Listing of mineral companies on the Hong Kong Stock Exchange

by David Richardson
Dorsey & Whitney
Hong Kong
Telephone: +852 2105 0234
Email: richardson.david@dorsey.com

Introduction

David Richardson is with the Hong Kong office of the law firm of Dorsey & Whitney, which have a strong mineral resources practice.

David advised in a secondary listing on the Hong Kong Stock Exchange (“Exchange”) of Sino Gold Mining Limited which raised approximately US$120 million. The Company is the only mineral resource explorer and producer presently listed on the Exchange. The Company was, at the time of listing, the largest foreign producer of gold in the PRC. David had previously acted in the listing of Zijin Mining, one of the largest domestic producer of gold in the PRC. David is presently acting for a number of overseas mineral companies in their listings on the Exchange.

The Exchange is characterized by great liquidity. Part of this liquidity is as a result of the qualified domestic institutional investor scheme to channel China's foreign reserves into the Exchange and to alleviate the liquidity glut in the economy. Despite the global financial crises, the Exchange will therefore be a relatively safe haven.

While the Exchange is dominated by Hong Kong and mainland Chinese companies, to alleviate this dependence, the Exchange implemented a policy in 2007 to attract foreign companies to list on it. Sino Gold Mining Limited from Australia was the first foreign company to list on the Exchange under this policy. Foreign companies are increasingly looking to list on the Exchange. The premiums for resource companies on the Exchange remain strong. Given China's huge demand for minerals and resources, the lack of mineral and resources companies on the Exchange and the premiums involved, foreign mineral and resources companies are especially looking to list on the Exchange.

Contents of Listing Documents

Main Board

GEM

Profit forecast

Profit forecast is not compulsory

Accountants’ report

To cover 3 financial years except for exempted companies.

Can be prepared in accordance with either Hong Kong Financial Reporting Standards or International Financial Reporting Standards for primary listings on the Exchange.

May be prepared in accordance with generally accepted accounting principles in the United States of America (US GAAP) or other acceptable accounting standards acceptable to the Exchange under certain circumstances.

To cover a period of at least 2 financial years.

Can be prepared in accordance with either Hong Kong Financial Reporting Standards or International Financial Reporting Standards.

Can be prepared in accordance with generally accepted accounting principles in the United States of America (US GAAP) if the applicant is or will be simultaneously listed on either the New York Stock Exchange or the NASDAQ National Market.


 

Moratorium

Main Board

GEM

In respect of controlling shareholders

The Exchange imposes certain restrictions on the disposal of shares by controlling shareholders following a company’s new listing. Essentially, any person regarded as a controlling shareholder at the time of listing shall not:

· dispose of his shares in the listed issuer in the period commencing on the date by reference to which disclosure of the shareholding of the controlling shareholder is made in the listing document and ending on the date which is six months from the date on which dealings in the securities of a new applicant commence on the Exchange; or

· dispose of his interest in the issuer if such disposal would result in him ceasing to be a controlling shareholder in the period of six months commencing on the date on which the period referred to above expires.

Controlling shareholder(s) of a new applicant must undertake to the issuer and the Exchange to disclose any pledge/charge of any securities beneficially owned by him/them in favour of an authorised institution for a period commencing on the date by reference to which disclosure of the shareholding of the controlling shareholder(s) is made in the listing document and ending on the date which is 12 months from the date on which dealings in the securities of a new applicant commence on the Exchange.

Restrictions on the issue of new shares

The Exchange does not normally permit further issues of shares or securities convertible into equity securities of a listed issuer within 6 months of listing.


 

Transfer of Listing from GEM to Main Board

Main Board

GEM

Eligibility

· Meeting Main Board admission requirements

· Listed on GEM for one year.

Mechanism

· No sponsor is required

· Require an announcement by the issuer, to be pre-vetted by the Listing Division and approved by the Listing Committee

· Not require the confirmation of a financial adviser of information which are not already the subject of public disclosures, and rely on directors’ assurance