S&P puts Zijin Mining on watch

S&P said it placed the Zijin Mining Group Co. Ltd. and the rating for its dollar-denominated senior secured notes on CreditWatch with negative implications.

“We expect Zijin Mining Group Co. Ltd.’s (Zijin) leverage will be materially elevated from our base case assumption, should the acquisition of Continental Gold Inc. (Continental Gold) go through. We anticipate that Zijin’s debt-to-EBITDA ratio will increase to 3.4x-3.6x in 2020 and remain above 3x in 2021 if this acquisition is carried out,” said S&P in a press release.

The proposed transaction is an all-cash buyout of 100% of Continental Gold’s equity for C$5.50 per share. Total cost is around RMB 7.03 billion. Zijin plans to fund 70% of the purchase using cash on hand and syndicated loans. The remaining 30% equity will be bought by financial investors, the agency said.

S&P said it sees resolving the placement within the next 90 days.

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