In particular, the tax consequences under
state, local and other laws are not discussed. This discussion does not constitute legal or tax advice. Accordingly, potential investors are strongly urged to consult their own tax adviser to determine the tax consequences of their investment.

The Peoples Republic of China

The following discussion summarizes the material PRC tax provisions relating to the ownership and disposition of H Shares or ADSs held by
investors as capital assets.

Taxation on Dividends

Individual Investors. Under the Provisional Regulations of China Concerning Questions of Taxation on Enterprises Experimenting with
the Share System (the Provisional Regulations), the Individual Income Tax Law of the PRC of 1980, as last amended on December 29, 2007 and other applicable tax laws and regulations, dividends paid by Chinese companies to individuals
are generally subject to a PRC withholding tax of 20%. However, on July 21, 1993, the PRC State Administration of Taxation issued the Notice Concerning the Taxation of Gains on Transfer and Dividends from Shares (Equities) Received by Foreign
Investment Enterprises, Foreign Enterprises and Foreign Individuals (the Tax Notice). Under the Tax Notice, dividends paid by a Chinese company to foreign persons with respect to shares listed on an overseas stock exchange
(Overseas Shares), including the H Shares and ADSs, are exempt from PRC withholding taxes so long as the Tax Notice is in effect. In a letter dated July 26, 1994 to the former State Commission for Restructuring the Economic System,
the former State Council Securities Committee and the CSRC, the PRC State Administration of Taxation reiterated the exemption. To date, the relevant tax authorities have not collected withholding tax from dividend payments on such shares exempted
under the Tax Notice. However, if the Tax Notice is withdrawn, a 20% tax may be withheld on dividends paid to non-PRC individual holders of H Shares or ADSs, subject to reduction by an applicable tax treaty between China and the country where such
holders reside.

Enterprises. According to the Enterprise Income Tax Law of the Peoples Republic of China
effective as of January 1, 2008, the relevant regulations in the Implementing Regulations for the Law of the Peoples Republic of China on Enterprise Income Tax (collectively, the EIT Law) and the Notice of the State
Administration of Taxation on the Issues Concerning Withholding the Enterprise Income Tax on the Dividends Paid by Chinese Resident Enterprises to H Share Holders that are Overseas Non-resident Enterprises, which was promulgated on November 6,
2008, where a Chinese resident enterprise pays dividends for the year of 2008 or any year thereafter to its H share holders that are overseas non-resident enterprises, it shall withhold the enterprise income tax thereon at the uniform rate of 10%.
After receiving dividends, a non-resident enterprise shareholder may submit an application to the competent tax authority to claim any treatment under a relevant tax agreement (arrangement).

Tax Treaties

Non-PRC shareholders who are residents or citizens of countries that have entered into treaties to avoid double-taxation with China may be
entitled to a reduction in the withholding tax imposed on the payment of dividends. China currently has such treaties with a number of countries, including:



| |  |  | the United States;
| | - |  | ------------------



| |  |  | Australia;
| | - |  | ----------



| |  |  | Canada;
| | - |  | -------



| |  |  | France;
| | - |  | -------



| |  |  | Germany;
| | - |  | --------



| |  |  | Japan;
| | - |  | ------



| |  |  | Malaysia;
| | - |  | ---------



| |  |  | the Netherlands;
| | - |  | ----------------



82



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| |  |  | Singapore; and
| | - |  | --------------



| |  |  | the United Kingdom.
| | - |  | -------------------

Under each one of these treaties, the withholding tax imposed by Chinas tax authorities is generally reduced. For example, under
the treaty between China and the United States, China may tax dividends paid by us to an eligible U.S. holder up to a maximum of 10% of the gross amount of the dividend. For the purposes of this discussion, an eligible U.S. holder is a person who,
by reason of domicile, residence, place or head office, place of incorporation or any other criterion of similar nature is subject to taxation in the United States.

Taxation on Capital Gains

According to the EIT Law, capital gains realized by foreign enterprises which have no establishment or residence in China or whose capital
gains from China do not relate to their establishment or residence in China are generally subject to capital gains tax at the rate of 10%. According to the Tax Notice, gains realized by enterprises that are holder of Overseas Shares would,
temporarily, not be subject to capital gains taxes. However, such tax exemption policy provided for in the Tax Notice was not included in the Preferential Notice.

According to the Interim Measures for Administration of Withholding at Source of Income Tax of Non-resident Enterprise, which was
promulgated by the State Administration of Taxation on January 9, 2009, when two non-resident enterprises enter into an equity assignment transaction to transfer the equity of a Chinese enterprise outside the territory of China, the assigning
non-resident enterprise shall pay tax with the competent tax authority in the place where the Chinese enterprise whose equity has been transferred is located. In addition, the Chinese enterprise whose equity is being assigned shall assist the tax
authority in the collection of tax for the transaction.

With respect to individual holders of H Shares, the Provisions for
Implementing the Individual Income Tax Law of China, as amended, provides that the levied individual income tax on the gains realized on the sale of shares will be regulated in separate rules to be drafted by the Ministry of Finance. However, to
date, no such implementing measures have been promulgated by the Ministry of Finance, and no individual income tax on gains realized on sales of shares has been levied. On June 20, 1994, February 9, 1996 and March 30, 1998, the
Ministry of Finance and the State Administration of Taxation issued notices providing that gains realized by individuals were temporarily exempted from individual income tax. In addition, according to the Tax Notice, individual holders of Overseas
Shares are temporarily not subject to capital gains tax. If such exemption does not apply or is not renewed, and the Tax Notice is found not to apply, a non-PRC enterprise shareholder might be subject to a 20% tax on capital gains, unless reduced by
an applicable double taxation treaty.

Additional China Tax Considerations

Under the Provisional Regulations of the PRC Concerning the Stamp Duty, Chinese stamp duty is not imposed on the transfer of shares, such
as the H Shares or ADSs, of Chinese publicly traded companies by non-Chinese investors that take place outside of China.

United States Federal Income Taxation

Investors are strongly urged to consult their own tax advisors to determine the particular United States federal, state, local, treaty and
foreign tax consequences of owning or disposing of the H Shares or ADSs.

The following is a general discussion of material
United States federal income tax consequences of owning and disposing of the H Shares or ADSs if you are a U.S. holder, as defined below, and hold the H Shares or ADSs as capital assets within the meaning of Section 1221 of the Internal Revenue
Code of 1986 as amended (the Code). This discussion does not address all of the tax consequences relating to the ownership and disposition of the H Shares or ADSs, and does not take into account U.S. holders who may be subject to special
rules including:



| |  |  | tax-exempt entities;
| | - |  | --------------------



| |  |  | banks, financial institutions, and insurance companies;
| | - |  | -------------------------------------------------------



| |  |  | real estate investment trusts, regulated investment companies and grantor trusts;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | dealers or traders in securities, commodities or currencies;
| | - |  | ------------------------------------------------------------



| |  |  | U.S. holders liable for alternative minimum tax;
| | - |  | ------------------------------------------------



83



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| |  |  | U.S. holders that own, actually or constructively, 10% or more of our voting stock;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | persons who receive the H Shares or ADSs as compensation for services;
| | - |  | ----------------------------------------------------------------------



| |  |  | U.S. holders that hold the H Shares or ADSs as part of a straddle or a hedging or conversion transaction;
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | certain U.S. expatriates; or
| | - |  | ----------------------------



| |  |  | U.S. holders whose functional currency is not the U.S. dollar.
| | - |  | --------------------------------------------------------------

Moreover, this description does not address United States federal estate, gift or alternative minimum taxes or any state or local tax
consequences of the ownership and disposition of the H Shares or ADSs.

This discussion is based on the Code, its legislative
history, final, temporary and proposed United States Treasury regulations promulgated thereunder, published rulings and court decisions as in effect on the date hereof, all of which are subject to change, or changes in interpretation, possibly with
retroactive effect.

You are a U.S. holder if you are a beneficial owner of H Shares or ADSs and are:



| |  |  | an individual citizen or resident of the United States for United States federal income tax purposes;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | a corporation, or other entity treated as a corporation for United States federal income tax purposes, created or organized under the laws of the
United States or any political subdivision thereof;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an estate the income of which is subject to United States federal income tax without regard to its source; or
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | a trust:
| | - |  | --------



| | - |  | subject to the primary supervision of a United States court and the control of one or more United States persons; or
| | - |  | --------------------------------------------------------------------------------------------------------------------



| | - |  | that has elected to be treated as a United States person under applicable United States Treasury regulations.
| | - |  | -------------------------------------------------------------------------------------------------------------

If a partnership (including any entity treated as a partnership for United States federal tax purposes) is
a beneficial owner of the H Shares or ADSs, the treatment of a partner in such partnership will generally depend upon the status of the partner and the activities of the partnership. If an investor is a partner in a partnership that holds H Shares
or ADSs, such investor should consult its tax advisor. We urge you to consult your tax advisors regarding the United States federal, state, local and non-United States tax consequences of the purchase, ownership and disposition of the H Shares or
ADSs.

In general, if you hold ADSs, you will be treated as the owner of the H Shares represented by the ADSs. Exchanges of H
shares for ADSs, and ADSs for H shares, generally will not be subject to United States federal income tax.

INVESTORS
SHOULD CONSULT THEIR TAX ADVISORS AS TO THE PARTICULAR TAX CONSIDERATIONS APPLICABLE TO THEM RELATING TO THE OWNERSHIP AND DISPOSITION OF THE H SHARES OR ADSs, INCLUDING THE APPLICABILITY OF U.S. FEDERAL, STATE AND LOCAL TAX LAWS OR NON-U.S. TAX
LAWS, ANY CHANGES IN APPLICABLE TAX LAWS AND ANY PENDING OR PROPOSED LEGISLATION OR REGULATIONS.

Distributions on the
H Shares or ADSs

Subject to the discussions below under   Passive Foreign Investment Company, the gross
amount of any distribution (without reduction for any PRC tax withheld) we make on the H Shares or ADSs out of our current or accumulated earnings and profits (as determined for United States federal income tax purposes) will be includible in your
gross income as ordinary dividend income when the distribution is actually or constructively received by you, or by the depositary in the case of ADSs. Distributions that exceed our current and accumulated earnings and profits will be treated as a
return of capital to you to the extent of your basis in the H Shares or ADSs and thereafter as capital gain. We, however, may not calculate earnings and profits in accordance with U.S. tax principles. In that case, all distributions by us to U.S.
Holders will generally be treated as dividends. Any dividend will not be eligible for the dividends-received deduction generally allowed to United States corporations in respect of dividends received from United States corporations. The amount of
any distribution of property other than cash will be the fair market value of such property on the date of such distribution.



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Subject to certain exceptions for short-term and hedged positions, the U.S. dollar amount of
dividends received by an individual, trust or estate in a taxable year prior to January 1, 2011 with respect to the H Shares or ADSs will be subject to taxation at a maximum rate of 15% if the dividends are qualified dividends.
Dividends paid on H Shares or ADSs will be treated as qualified dividends if either (i) we are eligible for the benefits of a comprehensive income tax treaty with the United States that the Internal Revenue Service, or IRS, has approved for the
purposes of the qualified dividend rules, or (ii) the dividends are with respect to ADSs readily tradable on a U.S. securities market, provided that we were not, in the year prior to the year in which the dividend was paid, and are not, in the
year in which the dividend is paid, a passive foreign investment company, or PFIC. The Agreement Between the Government of the United States of America and the Government of the People's Republic of China for the Avoidance of Double Taxation and the
Prevention of Tax Evasion with Respect to Taxes on Income PFIC rules (the Treaty) has been approved for the purposes of the qualified dividend rules, and we expect to qualify for benefits under the Treaty. We are considered a qualified
foreign corporation with respect to the ADSs because our ADSs are listed on the New York Stock Exchange.

If we make a
distribution paid in HK dollars, you will be considered to receive the U.S. dollar value of the distribution determined at the spot HK dollar/U.S. dollar exchange rate on the date such distribution is received by you or by the depositary, regardless
of whether you or the depositary convert the distribution into U.S. dollars. Any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend payment is includible in your income to the date you or the
depositary convert the distribution into U.S. dollars will be treated as ordinary income or loss from U.S. sources.

Dividends
paid by us generally will constitute income from sources outside the United States for U.S. foreign tax credit limitation purposes and will be categorized as passive income or, in the case of certain U.S. Holders as general
category income for U.S. foreign tax credit purposes. We may be required to withhold PRC income tax on dividends paid to U.S. Holders on the H Shares or ADSs. Subject to various limitations, any PRC tax withheld from distributions in
accordance with the Treaty may be deductible or creditable against your United States federal income tax liability.

In the
event we are required to withhold PRC income tax on dividends paid to U.S. Holders on the H Shares or ADSs (see discussion under Taxation  The Peoples Republic of China), you may be able to claim a reduced 10% rate of PRC
withholding tax if you are eligible for the benefits under the Treaty. You should consult your own tax advisor about the eligibility for reduction of PRC withholding tax.

You may not be able to claim a foreign tax credit (and instead may claim a deduction) for non-United States taxes imposed on dividends
paid on the H Shares or ADSs if you (i) have held the H Shares or ADSs for less than a specified minimum period during which you are not protected from risk of loss with respect to such shares, or (ii) are obligated to make payments
related to the dividends (for example, pursuant to a short sale). The rules relating to the U.S. foreign tax credit are complex. U.S. Holders should consult their own tax advisors regarding the effect of these rules in their particular circumstance.

Sale, Exchange or Other Disposition

Subject to the discussions below under  Passive Foreign Investment Company, upon a sale, exchange or other disposition
of the H Shares or ADSs, you will generally recognize capital gain or loss for United States federal income tax purposes in an amount equal to the difference between the U.S. dollar value of the amount realized and your tax basis, determined in U.S.
dollars, in such H Shares or ADSs. Any gain or loss will generally be United States source gain or loss for foreign tax credit limitation purposes and as a result of the U.S. foreign tax credit limitation, foreign taxes, if any, imposed upon capital
gains in respect of H Shares or ADSs may not be currently creditable. Under the Treaty, if any PRC tax was to be imposed on any gain from the disposition of H Shares or ADSs, the gain may be treated as PRC-source income. U.S. Holders are urged to
consult their tax advisors regarding the tax consequences if a foreign withholding tax is imposed on a disposition of H Shares or ADSs, including the availability of the foreign tax credit under their particular circumstances.

If you are paid in a currency other than U.S. dollars, any gain or loss resulting from currency exchange fluctuations during the period
from the date of the payment resulting from sale, exchange or other disposition is made to the date you convert the payment into U.S. dollars will be treated as United States source ordinary income or loss.



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Medicare Tax on Unearned Income

Newly enacted legislation requires certain U.S. Holders that are individuals, estates or trusts to pay an additional 3.8% tax on, among
other things, dividends on and capital gains from the sale or other disposition of stock for taxable years beginning after December 31, 2012. U.S. Holders that are individuals, estates or trusts should consult their tax advisors regarding the
effect, if any, of this legislation on their ownership and disposition of our common stock.

Passive Foreign Investment
Company

In general, a foreign corporation is a PFIC for any taxable year in which, after applying relevant look-through
rules with respect to the income and assets of subsidiaries:



| |  |  | 75% or more of its gross income consists of passive income, such as dividends, interest, rents, royalties, and gains from the sale of assets that give
rise to such income; or
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 50% or more of the average quarterly value of its assets consists of assets that produce, or are held for the production of, passive income.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------

Passive income does not include rents and royalties derived from the active conduct of a trade or business.
If we own at least 25% (by value) of the stock of another corporation, we will be treated, for purposes of the PFIC tests, as owning our proportionate share of the other corporation's assets and receiving our proportionate share of the other
corporation's income.

Based on the current and anticipated composition of our assets and income and current expectations
regarding the price of the H Shares and ADSs, we believe that we should not be treated as a PFIC for U.S. federal income tax purposes with respect to our 2009 taxable year and we do not intend or anticipate becoming a PFIC for any future taxable
year. The determination of PFIC status is a factual determination that must be made annually at the close of each taxable year and therefore, there can be no certainty as to our status in this regard for the taxable year ending December 31,
2010 until the close of the 2010 taxable year. Changes in the nature of our income or assets or a decrease in the trading price of the H Shares or ADSs may cause us to be considered a PFIC in the current or any subsequent year.

If we were a PFIC in any taxable year that you held the H Shares or ADSs, you generally would be subject to special rules with respect to
excess distributions made by us on the H Shares or ADSs and with respect to gain from your disposition of the H Shares or ADSs. An excess distribution generally is defined as the excess of the distributions you receive with
respect to the H Shares or ADSs in any taxable year over 125% of the average annual distributions you have received from us during the shorter of the three preceding years, or your holding period for the H Shares or ADSs. Generally, you would be
required to allocate any excess distribution or gain from the disposition of the H Shares or ADSs ratably over your holding period for the H Shares or ADSs. The portion of the excess distribution or gain allocated to a prior taxable year, other than
a year prior to the first year in which we became a PFIC, would be taxed at the highest United States federal income tax rate on ordinary income in effect for such taxable year, and you would be subject to an interest charge on the resulting tax
liability, determined as if the tax liability had been due with respect to such particular taxable years. The portion of the excess distribution or gain that is not allocated to prior taxable years, together with the portion allocated to the years
prior to the first year in which we became a PFIC, would be included in your gross income for the taxable year of the excess distribution or disposition and taxed as ordinary income.

These adverse tax consequences may be avoided if the U.S. Holder is eligible to and does elect to annually mark-to-market the H Shares or
ADSs. If a U.S. Holder makes a mark-to-market election, such holder will generally include as ordinary income the excess, if any, of the fair market value of the H Shares or ADSs at the end of each taxable year over their adjusted basis, and will be
permitted an ordinary loss in respect of the excess, if any, of the adjusted basis of the H Shares or ADSs over their fair market value at the end of the taxable year (but only to the extent of the net amount of previously included in income as a
result of the mark-to-market election). Any gain recognized on the sale or other disposition of the H Shares or ADSs will be treated as ordinary income. The mark-to-market election is available only for marketable stock, which is stock
that is traded in other than de minimis quantities on at least 15 days during each calendar quarter on a qualified exchange or other market, as defined in the applicable Treasury regulations. The H Shares or ADSs may qualify as marketable
stock because the ADSs are listed on the New York Stock Exchange.

A U.S. Holder's adjusted tax basis in the H Shares or
ADSs will be increased by the amount of any income inclusion and decreased by the amount of any deductions under the mark-to-market rules. If a U.S. Holder makes a mark-to-market election it will be effective for the taxable year for which the
election is made and all subsequent taxable years unless the H Shares or ADSs are no longer regularly traded on a qualified exchange or the IRS consents to the revocation of the election. U.S. Holders are urged to consult their tax advisors about
the availability of the mark-to-market election, and whether making the election would be advisable in their particular circumstances.



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Alternatively, a timely election to treat us as a qualified electing fund would avoid the
foregoing rules with respect to excess distributions and dispositions. You should be aware, however, that if we become a PFIC, we do not intend to satisfy record keeping requirements that would permit you to make a qualified electing fund election.

If you own the H Shares or ADSs during any year that we are a PFIC, you must file IRS Form 8621. The reduced tax rate for
dividend income, as discussed above under  Distributions on the H Shares or ADSs, is not applicable to a dividend paid by us if we are a PFIC for either our taxable year in which the dividend is paid or the preceding year. We
encourage you to consult your own tax advisor concerning the United States federal income tax consequences of holding the H Shares or ADSs that would arise if we were considered a PFIC.

Backup Withholding and Information Reporting

In general, information reporting requirements will apply to dividends in respect of the H Shares or ADSs or the proceeds of the sale,
exchange, or redemption of the H Shares or ADSs paid within the United States, and in some cases, outside of the United States, other than to various exempt recipients, including corporations. In addition, you may, under some circumstances, be
subject to backup withholding with respect to dividends paid on the H Shares or ADSs or the proceeds of any sale, exchange or transfer of the H Shares or ADSs, unless you



| |  |  | are a corporation or fall within various other exempt categories, and, when required, demonstrate this fact; or
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | provide a correct taxpayer identification number on a properly completed IRS Form W-9 or a substitute form, certify that you are exempt from backup
withholding and otherwise comply with applicable requirements of the backup withholding rules.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Any amount
withheld under the backup withholding rules generally will be creditable against your United States federal income tax liability provided that you furnish the required information to the IRS in a timely manner. If you do not provide a correct
taxpayer identification number you may be subject to penalties imposed by the IRS. Investors should consult their own tax advisors as to their qualifications for an exemption from backup withholding and the procedures for obtaining this exemption.

Hong Kong

The following discussion summarizes the material Hong Kong tax provisions relating to the ownership of H shares or ADSs held by you.

Dividends

Under current Hong Kong Inland Revenue Department practice, no Hong Kong tax is payable by the recipient in respect of dividends paid by
us.

Taxation of Capital Gains

No Hong Kong tax is imposed on capital gains arising from the sale of property (such as H shares) acquired and held as investment assets.
However, if a person carries on a trade, profession or business in Hong Kong (e.g., trading and dealing in securities) and derives trading gains from that trade, profession or business in or from Hong Kong, Hong Kong profits tax will be payable.
Gains from sales of H shares effected on or off the Hong Kong Stock Exchange are considered to derive from or arise in Hong Kong for this purpose. Hong Kong profits tax is currently charged at the rate of 16.5% for corporations and at the rate of
15% for individuals.

No Hong Kong tax liability will arise on capital or trading gains arising from the sale of ADSs where the
purchase and sale is effected outside Hong Kong, e.g., on the NYSE.

Hong Kong Stamp Duty

Hong Kong stamp duty is payable by each of the seller and the purchaser for every sold note and every bought note created for every sale
and purchase of the H shares. Stamp duty is charged at the total rate of 0.2% of the value of the H shares transferred (the buyer and seller each paying half of such stamp duty). In addition, a fixed duty of HK$5 is currently payable on an
instrument of transfer of H shares. If one of the parties to a sale is a non-resident of Hong Kong and does not pay the required stamp duty, the stamp duty not paid will be assessed on the instrument of transfer (if any), and the transferee will be
liable for payment of such stamp duty.

If the withdrawal of H shares when ADSs are surrendered or the issuance of ADSs when H
shares are deposited results in a change of beneficial ownership in the H shares under Hong Kong law, Hong Kong stamp duty at the rate described above for sale and purchase transaction will apply. The issuance of ADSs for deposited H shares issued
directly to the depositary or for the account of the depositary should not lead to a Hong Kong stamp duty liability. Holders of the ADSs are not liable for the Hong Kong stamp duty on transfers of ADSs outside of Hong Kong so long as the transfers
do not result in a change of beneficial interest in the H shares under Hong Kong law.



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|F. | Dividends and Paying Agents
|-- | ---------------------------

Not applicable.



|G. | Statement by Experts
|-- | --------------------

Not
applicable.



|H. | Documents on Display
|-- | --------------------

In
accordance with the Exchange Act, we must file reports, including this annual report, and other information with the Commission. The reports and other information we have filed under the Exchange Act and the registration statement on Form F-1 and
exhibits thereto we have previously filed with the Commission may be inspected and copied by the public at the public reference facilities maintained by the Commission at 100 F Street NE, Washington D.C. 20549, U.S.A. and will also be available for
inspection and copying at the regional offices of the Commission located at Seven World Trade Center, 13th Floor, New York, New York 10048, U.S.A. and at Northwest Atrium Center, 500 Madison Street (Suite 1400), Chicago, Illinois 60661, U.S.A.
Copies of such material may also be obtained from the Public Reference Section of the Commission at 100 F Street NE, Washington D.C. 20549, U.S.A. at prescribed rates. Our annual reports and other information filed with the Commission are also
available at the Commissions website at www.sec.gov. Such reports and other information may also be inspected at the office of the New York Stock Exchange, 11 Wall Street, New York, New York 10005, U.S.A.



|I. | Subsidiaries
|-- | ------------

As of
December 31, 2009, we owned the following significant subsidiaries:



|                                                 |  |                                                   |          |                                                 |  |                                                                         |  |       |                               |  |       |                      |  |       |   |  |                                                                                     
|------------------------------------------------ |  | ------------------------------------------------- | -------- | ----------------------------------------------- |  | ----------------------------------------------------------------------- |  | ----- | ----------------------------- |  | ----- | -------------------- |  | ----- | - |  | ------------------------------------------------------------------------------------
|Name of
Subsidiary                               |  | Country ofincorporation/registrationand operation |          | Issued and fullypaid capital/registered capital |  | Proportion of registeredcapital/issued share capitalheld by the
Company |  |       | Proportionof votingpower held |  |       | Principal activities
|                                                 |  |                                                   | Directly |                                                 |  | Indirectly                                                              |  |       |                              
|Austar Coal Mine Pty Limited                     |  | Australia                                         |          | AUD                                             |  | 64,000,000                                                              |  |      |                               |  | 100   | %                    |  | 100   | % |  | Coal mining business                                                                
|Felix Resources Limited                          |  | Australia                                         |          | AUD                                             |  | 446,408,871                                                             |  |      |                               |  | 100   | %                    |  | 100   | % |  | Coal mining, sales and exploration                                                  
|Qingdao Free Trade Zone Zhongyan Trade Co., Ltd. |  | PRC                                               |          | RMB                                             |  | 2,100,000                                                               |  | 52.38 | %                             |  |      |                      |  | 52.38 | % |  | Trading and processing of mining machinery                                          
|Shandong Hua Ju Energy Co., Limited              |  | PRC                                               |          | RMB                                             |  | 288,589,774                                                             |  | 95.14 | %                             |  |      |                      |  | 95.14 | % |  | Power and heat supply                                                               
|Shandong Yanmei Shipping Co., Ltd.               |  | PRC                                               |          | RMB                                             |  | 5,500,000                                                               |  | 92    | %                             |  |      |                      |  | 92    | % |  | Transportation via rivers and lakes and the sales of coal and construction materials
|Shanxi Heshun Tianchi Energy Company Limited     |  | PRC                                               |          | RMB                                             |  | 90,000,000                                                              |  |      |                               |  | 81.31 | %                    |  | 81.31 | % |  | Coal mining business                                                                
|Shanxi Tianhao Chemicals Company Limited         |  | PRC                                               |          | RMB                                             |  | 150,000,000                                                             |  |      |                               |  | 99.85 | %                    |  | 99.85 | % |  | Operation of methanol project                                                       
|Yancoal Australia Pty Limited                    |  | Australia                                         |          | AUD                                             |  | 64,000,000                                                              |  | 100   | %                             |  |      |                      |  | 100   | % |  | Investment holding                                                                  
|Yanzhou Coal Shanxi Nenghua Company Limited      |  | PRC                                               |          | RMB                                             |  | 600,000,000                                                             |  | 100   | %                             |  |      |                      |  | 100   | % |  | Investment holding                                                                  
|Yanmei Heze Nenghua Company Limited              |  | PRC                                               |          | RMB                                             |  | 1,500,000,000                                                           |  | 96.67 | %                             |  |      |                      |  | 96.67 | % |  | Coal mining business                                                                
|Yanzhou Coal Ordos Nenghua Company Limited       |  | PRC                                               |          | RMB                                             |  | 500,000,000                                                             |  | 100   | %                             |  |      |                      |  | 100   | % |  | Construction of 600,000 tonne methanol project                                      



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|                                           |  |                                                   |          |                                                 |  |                                                                         |  |                               |   |  |                      |  |     |   |  |                                            
|------------------------------------------ |  | ------------------------------------------------- | -------- | ----------------------------------------------- |  | ----------------------------------------------------------------------- |  | ----------------------------- | - |  | -------------------- |  | --- | - |  | -------------------------------------------
|Name of
Subsidiary                         |  | Country ofincorporation/registrationand operation |          | Issued and fullypaid capital/registered capital |  | Proportion of registeredcapital/issued share capitalheld by the Company |  | Proportionof votingpower held |   |  | Principal activities
|                                           |  |                                                   | Directly |                                                 |  | Indirectly                                                              |  |                              
|Yanzhou Coal Yulin Nenghua Company Limited |  | PRC                                               |          | RMB                                             |  | 1,400,000,000                                                           |  | 100                           | % |  |                     |  | 100 | % |  | Operation of 600,000 tonne methanol project



|J. | Compliance with and Exemption to Corporate Governance Standards Imposed by the New York Stock Exchange
|-- | ------------------------------------------------------------------------------------------------------

The New York Stock Exchange (NYSE) has imposed a series of corporate governance listing standards for companies listed on the
NYSE in Section 303A of the NYSE Listed Company Manual. However, the NYSE allows listed foreign private issuers, subject to certain limitations and conditions, to follow home country practice in lieu of the provisions of
Section 303A. To qualify for this exemption, a foreign private issuer must disclose any significant manners in which its corporate governance practices differ from those generally required under NYSE listing standards.

As of the date of this annual report, 52.86% of our voting rights are held by our controlling shareholder, Yankuang Group. We therefore
are not required to comply with the majority independent requirement of Section 303A.01 when forming our board of directors. Moreover, we are not required to form a nominating, corporate governance, and compensation committee composed entirely
of independent directors under the requirements of Sections 303A.04 and 303A.05.

We have established an audit
committee pursuant to Section 303A.06 of the NYSE Listed Company Manual. We rely on the exemption under Section 303A.00 of the NYSE Listed Company Manual for foreign private issuers, as well as exemptions for affiliated director and
employee director provided under Rule 10A-3 of the Exchange Act to comply with the audit committee requirements set out in the NYSE Listed Company Manual.

As a foreign private issuer, we are subject to more than one set of corporate governance requirements, including those applicable in our
home country. In the table below, we set out material differences between our corporate governance practices and the NYSEs corporate governance requirements as set out in Section 303A of the Listed Company Manual:



|                                                                                                |  |                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                
|----------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                |  | NYSE Listed Company Manual
Requirements on Corporate Governance                                                                                                                           |  | Our Practice                                                                                                                                                                                                                                                                                                                                                                                                   
|Non-management directors must meet at regularly scheduled executive sessions without management |  | Section 303A.03 of the Listed Company Manual requires non-management directors of each listed company to meet at regularly scheduled executive sessions without management
participation. |  | There is no identical corporate governance requirement in the PRC. We have established a reporting system to the Board to ensure that the Directors stay informed of our business and
operations. We believe that convening board meetings on a regularly basis offers non-management directors an effective forum to opine their views and engage in full and open discussions regarding our business affairs.



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|                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|----------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                    |  | NYSE Listed Company Manual
Requirements on Corporate Governance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | Our Practice                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Corporate Governance Guidelines     |  | Section 303A.09 requires a listed company to adopt and disclose corporate governance guidelines. In addition, Section 303A.09 lists out
matters that must be addressed in the guidelines: 
    director qualification standards;
     director
responsibilities; 
    director access to management and
independent advisors; 
    director compensation;
     director
orientation and continuing education;
     management
succession; and 
    annual performance evaluation of the
board.                                                                                                                                      |  | Although we have not adopted a separate set of corporate governance guidelines encompassing all the corporate governance matters
required by the NYSE, our shareholders have approved relevant corporate rules and measures to address issues pertaining to: 
    the duties, powers and responsibilities
of shareholders, the Board, the
Board of Supervisors, and the
independent Directors; 
    the disclosure of information; and
     connected
transactions.  We believe that collectively, the foregoing rules and
measures adequately address the corporate governance requirements of the NYSE and provide a comprehensive and detailed set of corporate governance requirements that promote the effective operation of the Company.
|                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Code of Business Conduct and Ethics |  | Section 303A.10 requires a listed company to adopt and disclose a code of business conduct and ethics for directors, officers and
employees, and promptly disclose any waivers from the code for directors or executive officers. The following topics must be addressed in a code of business conduct and ethics:
     conflicts of
interest; 
    corporate opportunities;

    confidentiality;
     fair dealing; 
    protection and proper use of company
assets; 
    compliance with laws, rules and
regulations (including insider trading
laws); and 
    encouraging the reporting of any illegal
or unethical behavior. |  | We have adopted a code of ethics, which is published on our website, in compliance with PRC laws and regulations as well as the rules of relevant stock exchanges. Although our
current code of ethics as adopted does not completely conform to the NYSE rules, we believe that the existing code of ethics adequately protects the interests of the Company and Shareholders.                                                                                                                                                                                                                                                                                                                                                                   



|ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
|-------- | -----------------------------------------------------------

Market risk represents the potential for loss due to adverse changes in the fair value of financial instruments. As a global concern, we
are exposed to adverse developments in foreign currency exchange rates, interest rates and commodity price risk. These exposures may change over time as our business develops and could have a material adverse impact on our financial results.

Interest Rate Risk. We are exposed to interest rate risk caused by interest rates changes on our liabilities, in
particular our long-term liabilities. We are also exposed to cash flow interest rate risk in relation to variable rate bank balances, term deposit, restricted cash and bank borrowings in Renminbi. Our cash flow interest rate risk is mainly
concentrated on fluctuations of the PBOC benchmark lending interest rate in relation to our RMB denominated borrowings. We undertake debt obligations to fund our ordinary expenses, including capital expenditures and working capital needs. Upward
fluctuations in interest rates increase the cost of new debt and the interest cost of outstanding variable rate liabilities. Interest rate fluctuations can also lead to significant fluctuations in the fair values of our debt obligations. The
Groups Australian subsidiaries also entered into contracts with banks to hedge a proportion of borrowings issued at variable interest rates through the use of floating-to-fixed interest rate swap contracts. As of December 31, 2009, the
outstanding notional amount was approximately RMB282 million maturing within three years at a hedge period of three months with floating rate and fixed rate of approximately 4.2783% and 5.89% respectively. We currently do not have an interest rate
hedging policy nor do we use any derivative instruments to hedge our interest rate risk as to our operation in China.



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Our exposures to interest rate risk on our financial assets and liabilities, as well as our
sensitivity to interest rate fluctuation are not significant. We have prepared a sensitivity analysis to assess the impact of interest rate fluctuations on our 2009 operating results. Based on this analysis, we estimate that an increase in the
interest rate of 1% would have decreased our reported net income attributable to our equity holders for 2009 by approximately RMB61.8 million.

Foreign Currency Exchange Rate Risk. China has adopted a managed floating exchange rate system to allow the value of the
Renminbi to fluctuate within a regulated band based on market supply and demand with reference to a basket of currencies. Exchange rate fluctuations may adversely affect the value of our net assets, earnings and any declared dividends when
translated or converted into U.S. dollars or Hong Kong dollars.

RMB fluctuations mainly affect our (a) income from coal
exports, which must be converted into RMB since our coal exports are denominated in U.S. dollars; (b) conversion of foreign currency deposits and loans; (c) exposure to the foreign currency loans we granted to our foreign operation; and
(d) costs of imported equipment and fittings.

The sales and costs of each entity in our Company are generally
denominated in the functional currency of the relevant entity. Accordingly, we are not exposed to significant foreign currency risk. Our Company is primarily exposed to fluctuations in the U.S. dollar, Hong Kong dollar and Australian dollar.



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The table below sets forth assets and liabilities of the Company and its subsidiaries that
are denominated in foreign currencies different than the functional currency of the entity that carries such assets or liabilities on its balance sheet as of December 31, 2009.



|                                                                         |  |             |  |         |  |           |  |        
|------------------------------------------------------------------------ |  | ----------- |  | ------- |  | --------- |  | -------
|                                                                         |  | Liabilities |  | Assets 
|                                                                         |  | 2009        |  | 2008    |  | 2009      |  | 2008   
|                                                                         |  | (RMB000)  
|United States Dollars (US$)                                              |  | 20,757,943  |  | 4,447   |  | 1,311,500 |  | 910,764
|Euro (EUR)                                                               |  |            |  |        |  | 3,611     |  | 15,718 
|Hong Kong Dollar (HK$)                                                   |  |            |  |        |  | 7,309     |  | 7,286  
|Notional amounts to sell USD foreign exchange contracts used for hedging |  |            |  | 210,800 |  | 1,143,416 |  |       
|Notional amounts of buy USD foreign exchange contracts used for hedging  |  | 73,713      |  |        |  |          |  |       
|Notional amounts of buy EUR foreign exchange contracts used for hedging  |  | 26,541      |  |        |  |          |  |       
|Notional amounts of buy Yen foreign exchange contracts used for hedging  |  | 71,511      |  |        |  |          |  |       

Except
as disclosed in our financial statements, we do not have a foreign currency hedging policy. However, our management monitors our foreign exchange exposure and will consider hedging significant currency exposure if the need arises.

We have prepared a sensitivity analysis to assess the impact of exchange rate fluctuations on our operating results based on a 5%
increase or decrease in the exchange rates for the U.S. dollar or Hong Kong dollar against the Renminbi. The sensitivity analysis includes only outstanding monetary items denominated in foreign currency and adjusts the translation of these monetary
items as of the end of the indicated year for a 5% change in the exchange rates for the relevant currency. The sensitivity analysis also assesses the impact of a 5% increase or decrease in the exchange rate for the Australian dollar against the U.S.
dollar, which would affect loans to foreign operations within our Group that are denominated in a currency other than the functional currency of the lender or the borrower.



|                                                         |  |           |   |  |         |   |  |      |   |  |      |  
|-------------------------------------------------------- |  | --------- | - |  | ------- | - |  | ---- | - |  | ---- | -
|                                                         |  | US$(1)    |   |  | HK$(1)  |  
|                                                         |  | 2009      |   |  | 2008    |   |  | 2009 |   |  | 2008 |  
|                                                         |  | (RMB000) |  
|Increase (decrease) to profit and loss                   |  |           |   |  |         |   |  |      |   |  |      |  
|- if RMB weakens against respective foreign currency     |  | 49,390    |   |  | 58,863  |   |  | 274  |   |  | 273  |  
|- if RMB strengthens against respective foreign currency |  | (49,390   | ) |  | (58,863 | ) |  | (274 | ) |  | (273 | )



|                                                         |  |           |   |  |           |  
|-------------------------------------------------------- |  | --------- | - |  | --------- | -
|                                                         |  | US$(2)    |  
|                                                         |  | 2009      |   |  | 2008      |  
|                                                         |  | (RMB000) |   |  | (RMB000) |  
|Increase (decrease) to profit and loss                   |  |           |   |  |           |  
|- if AUD weakens against respective foreign currency     |  | (739,749  | ) |  | (21,584   | )
|- if AUD strengthens against respective foreign currency |  | 739,749   |   |  | 21,584    |  



|(1) | This is mainly attributable to our exposure outstanding on the bank deposits and loans to foreign operations or subsidiaries denominated in U.S. dollars and Hong Kong
dollars at the year end in the Group.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | This is mainly attributable to the exposure outstanding on the loans to foreign operations within the Group, foreign currency bank borrowings and derivative financial
instruments where the denomination of the loan is in a currency other than the functional currency of the borrower (i.e., AUD).
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

During the year ended December 31, 2009, the Groups subsidiaries in Australia entered into forward foreign exchange contracts
to sell or purchase specified amounts of foreign currencies in the future at stipulated exchange rates. The objective of entering into the forward foreign exchange contracts is to reduce volatility in revenue streams and capital expenditures due to
foreign exchange rates and thereby enhance the Groups in risk management. The outstanding sell United States dollars contracts are hedging highly probable forecasted sales of coal, whereas the outstanding buy United States dollars, Euro and
Yen contracts relate to the purchase of mining equipment.



