OREANDA-NEWS. November 17, 2015. Fitch Ratings has affirmed Chinese iron ore miner Hengshi Mining Investments Limited's (Hengshi Mining) Long-Term Foreign Currency Issuer Default Rating (IDR) at 'B+' with Stable Outlook, and senior unsecured rating at 'B+', with Recovery Rating of 'RR4'.

Simultaneously, Fitch has chosen to withdraw these ratings for commercial reasons.

Hengshi Mining's rating is constrained by its small size and short operational track record, and underpinned by its low-cost position. Recent plunges in iron ore price have put pressure on Hengshi Mining's margins, while the poor liquidity of downstream steel makers and a build-up in the company's inventory have increased working capital requirements.

KEY RATING DRIVERS

Small Scale: The company generated revenue of CNY1.1bn (USD174m) and operating EBITDAR of CNY494m in 2014. It is small compared with global peers, and in an industry where capex is usually high, its limited size reduces funding flexibility.

Low-Cost Position: Hengshi Mining's rating is primarily supported by its low-cost position. The company sits in the first quartile of China's iron ore concentrate cost curve. Compared with international rivals, the company's costs, adjusted for total freight costs, are also highly competitive for its customers in Hebei province, China's largest steel producing province.

KEY ASSUMPTIONS

Fitch's key assumptions within our rating case for the issuer include:
- Capex of CNY250m in 2015 and CNY50m in 2016
- Price assumptions for iron ore: USD50/tonne in 2015-2016, USD55/tonne in 2017 and USD60/tonne over the long term;

RATING SENSITIVITIES

No longer relevant as the ratings have been withdrawn.