Listings

Key Requirements for Listing

The key requirements for listing on the HKEX by a mineral company are as follows:

	Main Board	GEM
*Operating history and management*	Trading record of not less than 3 financial years with: Management continuity for at least the 3 preceding financial years; and Ownership continuity and control for at least the most recent audited financial year.	Trading record of at least 2 full financial years with: Substantially the same management for the 2 preceding financial years; and Continuity of ownership and control for the preceding financial year.
*Financial tests*	Fulfil one of the three financial criteria: Profit test Market capitalisation / revenue test Market capitalisation / revenue / cashflow test	Positive cashflow from operating activities of at least HK$30m in aggregate for the 2 preceding financial years; and Market capitalisation of at least HK$150m at the time of listing.
*Public float*	25% of total issued share capital must be held by the public at all times. Market capitalisation of at least HK$125m held by the public at the time of listing.	25% of total issued share capital must be held by the public at all times. Market capitalisation of at least HK$45m held by the public at the time of listing.
*Spread of shareholders*	Minimum of 300 shareholders	At least 100 public shareholders
*Working capital*	Statement of sufficient working capital for at least 12 months from the date of the prospectus or how it proposes to provide the additional necessary working capital.	Statement of sufficient working capital for at least 12 months from the date of the prospectus or how it proposes to provide the additional necessary working capital.

Profit test

A profit in the most recent year of not less than HK$20 million, and in respect of the previous two years, an aggregate profit of not less than HK$30 million (such profits to exclude any income or loss generated by activities outside the ordinary and usual course of the business or by associated companies or entities whose results are recorded in the company’s accounts using the equity method of accounting);

Market capitalisation/revenue test:

A market capitalisation of at least HK$4 billion at the time of listing and revenue of at least HK$500 million in the most recent financial year; or

Market capitalisation/revenue/cash flow test:

A market capitalisation of at least HK$2 billion, revenue of at least HK$500 million in the most recent financial year, and positive cash flow of at least HK$100 million in aggregate in the last three years.

Waiver from the Main Board Financial Tests / GEM 2-year Trading Record Period

A mineral company that cannot satisfy one of the Financial Tests (exploration and pre-production stage companies) may still apply to be listed if it can establish to the HKEX’s satisfaction that it fulfils three conditions:

the applicant can demonstrate a clear path to commercial production;
To demonstrate a clear path to commercial production, the applicant must:
1. have conducted exploration and/or development activities on some or all of its mining assets during part or all of the track record period (the Pre-production Mining Assets);
2. the Pre-production Mining Assets must comprise a meaningful portfolio (in terms of quality and quantity) of the applicant’s resources and reserves; and
3. present a detailed plan, with reasonable assumptions, to achieve profitable commercial production with respect to the Pre-Production Mining Assets.
the directors and senior management, taken together, must have minimum of five years’ experience relevant to the exploration and/or extraction activity that the mineral company is pursuing; and

where the directors’ or managers’ experience in commodities or minerals is different from the applicant’s operations, the HKEX will consider whether the skills are transferable to the applicant’s mining activities and the directors’ or managers’ academic and professional qualifications, significant mining related achievements/awards, and contribution to the mining industry and/or any mineral companies.

A mineral company which seeks to rely on the aforementioned waiver must demonstrate that its primary activity is the exploration for and/or extraction of natural resources.

There is no equivalent waiver from the GEM Rules’ positive cash flow requirement, however the HKEX may waive the two year trading record requirement if satisfied that the directors and senior management have a minimum of five years’ relevant experience. The cash flow requirement must however be met for the shorter trading record period.

Charltons is experienced in advising mineral companies and their sponsors and underwriters on the HKEX’s management experience requirements and making applications for waivers based on management experience. At a preliminary stage, we can coordinate the collection and verification of supporting documentation in relation to directors’ and senior managements’ experience. Mineral companies should note that the minimum five years’ experience should be relevant to the exploration and/or extraction activity that the mineral company is pursuing. For example, the directors and senior management of a mineral company involved in the exploration and production of base metals should have experience in the base metals sector. Experience in, for example, coal or iron ore exploration and/or production or even more general industry experience may not be deemed relevant for the purposes of satisfying the five years’ experience requirement.