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Rating Action:

Moody's places four mining companies in China on review for downgrade

 The document has been translated in other languages

22 Jan 2016

Hong Kong, January 22, 2016 -- Moody's Investors Service has placed the ratings of four mining companies in China, and their rated subsidiaries, on review for downgrade. A complete set of companies and rating actions is listed below.

The actions reflect Moody's effort to recalibrate the ratings in the mining portfolio to align with the fundamental shift in the credit conditions of the global mining sector.

"Slowing growth in China, which consumes and produces at least half of base metals, and is a material player in the precious metals, iron ore and metallurgical and thermal coal markets is weakening demand for these commodities and driving prices to multi-year lows," says Dylan Yeo, a Moody's Analyst, adding "China's outsized influence on the commodities market, coupled with the need for significant recalibration of supply to bring the industry back into balance indicates that this is not a normal cyclical downturn, but a fundamental shift that will place an unprecedented level of stress on mining companies."

RATINGS RATIONALE

As part of an ongoing assessment of mining companies, Moody's sharply reduced its price sensitivity assumptions on December 8, 2015. Since then, credit conditions in the mining industry have weakened further, with prices continuing to decline. The likelihood has increased that prices for base metals, precious metals, iron ore and metallurgical and thermal coal will approach levels closer to Moody's stressed sensitivity scenario. In addition, the strong US dollar is a further factor contributing to weakening demand and driving prices lower since most metals are traded in dollars.

This broad ratings review will consider each mining company's asset base, cost structure, likely cash burn and liquidity, as well as management's strategy for coping with a prolonged downturn and the ability to execute on same. The review will assess each company's cash flow and credit metrics closer to our latest stressed price assumptions and the relative rating positioning.

Moody's believes that this downturn will mark an unprecedented shift for the mining industry. Whereas previous downturns have been cyclical, the effect of slowing growth in China indicates a fundamental change that will heighten credit risk for mining companies. This review reflects the belief that deteriorating industry fundamentals require a recalibration of the global mining portfolio rated by Moody's. Although all issuers in these sectors have been adversely affected by declining prices, severity varies substantially by issuer Accordingly, the range of possible outcomes upon conclusion of the review for given issuers varies from possible confirmation of ratings to multi-notch downgrades. Moody's expects to conclude a majority of the reviews by the end of the first quarter. While this review focuses on companies rated in the range from A1 to B3, Moody's is also reevaluating higher and lower rated companies in the context of industry conditions. The higher rated companies, on average, are somewhat more resilient to low commodity prices and many of the lower rated companies have recently been downgraded.

On Review for Possible Downgrade:

..Issuer: Baosteel Resources International Company Ltd.

.... Issuer Rating (Foreign Currency), Placed on Review for Possible Downgrade, currently Baa1

.... Issuer Rating (Local Currency), Placed on Review for Possible Downgrade, currently Baa1

..Issuer: Baosteel Financing 2015 Pty Ltd.

....Senior Unsecured Regular Bond/Debenture (Foreign Currency) Jan 28, 2020, Placed on Review for Possible Downgrade, currently Baa1

..Issuer: China Minmetals Corporation

.... Issuer Rating (Foreign Currency), Placed on Review for Possible Downgrade, currently A3

..Issuer: Minmetals Bounteous Finance (BVI) Limited

....Senior Unsecured Regular Bond/Debenture (Local Currency) Jul 30, 2025, Placed on Review for Possible Downgrade, currently A3

....Senior Unsecured Regular Bond/Debenture (Local Currency) Jul 30, 2020, Placed on Review for Possible Downgrade, currently A3

..Issuer: Yanzhou Coal Mining Co. Ltd.

.... Corporate Family Rating (Foreign Currency), Placed on Review for Possible Downgrade, currently Ba3

..Issuer: Yancoal International Trading Co., Limited

....Senior Unsecured Regular Bond/Debenture (Foreign Currency), Placed on Review for Possible Downgrade, currently Ba3

..Issuer: Yancoal Int'l Resources Development Co., Ltd

....Senior Unsecured Regular Bond/Debenture (Foreign Currency) May 16, 2022, Placed on Review for Possible Downgrade, currently Ba3

....Senior Unsecured Regular Bond/Debenture (Foreign Currency) May 16, 2017, Placed on Review for Possible Downgrade, currently Ba3

..Issuer: China National Gold Group Corporation

.... Issuer Rating (Foreign Currency), Placed on Review for Possible Downgrade, currently Baa3

.... Issuer Rating (Local Currency), Placed on Review for Possible Downgrade, currently Baa3

The principal methodology used in rating Baosteel Resources International Company Ltd. and Yanzhou Coal Mining Co. Ltd. was Global Mining Industry published in August 2014. The principal methodology used in rating China Minmetals Corporation and China National Gold Group Corporation was Global Mining Industry published in August 2014. Other methodologies used include the Government-Related Issuers methodology published in October 2014. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

The local market analyst for Baosteel Resources International Company Ltd. and Baosteel Financing 2015 Pty Ltd.'s ratings is Jiming Zou, VP-Senior Analyst, Corporate Finance Group, +86 (212) 057-4018.

The local market analyst for China Minmetals Corporation, Minmetals Bounteous Finance (BVI) Limited, and China National Gold Group Corporation's ratings is Pingping Xing, AVP-Analyst, Corporate Finance Group, +86 (106) 319-6561.

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 rating action on the support provider and in relation to each particular 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 rating action, and whose ratings may change as a result of this 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.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

The below contact information is provided for information purposes only. Please see the ratings tab of the issuer page at www.moodys.com, for each of the ratings covered, Moody's disclosures on the lead analyst and the Moody's legal entity that has issued the ratings.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com 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.

Dylan Yeo
Analyst
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
SUBSCRIBERS: (852) 3551-3077

Gary Lau
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (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
SUBSCRIBERS: (852) 3551-3077

Moody's places four mining companies in China on review for downgrade
No Related Data.
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