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New listing rules for mineral, oil and gas firms seen attracting more of them to S'pore[SINGAPORE] New mainboard listing rules for mineral, oil and gas (MOG) companies are expected to add impetus to their already-growing cluster on the Singapore Exchange (SGX).迷你倉Since it first introduced the new Catalist MOG rules in January 2011 and advertised its intention to court listings in the sector, the exchange has seen seven additions - through both initial public offerings and reverse takeovers - to bring the number of MOG firms on the exchange to 17.More could come if reverse takeover deals that have been announced to turn struggling listed firms into mining plays bear fruit.Bereavement care service provider Asia-Pacific Strategic Investments became the seventh such firm this year to do so when it announced a reverse takeover deal on Thursday to buy a firm holding mining exploration rights in Armenia.Industry observers told The Business Times that they expect more MOG listings to take place here."I think there is growing investor awareness on such listings, and I think more will come," said Marcus Chow, a partner at ATMD Bird & Bird.SGX last Thursday announced special MOG rules that will allow firms not yet in production - and hence unable to meet current listing rules for profit, operating revenue and positive cash flows - to list if they have a market capitalisation of not less than $300 million and disclose their plans, milestones and capital expenditure to progress to the production stage.But all MOG firms will have additional requirements to fulfil, such as achieving "indicated resources" for minerals or "contingent resources" for oil and gas.They also have to show that they have sufficient working capital for 18 months from listing.With these rules, the exchange has sought to balance between opening the market for early-stage MOG firms to raise funds and protecting the interests of shareholders given the technical nature of the industry.Since it introduced the MOG rules for the Catalist board, SGX has also ramped up its education efforts on the sector.It has held 34 seminars on topics such as introduction to gold mining and exploration, attended by about 3,600 participants; its YouTube channel is also dominated by video clips on the sector.This year, it started professional investor education courses for investment banking professionals and research analysts, and has held two such sessions so far.Industry observers say these have helped to lay the ground for other factors that are drawing early-stage MOG firms to Singapore, instead of traditional exchanges such as the Australian Securities Exchange and the Toronto儲存倉Stock Exchange.These range from possibly better valuations to Singapore's rise as a private wealth centre."If you were to list in Australia, you'll get lost among the hundreds out there," said DMG head of research Terence Wong. "Whereas if you come over here, you are one of the very few - I guess that lends a bit of prominence."Investors in traditional exchanges tend to have a legacy view of the sector and its risks, said AT Kearney head of corporate finance in Asia, Vikram Chakravarty.He added: "None of these exchanges are in Asia, and it could (also) be proximity that is driving them to SGX."Singapore's rise as a private wealth centre further enhances its attractive-ness for MOG firms, particularly since new capital has vacated the sector as supply of metals and minerals increases amid a slowing world economy, said EY global mining and metals leader Mike Elliot.With the sector being a relatively new one in Singapore, however, market players are treading carefully."You're dealing with something you can't see . . . whether a mine or an oilfield, you'd never know how much exactly there is down there," said an investment banker."(MOG deals) are quite complex to execute, to be honest," he added. "The market and regulators are all cautious, so we have to do our due diligence properly."The sector may also not be suitable for all investors.For one thing, smaller oil and gas producers or mining firms are well known to be high risk-high reward ventures.Investors in such firms would also have to adopt a longer investment horizon.Within the mining sector, a normal price cycle lasts between five and 10 years.Hence, an investor should be willing to wait seven to eight years to ride out the volatility and have a satisfactory rate of return, said Mr Elliot."It's very much a cyclical business and therefore you get a fair amount of volatility with that," he said. "This is primarily a long-term business where you invest in over multiple cycles."Shareholders will also have to contend with other stakeholders such as governments and workers, who have been seeking higher royalties and wage increases, he added.It doesn't help, too, that the mining industry now sits in a difficult part of the cycle."Risks in the mining industry have been accentuated and increased by the state of economic weakness in many emerging market economies," said AT Kearney manager Navin Nathani.As the MOG story unfolds, DMG's Mr Wong points out that nobody really knew how Reits would fare when they first came onto SGX.But "they took a life of their own" around 2004-2005, when the Reits started educating the market themselves."We have to start somewhere," he said.迷你倉價錢