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As of December 31, 2009, the outstanding notional amount to sell United States dollars
(sell United States dollars and buy Australian dollars) was approximately RMB1,143.4 million, all maturing within one year with forward rates of approximately from 0.7661 to 0.9044.

As of December 31, 2009, the outstanding notional amount to buy United States dollars (buy United States dollars and sell Australian
dollars), buy Euro (buy Euro and sell Australian dollars) and buy Yen (buy Yen and sell Australian dollars) was approximately RMB73.7 million, RMB26.5 million and RMB71.5 million respectively, all maturing within six months with forward rates of
approximately 0.753, 0.552 and floor price and ceiling price of 71.7 and 72.7 respectively.

For the year ended
December 31, 2008, the ineffective hedging portion of the changes in fair values of the forward foreign exchange contracts of approximately RMB10.4 million was recognized as selling, general and administrative expenses in the consolidated
income statement. No ineffective hedging portion has been included in the consolidated income statement for the year ended December 31, 2009. The effective hedging portion was recognized as current portion of derivative financial instruments in
the consolidated balance sheet.

Commodity Price Risk. Coal prices are subject to cyclical fluctuations that reflect
changes in demand and supply. Price fluctuations directly affect our operating and financial performance. We have historically experienced substantial price fluctuations and believe these fluctuations will continue. The volume-weighted average
selling price of our coal products was RMB640.2 in 2008 and RMB507.4 in 2009.

Equity Price Risk. In addition to
financial instruments, we are exposed to equity price risk because we hold investments in listed equity securities. We currently do not have any arrangements to hedge the price risk exposure of our investment in equity securities. We have conducted
a sensitivity analysis and determined that our exposure to equity price risk stemming from our investment in listed equity securities is not significant.



|ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
|-------- | ------------------------------------------------------



|A. | Debt Securities
|-- | ---------------

Not
applicable.



|B. | Warrants and Rights
|-- | -------------------

Not
applicable.



|C. | Other Securities
|-- | ----------------

Not
applicable.



|D. | American Depositary Shares
|-- | --------------------------

The following table summarizes the fees and charges that a holder of our ADSs may have to pay, directly or indirectly, in connection with
the ownership of our American Depositary Receipts.



|                                                                                                                                                          |  |      |  |                                                                                                                                                 
|--------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------
|Persons depositing or withdrawing shares must pay:                                                                                                        |  | For:
|                                                                                                                                                          |  |     
|$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)                                                                                                     |  |     |  | Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property                                       
|                                                                                                                                                          |  |     
|                                                                                                                                                          |  |     |  | Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates                                               
|                                                                                                                                                          |  |     
|A fee equivalent to the fee that would be payable if securities distributed to you had been shares and the shares had been deposited for issuance of ADSs |  |     |  | Distribution of securities to holders of deposited securities that are distributed by the depositary to ADS registered holders                  
|                                                                                                                                                          |  |     
|Registration or transfer fees                                                                                                                             |  |     |  | Transfer and registration of shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw shares
|                                                                                                                                                          |  |     
|Expenses of the depositary                                                                                                                                |  |     |  | Cable, telex and facsimile transmissions                                                                                                        



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|                                                                                                                                                                                           |  |                                               
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------------------------------------
|                                                                                                                                                                                           | 
|                                                                                                                                                                                           |  |   Converting foreign currency to U.S. dollars
|                                                                                                                                                                                           | 
|Taxes and other governmental charges the depositary or the custodian have to pay on any ADS or share underlying an ADS, for example, stock transfer taxes, stamp duty or withholding
taxes |  |   As necessary                               
|                                                                                                                                                                                           | 
|Any charges incurred by the depositary or its agents for servicing the deposited securities                                                                                                |  |   As necessary                               

The Bank of New York Mellon, as depositary, has agreed to waive certain standard fees related to the administration of our ADR
program and investor relationship programs. From January 1, 2009 to December 31 2009, the total amount of the fees that were waived was approximately US$139,000.

PART II



|ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
|-------- | -----------------------------------------------

As of December 31, 2009, we were not in default, in arrears or otherwise delinquent in the payment of principal or interest of any
indebtedness or dividends.



|ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
|-------- | ----------------------------------------------------------------------------

None.



|ITEM 15. | CONTROLS AND PROCEDURES
|-------- | -----------------------

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our general manager and chief financial officer, our management conducted an
evaluation of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, as amended) as of December 31, 2009. Based on the evaluation described below, our general
manager and chief financial officer concluded that, as of that date, our disclosure controls and procedures were effective.

Managements Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules
13a-15(f) and 15d-15(f) of the Exchange Act. As such, our management has designed internal control over financial reporting or caused internal control over financial reporting to be designed under its supervision in order to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Our internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of a companys assets, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors, and (3) provide reasonable assurance regarding the
prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the consolidated financial statements. Because of its inherent limitations, internal control over financial reporting
may not be able to prevent or detect misstatements on a timely basis, which may be a product of collusion, failure to abide by controls, error or fraud. In addition, projections of the internal controls effectiveness to future periods are
subject to the risk that the control may become inadequate because of changes in conditions or a deterioration in the degree of compliance with the internal control policies or procedures.

Under the supervision of and with the participation of our general manager and our chief financial officer, our management conducted an
evaluation of the effectiveness of our internal control over financial reporting using criteria established in the Internal Control  Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). As
the acquisition of Felix Resources Limited was completed on December 23, 2009, our evaluation of internal control over financial reporting did not include the internal control measures of Felix Resources Limited, whose financial statements
reflect total assets and revenues constituting 39% and nil percent, respectively, of our related consolidated financial statement amounts as of and for the year ended December 31, 2009. Based on its evaluation, our management has concluded
that, as of December 31, 2009, our internal control over financial reporting (excluding that of Felix Resources Limited) was effective.



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The effectiveness of our internal controls over financial reporting (excluding the internal
control over financial reporting of Felix Resources Limited) as of December 31, 2009 has been audited by Grant Thornton, our independent registered public accounting firm, as stated in their report which is included herein.

Changes in Internal Control over Financial Reporting

During the fiscal year covered by this annual report, as well as following the completion of the Felix acquisition in December 2009, there
have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



|ITEM 16A. | AUDIT COMMITTEE FINANCIAL EXPERT
|--------- | --------------------------------

Our audit committee consists of Mr. Zhai Xigui, Mr. Pu Hongjiu, Mr. Li Weian, Mr. Wang Junyan, Mr. Chen Changchun
and Mr. Dong Yunqing. Our Board of Directors has determined that Mr. Zhai Xigui meets the independence requirement of Section 303A.02 of the NYSE Listed Company Manual and that he qualifies as an audit committee financial expert as
the term is defined in rules and regulations established by the SEC.



|ITEM 16B. | CODE OF ETHICS
|--------- | --------------

We have
adopted a code of ethics that applies to our chairman, vice chairman, chief executive officer, chief financial officer, board secretary, chief engineer, financial controller and the managers of our finance and audit departments. Our code of ethics
is posted on our website at www.yanzhoucoal.com.cn/en/governance/img/site8/20091111/0015c54657fb0c64597902.pdf. No amendments to, or waivers from, our code of ethics have been made. A copy of our code of ethics is available to any
shareholder, without charge, upon written request to the address on the cover of this annual report.



|ITEM 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES
|--------- | --------------------------------------

During 2009, Grant Thornton and ShineWing Certified Public Accountants were our international and domestic auditors respectively and,
collectively, our principal accountants.

Audit Fees

Audit fees primarily consist of fees for the audits of the consolidated financial statements prepared under IFRS and PRC GAAP and the
statutory financial statements of our subsidiaries for the relevant year, the review of interim consolidated financial statements and the audit of our internal control over financial reporting as required by the Sarbanes-Oxley Act. Service fees
denominated in Australian dollars were incurred for the audit of Yancoal Australias financial statements and internal control.

The following table sets forth the aggregate audit fees of our principal accountants for each of the two years ended December 31,
2009:



|     |  |            |  |        
|---- |  | ---------- |  | -------
|     |  | Audit Fees
|     |  | (RMB)      |  | (AUD)  
|2008 |  | 6,960,000  |  | 90,000 
|2009 |  | 6,960,000  |  | 610,000

Audit-related
Fees, Tax Fees, All Other Fees

We did not incur any audit-related fees, tax fees or other fees for professional
service rendered by our principal accountants during the last two fiscal years.

Audit Committee Pre-Approval Policies
and Procedures

The audit committee of our Board of Directors is responsible for, among other things, the
recommendation or termination of external auditors subject to the requirements of applicable domestic and overseas listing rules and regulations. Before our principal accountants were engaged by the Company or our subsidiaries to render audit or
non-audit services, their respective engagements were approved by our audit committee. All of the audit services provided by Grant Thornton and ShineWing Certified Public Accountants in 2009 were pre-approved by our audit committee.



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|ITEM 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
|--------- | ----------------------------------------------------------

Our audit committee consists of four independent non-executive directors, Mr. Zhai Xigui, Pu Hongjiu, Li Weian and Wang Junyan; one
affiliated director, Mr. Chen Changchun; and one employee director, Mr. Dong Yunqing. As a foreign private issuer, we rely on the exemption under Section 303A.06 of the NYSE Listed Company Manual, as well as exemptions for affiliated
directors and employee directors as provided under Rule 10A-3 of the Exchange Act, to remain compliant with the audit committee standards set out in Section 303A.06 of the NYSE Listed Company Manual.

The affiliated director qualifies for the exemption under Rule 10A-3(b)(1)(iv)(D) of the Exchange Act because, except in his capacity as
a member of the Companys Board of Directors and audit committee, he does not receive, directly or indirectly, any consulting, advisory or other compensatory fee from us or any of our subsidiaries. In addition, the affiliated director is not a
voting member or the chairman of the audit committee pursuant to our audit committee charter, nor is the affiliated director one of our executive officers.

The employee director qualifies for the exemption under Rule 10A-3(b)(1)(iv)(C) of the Exchange Act because he is not our executive
officer and was elected to the Board of Directors of the Company pursuant to the Advisory Opinion Regarding the Establishment of Sound Corporate Governance for Company Employee Directors and Employee Supervisors, promulgated by the Shandong
Economic and Trade Commission on July 20, 2000. Rule 10A-3(b)(1)(iv)(C) of the Exchange Act provides an exemption to the independence requirement and permits an employee director of a foreign private issuer who is a non-executive officer who is
elected or named to the foreign private issuers board of directors or audit committee pursuant to the issuers governing law or documents, an employee collective bargaining or similar agreement or other home country legal or listing
requirements. The employee director is not a voting member or the chairman of the audit committee pursuant to our audit committee charter.



|ITEM 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
|--------- | ----------------------------------------------------------------------

Not applicable.

PART III



|ITEM 17. | FINANCIAL STATEMENTS
|-------- | --------------------

We
have elected to provide the financial statements and related information specified in Item 18 in lieu of Item 17.



|ITEM 18. | FINANCIAL STATEMENTS
|-------- | --------------------

Our
consolidated financial statements are included at the end of this annual report on Form 20-F.



|ITEM 19. | EXHIBITS
|-------- | --------

Documents filed
as exhibits to this annual report:



|               |  |                                                                                                                                                       
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
Number |  | Description                                                                                                                                           
|               | 
|4.1            |  | Scheme Implementation Agreement with Felix Resources Limited                                                                                          
|               | 
|8.1            |  | List of subsidiaries of Yanzhou Coal Mining Company Limited                                                                                           
|               | 
|12.1           |  | Certification of general manager pursuant to Rule 13a-14 or 15d-14 promulgated under the U.S. Securities Act of 1934                                  
|               | 
|12.2           |  | Certification of chief financial officer pursuant to Rule 13a-14 or 15d-14 promulgated under the U.S. Securities Act of 1934                          
|               | 
|13.1           |  | Certification of general manager pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of the U.S. Sarbanes-Oxley Act of 2002        
|               | 
|13.2           |  | Certification of chief financial officer pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of the U.S. Sarbanes-Oxley Act of 2002



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SIGNATURES

The registrant hereby certifies that it meets all the requirements for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this annual report on its behalf.



|                    |  |                                     |  |                 
|------------------- |  | ----------------------------------- |  | ----------------
|                    |  | YANZHOU COAL MINING COMPANY LIMITED
|                    |  | (Registrant)                       
|                    |  |                                    
|Date: June 29, 2010 |  | By:                                 |  | /s/    LI
WEIMIN
|                    |  | Name:                               |  | LI Weimin       
|                    |  | Title:                              |  | General Manager 



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YANZHOU COAL MINING COMPANY LIMITED

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007

AND REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



|                                                         |  |            
|-------------------------------------------------------- |  | -----------
|CONTENTS                                                 |  | PAGE(S)    
|REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |  | F-1 - F-4  
|                                                         | 
|CONSOLIDATED INCOME STATEMENTS                           |  | F-5        
|                                                         | 
|CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME          |  | F-6        
|                                                         | 
|CONSOLIDATED BALANCE SHEETS                              |  | F-7        
|                                                         | 
|CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY             |  | F-8        
|                                                         | 
|CONSOLIDATED STATEMENTS OF CASH FLOWS                    |  | F-9 & F-10 
|                                                         | 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS           |  | F-11 - F-90



---

##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF

YANZHOU COAL MINING COMPANY LIMITED


LOGO

(A joint stock company with limited liability established in the Peoples Republic of
China)

We have audited the accompanying consolidated balance sheets of Yanzhou Coal Mining Company Limited and its subsidiaries (the
Group) as of December 31, 2009 and 2008, and the related consolidated income statements, statements of comprehensive income, changes in equity, and cash flows for each of the two years in the period ended December 31, 2009.
These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for
our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Group as of December 31, 2009 and 2008, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2009, in conformity with International Financial Reporting Standards as
issued by the International Accounting Standards Board.

We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the Groups internal control over financial reporting as of December 31, 2009, based on the criteria established in Internal ControlIntegrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission and our report dated June 29, 2010 expressed an unqualified opinion on the Groups internal control over financial reporting.

/s/Grant Thornton

Hong Kong

June 29, 2010



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##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF

YANZHOU COAL MINING COMPANY LIMITED


LOGO

(A joint stock company with limited liability established in the Peoples Republic of
China)

We have audited the internal control over financial reporting of Yanzhou Coal Mining Company Limited and its subsidiaries (the
Group) as of December 31, 2009, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Companys management is responsible
for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the Managements Report on Internal Control over Financial Reporting
disclosed in Item 15 of the Form 20-F (Managements Report). Our responsibility is to express an opinion on the Groups internal control over financial reporting based on our audit. Our audit of, and opinion on, the
Groups internal control over financial reporting does not include internal control over financial reporting of Felix Resources Limited, a wholly owned subsidiary, whose financial statements reflect total assets and revenues constituting 39 and
nil percent, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2009. As indicated in the Managements Report, Felix Resources Limited was acquired during 2009 and therefore,
managements assertion on the effectiveness of the Groups internal control over financial reporting excluded internal control over financial reporting of Felix Resources Limited.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.

A companys internal control over financial
reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the financial statements.



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##### Table of Contents

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of the effectiveness to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.

In our opinion, the Group maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2009, based on the criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial
statements as of and for the year ended December 31, 2009 of the Group and our report dated June 29, 2010 expressed an unqualified opinion on those financial statements.

/s/Grant Thornton

Hong Kong

June 29, 2010



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##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF

YANZHOU COAL MINING COMPANY LIMITED

(A joint stock company with limited liability established in the Peoples Republic of China)

We have audited the accompanying consolidated income statement, statement of comprehensive income, changes in equity and cash flows of Yanzhou Coal
Mining Company Limited and subsidiaries (the Group) for the year ended December 31, 2007, all expressed in Renminbi. These consolidated financial statements are the responsibility of the Groups management. Our responsibility is to
express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of
the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such consolidated
financial statements present fairly, in all material respects, the results of operations and cash flows of Yanzhou Coal Mining Company Limited and subsidiaries for the year ended December 31, 2007, in conformity with International Financial
Reporting Standards as issued by the International Accounting Standards Board.

As discussed in Note 16 to the consolidated financial
statements, the 2007 reported earnings per American Depositary Shares (ADS) information has been retrospectively adjusted for the share split in July 2008.



|                                           
|-------------------------------------------
|/s/ Deloitte Touche Tohmatsu               
|                                           
|Certified Public Accountants               
|Hong Kong                                  
|June 26, 2008 (June 25, 2009 as to Note 16)



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

CONSOLIDATED INCOME STATEMENTS



|                                             |  |       |  |                         |   |  |             |   |  |            |  
|-------------------------------------------- |  | ----- |  | ----------------------- | - |  | ----------- | - |  | ---------- | -
|                                             |  |       |  | Year ended December 31, |  
|                                             |  | NOTES |  | 2009                    |   |  | 2008        |   |  | 2007       |  
|                                             |  |       |  | RMB000                 |   |  | RMB000     |   |  | RMB000    |  
|GROSS SALES OF COAL                          |  | 7     |  | 19,537,191              |   |  | 24,557,521  |   |  | 14,906,746 |  
|RAILWAY TRANSPORTATION SERVICE INCOME        |  |       |  | 258,443                 |   |  | 247,199     |   |  | 203,714    |  
|GROSS SALES OF ELECTRICITY POWER             |  |       |  | 185,593                 |   |  | 59,811      |   |  |           |  
|GROSS SALES OF METHANOL                      |  |       |  | 258,867                 |   |  | 38,550      |   |  |           |  
|GROSS SALES OF HEAT SUPPLY                   |  |       |  | 13,268                  |   |  |            |   |  |           |  
|                                             |  |       |  |                         |   |  |             |   |  |            |  
|TOTAL REVENUE                                |  |       |  | 20,253,362              |   |  | 24,903,081  |   |  | 15,110,460 |  
|                                             |  |       |  |                        
|TRANSPORTATION COSTS OF COAL                 |  | 7     |  | (403,311                | ) |  | (508,712    | ) |  | (549,816   | )
|COST OF SALES AND SERVICE PROVIDED           |  | 8     |  | (10,170,532             | ) |  | (11,816,789 | ) |  | (7,331,924 | )
|COST OF ELECTRICITY POWER                    |  |       |  | (188,855                | ) |  | (88,253     | ) |  |           |  
|COST OF METHANOL                             |  |       |  | (352,943                | ) |  | (37,834     | ) |  |           |  
|COST OF HEAT SUPPLY                          |  |       |  | (7,364                  | ) |  |            |   |  |           |  
|                                             |  |       |  |                         |   |  |             |   |  |            |  
|GROSS PROFIT                                 |  |       |  | 9,130,357               |   |  | 12,451,493  |   |  | 7,228,720  |  
|                                             |  |       |  |                        
|SELLING, GENERAL AND ADMINISTRATIVE EXPENSES |  | 9     |  | (3,820,241              | ) |  | (3,832,031  | ) |  | (2,854,677 | )
|SHARE OF INCOME (LOSS) OF AN ASSOCIATE       |  | 29    |  | 109,786                 |   |  | (67,367     | ) |  | (2,438     | )
|OTHER INCOME                                 |  | 10    |  | 311,019                 |   |  | 351,493     |   |  | 198,930    |  
|INTEREST EXPENSE                             |  | 11    |  | (45,115                 | ) |  | (38,360     | ) |  | (27,222    | )
|                                             |  |       |  |                         |   |  |             |   |  |            |  
|PROFIT BEFORE INCOME TAXES                   |  |       |  | 5,685,806               |   |  | 8,865,228   |   |  | 4,543,313  |  
|                                             |  |       |  |                        
|INCOME TAXES                                 |  | 12    |  | (1,553,312              | ) |  | (2,385,617  | ) |  | (1,315,520 | )
|                                             |  |       |  |                         |   |  |             |   |  |            |  
|PROFIT FOR THE YEAR                          |  | 13    |  | 4,132,494               |   |  | 6,479,611   |   |  | 3,227,793  |  
|                                             |  |       |  |                         |   |  |             |   |  |            |  
|Attributable to:                             |  |       |  |                         |   |  |             |   |  |            |  
|Equity holders of the company                |  |       |  | 4,117,322               |   |  | 6,488,908   |   |  | 3,230,450  |  
|Minority interests                           |  |       |  | 15,172                  |   |  | (9,297      | ) |  | (2,657     | )
|                                             |  |       |  |                         |   |  |             |   |  |            |  
|                                             |  |       |  | 4,132,494               |   |  | 6,479,611   |   |  | 3,227,793  |  
|                                             |  |       |  |                         |   |  |             |   |  |            |  
|EARNINGS PER SHARE, BASIC                    |  | 16    |  | RMB 0.84                |   |  | RMB1.32     |   |  | RMB0.66    |  
|                                             |  |       |  |                         |   |  |             |   |  |            |  
|EARNINGS PER ADS, BASIC                      |  | 16    |  | RMB 8.37                |   |  | RMB 13.19   |   |  | RMB 6.56   |  
|                                             |  |       |  |                         |   |  |             |   |  |            |  



F-5



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



|                                                                                                                                    |  |                         |   |  |           |   |  |           |  
|----------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | - |  | --------- | - |  | --------- | -
|                                                                                                                                    |  | Year ended December 31, |  
|                                                                                                                                    |  | 2009                    |   |  | 2008      |   |  | 2007      |  
|                                                                                                                                    |  | RMB000                 |   |  | RMB000   |   |  | RMB000   |  
|Profit for the year                                                                                                                 |  | 4,132,494               |   |  | 6,479,611 |   |  | 3,227,793 |  
|                                                                                                                                    |  |                         |  
|Other comprehensive income (after income tax):                                                                                      |  |                         |   |  |           |   |  |           |  
|                                                                                                                                    |  |                         |  
|Available-for-sale investments:                                                                                                     |  |                         |   |  |           |   |  |           |  
|Change in fair value                                                                                                                |  | 125,225                 |   |  | (269,639  | ) |  | 312,944   |  
|Deferred taxes                                                                                                                      |  | (31,306                 | ) |  | 67,409    |   |  | (75,519   | )
|                                                                                                                                    |  |                         |   |  |           |   |  |           |  
|                                                                                                                                    |  | 93,919                  |   |  | (202,230  | ) |  | 237,425   |  
|                                                                                                                                    |  |                         |  
|Cash flow hedges:                                                                                                                   |  |                         |   |  |           |   |  |           |  
|Cash flow hedge reserve recognized                                                                                                  |  | 12,280                  |   |  | (20,567   | ) |  |          |  
|Reclassification adjustments for amounts transferred to income statement (included in selling, general and administrative
expenses) |  | 18,118                  |   |  |          |   |  |          |  
|Deferred taxes                                                                                                                      |  | (11,780                 | ) |  | 8,831     |   |  |          |  
|                                                                                                                                    |  |                         |   |  |           |   |  |           |  
|                                                                                                                                    |  | 18,618                  |   |  | (11,736   | ) |  |          |  
|                                                                                                                                    |  |                         |  
|Exchange difference arising on translation of foreign operations                                                                    |  | 134,184                 |   |  | (101,227  | ) |  | 1,563     |  
|                                                                                                                                    |  |                         |   |  |           |   |  |           |  
|Other comprehensive income (loss) for the year                                                                                      |  | 246,721                 |   |  | (315,193  | ) |  | 238,988   |  
|                                                                                                                                    |  |                         |   |  |           |   |  |           |  
|Total comprehensive income for the year                                                                                             |  | 4,379,215               |   |  | 6,164,418 |   |  | 3,466,781 |  
|                                                                                                                                    |  |                         |   |  |           |   |  |           |  
|Attributable to:                                                                                                                    |  |                         |   |  |           |   |  |           |  
|Equity holders of the Company                                                                                                       |  | 4,364,043               |   |  | 6,173,715 |   |  | 3,469,438 |  
|Minority interests                                                                                                                  |  | 15,172                  |   |  | (9,297    | ) |  | (2,657    | )
|                                                                                                                                    |  |                         |   |  |           |   |  |           |  
|                                                                                                                                    |  | 4,379,215               |   |  | 6,164,418 |   |  | 3,466,781 |  
|                                                                                                                                    |  |                         |   |  |           |   |  |           |  



F-6



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

CONSOLIDATED BALANCE SHEETS



|                                                                                   |  |       |  |                 |  |           
|---------------------------------------------------------------------------------- |  | ----- |  | --------------- |  | ----------
|                                                                                   |  |       |  | At December 31,
|                                                                                   |  | NOTES |  | 2009            |  | 2008      
|                                                                                   |  |       |  | RMB000         |  | RMB000   
|ASSETS                                                                             |  |       |  |                 |  |           
|                                                                                   |  |       | 
|CURRENT ASSETS                                                                     |  |       |  |                 |  |           
|Bank balances and cash                                                             |  | 17    |  | 8,522,399       |  | 8,439,578 
|Term deposits                                                                      |  | 17    |  | 3,216,697       |  | 1,153,385 
|Restricted cash                                                                    |  | 17    |  | 315,045         |  | 18,823    
|Bills and accounts receivable                                                      |  | 18    |  | 4,723,922       |  | 2,977,266 
|Inventories                                                                        |  | 19    |  | 886,360         |  | 819,599   
|Prepayments and other receivables                                                  |  | 21    |  | 1,868,229       |  | 1,567,210 
|Prepaid lease payments                                                             |  | 22    |  | 17,121          |  | 15,296    
|Prepayment for resources compensation fees                                         |  | 23    |  | 2,761           |  | 3,240     
|Derivative financial instruments                                                   |  | 37    |  | 37,760          |  |          
|Tax recoverable                                                                    |  |       |  | 59,978          |  |          
|Overburden in advance                                                              |  | 26    |  | 350,676         |  |          
|                                                                                   |  |       |  |                 |  |           
|TOTAL CURRENT ASSETS                                                               |  |       |  | 20,000,948      |  | 14,994,397
|                                                                                   |  |       | 
|NON-CURRENT ASSETS                                                                 |  |       |  |                 |  |           
|Intangible assets                                                                  |  | 24    |  | 18,866,674      |  | 1,039,707 
|Prepaid lease payments                                                             |  | 22    |  | 691,339         |  | 628,119   
|Prepayment for resources compensation fees                                         |  | 23    |  | 13,208          |  | 15,490    
|Property, plant and equipment                                                      |  | 25    |  | 18,877,134      |  | 14,149,446
|Goodwill                                                                           |  | 27    |  | 1,305,345       |  | 298,650   
|Investments in securities                                                          |  | 28    |  | 295,295         |  | 139,887   
|Interests in an associate                                                          |  | 29    |  | 939,981         |  | 830,195   
|Interests in jointly controlled entities                                           |  | 31    |  | 1,257           |  |          
|Restricted cash                                                                    |  | 17    |  | 238,730         |  | 78,791    
|Deposit made on investment                                                         |  | 30    |  | 175,021         |  | 117,926   
|Deferred tax assets                                                                |  | 39    |  | 1,027,659       |  | 46,023    
|                                                                                   |  |       |  |                 |  |           
|TOTAL NON-CURRENT ASSETS                                                           |  |       |  | 42,431,643      |  | 17,344,234
|                                                                                   |  |       |  |                 |  |           
|TOTAL ASSETS                                                                       |  |       |  | 62,432,591      |  | 32,338,631
|                                                                                   |  |       |  |                 |  |           
|                                                                                   |  |       |  |                 |  |           
|LIABILITIES AND SHAREHOLDERS EQUITY                                               |  |       |  |                 |  |           
|                                                                                   |  |       | 
|CURRENT LIABILITIES                                                                |  |       |  |                 |  |           
|Bills and accounts payable                                                         |  | 33    |  | 1,366,976       |  | 910,127   
|Other payables and accrued expenses                                                |  | 34    |  | 4,441,834       |  | 2,698,256 
|Provision for land subsidence, restoration, rehabilitation and environmental costs |  | 35    |  | 1,564,106       |  | 450,979   
|Amounts due to Parent Company and its subsidiary companies                         |  | 45    |  | 757,882         |  | 706,328   
|Borrowings - due within one year                                                   |  | 36    |  | 1,598,113       |  | 82,000    
|Current portion of long term payable - due within one year                         |  | 38    |  | 5,967           |  |          
|Derivative financial instruments                                                   |  | 37    |  | 28,333          |  | 29,435    
|Tax payable                                                                        |  |       |  | 647,190         |  | 419,866   
|                                                                                   |  |       |  |                 |  |           
|TOTAL CURRENT LIABILITIES                                                          |  |       |  | 10,410,401      |  | 5,296,991 
|                                                                                   |  |       | 
|NON-CURRENT LIABILITIES                                                            |  |       |  |                 |  |           
|Amounts due to Parent Company and its subsidiary companies - due after one year    |  | 45    |  |                |  | 7,253     
|Borrowings - due after one year                                                    |  | 36    |  | 20,911,728      |  | 176,000   
|Deferred tax liability                                                             |  | 39    |  | 1,785,087       |  | 41,777    
|Provision for land subsidence, restoration, rehabilitation and environmental costs |  | 35    |  | 44,702          |  |          
|Non-current portion of long term payable- due after one year                       |  | 38    |  | 26,380          |  |          
|                                                                                   |  |       |  |                 |  |           
|TOTAL NON-CURRENT LIABILITIES                                                      |  |       |  | 22,767,897      |  | 225,030   
|                                                                                   |  |       |  |                 |  |           
|TOTAL LIABILITIES                                                                  |  |       |  | 33,178,298      |  | 5,522,021 
|                                                                                   |  |       | 
|Capital and reserves                                                               |  | 40    |  |                 |  |           
|Share capital                                                                      |  |       |  | 4,918,400       |  | 4,918,400 
|Reserves                                                                           |  |       |  | 24,233,407      |  | 21,836,724
|                                                                                   |  |       |  |                 |  |           
|Equity attributable to equity holders of the Company                               |  |       |  | 29,151,807      |  | 26,755,124
|Minority interest                                                                  |  |       |  | 102,486         |  | 61,486    
|                                                                                   |  |       |  |                 |  |           
|TOTAL EQUITY                                                                       |  |       |  | 29,254,293      |  | 26,816,610
|                                                                                   |  |       |  |                 |  |           
|TOTAL LIABILITIES AND EQUITY                                                       |  |       |  | 62,432,591      |  | 32,338,631
|                                                                                   |  |       |  |                 |  |           



