Fitch Ratings has affirmed Chinese mining company
The Outlook is Stable.
Zijin's ratings continue to be supported by its well-diversified portfolio of precious and base metals, an average cost position in the second quartile of the global cost curve and high-yielding assets with a long mine life. However, the ratings are constrained by Zijin's aggressive acquisition strategy, which increases volatility in its leverage profile.
The Stable Outlook reflects Fitch's expectation that Zijin will continue generating strong operational cash flow, which will aid its ongoing capex and acquisitive appetite.
Key Rating Drivers
Strong Profit, Higher Volume: Zijin's 2022 EBITDA rose to a record of
Mined gold rose almost 9t to 56t on the ramp-up from
Acquisitions, Capex Drive Leverage: Net leverage, measured by net debt to EBITDA, rose to 2.8x in 2022 from 2.1x in 2021, despite strong profitability, on acquisitions that were larger than we expected, equity investments and capex. We estimate cash flow will remain strong with funds flow from operations of
We expect capex to stay high at
Greater Geographical Diversification: Zijin's recent acquisitions have improved the geographical diversification of the company's assets. Its overseas mines contributed over half of its incremental volume in mined copper and gold in 2022. The proportion of its overseas mined copper and gold increased to 57% and 59%, respectively, in 2022, from 53% and 58% in 2021.
Derivation Summary
Zijin is rated one notch lower than
Zijin has a smaller scale, lower margins and higher leverage than major copper miner
Key Assumptions
Fitch's Key Assumptions Within Our Rating Case for the Issuer
Mined copper average selling price of
Mined copper sales volume of 760,000, 825,000 and 890,000 t in 2023, 2024 and 2025, respectively (2022: 738,690t); mined gold sales volume of 68, 76 and 86 t in 2023, 2024 and 2025, respectively, (2022: 60.8t)
Capex of
Annual investment outflow of
Dividend payout ratio of 30% per year in 2023-2025
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Transition away from the highly acquisitive growth strategy
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Net debt/EBITDA sustained above 3.0x
Significant increase in exposure to markets with high geopolitical and operating environment risks
Best/Worst Case Rating Scenario
International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
Liquidity and Debt Structure
Adequate Liquidity: Zijin had
Issuer Profile
Zijin was the world's sixth-largest copper miner, ninth-largest gold miner and fourth-largest zinc miner in 2022 by output. Overseas mines contributed 57% of its copper, 59% of gold and 48% of zinc and lead production in 2022.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg
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