Investing.com -- Moody’s Ratings has upgraded Mongolian Mining Corporation’s (MMC) corporate family rating (CFR) and senior unsecured rating from B3 to B2. The ratings are for the senior notes issued by MMC and its subsidiary, Energy Resources LLC, and are guaranteed by other key subsidiaries. The outlook on the ratings has been revised to stable from positive.
The upgrade is attributed to a significant improvement in MMC’s liquidity and debt maturity profile, following the successful issuance of $350 million notes. This improvement also reflects the company’s strong financial management track record, demonstrated by proactive liquidity management well ahead of maturity, according to Daniel Zhou, a Moody’s Ratings Assistant Vice President and Analyst.
Moody’s expects MMC to maintain stable operations, low leverage, and good liquidity despite fluctuations in coking coal prices over the next 12-18 months.
The company’s B2 CFR is supported by its integrated coking coal operations with long reserve lives, competitive cost position, stable operations, and prudent financial management characterized by low leverage and good liquidity. However, MMC’s rating is limited by its small scale with high concentration, emerging market risks, and exposure to carbon transition risks.
MMC’s liquidity and debt maturity profile saw a significant boost after successfully issuing $350 million notes with a five-year term in March 2025. The proceeds are used to repay its $220 million bond due in September 2026 and for general corporate purposes.
MMC’s liquidity was further strengthened by the new bond. The company’s cash balance of $141 million as of the end of 2024, projected operating cash flow of over $400 million over the next 18 months, and net proceeds from the issuance will provide ample buffer to cover its projected capital spending of $270 million, and debt maturities at project level over the same period.
MMC is expected to maintain steady production and sales volume due to continued downstream demand from Chinese steel producers. Despite declining coking coal prices impacting MMC’s earnings and cash flow, the company’s long-term contracts with customers help mitigate the pricing volatility.
The Bayan Khundii gold mine is expected to commence production in the second half of 2025, providing a moderate benefit to MMC’s profit generation and business diversification.
MMC is expected to maintain a conservative financial management strategy with modest reliance on external debt raising, supported by its steady cash flow and controlled capital spending. As such, MMC’s adjusted debt/EBITDA is projected to remain low at around 1.0x for the next 12-18 months.
The company’s rating also takes into account environmental and social risks stemming from its coal mining operations. MMC’s governance risk assessment reflects its financial management that led to historically high leverage. However, the company now demonstrates prudent financial management characterized by low financial leverage and proactive liquidity management. As a publicly traded company, MMC also provides regular and timely financial disclosures.
MMC’s B2 senior unsecured rating of the senior notes is not subject to structural subordination risks, as the notes are guaranteed on a senior unsecured basis by MMC and its other key subsidiaries.
The stable rating outlook reflects Moody’s expectation that MMC will maintain stable coking coal production, low leverage, good liquidity, and adherence to a prudent financial policy over the next 12-18 months.
An upgrade is unlikely in the near to medium term, due to the company’s small scale and high concentration of assets and operations in a few mines in Mongolia. Conversely, a downgrade could occur if MMC’s operating environment deteriorates, its liquidity weakens, its leverage significantly increases due to reduction in mining production or sizable debt-funded expansion, or if it fails to adhere to a conservative financial strategy.
MMC’s adjusted debt/EBITDA rising above 3.0x over a prolonged period could indicate a lower rating level. As all of MMC’s mining operations are in Mongolia, any downgrade of the rating of the Government of Mongolia (B2 stable) could also pressure MMC’s rating.
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