China Energy Resources Corporation Announces 1998 Preliminary Unaudited Results.

GAITHERSBURG, Md.--(BUSINESS WIRE)--April 26, 1999--

Increases Line of Credit from America Orient Group

Appoints Guoliang Guan as Director

China Energy Resources Corporation (the "Company") (ASE: CHG) today announced preliminary unaudited results of operations for the fiscal year ended December 31, 1998, an increase in its line of credit by $1,000,000 from America Orient Group, Inc. ("AOG"), and the appointment of Guoliang Guan, Director and Senior Vice President of AOG, as a member of the Board of Directors of the Company.

Regarding the Company's results of operations, the Company continued to experience difficulties resulting from a lack of financial and managerial resources and a weakening in organizational control in the fiscal year ended December 31, 1998. On December 3, 1998, the Company entered into a definitive stock and warrant purchase agreement (the "Stock Purchase Agreement") with AOG, in which the Company agreed to sell to AOG 5,000,000 shares of the common stock of the Company, par value $0.01 per share (the "Common Stock"), and a warrant to purchase 5,000,000 shares of Common Stock for US$1,000,000. The closing of the Stock Purchase Agreement is contingent, among other things, upon: (i) the satisfactory completion of the due diligence process by AOG; (ii) the satisfactory completion of the outstanding negotiations between AOG and the Company's convertible note holders who participated in the Company's financings in 1996/1997 regarding several adjustments to the terms of such convertible notes; and (iii) the approval of the Company's stockholders at the forthcoming Annual Meeting. The Annual Meeting will be scheduled as soon as practical after the SEC completes its review of the proxy statement.

On March 3, 1999, the Company assigned management responsibilities to AOG and has since drawn down approximately $200,000 in loan proceeds from AOG under a convertible note of $24,160 and a revolving convertible note of up to $250,000 (the "Revolving Note"), for working capital purposes. Both notes have an 8% per annum interest rate, and have the same conversion mechanisms which provide for AOG to convert any outstanding principal amount or accrued interest into shares of Common Stock at $0.20 per share.

On March 24, 1999, the Company, together with Mishan Hua Xing Coal Limited ("MHXC"), a joint venture company in China in which the Company owns an 80% interest, entered into a definitive loan and guarantee agreement (the "Loan Agreement") with the Orient Finance Company ("OFC") for a $2,000,000 term loan of three years with a one-year grace period and a 6.625% interest rate per annum. The Loan Agreement provides no conversion features. OFC is a subsidiary of the China Orient Group Industries, Inc. and an affiliate of AOG. The Loan Agreement will become effective upon the closing of the Stock Purchase Agreement. The loan proceeds will be primarily used in connection with the debt rescheduling and restructuring efforts by MHXC with regard to certain debts from local banks in China, and to provide working capital to re-start the coal wash operations in the Mishan City Coke Factory, one of the MHXC's factories.

The Company's preliminary unaudited consolidated statements of operations and balance sheets are provided below. The completion of the 1998 financial statements and the report of the independent auditors thereon is subject to the closing of the Stock Purchase Agreement and the provision of the finance under the Loan Agreement. -0-

                  CHINA ENERGY RESOURCES CORPORATION
                         PRELIMINARY UNAUDITED
                 CONSOLIDATED STATEMENTS OF OPERATIONS
            (Amounts in thousands except per share amounts)

                                  Years ended December 31,
                                     1998             1997

Net sales                         $6,660           $ 9,053
Subcontracting income                  -               362
Cost of sales                      (4,835)          (5,516)
                                   -------          -------
Gross profit                        1,825            3,899

Selling, general and
  administrative expenses          (2,634)          (4,921)
Write-off of advances to
  related parties                      -           (1,768)
                                  ---------        ---------
Operating (loss) income               (809)         (2,790)

Interest expense                    (1,339)         (1,056)
Other (expense) income                 (79)           (190)
                                  --------------- ------------
(Loss) income before
  minority interests                (2,227)          (4,036)

Minority interest                      196              494
                                  ---------        ---------

Net (loss) income                 $(2,031)         $(3,542)
                                  ---------        ---------

(Loss) earnings per share
  - Basic                           $(0.63)        $(1.18)
                                  ---------------  ----------
  - Fully-diluted                   $(0.63)        $(1.18)
                                  --------------   -----------

