Demand for mining stocks soars in Hong Kong
The Hong Kong Stock Exchange is under pressure to relax rules that prevent fledging mining companies from listing on its platform as investor demand for natural resources stocks increases.
Companies at a pre-production stage that want to raise capital for development in Hong Kong need a waiver from section 18 of the exchange’s listing rules, which requires a three year earnings history.
This is a lengthy process and there are only seven mining companies listed on the HKEx compared with 174 on London’s junior Alternative Investment Market, where companies at an early stage of exploration and development can readily raise capital.
However, the potential for high valuations means that a number of junior mining companies with operations in China are keen to list in Hong Kong, according to Brock Salier, a mining analyst at Ambrian Capital.
The chief executive of one junior mining company that is seeking a Hong Kong listing said it made sense to be close to China given the huge demand for natural resources.
"The Hong Kong exchange has traditionally focused on mature industrial and property companies that have come to market to provide liquidity to shareholders. But there are a lot of investors knocking on the exchange's door saying they want to invest in mining companies so it is having to evaluate its listing rules in the light of high demand from retail and institutional investors."
Sydney-based Xanadu Mines, which has coal and copper projects in Mongolia, plans to raise $100m (€64.5m) from a share sale in Hong Kong early next year to fund projects, according to a report on the South China Morning Post.
London still has advantages over the Hong Kong as a listing venue for mining companies in terms of the depth of international investor base and natural resource expertise. Sailer added: "The emerging wealth in Asia is creating new sources of capital for mining companies but it is still early days. It is not competition for London."
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