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Rating Action:

Moody's upgrades ALROSA's rating to Ba1; confirms ratings of 3 other mining companies

Global Credit Research - 27 Apr 2016

London, 27 April 2016 -- Moody's Investors Service has upgraded Russian diamond mining company ALROSA PJSC's corporate family rating (CFR) to Ba1 from Ba2 and probability of default rating (PDR) to Ba1-PD from Ba2-PD. The outlook on these ratings is negative.

At the same time, Moody's confirmed the Ba2 CFR and Ba2-PD PDR of JSC Holding Company METALLOINVEST (Metalloinvest) and the Ba3 CFRs and Ba3-PD PDRs of SUEK PLC and Nord Gold N.V., all of which are mining companies. The outlook is stable on Metalloinvest's and SUEK's ratings, and positive on Nord Gold's ratings.

Today's actions conclude the rating reviews initiated by Moody's on 22 January 2016. A full list of affected ratings/entities is included at the end of this press release.

RATINGS RATIONALE

Today's confirmation of the ratings of Metalloinvest, Nord Gold and SUEK reflects the companies' strong business profiles; low-cost position, which supports their competitiveness in international markets; high profitability; solid/adequate liquidity and Moody's expectation that their financial metrics will remain commensurate with their ratings on a sustainable basis despite the volatility in prices for commodities.

The upgrade of ALROSA's ratings primarily reflects the company's strengthened business and financial profile; Moody's expectation that its financial metrics will remain robust, despite demand and price volatility for diamonds; the company's high profitability, positive free cash flow generation and strong liquidity.

-- ALROSA

As ALROSA's principal shareholder is the government of the Russian Federation, Moody's applies its government-related issuer (GRI) rating methodology. The Ba1 CFR reflects a combination of (1) a baseline credit assessment (BCA) of ba1; (2) the Russian Federation's Ba1 local currency rating; (3) moderate default dependence between ALROSA and the government; and (4) the moderate probability of government support in the event of financial distress.

ALROSA's BCA has been raised to ba1 from ba3, reflecting the fact that its financial metrics have remained strong versus global peers and Moody's expectation that metrics will remain robust, owing to the company's status as a major producer and exporter of diamonds and weak rouble, the company's 29% share in the global diamond output, its low-cost reserve base, technical mining expertise, solid liquidity and conservative financial policy.

At the same time, ALROSA's BCA factors in the volatile demand and prices for diamonds and the company's exposure to the Russian macroeconomic environment, despite the high exports, given that its operating facilities are located in Russia.

RATIONALE FOR NEGATIVE OUTLOOK FOR ALROSA

The negative outlook is in line with the negative outlook for the sovereign rating and reflects the fact that a potential downgrade of Russia's sovereign rating may result in the lowering of Russia's foreign-currency bond country ceiling. This would result in a downgrade of the company's ratings.

WHAT COULD CHANGE THE RATINGS UP/DOWN

There is no immediate positive pressure on the ratings given the negative outlook. In a longer term, Moody's could upgrade ALROSA's ratings if it were to upgrade Russia's sovereign rating, as well as the diamond market environment were to stabilise, and the company were to maintain its robust financial metrics, continue to generate positive free cash flow and retain solid liquidity.

ALROSA's ratings would be downgraded if Russia's sovereign rating were downgraded and/or the foreign-currency bond country ceiling were lowered. Negative pressure could also be exerted on the ratings if the company's operating and financial performance, market position or liquidity were to deteriorate materially.

-- METALLOINVEST

Metalloinvest's Ba2 rating factors in the company's competitive cost profile, further supported by a weak rouble, high profitability, positive free cash flow generation, solid liquidity, long-life reserve base, integrated steel business model with steel segment profitability negatively correlating with iron ore prices, large share of niche and value-added products (pellets and hot briquetted iron), the prices for which are less volatile than iron ore, diversified customer base and flexibility with respect to the geography of shipments (export markets versus Russia).