F-7



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



|                                                                   |  |              |  |              |  |                       |  |                            |  |                    |   |  |                              |   |  |                        |   |  |                  |   |  |                                             |   |  |                  |   |  |            |  
|------------------------------------------------------------------ |  | ------------ |  | ------------ |  | --------------------- |  | -------------------------- |  | ------------------ | - |  | ---------------------------- | - |  | ---------------------- | - |  | ---------------- | - |  | ------------------------------------------- | - |  | ---------------- | - |  | ---------- | -
|                                                                   |  | Sharecapital |  | Sharepremium |  | Futuredevelopmentfund |  | Statutorycommonreservefund |  | Translationreserve |   |  | Investmentrevaluationreserve |   |  | Cash 
flowhedgereserve |   |  | Retainedearnings |   |  | Attributable toequity
holdersof the Company |   |  | Minorityinterest |   |  | Total      |  
|                                                                   |  | RMB000      |  | RMB000      |  | RMB000               |  | RMB000                    |  | RMB000            |   |  | RMB000                      |   |  | RMB000                |   |  | RMB000          |   |  | RMB000                                     |   |  | RMB000          |   |  | RMB000    |  
|                                                                   |  | (note 40)    |  |              |  | (note 40)             |  | (note 40)                  |  |                    |   |  |                              |   |  |                        |   |  |                  |   |  |                                             |   |  |                  |   |  |            |  
|Balance at January 1, 2007                                         |  | 4,918,400    |  | 2,981,002    |  | 2,218,574             |  | 1,704,611                  |  | (15,505            | ) |  | 22,754                       |   |  |                       |   |  | 7,101,943        |   |  | 18,931,779                                  |   |  | 61,961           |   |  | 18,993,740 |  
|Appropriations to reserves                                         |  |             |  |             |  | 368,531               |  | 333,329                    |  |                   |   |  |                             |   |  |                       |   |  | (701,860         | ) |  |                                            |   |  |                 |   |  |           |  
|                                                                   |  |              |  |              |  |                       |  |                            |  |                    |  
|Profit for the year                                                |  |             |  |             |  |                      |  |                           |  |                   |   |  |                             |   |  |                       |   |  | 3,230,450        |   |  | 3,230,450                                   |   |  | (2,657           | ) |  | 3,227,793  |  
|Other comprehensive income:                                        |  |              |  |              |  |                       |  |                            |  |                    |   |  |                              |   |  |                        |   |  |                  |   |  |                                             |   |  |                  |   |  |            |  
|- Fair value change of available-for-sale investments              |  |             |  |             |  |                      |  |                           |  |                   |   |  | 237,425                      |   |  |                       |   |  |                 |   |  | 237,425                                     |   |  |                 |   |  | 237,425    |  
|- Exchange difference arising on translation of foreign operations |  |             |  |             |  |                      |  |                           |  | 1,563              |   |  |                             |   |  |                       |   |  |                 |   |  | 1,563                                       |   |  |                 |   |  | 1,563      |  
|                                                                   |  |              |  |              |  |                       |  |                            |  |                    |   |  |                              |   |  |                        |   |  |                  |   |  |                                             |   |  |                  |   |  |            |  
|Total comprehensive income for the year                            |  |             |  |             |  |                      |  |                           |  | 1,563              |   |  | 237,425                      |   |  |                       |   |  | 3,230,450        |   |  | 3,469,438                                   |   |  | (2,657           | ) |  | 3,466,781  |  
|                                                                   |  |              |  |              |  |                       |  |                            |  |                    |  
|Transactions with owners                                           |  |              |  |              |  |                       |  |                            |  |                    |   |  |                              |   |  |                        |   |  |                  |   |  |                                             |   |  |                  |   |  |            |  
|- Dividends                                                        |  |             |  |             |  |                      |  |                           |  |                   |   |  |                             |   |  |                       |   |  | (983,680         | ) |  | (983,680                                    | ) |  | (330             | ) |  | (984,010   | )
|- Contribution from a minority shareholder of a subsidiary         |  |             |  |             |  |                      |  |                           |  |                   |   |  |                             |   |  |                       |   |  |                 |   |  |                                            |   |  | 24,000           |   |  | 24,000     |  
|- Acquisition of additional interest in a subsidiary               |  |             |  |             |  |                      |  |                           |  |                   |   |  |                             |   |  |                       |   |  |                 |   |  |                                            |   |  | (11,899          | ) |  | (11,899    | )
|                                                                   |  |              |  |              |  |                       |  |                            |  |                    |   |  |                              |   |  |                        |   |  |                  |   |  |                                             |   |  |                  |   |  |            |  
|Total transactions with owners                                     |  |             |  |             |  |                      |  |                           |  |                   |   |  |                             |   |  |                       |   |  | (983,680         | ) |  | (983,680                                    | ) |  | 11,771           |   |  | (971,909   | )
|                                                                   |  |              |  |              |  |                       |  |                            |  |                    |   |  |                              |   |  |                        |   |  |                  |   |  |                                             |   |  |                  |   |  |            |  
|Balance at December 31, 2007                                       |  | 4,918,400    |  | 2,981,002    |  | 2,587,105             |  | 2,037,940                  |  | (13,942            | ) |  | 260,179                      |   |  |                       |   |  | 8,646,853        |   |  | 21,417,537                                  |   |  | 71,075           |   |  | 21,488,612 |  
|                                                                   |  |              |  |              |  |                       |  |                            |  |                    |   |  |                              |   |  |                        |   |  |                  |   |  |                                             |   |  |                  |   |  |            |  
|Balance at January 1, 2008                                         |  | 4,918,400    |  | 2,981,002    |  | 2,587,105             |  | 2,037,940                  |  | (13,942            | ) |  | 260,179                      |   |  |                       |   |  | 8,646,853        |   |  | 21,417,537                                  |   |  | 71,075           |   |  | 21,488,612 |  
|Appropriations to reserves                                         |  |             |  |             |  | 382,219               |  | 785,235                    |  |                   |   |  |                             |   |  |                       |   |  | (1,167,454       | ) |  |                                            |   |  |                 |   |  |           |  
|                                                                   |  |              |  |              |  |                       |  |                            |  |                    |  
|Profit for the year                                                |  |             |  |             |  |                      |  |                           |  |                   |   |  |                             |   |  |                       |   |  | 6,488,908        |   |  | 6,488,908                                   |   |  | (9,297           | ) |  | 6,479,611  |  
|Other comprehensive income :                                       |  |              |  |              |  |                       |  |                            |  |                    |   |  |                              |   |  |                        |   |  |                  |   |  |                                             |   |  |                  |   |  |            |  
|- Fair value change of available-for-sale investments              |  |             |  |             |  |                      |  |                           |  |                   |   |  | (202,230                     | ) |  |                       |   |  |                 |   |  | (202,230                                    | ) |  |                 |   |  | (202,230   | )
|- Cash flow hedge reserve recognized                               |  |             |  |             |  |                      |  |                           |  |                   |   |  |                             |   |  | (11,736                | ) |  |                 |   |  | (11,736                                     | ) |  |                 |   |  | (11,736    | )
|- Exchange difference arising on translation of foreign operations |  |             |  |             |  |                      |  |                           |  | (101,227           | ) |  |                             |   |  |                       |   |  |                 |   |  | (101,227                                    | ) |  |                 |   |  | (101,227   | )
|                                                                   |  |              |  |              |  |                       |  |                            |  |                    |   |  |                              |   |  |                        |   |  |                  |   |  |                                             |   |  |                  |   |  |            |  
|Total comprehensive income for the year                            |  |             |  |             |  |                      |  |                           |  | (101,227           | ) |  | (202,230                     | ) |  | (11,736                | ) |  | 6,488,908        |   |  | 6,173,715                                   |   |  | (9,297           | ) |  | 6,164,418  |  
|                                                                   |  |              |  |              |  |                       |  |                            |  |                    |  
|Transactions with owners                                           |  |              |  |              |  |                       |  |                            |  |                    |   |  |                              |   |  |                        |   |  |                  |   |  |                                             |   |  |                  |   |  |            |  
|- Dividends                                                        |  |             |  |             |  |                      |  |                           |  |                   |   |  |                             |   |  |                       |   |  | (836,128         | ) |  | (836,128                                    | ) |  | (292             | ) |  | (836,420   | )
|                                                                   |  |              |  |              |  |                       |  |                            |  |                    |   |  |                              |   |  |                        |   |  |                  |   |  |                                             |   |  |                  |   |  |            |  
|Balance at December 31, 2008                                       |  | 4,918,400    |  | 2,981,002    |  | 2,969,324             |  | 2,823,175                  |  | (115,169           | ) |  | 57,949                       |   |  | (11,736                | ) |  | 13,132,179       |   |  | 26,755,124                                  |   |  | 61,486           |   |  | 26,816,610 |  
|                                                                   |  |              |  |              |  |                       |  |                            |  |                    |   |  |                              |   |  |                        |   |  |                  |   |  |                                             |   |  |                  |   |  |            |  
|Balance at January 1, 2009                                         |  | 4,918,400    |  | 2,981,002    |  | 2,969,324             |  | 2,823,175                  |  | (115,169           | ) |  | 57,949                       |   |  | (11,736                | ) |  | 13,132,179       |   |  | 26,755,124                                  |   |  | 61,486           |   |  | 26,816,610 |  
|Appropriations to reserves                                         |  |             |  |             |  | 292,550               |  | 381,280                    |  |                   |   |  |                             |   |  |                       |   |  | (673,830         | ) |  |                                            |   |  |                 |   |  |           |  
|                                                                   |  |              |  |              |  |                       |  |                            |  |                    |  
|Profit for the year                                                |  |             |  |             |  |                      |  |                           |  |                   |   |  |                             |   |  |                       |   |  | 4,117,322        |   |  | 4,117,322                                   |   |  | 15,172           |   |  | 4,132,494  |  
|Other comprehensive income :                                       |  |              |  |              |  |                       |  |                            |  |                    |   |  |                              |   |  |                        |   |  |                  |   |  |                                             |   |  |                  |   |  |            |  
|- Fair value change of available-for-sale investments              |  |             |  |             |  |                      |  |                           |  |                   |   |  | 93,919                       |   |  |                       |   |  |                 |   |  | 93,919                                      |   |  |                 |   |  | 93,919     |  
|- Cash flow hedge reserve recognized                               |  |             |  |             |  |                      |  |                           |  |                   |   |  |                             |   |  | 18,618                 |   |  |                 |   |  | 18,618                                      |   |  |                 |   |  | 18,618     |  
|- Exchange difference arising on translation of foreign operations |  |             |  |             |  |                      |  |                           |  | 134,184            |   |  |                             |   |  |                       |   |  |                 |   |  | 134,184                                     |   |  |                 |   |  | 134,184    |  
|                                                                   |  |              |  |              |  |                       |  |                            |  |                    |   |  |                              |   |  |                        |   |  |                  |   |  |                                             |   |  |                  |   |  |            |  
|Total comprehensive income for the year                            |  |             |  |             |  |                      |  |                           |  | 134,184            |   |  | 93,919                       |   |  | 18,618                 |   |  | 4,117,322        |   |  | 4,364,043                                   |   |  | 15,172           |   |  | 4,379,215  |  
|                                                                   |  |              |  |              |  |                       |  |                            |  |                    |  
|Transactions with owners                                           |  |              |  |              |  |                       |  |                            |  |                    |   |  |                              |   |  |                        |   |  |                  |   |  |                                             |   |  |                  |   |  |            |  
|- Dividends                                                        |  |             |  |             |  |                      |  |                           |  |                   |   |  |                             |   |  |                       |   |  | (1,967,360       | ) |  | (1,967,360                                  | ) |  | (466             | ) |  | (1,967,826 | )
|- Acquisition of interests from minority shareholders              |  |             |  |             |  |                      |  |                           |  |                   |   |  |                             |   |  |                       |   |  |                 |   |  |                                            |   |  | (134,820         | ) |  | (134,820   | )
|- Acquisition of subsidiaries                                      |  |             |  |             |  |                      |  |                           |  |                   |   |  |                             |   |  |                       |   |  |                 |   |  |                                            |   |  | 161,114          |   |  | 161,114    |  
|                                                                   |  |              |  |              |  |                       |  |                            |  |                    |   |  |                              |   |  |                        |   |  |                  |   |  |                                             |   |  |                  |   |  |            |  
|Total transactions with owners                                     |  |             |  |             |  |                      |  |                           |  |                   |   |  |                             |   |  |                       |   |  | (1,967,360       | ) |  | (1,967,360                                  | ) |  | 25,828           |   |  | (1,941,532 | )
|                                                                   |  |              |  |              |  |                       |  |                            |  |                    |   |  |                              |   |  |                        |   |  |                  |   |  |                                             |   |  |                  |   |  |            |  
|Balance at December 31, 2009                                       |  | 4,918,400    |  | 2,981,002    |  | 3,261,874             |  | 3,204,455                  |  | 19,015             |   |  | 151,868                      |   |  | 6,882                  |   |  | 14,608,311       |   |  | 29,151,807                                  |   |  | 102,486          |   |  | 29,254,293 |  
|                                                                   |  |              |  |              |  |                       |  |                            |  |                    |   |  |                              |   |  |                        |   |  |                  |   |  |                                             |   |  |                  |   |  |            |  



F-8



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                                  |  |       |  |                         |   |  |            |   |  |            |  
|--------------------------------------------------------------------------------- |  | ----- |  | ----------------------- | - |  | ---------- | - |  | ---------- | -
|                                                                                  |  |       |  | Year ended December 31, |  
|                                                                                  |  | NOTES |  | 2009                    |   |  | 2008       |   |  | 2007       |  
|                                                                                  |  |       |  | RMB000                 |   |  | RMB000    |   |  | RMB000    |  
|OPERATING ACTIVITIES                                                              |  |       |  |                         |   |  |            |   |  |            |  
|                                                                                  |  |       |  |                        
|Profit before income taxes                                                        |  |       |  | 5,685,806               |   |  | 8,865,228  |   |  | 4,543,313  |  
|Adjustments for:                                                                  |  |       |  |                         |   |  |            |   |  |            |  
|Interest expenses                                                                 |  |       |  | 45,115                  |   |  | 38,360     |   |  | 27,222     |  
|Interest income                                                                   |  |       |  | (187,604                | ) |  | (275,220   | ) |  | (103,564   | )
|Dividend income                                                                   |  |       |  | (2,288                  | ) |  | (7,401     | ) |  | (7,143     | )
|Net unrealized foreign exchange losses                                            |  |       |  | 37,676                  |   |  | 284,278    |   |  |           |  
|Depreciation of property, plant and equipment                                     |  |       |  | 1,793,278               |   |  | 1,140,809  |   |  | 1,237,132  |  
|Release of prepaid lease payments                                                 |  |       |  | 17,027                  |   |  | 15,109     |   |  | 13,861     |  
|Amortization of prepayment for resources compensation fees                        |  |       |  | 2,761                   |   |  | 2,998      |   |  | 3,339      |  
|Amortization of intangible assets                                                 |  |       |  | 44,278                  |   |  | 35,652     |   |  | 15,728     |  
|Reversal of impairment loss on accounts receivable and other receivables          |  |       |  | (13,634                 | ) |  | (4,369     | ) |  | (4,363     | )
|Share of (income) loss of an associate                                            |  |       |  | (109,786                | ) |  | 67,367     |   |  | 2,438      |  
|(Gain) loss on disposal of property, plant and equipment                          |  |       |  | 11,252                  |   |  | (12,317    | ) |  | (25,002    | )
|Impairment loss on property, plant and equipment                                  |  |       |  | 14,199                  |   |  |           |   |  | 339,743    |  
|                                                                                  |  |       |  |                         |   |  |            |   |  |            |  
|Operating cash flows before movements in working capital                          |  |       |  | 7,338,080               |   |  | 10,150,494 |   |  | 6,042,704  |  
|                                                                                  |  |       |  |                        
|Increase in bills and accounts receivable                                         |  |       |  | (1,416,577              | ) |  | (217,012   | ) |  | (536,673   | )
|(Increase) decrease in inventories                                                |  |       |  | 228,862                 |   |  | (405,200   | ) |  | 145,891    |  
|Movement in land subsidence, restoration, rehabilitation and environmental cost   |  |       |  | 1,109,659               |   |  | 431,344    |   |  | 232,547    |  
|(Increase) decrease in prepayments and other current assets                       |  |       |  | 20,193                  |   |  | (1,242,027 | ) |  | (108,607   | )
|Increase (decrease) in bills and accounts payable                                 |  |       |  | (4,964                  | ) |  | 263,755    |   |  | (90,180    | )
|Increase in other payables and accrued expenses                                   |  |       |  | 622,093                 |   |  | 34,481     |   |  | 622,128    |  
|Increase in long-term payables                                                    |  |       |  | 3,980                   |   |  |           |   |  |           |  
|Increase (decrease) in amounts due to Parent Company and its subsidiary companies |  |       |  | 57,549                  |   |  | 40,749     |   |  | (315,065   | )
|                                                                                  |  |       |  |                         |   |  |            |   |  |            |  
|Cash generated from operations                                                    |  |       |  | 7,958,875               |   |  | 9,056,584  |   |  | 5,992,745  |  
|                                                                                  |  |       |  |                        
|Income taxes paid                                                                 |  |       |  | (1,596,774              | ) |  | (2,207,217 | ) |  | (1,520,081 | )
|Interest paid                                                                     |  |       |  | (28,501                 | ) |  | (36,511    | ) |  | (24,722    | )
|Interest income received                                                          |  |       |  | 184,243                 |   |  | 275,220    |   |  | 103,564    |  
|Dividend income received                                                          |  |       |  | 2,288                   |   |  | 7,401      |   |  | 7,143      |  
|                                                                                  |  |       |  |                         |   |  |            |   |  |            |  
|NET CASH FROM OPERATING ACTIVITIES                                                |  |       |  | 6,520,131               |   |  | 7,095,477  |   |  | 4,558,649  |  
|                                                                                  |  |       |  |                         |   |  |            |   |  |            |  



F-9



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWSContinued



|                                                                                                                   |  |       |  |                         |   |  |            |   |  |            |  
|------------------------------------------------------------------------------------------------------------------ |  | ----- |  | ----------------------- | - |  | ---------- | - |  | ---------- | -
|                                                                                                                   |  |       |  | Year ended December 31, |  
|                                                                                                                   |  | NOTES |  | 2009                    |   |  | 2008       |   |  | 2007       |  
|                                                                                                                   |  |       |  | RMB000                 |   |  | RMB000    |   |  | RMB000    |  
|INVESTING ACTIVITIES                                                                                               |  |       |  |                         |   |  |            |   |  |            |  
|                                                                                                                   |  |       |  |                        
|Decrease (increase) in term deposits                                                                               |  |       |  | (1,971,371              | ) |  | 141,599    |   |  | (100,453   | )
|Purchase of property, plant and equipment                                                                          |  |       |  | (2,133,726              | ) |  | (2,027,030 | ) |  | (2,772,586 | )
|Decrease in other loans receivable                                                                                 |  |       |  |                        |   |  | 640,000    |   |  |           |  
|(Increase) decrease in restricted cash                                                                             |  |       |  | (432,492                | ) |  | (50,412    | ) |  | 59,404     |  
|Increase in deposit made on investment                                                                             |  |       |  | (57,095                 | ) |  |           |   |  | (20,500    | )
|Proceeds on disposal of property, plant and equipment                                                              |  |       |  | 79,626                  |   |  | 19,829     |   |  | 31,593     |  
|Acquisition of Hua Ju Energy                                                                                       |  | 43    |  | (761,683                | ) |  |           |   |  |           |  
|Acquisition of Felix                                                                                               |  | 44    |  | (19,558,544             | ) |  |           |   |  |           |  
|Acquisition of Shanxi Group                                                                                        |  |       |  |                        |   |  |           |   |  | (14,965    | )
|Acquisition of mining rights in Southland                                                                          |  |       |  |                        |   |  |           |   |  | (61,923    | )
|Acquisition of mining rights in Zhaolou                                                                            |  |       |  |                        |   |  | (747,339   | ) |  |           |  
|Purchase of intangible assets                                                                                      |  |       |  | (233                    | ) |  |           |   |  |           |  
|Purchase of land use right                                                                                         |  |       |  | (7,420                  | ) |  | (68,136    | ) |  | (11,515    | )
|Investment in an associate                                                                                         |  |       |  |                        |   |  |           |   |  | (900,000   | )
|                                                                                                                   |  |       |  |                         |   |  |            |   |  |            |  
|NET CASH USED IN INVESTING ACTIVITIES                                                                              |  |       |  | (24,842,938             | ) |  | (2,091,489 | ) |  | (3,790,945 | )
|                                                                                                                   |  |       |  |                         |   |  |            |   |  |            |  
|FINANCING ACTIVITIES                                                                                               |  |       |  |                         |   |  |            |   |  |            |  
|                                                                                                                   |  |       |  |                        
|Dividend paid                                                                                                      |  |       |  | (1,967,360              | ) |  | (836,128   | ) |  | (983,680   | )
|Proceeds from bank borrowings                                                                                      |  |       |  | 20,840,505              |   |  |           |   |  |           |  
|Repayments of bank borrowings                                                                                      |  |       |  | (188,705                | ) |  | (72,000    | ) |  | (50,000    | )
|Repayment to Parent Company and its subsidiary companies in respect of consideration for acquisition of Jining
III |  |       |  | (13,248                 | ) |  | (13,248    | ) |  | (8,689     | )
|Dividend paid to a minority shareholder of a subsidiary                                                            |  |       |  | (201                    | ) |  | (292       | ) |  | (330       | )
|Dividend paid to the former shareholders of Hua Ju Energy                                                          |  |       |  | (47,250                 | ) |  |           |   |  |           |  
|Repayment of borrowings to Parent Company                                                                          |  |       |  | (120,000                | ) |  |           |   |  |           |  
|Contribution from a minority shareholder of a subsidiary                                                           |  |       |  |                        |   |  |           |   |  | 24,000     |  
|                                                                                                                   |  |       |  |                         |   |  |            |   |  |            |  
|NET CASH FROM (USED IN) FINANCING ACTIVITIES                                                                       |  |       |  | 18,503,741              |   |  | (921,668   | ) |  | (1,018,699 | )
|                                                                                                                   |  |       |  |                         |   |  |            |   |  |            |  
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                                               |  |       |  | 180,934                 |   |  | 4,082,320  |   |  | (250,995   | )
|CASH AND CASH EQUIVALENTS, AT JANUARY 1                                                                            |  |       |  | 8,439,578               |   |  | 4,424,561  |   |  | 4,715,945  |  
|EFFECT OF FOREIGN EXCHANGE RATE CHANGES                                                                            |  |       |  | (98,113                 | ) |  | (67,303    | ) |  | (40,389    | )
|                                                                                                                   |  |       |  |                         |   |  |            |   |  |            |  
|CASH AND CASH EQUIVALENTS, AT DECEMBER 31, REPRESENTED BY BANK BALANCES AND CASH                                   |  |       |  | 8,522,399               |   |  | 8,439,578  |   |  | 4,424,561  |  
|                                                                                                                   |  |       |  |                         |   |  |            |   |  |            |  



F-10



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL

Organization and principal activities

Yanzhou Coal Mining Company Limited (the Company) is established as a joint stock company with limited liability in the Peoples Republic
of China (the PRC). In April 2001, the status of the Company was changed to that of a sino-foreign joint stock limited company. The Companys A shares are listed on the Shanghai Securities Exchange (SSE), its H shares
are listed on The Stock Exchange of Hong Kong (the SEHK), and its American Depositary Shares (ADS, one ADS represents 10 H shares) are listed on the New York Stock Exchange, Inc. The addresse of the registered office and
principal place of business of the Company is 298 Fushan South Road, Zoucheng, Shandong Province, PRC.

The Company operates six coal mines,
namely the Xinglongzhuang coal mine, Baodian coal mine, Nantun coal mine, Dongtan coal mine, Jining II coal mine (Jining II) and Jining III coal mine (Jining III), as well as a regional rail network that links these mines
with the national rail network. The Companys parent and ultimate holding company is Yankuang Group Corporation Limited (the Parent Company), a state-owned enterprise in the PRC.

The principal activities of the Companys associate and joint ventures are set out in notes 29, 31 and 32 respectively.

As at December 31, 2009, the Group has a net current assets of RMB9,590,547,000 (2008: RMB9,697,406,000) and total assets less current liabilities
of RMB52,022,190,000 (2008:RMB27,041,640,000).

Acquisitions and establishment of major subsidiaries

In 2006, the Company acquired a 98% equity interest in Yankuang Shanxi Neng Hua Company Limited (Shanxi Neng Hua) and its subsidiaries
(collectively referred as the Shanxi Group) from the Parent Company at cash consideration of RMB733,346,000. The principal activities of Shanxi Group are to invest in heat and electricity, manufacture and sale of mining machinery and
engine products, coal mining and the development of integrated coal technology.

Shanxi Neng Hua is an investment holding company, which holds
81.31% equity interest in Shanxi Heshun Tianchi Energy Company Limited (Shanxi Tianchi) and approximately 99.85% equity interest in Shanxi Tianhao Chemicals Company Limited (Shanxi Tianhao). The principal activities of Shanxi
Tianchi are to exploit and sale of coal from Tianchi Coal Mine, the principal asset of Shanxi Tianchi. Shanxi Tianchi has completed the construction of Tianchi Coal Mine and commenced production by the end of 2006. Shanxi Tianhao is established to
engage in the production of methanol and other chemical products, coke production, exploration and sales. The construction of the methanol facilities by Shanxi Tianhao commenced in March 2006 and it has commenced production in 2008. In 2007, the
Company further acquired the remaining 2% equity interest in Shanxi Neng Hua from a subsidiary of the Parent Company at cash consideration of RMB14,965,000.



F-11



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

1. GENERALContinued



The Company originally held a 97% equity interest in Yanzhou Coal Yulin Power Chemical Co., Ltd.
(Yulin). In 2008, the Company acquired the remaining 3% equity interest in Yulin. Moreover, the Company made further investment of RMB600,000,000 in Yulin in 2008.

In February 2009, the Company acquired 74% equity interest in Shandong Hua Ju Energy Company Limited (Hua Ju Energy) from the Parent Company
at a consideration of RMB593,243,000. Hua Ju Energy is a joint stock limited company established in the PRC with the principal business of the supply of electricity and heat by utilizing coal gangue and coal slurry produced from coal mining process.
In July 2009, the Company entered into acquisition agreements with three shareholders of Hua Ju Energy, pursuant to which, the Company agreed to acquire 21.14% equity interest in Hua Ju Energy at a consideration of RMB173,007,000.

During the year, the Company entered into a binding scheme implementation agreement with Felix Resources Limited (Felix), a corporation
incorporated in Australia with shares listed on the Australian Securities Exchange, to acquire all the shares of Felix in cash of approximately AUD3,333 million (equivalent to approximately RMB20,428 million). The principal activities of Felix are
exploring and extracting coal resources, operating, identifying, acquiring and developing resource related projects that primarily focus on coal in Australia. This acquisition was completed in the current year.

During the year, the Company invested RMB500 million to set up a wholly owned subsidiary located in Inner Mongolia, Yanzhou Coal Ordos Neng Hua Company
Limited (Ordos). Ordos is a limited liability company incorporated in the PRC with the objectives of production and sale of methanol and other chemical products. As at December 31, 2009, Ordos has not yet commenced any construction
and production projects.

2. BASIS OF PRESENTATION

The accompanying consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board. The consolidated financial statements were approved and authorized for issue by the Board of Directors on June 29, 2010.

The consolidated financial statements are presented in Renminbi, which is also the functional currency of the Company.

3. ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS

In the current year, the Group has applied, for the first time, a number of new standards and interpretations, and amended and revised standards and
interpretations (new IFRSs) applicable to the Group issued by the International Accounting Standards Board (the IASB) and the International Financial Reporting Interpretations Committee (the IFRIC) of IASB, which are
effective for the Groups financial year beginning January 1, 2009.



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YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

3. ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDSContinued



|                             |  |                                                                              
|---------------------------- |  | -----------------------------------------------------------------------------
|IFRSs (Amendments)           |  | Improvements to IFRSs 2008                                                   
|IAS 1 (Revised)              |  | Presentation of Financial Statements                                         
|IAS 23 (Revised)             |  | Borrowing Costs                                                              
|IFRS 1 & IAS 27 (Amendments) |  | Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate
|IFRS 7 (Amendment)           |  | Improving Disclosures about Financial Instruments                            
|IFRS 8                       |  | Operating Segments                                                           

Except for those new accounting
policies effective for the financial year beginning January 1, 2009 as applied in these financial statements of the Group, the accounting policies adopted for the current year are the same as those adopted for the Groups financial
statements for the year ended December 31, 2008. The new IFRSs, which have a significant impact on the financial statements of the Group, are as follows:



| |  |  | IAS 1 (Revised) - Presentation of Financial Statements: IAS 1 (Revised) materially changes the presentation of the Groups financial statements.
The amendments affect the presentation of owner changes in equity and introduce a statement of comprehensive income. The Group have the option of presenting items of income and expenses and components of other comprehensive income either in a single
statement of comprehensive income with subtotals, or in two separate statements (a separate income statement followed by a statement of comprehensive income). The amendment does not affect the financial position or results of the Group but gives
rise to additional disclosures. The Group adopts IAS 1 (Revised) from January 1, 2009, and presents items of income and expenses and components of other comprehensive income in two separate statements (a separate income statement followed by a
statement of comprehensive income).
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | IFRS 7 (Amendment) - Improving Disclosures about Financial Instruments: This amendment gives rise to additional disclosures on financial instruments,
including disclosures of a three-level fair value hierarchy.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | IFRS 8 - Operating Segments: The accounting policy for identifying segments is based on internal management reporting information that is regularly
reviewed by the Groups chief operating decision maker for the purposes of allocating resources to the segments and assessing their performances.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The adoption of the new IFRSs had no material effect on how the financial statements for the current or prior accounting years have been prepared.
Accordingly, no prior year adjustment has been required.

The Group has not early applied the following new and revised standards, amendments
or interpretations that have been issued but are not yet effective.



|                   |  |                                                
|------------------ |  | -----------------------------------------------
|IFRSs (Amendments) |  | Improvements to IFRSs
20091                    
|IAS 24 (Revised)   |  | Related Party
Disclosures2                     
|IAS 27 (Revised)   |  | Consolidated and Separate Financial
Statements3
|IAS 39 (Amendment) |  | Eligible Hedged
Items3                         
|IFRS 3 (Revised)   |  | Business
Combinations3                         
|IFRS 9             |  | Financial
Instruments4                         
|IFRSs (Amendments) |  | Improvements to IFRSs
20105                    



|1 | Effective for annual periods beginning on or after July 1, 2009 and January 1, 2010, as appropriate
|- | ---------------------------------------------------------------------------------------------------



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YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

3. ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDSContinued



|2 | Effective for annual periods beginning on or after January 1, 2011
|- | ------------------------------------------------------------------

|3 | Effective for annual periods beginning on or after July 1, 2009
|- | ---------------------------------------------------------------

|4 | Effective for annual periods beginning on or after January 1, 2013
|- | ------------------------------------------------------------------

|5 | Effective for annual periods beginning on or after July 1, 2010 and January 1, 2011, as appropriate
|- | ---------------------------------------------------------------------------------------------------

The adoption of IFRS 3 (Revised) may affect the accounting for business combination for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after July 1, 2009. IAS 27 (Revised) will affect the accounting treatment for changes in a parents ownership interest in a subsidiary that do not result in a loss of control, which will be
accounted for as an equity transaction.

IFRS 9 Financial Instruments introduces new requirements for the classification and
measurement of financial assets and will be effective from January 1, 2013, with earlier application permitted. The standard requires all recognized financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and
Measurementto be measured at either amortized cost or fair value. Specifically, debt investments that (i) are held within a business model whose objective is to collect the contractual cash flows and (ii) have contractual cash flows
that are solely payments of principal and interest on the principal outstanding are generally measured at amortized cost. All other debt investments and equity investments are measured at fair value.

IAS 24 (Revised) clarifies and simplifies the definition of related party. It introduces certain exemptions on disclosure requirements in respect of
transactions between government-related entities and government, and other government-related entities.

Except for the abovementioned
standards or interpretations, the directors are evaluating the impact of application of other standards or interpretations on the Groups future results and financial statements.

4. SIGNIFICANT ACCOUNTING POLICIES

The
consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments, which are stated at fair value. The principal accounting policies are set out below.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries).
Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of
acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of
subsidiaries to bring their accounting policies into line with those used by other members of the Group.



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

4. SIGNIFICANT ACCOUNTING POLICIESContinued

Basis of consolidationContinued



All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Minority interests in the net assets of consolidated subsidiaries are presented separately from the Groups equity therein. Minority interests in
the net assets consist of the amount of those interests at the date of the original business combination and the minoritys share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the
minoritys interest in the subsidiarys equity are allocated against the interests of the Group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses.

Business combination

The acquisition of business is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at
the date of exchange, of assets given and liabilities incurred or assumed by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquirees identifiable assets, liabilities
and contingent liabilities are recognized at their fair values at the acquisition date according to IFRS 3 Business Combinations.

Goodwill
arising on acquisition is recognized as an asset and initially measured at cost, being the excess of the cost of the business combination over the Groups interest in the net fair value of the identifiable assets, liabilities and contingent
liabilities recognized. If, after reassessment, the Groups interest in the net fair value of the acquirees identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognized
immediately in profit or loss.

The interest of minority shareholders in the acquiree is initially measured at the minoritys proportion
of the net fair value of the assets, liabilities and contingent liabilities recognized.

Acquisition of additional
interests in subsidiary

Goodwill arising on acquisition of additional interest in subsidiary represents the excess of the cost of
acquisition over the carrying value of the net assets attributable to the additional interest in the subsidiary.

Interests in associates

An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture.

The results and assets and liabilities of associates are incorporated in these consolidated financial statements using the equity method of accounting.
Under the equity method, investments in associates are carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the Groups share of net assets of the associates, less any identified impairment loss. When
the Groups share of losses of an associate equals or exceeds its interest in that associate (which includes any long-term interests that, in substance, form part of the Groups net investment in the associate), the Group discontinues
recognizing its share of further losses. An additional share of losses is provided for and a liability is recognized only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of that associate. If
the associate subsequently reports profits, the Group resumes recognizing its share of those profits only after its share of the profits exceeds the accumulated share of losses that has previously not been recognized.



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

4. SIGNIFICANT ACCOUNTING POLICIESContinued

Interests in associatesContinued



Any excess of the cost of acquisition over the Groups share of the net fair value of the
identifiable assets, liabilities and contingent liabilities of the associate recognized at the date of acquisition is recognized as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as
part of the investment. Any excess of the Groups share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognized immediately in profit or loss.

Where a group entity transacts with an associate of the Group, profits and losses are eliminated to the extent of the Groups interest
in the relevant associate.

Interests in joint ventures

A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control (i.e.
when the strategic financial and operating policy decisions relating to the activities of the joint venture require the unanimous consent of the parties sharing control).

When a group entity undertakes its activities under joint venture arrangements directly, the Groups share of jointly controlled assets and any
liabilities incurred jointly with other venturers are recognized in the financial statements of the relevant entity and classified according to their nature. Liabilities and expenses incurred directly in respect of interests in jointly controlled
assets are accounted for on an accrual basis. Income from the sale or use of the Groups share of the output of jointly controlled assets, and its share of joint venture expenses, are recognized when it is probable that the economic benefits
associated with the transactions will flow to/from the Group and their amount can be measured reliably.

Joint venture arrangements that
involve the establishment of a separate entity in which each venturer has an interest are referred to as jointly controlled entities. The Group reports its interests in jointly controlled entities using equity method of accounting and the details of
equity method of accounting have been set out in the accounting policy for interests in associates. When a group entity transacts with a jointly controlled entity of the Group, unrealized profits and losses are eliminated to the extent of the
Groups interest in the joint venture.

The Groups share using proportionate consolidation of the assets, liabilities, revenue and
expenses of other joint ventures (no separate entity has been established) are included in the appropriate items of the financial statements.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods sold and services provided
in the normal courses of business, net of discounts and sales related taxes. Provided it is probable that the economic benefits will flow to the Group and the revenue and costs, if applicable, can be measured reliably, revenue is recognized in
profit or loss as follows:

Sales of goods are recognized when goods are delivered and title has been passed.

Service income is recognized when services are provided.



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

4. SIGNIFICANT ACCOUNTING POLICIESContinued

Revenue recognitionContinued



Interest income from a financial asset is accrued on a time basis, by reference to the principal
outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial assets to that assets net carrying amount.

Dividend income from investments is recognized when the shareholders rights to receive payments have been established.

Intangible assets (other than goodwill)

Intangible assets acquired separately

Intangible assets acquired separately are carried at cost less accumulated amortization and accumulated impairment losses. Amortization is recognized over
their estimated useful lives. The estimated useful life and amortization method are reviewed at the end of each annual reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.

Internally-generated intangible assets  research and development expenditure

Expenditure on research activities is recognized as an expense in the period in which it is incurred.

An internally-generated intangible asset arising from development expenditure is recognized only if it is anticipated that the development costs incurred
on a clearly-defined project will be recovered through future commercial activity. The resultant asset is amortized on a straight line basis over its useful life. Expenditure incurred on projects to develop new products is capitalized only when the
Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic
benefits, the availability of resources to complete the project and the ability to measure reliably the expenditure during the development.

No development expenditure has been deferred by the Company.

Intangible assets acquired in a business combination

Intangible assets acquired in a business combination and recognized separately from goodwill are initially recognized at their fair value at the
acquisition date (which is regarded as their cost).

Subsequent to initial recognition, intangible assets acquired in a business combination
are reported at cost less accumulated amortization and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

4. SIGNIFICANT ACCOUNTING POLICIESContinued

Intangible assets (other than goodwill)Continued



(i) Coal reserves

Coal reserves represent the portion of total proven and probable reserves in the coal mine of a mining right. Coal reserves are amortized on a straight
line basis over the shorter of their useful life estimated based on the total proven and probable reserves of the coal mine or contractual period from the date of acquisition which approximates the date from which they are available for use, or are
amortized over the life of the mine on a unit of production basis of Australia Joint Ore Reserves Committee (JORC) reserves. Changes in the annual amortization rate resulting from changes in the remaining JORC reserves are applied on a
prospective basis from the commencement of the next financial year.

(ii) Coal resources

Coal resources represent the fair value of economically recoverable reserves (excluding the portion of total proven and probable reserves of coal mines of
a mining right i.e. does not include the above coal reserves) of coal mines of a mining right (Details are set out in the accounting policy of exploration and evaluation expenditure). When production commences, the coal resources for the relevant
areas of interest are amortized over the life of the area according to the rate of depletion of the economically recoverable reserves.

(iii) Rail access rights

Rail access rights are amortized on a straight line basis or on a unit of production basis under agreement over the life of the mine.

Exploration and evaluation expenditure

Exploration and evaluation expenditure incurred is accumulated in respect of each separately identifiable area of interest which is at individual mine
level. These costs are only carried forward where the right of tenure for the area of interest is current and to the extent that they are expected to be recouped through successful development and commercial exploitation, or alternatively, sale of
the area, or where activities in the area have not yet reached a stage which permits reasonable assessment of the existence of economically recoverable reserves and active and significant operations in, or in relation to, the area of interest are
continuing.

The carrying amount of exploration and evaluation assets is assessed for impairment when facts or circumstances suggest the
carrying amount of the assets may exceed their recoverable amount.

A regular review is undertaken of each area of interest to determine the
appropriateness of continuing to carry forward costs in relation to that area of interest. Accumulated costs in relation to an abandoned area are written-off in full in the period in which the decision to abandon the area is made.



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

4. SIGNIFICANT ACCOUNTING POLICIESContinued

Exploration and evaluation expenditureContinued



When production commences, the accumulated costs for the relevant area of interest are amortized over
the life of the area according to the rate of depletion of the economically recoverable reserves.

Capitalized exploration and evaluation
expenditure considered to be tangible is recorded as a component of property, plant and equipment. Otherwise, it is recorded as an intangible asset.

Exploration and evaluation expenditure acquired in a business combination are recognized at their fair value at the acquisition date (the fair value of
potential economically recoverable reserves at the acquisition date which is shown as coal resources)

Prepaid lease payments

Prepaid lease payments represent land use rights under operating lease arrangement and are stated at cost less accumulated amortization and accumulated
impairment losses.

Property, plant and equipment

Property, plant and equipment, other than construction in progress and freehold land, are stated at cost less subsequent accumulated depreciation and
accumulated impairment losses.

Depreciation is charged so as to write off the cost of items of property, plant and equipment, other than
construction in progress and freehold land, over their estimated useful lives and after taking into account their estimated residual value, using the straight line method or unit of production method.

Construction in progress represents property, plant and equipment under construction for production or for its own use purposes. Construction in progress
is carried at cost less any impairment loss. Construction in progress is classified to the appropriate category of property, plant and equipment when completed and ready for intended use. Depreciation commences when the assets are ready for their
intended use.

Any gain or loss arising on the disposal of an item of property, plant and equipment is determined as the difference between
the sales proceeds and the carrying amount of the asset and is recognized in the consolidated income statement.

Impairment other than goodwill

At each balance sheet date, the Group reviews the carrying amounts of its tangible assets and intangible assets with finite useful life to determine
whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset (determined at the higher of its fair value less costs to sell and its value in use) is estimated
in order to determine the extent of the impairment loss (if any). Intangible assets with an indefinite useful life will be tested for impairment annually.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset
(cash-generating unit) is reduced to its recoverable amount. Impairment loss is recognized as an expense immediately.



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YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

4. SIGNIFICANT ACCOUNTING POLICIESContinued

Impairment other than goodwillContinued



Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit)
is increased to the revised estimate of its recoverable amount, but such that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (cash-generating
unit) in prior years. A reversal of an impairment loss is recognized as an income immediately.

Goodwill

Goodwill arising on acquisitions prior to January 1, 2005

Goodwill arising on an acquisition of net assets and operations of another entity for which the agreement date is before January 1, 2005 represents
the excess of the cost of acquisition over the Groups interest in the fair value of the identifiable assets and liabilities of the relevant acquiree at the date of acquisition.

For previously capitalized goodwill arising on acquisitions of net assets and operations of another entity after January 1, 2001, the Group has
discontinued amortization from January 1, 2005 onwards, and such goodwill is tested for impairment annually, and whenever there is an indication that the cash-generating unit to which the goodwill relates may be impaired (see the accounting
policy below).

Goodwill arising on acquisitions on or after January 1, 2005

Goodwill arising on an acquisition of a business for which the agreement date is on or after January 1, 2005 represents the excess of the cost of
acquisition over the Groups interest in the fair value of the identifiable assets, liabilities and contingent liabilities of the relevant business at the date of acquisition. Such goodwill is carried at cost less any accumulated impairment
losses.

Goodwill is presented separately in the consolidated balance sheet.

For the purposes of impairment testing, goodwill is allocated to each of the Groups cash-generating units expected to benefit from the synergies of
the acquisition. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is
less than the carrying amount of the unit, the impairment loss is allocated to reduce the carrying amount of any goodwill allocated to the unit first and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset
in the unit. Any impairment is recognized immediately in the consolidated income statement and is not subsequently reversed.

On disposal of
the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the gain or loss on disposal.



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

4. SIGNIFICANT ACCOUNTING POLICIESContinued



Inventories

Inventories of coal and methanol are stated at the lower of cost and net realizable value. Cost, which comprises direct materials and, where applicable,
direct labour and overheads that have been incurred in bringing the inventories to their present location and condition, is calculated using the weighted average method. Net realizable value represents the estimated selling price less all further
costs to completion and costs to be incurred in selling, marketing and distribution.

Inventories of auxiliary materials, spare parts and
small tools expected to be used in production are stated at weighted average cost less allowance, if necessary, for obsolescence.

Overburden in advance

Overburden in advance comprises the accumulation of expenses incurred to enable access to the coal seams, and includes direct removal costs, machinery and
plant running costs. The deferred costs are then charged to the consolidated income statement in subsequent periods on the basis of run-of-mine (ROM) coal tonnes mined. This is calculated by multiplying the ROM coal tonnes mined during
the period by the weighted average cost to remove a bank cubic metre (BCM) of waste by the stripping ratio (ratio of waste removed in BCMs to ROM coal tonnes mined). The stripping ratio of the Companys Australian subsidiaries is
based on the JORC reserves of each mine.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated income statement
because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Groups liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the balance sheet date.

