Shandong Gold Group Co. Ltd.

The stable outlook reflects our view that Shandong Gold Group Co. Ltd. will maintain its current leading market position in China and take measures to reduce its high financial leverage in the next 24 months. On top of an IPO in Hong Kong by a key operating subsidiary, these measures also include: the company gradually disposing of non-core businesses such as financial services and real estate; attracting strategic investors at the group level; and continuing to carry out debt-to-equity swaps. We also expect Shandong Gold to further expand mined gold output in the coming 12-24 months to generate steady operating cash flow. We could lower the rating on Shandong Gold if its financial metrics deteriorate due to lower-than-expected gold prices

...Large-sized gold miner with a portfolio of long¡life mines and a diversified presence in China. Shandong Gold is the largest mined gold producer in China with output of 44 metric tons in 2017. The company had total gold reserves of 1,725 metric tons as of the end of 2017. We expect Shandong Gold will remain one of the largest gold producers in China and medium-to-large-sized gold producer globally in the next few years. The company owns four of the top 10 largest gold mines in China, providing production visibility. We believe the company has good volume growth potential given its large reserves and diversified gold mines across China. Relatively low cash costs positioned at lower end of second quartile in the global cost curve. We expect Shandong Gold to maintain its relatively low cash costs in the next few years, owing to its higher-than-average ore grade than domestic peers'. The company's domestic mines have average ore grade of 2.34 grams (g)/metric ton. The company has advanced technology...

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