At the same time, Metalloinvest's rating takes into account its high exposure to iron ore products, the prices for which will likely remain depressed in the medium term; the expected deterioration of its financial metrics because of weak commodity prices; the limited geographic diversification of its assets; and concentrated ownership-related risks, including related-party transactions and shareholder-friendly financial policies with high dividend payouts and shareholder loans. The rating also reflects the company's exposure to the Russian macroeconomic environment, given that its assets are located in Russia where it generates 40%-45% of its revenues.

RATIONALE FOR STABLE OUTLOOK FOR METALLOINVEST

The stable rating outlook reflects Moody's expectation that Metalloinvest will (1) maintain its Moody's-adjusted debt/EBITDA below 3.0x on a sustainable basis, although this may be exceeded in 2016 as a result of the volatile iron ore prices; (2) continue to generate positive free cash flow; and (3) retain solid liquidity.

WHAT COULD CHANGE THE RATINGS UP/DOWN

Moody's could upgrade Metalloinvest's ratings if the macroeconomic situation in Russia were to stabilise, and the company were to reduce its Moody's-adjusted debt/EBITDA below 2.0x on a sustainable basis, continue to generate positive free cash flow, maintain solid liquidity, improve corporate governance and curtail related party transactions.

Moody's could downgrade Metalloinvest's ratings if the company's Moody's-adjusted debt/EBITDA were to exceed 3.0x on a sustained basis, free cash flow turns negative as a result of low iron ore prices, generous dividend payouts, share buybacks or related-party transactions, or its liquidity deteriorates materially.

-- NORD GOLD

Nord Gold's Ba3 rating factors in Nord Gold's competitive cost position and reserve base dominated by open-pit mines, as well as its operational and geographical diversification, with nine active mines and two mines under construction. Nord Gold has robust financial metrics, with Moody's expectation that its adjusted debt/EBITDA will remain below 2.0x on a sustainable basis, conservative financial policy and solid liquidity. The company has built a track record of organic growth and demonstrates strong corporate governance.

At the same time, the rating reflects the company's fairly small size, with gold production of 950 thousand ounces (koz) in 2015. The company has substantial capex programme and faces execution risks, which are common for mining companies. Nord Gold is exposed to the volatile price of gold and the heightened business, political and event risks in the countries in which the company operates, primarily Burkina Faso and Guinea. The company's product diversification is low as it produces no by-products.

RATIONALE FOR POSITIVE OUTLOOK FOR NORD GOLD

The positive outlook reflects Moody's expectation that Nord Gold will maintain its robust financial metrics despite the volatility in gold prices, with Moody's-adjusted debt/EBITDA not exceeding 2.0x on a sustainable basis, and continue to generate significant operating cash flows to support the company's capex requirements, while pursuing a conservative financial policy and retaining solid liquidity. The outlook also reflects the rating agency's expectation that Nord Gold will be able to successfully start operations at its Bouly deposit in Burkina Faso in 2016 without significant cost overruns or delays.

WHAT COULD CHANGE THE RATINGS UP/DOWN

Moody's could upgrade Nord Gold's ratings if the company were to maintain its robust financial metrics, with Moody's-adjusted debt/EBITDA not exceeding 2.0x on a sustainable basis; increase its scale of operations by beginning production at the Bouly deposit; pursue a conservative financial policy and maintain solid liquidity.

Moody's could downgrade Nord Gold's ratings if the company's Moody's-adjusted debt/EBITDA were to exceed 3.5x on a sustained basis, or its operating performance and liquidity were to deteriorate materially.

-- SUEK

SUEK's Ba3 rating takes into account SUEK's status as a global thermal coal producer, its competitive operating costs on the back of weak rouble and cost efficiency measures, its vast coal reserves and fairly simple geology, well-diversified domestic and international customer base and Moody's expectation that its financial metrics will be resilient to the current global coal market downturn.

The rating also reflects the resilience of the company's domestic sales owing to the proximity of its mines to its power generation customers, and its control over a considerable portion of its transportation infrastructure (including ports in Vanino, Murmansk and Maliy), such that it is positioned to efficiently service Pacific and Atlantic export markets.