Deferred tax is recognized on differences between the carrying amounts of assets
and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit, and are accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognized for
all taxable temporary differences, and deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilized. Such assets and liabilities are not
recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognized for taxable temporary differences arising on investments in subsidiaries, associates and joint
ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient
taxable profit will be available to allow all or part of the asset to be recovered.



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

4. SIGNIFICANT ACCOUNTING POLICIESContinued

TaxationContinued



Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability
is settled or the asset realised. Deferred tax is charged or credited in the consolidated income statement, except when it relates to items that are recognized in other comprehensive income or directly to equity, in which case the deferred tax is
also recognized in other comprehensive income or directly in equity respectively.

Deferred tax assets and liabilities are offset when they
relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Felix and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under the tax consolidation regime. Each entity in the
tax consolidated group recognizes its own deferred tax assets and liabilities, except where the deferred tax assets relate to unused tax losses and credits, in which case Felix recognizes the assets. Felix group has entered into a tax sharing
agreement whereby each company in the Felix group contributes to the income tax payable in proportion to their contribution to the profit before tax of the tax consolidated group. The tax consolidated group has also entered into a tax funding
agreement whereby each entity in the Felix group can recognize their balance of the current tax assets and liabilities through inter-entity accounts.

Land subsidence, restoration, rehabilitation and environmental costs

One consequence of coal mining is land subsidence caused by the resettlement of the land above the underground mining sites. Depending on the
circumstances, the Group may relocate inhabitants from the land above the underground mining sites prior to mining those sites or the Group may compensate the inhabitants for losses or damages from land subsidence after the underground sites have
been mined. The Group may also be required to make payments for restoration, rehabilitation or environmental protection of the land after the underground sites have been mined.

An estimate of such costs is recognized in the period in which the obligation is identified and is charged as an expense in proportion to the coal
extracted. At each balance sheet date, the Group adjusts the estimated costs in accordance with the actual land subsidence status.

Leases

Leases of
fixed assets where substantially all the risks and benefits incidental to ownership of the assets, but not the legal ownership, are transferred to the entities in the Group are classified as finance leases. Finance leases are capitalized, recording
an asset and a liability equal to the lower of the fair value of the leased property plus transaction costs incurred or the present value of the minimum lease payments, including any guaranteed residual value. Leased assets are depreciated on a
straight-line basis over their estimated useful lives where it is likely that the Group will obtain ownership of the assets or over the shorter of the assets useful life and the term of the lease. Lease payments are allocated between the
reduction of the lease liability and lease finance charges for the year.



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YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

4. SIGNIFICANT ACCOUNTING POLICIESContinued

LeasesContinued



The net gains arising on the sale of an asset and the leasing back of the same asset using a finance
lease are included as deferred income in the balance sheet and are released to the consolidated income statement on a straight-line basis over the term of the lease.

Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses on a straight-line
basis over the term of the lease.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a
substantial period of time to get ready for their intended use or sale, are capitalized as part of the cost of those assets. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets
is deducted from the borrowing costs eligible for capitalization.

All other borrowings costs are recognized as expenses in the period in
which they are incurred.

Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than the functional currency of that entity
(foreign currencies) are recorded in the respective functional currency (i.e., the currency of the primary environment in which the entity operates) at the rates of exchanges prevailing on the dates of the transactions. At each balance sheet date,
monetary items denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing on the
date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are recognized in profit or loss in the
period in which they arise.

For the purposes of presenting the consolidated financial statements, the assets and liabilities of the
Groups foreign operations are translated into the presentation currency of the Company (i.e. Renminbi) at the rate of exchange prevailing at the balance sheet date, and their income and expenses are translated at the average exchange rates for
the year, unless exchange rates fluctuate significantly during the period, in which case, the exchange rates prevailing at the dates of transactions are used. Exchange differences arising, if any, are recognized in other comprehensive income and
accumulated in equity (attributed to minority interests as appropriate). Such exchange differences are recognized in profit or loss in the period in which the foreign operation is disposed of.



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YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

4. SIGNIFICANT ACCOUNTING POLICIESContinued



Government grants

Government grants are recognized as income over the periods necessary to match them with the related costs. If the grants do not relate to any specific
expenditure incurred by the Group, they are reported separately as other income. If the grants subsidize an expense incurred by the Group, they are deducted in reporting the related expense. Grants relating to depreciable assets are presented as a
deduction from the cost of the relevant asset.

Annual leave, sick leave and long service leave

Benefits accruing to employees in respect of wages and salaries, annual leave and sick leave are included in trade and other payables. Related on-costs
are also included in trade and other payables as other creditors. Long service leave is provided for when it is probable that settlement will be required and it is capable of being measured reliably.

Employee benefits expected to be settled within 12 months are measured using the remuneration rate expected to apply at the time of settlement.
Provisions made in respect of employee benefits which are not expected to be settled within 12 months are measured as the present value of the estimated future cash outflows to be made by the Group in respect of services provided by employees up to
the reporting date.

Retirement benefit costs

Payments to defined contribution retirement benefit plans are charged as expenses when the employees render the services entitling them to the
contributions.

Financial instruments

Financial assets and financial liabilities are recognized when the Group becomes a party to the contractual provisions of the instrument. Financial assets
and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair
value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or
financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

Financial assets

The Groups financial assets are classified into loans and receivables and available-for-sale financial assets. All regular way
purchases or sales of financial assets are recognized and derecognized on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation
or convention in the marketplace. The accounting policies adopted in respect of financial assets are set out below.



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

4. SIGNIFICANT ACCOUNTING POLICIESContinued

Financial instrumentsContinued

Financial assetsContinued



Loan and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loan and
receivables (including bank balances and cash, term deposits, restricted cash, bills and accounts receivable and other receivables) are initially measured at fair value and subsequently measured at amortized cost using the effective interest method,
less any identified impairment loss.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated or not classified as financial assets at fair value through profit or
loss, loans and receivables or held-to-maturity investments.

At each balance sheet date subsequent to initial recognition, available-for-sale
financial assets are measured at fair value. Changes in fair value are recognized initially in other comprehensive income and accumulated in equity, until the financial asset is disposed of or is determined to be impaired, at which time, the
cumulative gain or loss previously recognized in equity is removed from equity and recognized in profit or loss (see accounting policy on impairment loss on financial assets below).

Available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are
measured at cost less any identified impairment losses at each balance sheet date subsequent to initial recognition (see accounting policy on impairment loss on financial assets below).

Impairment of financial assets

Financial assets are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence
that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial assets have been impacted.

For an available-for sale equity investment, a significant or prolonged decline in the fair value of that investment below its cost is considered to be
objective evidence of impairment.

For all other financial assets, objective evidence of impairment could include:



| |  |  | significant financial difficulty of the issuer or counterparty; or
| | - |  | ------------------------------------------------------------------



| |  |  | default or delinquency in interest or principal payments; or
| | - |  | ------------------------------------------------------------



| |  |  | it becoming probable that the borrower will enter bankruptcy or financial re-organization.
| | - |  | ------------------------------------------------------------------------------------------

For certain categories of financial asset, such as trade and bills receivables, assets that are assessed not to be impaired individually are subsequently
assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Groups past experience of collecting payments and changes in national or local economic conditions that correlate
with default on receivables.



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

4. SIGNIFICANT ACCOUNTING POLICIESContinued

Financial instrumentsContinued

Financial assetsContinued

Impairment of financial assetsContinued



For financial assets carried at amortized cost, an impairment loss is recognized in profit or loss when
there is objective evidence that the asset is impaired, and is measured as the difference between the assets carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate.

For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the assets carrying
amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade and bills
receivables and other receivables, where the carrying amounts are reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss. When a trade and bills receivables and other
receivables are considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss.

For financial assets measured at amortized cost, if, in a subsequent period, the amount of impairment loss decreases and the decrease can be related
objectively to an event occurring after the impairment losses was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset at the date the impairment is reversed
does not exceed what the amortized cost would have been had the impairment not been recognized.

Impairment losses on available-for-sale
equity investments will not be reversed in profit or loss in subsequent periods. Any increase in fair value subsequent to impairment loss is recognized initially in other comprehensive income and accumulated in equity.

Financial liabilities and equity

Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into
and the definitions of a financial liability and an equity instrument.

An equity instrument is any contract that evidences a residual
interest in the assets of the Group after deducting all of its liabilities.



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

4. SIGNIFICANT ACCOUNTING POLICIESContinued

Financial instrumentsContinued

Financial liabilities and equityContinued



Financial liabilities

The Groups financial liabilities including accounts payable and bills, other payables, amounts due to Parent Company and its subsidiary companies
and bank borrowings are subsequently measured at amortized cost, using the effective interest method.

Equity
instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Derecognition

Financial assets are derecognized when the rights to receive cash flows from the assets expire or, the financial assets are transferred and the Group has
transferred substantially all the risks and rewards of ownership of the financial assets. On derecognition of a financial asset, the difference between the assets carrying amount and the sum of the consideration received and receivable and the
cumulative gain or loss that had been recognized directly in equity is recognized in profit or loss.

Financial liabilities are derecognized
when the obligation specified in the relevant contract is discharged, cancelled or expires. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.

Accounting for derivative financial instruments and hedging activities

Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value.
The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as either: (i) hedges of the
fair value of recognized assets or liabilities (fair value hedge); and (ii) hedges of highly probable forecast transactions (cash flow hedge).

The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management
objectives and strategy for undertaking various hedging transactions. The Group also documents its assessment, both at the inception of the hedge and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly
effective in offsetting changes in fair values or cash flows of the hedged items.

The fair values of various derivative instruments used for
hedging purposes are disclosed in note 37. The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months and as a current asset or liability when
the remaining maturity of the hedged item is less than 12 months.



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

4. SIGNIFICANT ACCOUNTING POLICIESContinued

Financial instrumentsContinued

Accounting for derivative financial instruments and hedging activitiesContinued



(i) Fair value hedge

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognized initially in consolidated income statement
immediately, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. To the extent that the derivative is not effective as a hedge, gains and losses are recognized in the consolidated
income statement as gains or losses on derivative instruments.

(ii) Cash flow hedge

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognized initially in other
comprehensive income and accumulated in equity. The gain or loss relating to the ineffective portion is recognized immediately in the consolidated income statement. Amounts accumulated in equity are recognized in the consolidated income statement as
the underlying hedged items are recognized.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for
hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognized when the forecast transaction is ultimately recognized in the consolidated income statement. When a forecast transaction is no longer
expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the consolidated income statement.

(iii) Derivatives that do not qualify for hedge accounting and those not designated as hedge

Changes in the fair value of any derivative instruments that do not qualify for hedge accounting and those not designated as hedges are recognized
immediately in the consolidated income statement.

5. KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Groups accounting policies, which are described in note 4, management is required to make judgements, estimates and
assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



5. KEY SOURCES OF ESTIMATION UNCERTAINTYContinued



Depreciation of property, plant and equipment

The cost of mining structures is depreciated using the unit of production method based on the estimated production volume for which the
structure was designed. The management exercises their judgment in estimating the useful lives of the depreciable assets and the production volume of the mine. The estimated coal production volumes are updated at regular basis and have taken into
account recent production and technical information about each mine. These changes are considered a change in estimate for accounting purposes and are reflected on a prospective basis in related depreciation rates. Estimates of the production volume
are inherently imprecise and represent only approximate amounts because of the subjective judgements involved in developing such information.

Amortization of assets

Coal reserves, coal resources and rail access rights are amortized on a straight line basis or unit of production basis over the shorter of their useful
lives and the contractual period. The expensing of overburden removal costs is based on saleable coal production over estimated economically recoverable reserves. The useful lives are estimated on the basis of the total proven and probable reserves
of coal mine. Proven and probable coal reserve estimates are updated at regular basis and have taken into account of recent production and technical information about each mine.

Provision for land subsidence, restoration, rehabilitation and environmental costs

The provision is reviewed regularly to verify that it properly reflects the remaining obligation arising from the current and past mining activities.
Provision for land subsidence, restoration, rehabilitation and environmental costs are determined by the management based on their best estimates of the current and future costs, latest government policies and past experiences.

Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The
value in use calculation requires the Group to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the present value. As at December 31, 2009, the carrying amount of
goodwill is RMB1,305,345,000 (2008: RMB 298,650,000).

Cash flow projections during the budget period for each of the above units are based on
the budgeted revenue and expected gross margins during the budget period and the raw materials price inflation during the budget period. Expected cash inflows/outflows have been determined based on past performance and managements expectations
for the market development.



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



5. KEY SOURCES OF ESTIMATION UNCERTAINTYContinued



Estimated impairment of property, plant and equipment

When there is impairment indicator, the Group takes into consideration the estimation of future cash flows. The amount of the
impairment loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows. Where the actual future cash flows are less than expected, a material impairment loss may arise. In
estimating the future cash flows, the management have taken into account the recent production and technical advancement. As prices and cost levels change from year to year, the estimate of the future cash flow also changes. Notwithstanding the
management has used all the available information to make their impairment assessment, inherent uncertainty exists on conditions of the mine and of the environment and actual written off may be higher than the amount estimated. As at
December 31, 2009, the carrying amounts of property, plant and equipment is approximately RMB18,877,134,000 (2008: RMB14,149,446,000). During the year ended December 31, 2009, RMB14,199,000 was written off as expenses (2008: nil; 2007: RMB
339,743,000).

6. SEGMENT INFORMATION

The Group is engaged primarily in the coal mining business. The Group is also engaged in the coal railway transportation business. The Company does not
currently have direct export rights in the PRC and all of its export sales is made through China National Coal Industry Import and Export Corporation (National Coal Corporation), Minmetals Trading Co., Ltd. (Minmetals
Trading) or Shanxi Coal Imp. & Exp. Group Corp. (Shanxi Coal Corporation). The final customer destination of the Companys export sales is determined by the Company, National Coal Corporation, Minmetals Trading or
Shanxi Coal Corporation. Certain of the Companys subsidiaries are engaged in trading and processing of mining machinery and the transportation business via rivers and lakes in the PRC. No separate segment information about these businesses is
presented in these financial statements as the underlying gross sales, results and assets of these businesses, which are currently included in the coal mining business segment, are insignificant to the Group. Certain of the Companys
subsidiaries are engaged in production of methanol and other chemical products, and invest in heat and electricity.

Gross revenue disclosed
below is same as the turnover.

For management purposes, the Group is currently organized into three operating divisions - coal mining, coal
railway transportation and methanol, electricity and heat supply. These divisions are the basis on which the Group reports its segment information.

Principal activities are as follows:



|                                      |  |   |  |                                                                                  
|------------------------------------- |  | - |  | ---------------------------------------------------------------------------------
|Coal mining                           |  | - |  | Underground mining, preparation and sales of coal                                
|Coal railway transportation           |  | - |  | Provision of railway transportation services                                     
|Methanol, electricity and heat supply |  | - |  | Production and sales of methanol and electricity and related heat supply services

The accounting policies of the reportable segments are the same as the Groups accounting policies described in note 4. Segment profit represents
the profit earned by each segment without allocation of corporate expenses and directors emoluments, results of associates, investment revenue, interest income, interest expenses and income tax expenses. This is the measure reported to the
chief operating decision maker for the purposes of resource allocation and assessment of segment performance.



F-30



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



6. SEGMENT INFORMATIONContinued



Segment information about these businesses is presented below:

INCOME STATEMENT



|              |  |                                      |  |                            |  |                                    |  |             |  |              |   |  |             
|------------- |  | ------------------------------------ |  | -------------------------- |  | ---------------------------------- |  | ----------- |  | ------------ | - |  | ------------
|              |  | For the year ended December 31, 2009
|              |  | Coal mining                          |  | Coal railwaytransportation |  | Methanol,electricityand heatsupply |  | Unallocated |  | Eliminations |   |  | Consolidated
|              |  | RMB000                              |  | RMB000                    |  | RMB000                            |  | RMB000     |  | RMB000      |   |  | RMB000     
|GROSS REVENUE |  |                                      |  |                            |  |                                    |  |             |  |              |   |  |             
|External      |  | 19,537,191                           |  | 258,443                    |  | 457,728                            |  |            |  |             |   |  | 20,253,362  
|Inter-segment |  | 169,153                              |  | 61,507                     |  | 474,946                            |  |            |  | (705,606     | ) |  |            
|              |  |                                      |  |                            |  |                                    |  |             |  |              |   |  |             
|Total         |  | 19,706,344                           |  | 319,950                    |  | 932,674                            |  |            |  | (705,606     | ) |  | 20,253,362  
|              |  |                                      |  |                            |  |                                    |  |             |  |              |   |  |             

Inter-segment revenue is charged at prices pre-determined by the
relevant governmental authority.



|                                |  |                                      |  |                            |   |  |                                    |   |  |              |  |              |  
|------------------------------- |  | ------------------------------------ |  | -------------------------- | - |  | ---------------------------------- | - |  | ------------ |  | ------------ | -
|                                |  | For the year ended December 31, 2009 | 
|                                |  | Coalmining                           |  | Coal railwaytransportation |   |  | Methanol,electricityand heatsupply |   |  | Eliminations |  | Consolidated |  
|                                |  | RMB000                              |  | RMB000                    |   |  | RMB000                            |   |  | RMB000      |  | RMB000      |  
|RESULT                          |  |                                      |  |                            |   |  |                                    |   |  |              |  |              |  
|Segment results                 |  | 6,353,496                            |  | (171,712                   | ) |  | (277,320                           | ) |  |             |  | 5,904,464    |  
|                                |  |                                      |  |                            |   |  |                                    |   |  |              |  |              |  
|Unallocated corporate expenses  |  |                                      |  |                            |   |  |                                    |   |  |              |  | (473,221     | )
|Unallocated corporate income    |  |                                      |  |                            |   |  |                                    |   |  |              |  | 2,288        |  
|Interest income                 |  |                                      |  |                            |   |  |                                    |   |  |              |  | 187,604      |  
|Share of profit of an associate |  |                                     |  |                           |   |  | 109,786                            |   |  |             |  | 109,786      |  
|Interest expenses               |  |                                      |  |                            |   |  |                                    |   |  |              |  | (45,115      | )
|                                |  |                                      |  |                            |   |  |                                    |   |  |              |  |              |  
|Profit before income taxes      |  |                                      |  |                            |   |  |                                    |   |  |              |  | 5,685,806    |  
|Income taxes                    |  |                                      |  |                            |   |  |                                    |   |  |              |  | (1,553,312   | )
|                                |  |                                      |  |                            |   |  |                                    |   |  |              |  |              |  
|Profit for the year             |  |                                      |  |                            |   |  |                                    |   |  |              |  | 4,132,494    |  
|                                |  |                                      |  |                            |   |  |                                    |   |  |              |  |              |  



F-31



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



6. SEGMENT INFORMATIONContinued



BALANCE SHEET



|                                         |  |                      |  |                            |  |                                    |  |             
|---------------------------------------- |  | -------------------- |  | -------------------------- |  | ---------------------------------- |  | ------------
|                                         |  | At December 31, 2009
|                                         |  | Coal mining          |  | Coal railwaytransportation |  | Methanol,electricityand heatsupply |  | Consolidated
|                                         |  | RMB000              |  | RMB000                    |  | RMB000                            |  | RMB000     
|ASSETS                                   |  |                      |  |                            |  |                                    |  |             
|Segment assets                           |  | 46,812,323           |  | 690,172                    |  | 4,105,745                          |  | 51,608,240  
|                                         |  |                      |  |                            |  |                                    |  |             
|Interests in an associate                |  |                     |  |                           |  | 939,981                            |  | 939,981     
|Interests in jointly controlled entities |  | 1,257                |  |                           |  |                                   |  | 1,257       
|Unallocated corporate assets             |  |                      |  |                            |  |                                    |  | 9,883,113   
|                                         |  |                      |  |                            |  |                                    |  |             
|                                         |  |                      |  |                            |  |                                    |  | 62,432,591  
|                                         |  |                      |  |                            |  |                                    |  |             
|LIABILITIES                              |  |                      |  |                            |  |                                    |  |             
|Segment liabilities                      |  | 5,358,455            |  | 85,695                     |  | 2,005,549                          |  | 7,449,699   
|                                         |  |                      |  |                            |  |                                    |  |             
|Unallocated corporate liabilities        |  |                      |  |                            |  |                                    |  | 25,728,599  
|                                         |  |                      |  |                            |  |                                    |  |             
|                                         |  |                      |  |                            |  |                                    |  | 33,178,298  
|                                         |  |                      |  |                            |  |                                    |  |             

OTHER INFORMATION



|                                                                        |  |                                      |   |  |                            |  |                                    |  |             |  |           |  |              |  
|----------------------------------------------------------------------- |  | ------------------------------------ | - |  | -------------------------- |  | ---------------------------------- |  | ----------- |  | --------- |  | ------------ | -
|                                                                        |  | For the year ended December 31, 2009 |  
|                                                                        |  | Coal mining                          |   |  | Coal railwaytransportation |  | Methanol,electricityand heatsupply |  | Unallocated |  | Corporate |  | Consolidated |  
|                                                                        |  | RMB000                              |   |  | RMB000                    |  | RMB000                            |  | RMB000     |  | RMB000   |  | RMB000      |  
|Capital additions (note 1)                                              |  | 24,086,467                           |   |  | 11,401                     |  | 1,219,970                          |  |            |  | 6,954     |  | 25,324,792   |  
|Investments in jointly controlled entities                              |  | 1,257                                |   |  |                           |  |                                   |  |            |  |          |  | 1,257        |  
|Amortization of intangible assets                                       |  | 44,274                               |   |  |                           |  | 4                                  |  |            |  |          |  | 44,278       |  
|Release of prepaid lease payments                                       |  | 9,606                                |   |  | 5,372                      |  | 2,049                              |  |            |  |          |  | 17,027       |  
|Depreciation of property, plant and equipment                           |  | 1,409,507                            |   |  | 86,251                     |  | 295,321                            |  |            |  | 2,199     |  | 1,793,278    |  
|Impairment loss on property, plant and equipment                        |  | 13,609                               |   |  |                           |  | 590                                |  |            |  |          |  | 14,199       |  
|Impairment losses reversed on accounts receivable and other receivables |  | (14,222                              | ) |  |                           |  | 588                                |  |            |  |          |  | (13,634      | )
|                                                                        |  |                                      |   |  |                            |  |                                    |  |             |  |           |  |              |  



F-32



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



6. SEGMENT INFORMATIONContinued



|        |  |                                                                                                                                                                                                                  
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note 1: |  | Capital additions include the increase in goodwill during the year which represents RMB 766,816,000 and RMB239,879,000 in respect of coal mining and methanol, electricity and
heat supply segments respectively.
|        | 
|Note 2: |  | Capital additions and investments in jointly controlled entities include those arising from the acquisition of subsidiaries.                                                                                     

INCOME STATEMENT



|              |  |                                      |  |                            |  |                                    |  |             |  |              |   |  |             
|------------- |  | ------------------------------------ |  | -------------------------- |  | ---------------------------------- |  | ----------- |  | ------------ | - |  | ------------
|              |  | For the year ended December 31, 2008
|              |  | Coal mining                          |  | Coal railwaytransportation |  | Methanol,electricityand
heatsupply |  | Unallocated |  | Eliminations |   |  | Consolidated
|              |  | RMB000                              |  | RMB000                    |  | RMB000                            |  | RMB000     |  | RMB000      |   |  | RMB000     
|GROSS REVENUE |  |                                      |  |                            |  |                                    |  |             |  |              |   |  |             
|External      |  | 24,557,521                           |  | 247,199                    |  | 98,361                             |  |            |  |             |   |  | 24,903,081  
|Inter-segment |  | 131,655                              |  | 88,458                     |  |                                   |  |            |  | (220,113     | ) |  |            
|              |  |                                      |  |                            |  |                                    |  |             |  |              |   |  |             
|Total         |  | 24,689,176                           |  | 335,657                    |  | 98,361                             |  |            |  | (220,113     | ) |  | 24,903,081  
|              |  |                                      |  |                            |  |                                    |  |             |  |              |   |  |             

Inter-segment revenue is charged at prices pre-determined by the
relevant governmental authority.



|                               |  |                                      |  |                            |   |  |                                    |   |  |              |  |              |  
|------------------------------ |  | ------------------------------------ |  | -------------------------- | - |  | ---------------------------------- | - |  | ------------ |  | ------------ | -
|                               |  | For the year ended December 31, 2008 | 
|                               |  | Coal mining                          |  | Coal railwaytransportation |   |  | Methanol,electricityand heatsupply |   |  | Eliminations |  | Consolidated |  
|                               |  | RMB000                              |  | RMB000                    |   |  | RMB000                            |   |  | RMB000      |  | RMB000      |  
|RESULT                         |  |                                      |  |                            |   |  |                                    |   |  |              |  |              |  
|Segment results                |  | 9,678,304                            |  | (91,781                    | ) |  | (185,116                           | ) |  |             |  | 9,401,407    |  
|                               |  |                                      |  |                            |   |  |                                    |   |  |              |  |              |  
|Unallocated corporate expenses |  |                                      |  |                            |   |  |                                    |   |  |              |  | (580,843     | )
|Unallocated corporate income   |  |                                      |  |                            |   |  |                                    |   |  |              |  | 7,401        |  
|Interest income                |  |                                      |  |                            |   |  |                                    |   |  |              |  | 142,990      |  
|Share of loss of an associate  |  |                                     |  |                           |   |  | (67,367                            | ) |  |             |  | (67,367      | )
|Interest expenses              |  |                                      |  |                            |   |  |                                    |   |  |              |  | (38,360      | )
|                               |  |                                      |  |                            |   |  |                                    |   |  |              |  |              |  
|Profit before income taxes     |  |                                      |  |                            |   |  |                                    |   |  |              |  | 8,865,228    |  
|Income taxes                   |  |                                      |  |                            |   |  |                                    |   |  |              |  | (2,385,617   | )
|                               |  |                                      |  |                            |   |  |                                    |   |  |              |  |              |  
|Profit for the year            |  |                                      |  |                            |   |  |                                    |   |  |              |  | 6,479,611    |  
|                               |  |                                      |  |                            |   |  |                                    |   |  |              |  |              |  



F-33



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



6. SEGMENT INFORMATIONContinued



BALANCE SHEET



|                                  |  |                      |  |                            |  |                                    |  |             
|--------------------------------- |  | -------------------- |  | -------------------------- |  | ---------------------------------- |  | ------------
|                                  |  | At December 31, 2008
|                                  |  | Coal mining          |  | Coal railwaytransportation |  | Methanol,electricityand heatsupply |  | Consolidated
|                                  |  | RMB000              |  | RMB000                    |  | RMB000                            |  | RMB000     
|ASSETS                            |  |                      |  |                            |  |                                    |  |             
|Segment assets                    |  | 18,315,343           |  | 757,081                    |  | 2,906,695                          |  | 21,979,119  
|                                  |  |                      |  |                            |  |                                    |  |             
|Interests in an associate         |  |                     |  |                           |  | 830,195                            |  | 830,195     
|Unallocated corporate assets      |  |                      |  |                            |  |                                    |  | 9,529,317   
|                                  |  |                      |  |                            |  |                                    |  |             
|                                  |  |                      |  |                            |  |                                    |  | 32,338,631  
|                                  |  |                      |  |                            |  |                                    |  |             
|LIABILITIES                       |  |                      |  |                            |  |                                    |  |             
|Segment liabilities               |  | 2,264,820            |  | 46,008                     |  | 1,215,524                          |  | 3,526,352   
|                                  |  |                      |  |                            |  |                                    |  |             
|Unallocated corporate liabilities |  |                      |  |                            |  |                                    |  | 1,995,669   
|                                  |  |                      |  |                            |  |                                    |  |             
|                                  |  |                      |  |                            |  |                                    |  | 5,522,021   
|                                  |  |                      |  |                            |  |                                    |  |             

OTHER INFORMATION



|                                                                        |  |                                      |   |  |                            |  |                                    |  |             |  |           |  |              |  
|----------------------------------------------------------------------- |  | ------------------------------------ | - |  | -------------------------- |  | ---------------------------------- |  | ----------- |  | --------- |  | ------------ | -
|                                                                        |  | For the year ended December 31, 2008 |  
|                                                                        |  | Coalmining                           |   |  | Coal railwaytransportation |  | Methanol,electricityand
heatsupply |  | Unallocated |  | Corporate |  | Consolidated |  
|                                                                        |  | RMB000                              |   |  | RMB000                    |  | RMB000                            |  | RMB000     |  | RMB000   |  | RMB000      |  
|Capital additions                                                       |  | 1,925,294                            |   |  | 29,234                     |  | 925,084                            |  |            |  | 2,105     |  | 2,881,717    |  
|Amortization of intangible assets                                       |  | 35,652                               |   |  |                           |  |                                   |  |            |  |          |  | 35,652       |  
|Release of prepaid lease payments                                       |  | 9,379                                |   |  | 5,372                      |  | 358                                |  |            |  |          |  | 15,109       |  
|Depreciation of property, plant and equipment                           |  | 1,009,365                            |   |  | 79,912                     |  | 49,159                             |  |            |  | 2,373     |  | 1,140,809    |  
|Gain on disposal of property, plant and equipment                       |  | (12,317                              | ) |  |                           |  |                                   |  |            |  |          |  | (12,317      | )
|Impairment losses reversed on accounts receivable and other receivables |  | (4,369                               | ) |  |                           |  |                                   |  |            |  |          |  | (4,369       | )
|                                                                        |  |                                      |   |  |                            |  |                                    |  |             |  |           |  |              |  



F-34



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



6. SEGMENT INFORMATIONContinued



INCOME STATEMENT



|              |  |                                      |  |                            |  |             |  |              |   |  |             
|------------- |  | ------------------------------------ |  | -------------------------- |  | ----------- |  | ------------ | - |  | ------------
|              |  | For the year ended December 31, 2007
|              |  | Coal mining                          |  | Coal railwaytransportation |  | Unallocated |  | Eliminations |   |  | Consolidated
|              |  | RMB000                              |  | RMB000                    |  | RMB000     |  | RMB000      |   |  | RMB000     
|GROSS REVENUE |  |                                      |  |                            |  |             |  |              |   |  |             
|External      |  | 14,906,746                           |  | 203,714                    |  |            |  |             |   |  | 15,110,460  
|Inter-segment |  |                                     |  | 103,267                    |  |            |  | (103,267     | ) |  |            
|              |  |                                      |  |                            |  |             |  |              |   |  |             
|Total         |  | 14,906,746                           |  | 306,981                    |  |            |  | (103,267     | ) |  | 15,110,460  
|              |  |                                      |  |                            |  |             |  |              |   |  |             

Inter-segment revenue is charged at prices pre-determined by the
relevant governmental authority.



|                               |  |                                      |  |                            |   |  |             |   |  |              |  |              |  
|------------------------------ |  | ------------------------------------ |  | -------------------------- | - |  | ----------- | - |  | ------------ |  | ------------ | -
|                               |  | For the year ended December 31, 2007 | 
|                               |  | Coalmining                           |  | Coal railwaytransportation |   |  | Unallocated |   |  | Eliminations |  | Consolidated |  
|                               |  | RMB000                              |  | RMB000                    |   |  | RMB000     |   |  | RMB000      |  | RMB000      |  
|RESULT                         |  |                                      |  |                            |   |  |             |   |  |              |  |              |  
|Segment results                |  | 5,027,049                            |  | (78,653                    | ) |  | (84,252     | ) |  |             |  | 4,864,144    |  
|                               |  |                                      |  |                            |   |  |             |   |  |              |  |              |  
|Unallocated corporate expenses |  |                                      |  |                            |   |  |             |   |  |              |  | (401,878     | )
|Unallocated corporate income   |  |                                      |  |                            |   |  |             |   |  |              |  | 7,143        |  
|Interest income                |  |                                      |  |                            |   |  |             |   |  |              |  | 103,564      |  
|Share of loss of an associate  |  |                                     |  |                           |   |  |            |   |  |             |  | (2,438       | )
|Interest expenses              |  |                                      |  |                            |   |  |             |   |  |              |  | (27,222      | )
|                               |  |                                      |  |                            |   |  |             |   |  |              |  |              |  
|Profit before income taxes     |  |                                      |  |                            |   |  |             |   |  |              |  | 4,543,313    |  
|Income taxes                   |  |                                      |  |                            |   |  |             |   |  |              |  | (1,315,520   | )
|                               |  |                                      |  |                            |   |  |             |   |  |              |  |              |  
|Profit for the year            |  |                                      |  |                            |   |  |             |   |  |              |  | 3,227,793    |  
|                               |  |                                      |  |                            |   |  |             |   |  |              |  |              |  



F-35



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



6. SEGMENT INFORMATIONContinued



OTHER INFORMATION



|                                                                        |  |                                      |   |  |                            |  |             |  |           |  |              |  
|----------------------------------------------------------------------- |  | ------------------------------------ | - |  | -------------------------- |  | ----------- |  | --------- |  | ------------ | -
|                                                                        |  | For the year ended December 31, 2007 |  
|                                                                        |  | Coalmining                           |   |  | Coal railwaytransportation |  | Unallocated |  | Corporate |  | Consolidated |  
|                                                                        |  | RMB000                              |   |  | RMB000                    |  | RMB000     |  | RMB000   |  | RMB000      |  
|Capital additions                                                       |  | 1,234,177                            |   |  | 30,367                     |  | 1,704,375   |  | 24,100    |  | 2,993,019    |  
|Amortization of intangible assets                                       |  | 15,728                               |   |  |                           |  |            |  |          |  | 15,728       |  
|Release of prepaid lease payments                                       |  | 8,635                                |   |  | 5,226                      |  |            |  |          |  | 13,861       |  
|Depreciation of property, plant and equipment                           |  | 1,135,820                            |   |  | 81,059                     |  | 1,289       |  | 18,964    |  | 1,237,132    |  
|Gain on disposal of property, plant and equipment                       |  | (25,002                              | ) |  |                           |  |            |  |          |  | (25,002      | )
|Impairment loss on property, plant and equipment                        |  | 339,743                              |   |  |                           |  |            |  |          |  | 339,743      |  
|Impairment losses reversed on accounts receivable and other receivables |  | (4,363                               | ) |  |                           |  |            |  |          |  | (4,363       | )
|                                                                        |  |                                      |   |  |                            |  |             |  |           |  |              |  

GEOGRAPHICAL INFORMATION

The following table sets out the geographical information. The geographical location of sales to external customers is based on the location at which the
services were provided or the goods delivered. The geographical location of the specified non-current assets is based on the physical location of the asset, in the case of property, plant and equipment, the location of the operation to which they
are allocated, in the case of intangible assets and goodwill, and the location of operations, in the case of interests in an associate and jointly controlled entities.

The geographical information of sales are as follows:



|                            |  |                                 |  |            |  |           
|--------------------------- |  | ------------------------------- |  | ---------- |  | ----------
|                            |  | Revenue from external customers
|                            |  | For the year ended December 31,
|                            |  | 2009                            |  | 2008       |  | 2007      
|                            |  | RMB000                         |  | RMB000    |  | RMB000   
|The PRC (place of domicile) |  | 19,210,201                      |  | 23,034,544 |  | 13,559,475
|Australia                   |  | 45,121                          |  | 16,346     |  | 23,175    
|Others                      |  | 998,040                         |  | 1,852,191  |  | 1,527,810 
|                            |  |                                 |  |            |  |           
|Total                       |  | 20,253,362                      |  | 24,903,081 |  | 15,110,460
|                            |  |                                 |  |            |  |           



F-36



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



6. SEGMENT INFORMATIONContinued

Geographical InformationContinued



The geographical information of specified non-current assets are as follows:



|                            |  |                              |  |           
|--------------------------- |  | ---------------------------- |  | ----------
|                            |  | Specified non-current assets
|                            |  | At December 31,             
|                            |  | 2009                         |  | 2008      
|                            |  | RMB000                      |  | RMB000   
|The PRC (place of domicile) |  | 17,347,369                   |  | 16,097,008
|Australia                   |  | 23,334,361                   |  | 849,109   
|                            |  |                              |  |           
|Total non-current assets    |  | 40,681,730                   |  | 16,946,117
|                            |  |                              |  |           

For the year ended December 31, 2009, the revenue from coal
mining segment amounted to RMB19,537,191,000 (2008: RMB24,557,521,000; 2007: RMB14,906,746,000) which including sales to the Groups largest customer located in the PRC of approximately RMB 3,122,684,000 (2008: RMB 4,413,948,000; 2007: RMB
1,802,144,000). As at December 31, 2009, accounts receivable from this customer accounted for approximately 0% (2008: 20%) of the Groups total accounts receivable. Other than this customer, there is no other customer whose sales accounted
for 10% or more of the Groups total revenue.

7. NET SALES OF COAL



|                                 |  |                         |  |            |  |           
|-------------------------------- |  | ----------------------- |  | ---------- |  | ----------
|                                 |  | Year ended December 31,
|                                 |  | 2009                    |  | 2008       |  | 2007      
|                                 |  | RMB000                 |  | RMB000    |  | RMB000   
|Coal sold in the PRC, gross      |  | 18,494,030              |  | 22,688,984 |  | 13,355,761
|Less: Transportation costs       |  | 305,110                 |  | 356,517    |  | 280,694   
|                                 |  |                         |  |            |  |           
|Coal sold in the PRC, net        |  | 18,188,920              |  | 22,332,467 |  | 13,075,067
|                                 |  |                         |  |            |  |           
|Coal sold outside the PRC, gross |  | 1,043,161               |  | 1,868,537  |  | 1,550,985 
|Less: Transportation costs       |  | 98,201                  |  | 152,195    |  | 269,122   
|                                 |  |                         |  |            |  |           
|Coal sold outside the PRC, net   |  | 944,960                 |  | 1,716,342  |  | 1,281,863 
|                                 |  |                         |  |            |  |           
|Net sales of coal                |  | 19,133,880              |  | 24,048,809 |  | 14,356,930
|                                 |  |                         |  |            |  |           

Net sales of coal represent the invoiced value of coal sold and are
net of returns, discounts, sales taxes and transportation costs if the invoiced value includes transportation costs to the customers.



