This paper makes a comparative study on the mining industry rating methods of Moody’s, S & P and Fitch from three aspects: industry definition, industry characteristics and rating element selection.
In terms of industry definition, the scope of enterprises included in each definition of the three major international rating agencies is basically the same, that is, the global enterprises mainly engaged in the mining of ore, coal or other minerals and the subsequent smelting and refining of minerals and ores.
In terms of industry characteristics, the generalization and refinement of the three major international rating agencies are basically the same. We briefly summarize the industry characteristics into strong periodicity, capital intensive and high income volatility. In terms of periodicity, the three major international rating agencies believe that the mining industry has strong periodicity and high industry risk. At the same time, due to the characteristics of its production Commodities, the price and income fluctuations of mining products are more obvious than other industries. In addition, the mining industry also has the typical characteristics of capital intensive industries. Enterprises need to continuously make relevant capital investment in the normal operation process. The early investment is large, the sunk cost is high, and the capital recovery cycle is long.
In terms of rating elements, we compared the selection of rating elements of the mining industry by the three major rating agencies. In the selection of rating elements, although there are differences in the selection of specific indicators among the three international institutions, the main logic is generally similar, and there are many similarities or similarities in the selection of specific indicators, which are consistent with the characteristics of the industry. In terms of business conditions, the three companies have started to evaluate the stability of enterprise income and profit, taking into account factors such as diversity, competitive position, environmental supervision, political risk and so on; In terms of scale, the three stressed the importance of reserves for mining enterprises to ensure their long-term operation in the future; In terms of profitability and efficiency, leverage and coverage, in addition to the differences in specific indicators, the three companies conduct correlation analysis in combination with historical data and future forecast in the rating process, and adopt multi-year mean value in the calculation of indicators; In addition, the three also adopt multi factor comprehensive consideration in financial policies, so as to evaluate the credit and risk ability of enterprises more three-dimensional.
This paper aims to summarize and think about the rating ideas reflected in the selection of rating elements through the comparative analysis of the mining industry rating methods of the three international credit rating agencies, in order to provide reference for the credit analysis of mining enterprises.
