Hong Kong, June 10, 2020 -- Moody's Investors Service has today placed on review for downgrade
Zijin Mining Group Company Limited's (Zijin) Baa3 issuer rating
and the Baa3 senior unsecured rating on the bonds issued by Zijin International
Capital Company Limited and guaranteed by Zijin.
The outlook has been changed to ratings under view from stable.
RATINGS RATIONALE / FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE
OF THE RATINGS
"The review for downgrade reflects Moody's concerns over Zijin's
acquisitive strategy and the expected weakening in its financial metrics
over the next 12-18 months following the company's announcement
on 8 June that it will acquire Tibet Julong Copper Co., Ltd.
for RMB 3.9 billion," says Kaven Tsang, a Moody's Senior
Vice President and the International Lead Analyst for Zijin.
Zijin has been acquisitive since 2018 when its credit metrics were already
weakly positioned at its current rating level. This latest acquisition
follows the company's RMB7 billion investment in Continental Gold
Inc. in March 2020.
Moody's expects both acquisitions and the related additional capital
expenditure will be partially funded by debt. Moody's also
expects limited earnings contribution from these newly acquired assets
over the next 12-18 months.
As a result and absent any deleveraging initiatives, Zijin's
debt/EBITDA will likely rise to 4.5x-5.0x in 2020
and remain above 4.0x in 2021. This level of leverage is
weak for its Baa3 rating.
In addition, Zijin is facing growing project execution risk and
geopolitical risk as it expands through acquisitions both domestically
and overseas, as shown in its failure to extend the Special Mining
Lease of the Porgera Gold Mine in April 2020.
Moody's review will evaluate Zijin's risk appetite and financial
policy in pursuing its acquisition strategy, the risk profile of
its newly acquired mining projects, and its ability to lower its
projected high leverage.
Zijin's ratings also consider the following environmental, social
and governance (ESG) factors.
The mining industry has high exposure to environmental risks, and
the sector is exposed to tightening regulations. However,
Zijin has a good track record of environmental compliance in its mining
operations, and has procedures in place to comply with regulations
and monitor pollutants released into the air, water, and soil
during production.
While Zijin is exposed to social risks associated with the mining industry,
including health and safety and responsible production, the company
strives for "zero work fatalities, zero occupational diseases
and zero environmental accidents". Zijin also carries out
poverty alleviation projects in areas near the operations of its subsidiaries.
In terms of governance, as a dual-listed entity on the Shanghai
Stock Exchange and the Stock Exchange of Hong Kong, Zijin has adequate
transparency regarding its financial policy and investments.
The principal methodology used in these ratings was Mining published in
September 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1089739.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Zijin Mining Group Company Limited is one of the largest and most diversified
metals and mining companies in China. It is primarily engaged in
the exploration and mining of gold, copper, zinc and other
metal minerals, supplemented by refining, processing and sales
of related products. The company also has other mining-related
businesses such as research and development, construction,
trade and finance.
Zijin generated revenue of RMB136 billion in 2019 and reported total assets
of RMB123.8 billion as of year-end 2019.
The local market analyst for this rating is Jin Wu, +86 (212)
057-4021.
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Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
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The first name below is the lead rating analyst for this Credit Rating
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this Credit Rating.
Kaven Tsang
Senior Vice President
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
Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
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JOURNALISTS: 852 3758 1350
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