F-37



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



8. COST OF SALES AND SERVICE PROVIDED



|                                                                     |  |                         |  |            |  |          
|-------------------------------------------------------------------- |  | ----------------------- |  | ---------- |  | ---------
|                                                                     |  | Year ended December 31,
|                                                                     |  | 2009                    |  | 2008       |  | 2007     
|                                                                     |  | RMB000                 |  | RMB000    |  | RMB000  
|Materials                                                            |  | 1,482,653               |  | 1,616,865  |  | 1,257,433
|Wages and employee benefits                                          |  | 3,281,578               |  | 2,624,821  |  | 2,392,447
|Electricity                                                          |  | 500,518                 |  | 346,401    |  | 377,686  
|Depreciation                                                         |  | 1,286,265               |  | 907,218    |  | 1,121,557
|Land subsidence, restoration, rehabilitation and environmental costs |  | 1,738,103               |  | 3,279,503  |  | 833,282  
|Repairs and maintenance                                              |  |                        |  |           |  | 441,511  
|Annual fee and amortization of mining rights (note 24)               |  | 181,344                 |  | 170,793    |  | 28,708   
|Transportation costs                                                 |  | 86,618                  |  | 131,301    |  | 105,930  
|Cost of traded coal                                                  |  | 1,077,538               |  | 1,810,342  |  |         
|Others                                                               |  | 535,915                 |  | 929,545    |  | 773,370  
|                                                                     |  |                         |  |            |  |          
|                                                                     |  | 10,170,532              |  | 11,816,789 |  | 7,331,924
|                                                                     |  |                         |  |            |  |          

9. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES



|                                                  |  |                         |  |           |  |          
|------------------------------------------------- |  | ----------------------- |  | --------- |  | ---------
|                                                  |  | Year ended December 31,
|                                                  |  | 2009                    |  | 2008      |  | 2007     
|                                                  |  | RMB000                 |  | RMB000   |  | RMB000  
|Wages and employee benefits                       |  | 1,402,920               |  | 1,374,698 |  | 1,093,732
|Additional medical insurance                      |  | 20,919                  |  | 53,068    |  | 22,896   
|Staff training costs                              |  | 35,398                  |  | 24,412    |  | 38,735   
|Depreciation                                      |  | 168,334                 |  | 114,451   |  | 129,436  
|Distribution charges                              |  | 148,580                 |  | 103,209   |  | 93,014   
|Resource compensation fees (note)                 |  | 177,842                 |  | 159,938   |  | 117,772  
|Repairs and maintenance                           |  | 474,233                 |  | 424,751   |  | 34,348   
|Research and development                          |  | 46,321                  |  | 106,516   |  | 78,973   
|Freight charges                                   |  | 28,556                  |  | 20,247    |  | 29,305   
|Property, plant and equipment written off         |  | 14,199                  |  |          |  | 339,743  
|Loss on disposal of property, plant and equipment |  | 11,252                  |  |          |  |         
|Legal and professional fees                       |  | 88,320                  |  | 76,328    |  | 74,661   
|Social welfare and insurance                      |  | 101,693                 |  | 138,264   |  | 93,140   
|Utilities relating to administrative buildings    |  | 239,439                 |  | 147,737   |  | 109,269  
|Environmental protection                          |  | 82,426                  |  | 48,028    |  | 26,700   
|Travelling, entertainment and promotion           |  | 79,734                  |  | 80,109    |  | 87,644   
|Foreign exchange losses                           |  |                        |  | 328,858   |  | 3,150    
|Coal price adjustment fund                        |  | 266,876                 |  | 264,815   |  | 105,421  
|Bonus payments                                    |  | 67,842                  |  | 49,977    |  | 75,655   
|Others                                            |  | 365,357                 |  | 316,625   |  | 301,083  
|                                                  |  |                         |  |           |  |          
|                                                  |  | 3,820,241               |  | 3,832,031 |  | 2,854,677
|                                                  |  |                         |  |           |  |          



|Note: | In accordance with the relevant regulations, the Group pays resource compensation fees (effectively a government levy) to the Ministry of Geology and Mineral Resources
at the rate of 1% on the sales value of raw coal.
|----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-38



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



10. OTHER INCOME



|                                              |  |                         |  |         |  |        
|--------------------------------------------- |  | ----------------------- |  | ------- |  | -------
|                                              |  | Year ended December 31,
|                                              |  | 2009                    |  | 2008    |  | 2007   
|                                              |  | RMB000                 |  | RMB000 |  | RMB000
|Dividend income                               |  | 2,288                   |  | 7,401   |  | 7,143  
|Gain on sales of auxiliary materials          |  | 25,769                  |  | 37,762  |  | 63,579 
|Government grants                             |  | 29,839                  |  | 3,500   |  |       
|Interest income from bank deposits            |  | 187,604                 |  | 142,990 |  | 103,564
|Interest income from entrusted loan (note 20) |  |                        |  | 132,230 |  |       
|Others                                        |  | 65,519                  |  | 27,610  |  | 24,644 
|                                              |  |                         |  |         |  |        
|                                              |  | 311,019                 |  | 351,493 |  | 198,930
|                                              |  |                         |  |         |  |        

The above dividend income is from listed investments.

11. INTEREST EXPENSE



|                                                                 |  |                         |  |         |  |        
|---------------------------------------------------------------- |  | ----------------------- |  | ------- |  | -------
|                                                                 |  | Year ended December 31,
|                                                                 |  | 2009                    |  | 2008    |  | 2007   
|                                                                 |  | RMB000                 |  | RMB000 |  | RMB000
|Interest expenses on:                                            |  |                         |  |         |  |        
|- bank borrowings wholly repayable within 5 years                |  | 18,838                  |  | 20,537  |  | 10,522 
|- bank borrowings not wholly repayable within 5 years            |  | 11,396                  |  | 15,899  |  | 14,200 
|- bills receivable discounted without recourse                   |  | 13,665                  |  | 75      |  |       
|Deemed interest expenses in respect of acquisition of Jining III |  | 1,216                   |  | 1,849   |  | 2,500  
|                                                                 |  |                         |  |         |  |        
|                                                                 |  | 45,115                  |  | 38,360  |  | 27,222 
|                                                                 |  |                         |  |         |  |        

12. INCOME TAXES



|                                     |  |                         |   |  |           |   |  |           |  
|------------------------------------ |  | ----------------------- | - |  | --------- | - |  | --------- | -
|                                     |  | Year ended December 31, |  
|                                     |  | 2009                    |   |  | 2008      |   |  | 2007      |  
|                                     |  | RMB000                 |   |  | RMB000   |   |  | RMB000   |  
|Income taxes:                        |  |                         |   |  |           |   |  |           |  
|Current taxes                        |  | 1,771,674               |   |  | 2,351,759 |   |  | 1,484,195 |  
|Under(over) provision in prior years |  | 42,221                  |   |  | 265,390   |   |  | (104,512  | )
|                                     |  |                         |   |  |           |   |  |           |  
|                                     |  | 1,813,895               |   |  | 2,617,149 |   |  | 1,379,683 |  
|Deferred tax charge (note 39)        |  | (260,583                | ) |  | (231,532  | ) |  | 1,925     |  
|Attributable to a change in tax rate |  |                        |   |  |          |   |  | (66,088   | )
|                                     |  |                         |   |  |           |   |  |           |  
|                                     |  | 1,553,312               |   |  | 2,385,617 |   |  | 1,315,520 |  
|                                     |  |                         |   |  |           |   |  |           |  

The Company and its subsidiaries in the PRC are subject to a standard income tax rate of 25% on its taxable income (2008:
25%; 2007: 33%).

Taxation arising in other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions.



F-39



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



12. INCOME TAXESContinued



On 16 March 2007, the Peoples Republic of China promulgated the
Law of the Peoples Republic of China on Enterprise Income Tax (the New Law) by Order No. 63 of the President of the Peoples Republic of China. On 6 December 2007, the State Council of the PRC issued Implementation
Regulations of the New Law. The New Law and Implementation Regulations will change the tax rate from 33% to 25% for the Company and subsidiaries established in the PRC from 1 January 2008. The deferred tax balance has been adjusted to reflect
the tax rates that are expected to apply to the respective periods when the asset is realized or the liability is settled.

The total charge
for the year can be reconciled to the profit per the consolidated income statement as follows:



|                                                                                          |  |                         |   |  |           |   |  |           |  
|----------------------------------------------------------------------------------------- |  | ----------------------- | - |  | --------- | - |  | --------- | -
|                                                                                          |  | Year ended December 31, |  
|                                                                                          |  | 2009                    |   |  | 2008      |   |  | 2007      |  
|                                                                                          |  | RMB000                 |   |  | RMB000   |   |  | RMB000   |  
|Standard income tax rate in the PRC                                                       |  | 25                      | % |  | 25        | % |  | 33        | %
|Standard income tax rate applied to income before income taxes                            |  | 1,421,452               |   |  | 2,216,307 |   |  | 1,499,293 |  
|                                                                                          |  |                         |  
|Reconciling items:                                                                        |  |                         |   |  |           |   |  |           |  
|Tax effect of future development fund deductible for tax purposes                         |  | (20,436                 | ) |  |          |   |  | (67,449   | )
|Deemed interest not deductible for tax purposes                                           |  | 304                     |   |  | 462       |   |  | 825       |  
|Expenses not deductible for tax purposes                                                  |  | (64,170                 | ) |  | (74,491   | ) |  | 29,008    |  
|(Reversal) provision of impairment loss on doubtful debts not subject to tax              |  |                        |   |  | (11,398   | ) |  | (1,439    | )
|Deemed interest income from subsidiaries subject to tax                                   |  | 31,134                  |   |  | 40,213    |   |  | 17,402    |  
|Tax effect of tax losses not recognized                                                   |  | 135,268                 |   |  | 28        |   |  | 3,824     |  
|Under (over) provision in prior years                                                     |  | 42,221                  |   |  | 265,390   |   |  | (104,512  | )
|Decrease in opening deferred tax liability resulting from decrease in applicable tax rate |  |                        |   |  |          |   |  | (66,088   | )
|Utilization of unrecognized tax losses in prior years                                     |  |                        |   |  | (51,600   | ) |  |          |  
|Effect of tax rate differences in other taxation jurisdictions                            |  | 1,504                   |   |  |          |   |  |          |  
|Others                                                                                    |  | 6,035                   |   |  | 706       |   |  | 4,656     |  
|                                                                                          |  |                         |   |  |           |   |  |           |  
|Income taxes                                                                              |  | 1,553,312               |   |  | 2,385,617 |   |  | 1,315,520 |  
|                                                                                          |  |                         |   |  |           |   |  |           |  
|Effective income tax rate                                                                 |  | 27                      | % |  | 27        | % |  | 29        | %
|                                                                                          |  |                         |   |  |           |   |  |           |  

13. PROFIT FOR THE YEAR



|                                                                         |  |                         |   |  |            |   |  |           |  
|------------------------------------------------------------------------ |  | ----------------------- | - |  | ---------- | - |  | --------- | -
|                                                                         |  | Year ended December 31, |  
|                                                                         |  | 2009                    |   |  | 2008       |   |  | 2007      |  
|                                                                         |  | RMB000                 |   |  | RMB000    |   |  | RMB000   |  
|Profit for the year has been arrived at after charging:                  |  |                         |   |  |            |   |  |           |  
|                                                                         |  |                         |  
|Amortization of intangible assets                                        |  | 44,278                  |   |  | 35,652     |   |  | 15,728    |  
|Depreciation of property, plant and equipment                            |  | 1,793,278               |   |  | 1,140,809  |   |  | 1,237,132 |  
|                                                                         |  |                         |   |  |            |   |  |           |  
|Total depreciation and amortization                                      |  | 1,837,556               |   |  | 1,176,461  |   |  | 1,252,860 |  
|                                                                         |  |                         |   |  |            |   |  |           |  
|Release of prepaid lease payments                                        |  | 17,027                  |   |  | 15,109     |   |  | 13,861    |  
|Auditors remuneration                                                   |  | 12,401                  |   |  | 10,157     |   |  | 14,683    |  
|Staff costs, including directors and supervisors emoluments            |  | 4,897,951               |   |  | 4,358,556  |   |  | 3,572,734 |  
|Retirement benefit scheme contributions (included in staff costs above)  |  | 1,092,817               |   |  | 867,808    |   |  | 720,091   |  
|Cost of inventories                                                      |  | 9,219,686               |   |  | 11,986,520 |   |  | 7,145,614 |  
|Exchange loss, net
and crediting:                                        |  |                        |   |  | 328,858    |   |  | 3,150     |  
|Exchange gains, net                                                      |  | (46,151                 | ) |  |           |   |  |          |  
|Gain on disposal of property, plant and equipment                        |  |                        |   |  | (12,317    | ) |  | (25,002   | )
|Reversal of impairment loss on accounts receivable and other receivables |  | (13,634                 | ) |  | (4,369     | ) |  | (4,363    | )
|                                                                         |  |                         |   |  |            |   |  |           |  



F-40



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



14. DIRECTORS AND SUPERVISORS REMUNERATION AND FIVE HIGHEST PAID INDIVIDUALS

(a) Directors and supervisors emoluments

Details of the directors and supervisors emoluments are as follows:



|                                    |  |                                      |  |                                              |  |                                       |  |        
|----------------------------------- |  | ------------------------------------ |  | -------------------------------------------- |  | ------------------------------------- |  | -------
|                                    |  | For the year ended December 31, 2009
|                                    |  | Fees                                 |  | Salaries, allowanceand other
benefitsin kind |  | Retirementbenefit schemecontributions |  | Total  
|                                    |  | RMB000                              |  | RMB000                                      |  | RMB000                               |  | RMB000
|Independent non-executive directors |  |                                      |  |                                              |  |                                       |  |        
|Pu Hongjiu                          |  | 109                                  |  |                                             |  |                                      |  | 109    
|Zhai Xigui                          |  | 109                                  |  |                                             |  |                                      |  | 109    
|Li Weian                            |  | 109                                  |  |                                             |  |                                      |  | 109    
|Wang Junyan                         |  | 109                                  |  |                                             |  |                                      |  | 109    
|                                    |  |                                      |  |                                              |  |                                       |  |        
|                                    |  | 436                                  |  |                                             |  |                                      |  | 436    
|                                    |  |                                      |  |                                              |  |                                       |  |        
|Executive directors                 |  |                                      |  |                                              |  |                                       |  |        
|Wang Xin                            |  |                                     |  |                                             |  |                                      |  |       
|Geng Jiahuai                        |  |                                     |  |                                             |  |                                      |  |       
|Yang Deyu                           |  |                                     |  | 148                                          |  | 29                                    |  | 177    
|Shi Xuerang                         |  |                                     |  |                                             |  |                                      |  |       
|Chen Changchun                      |  |                                     |  |                                             |  |                                      |  |       
|Wu Yuxiang                          |  |                                     |  | 220                                          |  | 44                                    |  | 264    
|Wang Xinkun                         |  |                                     |  | 250                                          |  | 50                                    |  | 300    
|Zhang Baocai                        |  |                                     |  | 220                                          |  | 44                                    |  | 264    
|Dong Yunqing                        |  |                                     |  | 220                                          |  | 44                                    |  | 264    
|                                    |  |                                      |  |                                              |  |                                       |  |        
|                                    |  |                                     |  | 1,058                                        |  | 211                                   |  | 1,269  
|                                    |  |                                      |  |                                              |  |                                       |  |        
|Supervisors                         |  |                                      |  |                                              |  |                                       |  |        
|Song Guo                            |  |                                     |  |                                             |  |                                      |  |       
|Zhang Shengdong                     |  |                                     |  |                                             |  |                                      |  |       
|Zhou Shoucheng                      |  |                                     |  |                                             |  |                                      |  |       
|Zhen Ailan                          |  |                                     |  |                                             |  |                                      |  |       
|Wei Huanmin                         |  |                                     |  | 220                                          |  | 44                                    |  | 264    
|Xu Bentai                           |  |                                     |  | 259                                          |  | 52                                    |  | 311    
|                                    |  |                                      |  |                                              |  |                                       |  |        
|                                    |  |                                     |  | 479                                          |  | 96                                    |  | 575    
|                                    |  |                                      |  |                                              |  |                                       |  |        
|Other management team               |  |                                      |  |                                              |  |                                       |  |        
|Li Weimin                           |  |                                     |  | 61                                           |  | 12                                    |  | 73     
|Jin Tai                             |  |                                     |  | 61                                           |  | 13                                    |  | 74     
|Zhang Yingmin                       |  |                                     |  | 61                                           |  | 12                                    |  | 73     
|He Ye                               |  |                                     |  | 61                                           |  | 12                                    |  | 73     
|Tian Fengze                         |  |                                     |  | 221                                          |  | 44                                    |  | 265    
|Shi Chenzhong                       |  |                                     |  | 250                                          |  | 50                                    |  | 300    
|Qu Tianzhi                          |  |                                     |  | 250                                          |  | 50                                    |  | 300    
|Ni Xinghua                          |  |                                     |  | 250                                          |  | 50                                    |  | 300    
|Lai Cunliang                        |  |                                     |  | 540                                          |  |                                      |  | 540    
|                                    |  |                                      |  |                                              |  |                                       |  |        
|                                    |  |                                     |  | 1,755                                        |  | 243                                   |  | 1,998  
|                                    |  |                                      |  |                                              |  |                                       |  |        



F-41



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



14. DIRECTORS AND SUPERVISORS REMUNERATION AND FIVE HIGHEST PAID
INDIVIDUALSContinued

(a) Directors and supervisors emolumentsContinued



|                                    |  |                                      |  |                                              |  |                                        |  |        
|----------------------------------- |  | ------------------------------------ |  | -------------------------------------------- |  | -------------------------------------- |  | -------
|                                    |  | For the year ended December 31, 2008
|                                    |  | Fees                                 |  | Salaries, allowanceand other
benefitsin kind |  | Retirementbenefit 
schemecontributions |  | Total  
|                                    |  | RMB000                              |  | RMB000                                      |  | RMB000                                |  | RMB000
|Independent non-executive directors |  |                                      |  |                                              |  |                                        |  |        
|Pu Hongjiu                          |  | 104                                  |  |                                             |  |                                       |  | 104    
|Cui Jianmin                         |  | 50                                   |  |                                             |  |                                       |  | 50     
|Wang Xiaojun                        |  | 60                                   |  |                                             |  |                                       |  | 60     
|Wang Quanxi                         |  | 50                                   |  |                                             |  |                                       |  | 50     
|Zhai Xigui                          |  | 54                                   |  |                                             |  |                                       |  | 54     
|Li Weian                            |  | 54                                   |  |                                             |  |                                       |  | 54     
|Wang Junyan                         |  | 54                                   |  |                                             |  |                                       |  | 54     
|                                    |  |                                      |  |                                              |  |                                        |  |        
|                                    |  | 426                                  |  |                                             |  |                                       |  | 426    
|                                    |  |                                      |  |                                              |  |                                        |  |        
|Executive directors                 |  |                                      |  |                                              |  |                                        |  |        
|Wang Xin                            |  |                                     |  |                                             |  |                                       |  |       
|Geng Jiahuai                        |  |                                     |  |                                             |  |                                       |  |       
|Yang Deyu                           |  |                                     |  |                                             |  |                                       |  |       
|Shi Xuerang                         |  |                                     |  |                                             |  |                                       |  |       
|Chen Changchun                      |  |                                     |  |                                             |  |                                       |  |       
|Wu Yuxiang                          |  |                                     |  | 192                                          |  | 38                                     |  | 230    
|Wang Xinkun                         |  |                                     |  | 218                                          |  | 44                                     |  | 262    
|Zhang Baocai                        |  |                                     |  | 191                                          |  | 38                                     |  | 229    
|Dong Yunqing                        |  |                                     |  | 192                                          |  | 38                                     |  | 230    
|                                    |  |                                      |  |                                              |  |                                        |  |        
|                                    |  |                                     |  | 793                                          |  | 158                                    |  | 951    
|                                    |  |                                      |  |                                              |  |                                        |  |        
|Supervisors                         |  |                                      |  |                                              |  |                                        |  |        
|Meng Xianchang                      |  |                                     |  |                                             |  |                                       |  |       
|Song Guo                            |  |                                     |  |                                             |  |                                       |  |       
|Zhang Shengdong                     |  |                                     |  |                                             |  |                                       |  |       
|Liu Weixin                          |  |                                     |  |                                             |  |                                       |  |       
|Zhou Shoucheng                      |  |                                     |  |                                             |  |                                       |  |       
|Zhen Ailan                          |  |                                     |  |                                             |  |                                       |  |       
|Wei Huanmin                         |  |                                     |  | 192                                          |  | 38                                     |  | 230    
|Xu Bentai                           |  |                                     |  | 207                                          |  | 41                                     |  | 248    
|                                    |  |                                      |  |                                              |  |                                        |  |        
|                                    |  |                                     |  | 399                                          |  | 79                                     |  | 478    
|                                    |  |                                      |  |                                              |  |                                        |  |        
|Other management team               |  |                                      |  |                                              |  |                                        |  |        
|Jin Tai                             |  |                                     |  |                                             |  |                                       |  |       
|Zhang Yingmin                       |  |                                     |  |                                             |  |                                       |  |       
|He Ye                               |  |                                     |  |                                             |  |                                       |  |       
|Tian Fengze                         |  |                                     |  | 192                                          |  | 38                                     |  | 230    
|Shi Chenzhong                       |  |                                     |  | 218                                          |  | 44                                     |  | 262    
|Qu Tianzhi                          |  |                                     |  | 218                                          |  | 44                                     |  | 262    
|Ni Xinghua                          |  |                                     |  | 218                                          |  | 44                                     |  | 262    
|Lai Cunliang                        |  |                                     |  | 508                                          |  | 102                                    |  | 610    
|                                    |  |                                      |  |                                              |  |                                        |  |        
|                                    |  |                                     |  | 1,354                                        |  | 272                                    |  | 1,626  
|                                    |  |                                      |  |                                              |  |                                        |  |        



F-42



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



14. DIRECTORS AND SUPERVISORS REMUNERATION AND FIVE HIGHEST PAID
INDIVIDUALSContinued

(a) Directors and supervisors emolumentsContinued





|                                    |  |                                      |  |                                              |  |                                        |  |        
|----------------------------------- |  | ------------------------------------ |  | -------------------------------------------- |  | -------------------------------------- |  | -------
|                                    |  | For the year ended December 31, 2007
|                                    |  | Fees                                 |  | Salaries, allowanceand other
benefitsin kind |  | Retirementbenefit 
schemecontributions |  | Total  
|                                    |  | RMB000                              |  | RMB000                                      |  | RMB000                                |  | RMB000
|Independent non-executive directors |  |                                      |  |                                              |  |                                        |  |        
|Pu Hongjiu                          |  | 96                                   |  |                                             |  |                                       |  | 96     
|Cui Jianmin                         |  | 96                                   |  |                                             |  |                                       |  | 96     
|Wang Xiaojun                        |  | 115                                  |  |                                             |  |                                       |  | 115    
|Wang Quanxi                         |  | 96                                   |  |                                             |  |                                       |  | 96     
|                                    |  |                                      |  |                                              |  |                                        |  |        
|                                    |  | 403                                  |  |                                             |  |                                       |  | 403    
|                                    |  |                                      |  |                                              |  |                                        |  |        
|                                    |  |                                      |  |                                             
|Executive directors                 |  |                                      |  |                                              |  |                                        |  |        
|Wang Xin                            |  |                                     |  |                                             |  |                                       |  |       
|Geng Jiahuai                        |  |                                     |  |                                             |  |                                       |  |       
|Yang Deyu                           |  |                                     |  |                                             |  |                                       |  |       
|Shi Xuerang                         |  |                                     |  |                                             |  |                                       |  |       
|Chen Changchun                      |  |                                     |  |                                             |  |                                       |  |       
|Wu Yuxiang                          |  |                                     |  | 172                                          |  | 34                                     |  | 206    
|Wang Xinkun                         |  |                                     |  | 196                                          |  | 39                                     |  | 235    
|Zhang Baocai                        |  |                                     |  | 171                                          |  | 34                                     |  | 205    
|Dong Yunqing                        |  |                                     |  | 172                                          |  | 34                                     |  | 206    
|                                    |  |                                      |  |                                              |  |                                        |  |        
|                                    |  |                                     |  | 711                                          |  | 141                                    |  | 852    
|                                    |  |                                      |  |                                              |  |                                        |  |        
|                                    |  |                                      |  |                                             
|Supervisors                         |  |                                      |  |                                              |  |                                        |  |        
|Meng Xianchang                      |  |                                     |  |                                             |  |                                       |  |       
|Song Guo                            |  |                                     |  |                                             |  |                                       |  |       
|Zhang Shengdong                     |  |                                     |  |                                             |  |                                       |  |       
|Liu Weixin                          |  |                                     |  |                                             |  |                                       |  |       
|Xu Bentai                           |  |                                     |  | 207                                          |  | 41                                     |  | 248    
|                                    |  |                                      |  |                                              |  |                                        |  |        
|                                    |  |                                     |  | 207                                          |  | 41                                     |  | 248    
|                                    |  |                                      |  |                                              |  |                                        |  |        
|                                    |  |                                      |  |                                             
|Other management team               |  |                                      |  |                                              |  |                                        |  |        
|Jin Tai                             |  |                                     |  |                                             |  |                                       |  |       
|Zhang Yingmin                       |  |                                     |  |                                             |  |                                       |  |       
|He Ye                               |  |                                     |  | 212                                          |  | 42                                     |  | 254    
|Tian Fengze                         |  |                                     |  | 172                                          |  | 34                                     |  | 206    
|Shi Chenzhong                       |  |                                     |  | 195                                          |  | 39                                     |  | 234    
|Qu Tianzhi                          |  |                                     |  | 212                                          |  | 42                                     |  | 254    
|Ni Xinghua                          |  |                                     |  | 196                                          |  | 39                                     |  | 235    
|Lai Cunliang                        |  |                                     |  | 410                                          |  |                                       |  | 410    
|                                    |  |                                      |  |                                              |  |                                        |  |        
|                                    |  |                                     |  | 1,397                                        |  | 196                                    |  | 1,593  
|                                    |  |                                      |  |                                              |  |                                        |  |        

No directors waived any emoluments in each of the year ended
December 31, 2009, 2008 and 2007.



F-43



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



14. DIRECTORS AND SUPERVISORS REMUNERATION AND FIVE HIGHEST PAID
INDIVIDUALSContinued



(b)
Employees emoluments

The five highest paid individuals in the Group included no director for the year ended December 31,
2009 (2008: nil; 2007: nil). The emoluments of the five highest paid individuals (2008: five; 2007: five) were stated as follows:



|                                               |  |                         |  |         |  |        
|---------------------------------------------- |  | ----------------------- |  | ------- |  | -------
|                                               |  | Year ended December 31,
|                                               |  | 2009                    |  | 2008    |  | 2007   
|                                               |  | RMB000                 |  | RMB000 |  | RMB000
|Salaries, allowance and other benefits in kind |  | 6,380                   |  | 6,787   |  | 6,997  
|Retirement benefit scheme contributions        |  | 574                     |  | 611     |  | 630    
|Discretionary bonuses                          |  | 228                     |  | 242     |  | 250    
|                                               |  |                         |  |         |  |        
|                                               |  | 7,182                   |  | 7,640   |  | 7,877  
|                                               |  |                         |  |         |  |        

Their emoluments were within the following bands:



|                             |  |                         |  |                 |  |                
|---------------------------- |  | ----------------------- |  | --------------- |  | ---------------
|                             |  | Year ended December 31,
|                             |  | 2009                    |  | 2008            |  | 2007           
|                             |  | No. ofemployees         |  | No. ofemployees |  | No. ofemployees
|Nil to HK$1,000,000          |  |                        |  |                |  |               
|HK$1,000,001 to HK$1,500,000 |  | 3                       |  | 3               |  | 3              
|HK$1,500,001 to HK$2,000,000 |  | 1                       |  | 1               |  | 2              
|HK$2,000,001 to HK$2,500,000 |  | 1                       |  | 1               |  |               
|                             |  |                         |  |                 |  |                

15. DIVIDEND RECOGNIZED AS DISTRIBUTION DURING THE YEAR



|                                                                                                                 |  |                         |  |         |  |        
|---------------------------------------------------------------------------------------------------------------- |  | ----------------------- |  | ------- |  | -------
|                                                                                                                 |  | Year ended December 31,
|                                                                                                                 |  | 2009                    |  | 2008    |  | 2007   
|                                                                                                                 |  | RMB000                 |  | RMB000 |  | RMB000
|2008 final dividend, RMB0.400 per share (2008: 2007 final dividend RMB0.170; 2007: 2006 final dividend RMB0.120) |  | 1,967,360               |  | 836,128 |  | 590,208
|Special dividends approved, nil per share (2008: nil; 2007: RMB0.080)                                            |  |                        |  |        |  | 393,472
|                                                                                                                 |  |                         |  |         |  |        
|                                                                                                                 |  | 1,967,360               |  | 836,128 |  | 983,680
|                                                                                                                 |  |                         |  |         |  |        

In the annual general meeting held on June 15, 2007, a final
dividend and a special dividend in respect of the year ended December 31, 2006 was approved by the shareholders and paid to the shareholders of the Company.



F-44



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



15. DIVIDENDS RECOGNIZED AS DISTRIBUTION DURING THE YEARContinued



In the annual general meeting held on June 27, 2008, a final dividend in
respect of the year ended December 31, 2007 was approved by the shareholders and paid to the shareholders of the Company.

In the annual
general meeting held on June 26, 2009, a final dividend in respect of the year ended December 31, 2008 was approved by the shareholders and paid to the shareholders of the Company.

The board of directors proposes to declare a final dividend of approximately RMB1,229,600,000 calculated based on a total number of 4,918,400,000 shares
issued at RMB1 each, at RMB0.25 per share, in respect of the year ended December 31, 2009. The declaration and payment of the final dividend needs to be approved by the shareholders of the Company by way of an ordinary resolution in accordance
with the requirements of the Companys Articles of Association. A shareholders general meeting will be held for the purpose of considering and, if thought fit, approving this ordinary resolution.

16. EARNINGS PER SHARE AND PER ADS

The
calculation of the earnings per share attributable to the equity holders of the Company for the years ended December 31, 2009, 2008 and 2007 is based on the profit attributable to the equity holders of the Company for the year of
RMB4,117,322,000, RMB6,488,908,000 and RMB3,230,450,000 and on the 4,918,400,000 shares in issue, during each of the three years.

The
earnings per ADS have been calculated based on the profit for the relevant periods and on one ADS, being equivalent to 10 H shares. The equivalent H shares to one ADS have been changed from 50 to 10 H shares from June 27, 2008. The new ADS were
distributed to ADS holders on July 3, 2008. The comparative figures of 2007 have been adjusted accordingly.

No diluted earnings per
share has been presented as there are no dilutive potential shares in issue during the years ended December 31, 2009, 2008 and 2007.

17. BANK BALANCES AND CASH/TERM DEPOSITS AND RESTRICTED CASH

Bank balances carry interest at market rates which ranged from 0.36% to 3.75% (2008: from 0.36% to 1.44%) per annum.

At the balance sheet dates, the short-term restricted cash, which carry interest at market rates of 0.36%-3.47% per annum (2008: 0.05%),
represents the bank deposits pledged to certain banks to secure banking facilities granted to the Group. The long-term amount represents the bank deposits placed as guarantee for the future payments of rehabilitation costs of Southland as required
by the Australian government and as guarantee for borrowings. The long-term deposits carry interest rate of 4.41% (2008:6.5%) per annum.

The term deposits carry fixed interest rate of 1.17% to 4.53% (2008: 1.35% to 2.52%) per annum.



F-45



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



18. BILLS AND ACCOUNTS RECEIVABLE



|                                         |  |                 |   |  |           |  
|---------------------------------------- |  | --------------- | - |  | --------- | -
|                                         |  | At December 31, |  
|                                         |  | 2009            |   |  | 2008      |  
|                                         |  | RMB000         |   |  | RMB000   |  
|Accounts receivable                      |  |                 |   |  |           |  
|- From third parties                     |  | 357,282         |   |  | 435,711   |  
|- From a jointly controlled entity       |  | 81,329          |   |  |          |  
|                                         |  |                 |   |  |           |  
|Total accounts receivable                |  | 438,611         |   |  | 435,711   |  
|Less: Impairment loss                    |  | (4,542          | ) |  | (29,509   | )
|                                         |  |                 |   |  |           |  
|                                         |  | 434,069         |   |  | 406,202   |  
|Total bills receivable                   |  | 4,289,853       |   |  | 2,571,064 |  
|                                         |  |                 |   |  |           |  
|Total bills and accounts receivable, net |  | 4,723,922       |   |  | 2,977,266 |  
|                                         |  |                 |   |  |           |  

Bills receivable represents unconditional orders in writing issued by or negotiated from customers of the Group for
completed sale orders which entitle the Group to collect a sum of money from banks or other parties. The bills are non-interest bearing and have a maturity of six months.

According to the credit rating of different customers, the Group allows a range of credit periods to its trade customers not exceeding 180 days.

The following is an aged analysis of bills and accounts receivable based on the invoice dates at the balance sheet dates:



|              |  |                 |  |          
|------------- |  | --------------- |  | ---------
|              |  | At December 31,
|              |  | 2009            |  | 2008     
|              |  | RMB000         |  | RMB000  
|1 - 90 days   |  | 2,592,713       |  | 1,759,526
|91 - 180 days |  | 2,131,209       |  | 1,217,740
|              |  |                 |  |          
|              |  | 4,723,922       |  | 2,977,266
|              |  |                 |  |          

Before accepting any new customer, the Group assesses the potential
customers credit quality and defines credit limits by customer. Limits attributed to customers are reviewed once a year.

There are no
significant trade receivables which are past due but not yet impaired on both balance sheet dates. The Group does not hold any collateral over these balances. The average age of these receivables is 88 days (2008: 65 days). The management closely
monitors the credit quality of accounts receivable and consider the balance that are neither past due nor impaired are of good credit quality.

The Group has provided fully for all receivables over 3 years because historical experience is such that receivables that are past due beyond 3 years are
generally not recoverable. For receivable aged over 4 years and considered irrecoverable by the management will be written off.



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YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



18. BILLS AND ACCOUNTS RECEIVABLEContinued



An analysis of the impairment loss on bills and accounts receivable is as
follows:



|                                  |  |                 |   |  |         |  
|--------------------------------- |  | --------------- | - |  | ------- | -
|                                  |  | At December 31, |  
|                                  |  | 2009            |   |  | 2008    |  
|                                  |  | RMB000         |   |  | RMB000 |  
|Balance at January 1              |  | 29,509          |   |  | 20,996  |  
|Provided for the year             |  | 335             |   |  | 8,950   |  
|Written off (recognized) reversed |  | (5,797          | ) |  | 2,265   |  
|Reversal                          |  | (19,505         | ) |  | (2,702  | )
|                                  |  |                 |   |  |         |  
|Balance at December 31            |  | 4,542           |   |  | 29,509  |  
|                                  |  |                 |   |  |         |  

Included in the allowance for doubtful debts is an allowance of RMB 4.5 million (2008: RMB 29.5 million) for
individually impaired trade receivables, which are mainly due from corporate customers in the PRC and considered irrecoverable by the management after consideration on the credit quality of those individual customers, the ongoing relationship with
the Group and the aging of these receivables. The impairment recognized represents the difference between the carrying amount of these trade receivables and the present value of the amounts. The Group does not hold any collateral over these
balances.

19. INVENTORIES



|                                                 |  |                 |  |        
|------------------------------------------------ |  | --------------- |  | -------
|                                                 |  | At December 31,
|                                                 |  | 2009            |  | 2008   
|                                                 |  | RMB000         |  | RMB000
|COST                                             |  |                 |  |        
|Methanol                                         |  | 27,320          |  | 7,414  
|Auxiliary materials, spare parts and small tools |  | 288,550         |  | 220,960
|Coal products                                    |  | 570,490         |  | 591,225
|                                                 |  |                 |  |        
|                                                 |  | 886,360         |  | 819,599
|                                                 |  |                 |  |        

20. OTHER LOANS RECEIVABLE

At December 31, 2007, the amount represented a loan granted to an independent third party, which carried interest at 7.00% per annum and was
guaranteed by other independent third parties. The loan (the Default Loan) was secured by certain state legal person shares of a company listed on the SSE (the Secured Shares) and certain equity interest in another unlisted
company held by the guarantor. The Default Loan was defaulted in January 2005 and the Company had applied to The Peoples Supreme Court of the Shangdong Province (the Court) to freeze the Secured Shares. The Company has also applied
to the Court to dispose the Secured Shares by way of a public auction and the proceeds would be applied to repay the Default Loan and the associated interests to the Company.



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YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



20. OTHER LOANS RECEIVABLEContinued



In 2006, Shandong Runhua Group Company Limited (Shandong Runhua)
has also claimed for a portion of the Secured Shares. To protect the Companys priority rights in the Secured Shares to recover the Default Loan, the Company sought support from the Shandong provincial government and the State-owned Assets
Supervision and Administrative Committee (the SASAC). In January 2007, these government authorities in Shandong province and the SASAC have rendered formal written request to the Court to protect the Companys priority right on the
Secured Shares.

