SouthGobi Announces Connected Transaction Involving Amendment of Convertible Debenture - Seite 2

The aforementioned summary of the principal terms of the Convertible Debenture Amendment is not comprehensive, and is qualified in its entirety by reference to the full text of the Convertible Debenture Amendment, a copy of which has been filed on the Company's profile on SEDAR+ at www.sedarplus.ca.

General Information of the Parties

The Group

The Company is an integrated coal mining, development and trading company. SGQ Coal Investment Pte. Ltd. is a wholly-owned subsidiary of the Company incorporated under the laws of Singapore, which is principally engaged in the investment holding business activities. Southgobi Sands LLC is a wholly-owned subsidiary of the Company incorporated under the laws of Mongolia, which is principally engaged in coal mining, development and exploration of properties in Mongolia.

JDZF

JDZF is an exempt limited partnership formed under the laws of the Cayman Islands, which is principally engaged in investment holding activities. JDZF's general partner and limited partner are JD Dingxing Limited and Inner Mongolia Tianyu Trading Limited, respectively. To the best of the Company's knowledge and belief, the ultimate beneficial owner of the limited partner is Mr. Yong An and the general partner is Ms. Chonglin Zhu. Mr. Yong An is the Chairman and founder of Inner Mongolia Tianyu Innovation Investment Group Co. Ltd.* (內蒙古天宇創 新投資集團有限公司) ("Tianyu Group"), and has conducted business in Inner Mongolia region since 1998. Ms. Chonglin Zhu was the Chief Financial Officer of Tianyu Group from March 2015 to September 2022, and was also responsible for managing JDZF. Ms. Chonglin Zhu has served as an Executive Director of the Company since September 8, 2022. She was the Company's Senior Vice President of Finance from September 8, 2022 to February 2, 2024, and appointed as the Company's Chief Financial Officer on February 2, 2024.

Reasons for and Benefits of the Convertible Debenture Amendment

In evaluating the terms of the Convertible Debenture Amendment and reaching its conclusion and making its recommendation in support of the Convertible Debenture Amendment, the Board (excluding the Amendment Interested Directors (as defined below)), considered a number of factors, including the following: (i) the Convertible Debenture Amendment is designed to improve the financial position of the Company, as it provides the Company with an ability to repay the principal amount and accrued cash interest or PIK interest, without penalty, at the discretion of the Board, if doing so is in the best interests of the Company; (ii) the Convertible Debenture Amendment improves the financial flexibility of the Company, as the Company did not have a right to prepay the principal amount outstanding under the Convertible Debenture under the original terms of the Convertible Debenture; (iii) the terms of the Convertible Debenture Amendment are reasonable in the circumstances of the Company, in particular given that the Company is not providing any additional form of consideration to JDZF in connection with the Convertible Debenture Amendment; and (iv) the best interests of the Company and shareholders will be served by approving the Convertible Debenture Amendment.