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New listing rules – the criteria in a nutshell
· To establish eligibility for initial listing under the new Chapter 18 rules, a company's main activity must be the exploration for and/or extraction of natural resources (including minerals and petroleum) and this must represent 25% or more of the total assets, revenue or operating expenses of the company and its subsidiaries
· The company must also have a portfolio of resources identifiable under the applicable international reporting standard, the JORC Code, NI 43-101 or the SAMREC Code (Minerals) or PRMS (Petroleum). Companies that have only inferred or prospective resources will not qualify
· The HKSE has also expanded its approved list of acceptable jurisdictions for listing applicants, and Australia and Canada (British Columbia and Ontario) are now included
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Given the recent changes to listing rules, Chinese mining and natural resources companies will increasingly favour the option of an IPO in Hong Kong.
The Hong Kong Exchanges and Clearing Ltd has recently issued new rules for the listing of exploration and mining companies on the Hong Kong Stock Exchange (HKEx). The new rules that set out disclosure obligations and standards for reporting resources and reserves, for valuing mineral and petroleum assets, and for the qualifications and experience of technical experts will take effect on 3 June 2010.
These rules are part of Hong Kong's pitch to IPO-hungry mining firms and its strategy is simple: China is the world's dominant source of commodity demand, and Hong Kong is China's international gateway. “The new rules are more mature and may attract more Chinese resource companies to choose to list on the HKSE instead of other international capital markets such as the AIM or TSX,” said Zheng Xiaodong, partner at Jincheng Tongda & Neal (JT&N). Zheng also stated that the HKSE, in comparison with local Shanghai and Shenzhen stock exchanges, is more lax on administrative approvals and that also makes it a more feasible options for potentials.
Apart from companies that are yet to launch an IPO, Zheng said that the new rules may trigger re-issuances and re-listings of already listed companies, and in general, will generate new opportunities for PRC legal advisors.
Zheng recently also represented Lansen Pharma in its US$137m Hong Kong IPO. JT&N is the issuer’s long-term legal advisor, having advised on the merger and division of its PRC subsidiaries and its acquisitions and investments in upstream and downstream enterprises in China. ALB