Weighted average number of
  shares outstanding
  - Basic                            3,248          2,994
                                  ---------        ---------
  - Fully-diluted                    3,248          2,994
                                  ---------        ---------


                  CHINA ENERGY RESOURCES CORPORATION
                         PRELIMINARY UNAUDITED
                      CONSOLIDATED BALANCE SHEETS
       (Amounts in thousands except share and per share amounts)

                                               December 31,
                                        1998             1997
ASSETS
Current assets:
Cash and cash equivalents             $    82         $   767
Accounts receivable, net of allowance
   for doubtful accounts of
   $1,571 (1997: $1,576)                1,472            2,346
Prepayments, prepaid expenses,
  and other assets                      1,222            1,615
Inventories                             3,020            4,136
                                       ------            -----
         Total current assets           5,796            8,864

Property, plant and equipment, net     17,916           18,002
Value added taxes receivable               81              140
Other assets                              284              387
                                      --------         --------
         Total assets                 $24,077          $27,393
                                      --------          -------

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Short-term borrowings                   $4,625           $5,057
Current portion of long-term debt        1,812            1,812
Accounts payable                           796            1,629
Customer deposits                          225               87
Other payables                           2,078            2,392
Plant construction payables                  7               77
Accrued payroll and employee benefits      385              474
Accrued interest                         2,495            1,596
Other accrued liabilities                  367              187
                                      ------------      ---------
         Total current liabilities      12,790           13,311

Long-term debt
    Related parties                      2,800            2,414
Convertible notes                        2,548            2,347
Minority interests                       1,543            1,739

Commitments and contingencies

Stockholders' equity:
Preferred shared, $0.01 par value,
  2,000,000 shares authorized
    No shares issued and outstanding         -                -
Common stock, $0.01 par value,
   50,000,000 shares authorized,
    3,248,494 (1997: 3,248,494)
   shares issued and outstanding            32               32
Additional paid-in capital              11,770           11,762
Deficit                                 (3,971)          (1,940)
Advances receivable from
  related parties                       (3,435)          (2,272)
                                       -------------    ---------

         Total stockholders' equity      4,396             7,582
                                       --------         ---------

         Total liabilities and
           stockholders' equity        $24,077           $27,393
                                        -------         ----------

AOG has agreed to increase the line of credit under the Revolving Note by $1,000,000, to enable the Company to, among other things, restructure the Company's debt with local banks in China and re-start the coal wash operations under MHXC.

The Board of Directors of the Company has appointed Guoliang Guan as a Director. Mr. Guan is a Director and Senior Vice President of AOG, positions he has held since 1994. Mr. Guan, a CPA in China, has also been a Director and Vice President of China Orient Group Industries, Inc. ("COG"), AOG's parent company in China, since 1992. Other positions presently held by Mr. Guan include: Executive Director of the Board of Directors and General Manger of the Orient Group Co. Ltd., a partially owned subsidiary of COG listed on the Shanghai Stock Exchange; Chairman of the Board of Directors of the New China Life Insurance Co. Ltd., a partially owned insurance company of COG with operations in China; Chairman of the Board of Directors of the OFC, a wholly owned finance company of COG; and a member of the Board of Directors of the Jinzhou Harbor (Group) Co. Ltd., a partially owned subsidiary of COG listed on the Shanghai Stock Exchange. With Guoliang Guan's appointment, the Company's Board will now have five members.

The Company is a holding company which is the sole shareholder in China Coal Mining (B.V.I.) Co. Ltd., a coal refining company located in the People's Republic of China.

The Statements in this press release that are not historical facts constitute "forward-looking statements" that involve risks, uncertainties and other facts which may cause results to be materially different from those set forth in the forward-looking statements. Such factors include but are not limited to, the following general economic and business conditions; competition; the ability to implement and the effectiveness of business strategy and development plans; quality of management; business abilities and judgment of personnel; availability of qualified personnel; labor and employee benefit costs; and availability and cost of raw materials and supplies. China Energy resources Corporation will not undertake and specifically declines any obligation to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. Parties receiving this release are encouraged to review all filings made by the Company with the Securities and Exchange Commission.