It's the China card that Hong Kong hopes to capitalise on: the fact that the mainland is, and is likely to remain, a big importer of such commodities as coal and copper. But the biggest overseas mining hopefuls have had to pull their deals or reduce their scope.

That is because investors, unfamiliar with overseas mining plays - especially companies with no profit track record - have so far proved skittish. Three global miners have listed through IPOs and two of them are trading below their IPO price.

'It is fair to say these international [mining] listings have not been a great success,' says Warren Gilman, the Hong Kong-based head of commercial banking at Canadian International Bank of Commerce.

In contrast, he says, 'Hong Kong investors have received Chinese mining companies very well.' An array of Chinese miners, from coal to gold producers, is listed on the Hong Kong exchange. Many of those companies, however, came to the market with proven track records. And they carry the cachet of being located in China.

Miners from outside China have generally flopped not just because investors trading shares in Hong Kong are unfamiliar with mining assets but because they 'don't offer the China story', says Jamie Gibson, chief executive of mainland miner Regent Pacific.

Australian billionaire Clive Palmer tried to cash in on the China story, but investors apparently weren't buying. He wanted to list his Resourcehouse in Hong Kong, aiming to raise up to US$3 billion through an initial public offering.

Resourcehouse's two main assets are a thermal coal deposit in Australia's Queensland state and a magnetite iron ore project in the Pilbara region of Western Australia state. Both projects were to be up and running by 2013, with the main market being China.

To burnish the investment appeal, Palmer renamed his Australian mining projects China First Coal and China First Iron Ore. He even hired China Metallurgical Corporation to build the coal mine. But in February, following some pre-marketing meetings with potential investors, Palmer pulled the Hong Kong IPO.

A spokesman for Palmer declined to comment on the specific reasons.

Strikeforce Mining and Resources, a company that produces molybdenum - the uses for which include hardening steel - has been attempting to raise US$200 million in a Hong Kong IPO since early 2008. The company, controlled by Russian billionaire Oleg Deripaska, has postponed the deal twice, most recently in May.

Only three non-Chinese miners have managed to make it out of the IPO gate so far this year. And only one of those, Mongolia Mining Corporation, can boast that its shares are trading above the listing price.

It's not due to lack of overall investor interest. According to Dealogic, so far this year on the Hong Kong exchange investors have snapped up nearly US$45 billion of IPOs from 63 companies. By comparison, 60 companies have raised nearly US$12 billion in New York, while 13 companies have raised about US$7 billion in London.

As far as overseas miners go in Hong Kong, it was all meant to be so different. Companies and bankers involved in these deals think Hong Kong is the perfect meeting place for global miners who sell resources to China and Asia-focused investors who want a piece of that action.

Lawrence Fok, chief marketing officer of Hong Kong Exchanges and Clearing, wants to make the local market more international and is counting on the mining industry to lead the charge.

'China will remain metal-intensive for the next 15 to 20 years,' Fok contends. 'So we are becoming an international mining finance hub. Mining companies who are selling to China should come here to list.'

To facilitate such listings, in June the Hong Kong exchange waived for miners a long-held rule that companies intending to list had to be profitable. The waiver brings Hong Kong more in line with other exchanges such as Australia, Toronto and London, which have deeper and longer experience with fledgling mining stocks.

(Waiver aside, getting a listing of any kind in Hong Kong takes time, which adds to costs. 'In Australia, it normally takes a company a minimum of three months to complete an IPO. In Hong Kong, that is more like a minimum of six months,' says Shaun McRobert, a Hong Kong-based partner of law firm Norton Rose, who has worked on mining IPOs in Hong Kong and Sydney.)

Mining companies generally need money long before they have built their mines and begun extracting reserves. They often raise that cash through IPOs.

In the established mining centres of Australia, Toronto and London, a whole body of expertise has developed to value miners that are still in the exploration stage. 'In central Toronto, you probably have 4,000 analysts within a four block radius with this expertise,' says Gilman of CIBC. 'Hong Kong does not have many yet.'

Unlike price-to-earnings ratios - where investors can divide a profitable company's share price by its earnings a share and determine whether it is in line with the industry average - there is no simple way to value a miner that isn't producing anything yet.

Usually analysts apply what is called discounted cash flow to value a mine and then put a model together. It involves a complex spreadsheet used to calculate a mine's value by determining how much money the project will cost, and the amount of cash it will bring in once it starts producing. Part of the calculation is to estimate what the price of a certain commodity, say a metal, might be in five, 10 or 15 years, and have the experience of working as a mining engineer or geologist to determine if a mining company's assessment of its future costs are correct.

'Comparing a non-producing gold asset is very different from a non-producing copper asset,' says CIBC's Gilman. And then there are the wild cards like political risk. For instance, he says, 'a resource in Australia is worth more than one in the [Democratic Republic of] Congo'.

'It's still early days but expertise is slowly developing' in Hong Kong, says Alex Molyneux, the chief executive of Hong Kong- and Toronto-listed Mongolian miner Southgobi Energy Resources. Southgobi's shares have plunged 31 per cent since its IPO on January 29.

But it could take some time before local investors, who are used to valuing income streams, learn how to determine the correct market price of a hole in the ground.

'The problem is very obvious,' says Andrew Ferguson, the chief executive of Hong Kong-listed resources fund manager and commodity trader APAC Resources. 'There is no mining in Hong Kong' so investors are not all that comfortable with the industry.

Consider the case of IRC, a loss-making Russian iron ore miner. Sitting in his brand new office in Hong Kong's central business district, 36-year-old Jay Hambro, the United Kingdom-based chairman of IRC, laments that the company's IPO on October 21 did not go as planned.

IRC originally aimed to raise US$513 million, but halved that to US$242 million, just 13 days before the IPO, because of subdued investor interest.

Since IRC plans to sell the majority of its iron ore to China, says Hambro, 'Hong Kong is a natural home for our equity'.

The trouble, he adds, is investors just don't understand how to value the company.

IRC, a division of London-listed gold miner Petropavlosk, has three mines in Russia's Amur region, close to Heilongjiang province in northeast China. Previously called Aricom, it was listed on London's AIM market until Petropavlosk, its majority owner, bought it back in April 2009.

According to Bank of China International, which worked on IRC's IPO, the company will rack up a US$95 million loss for 2011 and needs US$400 million to fund the first stage of its projects.

Hambro says that most of the fund managers who own shares in Petropavlosk, or who owned Aricom, participated in IRC's Hong Kong IPO. But he concedes that it was tough to sell the company to Asia-based investors, such as government wealth funds, wealthy families and individual Hong Kong investors. 'With our lack of earnings, our listing was new territory' for Hong Kong, he says.

A few months before the listing, IRC sold a US$60 million stake to cornerstone investors including Hong Kong billionaire Li Ka-shing in a deal that valued all of IRC at US$860 million.

But after some preliminary meetings with potential investors, the company opted to slash its overall value before the IPO. It debuted in Hong Kong with the lower market capitalisation of HK$6.05 billion.

IRC's shares are now trading at around HK$1.70, 6 per cent below their HK$1.80 IPO price.

Mongolia Mining has been the one bright spot, probably because it is profitable and is already selling its products to China. The company, which mines coking coal from a deposit based in the South Gobi desert that is 240 kilometres from the Chinese border, is set to post US$68 million of net income in 2010 and US$260 million in 2011, according to JP Morgan research.

Mongolia Mining's shares have zoomed up 20 per cent since it raised HK$5 billion in its October 12 IPO.

The bottom line is investors in the Hong Kong market 'aren't used to companies that are in a growth phase' that aren't paying dividends yet, says Norton Rose's McRobert.