When the Hong Kong Stock Exchange changed its rules to allow junior exploration companies to list on the bourse, it opened an alternative source of equity to Western Australia’s mid-tier resources companies that have mainly been wooed by Toronto and London for overseas capital.
In April, the exchange loosened its listing requirements for mining companies, meaning Australian juniors now had another option for overseas capital.
In recent years the Toronto Stock Exchange and London’s AIM board have been the favoured secondary bourses for Australian explorers.
AIM suffered heavily during the GFC, losing many of its junior and mid-tier minerals companies to delisting as raising money in London became more difficult.
The TSX has an estimated market capitalisation of about US$1 trillion and has more mining stocks that any other exchange in the world.
Companies on the HKEx have an estimated capitalisation of more than twice the TSX.
The main difference, for junior mining firms, between the two is the tougher rules regarding floats in Hong Kong.
Richard Tsang, chairman and managing director of Strategic PR Group, China’s largest independent investor relations firm, visited Perth last week to promote the Hong Kong exchange to local companies.
Mr Tsang, whose company is responsible for more than 200 initial public offerings on the exchange in the past 10 years, said the biggest advantage of listing was access to capital from mainland China.
Some 40 per cent of trade on the exchange is from retail investors.
“Hong Kong is the first stop to China money … we’re talking about billions of US dollars,” Mr Tsang said.
“There is proof that these mainland Chinese investors already have an understanding and a confidence in Australian companies.”
The exchange received a boost in January when Mongolia-focused coalmine developer SouthGobi Resources chose Hong Kong for its secondary listing and a US$500 million capital raising.
SouthGobi is controlled by Canada’s Ivanhoe Mines.
Despite lessening the listing requirements in Hong Kong, there are still greater demands for listing companies than in Toronto.
An exploration company must “disclose its plans to proceed to production with indicative dates and costs, which is supported by at least a scoping study”, according to the Hong Kong exchange’s website.
HKEx head of listing Mark Dickens said this requirement may change.
“To be eligible for listing, mineral companies are required to have made a meaningful discovery of resources and outline a path to production,” he said.
“As the market matures, we will consider again whether the more speculative early stage exploration ventures should be eligible for listing.”
To promote the HKEx among Perth-based companies, Mr Tsang has teamed up with local investor relations firm Purple Communications.
Purple was invited into the Public Relations Organisation International group of companies – the only Australian PR firm to join the network.
Mr Tsang has been working with Purple managing director Warrick Hazeldine to spruik Hong Kong capital.
“We’ve seen an increase in interest and appetite for capital from Hong Kong from Australian companies, particularly to tap into that China link,” Mr Hazeldine said.
He said other advantages of operating in Hong Kong included its legal tradition based on the British system as well as the high proportion of English speakers and a shared time zone with Perth.
