The Hong Kong Stock Exchange's listing agreement says:
In addition to the information set out in Appendix 1A, a Mineral Company must include in its listing document......if relevant and material to the Mineral Company's business operations, information on the following:–
(c) compliance with host country laws, regulations and permits, and payments made to host country governments in respect of tax, royalties and other signiï¬cant payments on a country by country basis;
Note the reference to country-by-country reporting. I stress, the data referred to here is on past performance. There is a separate requiremnt that these payments also be projected.
Glencore's Hong Kong prospectus was issued today.
The data referred to above is not included in it as far as I can see. I've searched it each and every way I can.
There is some projected data - but on tax it simply discloses statutory tax rates in most cases. But of country-by-country reporting of past data there is not a hint.
In that case does this disclosure comply with Hong Kong's listing requirements? Would anyone like to suggest how that can be the case?
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Probably because Glencore isn’t a mineral company as defined in the listing rules.
Oh yes it is
Read the prospectus
It is not obvious that Glencore acknowledges that it is a “Mineral Company” as defined under the HK listing rules at any point in the prospectus. Do you have a reference to a page or pages in the prospectus where such acknowledgement is made?
Undeniably, Glencore is involved in actitivity associated with minerals and petroleum (“Natural Resources” under the HK rules) but as JayPee suggests being actively involved with minerals and petroleum does not make Glencore a Mineral Company under the HK rules unless it satisfies the definition of what is a Mineral Company under the rules. It is more or less clear from the prospectus that Glencore does not satisfy the “revenue” test or the “cost” test. It is more difficult to determine whether it satisfies the “asset” test. Have you carried out an asset test calculation that demonstrates that Glencore is a Mineral Company as defined under the listing rules? I would be very interested in seeing it if you had. A breach of the HK listing rules (without a valid exemption) might raise problems for the global offering.
There are several hundreds of pages in the prospectus providing information on its mineral operations, information provided because it is a minerals company as defined by Hong Kong.
But not the country-by-country reporting data that should go with it.
So I’m suggesting it has breached those rules. And I was asking for evidence why it hadn’t.
Ignoring the contents of a large part of the prospectus that relates to mining is not evidence, I suggest
I am aware that the prospectus contains many hundreds of pages about its mineral and petroleum activities, but the information in the prospectus suggests that revenue and costs attributed to these activities does not exceed 25% of total revenue and total costs. In which case you are suggesting (I think) that Glencore is a Minerals Company (as defined in the HK listing rules) because 25% or more of its assets are mineral or petroleum assets,
I am simple asking you whether or not you have carried out an asset test calculation? If so I would be interested in seeing it.
If not, how do you know that Glencore has more than 25% of its assets in the form of mineral or petroleum assets? Does it say so in the prospectus? If so I would like to know where because if the prospectus is in breach of HK rules it might be possible to do something about the proposed global offering, something I assume that would be of interest to you.
If they’re not a mineral company why have thy complied with all the other requirements for a mineral company in their HK prospectus, as far as I can see?
The amount of information provided will possibly be because, as you know, when a prospectus is issued sufficient information has to be provided to potential investors to enable them to decide as to whether to invest or not. Just on the basis of the listing requirement contained in Appendix 1A you would expect to see a massive amount of information about a company and its investments that is as complicated as this one.
Even though a great deal of information is provided on the minerals and petroleum activity of Glencore, it is still possible that minerals and petroleum can be a large part of the activites of Glencore without it being a sufficiently large part to satisfy the 25% tests of the HK listing rules. When you posted your original blog I assumed that you had satisfied yourself that Glencore was a Minerals Company (as defined in the HK listing rules). As my previous comments, if you have I would appreciate having sight of the calculation because of the consequences of what you have found.
What is of interest is that there is not mention of any exemption being asked for or given (see section on Waivers and exemptions from Hong Kong Laws and regulations) in respect the contents of Rule (chapter) 18 which suggest that this chapter did not apply at any time. Given the exemptions that have been given it would be a significant oversight if Rule 18 applied but there was no disclosure in respect of paragraph 18.05(6) c.
So, I guess that if Glencore is not a Minerals Company (as defined in the HK rules) that is the answer to the questions you pose in your blog.
Are you suggesting that the Hong Kong Stock Exchange have waived their own rules in favour of Glencore.
And if so, why?
JayPee, if you read the prospectus you will find many instances that are disclosed of a waiver being given to the HK listing rules. That often happens with such an offering. If Glencore has to comply with UK listing rules and there is an overlap or the facts of the actual circumstances do not exactly fit with the situation that is more common in say HK (see the section on the location of the company secretary) then a waiver might be granted.
Neither Richard nor I have indicated in any way that a waiver has been granted to Glencore on the matter of wether or not it is a Minerals Company (as defned). Rather it would appear that Richard posted his blog on the assumption that it was a Minerals Company (as defined) and yet there appears to be no reason to support this particular assumption even if it clear that Glencore is involved in mineral and petroleum activity.