HKEx Publishes Consultation Paper On Proposed Listing Rules For Mineral And Exploration Companies

Hong Kong Exchanges and Clearing Limited (HKEx) today (Friday) published a consultation paper on proposed new Listing Rules for mineral and exploration companies.

The Consultation Paper on New Listing Rules for Mineral and Exploration Companies seeks the public's views on proposals to strengthen Hong Kong's role as an important listing centre for mineral and exploration companies and broaden investor choices by allowing exploration companies with 'resources' to list on The Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of HKEx.

The paper proposes that for initial listings, a Mineral and Exploration Company be defined as one whose "principal activity, whether directly or through its subsidiaries, involves the exploration for or extraction of natural resources including minerals, oil and gas or solid fuels." Principal activity would be determined by whether the activity represented 25 per cent or more of the company's assets, gross revenue or operating expenses.

Companies already listed would be treated as Mineral and Exploration Companies only if they acquire mineral or exploration assets by a transaction classed as major or above after the proposals took effect.

The proposals include:

(a)	revised eligibility requirements for Mineral and Exploration Companies applying for a new listing;
(b)	specific continuing disclosure obligations for listed Mineral and Exploration Companies;
(c)	specific disclosure requirements for listed companies entering into major transactions or above involving mineral and/or exploration assets; and
(d)	the requirement for listed companies to update previously published statements on reserves and resources, if any, on an annual basis.

Further details of some of the proposals are provided below.

Initial Listing

A Mineral and Exploration Company applying for listing on the Exchange after the proposed rules took effect would have to provide a report by a qualified expert on its reserves and resources under one of three internationally recognised mineral reporting codes (the JORC Code, the Canadian National Instrument 43-101 or the SAMREC Code) or the Petroleum Resources Management System, or PRMS, for oil and gas reporting. The proposals include details of matters to be incorporated in an experts report on oil and gas resources.

Under the proposed rule changes, a new listing applicant must demonstrate either that it can meet the track record requirements under Listing Rule 8.05 or that its senior managers and directors, taken together, have a minimum of five years relevant experience.

The listing applicant must also demonstrate that it has:

	identified resources under one of the proposed internationally recognised reporting standards;
	sufficient working capital for 125 per cent of its budgeted needs for the next 12 months; and
	provided disclosure about social and environmental matters in its prospectus or circular for transactions if the matters have a material impact on the listing applicants business.

The proposed rule changes will not affect existing listed companies except where stated.

Major Transactions*

Under the proposals, listed companies entering into major transactions or above to acquire resources and/or reserves which require shareholder approval must provide to shareholders ahead of the general meeting a qualified experts report on the assets the company is seeking to acquire. On completion of such an acquisition, listed companies are treated as Mineral and Exploration Companies under the proposed rules.

This requirement for a qualified experts report would apply to both acquisitions and disposals of mineral resources and/or reserves classed as major or above entered into by companies which were treated as Mineral and Exploration Companies at the time of their initial listing or became Mineral and Exploration Companies by acquiring mineral or exploration assets through a major acquisition or above.

Other Continuing Obligations

The paper proposes that Mineral and Exploration Companies be required to provide details of their exploration, mining production and development activities and expenditures incurred for those in their interim (half-yearly) and annual reports. This applies only to companies which were treated as Mineral and Exploration Companies at the time of their initial listing or which have become Mineral and Exploration Companies by acquiring mineral or exploration assets through a major transaction or above.

It is also proposed that listed companies with mineral and/or exploration assets be required to update any statements of reserves and resources they have previously made once a year through their annual reports. This may be achieved with statements prepared by companies internal management. This proposed requirement applies to all companies that have previously published details of reserves and resources.

Our proposals are aimed at updating Hong Kongs regulatory framework for listed mineral and exploration companies, bringing the framework into line with international best practice and ensuring investors will be provided with information that is both material and reliable, Mark Dickens , HKExs Head of Listing, said.

We are open to responses from market participants and will draw conclusions on the proposals based on market consensus, Mr Dickens said.

The Consultation Paper can be downloaded from the HKEx website. Interested parties are encouraged to submit their views on the proposals in the consultation paper by completing and returning the questionnaire. The deadline for submissions is 11 November 2009 .

* Major transaction refers to a transaction triggering the 25 per cent threshold under Chapter 14 of the Listing Rules.