Select Page

Listings

Advising on Asset “Spin Offs”

Charltons advises mineral companies seeking to effect the separate listing on the Hong Kong Stock Exchange (HKEX) or elsewhere of assets or businesses wholly or partly within their existing groups (Spin-Offs). We advise spun-off entities and their parent companies on compliance with the Hong Kong Stock Exchange Listing Rules (HKEX Listing Rules) and in particular the additional provisions imposed by the HKEX on Spin-Offs.

Mining Spin-Offs can potentially give rise to a number of unique issues. The board and senior management team of the spun-off company may be required to establish to the HKEX’s satisfaction that, taken together, they have a minimum of 5 years’ experience relevant to the exploration and/or extraction activity that the spun-off mineral company is pursuing. Members of the parent company’s Board and senior management are likely to have to join the spun-off entity. This is not always a straightforward exercise, particularly if the parent company is interested in a number of different categories of mineral assets and the personnel it stands to lose are also experienced in the exploration and/or extraction of assets which will continue to be controlled by the parent company. Furthermore the HKEX requires that the spun-off entity demonstrates management continuity for at least the preceding three financial years. If the spun-off entity is newly established it will be required to demonstrate that its Board and senior management had oversight for and/or were responsible for the development of the spun-off mineral assets.

It is worth noting that in recognition that the original listing of the parent company will have been approved on the basis of the parent company’s portfolio of mining/mineral assets and that the expectation of investors at that time would have been that the parent company would continue to develop those businesses, the HKEX would not normally consider a spin-off application within three years of the date of listing of the parent company.

Mining Spin-Offs can be further complicated due to the fact that the spun-off entity may need access to infrastructure owned or controlled by its parent and/or may want to rely on its parent for certain administrative or technical services. Such arrangements can constitute a connected transactions under the Listing Rules. Generally, continuing connected transactions are limited to three year terms under the Listing Rules, which will be problematic for mineral companies seeking long term access to infrastructure.

The HKEX emphasizes that it retains an absolute discretion to accept or reject a proposal submitted by issuer to effect the separate listing of assets or businesses wholly or partly within its existing group. The HKEX may impose additional requirements or make a Spin-Off proposal subject to special conditions whenever it considers it appropriate.

The Exchange has issued a Practice Note on the basic principles it applies to Spin-Off listings.

Read our latest News

Platinum demand increases

Zijin Mining invests in lithium

NATURAL RESOURCES News Zijin Mining, one of China’s largest gold and copper producers has acquired Neo Lithium Corporation for $770 million in a bid to carve out a stable supply chain for the future. This comes as the latest in a slew of...

Platinum demand increases

Price of steel rapidly increasing

NATURAL RESOURCES News The lack of supply for steel has US companies scrambling to produce cans, metal desks and filing cabinets, Peloton bikes and cars as prices have shot up to $1940 a ton this September compared to $560 for both 2019...

Platinum demand increases

Financial institutions adopt IPCC targets

NATURAL RESOURCES News Shying away from the International Energy Agency’s ‘Net Zero by 2050’ plan, which bars committed companies from operating new fossil fuel exploration projects this year, most banks have chosen to follow the...

Platinum demand increases

China increases local coal production

NATURAL RESOURCES News As the United Nation’s COP26 climate conference looms, President Xi Jinping has won international praise for promising that China’s peak carbon emissions would peak before 2030, and the country would achieve carbon...

Platinum demand increases

Exploration tech backed by billionaire

NATURAL RESOURCES News KoBold Metals (“KoBold”), an exploration company which discovers materials critical for the electric vehicle and renewable energy revolutions has partnered with BHP to search Western Australia for metals and critical...