In October 2007, the Company, Shandong Runhua and the guarantor reached an agreement in the presence of the Court. According
to the settlement agreement, 240 million of the total 289 million Secured Shares held by the guarantor should belong to Shandong Runhua and 200 million Secured Shares should be transferred to Shandong Runhua from the guarantor. At the
same time, Shandong Runhua has agreed to assist the guarantor to repay the principal and the associated interest of the Default Loan to the Company. The Company has the right to request for the disposal of the frozen 49 million Secured Shares
owned by the guarantor for the settlement if the Default Loan is not repaid by the guarantor or Shandong Runhua after June 6, 2008 (the date the restriction on trading of the Secured Shares is removed). If the proceed received from the disposal
of the 49 million Secured Shares would not be sufficient to cover the loan principal and interest of the Default Loan by that time, the Company has the right to request for the disposal of the remaining 40 million Secured Shares held under
the guarantor and not yet transferred to Shandong Runhua for settlement. If the disposal of the above mentioned 89 million Secured Shares would still not be sufficient for settlement of the liability borne by the guarantor, the Company would
have the right to further request for the disposal of the 200 million Secured Shares already transferred by the guarantor to Shandong Runhua for full settlement of approximately RMB700 million (including the interest). In 2008, the Company has
executed the Secured Share rights and collected principal of RMB640 million plus interest after tax of RMB130 million (note 10).

21.
PREPAYMENTS AND OTHER RECEIVABLES



|                                                     |  |                 |  |          
|---------------------------------------------------- |  | --------------- |  | ---------
|                                                     |  | At December 31,
|                                                     |  | 2009            |  | 2008     
|                                                     |  | RMB000         |  | RMB000  
|Advances to suppliers                                |  | 75,623          |  | 94,796   
|Prepaid freight charges and related handling charges |  | 5,232           |  | 7,958    
|Due from a jointly controlled entity                 |  | 66,321          |  |         
|Deposit for environment protection                   |  | 226,252         |  | 200,000  
|Prepaid relocation costs of inhabitants              |  | 1,288,453       |  | 1,151,895
|Others                                               |  | 206,348         |  | 112,561  
|                                                     |  |                 |  |          
|                                                     |  | 1,868,229       |  | 1,567,210
|                                                     |  |                 |  |          

Included in the above balances as of December 31, 2009 is an
impairment loss of RMB21,854,000 (2008: RMB16,854,000). During the year ended December 31, 2009, the Group wrote off impairment loss of RMB536,000. During the year ended December 31, 2008, the Group wrote off impairment loss of
RMB2,646,000 and reversed impairment loss of RMB10,617,000. During the year ended December 31, 2007, the Group wrote off impairment loss of RMB2,533,000.



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



21. PREPAYMENTS AND OTHER RECEIVABLESContinued



The Group has provided fully for all receivables over 3 years because
historical experience is such that receivables that are past due beyond 3 years are generally not recoverable. Receivable will be written off, if aged over 4 years and considered irrecoverable by the management after considering the credit quality
of the individual party and the nature of the amount overdue.

The amount due from a jointly controlled entity is unsecured, interest-free and
has no fixed repayment term.

22. PREPAID LEASE PAYMENTS



|                    |  |                 |  |        
|------------------- |  | --------------- |  | -------
|                    |  | At December 31,
|                    |  | 2009            |  | 2008   
|                    |  | RMB000         |  | RMB000
|Current portion     |  | 17,121          |  | 15,296 
|Non-current portion |  | 691,339         |  | 628,119
|                    |  |                 |  |        
|                    |  | 708,460         |  | 643,415
|                    |  |                 |  |        

The amounts represent prepaid lease payments for land use rights which
are situated in the PRC and have a term of 45 to 50 years from the date of grant of land use rights certificates.

23. PREPAYMENT FOR
RESOURCES COMPENSATION FEES

In accordance with the relevant regulations, the Shanxi Group is required to pay resources compensation fees
to the Heshun Municipal Coal Industry Bureau at a rate of RMB2.70 per tonne of raw coal mined. During the year 2006, Shanxi Group was requested by the relevant government to prepay the fees based on production volume of 10 million tonnes. At
the balance sheet date, the amount represented the prepayment for resources compensation fees not yet utilized. The current portion represents the amount to be utilized in the coming year which is estimated based on expected production volume.



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



24. INTANGIBLE ASSETS



|                                            |  |              |   |  |               |  |            |  |                   |  |         |  |            |  
|------------------------------------------- |  | ------------ | - |  | ------------- |  | ---------- |  | ----------------- |  | ------- |  | ---------- | -
|                                            |  | Coalreserves |   |  | Coalresources |  | Technology |  | Rail accessrights |  | Others  |  | Total      |  
|                                            |  | RMB000      |   |  | RMB000       |  | RMB000    |  | RMB000           |  | RMB000 |  | RMB000    |  
|COST                                        |  |              |   |  |               |  |            |  |                   |  |         |  |            |  
|At January 1, 2008                          |  | 417,113      |   |  |              |  |           |  |                  |  |        |  | 417,113    |  
|Exchange re-alignment                       |  | (30,772      | ) |  |              |  |           |  |                  |  |        |  | (30,772    | )
|Acquisition of Zhaolou Coal mine            |  | 747,339      |   |  |              |  |           |  |                  |  |        |  | 747,339    |  
|                                            |  |              |   |  |               |  |            |  |                   |  |         |  |            |  
|At December 31, 2008 and at January 1, 2009 |  | 1,133,680    |   |  |              |  |           |  |                  |  |        |  | 1,133,680  |  
|Exchange re-alignment                       |  | 25,998       |   |  |              |  |           |  |                  |  |        |  | 25,998     |  
|Additions for the year                      |  |             |   |  |              |  |           |  |                  |  | 233     |  | 233        |  
|Acquisition of Felix                        |  | 13,782,538   |   |  | 3,859,559     |  | 153,235    |  | 41,523            |  | 11,168  |  | 17,848,023 |  
|                                            |  |              |   |  |               |  |            |  |                   |  |         |  |            |  
|At December 31, 2009                        |  | 14,942,216   |   |  | 3,859,559     |  | 153,235    |  | 41,523            |  | 11,401  |  | 19,007,934 |  
|                                            |  |              |   |  |               |  |            |  |                   |  |         |  |            |  
|                                            |  |              |   |  |               | 
|AMORTIZATION                                |  |              |   |  |               |  |            |  |                   |  |         |  |            |  
|At January 1, 2008                          |  | 61,101       |   |  |              |  |           |  |                  |  |        |  | 61,101     |  
|Exchange re-alignment                       |  | (2,780       | ) |  |              |  |           |  |                  |  |        |  | (2,780     | )
|Provided for the year                       |  | 35,652       |   |  |              |  |           |  |                  |  |        |  | 35,652     |  
|                                            |  |              |   |  |               |  |            |  |                   |  |         |  |            |  
|At December 31, 2008 and at January 1, 2009 |  | 93,973       |   |  |              |  |           |  |                  |  |        |  | 93,973     |  
|Exchange re-alignment                       |  | 3,009        |   |  |              |  |           |  |                  |  |        |  | 3,009      |  
|Provided for the year                       |  | 44,274       |   |  |              |  |           |  |                  |  | 4       |  | 44,278     |  
|                                            |  |              |   |  |               |  |            |  |                   |  |         |  |            |  
|At December 31, 2009                        |  | 141,256      |   |  |              |  |           |  |                  |  | 4       |  | 141,260    |  
|                                            |  |              |   |  |               |  |            |  |                   |  |         |  |            |  
|                                            |  |              |   |  |               | 
|CARRYING VALUES                             |  |              |   |  |               |  |            |  |                   |  |         |  |            |  
|At December 31, 2009                        |  | 14,800,960   |   |  | 3,859,559     |  | 153,235    |  | 41,523            |  | 11,397  |  | 18,866,674 |  
|                                            |  |              |   |  |               |  |            |  |                   |  |         |  |            |  
|At December 31, 2008                        |  | 1,039,707    |   |  |              |  |           |  |                  |  |        |  | 1,039,707  |  
|                                            |  |              |   |  |               |  |            |  |                   |  |         |  |            |  

The addition of mining right of RMB747,339,000 during the year ended December 31, 2008 represented the consideration
paid for Zhaolou coal mine acquired from the Parent Company.

In addition, the Parent Company and the Company have entered into a mining
rights agreement pursuant to which the Company has agreed to pay to the Parent Company, effective from September 25, 1997, an annual fee of RMB12,980,000 as compensation for the Parent Companys agreement to give up the mining rights
associated with the Xinglongzhuang coal mine, Baodian coal mine, Nantun coal mine, Dongtan coal mine and Jining II. The annual fee is subject to change after a ten-year period. Up to the date of these financial statements, compensation fee of RMB5
per tonne of raw coal mined amounting to RMB 137,070,000 (2008: RMB135,141,000) for the year has been preliminary agreed. The revised compensation fees are to be settled with governmental authority directly. The actual amount of compensation fee
payable each year is still to be confirmed by the governmental authority.



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



24. INTANGIBLE ASSETSContinued



The other mining rights (coal reserves) are amortized on the following basis:



|           |  |                                                 
|---------- |  | ------------------------------------------------
|           |  | Amortization method                             
|Jining III |  | Amortized on a straight-line basis over 20 years
|Zhaolou    |  | Amortized on a straight-line basis over 28 years
|Tianchi    |  | Amortized on a straight-line basis over 27 years
|Austar     |  | Unit of production method                       
|Ashton     |  | Unit of production method                       
|Minerva    |  | Unit of production method                       
|Moolarben  |  | Unit of production method                       
|Yarrabee   |  | Unit of production method                       

Rail access rights are
amortized on a straight line basis or unit of production basis over the life of the mine.

Technology has not yet reached the stage of
commercial application and therefore is not amortized.

Other intangible assets namely represent computer software and water licenses and are
amortized on a straight line basis of 2.5 to 5 years over the useful life and the life of coal mine respectively.

Amortization expense for
the year of RMB44,278,000 (2008: RMB35,652,000; 2007: RMB15,728,000) has been included in cost of sales and service provided.

At
December 31, 2009, intangible assets with a carrying amount of approximately RMB4,288,410,000 (2008: Nil) have been pledged to secure the borrowings of the Companys subsidiaries (Note 36).



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YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



25. PROPERTY, PLANT AND EQUIPMENT



|                                         |  |                          |   |  |           |   |  |                       |   |  |                   |   |  |                  |  |                             |   |  |                         |   |  |                         |   |  |            |  
|---------------------------------------- |  | ------------------------ | - |  | --------- | - |  | --------------------- | - |  | ----------------- | - |  | ---------------- |  | --------------------------- | - |  | ----------------------- | - |  | ----------------------- | - |  | ---------- | -
|                                         |  | Freeholdland inAustralia |   |  | Buildings |   |  | Harborworks andcrafts |   |  | Railwaystructures |   |  | Miningstructures |  | Plant,machineryandequipment |   |  | Transportationequipment |   |  | Constructionin progress |   |  | Total      |  
|                                         |  | RMB000                  |   |  | RMB000   |   |  | RMB000               |   |  | RMB000           |   |  | RMB000          |  | RMB000                     |   |  | RMB000                 |   |  | RMB000                 |   |  | RMB000    |  
|COST                                     |  |                          |   |  |           |   |  |                       |   |  |                   |   |  |                  |  |                             |   |  |                         |   |  |                         |   |  |            |  
|At January 1, 2008                       |  | 57,311                   |   |  | 2,580,091 |   |  | 250,349               |   |  | 736,358           |   |  | 3,687,389        |  | 9,547,481                   |   |  | 354,373                 |   |  | 4,681,062               |   |  | 21,894,414 |  
|Exchange re-alignment                    |  | (15,032                  | ) |  | (3,066    | ) |  |                      |   |  |                  |   |  |                 |  | (252,328                    | ) |  | (303                    | ) |  | (70,451                 | ) |  | (341,180   | )
|Additions                                |  |                         |   |  |          |   |  |                      |   |  |                  |   |  |                 |  | 97,150                      |   |  | 3,330                   |   |  | 1,965,762               |   |  | 2,066,242  |  
|Transfers                                |  |                         |   |  | 429,580   |   |  | 5,456                 |   |  | 132,609           |   |  | 11,184           |  | 1,145,823                   |   |  | 24,270                  |   |  | (1,748,922              | ) |  |           |  
|Disposals                                |  |                         |   |  | (978      | ) |  |                      |   |  |                  |   |  |                 |  | (45,996                     | ) |  | (4,045                  | ) |  |                        |   |  | (51,019    | )
|                                         |  |                          |   |  |           |   |  |                       |   |  |                   |   |  |                  |  |                             |   |  |                         |   |  |                         |   |  |            |  
|At December 31, 2008 and January 1, 2009 |  | 42,279                   |   |  | 3,005,627 |   |  | 255,805               |   |  | 868,967           |   |  | 3,698,573        |  | 10,492,130                  |   |  | 377,625                 |   |  | 4,827,451               |   |  | 23,568,457 |  
|Exchange re-alignment                    |  | 14,037                   |   |  | 2,933     |   |  |                      |   |  |                  |   |  |                 |  | 261,896                     |   |  | 60                      |   |  | 42,608                  |   |  | 321,534    |  
|Acquisition of Hua Ju Energy             |  |                         |   |  | 290,362   |   |  |                      |   |  |                  |   |  |                 |  | 434,929                     |   |  | 4,050                   |   |  | 25,872                  |   |  | 755,213    |  
|Acquisition of Felix                     |  | 223,963                  |   |  | 35,403    |   |  |                      |   |  |                  |   |  | 486,736          |  | 1,882,269                   |   |  |                        |   |  | 918,536                 |   |  | 3,546,907  |  
|Additions                                |  | 9,656                    |   |  | 1,084     |   |  |                      |   |  |                  |   |  |                 |  | 163,300                     |   |  | 6,981                   |   |  | 1,904,628               |   |  | 2,085,649  |  
|Transfers                                |  | 577                      |   |  | 481,045   |   |  |                      |   |  | 480,557           |   |  | 994,476          |  | 4,553,842                   |   |  | 21,366                  |   |  | (6,531,863              | ) |  |           |  
|Written off                              |  |                         |   |  |          |   |  |                      |   |  |                  |   |  |                 |  |                            |   |  |                        |   |  | (14,199                 | ) |  | (14,199    | )
|Disposals                                |  |                         |   |  | (39,410   | ) |  | (2,127                | ) |  | (2,936            | ) |  |                 |  | (359,180                    | ) |  | (36,637                 | ) |  |                        |   |  | (440,290   | )
|                                         |  |                          |   |  |           |   |  |                       |   |  |                   |   |  |                  |  |                             |   |  |                         |   |  |                         |   |  |            |  
|At December 31, 2009                     |  | 290,512                  |   |  | 3,777,044 |   |  | 253,678               |   |  | 1,346,588         |   |  | 5,179,785        |  | 17,429,186                  |   |  | 373,445                 |   |  | 1,173,033               |   |  | 29,823,271 |  
|                                         |  |                          |   |  |           |   |  |                       |   |  |                   |   |  |                  |  |                             |   |  |                         |   |  |                         |   |  |            |  
|ACCUMULATED DPERECIATION AND IMPAIRMENT  |  |                          |   |  |           |   |  |                       |   |  |                   |   |  |                  |  |                             |   |  |                         |   |  |                         |   |  |            |  
|At January 1, 2008                       |  |                         |   |  | 1,225,364 |   |  | 24,277                |   |  | 323,121           |   |  | 1,719,539        |  | 4,856,779                   |   |  | 220,740                 |   |  |                        |   |  | 8,369,820  |  
|Exchange re-alignment                    |  |                         |   |  | (964      | ) |  |                      |   |  |                  |   |  |                 |  | (47,147                     | ) |  |                        |   |  |                        |   |  | (48,111    | )
|Provided for the year                    |  |                         |   |  | 94,907    |   |  | 42,653                |   |  | 62,171            |   |  | 80,538           |  | 836,981                     |   |  | 23,559                  |   |  |                        |   |  | 1,140,809  |  
|Eliminated on disposals                  |  |                         |   |  | (387      | ) |  |                      |   |  |                  |   |  |                 |  | (39,393                     | ) |  | (3,727                  | ) |  |                        |   |  | (43,507    | )
|                                         |  |                          |   |  |           |   |  |                       |   |  |                   |   |  |                  |  |                             |   |  |                         |   |  |                         |   |  |            |  
|At December 31, 2008 and January 1, 2009 |  |                         |   |  | 1,318,920 |   |  | 66,930                |   |  | 385,292           |   |  | 1,800,077        |  | 5,607,220                   |   |  | 240,572                 |   |  |                        |   |  | 9,419,011  |  
|Exchange re-alignment                    |  |                         |   |  | 936       |   |  |                      |   |  |                  |   |  |                 |  | 82,274                      |   |  | 50                      |   |  |                        |   |  | 83,260     |  
|Provided for the year                    |  |                         |   |  | 220,440   |   |  | 12,010                |   |  | 35,765            |   |  | 86,087           |  | 1,399,981                   |   |  | 38,995                  |   |  |                        |   |  | 1,793,278  |  
|Eliminated on disposals                  |  |                         |   |  | (9,783    | ) |  | (1,473                | ) |  | (2,226            | ) |  |                 |  | (302,184                    | ) |  | (33,746                 | ) |  |                        |   |  | (349,412   | )
|                                         |  |                          |   |  |           |   |  |                       |   |  |                   |   |  |                  |  |                             |   |  |                         |   |  |                         |   |  |            |  
|At December 31, 2009                     |  |                         |   |  | 1,530,513 |   |  | 77,467                |   |  | 418,831           |   |  | 1,886,164        |  | 6,787,291                   |   |  | 245,871                 |   |  |                        |   |  | 10,946,137 |  
|                                         |  |                          |   |  |           |   |  |                       |   |  |                   |   |  |                  |  |                             |   |  |                         |   |  |                         |   |  |            |  
|CARRYING VALUES                          |  |                          |   |  |           |   |  |                       |   |  |                   |   |  |                  |  |                             |   |  |                         |   |  |                         |   |  |            |  
|At December 31, 2009                     |  | 290,512                  |   |  | 2,246,531 |   |  | 176,211               |   |  | 927,757           |   |  | 3,293,621        |  | 10,641,895                  |   |  | 127,574                 |   |  | 1,173,033               |   |  | 18,877,134 |  
|                                         |  |                          |   |  |           |   |  |                       |   |  |                   |   |  |                  |  |                             |   |  |                         |   |  |                         |   |  |            |  
|At December 31, 2008                     |  | 42,279                   |   |  | 1,686,707 |   |  | 188,875               |   |  | 483,675           |   |  | 1,898,496        |  | 4,884,910                   |   |  | 137,053                 |   |  | 4,827,451               |   |  | 14,149,446 |  
|                                         |  |                          |   |  |           |   |  |                       |   |  |                   |   |  |                  |  |                             |   |  |                         |   |  |                         |   |  |            |  

The following estimated useful lives are used for the depreciation of property, plant and equipment, other than construction
in progress and freehold land:



|                               |  |                
|------------------------------ |  | ---------------
|Buildings                      |  | 10 to 30 years 
|Harbor works and crafts        |  | 40 years       
|Railway structures             |  | 15 to 25 years 
|Plant, machinery and equipment |  | 2.5 to 25 years
|Transportation equipment       |  | 6 to 18 years  

Transportation equipment includes vessels
which are depreciated over the estimated useful lives of 18 years.

The mining structures include the main and auxiliary mine shafts and
underground tunnels. Depreciation is provided to write off the cost of the mining structures using the units of production method based on the estimated production volume for which the structure was designed and the contractual period of the
relevant mining rights.



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YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



25. PROPERTY, PLANT AND EQUIPMENTContinued



During the year ended December 31, 2009, the directors conducted a
review of the Groups mining assets and determined that a number of those assets were impaired, due to physical damage and technical obsolescence. Accordingly, an aggregate amount of RMB14,199,000 (2008: nil) have been written off in respect of
construction in progress including railway projects and water engineering projects.

At December 31, 2009, property, plant and equipment
with a carrying amount of approximately RMB3,546,907,000 (2008: Nil) have been pledged to secure bank borrowings of the Group (Note 36).

In
addition, the Groups finance leases (Note 36) are secured by the property, plant and equipment held under the relevant finance leases with a carrying amount of RMB651,981,000 (2008: Nil).

26. OVERBURDEN IN ADVANCE



|                             |  |                 |  |        
|---------------------------- |  | --------------- |  | -------
|                             |  | At December 31,
|                             |  | 2009            |  | 2008   
|                             |  | RMB000         |  | RMB000
|Overburden in advance - cost |  | 350,676         |  |       
|                             |  |                 |  |        

Overburden in advance comprises the accumulation of expenses incurred
to enable access to the coal seams, and includes direct removal costs, machinery and plant running costs. The deferred costs are presented after the deduction of the portion that has been transferred to the income statement in the period.

27. GOODWILL



|                             |  |           |  |        
|---------------------------- |  | --------- |  | -------
|                             |  | 2009      |  | 2008   
|                             |  | RMB000   |  | RMB000
|COST                         |  |           |  |        
|At January 1                 |  | 298,650   |  | 298,650
|Acquisition of Hua Ju Energy |  | 239,879   |  |       
|Acquisition of Felix         |  | 766,816   |  |       
|                             |  |           |  |        
|At December 31               |  | 1,305,345 |  | 298,650
|                             |  |           |  |        



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YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



27. GOODWILLContinued



Goodwill acquired in a business combination is allocated, at acquisition, to
the cash generating units that are expected to benefit from that business combination. The carrying amount of goodwill had been allocated as follows:



|                                    |  |           |  |        
|----------------------------------- |  | --------- |  | -------
|                                    |  | 2009      |  | 2008   
|                                    |  | RMB000   |  | RMB000
|Coal Mining                         |  |           |  |        
|- Jining II                         |  | 10,106    |  | 10,106 
|- Shandong Yanmei Shipping Co., Ltd |  | 10,046    |  | 10,046 
|- Heze                              |  | 35,645    |  | 35,645 
|- Shanxi Group                      |  | 145,613   |  | 145,613
|- Felix                             |  | 766,816   |  |       
|                                    |  |          
|Coal Railway Transportation         |  |           |  |        
|- Railway Assets                    |  | 97,240    |  | 97,240 
|                                    |  |          
|Electricity and heat supply         |  |           |  |        
|- Hua Ju Energy                     |  | 239,879   |  |       
|                                    |  |           |  |        
|                                    |  | 1,305,345 |  | 298,650
|                                    |  |           |  |        

Felix was acquired by the Group at the end of the year and its fair
value has been assessed by the valuer (note 44). Therefore the Group did not perform detailed calculation of value in use on the cash generating units to assess whether impairment is required on the goodwill.

The recoverable amounts of goodwill from each of the above cash generating units have been determined on the basis of value in use calculations. The
recoverable amounts are based on certain similar key assumptions on discount rates, growth rates and expected changes in selling prices and direct cost. All value in use calculations use cash flow projections based on financial budgets approved by
management covering a 5-year period, using a zero percent growth rate and with a discount rate of 8% (2008: 8%).

The cash flows beyond the
5-year period are extrapolated for 5 years using a zero percent growth rate. Cash flow projections during the budget period for each of the above units are based on the budgeted revenue and expected gross margins during the budget period and the
same raw materials price inflation during the budget period. Expected cash inflows/outflows, which include budgeted sales, gross margin and raw material price inflation, have been determined based on past performance and managements
expectations for the market development. Management believes that any reasonably possible change in any of these assumptions would not cause the carrying amount of each of the above units to exceed the recoverable amount of each of the above units.
During the years ended December 31, 2009 and 2008, management of the Group determined that there are no impairments of any of its cash-generating units containing goodwill.



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YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



28. INVESTMENTS IN SECURITIES

The investments in securities represent available-for-sale equity investments:



|                                    |  |                 |  |        
|----------------------------------- |  | --------------- |  | -------
|                                    |  | At December 31,
|                                    |  | 2009            |  | 2008   
|                                    |  | RMB000         |  | RMB000
|Equity securities listed on the SSE |  |                 |  |        
|- Stated at fair value              |  | 264,672         |  | 139,447
|Unlisted equity securities          |  | 30,623          |  | 440    
|                                    |  |                 |  |        
|                                    |  | 295,295         |  | 139,887
|                                    |  |                 |  |        

Previously, the Group invested in certain state legal person shares of
Shenergy Company Limited and Jiangsu Lian Yun Gang Port Corporation Limited. These shares were not tradable.

Pursuant to the share reform
plan of Shenergy Company Limited carried out in 2006, the non-tradable legal person shares with the investment cost of RMB60,421,000 held by the Company were converted into tradable shares on August 17, 2006. Under this share reform plan, the
Company has committed that the Company will not sell more than one-third of the shares held as of August 17, 2005 within one year after August 17, 2006; and two-third of the shares held as of August 17, 2005 within two years after
August 17, 2006. This investment is presented as listed securities stated at fair value as at December 31, 2009 at the amount of RMB254,046,000 (2008:RMB133,720,000).

On April 26, 2007, Jiangsu Lian Yun Gang Port Corporation Limited became a public company with its shares listed in SSE. The Company has committed
not to sell its holding, or transfer to others before April 28, 2008. This investment is presented as listed securities which amount to RMB10,626,000 as at December 31, 2009 (2008:RMB5,727,000).

The investments in equity securities listed on the SSE are carried at fair value determined according to the quoted market prices in an active market.

The unlisted equity securities are stated at cost less impairment at each balance sheet date because the range of reasonable fair value
estimates is so significant that the directors of the Company are of the opinion that their fair value cannot be measured reliably.



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YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



29. INTERESTS IN AN ASSOCIATE



|                                        |  |                 |  |         |  
|--------------------------------------- |  | --------------- |  | ------- | -
|                                        |  | At December 31, | 
|                                        |  | 2009            |  | 2008    |  
|                                        |  | RMB000         |  | RMB000 |  
|Cost of investment in an associate      |  | 900,000         |  | 900,000 |  
|Share of post-acquisition profit (loss) |  | 39,981          |  | (69,805 | )
|                                        |  |                 |  |         |  
|                                        |  | 939,981         |  | 830,195 |  
|                                        |  |                 |  |         |  

Information on major associates is as follows:



|                                                 |  |                                    |  |                     |               |                               |               |                 |  |    
|------------------------------------------------ |  | ---------------------------------- |  | ------------------- | ------------- | ----------------------------- | ------------- | --------------- |  | ---
|                                                 |  | Place ofestablishmentand operation |  | Class ofshares held |               | Principalactivity             |               | At December 31,
|                                                 |  |                                    |  |                     | 2009          |                               | 2008         
|Name of associate                                |  |                                    |  |                     | Interest held |                               | Interest held
|Huadian Zouxian Power Generation Company Limited |  | PRC                                |  | RegisteredCapital   |               | Electricitygenerationbusiness |               | 30%             |  | 30%

Huadian Zouxian Power Generation Company
Limited is held by the Company directly.

Summarized financial information in respect of the Groups associates is set out below:



|                                          |  |                 |   |  |            |  
|----------------------------------------- |  | --------------- | - |  | ---------- | -
|                                          |  | At December 31, |  
|                                          |  | 2009            |   |  | 2008       |  
|                                          |  | RMB000         |   |  | RMB000    |  
|Total assets                              |  | 6,945,366       |   |  | 7,623,355  |  
|Total liabilities                         |  | (3,812,095      | ) |  | (4,856,038 | )
|                                          |  |                 |   |  |            |  
|Net assets                                |  | 3,133,271       |   |  | 2,767,317  |  
|                                          |  |                 |   |  |            |  
|Groups share of net assets of associates |  | 939,981         |   |  | 830,195    |  
|                                          |  |                 |   |  |            |  



|                                             |  |                         |  |           |  
|-------------------------------------------- |  | ----------------------- |  | --------- | -
|                                             |  | Year ended December 31, | 
|                                             |  | 2009                    |  | 2008      |  
|                                             |  | RMB000                 |  | RMB000   |  
|Revenue                                      |  | 3,832,204               |  | 3,650,661 |  
|                                             |  |                         |  |           |  
|Profit (Loss) for the year                   |  | 365,954                 |  | (224,556  | )
|                                             |  |                         |  |           |  
|Groups share of profit (loss) of associates |  | 109,786                 |  | (67,367   | )
|                                             |  |                         |  |           |  



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YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



30. DEPOSIT MADE ON INVESTMENT



|                                                   |  |                 |  |        
|-------------------------------------------------- |  | --------------- |  | -------
|                                                   |  | At December 31,
|                                                   |  | 2009            |  | 2008   
|                                                   |  | RMB000         |  | RMB000
|Shaanxi coal mine operating company                |  | 117,926         |  | 117,926
|Inner Mongolia Rong Xin Chemical Co., Ltd.         |  | 1,320           |  |       
|Inner Mongolia Yi Feng Mining Investment Co., Ltd. |  | 53,880          |  |       
|Inner Mongolia Da Xin Industrial Gases Co., Ltd.   |  | 1,800           |  |       
|Stamp duty paid                                    |  | 95              |  |       
|                                                   |  |                 |  |        
|                                                   |  | 175,021         |  | 117,926
|                                                   |  |                 |  |        

During 2006, the Company entered into a co-operative agreement with
two independent third parties to establish a company for acquiring a coal mine in Shaanxi province for operations. The Company will have to invest approximately RMB196.8 million in order to obtain 41% equity interest. As at December 31, 2009,
the Company made a deposit of RMB118 million (2008: RMB118 million) in relation to this acquisition. As at December 31, 2009, the relevant procedures to establish the new company are still in progress, and the establishment has not yet been
completed.

During the year, the Company entered into a co-operative agreement with an independent third party to acquire 100% equity interest
in Inner Mongolia Rong Xin Chemical Co., Ltd. at a consideration of RMB4.4 million. As at December 31, 2009, the Company made a deposit of RMB1.32 million in relation to this acquisition. As at December 31, 2009, equity transfer and the
relevant approval from government authority have not yet been completed. Under the agreement, the Company can only assign personnel to take over the companys business until the relevant application documents are approved formally. In April
2010, the equity transfer and the relevant approval from government authority have been completed.

During the year, the Company entered into
a co-operative agreement with an independent third party to acquire 100% equity interest in Inner Mongolia Yi Feng Mining Investment Co., Ltd. at a consideration of RMB179.6 million. As at December 31, 2009, the Company made a deposit of
RMB53.88 million in relation to this acquisition. As at December 31, 2009, equity transfer and the relevant approval from government authority have not yet been completed. Under the agreement, the Company can only assign personnel to take over
the companys business until the relevant application documents are approved formally. In April 2010, the equity transfer and the relevant approval from government authority have been completed.

During the year, the Company entered into a co-operative agreement with two independent third parties to acquire 100% equity interest in Inner Mongolia
Da Xin Industrial Gases Co., Ltd. at a consideration of RMB6 million. As at December 31, 2009, the Company made a deposit of RMB1.8 million in relation to this acquisition. As at December 31, 2009, equity transfer and the relevant approval
from government authority have not yet been completed. Under the agreement, the Company can only assign personnel to take over the companys business until the relevant application documents are approved formally. In April 2010, the equity
transfer and the relevant approval from government authority have been completed.

The above completed acquisitions are not material to the
Group and therefore their financial information are not presented.



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YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



31. INTERESTS IN JOINTLY CONTROLLED ENTITIES



|                    |  |                 |  |        
|------------------- |  | --------------- |  | -------
|                    |  | At December 31,
|                    |  | 2009            |  | 2008   
|                    |  | RMB000         |  | RMB000
|Share of net assets |  | 1,257           |  |       
|                    |  |                 |  |        

Information on major jointly controlled entities is as follows:



|                                                |  |                                    |  |                     |             |                                   |               |                 |             |     |               |   |  |  
|----------------------------------------------- |  | ---------------------------------- |  | ------------------- | ----------- | --------------------------------- | ------------- | --------------- | ----------- | --- | ------------- | - |  | -
|                                                |  | Place ofestablishmentand operation |  | Class of sharesheld |             | Principal activity                |               | At December 31,
|                                                |  |                                    |  |                     | 2009        |                                   | 2008         
|Name of jointly controlled entity               |  |                                    |  |                     | Votingpower |                                   | Interest held |                 | Votingpower |     | Interest held
|Australian Coal Processing Holdings Pty Ltd (i) |  | Australia                          |  | Ordinary shares     |             | Holding company                   |               | 33.33%          |             | 60% |               |  |  | 
|Ashton Coal Mines Limited (ii)                  |  | Australia                          |  | Ordinary shares     |             | Real estate holder& sales
company |               | 33.33%          |             | 60% |               |  |  | 



|(i) | A subsidiary of the Company holds 60% of the ordinary shares of Australian Coal Processing Holdings Pty Ltd. Under the shareholders agreement between the subsidiary and
the remaining two shareholders, all major financial and operating policy decisions require a vote by directors who together represent shareholders holding 100% of the shares or a vote by shareholders who together hold 100% of the shares. Therefore
decisions must be passed unanimously by directors or shareholders and the subsidiarys voting power is equivalent to 33.33%.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(ii) | A subsidiary of the Company holds 60% of the ordinary shares of Ashton Coal Mines Limited. Under the shareholders agreement between the subsidiary and the remaining two
shareholders, all major financial and operating policy decisions require a unanimous resolution of the shareholders. Therefore decisions must be passed unanimously by shareholders and the subsidiarys voting power is equivalent to 33.33%.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(iii) | The above jointly controlled entities are held indirectly by the Company. These entities were obtained from the acquisition of Felix at the end of the year and
therefore there is no share of profit or loss of jointly controlled entities.
|----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Summarized financial information in respect of
the Groups jointly controlled entities is set out below:



|                                                           |  |                 |   |  |        
|---------------------------------------------------------- |  | --------------- | - |  | -------
|                                                           |  | At December 31,
|                                                           |  | 2009            |   |  | 2008   
|                                                           |  | RMB000         |   |  | RMB000
|Total assets                                               |  | 245,024         |   |  |       
|Total liabilities                                          |  | (242,929        | ) |  |       
|                                                           |  |                 |   |  |        
|Net assets                                                 |  | 2,095           |   |  |       
|                                                           |  |                 |   |  |        
|Groups share of net assets of jointly controlled entities |  | 1,257           |   |  |       
|                                                           |  |                 |   |  |        



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YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



32. INTERESTS IN JOINT VENTURES

Information on major joint ventures (other than jointly controlled entities) is as follows:



|                        |  |                                    |  |                                                                  |  |                 |               |  |  
|----------------------- |  | ---------------------------------- |  | ---------------------------------------------------------------- |  | --------------- | ------------- |  | -
|                        |  | Place
ofestablishmentand operation |  | Principal activity                                               |  | At December 31,
|                        |  |                                    |  | 2009                                                             |  |                 | 2008         
|Name of joint venture   |  |                                    |  | Interest held                                                    |  |                 | Interest held
|Boonal joint venture    |  | Australia                          |  | Provision of a coal haul road and train load out facilities      |  | 50              | %             |  | 
|Minerva joint venture   |  | Australia                          |  | Development and operation of an open-cut coal mine               |  | 51              | %             |  | 
|Athena joint venture    |  | Australia                          |  | Coal exploration                                                 |  | 51              | %             |  | 
|Ashton joint venture    |  | Australia                          |  | Development and operation of open-cut and underground coal mines |  | 60              | %             |  | 
|Moolarben joint venture |  | Australia                          |  | Development and operation of open-cut and underground coal mines |  | 80              | %             |  | 

The above joint ventures
are established and operated as unincorporated businesses and are held indirectly by the Company. These joint ventures are consolidated into the Companys consolidated financial statements due to the acquisition of Felix.

The Groups interest in the assets and liabilities of the joint ventures is set out below:



|                        |  |                 |   |  |        
|----------------------- |  | --------------- | - |  | -------
|                        |  | At December 31,
|                        |  | 2009            |   |  | 2008   
|                        |  | RMB000         |   |  | RMB000
|Current assets          |  | 537,378         |   |  |       
|Non-current assets      |  | 18,677,130      |   |  |       
|Current liabilities     |  | (5,393,837      | ) |  |       
|Non-current liabilities |  | (30,327         | ) |  |       
|                        |  |                 |   |  |        
|                        |  | 13,790,344      |   |  |       
|                        |  |                 |   |  |        



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YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



33. BILLS AND ACCOUNTS PAYABLE



|                                 |  |                 |  |        
|-------------------------------- |  | --------------- |  | -------
|                                 |  | At December 31,
|                                 |  | 2009            |  | 2008   
|                                 |  | RMB000         |  | RMB000
|Accounts payable                 |  |                 |  |        
|- To third parties               |  | 1,242,349       |  | 749,786
|- To a jointly controlled entity |  | 5,667           |  |       
|                                 |  |                 |  |        
|                                 |  | 1,248,016       |  | 749,786
|Bills payable                    |  | 118,960         |  | 160,341
|                                 |  |                 |  |        
|                                 |  | 1,366,976       |  | 910,127
|                                 |  |                 |  |        

The following is an aged analysis of bills and accounts payable based
on the invoice dates at the reporting date:



|               |  |                 |  |        
|-------------- |  | --------------- |  | -------
|               |  | At December 31,
|               |  | 2009            |  | 2008   
|               |  | RMB000         |  | RMB000
|1 - 90 days    |  | 1,153,686       |  | 469,740
|91 - 180 days  |  | 84,400          |  | 177,404
|181 - 365 days |  | 46,955          |  | 132,576
|1 - 2 years    |  | 81,935          |  | 130,407
|               |  |                 |  |        
|               |  | 1,366,976       |  | 910,127
|               |  |                 |  |        

The average credit period for accounts payable and bills payable is 90
days. The Group has financial risk management policies in place to ensure that all payables are within the credit timeframe.



