Chapter 23

Due Diligence Guidelines –

Mineral Companies

9. Environmental Issues

9.1 Standard

9.1.1 Regarding the preparation of a listing document, a sponsor should perform, without limitation … assess the business performance, financial condition, development, prospects and any financial projection or profit forecast. [Paragraph 17.6(d)(vi) of the Code of Conduct]

9.1.2 If relevant and material to the Mineral Company’s business operations, [the listing document must include] information on … project risks arising from environmental … issues, … sufficiency of funding plans for remediation, rehabilitation and closure and, removal of facilities in a sustainable manner … [and] … environmental liabilities of its projects or properties. [Listing Rules 18.05(6)(a), (d) and (e)]

9.2 Guidance

9.2.1 Due to the nature of the operations of Mineral Companies, disclosure of environmental policies and potential environmental issues is crucial to understanding the manner in which the mining and/or exploration activities are carried out.

9.2.2 The sponsor should consider environmental issues in its discussions with management, with particular regard to how these may impact on the business continuity, reputation and financial performance of the Mineral Company.

9.2.3 In addition, sponsors should note that the Exchange would expect the information set out in Exchange Guidance Letter GL52-13 to be disclosed in the listing document:

(a) Summary and status of all environmental approvals, licences and permits.

(b) Details of provisions for rehabilitation costs and reserves.

(c) Environmental impact of the project and preventative/mitigating measures.

(d) Environmental management policies.

(e) Any local community concerns (e.g. potential pollution of local environment by the mining operation).

(f) Any operational and financial impact of new environmental regulations/programs and associated risks.19

9.2.4 The sponsor should also follow the guidance set out in Chapter 22 “Due Diligence Guidelines – Environmental”.

9.3 Recommended Steps

9.3.1 The sponsor should discuss with management the impact on the environment resulting from its exploration and/or extraction activities, environmental risks faced by the industry generally and the specific environmental issues faced by the Mineral Company in its operations.

9.3.2 The sponsor should understand which aspects of the production process are more likely to give rise to environmental issues (e.g. certain forms of tailings management, leaching, fracking, etc. may carry higher risks).

9.3.3 The sponsor should review the sections of the Competent Person’s Report on environmental risk. In most cases, the Competent Person’s Report is likely to provide adequate coverage of environmental risks, but where the Competent Person’s Report raises particular concern over environmental issues, a sponsor may be justified in requiring the Mineral Company to commission a separate environmental impact report.

9.3.4 The sponsor should review the Mineral Company’s environmental policies on air and greenhouse emissions, discharges into water and land, generation of hazardous and non-hazardous waste, etc and discuss with management the Mineral Company’s compliance with these policies. For a mining company, the sponsor should also understand the Mineral Company’s tailings management policy, the risks and its compliance with such policy.

9.3.5 The sponsor should gain an understanding (from discussions with lawyers in relevant jurisdictions, the Competent Person and/or management) of the regulatory framework relating to environmental issues. The sponsor should also review the findings of a legal due diligence exercise conducted by lawyers in any relevant jurisdiction in respect of the validity of licences and permits for waste management, emissions, water management and other relevant environmental aspects and compliance with environmental laws and regulations. (See also section 10 “Compliance with Laws”.)

9.3.6 The sponsor should request from the Mineral Company information on financial obligations in respect of environmental issues (in particular remedial obligations in respect of a project) and what arrangements are in place to provide for these obligations.

9.4 Standard

If relevant and material to the Mineral Company’s business operations, [the listing document must include] information on … any non-governmental organisation impact on sustainability of mineral and/or exploration projects. [Listing Rule 18.05(6)(b)]

9.5 Recommended Steps

9.5.1 The sponsor should carry out media searches for any reports produced by non-governmental organisations in respect of the Mineral Company’s project(s) and review any which have been published.

9.5.2 The sponsor should discuss the findings and allegations (if any) in such reports with management and ascertain management’s views on the findings, including where management’s views differ from the report.

9.5.3 The sponsor should form an impression (based upon its view of the report’s authors, interviews with management and other relevant sources) as to whether the report raises issues which should be further investigated. It will not always be necessary to investigate all allegations, but where reports have been issued, sponsors should engage in an initial level of enquiry with respect to any allegations which are not referred to in the listing document (including interviews with senior management). In some cases, sponsors may need to request third party investigations be undertaken.


19. Paragraph 3.21 of Exchange Guidance Letter GL52-13.


HKCFEF Limited and the contributing law firms, accountants and sponsors are not offering these due diligence guidelines as legal, financial or professional advice or services and they should not be relied upon as such. These due diligence guidelines should not be used as a sole basis for any decision, action or inaction and are not meant to serve as a substitute for the advice of qualified professionals. See here for the full terms and conditions.

Listing Document for Mineral Companies

Potential Environmental Issues

Disclosure of Environmental Policies and Potential Environmental Issues

Mineral Companies Environmental Issues

Mineral Company Business Operations

Exchange Guidance Letter GL52-13

Mineral Company Environmental Due Diligence EDD

Competent Persons Report on Environmental Risk

Non-Governmental Organisation Impact on Sustainability of Mineral and/or Exploration Projects

Mineral Company Environmental Policies
Environmental Issues Regulatory Framework

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