IPOs not a good option for companies in mining industry

PUBLISHED : Tuesday, 22 March, 2011, 12:00am
UPDATED : Tuesday, 22 March, 2011, 12:00am

The Hong Kong government may want to make the city an IPO destination for resource industries, but for small mining and mining-related companies it makes much more sense to seek funding here through other platforms, such as venture capital and private equity, rather than initial public offerings.

Cathy Yao, managing director of British Columbia's international trade and investment representative office in South China, said it was difficult for growing enterprises to attempt listing here.

'Hong Kong Exchanges and Clearing usually only accepts mature companies,' Yao said on the sidelines of a gathering of mining bosses yesterday. Fourteen companies in the mining sector assembled to seek investment.

G. Andrew Work, executive director of the Canadian Chamber of Commerce in Hong Kong, said: 'There are four major groups [of investors]: venture capital, private equity, institutional investors like major banks and hedge funds, and a little bit of family office that usually take minority stakes in late-stage operations.'

Advanced Explorations, a Canadian resource development company with a Chinese strategic partner, XinXing Pipes Group, is seeking financing for its flagship Roche Bay iron ore project in Canada's Nunavut territory. President John Gingerich said the company had no intention of seeking an initial public offering in Hong Kong as the project was at an early stage of development.

Work said local capital was getting increasingly active in the mining sector because the final mining products in many cases were going to China.

'They understand the growth story in China, so they understand what is going to be needed to fuel that growth story,' he said.

He pointed out that besides money, many companies were also keen to find partners that could help them work more effectively. 'It might be for licensing, it might be purchasing the properties and so on.'

Majestic Gold Corporation, which has a project in Shandong province, is seeking an investment of US$40 million. Varun Chandran, public affairs officer of the company, said the average annual output of the project was estimated at 106,000 ounces for several years.

'The Chinese government buys all our gold through Bank of China from the Shanghai metal exchange,' said Chandran.

Other participants at the meeting included Trans Coal Mongolia, a logistics business seeking US$5 million for a fleet of trucks to ship coal from mines around South Gobi to ports.