[ET Net News Agency, 26 November 2019] S&P Global Ratings today said that Zijin Mining
Group Co. Ltd.'s (02899)(BBB-/Stable/--) successful equity issuance will lead to a one-off
decline in the China-based miner's gearing.
However, the credit rating agency believes further deleveraging will happen at a slower
pace. S&P expects Zijin's higher copper and zinc production volume as well as its higher
gold price assumptions--offset by narrower copper and zinc margins, high capital
expenditure, and working capital needs--to lead to largely stable leverage trends.
The agency thinks Zijin will remain active in seeking new acquisition targets. It will
closely monitor the company's investment activities and their potential impact on Zijin's
financial leverage. The rating buffer will be tight if acquisitions are debt-funded, given
that the rating downside trigger is a debt-to-EBITDA ratio of 3.0x for an extended period.
S&P expects the company's total adjusted debt to decline to RMB41.5 billion-RMB42
billion in 2019 after the equity issuance, from RMB45.1 billion in 2018.
Zijin's debt-to-EBITDA ratio will improve to 3.1x-3.2x in 2019, from 3.6x in 2018.
S&P anticipates its 2020 leverage to fall slightly below 3.0x, based on the assumption
that the company will maintain its unit cost of production at its 2019 level and that it
does not make further acquisitions.
Earlier this month, Zijin raised RMB8 billion from an issue of new A-shares on the
Shanghai Stock Exchange. On 25 November 2019, the company announced that it directed the
issuance proceeds to replace its own financing used in the acquisition of Nevsun Resources
Ltd. back in December 2018. S&P has already factored in the equity issuance in its
base-case assumptions. (KL)