Fitch Ratings has affirmed
The Outlook on the IDR is Stable.
The ratings on Zijin are supported by a well-diversified product portfolio of precious and base metals and diversified operations, an average cost position in the second quartile of the global cost curve and high-yielding assets with a long mine life. However, Zijin's rating headroom is limited due to its aggressive acquisition appetite and accompanying large capex, which, if not managed properly, can result in prolonged high leverage.
The Stable Outlook reflects Fitch's expectation that Zijin will continue generating strong operational cash flow, which will aid its capex and acquisitive appetite within Fitch's expectations.
Key Rating Drivers
Strong EBITDA on Higher Output: Fitch expects Zijin's EBITDA will remain strong at
Higher Leverage; Limited Rating Headroom: Fitch expects Zijin's net leverage to remain high at 2.5x-3.0x in 2024-2026 due to hefty capex and potential investments, thus limiting its rating headroom. Net leverage, measured by net debt to EBITDA, rose to 3.1x in 2023, from 2.7x in 2022, mainly driven by large capex, acquisitions and equity investment outflow, despite a strong profit.
Fitch expects Zijin to stick to its acquisitive strategy to fulfill its long-term goal of becoming a top miner globally by 2030. Zijin spent a hefty
Diversified Low-Cost Producer: Zijin has a diversified production portfolio across precious and base metals, as well as geographically. We expect its product diversification to further enhance with the ramp-up of its newly acquired lithium assets from 2025 and onwards. In addition, its copper and gold cost position is fairly low, ranking in the second quartile on the global cost curve. The company also has an average mine life of 20 years and above for major copper mines, and 10 years for gold mines.
Limited Country Risk: We do not consider the location of some of Zijin's assets in higher risk countries, such as the
Zijin's acquisitions during 2020-2023 have increased its asset base, along with its geographical diversification. The proportion of its overseas mined copper and gold stayed high at 56% and 64%, respectively, of Zijin's total mined output in 2023 (2022: 57% and 59%).
Derivation Summary
Zijin has smaller operational scale and lower profitability compared with one of the top-three global copper producers,
Zijin's ratings are higher than the Standalone Credit Profile of 'bb' of
Zijin is rated one notch lower than
Key Assumptions
Fitch's Key Assumptions Within the Rating Case for the Issuer
Mined copper average selling price of
Mined copper sales volume of 870,000t in 2024, 930,000t in 2025 and 1.04mt in 2026 (2023: 810,737t); mined gold sales volume of 73t in 2024, 78t in 2025 and 83t in 2026 (2023: 66.7t);
Capex of
Annual investment outflow of
Dividend payout ratio of 30% a year in 2024-2026.
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 above 3.0x for a sustained period.
Liquidity and Debt Structure
Adequate Liquidity: Zijin had
Issuer Profile
Zijin in 2023 was one of the world's top-ten copper and gold miners, and fourth-largest zinc miner, by consolidated output. Zijin has more than 30 operating assets covering copper, gold, zinc, lead, iron ore, silver and lithium in 16 countries across
Summary of Financial Adjustments
Time deposits and government bond reverse repurchases, totalling
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
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' 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. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/topics/esg/products#esg-relevance-scores.
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