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YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



34 OTHER PAYABLES AND ACCRUED EXPENSES



|                                                                                             |  |                 |  |          
|-------------------------------------------------------------------------------------------- |  | --------------- |  | ---------
|                                                                                             |  | At December 31,
|                                                                                             |  | 2009            |  | 2008     
|                                                                                             |  | RMB000         |  | RMB000  
|Customers deposits                                                                          |  | 1,488,748       |  | 757,631  
|Accrued wages                                                                                |  | 578,679         |  | 435,450  
|Other taxes payable                                                                          |  | 166,604         |  | 265,231  
|Payables in respect of purchases of property, plant and equipment and construction materials |  | 643,674         |  | 654,304  
|Accrued freight charges                                                                      |  | 58,119          |  | 13,189   
|Accrued repairs and maintenance                                                              |  | 35,846          |  | 49,766   
|Accrued utility expenses                                                                     |  | 18,829          |  |         
|Staff welfare payable                                                                        |  | 122,487         |  | 77,873   
|Withholding tax payable                                                                      |  | 1,869           |  | 466      
|Deposits received from employees                                                             |  | 14,469          |  | 68,969   
|Coal price adjustment fund                                                                   |  | 34,764          |  | 34,081   
|Accrued land subsidence, restoration, rehabilitation and environmental costs                 |  | 78,356          |  | 59,871   
|Payable on compensation fee of mining rights                                                 |  | 272,210         |  | 135,141  
|Payables by Felix to companies related to its directors (note)                               |  | 602,597         |  |         
|Others                                                                                       |  | 324,583         |  | 146,284  
|                                                                                             |  |                 |  |          
|                                                                                             |  | 4,441,834       |  | 2,698,256
|                                                                                             |  |                 |  |          



|Note: | To assist with the funding of the dividend paid to Felixs shareholders prior to the acquisition by the Group, certain Felixs directors, through their
related entities, loaned unsecured funds to Felix. The amounts due have been fully repaid after the balance sheet date.
|----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

35.
PROVISION FOR LAND SUBSIDENCE, RESTORATION, REHABILITATION AND ENVIRONMENTAL COSTS



|                                 |  |           |   |  |            |  
|-------------------------------- |  | --------- | - |  | ---------- | -
|                                 |  | 2009      |   |  | 2008       |  
|                                 |  | RMB000   |   |  | RMB000    |  
|Balance at January 1             |  | 450,979   |   |  | 19,635     |  
|Acquisition of Felix             |  | 48,170    |   |  |           |  
|Additional provision in the year |  | 1,733,325 |   |  | 3,369,696  |  
|Utilization of provision         |  | (623,666  | ) |  | (2,938,352 | )
|                                 |  |           |   |  |            |  
|Balance at December 31           |  | 1,608,808 |   |  | 450,979    |  
|                                 |  |           |   |  |            |  
|Presented as:                    |  |           |   |  |            |  
|Current portion                  |  | 1,564,106 |   |  | 450,979    |  
|Non-current portion              |  | 44,702    |   |  |           |  
|                                 |  |           |   |  |            |  
|                                 |  | 1,608,808 |   |  | 450,979    |  
|                                 |  |           |   |  |            |  



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YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



35. PROVISION FOR LAND SUBSIDENCE, RESTORATION, REHABILITATION AND ENVIRONMENTAL

COSTSContinued



The provision for land subsidence, restoration, rehabilitation and environmental costs has been determined by the directors based on their best estimates.
However, in so far as the effect on the land and the environment from current mining activities becomes apparent in future periods, the estimate of the associated costs may be subject to change in the near term.

36. BORROWINGS



|                           |  |                 |  |        
|-------------------------- |  | --------------- |  | -------
|                           |  | At December 31,
|                           |  | 2009            |  | 2008   
|                           |  | RMB000         |  | RMB000
|Current liabilities        |  |                 |  |        
|Bank borrowings            |  |                 |  |        
|- Unsecured borrowings (i) |  | 22,000          |  | 82,000 
|- Secured borrowings (ii)  |  | 919,410         |  |       
|Finance leases (iii)       |  | 656,703         |  |       
|                           |  |                 |  |        
|                           |  | 1,598,113       |  | 82,000 
|                           |  |                
|Non-current liabilities    |  |                 |  |        
|Bank borrowings            |  |                 |  |        
|- Unsecured borrowings (i) |  | 154,000         |  | 176,000
|- Secured borrowings (ii)  |  | 20,757,728      |  |       
|                           |  |                 |  |        
|                           |  | 20,911,728      |  | 176,000
|                           |  |                 |  |        
|Total borrowings           |  | 22,509,841      |  | 258,000
|                           |  |                 |  |        

(i) Unsecured borrowings are repayable as follows:



|                                                  |  |                 |  |        
|------------------------------------------------- |  | --------------- |  | -------
|                                                  |  | At December 31,
|                                                  |  | 2009            |  | 2008   
|                                                  |  | RMB000         |  | RMB000
|Within one year                                   |  | 22,000          |  | 82,000 
|More than one year, but not exceeding two years   |  | 22,000          |  | 22,000 
|More than two years, but not more than five years |  | 66,000          |  | 66,000 
|More than five years                              |  | 66,000          |  | 88,000 
|                                                  |  |                 |  |        
|Total                                             |  | 176,000         |  | 258,000
|                                                  |  |                 |  |        

The balance as of December 31, 2008 represented two borrowings
amounting to RMB60,000,000 and RMB198,000,000 obtained by Shanxi Tianchi before the Company acquired it. Included in the loans was an amount of RMB60,000,000 that carried interest at 5.31% per annum and the Group has fully settled the amount in
2009. The remaining balance of RMB176,000,000 (2008: RMB198,000,000) carries interest at 5.94% (2008: 5.94%) per annum and is subject to adjustment based on the interest rate stipulated by the Peoples Bank of China (PBOC). The
loan is repayable by 20 instalments over a period of 12 years, with the first instalment due in May 2008. The amount is also guaranteed by the Parent Company.



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YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



36. BORROWINGSContinued



(ii) Secured borrowings are repayable as follows:



|                                                  |  |                 |  |        
|------------------------------------------------- |  | --------------- |  | -------
|                                                  |  | At December 31,
|                                                  |  | 2009            |  | 2008   
|                                                  |  | RMB000         |  | RMB000
|Within one year                                   |  | 919,410         |  |       
|More than one year, but not exceeding two years   |  | 6,930,623       |  |       
|More than two years, but not more than five years |  | 13,827,105      |  |       
|                                                  |  |                 |  |        
|Total                                             |  | 21,677,138      |  |       
|                                                  |  |                 |  |        

Included in the balance as of December 31, 2009 are loans
amounting to RMB20,757,728,000 (USD3,040,000,000) obtained by the Group for the purpose of settling the consideration in respect of acquisition of Felix. The borrowings of RMB19,801,780,000 (USD2,900,000,000) and of RMB955,948,000 (USD140,000,000)
carry interest at three-month LIBOR plus a margin of 0.75% (approximately 4.02%) and at three-month LIBOR plus a margin of 0.8% (approximately 4.22%) respectively. The borrowings are guaranteed by the Company, couter guaranteed by the Parent Company
and secured by the Groups restricted cash (note 17).

The remaining borrowing attributable to Felix amounting to RMB919,410,000
(AUD150,000,000) carries interest at BBSY plus a margin of 3.8% (approximately 7.6%) and was obtained prior to the acquisition of Felix. This borrowing and the finance leases (note 36(iii)) are secured by the Groups property, plant and
equipment (note 25) and intangible assets (note 24) and are also secured by a floating charge over the other assets of Felix.

(iii)Finance
leases are repayable as follows:



|                                                  |  |                 |   |  |        
|------------------------------------------------- |  | --------------- | - |  | -------
|                                                  |  | At December 31,
|                                                  |  | 2009            |   |  | 2008   
|                                                  |  | RMB000         |   |  | RMB000
|Minimum lease payments                            |  |                 |   |  |        
|Within one year                                   |  | 841,590         |   |  |       
|More than one year, but not exceeding two years   |  |                |   |  |       
|More than two years, but not more than five years |  |                |   |  |       
|                                                  |  |                 |   |  |        
|                                                  |  | 841,590         |   |  |       
|Less: Future finance charges                      |  | (184,887        | ) |  |       
|                                                  |  |                 |   |  |        
|Present value of lease payments                   |  | 656,703         |   |  |       
|                                                  |  |                 |   |  |        



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YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



36. BORROWINGSContinued



(iii)Finance leases are repayable as follows:Continued



|                                                                      |  |                 |   |  |        
|--------------------------------------------------------------------- |  | --------------- | - |  | -------
|                                                                      |  | At December 31,
|                                                                      |  | 2009            |   |  | 2008   
|                                                                      |  | RMB000         |   |  | RMB000
|Present value of minimum finance lease payments                       |  |                 |   |  |        
|Within one year                                                       |  | 656,703         |   |  |       
|More than one year, but not exceeding two years                       |  |                |   |  |       
|More than two years, but not more than five years                     |  |                |   |  |       
|                                                                      |  |                 |   |  |        
|                                                                      |  | 656,703         |   |  |       
|Less: amounts due within one year and included in current liabilities |  | (656,703        | ) |  |       
|                                                                      |  |                 |   |  |        
|Amounts due after one year and included in non-current liabilities    |  |                |   |  |       
|                                                                      |  |                 |   |  |        

Breach of loan agreement:

The bank borrowings and finance leases granted to Felix have a number of provisions including the satisfaction of minimum net assets value and the
proportion of forward contracts by Felix as at December 31, 2009.

At December 31, 2009, Felix breached the above loan provisions.
As a result of the breach, long term portions of the bank borrowings and finance leases of RMB 919,410,000 and RMB654,546,000 respectively have been reclassified as current liabilities.

In April 2010, Felix has obtained the waiver letter from the relevant lenders. The lenders agree not to demand immediate payments from Felix and the
terms of borrowings remain unchanged. Under the original borrowing terms, the bank borrowings and finance leases shall be repaid as follows:



|                                                  |  |                    
|------------------------------------------------- |  | -------------------
|                                                  |  | At December 31,2009
|                                                  |  | RMB000            
|Bank borrowings:                                  |  |                    
|Secured bank borrowings                           |  |                    
|Within one year                                   |  | 245,176            
|More than one year, but not more than two years   |  | 196,141            
|More than two years, but not more than five years |  | 478,093            
|                                                  |  |                    
|Total                                             |  | 919,410            
|                                                  |  |                    
|                                                  | 
|                                                  |  | At December 31,2009
|                                                  |  | RMB000            
|Finance leases:                                   |  |                    
|Present value of minimum lease payments           |  |                    
|Within one year                                   |  | 100,029            
|More than one year, but not more than two years   |  | 67,301             
|More than two years, but not more than five years |  | 487,216            
|                                                  |  |                    
|                                                  |  | 654,546            
|                                                  |  |                    



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YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



37. DERIVATIVE FINANCIAL INSTRUMENTS



|                                        |  |                 |  |        
|--------------------------------------- |  | --------------- |  | -------
|                                        |  | At December 31,
|                                        |  | 2009            |  | 2008   
|                                        |  | RMB000         |  | RMB000
|Derivatives used for cash flow hedging: |  |                 |  |        
|Current assets                          |  |                 |  |        
|- Forward foreign exchange contracts    |  | 37,760          |  |       
|                                        |  |                 |  |        
|Current liabilities                     |  |                 |  |        
|- Forward foreign exchange contracts    |  | 23,980          |  | 29,435 
|- Interest rate swap contracts          |  | 4,353           |  |       
|                                        |  |                 |  |        
|                                        |  | 28,333          |  | 29,435 
|                                        |  |                 |  |        

During the year ended December 31, 2009, the Groups
subsidiaries in Australia entered into forward foreign exchange contracts to sell or purchase specified amounts of foreign currencies in the future at stipulated exchange rates. The objective of entering into the forward foreign exchange contracts
is to reduce the foreign exchange rate related volatility of revenue stream and capital expenditure and thereby assist in risk management for the Group. The outstanding sell United States dollars contracts are hedging highly probable forecasted
sales of coal, whereas the outstanding buy United States dollars, Euro and Yen contracts relate to the purchase of mining equipment.

As at
December 31, 2009, the outstanding notional amount to sell United States dollars (sell United States dollars and buy Australian dollars) was approximately RMB1,143 million (2008: RMB211 million), all maturing within one year (2008: within 7
months) with forward rates of approximately from 0.7661 to 0.9044 (2008: floor price and ceiling price of 0.6293 and 0.9568 respectively).

As
at December 31, 2009, the outstanding notional amount to buy United States dollars (buy United States dollars and sell Australian dollars), buy Euro (buy Euro and sell Australian dollars) and buy Yen (buy Yen and sell Australian dollars) was
approximately RMB74 million (2008: nil), RMB27 million (2008: nil) and RMB72 million (2008: nil) respectively, all maturing within six months (2008: nil) with forward rates of approximately 0.753 (2008: nil), 0.552 (2008: nil) and floor price and
ceiling price of 71.7 and 72.7 (2008: nil) respectively.

The Groups Australian subsidiaries also entered into contracts with banks to
hedge a proportion of borrowings issued at variable interest rates through the use of floating-to-fixed interest rate swap contracts. As at December 31, 2009, the outstanding notional amount was approximately RMB282 million (2008: nil),
maturing within three years (2008: nil) at a hedge period of 3 months with floating rate and fixed rate of approximately 4.2783% and 5.89% respectively (2008: nil).

For the year ended December 31, 2008, the ineffective hedging portion of the changes in fair values of the forward foreign exchange contracts of
approximately RMB10,445,000 was recognized as selling, general and administrative expenses in the consolidated income statement. No ineffective hedging portion has been included in the consolidated income statement for the year ended
December 31, 2009. The effective hedging portion was recognized as current portion of derivative financial instruments in the consolidated balance sheet.



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YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



37. DERIVATIVE FINANCIAL INSTRUMENTSContinued



The fair values of the forward foreign exchange contracts are estimated based
on the discounted cash flows between the contract forward rate and spot forward rate. The fair values of the interest rate swap contracts are estimated based on the discounted cash flows between the contract floating rate and the contract fixed
rate.

38. LONG-TERM PAYABLE



|                                                                |  |                 |  |        
|--------------------------------------------------------------- |  | --------------- |  | -------
|                                                                |  | At December 31,
|                                                                |  | 2009            |  | 2008   
|                                                                |  | RMB000         |  | RMB000
|Current liabilities                                             |  |                 |  |        
|- Deferred income of sale and leaseback                         |  | 2,902           |  |       
|- Deferred payment for acquisition of interests in Minerva (i)  |  | 3,065           |  |       
|                                                                |  |                 |  |        
|                                                                |  | 5,967           |  |       
|                                                                |  |                
|Non-current liabilities                                         |  |                 |  |        
|- Deferred income of sale and leaseback                         |  | 10,156          |  |       
|- Deferred payment for acquisition of interests in Minerva (ii) |  | 12,244          |  |       
|- Others                                                        |  | 3,980           |  |       
|                                                                |  |                 |  |        
|                                                                |  | 26,380          |  |       
|                                                                |  |                 |  |        
|Total                                                           |  | 32,347          |  |       
|                                                                |  |                 |  |        



|(i) | The carrying value of the deferred payment for acquisition of interests in Minerva is based on cash flows discounted using a rate of 7.5%.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------

|(ii) | Felix incurred the deferred income of sale and leaseback and deferred payment for acquisition of interests in Minerva prior to its acquisition by the Group.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------



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YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



39. DEFERRED TAXATION



|                                                               |  |                              |   |  |                            |   |  |                                                     |   |  |                                            |   |  |            |   |  |                        |   |  |          |  
|-------------------------------------------------------------- |  | ---------------------------- | - |  | -------------------------- | - |  | --------------------------------------------------- | - |  | ------------------------------------------ | - |  | ---------- | - |  | ---------------------- | - |  | -------- | -
|                                                               |  | Available-for-saleinvestment |   |  | Acceleratedtaxdepreciation |   |  | Fair
valueadjustment onmining rights(coal
reserves) |   |  | Temporarydifferences 
onexpensesrecognized |   |  | Tax losses |   |  | Cash 
flowhedgereserve |   |  | Total    |  
|                                                               |  | RMB000                      |   |  | RMB000                    |   |  | RMB000                                             |   |  | RMB000                                    |   |  | RMB000    |   |  | RMB000                |   |  | RMB000  |  
|Balance at January 1, 2008                                     |  | (86,726                      | ) |  | (200,154                   | ) |  | (39,474                                             | ) |  |                                           |   |  | 31,175     |   |  |                       |   |  | (295,179 | )
|Exchange re-alignment                                          |  |                             |   |  |                           |   |  |                                                    |   |  |                                           |   |  | (8,347     | ) |  |                       |   |  | (8,347   | )
|(Charge) Credit to other comprehensive income                  |  | 67,409                       |   |  |                           |   |  |                                                    |   |  |                                           |   |  |           |   |  | 8,831                  |   |  | 76,240   |  
|(Charge) Credit to the consolidated income statement (note 12) |  |                             |   |  | (39,192                    | ) |  | 1,513                                               |   |  | 225,125                                    |   |  | 44,086     |   |  |                       |   |  | 231,532  |  
|                                                               |  |                              |   |  |                            |   |  |                                                     |   |  |                                            |   |  |            |   |  |                        |   |  |          |  
|Balance at January 1, 2009                                     |  | (19,317                      | ) |  | (239,346                   | ) |  | (37,961                                             | ) |  | 225,125                                    |   |  | 66,914     |   |  | 8,831                  |   |  | 4,246    |  
|Exchange re-alignment                                          |  |                             |   |  |                           |   |  |                                                    |   |  | (8,077                                     | ) |  |           |   |  |                       |   |  | (8,077   | )
|Acquisition of Hua Ju Energy                                   |  |                             |   |  |                           |   |  |                                                    |   |  | 2,017                                      |   |  |           |   |  |                       |   |  | 2,017    |  
|Acquisition of Felix                                           |  |                             |   |  |                           |   |  | (596,585                                            | ) |  | (929,508                                   | ) |  | 554,300    |   |  | (1,318                 | ) |  | (973,111 | )
|(Charge) Credit to other comprehensive income                  |  | (31,306                      | ) |  |                           |   |  |                                                    |   |  |                                           |   |  |           |   |  | (11,780                | ) |  | (43,086  | )
|(Charge) Credit to the consolidated income statement (note 12) |  |                             |   |  | (61,880                    | ) |  | 1,513                                               |   |  | 378,493                                    |   |  | (57,543    | ) |  |                       |   |  | 260,583  |  
|                                                               |  |                              |   |  |                            |   |  |                                                     |   |  |                                            |   |  |            |   |  |                        |   |  |          |  
|Balance at December 31, 2009                                   |  | (50,623                      | ) |  | (301,226                   | ) |  | (633,033                                            | ) |  | (331,950                                   | ) |  | 563,671    |   |  | (4,267                 | ) |  | (757,428 | )
|                                                               |  |                              |   |  |                            |   |  |                                                     |   |  |                                            |   |  |            |   |  |                        |   |  |          |  

The temporary differences on expenses recognized mainly arose in respect of unpaid provision of salaries and wages,
provisions of compensation fees for mining rights and land subsidence, restoration, rehabilitation and environmental costs and also included payments on certain expenses such as exploration costs.

The following is the analysis of the deferred tax balances for financial reporting purposes:



|                         |  |            |   |  |         |  
|------------------------ |  | ---------- | - |  | ------- | -
|                         |  | 2009       |   |  | 2008    |  
|                         |  | RMB000    |   |  | RMB000 |  
|Deferred tax assets      |  | 1,027,659  |   |  | 46,023  |  
|Deferred tax liabilities |  | (1,785,087 | ) |  | (41,777 | )
|                         |  |            |   |  |         |  
|                         |  | (757,428   | ) |  | 4,246   |  
|                         |  |            |   |  |         |  

At the balance sheet date, the Group has unused tax losses of RMB2,884 million (2008: RMB682 million) contributed by the
subsidiaries available for offset against future profits. A deferred tax asset has been recognized in respect of RMB1,882 million (2008: RMB223 million) of such losses. No deferred tax asset has been recognized in respect of the remaining RMB1,002
million (2008: RMB459 million) due to the unpredictability of future profit streams. Included in unrecognized tax losses are losses of RMB55 million that will expire in 2011, losses of RMB106 million that will expire in 2012, losses of RMB298
million that will expire in 2013 and losses of RMB357 million that will expire in 2014 (2008: losses of RMB55 million that will expire in 2011, losses of RMB106 million that will expire in 2012 and losses of RMB298 million that will expire in 2013).
Other losses may be carried forward indefinitely.

By reference to financial budgets, management believes that there will be sufficient future
profits for the realization of deferred tax assets which have been recognized in respect of tax losses.



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YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



40. SHAREHOLDERS EQUITY

Share capital

The
Companys share capital structure at the balance sheet date is as follows:



|                                                          |  |                                                       |  |                         |  |                                                 |  |              
|--------------------------------------------------------- |  | ----------------------------------------------------- |  | ----------------------- |  | ----------------------------------------------- |  | -------------
|                                                          |  | Domestic invested shares                              |  | Foreign
invested shares |  | Total                                          
|                                                          |  | State legal personshares (held by theParent Company)  |  | A shares                |  | H shares(including H 
sharesrepresented by ADS) | 
|                                                          |  |                                                       |  |                        
|Number of shares                                          |  |                                                       |  |                         |  |                                                 |  |              
|At January 1, 2008, January 1, 2009 and December 31, 2009 |  | 2,600,000,000                                         |  | 360,000,000             |  | 1,958,400,000                                   |  | 4,918,400,000
|                                                          |  |                                                       |  |                         |  |                                                 |  |              
|                                                          |  |                                                       | 
|                                                          |  | Domestic invested shares                              |  | Foreign
invested shares |  | Total                                          
|                                                          |  | State legal personshares (held 
by theParent Company) |  | A shares                |  | H
shares(including H sharesrepresented by ADS)  | 
|                                                          |  | RMB000                                               |  | RMB000                 |  | RMB000                                         |  | RMB000      
|Registered, issued and fully paid                         |  |                                                       |  |                         |  |                                                 |  |              
|At January 1, 2008, January 1, 2009 and December 31, 2009 |  | 2,600,000                                             |  | 360,000                 |  | 1,958,400                                       |  | 4,918,400    
|                                                          |  |                                                       |  |                         |  |                                                 |  |              

Each share has a par value of RMB1.

The Company has completed the implementation of the share reform plan on April 3, 2006 and the non-tradable legal person shares held by the Parent
Company become tradable shares. The Parent Company guaranteed that it would not trade these shares in the market within 48 months from that day. As part of the share reform plan, the Parent agreed that the Group can participate in the investment and
joint development in the oil production project of the Parent. Up to the issue of these financial statements, there is no progress on the project development and hence the shares held by the Parent are still not yet tradeable.



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YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

40. SHAREHOLDERS EQUITYContinued



Reserves

Future Development Fund

Pursuant to regulation in the PRC, the Company, Shanxi Tianchi and Heze are required to transfer an annual amount to a future development fund at RMB6
per tonne of raw coal mined. The fund can only be used for the future development of the coal mining business and is not available for distribution to shareholders.

Shanxi Tianchi is required to transfer an additional amount at RMB15 per tonne of raw coal mined from 2008 onwards as coal mine transformation fund.

Pursuant to the regulations of the Shandong Province Finance Bureau, State-owned Assets Supervision and Administration Commission of Shandong
Province and the Shandong Province Coal Mining Industrial Bureau, the Company is required to transfer an additional amount at RMB5 per tonne of raw coal mined from July 1, 2004 to the reform specific development fund for the future improvement
of the mining facilities and is not distributable to shareholders. No further transfer to the reform specific development fund is required from January 1, 2008.

In accordance with the regulations of the State Administration of Work Safety, the Company has a commitment to incur RMB8 (Shanxi Tianchi: RMB15) for
each tonne of raw coal mined from May 1, 2004 which will be used for enhancement of safety production environment and improvement of facilities (Work Safety Cost). In prior years, the work safety expenditures are recognized only
when acquiring the fixed assets or incurring other work safety expenditures. The Company, Heze and Shanxi Tianchi make appropriation to the future development fund in respect of unutilized Work Safety Cost from 2008 onwards. In accordance with the
regulations of the State Administration of Work Safety, the Companys subsidiaries, Hua Ju Energy and Yulin, have a commitment to incur Work Safety Cost at the rate of: 4% of the sales income for the year below RMB10 million; 2% of the actual
sales income for the year between RMB10 million and RMB100 million (included); 0.5% of the actual sales income for the year between RMB10,000 and RMB100,000 (included); 0.2% of the actual sales income for the year above RMB1 billion. The unutilized
Work Safety Cost at December 31, 2009 was RMB262,660,000.

Statutory Common Reserve Fund

The Company and its subsidiaries in the PRC have to set aside 10% of its profit for the statutory common reserve fund (except where the fund has reached
50% of its registered capital). The statutory common reserve fund can be used for the following purposes:



| |  |  | to make good losses in previous years; or
| | - |  | -----------------------------------------



| |  |  | to convert into capital, provided such conversion is approved by a resolution at a shareholders general meeting and the balance of the statutory
common reserve fund does not fall below 25% of the registered capital.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

40. SHAREHOLDERS’EQUITYContinued

ReservesContinued



Retained earnings

In accordance with the Company’s Articles of Association, the profit for the purpose of appropriation will be deemed to be the lesser of the amounts
determined in accordance with (i) PRC accounting standards and regulations and (ii) IFRS or the accounting standards of the places in which its shares are listed.

The Company can also create a discretionary reserve in accordance with its Articles of Association or pursuant to resolutions which may be adopted at a
meeting of shareholders.

The Company’s distributable reserve as at December 31, 2009 is the retained earnings computed under PRC
GAAP which amounted to approximately RMB15,062,956,000 (At December 31, 2008: RMB13,250,081,000, as restated with the adoption of new accounting standards under PRC GAAP).

41. CAPITAL RISK MANAGEMENT

The Group
manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. The Group’s overall strategy remains
unchanged from prior year.

The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 36 and equity
attributable to equity holders of the Company, comprising issued share capital, reserves and retained earnings, and amounted to RMB51,661,648,000 (2008: RMB27,013,124,000) as at December 31, 2009.

The directors of the Company review the capital structure regularly. As part of this review, the directors of the Company assess the annual budget
prepared by the accounting and treasury department and consider and evaluate the cost of capital and the risks associated with each class of capital. The Group will balance its capital structure through the payment of dividends, issue of new shares
and new debts or the repayment of existing debts.



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YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



42. FINANCIAL INSTRUMENT

42a. Categories of financial instruments



|                                                                       |  |                 |  |           
|---------------------------------------------------------------------- |  | --------------- |  | ----------
|                                                                       |  | At December 31,
|                                                                       |  | 2009            |  | 2008      
|                                                                       |  | RMB000         |  | RMB000   
|                                                                       |  |                
|Financial assets                                                       |  |                 |  |           
|Loans and receivables (including cash and cash equivalents)            |  | 17,515,714      |  | 12,980,405
|Available-for-sale financial assets                                    |  | 295,295         |  | 139,887   
|Derivative financial instruments (financial instruments at fair value) |  | 37,760          |  |          
|                                                                       |  |                
|Financial liabilities                                                  |  |                 |  |           
|Amortized cost                                                         |  | 27,262,173      |  | 3,559,204 
|Derivative financial instruments (financial instruments at fair value) |  | 28,333          |  | 29,435    
|                                                                       |  |                 |  |           

42b. Financial risk management objectives and
policies

The Group’s major financial instruments include available-for-sales equity instrument, bills and accounts receivable,
other receivables, bank balances and cash, term deposits, restricted cash, derivative financial instrument, bills and accounts payable, other payables, borrowings and amount due to Parent Company and its subsidiary companies. Details of these
financial instruments are disclosed in respective notes. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure
appropriate measures are implemented on a timely and effective manner. There has been no significant change to the Group’s exposure to market risk or the manner in which it manages and measures the risk.

Credit risk

Credit risk
refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group.

At
December 31, 2009 and 2008, the Group’s maximum exposure to credit risk which will cause a financial loss to the Group arising from the failure to perform their obligations in relation to each class of recognized financial assets is the
carrying amount of those assets as stated in the consolidated balance sheet.

In order to minimise the credit risk, the management of the
Group has delegated a team responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of
each individual trade debt at each balance sheet date to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Company consider that the Group’s credit risk is significantly reduced.

The Group maintains its cash and cash equivalents with reputable banks. Therefore, the directors consider that the credit risk for such is
minimal.



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

42. FINANCIAL INSTRUMENTContinued

42b. Financial risk management objectives and policiesContinued

Credit riskContinued



The Group generally grants the customers with long-relationship credit terms not exceeding 180 days,
depending on the situations of the individual customers. For small to medium sized new customers, the Group generally requires them to pay for the products before delivery.

Most of the Group’s domestic sales are sales to electric power plants, metallurgical companies, construction material producers and railway
companies. The Group generally has established long-term and stable relationships with these companies. The Group also sells its coal to provincial and city fuel trading companies.

As the Group does not currently have direct export rights, all of its export sales must be made through National Coal Corporation, Shanxi Coal
Corporation or Minmetals Trading. The qualities, prices and final customer destinations of the Group’s export sales are determined by the Group, National Coal Corporation, Shanxi Coal Corporation or Minmetals Trading.

For the years ended December 31, 2009, 2008 and 2007, net sales to the Group’s five largest customers accounted for approximately 28.7%, 32.8%
and 25.6%, respectively, of the Group’s total net sales. Net sales to the Group’s largest customer accounted for 15.4%, 17.7% and 12.1% of the Group’s net sales for the years ended December 31, 2009, 2008 and 2007,
respectively. The Group’s largest customer was Huadian Power International Corporation Limited (Huadian) for the years ended December 31, 2009, 2008 and 2007.

Details of the accounts receivable from the five customers with the largest receivable balances at December 31, 2009 and 2008 are as follows:



|                                 |  |                                   |   |  |       |  
|-------------------------------- |  | --------------------------------- | - |  | ----- | -
|                                 |  | Percentage of accounts receivable |  
|                                 |  | At December 31,                   |  
|                                 |  | 2009                              |   |  | 2008  |  
|                                 |  |                                  
|Five largest receivable balances |  | 62.18                             | % |  | 87.54 | %
|                                 |  |                                   |   |  |       |  

The management considers the strong financial background and good creditability of these customers, and there is no
significant uncovered credit risk.



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

42. FINANCIAL INSTRUMENTContinued

42b. Financial risk management objectives and policiesContinued

Credit riskContinued



The table below shows the credit limit and balance of 5 major counterparties at the balance sheet date:



|             |  |           |  |                |  |                 |  |              |  |                
|------------ |  | --------- |  | -------------- |  | --------------- |  | ------------ |  | ---------------
|             |  |           |  | 31.12.2009     |  | 31.12.2008     
|Counterparty |  | Location  |  | Credit limit   |  | Carrying amount |  | Credit limit |  | Carrying amount
|             |  |           |  | RMB’000        |  | RMB’000         |  | RMB’000      |  | RMB’000        
|             |  |           |  | (note)         |  |                 |  |              |  |                
|Company A    |  | Australia |  | Not applicable |  | 81,329          |  |              |  |                
|Company B    |  | Korea     |  | Not applicable |  | 54,959          |  |              |  |                
|Company C    |  | Korea     |  | Not applicable |  | 51,235          |  |              |  |                
|Company D    |  | The PRC   |  | Not applicable |  | 43,592          |  |              |  |                
|Company E    |  | The PRC   |  | Not applicable |  | 41,615          |  |              |  |                
|Company F    |  | The PRC   |  |                |  |                 |  | 300,000      |  | 207,232        
|Company G    |  | The PRC   |  |                |  |                 |  | 300,000      |  | 89,074         
|Company H    |  | The PRC   |  |                |  |                 |  | 50,000       |  | 38,226         
|Company I    |  | The PRC   |  |                |  |                 |  | 24,000       |  | 23,769         
|Company J    |  | The PRC   |  |                |  |                 |  | 30,000       |  | 23,115         
|             |  |           |  |                |  |                 |  |              |  |                
|             |  |           |  |                |  | 272,730         |  |              |  | 381,416        
|             |  |           |  |                |  |                 |  |              |  |                



|Note: | Customers in other countries of Australian subsidiaries have not been granted the credit limit. Australian subsidiaries generally make annual sales arrangements with
customers.
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Group’s geographical concentration of credit risk is mainly in the PRC and East Asia (excluding the PRC).
As at December 31, 2009 and 2008, over 91% and 90% of the Group’s total trade receivables were from East Asia (excluding the PRC) and from the PRC respectively.



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

42. FINANCIAL INSTRUMENTContinued

42b. Financial risk management objectives and policiesContinued



Market risk

(i) Currency risk

The Groups sales are denominated mainly in the functional currency of the relevant group entity making the sale, whilst costs are mainly denominated
in the group entitys functional currency. Accordingly, there is no significant exposure to foreign currency risk.

The carrying amounts
of the Groups foreign currency denominated monetary assets and monetary liabilities in currencies other than the functional currencies of the relevant group entities at the balance sheet date are as follows:



|                                                                         |  |             |  |         |  |           |  |        
|------------------------------------------------------------------------ |  | ----------- |  | ------- |  | --------- |  | -------
|                                                                         |  | Liabilities |  | Assets 
|                                                                         |  | 2009        |  | 2008    |  | 2009      |  | 2008   
|                                                                         |  | RMB’000     |  | RMB000 |  | RMB’000   |  | RMB’000
|                                                                         |  |             |  |        
|United States Dollar (USD)                                             |  | 20,757,943  |  | 4,447   |  | 1,311,500 |  | 910,764
|Euro (EUR)                                                             |  |            |  |        |  | 3,611     |  | 15,718 
|Hong Kong Dollar (HKD)                                                 |  |            |  |        |  | 7,309     |  | 7,286  
|Notional amounts of sell USD foreign exchange contracts used for hedging |  |            |  | 210,800 |  | 1,143,416 |  |       
|Notional amounts of buy USD foreign exchange contracts used for hedging  |  | 73,713      |  |        |  |          |  |       
|Notional amounts of buy EUR foreign exchange contracts used for hedging  |  | 26,541      |  |        |  |          |  |       
|Notional amounts of buy Yen foreign exchange contracts used for hedging  |  | 71,511      |  |        |  |          |  |       
|                                                                         |  |             |  |         |  |           |  |        

The sales of the Groups subsidiaries in Australia are mainly
export sales and some of their fixed assets are imported from overseas. Their foreign exchange hedging policy is disclosed in note 37. The Groups operations in the PRC do not adopt any foreign exchange hedging policy.



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

42. FINANCIAL INSTRUMENTContinued

42b. Financial risk management objectives and policiesContinued

Market riskContinued

(i) Currency riskContinued



Sensitivity analysis

The Group is mainly exposed to the fluctuation against the currency of United States Dollar and Hong Kong Dollar.

The following table details the Group’s sensitivity to a 5% increase and decrease in RMB against relevant foreign currencies. 5% represents
management’s assessment of reasonably possible changes in foreign exchange rates over the period until the next annual balance sheet date. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and
adjusts their translation at the year end for a 5% change in foreign currency rates and also assumes all other risk variables remained constant. The sensitivity analysis includes loans to foreign operations within the Group where the denomination of
the loan is in a currency other than the functional currency of the lender or the borrower.



|                                                         |  |                     |   |  |                      |   |  |         |   |  |         |  
|-------------------------------------------------------- |  | ------------------- | - |  | -------------------- | - |  | ------- | - |  | ------- | -
|                                                         |  | USD Impact (note i) |   |  | HKD Impact (note i ) |  
|                                                         |  | 2009                |   |  | 2008                 |   |  | 2009    |   |  | 2008    |  
|                                                         |  | RMB’000             |   |  | RMB’000              |   |  | RMB’000 |   |  | RMB’000 |  
|                                                         |  |                     |   | 
|Increase (Decrease) to profit and loss                   |  |                     |   |  |                      |   |  |         |   |  |         |  
|- if RMB weakens against respective foreign currency     |  | 49,390              |   |  | 58,863               |   |  | 274     |   |  | 273     |  
|- if RMB strengthens against respective foreign currency |  | (49,390             | ) |  | (58,863              | ) |  | (274    | ) |  | (273    | )
|                                                         |  |                     |   |  |                      |   |  |         |   |  |         |  



|                                                         |  |                      |   |  |         |  
|-------------------------------------------------------- |  | -------------------- | - |  | ------- | -
|                                                         |  | USD Impact (note ii) |  
|                                                         |  | 2009                 |   |  | 2008    |  
|                                                         |  | RMB’000              |   |  | RMB’000 |  
|                                                         |  |                     
|Increase (Decrease) to profit and loss                   |  |                      |   |  |         |  
|- if AUD weakens against respective foreign currency     |  | (739,749             | ) |  | (21,584 | )
|- if AUD strengthens against respective foreign currency |  | 739,749              |   |  | 21,584  |  
|                                                         |  |                     
|Increase (Decrease) to shareholders’ equity              |  |                      |   |  |         |  
|- if AUD weakens against respective foreign currency     |  | (740,615             | ) |  | (21,144 | )
|- if AUD strengthens against respective foreign currency |  | 740,615              |   |  | 21,144  |  
|                                                         |  |                      |   |  |         |  



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

42. FINANCIAL INSTRUMENTContinued

42b. Financial risk management objectives and policiesContinued

Market riskContinued

(i) Currency riskContinued



Notes:



|(i) | This is mainly attributable to the exposure outstanding on the bank deposit and loans to foreign operations within the Group of USD and HKD at year end in the Group.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(ii) | This is mainly attributable to the exposure outstanding on the loans to foreign operations within the Group, foreign currency bank borrowings and derivative financial
instruments where the denomination of the loan is in a currency other than the functional currency of the borrower (i.e. AUD).
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In management’s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk as the year end exposure does not
reflect the exposure during the year.

(ii) Interest rate risk

The Group is exposed to fair value interest rate risk in relation to fixed-rate loan receivable (see note 20 for details). The Group is also exposed to
cash flow interest rate risk in relation to variable-rate bank balances, term deposits, restricted cash (see note 17 for details of these bank balances) and bank borrowings (see note 36 for details of these borrowings).

The interest rate hedging policy of the Group’s subsidiaries in Australia is disclosed in note 37. The Group’s operations in the PRC do not
adopt any interest rate hedging policy.

