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Requirements Regarding Control Over Mining Assets

A new applicant mineral company must be able to demonstrate that it has the right to actively participate in the exploration for and/or extraction of resources either through:

  1. control over a majority (by value) of the assets in which it has invested together with adequate rights over the exploration for and/or extraction of natural resources (control over a majority means an interest greater than 50%); or
  2. adequate rights arising under arrangements acceptable to the HKEX, which give it sufficient influence in decisions over the exploration for and/or extraction of the natural resources, which the HKEX ordinarily expects to be at least a 30% interest, corresponding with the level of “controlling” interest under the HKEX Listing Rules. Other arrangements where a listing applicant has an interest below 30% but actively operates mining projects may be considered by the HKEX depending on the facts and circumstances of the particular case.

As mineral assets are often held under complex holding structures and/or are located in jurisdictions where the relevant national mining legislation contains restrictions on control over the assets including restrictions on foreign ownership, and of which the HKEX could not be expected to be familiar, it is essential to clearly establish for the benefit of the HKEX and for prospective investors alike that the mineral company has control over a majority (by value) of the assets and adequate rights arising under arrangements acceptable to the HKEX, which give it sufficient influence in decisions over the exploration for and/or extraction of the resources.

For the avoidance of doubt, and to save any unnecessary complications further along in the listing process, Charltons recommends that mineral companies or their sponsors describe how the mineral company enjoys control over a majority (by value) of the assets in which it has invested and adequate rights they exercise over mineral assets in pre-listing preliminary submission(s) to the HKEX to ascertain whether or not the HKEX is of the view that the mineral company is possessed of the aforementioned rights and is a suitable candidate for listing.

Information should be provided on the structure and local licensing regime under which the assets are held. Although not required at the pre-application stage, a legal opinion from counsel in the jurisdictions where the underlying assets are located should be included with the submission if available. Other documentation containing information on local mining laws or describing how the mining assets are held (or extracts thereof) can also be provided as part of the submission.

Charltons is experienced in making pre-application submissions to the HKEX to explain both the control and adequate rights the mineral company has over mineral assets. We are further experienced in liaising with local counsel as required and in making follow-up presentations to representatives of the HKEX’s listing committee.

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