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ESG Industry Report Card: Metals And Mining

Analytic Approach

Environmental, social, and governance (ESG) risks and opportunities can affect an entity's capacity to meet its financial commitments in many ways. S&P Global Ratings incorporates these considerations into its ratings methodology and analytics, which enables analysts to factor in short-, medium-, and long-term impacts--both qualitative and quantitative--to multiple steps of their credit analysis. Strong ESG credentials do not necessarily indicate strong creditworthiness (see "The Role Of Environmental, Social, And Governance Credit Factors In Our Ratings Analysis," published Sept. 12, 2019).

Our ESG report cards qualitatively explore the relative exposures (average, below, above average) of sectors to environmental and social credit factors over the short, medium, and long term. For environmental exposures, chart 1 shows a more granular listing of key sectors and (in some cases) subsectors reflecting the qualitative views of our analytical rating teams. This sector comparison is not an input to our credit ratings and not a component of our credit rating methodologies; it is based on our current qualitative, forward-looking opinion of credit risks across sectors.

In addition to our sector views, this report card lists ESG insights for individual companies, including how and why ESG factors may have had a more positive or negative influence on an entity's credit quality compared to sector peers or the broader sector. These comparative views of environmental and social risks are qualitative and established by analysts during industry portfolio discussions, with the goal of providing more insight and transparency.

Environmental risks we considered include greenhouse gas (GHG) emissions, including carbon dioxide, pollution, and waste, water and land usage, and natural conditions (physical climate, including extreme and changing weather conditions, though these tend to be more geographic/entity-specific than a sector feature). Social risks include human capital management, safety management, community impacts, and consumer-related impacts from customer service and changing behavior to the extent influenced by environmental, health, human rights, and privacy (but excluding changes resulting from broader demographic, technological, or other disruptive industry trends). Our views on governance are directly embedded in our rating methodology as part of the management and governance assessment score.

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The list of entities covered in this report is not exhaustive. We may provide additional ESG insights in individual company analyses throughout the year as they change or develop, with companies expected to increasingly focus on ESG in their communication and strategy updates.

Metals And Mining

Environmental

Mining:   We view the mining sector as having well-above-average environmental credit risk. In all its forms, mining has the potential to release toxic elements to the air, water, or soil. Open-pit and underground mining involve the crushing and treatment of large amounts of ore, which may alter ecosystems if containment isn't adequate. Other forms of mining, such as heap leaching, use toxic fluids (i.e. cyanide, sulfuric acid) that are hazardous to handle and dispose of, and can be devastating if leaked into the environment. If an environmental accident or leakage causes a major business or financial disruption, it can take a toll on credit ratings. Even if considered low probability, the breakage of tailing dams has severe impacts, as witnessed at Imperial Metals' Mount Polley mine in Canada (2014) and in Brazil Samarco (2015) and Vale (2019).

Coal Mining:   Coal mining has the highest exposure to environmental risk factors in the sector, as evidenced by expected decline in coal demand in coming years and the fact that coal-fired power generation emits roughly twice as much GHG as gas. This is because coal-fired power plants are heavy air polluters, and governments are increasingly limiting them and incentivizing greener forms of energy. The United Nations' Paris Agreement, which the EU and other developed economies signed, aims at reducing GHG emissions by at least 40% by 2030 compared to 1990 levels. Similarly, the share of coal-fired generation has seen a steady decline in the U.S. to below 30% these days from 50% several years ago. Some developing markets (like India and China) are still building coal-fired power plants but we expect the rise in renewables to provide medium- to long-term headwinds to demand in these markets.

Steel:   The steel industry has well-above-average environmental risk as production of steel is extremely power- and CO2-intensive. Most steel is still produced with blast furnaces, releasing large amounts of carbon dioxide, nitrogen oxide, and particulate matters into the air. Despite the efforts to scrub the toxins before they are released, the process remains detrimental to the environment. That said, we expect electric arc furnaces (EAFs), which generally have a lighter environmental impact, to continue replacing blast furnaces. In China, government policies are focused on reducing air pollution, which so far has led to the closure of more than 150 million tons of steel capacity there. Complying with the different environmental regulations around the world remains a significant capital expenditure (capex). For example, in Europe the companies have CO2 quotas, making them slightly less competitive than their peers in Asia. Other capital expenditures targets include the need to reduce costs and improve technology. As a result, steel companies will continue to devote a sizable portion of their annual capital spending to improve their energy efficiency and lower their GHG emissions.

