MARKETS & INVESTING | Tony Chua, Hong Kong

Hong Kong seen as a global mining companies listing hub

The HKSE has attracted several large high profile mining company listings over the last few years.

As China’s insatiable demand for natural resources continues to grow to fuel a burgeoning economy that remains one of the world’s strongest, global mining industry players are increasingly recognising Hong Kong as an ideal location for a public listing due to the city’s proximity to China’s capital markets that highly value commodity based stocks. 

PwC Hong Kong Mining Leader and Assurance Partner Benson Wong said there was no doubt Hong Kong was emerging as a listing hub for mining and resource companies. “The trend is clear. Over the past few years, the Hong Kong Stock Exchange has attracted several large high profile mining company listings, and the pipeline for future listings is very healthy,” Mr Wong said.

Mr Wong predicts 10-15 mining and natural resource companies will list in Hong Kong in 2012, and this trend will gather momentum when global economic uncertainty subsides and confidence returns. Current market sentiment has affected the number of listings in 2011. The number of mining and natural resources-related IPOs decreased in 2011 as compared to last year, from 22 IPOs in 2010 to 8 IPOs in 2011 (up to end September, 2011). However, the funds raised have increased from HK$68 billion in 2010 to HK$94 billion in 2011 so far.

China’s demand for commodities is unlikely to be significantly affected by the current financial crisis in Europe and the US, with China tipped to grow at a rate of 7-8% next year. “This staggering growth rate amid global economic turmoil represents a continuous increase in demand for commodities, and coupled with a lack of great new deposits and rising costs, prospects for commodity prices are positive,” Mr Wong added.

In this context, the Hong Kong Stock Exchange is keen to attract more mining company initial public offerings. In addition, PwC expects Hong Kong will continue to attract more foreign mining and natural resource companies to come over for dual primary or secondary listings.

Meanwhile, in the first six months of 2011, Chinese entities announced 75 acquisitions in the global mining sector worth a total of $4.7 billion (excluding cancelled & withdrawn deals), according to the PwC Mine 2011 report, which reviews the global trends in the mining industry based on analysis of the financial performance and position of the global mining industry represented by the top 40 mining companies by market capitalisation.

“China is expected to continue acquiring gold and other precious metals, as well as quality industrial resource assets like iron ore, metallurgical coal, fertilizer minerals and base metals. We also anticipate China will continue to look at traditional developed investment destinations as well as expanding into frontier markets, such as Mongolia and Africa, and further consolidate its fragmented domestic mining sector, ”said Ken Su, PwC China, Mining Leader and Advisory Partner.

Additionally, according to the PwC Mine 2011 report, the outlook expressed by industry leaders is increasingly positive, with companies taking definitive action on capital investment projects, as well as mergers and acquisitions. CEOs note their continuing belief in the emerging markets, particularly the ongoing growth in China and the nation’s ability to achieve or exceed the 7% growth target outlined in the 12th Five Year Plan. Resource nationalism and stakeholder management occupy a higher degree of attention from the CEOs, as does the ever increasing complexity and sophistication in the industry.

At a time of budget deficits and changing economic and social priorities, many governments around the world are looking at reforms to their mining codes, grappling with sustainability issues and revisiting their approach to taxation and royalties,” said Tim Goldsmith, PwC Global Mining Leader. “Mining and natural resource companies are rapidly climbing up the political priority list.”

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