The Group’s exposures to interest rate risk on financial assets and financial liabilities are
detailed in the liquidity risk section of this note. The Group’s cash flow interest rate risk is mainly concentrated on the fluctuation of the PBOC arising from the Group’s RMB borrowings, the LIBOR arising from the Group’s
USD borrowings and the Australian BBSY arising from the Group’s AUD borrowings.



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

42. FINANCIAL INSTRUMENTContinued

42b. Financial risk management objectives and policiesContinued

Market riskContinued

(ii) Interest rate riskContinued



Sensitivity Analysis

The following table details the Groups sensitivity to a change of 100 basis points in the interest rate, assuming the financial instruments
outstanding at the end of the reporting period were outstanding for the whole year and all the variables were held constant. It includes the interest rate fluctuation of the abovementioned PBOC rate, LIBOR and Australian BBSY rate.



|                                            |  |         |  
|------------------------------------------- |  | ------- | -
|                                            |  | 2009    |  
|                                            |  | RMB000 |  
|                                            | 
|Increase (Decrease) to profit and loss      |  |         |  
|- If increases by 100 basis points          |  | (61,818 | )
|- If decreases by 100 basis points          |  | 61,818  |  
|                                            | 
|Increase (Decrease) to shareholders equity |  |         |  
|- If increases by 100 basis points          |  | (61,818 | )
|- If decreases by 100 basis points          |  | 61,818  |  
|                                            |  |         |  

At December 31, 2008, the Groups exposure to interest rate risk on financial assets and liabilities and also the
result of the sensitivity analysis is not significant.

(iii) Other price risk

In addition to the above risks relating to financial instruments, the Group is exposed to equity price risk through investment in listed equity securities
and also to price risk in non financial instruments such as steel and metals (the Groups major raw materials). The Group currently does not have any arrangement to hedge the price risk exposure of its investment in equity securities and its
purchase of raw materials. The Groups exposure to equity price risk through investment in listed equity securities and also the result of the sensitivity analysis is not significant.



F-77



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

42. FINANCIAL INSTRUMENTContinued

42b. Financial risk management objectives and policiesContinued



Liquidity risk

In the management of the liquidity risk, the Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to
finance the Groups operations and mitigate the effects of fluctuations in cash flows. The management monitors the utilization of bank borrowings and ensures compliance with loan covenants.

The following table details the Groups remaining contractual maturity for its financial liabilities. For non-derivative financial liabilities, the
table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows.

Liquidity and interest risk tables



|                                                          |  |                                         |   |  |                   |  |           |  |                   |  |            |  |          |  |                            |  |                       
|--------------------------------------------------------- |  | --------------------------------------- | - |  | ----------------- |  | --------- |  | ----------------- |  | ---------- |  | -------- |  | -------------------------- |  | ----------------------
|                                                          |  | Weightedaverage 
effectiveinterest rate |   |  | Less than3 months |  | 3-6months |  | 6 monthsto 1 year |  | 1-5 years  |  | 5+ years |  | Totalundiscountedcash flow |  | Carryingamount
at12.31
|                                                          |  | %                                       |   |  | RMB000           |  | RMB000   |  | RMB000           |  | RMB000    |  | RMB000  |  | RMB000                    |  | RMB000               
|2009                                                      |  |                                         |   |  |                   |  |           |  |                   |  |            |  |          |  |                            |  |                       
|Non-derivative financial liabilities                      |  |                                         |   |  |                   |  |           |  |                   |  |            |  |          |  |                            |  |                       
|Bills and accounts payables                               |  | N/A                                     |   |  | 1,306,265         |  | 60,711    |  |                  |  |           |  |         |  | 1,366,976                  |  | 1,366,976             
|Other payables                                            |  | N/A                                     |   |  | 2,612,165         |  |          |  |                  |  |           |  |         |  | 2,612,165                  |  | 2,612,165             
|Amount due to Parent Company and its subsidiary companies |  | N/A                                     |   |  | 757,882           |  |          |  |                  |  |           |  |         |  | 757,882                    |  | 757,882               
|Finance leases                                            |  | 6.9%-12.47                              | % |  | 656,703           |  |          |  |                  |  |           |  |         |  | 656,703                    |  | 656,703               
|Bank borrowings - variable rate                           |  | 4.02%-7.6                               | % |  | 919,410           |  | 11,254    |  | 11,588            |  | 24,930,041 |  | 92,394   |  | 25,964,687                 |  | 21,853,138            
|Long-term payable                                         |  | N/A                                     |   |  | 1,532             |  |          |  | 1,532             |  | 15,324     |  | 3,065    |  | 21,453                     |  | 15,309                
|                                                          |  |                                         |   |  |                   |  |           |  |                   |  |            |  |          |  |                            |  |                       
|                                                          |  |                                         |   |  | 6,253,957         |  | 71,965    |  | 13,120            |  | 24,945,365 |  | 95,459   |  | 31,379,866                 |  | 27,262,173            
|                                                          |  |                                         |   |  |                   |  |           |  |                   |  |            |  |          |  |                            |  |                       
|                                                          |  |                                         |   |  |                   |  |           | 
|Financial guarantees issued                               |  |                                         |   |  |                   |  |           |  |                   |  |            |  |          |  |                            |  |                       
|Maximum amount guaranteed (note)                          |  | N/A                                     |   |  |                  |  |          |  |                  |  |           |  | 286,181  |  | 286,181                    |  |                      
|                                                          |  |                                         |   |  |                   |  |           |  |                   |  |            |  |          |  |                            |  |                       
|                                                          |  |                                         |   |  |                   |  |           | 
|Derivative financial instruments  gross settlement       |  |                                         |   |  |                   |  |           |  |                   |  |            |  |          |  |                            |  |                       
|Forward foreign exchange contracts - Outflow              |  | N/A                                     |   |  | 100,254           |  | 71,511    |  |                  |  |           |  |         |  | 171,765                    |  | 171,765               
|                                                          |  |                                         |   |  |                   |  |           |  |                   |  |            |  |          |  |                            |  |                       
|                                                          |  |                                         |   |  |                   |  |           | 
|Derivative financial instruments  net settlement         |  |                                         |   |  |                   |  |           |  |                   |  |            |  |          |  |                            |  |                       
|Interest rate swap contracts                              |  | N/A                                     |   |  | 4,353             |  |          |  |                  |  |           |  |         |  | 4,353                      |  | 4,353                 
|                                                          |  |                                         |   |  |                   |  |           |  |                   |  |            |  |          |  |                            |  |                       



|Note: | The amount presented is the maximum contractual payment under guarantees issued.
|----- | --------------------------------------------------------------------------------



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

42. FINANCIAL INSTRUMENTContinued

42b. Financial risk management objectives and policiesContinued



Liquidity riskContinued



|                                                          |  |                                         |   |  |                   |  |           |  |                   |  |           |  |          |  |                            |  |                       
|--------------------------------------------------------- |  | --------------------------------------- | - |  | ----------------- |  | --------- |  | ----------------- |  | --------- |  | -------- |  | -------------------------- |  | ----------------------
|                                                          |  | Weightedaverage 
effectiveinterest rate |   |  | Less than3 months |  | 3-6months |  | 6 monthsto 1 year |  | 1-5 years |  | 5+ years |  | Totalundiscountedcash flow |  | Carryingamount
at12.31
|                                                          |  | %                                       |   |  | RMB000           |  | RMB000   |  | RMB000           |  | RMB000   |  | RMB000  |  | RMB000                    |  | RMB000               
|2008                                                      |  |                                         |   |  |                   |  |           |  |                   |  |           |  |          |  |                            |  |                       
|Non-derivative financial liabilities                      |  |                                         |   |  |                   |  |           |  |                   |  |           |  |          |  |                            |  |                       
|Bills and accounts payables                               |  | N/A                                     |   |  | 910,127           |  |          |  |                  |  |          |  |         |  | 910,127                    |  | 910,127               
|Other payables                                            |  | N/A                                     |   |  | 1,677,496         |  |          |  |                  |  |          |  |         |  | 1,677,496                  |  | 1,677,496             
|Amount due to Parent Company and its subsidiary companies |  | N/A                                     |   |  | 706,328           |  |          |  |                  |  | 13,248    |  |         |  | 719,576                    |  | 713,581               
|Bank borrowings - variable rate                           |  | 5.31%-5.94                              | % |  |                  |  | 11,254    |  | 74,739            |  | 104,625   |  | 125,839  |  | 316,457                    |  | 258,000               
|                                                          |  |                                         |   |  |                   |  |           |  |                   |  |           |  |          |  |                            |  |                       
|                                                          |  |                                         |   |  | 3,293,951         |  | 11,254    |  | 74,739            |  | 117,873   |  | 125,839  |  | 3,623,656                  |  | 3,559,204             
|                                                          |  |                                         |   |  |                   |  |           |  |                   |  |           |  |          |  |                            |  |                       
|                                                          |  |                                         |   |  |                   |  |           | 
|Derivative financial instruments  gross settlement       |  |                                         |   |  |                   |  |           |  |                   |  |           |  |          |  |                            |  |                       
|Forward foreign exchange contracts - Outflow              |  | N/A                                     |   |  | 129,200           |  | 71,400    |  | 10,200            |  |          |  |         |  | 210,800                    |  | 210,800               
|                                                          |  |                                         |   |  |                   |  |           |  |                   |  |           |  |          |  |                            |  |                       

42c. Fair values

The fair value of available-for-sales investment is determined with reference to quoted market price. The fair values of the forward foreign exchange
contracts are estimated based on the discounted cash flows between the contract forward rate and spot forward rate. The fair values of interest rate swap contracts are estimated based on the discounted cash flows between the contract floating rate
and contract fixed rate. The fair value of other financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow analysis.

The directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortized cost in the consolidated financial
statements approximate their fair values.



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

42. FINANCIAL INSTRUMENTContinued

42c. Fair valuesContinued



Fair values of financial assets and financial liabilities are determined as follows:

The following table presents the carrying value of financial instruments measured at fair value across the three levels of the fair value hierarchy
defined in IFRS 7 (Amendment). The levels of fair value are defined as follows:



|         |  |                                                                                                                                                                                                                                     
|-------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Level 1: |  | fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets and liabilities;                                                                                                   
|         | 
|Level 2: |  | fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly (i.e. as
prices) or indirectly (i.e. derived from prices); and
|         | 
|Level 3: |  | fair value measurements are those derived from valuation techniques that include inputs for the assets or liability that are not based on observable market data (unobservable
inputs).                                             



|                                              |  |         |  |         |  |         |  |                    
|--------------------------------------------- |  | ------- |  | ------- |  | ------- |  | -------------------
|                                              |  | Level 1 |  | Level 2 |  | Level 3 |  | At December 31Total
|                                              |  | RMB000 |  | RMB000 |  | RMB000 |  | RMB000            
|2009                                          |  |         |  |         |  |         |  |                    
|Assets                                        |  |         |  |         |  |         |  |                    
|Available-for-sale investments                |  |         |  |         |  |         |  |                    
|- Investments in securities listed on the SSE |  | 264,672 |  |        |  |        |  | 264,672            
|Derivative financial instruments              |  |         |  |         |  |         |  |                    
|- Forward foreign exchange contracts          |  |        |  | 37,760  |  |        |  | 37,760             
|                                              |  |         |  |         |  |         |  |                    
|                                              |  | 264,672 |  | 37,760  |  |        |  | 302,432            
|                                              |  |         |  |         |  |         |  |                    
|                                              |  |         |  |        
|Liabilities                                   |  |         |  |         |  |         |  |                    
|Derivative financial instruments              |  |         |  |         |  |         |  |                    
|- Forward foreign exchange contracts          |  |        |  | 23,980  |  |        |  | 23,980             
|- Interest rate swap contracts                |  |        |  | 4,353   |  |        |  | 4,353              
|                                              |  |         |  |         |  |         |  |                    
|                                              |  |        |  | 28,333  |  |        |  | 28,333             
|                                              |  |         |  |         |  |         |  |                    
|                                              |  |         |  |        
|2008                                          |  |         |  |         |  |         |  |                    
|Assets                                        |  |         |  |         |  |         |  |                    
|Available-for-sale investments                |  |         |  |         |  |         |  |                    
|- Investments in securities listed on the SSE |  | 139,447 |  |        |  |        |  | 139,447            
|                                              |  |         |  |         |  |         |  |                    
|                                              |  | 139,447 |  |        |  |        |  | 139,447            
|                                              |  |         |  |         |  |         |  |                    
|                                              |  |         |  |        
|Liabilities                                   |  |         |  |         |  |         |  |                    
|Derivative financial instruments              |  |         |  |         |  |         |  |                    
|- Forward foreign exchange contracts          |  |        |  | 29,435  |  |        |  | 29,435             
|                                              |  |         |  |         |  |         |  |                    
|                                              |  |        |  | 29,435  |  |        |  | 29,435             
|                                              |  |         |  |         |  |         |  |                    

There were no transfers between Levels 1 and 2 during the year ended
December 31, 2009 and 2008.



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



43. ACQUISITION OF HUA JU ENERGY

On October 24, 2008, the Company entered into an acquisition agreement with the Parent Company to acquire 74% equity interest in Hua Ju Energy. On
February 18, 2009, the acquisition was completed and the consideration of RMB593,243,000 was fully paid to the Parent Company to acquire 74% equity interest of Hua Ju Energy. The net assets acquired were included in the methanol, electricity
and heat supply segment.

In July 2009, the Company paid RMB173,007,000 to three former shareholders of Hua Ju Energy to acquire additional
21.14% equity interest in Hua Ju Energy which gives rise to goodwill of RMB38,187,000.

This acquisition has been accounted for using the
purchase method.

The net assets of Hua Ju Energy acquired, and the goodwill arising, are as follows:



|                                         |  |            |  
|---------------------------------------- |  | ---------- | -
|                                         |  | Fair value |  
|                                         |  | RMB000    |  
|Bank balances and cash                   |  | 4,567      |  
|Bills and accounts receivable            |  | 2,129      |  
|Inventories                              |  | 3,611      |  
|Prepayments and other receivables        |  | 79,563     |  
|Other currents assets                    |  | 25,246     |  
|Property, plant and equipment            |  | 755,213    |  
|Prepaid lease payment                    |  | 74,652     |  
|Available-for-sale financial assets      |  | 30,182     |  
|Deferred tax assets                      |  | 2,017      |  
|Accounts payable                         |  | (64,760    | )
|Customers deposits and other payables   |  | (263,297   | )
|Other current liabilities                |  | (120,000   | )
|                                         |  |            |  
|Net assets acquired                      |  | 529,123    |  
|Minority interests                       |  | (137,572   | )
|Goodwill arising on acquisition          |  | 201,692    |  
|                                         |  |            |  
|                                         |  | 593,243    |  
|                                         |  |            |  
|                                         | 
|Total consideration satisfied by:        |  |            |  
|Cash consideration paid on acquisition   |  | 593,243    |  
|                                         |  |            |  
|                                         | 
|Net cash outflow arising on acquisition: |  |            |  
|Cash paid on acquisition                 |  | (593,243   | )
|Bank balances and cash acquired          |  | 4,567      |  
|                                         |  |            |  
|                                         |  | (588,676   | )
|                                         |  |            |  

There is no significant difference between the carrying value and the fair value of net assets of Hua Ju Energy.



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YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

43. ACQUISITION OF HUA JU ENERGYContinued



Goodwill arising from acquisition of Hua Ju Energy is mainly because this acquisition can establish an
electricity management platform for the Group and is beneficial to the future development of coal resources of the Group. It also ensures stable supply of electricity to the Group, reduce operating costs, and enhance profitability and operating
results. It further ensures environmental disposal of waste products such as coal gangue produced from the Groups mining operations.

During the period from the acquisition date/the beginning period date to December 31, 2009, this transaction does not have any material impact on
the revenue and operating results of the Group.

44. ACQUISITION OF FELIX

On 13 August 2009, the Company entered into a binding scheme implementation agreement with Felix to acquire 100% equity interest in Felix. On
December 23, 2009, the acquisition was completed and the Company paid the consideration of AUD3,333 million (equivalent to approximately RMB20,428 million) to all the shareholders of Felix. On December 30, 2009, Felix was delisted from the
Australian Securities Exchange and all legal procedures of acquiring all of the Felix shares have been completed. The net assets acquired were included in the coal mining segment.

This acquisition has been accounted for using the purchase method.



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YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

44. ACQUISITION OF FELIXContinued



The net assets of Felix acquired, and the goodwill arising, are as follows:



|                                                                                   |  |                  |   |  |                       |   |  |             |  
|---------------------------------------------------------------------------------- |  | ---------------- | - |  | --------------------- | - |  | ----------- | -
|                                                                                   |  | Carrying amounts |   |  | Fair valueadjustments |   |  | Fair values |  
|                                                                                   |  | RMB000          |   |  | RMB000               |   |  | RMB000     |  
|Bank balances and cash                                                             |  | 872,435          |   |  |                      |   |  | 872,435     |  
|Term deposits                                                                      |  | 91,941           |   |  |                      |   |  | 91,941      |  
|Bills and accounts receivable                                                      |  | 292,008          |   |  |                      |   |  | 292,008     |  
|Inventories                                                                        |  | 306,444          |   |  | (39,349               | ) |  | 267,095     |  
|Prepayments and other receivables                                                  |  | 214,501          |   |  |                      |   |  | 214,501     |  
|Derivative financial instrument assets                                             |  | 27,928           |   |  |                      |   |  | 27,928      |  
|Tax recoverable                                                                    |  | 46,777           |   |  |                      |   |  | 46,777      |  
|Other currents assets                                                              |  | 350,676          |   |  |                      |   |  | 350,676     |  
|Property, plant and equipment, net                                                 |  | 2,842,046        |   |  | 704,861               |   |  | 3,546,907   |  
|Available-for-sale financial assets                                                |  | 1                |   |  |                      |   |  | 1           |  
|Interests in jointly controlled entities                                           |  | 1,257            |   |  |                      |   |  | 1,257       |  
|Intangible assets                                                                  |  | 1,312,393        |   |  | 16,535,630            |   |  | 17,848,023  |  
|Accounts payable                                                                   |  | (390,927         | ) |  |                      |   |  | (390,927    | )
|Receipts in advance and other payables                                             |  | (700,833         | ) |  |                      |   |  | (700,833    | )
|Borrowings                                                                         |  | (1,573,956       | ) |  |                      |   |  | (1,573,956  | )
|Derivative financial instrument liabilities                                        |  | (28,333          | ) |  |                      |   |  | (28,333     | )
|Deferred taxation                                                                  |  | (376,526         | ) |  | (596,585              | ) |  | (973,111    | )
|Provision for land subsidence, restoration, rehabilitation and environmental costs |  | (48,170          | ) |  |                      |   |  | (48,170     | )
|Other long-term payables                                                           |  | (28,367          | ) |  |                      |   |  | (28,367     | )
|                                                                                   |  |                  |   |  |                       |   |  |             |  
|Net assets acquired                                                                |  |                  |   |  |                       |   |  | 19,815,852  |  
|Minority interests                                                                 |  |                  |   |  |                       |   |  | (23,542     | )
|Goodwill arising on acquisition                                                    |  |                  |   |  |                       |   |  | 766,816     |  
|                                                                                   |  |                  |   |  |                       |   |  |             |  
|                                                                                   |  |                  |   |  |                       |   |  | 20,559,126  |  
|                                                                                   |  |                  |   |  |                       |   |  |             |  
|                                                                                   |  |                  |  
|Total consideration satisfied by:                                                  |  |                  |   |  |                       |   |  |             |  
|Cash consideration paid on acquisition                                             |  |                  |   |  |                       |   |  | 20,428,030  |  
|Direct acquisition costs paid                                                      |  |                  |   |  |                       |   |  | 2,949       |  
|Direct acquisition costs not yet settled                                           |  |                  |   |  |                       |   |  | 128,147     |  
|                                                                                   |  |                  |   |  |                       |   |  |             |  
|                                                                                   |  |                  |   |  |                       |   |  | 20,559,126  |  
|                                                                                   |  |                  |   |  |                       |   |  |             |  
|                                                                                   |  |                  |  
|Net cash outflow arising on acquisition:                                           |  |                  |   |  |                       |   |  |             |  
|Cash paid on acquisition                                                           |  |                  |   |  |                       |   |  | (20,430,979 | )
|Bank balances and cash acquired                                                    |  |                  |   |  |                       |   |  | 872,435     |  
|                                                                                   |  |                  |   |  |                       |   |  |             |  
|                                                                                   |  |                  |   |  |                       |   |  | (19,558,544 | )
|                                                                                   |  |                  |   |  |                       |   |  |             |  

During the period from the acquisition date to December 31, 2009, Felix does not have any material impact on the
revenue and operating results of the Group.

If the acquisition had been completed on January 1, 2009, the Groups revenue for the
year would have been RMB23,894 million, and the Groups profit for the year would have been RMB4,914 million. The pro forma information is for illustrative purposes only and is not necessarily an indication of revenue and results of operations
of the Group that actually would have been achieved had the acquisition been completed on January 1, 2009, nor is it intended to be a projection of future results.



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YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

44. ACQUISITION OF FELIXContinued



The goodwill arising from the acquisition is attributable to the extension of coal reserves and
diversification of operations by the Group, and operational synergies and strategic benefits.

45. RELATED PARTY BALANCES AND TRANSACTIONS

Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and
are not disclosed. Details of balances and transactions between the Group and other related parties are disclosed below.

Related party balances

The amounts due to the Parent Company and its subsidiary companies are non-interest bearing and unsecured.

The amounts due to the Parent Company and its subsidiary companies as at December 31, 2009 and 2008 included the present value of the outstanding
balance that arose from the funding of the acquisition of the mining rights of Jining III as of January 1, 2001 discounted using the market rate of bank borrowings.

The consideration for the cost of the mining rights of approximately RMB132,479,000 is to be settled over the 10 years, commencing from 2001.



|                                                           |  |                 |   |  |          |  
|---------------------------------------------------------- |  | --------------- | - |  | -------- | -
|                                                           |  | At December 31, |  
|                                                           |  | 2009            |   |  | 2008     |  
|                                                           |  | RMB000         |   |  | RMB000  |  
|                                                           |  |                
|Amounts due to Parent Company and its subsidiary companies |  |                 |   |  |          |  
|Within one year                                            |  | 757,882         |   |  | 706,328  |  
|More than one year, but not exceeding two years            |  |                |   |  | 7,253    |  
|                                                           |  |                 |   |  |          |  
|                                                           |  |                
|Total                                                      |  | 757,882         |   |  | 713,581  |  
|Less: amount due within one year                           |  | (757,882        | ) |  | (706,328 | )
|                                                           |  |                 |   |  |          |  
|Amount due after one year                                  |  |                |   |  | 7,253    |  
|                                                           |  |                 |   |  |          |  

Except the amounts disclosed above, the amounts due to the Parent Company and/or its subsidiary companies are repayable on
demand.



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YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

45. RELATED PARTY BALANCES AND TRANSACTIONSContinued



Related party transactions

During the years, the Group had the following significant transactions with the Parent Company and/or its subsidiary companies:



|                                            |  |                         |  |           |  |          
|------------------------------------------- |  | ----------------------- |  | --------- |  | ---------
|                                            |  | Year ended December 31,
|                                            |  | 2009                    |  | 2008      |  | 2007     
|                                            |  | RMB000                 |  | RMB000   |  | RMB000  
|                                            |  |                         | 
|Income                                      |  |                         |  |           |  |          
|Sales of coal                               |  | 2,086,542               |  | 1,384,415 |  | 1,014,963
|Sales of auxiliary materials                |  | 317,479                 |  | 550,986   |  | 595,143  
|Sales of heat and electricity               |  | 204,061                 |  |          |  |         
|Expenditure                                 |  |                         |  |           |  |          
|Utilities and facilities                    |  | 39,069                  |  | 376,288   |  | 377,074  
|Annual fee for mining rights                |  |                        |  |          |  | 12,980   
|Purchases of supply materials and equipment |  | 598,498                 |  | 471,768   |  | 454,469  
|Repair and maintenance services             |  | 388,917                 |  | 253,864   |  | 215,102  
|Social welfare and support services         |  | 769,561                 |  | 255,265   |  | 313,062  
|Technical support and training              |  | 26,000                  |  | 20,000    |  | 20,000   
|Road transportation services                |  | 79,560                  |  | 86,671    |  | 60,718   
|Construction services                       |  | 242,593                 |  | 294,938   |  | 316,801  
|                                            |  |                         |  |           |  |          

Certain expenditure for social welfare and support services (excluding
medical and child care expenses) of RMB165,900,000, RMB165,900,000 and RMB165,900,000 for the years ended December 31, 2009, 2008 and 2007, respectively, and for technical support and training of RMB26,000,000, RMB20,000,000 and RMB20,000,000,
have been charged by the Parent Company at a new negotiated amount per annum, subject to changes every year.

During the year ended
December 31, 2008, the Company acquired Zhaolou coal mine from the Parent Company. Details of this acquisition are set out in note 24.

During the year ended December 31, 2009, the Company acquired 74% equity interest in Hua Ju Energy from the Parent Company. Details of this
acquisition are set out in note 43.

In addition to the above, the Company participates in a retirement benefit scheme of the Parent Company
in respect of retirement benefits (note 47).

Transactions/balances with other state-controlled entities in the PRC

The Group operates in an economic environment currently predominated by entities directly or indirectly owned or controlled by the PRC
government (state-controlled entities). In addition, the Group itself is part of a larger group of companies under the Parent Company which is controlled by the PRC government. Apart from the transactions with the Parent Company and its
subsidiaries disclosed above, the Group also conducts business with other state-controlled entities. The directors consider those state-controlled entities are independent third parties so far as the Groups business transactions with them are
concerned.



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YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

45. RELATED PARTY BALANCES AND TRANSACTIONSContinued

Transactions/balances with other state-controlled entities in the PRCContinued



Material transactions with other state- controlled entities are as follows:



|                |  |                         |  |            |  |          
|--------------- |  | ----------------------- |  | ---------- |  | ---------
|                |  | Year ended December 31,
|                |  | 2009                    |  | 2008       |  | 2007     
|                |  | RMB000                 |  | RMB000    |  | RMB000  
|                |  |                         | 
|Trade sales     |  | 6,970,855               |  | 10,253,998 |  | 6,035,156
|                |  |                         |  |            |  |          
|                |  |                         | 
|Trade purchases |  | 1,191,783               |  | 1,328,958  |  | 1,056,959
|                |  |                         |  |            |  |          

Material balances with other state-controlled entities are as follows:



|                                                 |  |                 |  |        
|------------------------------------------------ |  | --------------- |  | -------
|                                                 |  | At December 31,
|                                                 |  | 2009            |  | 2008   
|                                                 |  | RMB000         |  | RMB000
|                                                 |  |                
|Amounts due to other state-controlled entities   |  | 359,726         |  | 294,888
|                                                 |  |                 |  |        
|                                                 |  |                
|Amounts due from other state-controlled entities |  | 1,101,535       |  | 364,420
|                                                 |  |                 |  |        

Amounts due to and from state-controlled entities are trade nature of
which terms are not different from other customers (notes 18 and 33).

In addition, the Group has entered into various transactions, including
deposits placements, borrowings and other general banking facilities, with certain banks and financial institutions which are state-controlled entities in its ordinary course of business. In view of the nature of those banking transactions, the
directors are of the opinion that separate disclosure would not be meaningful.

Except as disclosed above, the directors are of the opinion
that transactions with other state- controlled entities are not significant to the Groups operations.

Balances
and transactions with jointly controlled entities

Due from a jointly controlled entity:



|                                               |  |                         |  |        
|---------------------------------------------- |  | ----------------------- |  | -------
|                                               |  | Year ended December 31,
|                                               |  | 2009                    |  | 2008   
|                                               |  | RMB000                 |  | RMB000
|                                               |  |                        
|Due from a jointly controlled entity (note 21) |  | 66,321                  |  |       
|                                               |  |                         |  |        

The amount due from a jointly controlled entity is unsecured and
interest-free.



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##### Table of Contents

YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

45. RELATED PARTY BALANCES AND TRANSACTIONSContinued

Balances and transactions with jointly controlled entitiesContinued



As at December 31, 2009, the trade balances between the Group and a jointly controlled entity are
disclosed in notes 18 and 33. The jointly controlled entity was obtained through the acquisition of Felix and therefore there were no sales or purchases included in the consolidated financial statements for the year.

Compensation of key management personnel

The remuneration of directors and other members of key management were as follows:



|                                               |  |                         |  |         |  |        
|---------------------------------------------- |  | ----------------------- |  | ------- |  | -------
|                                               |  | Year ended December 31,
|                                               |  | 2009                    |  | 2008    |  | 2007   
|                                               |  | RMB000                 |  | RMB000 |  | RMB000
|                                               |  |                         | 
|Directors fee                                 |  | 436                     |  | 426     |  | 403    
|Salaries, allowance and other benefits in kind |  | 3,292                   |  | 2,545   |  | 2,315  
|Retirement benefit scheme contributions        |  | 550                     |  | 407     |  | 378    
|                                               |  |                         |  |         |  |        
|                                               |  | 4,278                   |  | 3,378   |  | 3,096  
|                                               |  |                         |  |         |  |        

The remuneration of directors and key executives is determined by the
remuneration committee having regard to the performance of individuals and market trends.

46. COMMITMENTS



|                                                                                                   |  |                 |  |        
|-------------------------------------------------------------------------------------------------- |  | --------------- |  | -------
|                                                                                                   |  | At December 31,
|                                                                                                   |  | 2009            |  | 2008   
|                                                                                                   |  | RMB000         |  | RMB000
|                                                                                                   |  |                
|Capital expenditure contracted for but not provided in the consolidated financial statements       |  |                 |  |        
|Acquisition of property, plant and equipment                                                       |  |                 |  |        
|- the Group                                                                                        |  | 5,308           |  | 142,399
|- share of joint ventures                                                                          |  | 708,573         |  |       
|Exploration and evaluation expenditure                                                             |  |                 |  |        
|- share of joint ventures                                                                          |  | 2,315           |  |       
|                                                                                                   |  |                 |  |        
|                                                                                                   |  | 716,196         |  | 142,399
|                                                                                                   |  |                 |  |        
|                                                                                                   |  |                
|Capital expenditure authorized but not contracted for Acquisition of property, plant and equipment |  |                 |  |        
|- the Group                                                                                        |  | 142,565         |  |       
|                                                                                                   |  |                 |  |        

During 2006, the Company entered into a co-operative agreement with
two independent third parties to establish a company for acquiring a coal mine in Shaanxi province for operations. In addition to the deposit referred to in note 30, the Company is committed to invest a further RMB78.8 million as at
December 31, 2009 and 2008.



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YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

46. COMMITMENTSContinued



Pursuant to the regulations issued by the Shandong Province Finance Bureau, the Group has to pay a
deposit of RMB1,980 million (2008: RMB997 million) to the relevant government authority, which secured for the environmental protection work done by the Company. As at December 31, 2009, deposit of RMB212 million (2008: RMB200 million) were
made and the Company is committed to further make security deposit of RMB1,768 million (2008: RMB797 million).

As at December 31, 2008,
the Company entered into an acquisition agreement with the Parent Company at a consideration of RMB593.24 million to acquire 74% equity interest in Hua Ju Energy. The acquisition has been completed during the year and details are set out in note 43.

During 2007, the Company entered into an agreement with the Parent Company and China Credit Trust Co., Ltd to establish a company, with the
proposed name of Yankuang Group Finance Company Limited (the Investee), which will engage in banking and financing business. The name and the activities of the Investee are subject to the approval by China Banking Regulatory Commission
and other relevant government authorities. In November 2009, the Company has received the approval from China Banking Regulatory Commission. The Company shall contribute RMB125 million from internal resources, which will account for 25% of the
equity interest in the Investee. As of December 31, 2009, the procedures to establish the Investee are still in progress. On April 20, 2010, all the investors signed a formal joint venture establishment agreement. As at the date of issue
of these financial statements, the Company has made full contribution and the incorporation of the Investee is in the progress.

Compensation
fees for mining rights are required to be paid annually and details are set out in note 24.

In 2009, the Company entered into agreements with
third parties to acquire three subsidiary companies. The Company has made deposits of RMB 57 million and the Group has to pay additional consideration of RMB133 million. Details of the acquisitions are set out in note 30.

On October 27, 2009, the board of directors of the Company passed a resolution for additional investment in Yanmei Heze Neng Hua Co., Ltd of RMB1.5
billion by internal funding and thereby increasing its registered capital from RMB1.5 billion to RMB3 billion. The percentage of equity interest held by the Company increased from 96.67% to 98.33% and this capital increase was completed in March
2010.

47. RETIREMENT BENEFITS

Qualifying employees of the Company are entitled to a pension, medical and other welfare benefits. The Company participates in a scheme of the Parent
Company and pays a monthly contribution to the Parent Company in respect of retirement benefits at an agreed contribution rate based on the monthly basic salaries and wages of the qualified employees. The Parent Company is responsible for the
payment of all retirement benefits to the retired employees of the Company.



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YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)

47. RETIREMENT BENEFITSContinued



Pursuant to the Provision of Insurance Fund Administrative Services Agreement entered into by the
Company and the Parent Company on November 7, 2008, the monthly contribution rate is set at 20% (2008: 45%; 2007: 45%) of the total monthly basic salaries and wages of the Companys employees for the period from January 1, 2009 to
December 31, 2011. Retirement pension and other welfare benefits will be provided by the Parent Company on the actual cost basis, which will be reimbursed by the Company after the actual payment made by the Parent Company (included in 45%
contribution rate in pension scheme for the years ended December 31, 2008 and 2007).

The amount of contributions paid to the Parent
Company were RMB520,273,000, RMB759,356,000 and RMB692,912,000 for the years ended December 31, 2009, 2008, and 2007, respectively.

The
Companys subsidiaries are participants in a state-managed retirement scheme pursuant to which the subsidiaries pay a fixed percentage of its qualifying staffs wages as a contribution to the scheme. The subsidiaries financial
obligations under this scheme are limited to the payment of the employers contribution. During the year, contributions paid and payable by the subsidiaries pursuant to this arrangement were insignificant to the Group.

During the year and at the balance sheet date, there were no forfeited contributions which arose upon employees leaving the above schemes available to
reduce the contributions payable in future years.

48. HOUSING SCHEME

The Parent Company is responsible for providing accommodation to its employees and the employees of the Company. The Company and the Parent Company share
the incidental expenses relating to the accommodation at a negotiated amount for each of the three years ended December 31, 2009, 2008 and 2007. Such expenses, amounting to RMB140,000,000, RMB86,200,000 and RMB86,269,000 for each of the three
years ended December 31, 2009, 2008 and 2007 respectively, have been included as part of the social welfare and support services expenses summarized in note 45.

The Company currently makes a fixed monthly contribution for each of its qualifying employees to a housing fund which is equally matched by a
contribution from the employees. The contributions are paid to the Parent Company which utilizes the funds, along with the proceeds from the sales of accommodation and, if the need arises, from loans arranged by the Parent Company, to construct new
accommodation.

49. MAJOR NON-CASH TRANSACTION

During the year ended December 31, 2009, the Group acquired certain property, plant and equipment, of which RMB606,227,000 (2008: RMB654,304,000)
have not yet been paid.



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YANZHOU COAL MINING COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(Continued)



50. POST BALANCE SHEET EVENT

Felix breached certain provisions in the borrowing agreements signed with the banks at December 31, 2009 (note 36). In April 2010, Felixs
management has obtained a waiver letter from lenders in this respect to waive any penalty and early repayment requirements.

The
Companys board of directors passed a resolution to change the accounting estimate in respect of the amortization method of mining rights (coal reserves) and agreed to adopt unit of production method as a uniform amortization method for the
Company and its subsidiaries. In effect the Company and certain of its subsidiaries will change its amortization method from straight line basis to unit of production basis. The directors are assessing the impact of the above change in accounting
estimate on the Companys future results.

51. CONTINGENT LIABILITIES



|           |  |                                                                                                                                            |  |         |  |  
|---------- |  | ------------------------------------------------------------------------------------------------------------------------------------------ |  | ------- |  | -
|           |  | At December 31,                                                                                                                           
|           |  | 2009                                                                                                                                       |  | 2008   
|           |  | RMB000                                                                                                                                    |  | RMB000
|           |  |                                                                                                                                           
|Guarantees |  |                                                                                                                                            |  |        
|(a)        |  | The Group                                                                                                                                  |  |         |  |  
|           |  | Guarantees secured over deposits                                                                                                           |  | 4,294   |  | 
|           |  | Performance guarantees provided to external parties                                                                                        |  | 197,466 |  | 
|           |  | Guarantees provided in respect of the cost of restoration of certain mining leases, given to government departments as
required by statute |  | 41,334  |  | 
|           |  |                                                                                                                                            | 
|(b)        |  | Joint ventures                                                                                                                             |  |         |  |  
|           |  | Guarantees secured over deposits                                                                                                           |  | 460     |  | 
|           |  | Performance guarantees provided to external parties                                                                                        |  | 423     |  | 
|           |  | Guarantees provided in respect of the cost of restoration of certain mining leases, given to government departments as
required by statute |  | 42,204  |  | 
|           |  |                                                                                                                                            |  |         |  |  
|           |  |                                                                                                                                            |  | 286,181 |  | 
|           |  |                                                                                                                                            |  |         |  |  

52. OPERATING LEASE COMMITMENTS



|                                                 |  |                 |  |        
|------------------------------------------------ |  | --------------- |  | -------
|                                                 |  | At December 31,
|                                                 |  | 2009            |  | 2008   
|                                                 |  | RMB000         |  | RMB000
|                                                 |  |                
|Within one year                                  |  | 27,765          |  |       
|More than one year, but not more than five years |  | 205,155         |  |       
|                                                 |  |                 |  |        
|                                                 |  | 232,920         |  |       
|                                                 |  |                 |  |        

Operating leases have average remaining lease terms of 3 years. Items
that are subject to operating leases include mining equipment, office space and small items of office equipment.



F-90