Hong Kong, October 05, 2018 -- Moody's Investors Service has assigned a Baa3 senior unsecured debt
rating to the proposed USD senior notes to be issued by Zijin International
Capital Company Limited and guaranteed by Zijin Mining Group Company Limited
(Zijin, Baa3 stable).
The rating outlook is stable.
The bond rating reflects Moody's expectation that Zijin will complete
the note issuance upon satisfactory terms and conditions, including
proper registrations with the National Development and Reform Commission
and the State Administration of Foreign Exchange in China (A1 stable).
The guaranteed notes will rank pari passu with all other present and future
unsecured indebtedness of Zijin.
The proceeds from the senior notes will be used for Zijin's overseas
business development and repayment of offshore debt.
RATINGS RATIONALE
"Zijin's issuance of the senior notes is within the estimated new
fund raised for its existing operations and acquisitions in 2018,
and will help improve its liquidity and debt maturity profile,"
says Kaven Tsang, a Moody's Vice President and Senior Credit Officer,
and the International Lead Analyst for Zijin.
Moody's expects Zijin's EBITDA will reach about RMB14-RMB15 billion
over the next 12-18 months, driven mainly by the company's
plan to progressively ramp up its mined copper production to 360,000
tons in 2020 from 208,000 tons in 2017 while its gold and zinc production
from mining will only increase modestly.
Zijin's total debt could increase up to RMB 52 billion by end-2018
from RMB 39.7 billion at end-June 2018, even if assuming
it applies 100% debt financing for the proposed acquisitions of
two mining projects announced in early September 2018. While Zijin
has not disclosed its financing plan for the acquisitions, Moody's
expects Zijin will exercise prudence and fund the proposed acquisitions
with both equity and debt, which will help limit its debt increase.
Moody's expects Zijin's debt leverage - as measured by debt/EBITDA
- could rise but stay at around 3.5x post the acquisitions
and fall to low 3.0x driven by earning increase over the next 12-18
months. Such leverage remains consistent with its Baa3 rating.
Zijin's Baa3 issuer rating reflects the company's (1) large
scale and leading position as one of the major producers of gold,
copper and zinc in China; (2) diversified metal products and geographic
locations; (3) profitable mining operations with a competitive cost
advantage; (4) relationship with the Shanghang County Government
in Fujian province and good access to funding, and (5) credit metrics
consistent with its current ratings for the next two years.
On the other hand, Zijin's rating is constrained by its (1)
exposure to metal price volatility; (2) financial risk from growth
through debt-funded acquisitions; and (3) associated execution
and geopolitical risks.
The rating on the proposed notes has considered no significant subordination
risk arising from the claims at the operating companies because Moody's
expects the majority of claims will remain at the holding company,
which is the major borrower or guarantor for the group.
The stable outlook reflects Moody's expectation that Zijin will exercise
prudence in its acquisitions and financial management, and carefully
manage execution and geopolitical risks as it expands overseas.
The rating could be upgraded if Zijin (1) enhances its business scale
and market position; (2) shows prudence in capital spending and acquisitions;
and (3) further improves its credit metrics, such that adjusted
debt/EBITDA falls below 2.0x on a sustained basis.
The rating could be downgraded if (1) there is a material decline in revenue
or profit arising from operating, geopolitical or environmental
problems; (2) there is an aggressive expansion that puts stress on
the company's financial position; (3) the Shanghang County Government
loses its position as the largest shareholder of Zijin, which could
impair the company's operational benefits, the right to import
gold, and access to banking facilities; or (4) there is a deterioration
credit metrics, such that adjusted debt/EBITDA exceeds 3.5x-4.0x
with a low likelihood of deleveraging over the next 12-18 months.
The principal methodology used in this rating was Mining published in
September 2018. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Zijin Mining Group Company Limited is engaged in the exploration and mining
of gold, copper, zinc and other metal mineral resources,
as well as in the refining, processing and sales of related products.
The company also has other mining-related businesses, such
as research and development, construction, and trade and finance.
Zijin is listed on both the Hong Kong Stock Exchange and Shanghai Stock
Exchange. At the end of 2017, Zijin was 25.88%
owned and controlled by Minxi Xinghang State-owned Asset Investment
Company Limited, a local SOE in Shanghang County, Fujian Province.
Zijin reported total assets of RMB89.3 billion and total revenue
of RMB94.5 billion for 2017.
The local market analyst for this rating is Jin Wu, +86 21
2057 4021.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain regulatory
disclosures in relation to the provisional rating assigned, and
in relation to a definitive rating that may be assigned subsequent to
the final issuance of the debt, in each case where the transaction
structure and terms have not changed prior to the assignment of the definitive
rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Moody's considers a rated entity or its agent(s) to be participating
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Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
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for additional regulatory disclosures for each credit rating.
The first name below is the lead rating analyst for this Credit Rating
and the last name below is the person primarily responsible for approving
this Credit Rating.
Kaven Tsang
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Gary Lau
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Peter Choy
Senior Vice President
Corporate Finance Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
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