Last week, SGX announced that they were seeking a public consultation on proposed new admission rules and continuing listing obligations for mineral, oil and gas (“MOG”) exploration companies.
The proposed rules will enable more MOG exploration companies seeking to extend their presence in Asia to list on SGX and help augment Singapore’s position as a commodity trading, financing and risk management hub.
As companies in MOG exploration typically have periodic need for large exploration expenditure at various stages of project development, the proposed rules will allow them access to funding from the equity market.
To list on SGX Mainboard, MOG companies must fulfill the proposed stringent listing requirements including the following key conditions:
- Have market capitalization of not less than S$300 million based on the issue price and post-invitation issued share capital if they are non-producing;
- Have adequate working capital for at least 18 months after listing;
- Disclose its plans and milestones and relative capital expenditure in advancing to production stage. These plans must be substantiated by the opinion of an independent qualified expert; and
- Have reached at least “indicated resources” stage for minerals or “contingent resources” stage for oil and gas as certified by an independent qualified expert and in accordance with internationally recognised standards.
- In addition to periodic financial reporting, MOG companies will be required to provide quarterly reports on their projected use of funds, and provide updates on their exploration and extraction activities. This keeps investors informed on the progress of the projects, and maintains transparency and accountability in the marketplace.
The full consultation paper can be found here and any feedback can be sent to lm@sgx.com by 20 July 2012.
Personally, I feel that allowing the exploration companies to list on SGX is a bad idea. Companies at this stage are very high risk and many retail investors will not be in a position to evaluate these companies properly. Without proper knowledge, investing in these companies will be like playing the lottery.
SGX should come up with another platform, where such high risk companies can be listed. The difference for this platform is that access is only restricted to institutional and accredited investors. This will allow the companies to still tap capital from a pool of investors, and protect retail investors at the same time.