Fitch Ratings has affirmed Mongolian coal producer Mongolian Mining Corporation’s (MMC) Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘B’. The Outlook is Stable. Fitch also assigned a ‘B’ final rating to the US dollar senior exchange notes due September 2026, with a Recovery Rating of ‘RR4’. The notes are jointly and severally issued by MMC and its wholly owned subsidiary, Energy Resources LLC.

The ratings were removed from Rating Watch Negative (RWN), on which they were placed on 28 August 2023, as MMC completed the exchange offer, improving its liquidity and debt maturity profile.

MMC’s IDR is constrained by its customer concentration, limited scale and volatility of mining regulations in Mongolia.

MMC’s refinancing risk is mitigated after completing the exchange offer, with a larger cash buffer enhancing liquidity and more spread-out debt maturities. After the exchange offer and new note issuance, MMC’s maturity profile improved significantly with USD84 million of notes maturing in 2024 and USD180 million in 2026, compared with USD350 million in 2024 previously. We expect MMC’s cash balance at end-2023 to be slightly under USD150 million, which is sufficient to cover USD84 million due in April 2024 and provides a sufficient cash buffer to maintain operations.

MMC’s heavy reliance on Chinese customers caused major business disruptions during Covid-19-related border closures between Mongolia and China. Border throughput decreased to 100-200 trucks a day, on average, with periods of complete closure, from around 700 trucks a day pre-Covid. Sales volume dropped to 1.6 million tonnes (mt) in 2021 from an average of 5mt historically.