Mining Corporation’s (CNMC) IPO and subsequent
listing represented the first Africa-based company to list on
the Hong Kong Stock Exchange. Lawyers believe it could spark
a wave of copycats. Here’s why.
copper production company CNMC, part of the larger
state-owned China Nonferrous Metal Mining Group, listed on
the Hong Kong Stock Exchange on 29 June. The Hong Kong
Exchange did not require a waiver for the listing.
Smith’s Tom Chau said this was an encouraging
development for Africa-based corporates looking to list in
Hong Kong. It means an application with an African –
or at least Zambian – operation may be able to meet
all necessary listing requirements under Hong Kong listing
rules, he explained.
warned that mineral issues face additional listing and
disclosure requirements under Chapter 18 of Hong
Kong’s listing rules.
expect the deal to start a trend of Chinese-owned resources
companies listing in Hong Kong.
partner Shaun McRobert, who advised the joint global
coordinators, joint bookrunners, joint sponsors and joint
lead managers on the deal, said that Hong Kong was gradually
becoming a viable alternative to London in the resources
space, particularly when there’s a Chinese
off-take or a significant Chinese shareholder or
Davis Polk &
Wardwell partner Antony Dapiran, who acted for CNMC, agreed
that there was an increasing trend of Chinese-owned
international businesses looking to go public. "Hong Kong is
a natural home market for these companies, with controlling
shareholders based primarily in mainland China and the
businesses they’ve invested in based all over
the world," he said.
The transaction was, however, subject to a number of issues common in emerging markets. Dapiran said
the challenge when dealing with a developing
country’s legal regime was often the gap between
the laws and their implementation and enforcement.
He warned that
what works for a company from a business point of view might
not be sufficient to obtain a clean legal opinion from local
in-house counsel and private practitioners at IFLR’s inaugural Africa Forum also
warned against this.
Both Dapiran and
McRobert emphasised the importance of working closely with
local counsel to ensure that any risks were addressed by
taking rectification measures or disclosed appropriately in
the worst thing you can do in Africa is take legal advice
from someone who doesn’t meet international
standards. He recommended working closely with selected local
counsel to achieve these standards.
It is also
essential to take politics into account. Deal counsel noted
that every African country has political issues, and that it
is necessary to explain political risks involved to
investors. Resource nationalism is also an issue; many
African jurisdictions have highly protective laws governing
In the case of
the CNMC IPO, media coverage largely focused on an election
and change of government in Zambia in late 2011. Michael
Sata, Zambia’s new president, campaigned with a
platform against labour abuses by Chinese mining
corporations. However, after the election Sata reiterated his
support for CNMC and Chinese investment.
Sata’s concerns, it is unsurprising that
exchanges are looking more deeply at health, safety and
environmental concerns. McRobert said that sponsors are also
paying greater attention to these issues as part of their
ongoing compliance and international assessment
He advised that
sponsors take a proactive approach. "We think going on site
is the best way to understand where potential risks might
arise," he said.