At the same time, the rating factors in weak thermal coal prices in seaborne markets, the company's limited product diversification as a result of its exposure to a single commodity, thermal coal, its sizeable railway expenses and risks related to the company's concentrated ownership structure, although mitigated by corporate governance improvements.

RATIONALE FOR STABLE OUTLOOK FOR SUEK

The stable rating outlook reflects Moody's expectation that SUEK will (1) maintain its Moody's-adjusted debt/EBITDA below 3.5x on a sustainable basis; (2) continue to generate positive free cash flow; and (3) retain adequate liquidity.

WHAT COULD CHANGE THE RATINGS UP/DOWN

Moody's could upgrade SUEK's ratings if the macroeconomic environment in Russia were to stabilise, thermal coal prices in export markets were to recover sustainably, the company were to reduce its Moody's-adjusted debt/EBITDA below 2.5x on a sustainable basis and maintain adequate liquidity.

Moody's could downgrade SUEK's ratings if the company's Moody's-adjusted debt/EBITDA were to exceed 3.5x on a sustained basis, the company were unable to generate positive free cash flow, or its liquidity and liquidity management were to deteriorate materially.

LIST OF AFFECTED RATINGS

Upgrades:

..Issuer: ALROSA PJSC

.... Corporate Family Rating, Upgraded to Ba1 from Ba2

.... Probability of Default Rating, Upgraded to Ba1-PD from Ba2-PD

..Issuer: Alrosa Finance S.A.

....BACKED Senior Unsecured Regular Bond/Debenture, Upgraded to Ba1 from Ba2

Confirmations:

..Issuer: JSC Holding Company METALLOINVEST

.... Corporate Family Rating, Confirmed at Ba2

.... Probability of Default Rating, Confirmed at Ba2-PD

..Issuer: Metalloinvest Finance Limited

....BACKED Senior Unsecured Regular Bond/Debenture, Confirmed at Ba2

..Issuer: Nord Gold N.V.

.... Corporate Family Rating, Confirmed at Ba3

.... Probability of Default Rating, Confirmed at Ba3-PD

....Senior Unsecured Regular Bond/Debenture, Confirmed at Ba3

..Issuer: SUEK PLC

.... Corporate Family Rating, Confirmed at Ba3

.... Probability of Default Rating, Confirmed at Ba3-PD

..Issuer: SUEK Finance

....Senior Unsecured Regular Bond/Debenture, Confirmed at Ba3

Outlook Actions:

..Issuer: ALROSA PJSC

....Outlook, Changed To Negative From Rating Under Review

..Issuer: Alrosa Finance S.A.

....Outlook, Changed To Negative From Rating Under Review

..Issuer: JSC Holding Company METALLOINVEST

....Outlook, Changed To Stable From Rating Under Review

..Issuer: Metalloinvest Finance Limited

....Outlook, Changed To Stable From Rating Under Review

..Issuer: Nord Gold N.V.

....Outlook, Changed To Positive From Rating Under Review

..Issuer: SUEK PLC

....Outlook, Changed To Stable From Rating Under Review

..Issuer: SUEK Finance

....Outlook, Changed To Stable From Rating Under Review

PRINCIPAL METHODOLOGY

The principal methodology used in rating ALROSA PJSC and Alrosa Finance S.A. was Global Mining Industry published in August 2014. Other methodologies used include the Government-Related Issuers methodology published in October 2014.

The principal methodology used in rating JSC Holding Company METALLOINVEST, Metalloinvest Finance Limited, Nord Gold N.V., SUEK PLC and SUEK Finance was Global Mining Industry published in August 2014.

Please see the Ratings Methodologies page on www.moodys.com for a copy of these methodologies.

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.

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 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.

Artem Frolov
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service Limited, Russian Branch
7th floor, Four Winds Plaza
21 1st Tverskaya-Yamskaya St.
Moscow 125047
Russia
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Victoria Maisuradze
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's upgrades ALROSA's rating to Ba1; confirms ratings of 3 other mining companies
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