Chapter 23

Due Diligence Guidelines –

Mineral Companies

14. Transportation and Logistics

14.1 Standard

Regarding the preparation of a listing document, a sponsor should perform, without limitation … achieve a thorough understanding of the listing applicant, including its business, history, background, structure and systems. [Paragraph 17.6(d)(ii) of the Code of Conduct]

14.2 Guidance

14.2.1 For Mineral Companies, the “route to market” is a significant factor in the assessment of whether a particular project is viable. Sponsors should understand the transport and logistics infrastructure and arrangements required for a particular project. This extends to the transportation of the product for processing as well as the transportation to the end market.

14.2.2 In addition, sponsors should note that the Exchange would expect disclosure in the listing document of information such as whether the applicant has experienced any shortage of transportation capacity for its products during the track record period and up to the latest practicable date, whether the existing transportation infrastructure is sufficient for the applicant’s expansion and the associated risk, and the applicant’s plans to secure sufficient access to the infrastructure.22

14.3 Recommended Steps

14.3.1 The sponsor should discuss with the Mineral Company and the Competent Person the “routes to market” of the Mineral Company’s products and whether there are any relevant barriers (including export approvals and tariffs and access to infrastructure).

14.3.2 Access to (or ownership of) pipelines, rail, roads, ports, stockpiling facilities, transshipment facilities and other logistics should be reviewed, including a review of the terms of any long-term contracts with transportation/logistics providers, the legal rights afforded to project owners and the commercial environment for such operations.

14.3.3 Where transportation and logistics have been outsourced to a third party, the sponsor should conduct interviews with the third party provider if significant reliance is placed on that third party but where numerous alternative suppliers are used, interviews with those suppliers will not normally be needed.

14.3.4 Where transportation costs are an important component of the cost-per-unit, the sponsor may consider requesting the Mineral Company to commission a separate study from a transportation consultant to verify management’s estimates as to transportation costs.

14.3.5 The sponsor should understand the legal and practical requirements for the export of products, with assistance from lawyers in relevant jurisdictions if appropriate.

14.3.6 Where there are existing offtake contracts, the sponsor should review and understand the transportation/delivery obligations on the Mineral Company under such contracts and the arrangements in place for such transportation/delivery of product, including the extent of which the Mineral Company has secured transportation capacity and whether it is obliged to make use of this capacity.

14.3.7 The sponsor should also discuss with management any historical or on-going delays in transportation and understand the reasons for such delays. The sponsor should also discuss and understand the contingency plans if transportation becomes unavailable for extended periods of time.


22. Paragraph 3.20 (ii) 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.

Mineral Companies Transportation and Logistics

Route to Market for Mineral Companies

Paragraph 17.6(d)(ii) of the Code of Conduct

Pipelines Rail Roads Ports Stockpiling Facilities Transshipment Facilities Logistics Due Diligence

Hong Kong Securities and Futures Commission SFC

Shortage of Transportation Disclosure in Listing Document

Listing Applicants Transport and Logistics Infrastructure

Applicants Expansion and Associated Risk

Mineral Company routes to market

outsourced transportation and logistics Mineral Company

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