Aluminum:   The aluminum industry has comparatively less but still above-average environmental exposure, due to its extremely high electricity-intensity, mitigated by its advantageous lightweight and recyclability characteristics. Some in the industry see aluminum as the metal of the future, as reflected by its increased acceptance as a substitute to steel. Aluminum is lighter, stronger, and has better connectivity than steel, making it advantageous to auto manufacturers, who are in a race to build lighter and more fuel-efficient vehicles. Moreover, once produced, aluminum can be easily recycled with very low costs. However, the production of aluminum consumes about 10 times more energy than the production of steel, and about 70%-80% of the costs of aluminum production are energy related. About 50% of the electricity used to produce primary aluminum worldwide comes from environmentally friendly hydroelectric power and other renewable, nonpolluting sources. A further 3.5% comes from nuclear power, which is substantially free from CO2 emissions but has its own set of risks. Consequently, aluminum producers devote a sizable portion of their annual capital spending to improve their energy efficiency and gas emissions.

Social Exposure

The social risks for metals and mining entities are above average, mainly stemming from the sector's exposure to safety management and social cohesion. Safety management is a key risk given the heavy use of large and dangerous equipment as well as the fact that some mining sites are located in remote and sometimes hostile environments.

Safety incidents, like mine collapses or explosions, can involve significant operational disruption and, in cases of a high human death toll, can create significant community opposition or regulatory penalties. Hence, companies in the sector track and respond to incidents and have specific programs in place to educate work forces. Over the years we saw a clear trend of improvement in the lost time injury frequency rate (LTIFR). For example, the average rate for the steel industry in 2017 was 0.97x compared to 4.55x in 2006.

Social cohesion refers specifically to social license to operate, given the land use and disruptions that mining sites can create for the local communities in proximity. Governments around the globe are increasingly demanding social infrastructure and other forms of social responsibility from miners. Poor management of these factors typically leads to reputational issues, license suspension/termination, adverse litigation, staffing issues, and unrest.

Given that natural resources are also national resources, we note that governments can seek to renegotiate or change tax and royalty agreements, particularly at times of rising prices. Companies will tend to be pragmatic and reach an amicable solution. However, in some situations, the companies may stop some operations or investments, translating into tensions with the local communities.

Governance

Governance risks in metals and mining are largely driven by the entities' risk culture, degree of complexity, and location of businesses. Long-term business continuity is key, as it ensures alignment between stockholders and stakeholders. Poorer governance tends to be more recurrent among junior mining companies whose financial strength is generally weaker, and who do businesses in riskier jurisdictions and are more focused on short-term gains.

Some large, state-owned mining companies may be more focused on long-term sustainability than some privately owned companies, and usually there's a high barrier to entry to the industry in their home countries. Family owned businesses are also fairly common in mining, especially in emerging countries, and they usually pursue long-term growth strategies and have longstanding presences. Some large groups started out as mining companies and grew in size and diversification, strengthening governance standards as they became multisector entities.

ESG Risks In Metals & Mining

Europe, The Middle East, and Africa

Table 1

Company/Issuer Credit Rating/Comments Analyst
Anglo American PLC(BBB/Stable/A-2)  
We see exposure to ESG risks for Anglo American to be broadly in line with that of the metals and mining industry. First of all, we expect portfolio size and diversity to help mitigate the impact of potential changes in regulations in a particular country or most one-off environmental accidents. Also, the company has a good record with no material industrial accidents in the last five years. The minor pipeline leakage in early 2018 at its iron ore operation in Brazil, Minas-Rio, had a low environmental and financial impact and was deemed by the local community to have been swiftly handled and cleaned up. The completion of the divestment of its less-cost-competitive operations, such as a number of the older and deeper South African platinum operations, also reduced its environmental and safety exposure. Like peers operating in developing countries, Anglo American's exposure to the social aspect in South Africa (about 30% of the EBITDA, coming down from more than 50% in the past, and expected to continue to reduce thanks to the commissioning of new projects outside South Africa) will remain a sensitive issue. The increased underlying social tensions and inequalities translate into weaker business and investment conditions. Breaban, Ozana
AngloGold Ashanti Ltd.(BB+/Stable/--)  
We see ESG credit factors for AngloGold Ashanti to be broadly in line with those of industry peers, with the company focused on retaining its regulatory and social licenses to operate, within a complex operating environment notably in South Africa (roughly 13% of production based on the trailing 12-month period ending Sept. 30, 2019). However, we note that the company is currently in the process of divesting its remaining assets in South Africa. Environmental risks associated with tailings storage facilities, mine reclamation, and water and energy consumption appear manageable at this time. Safety is an important social factor that has seen significant improvement over the years. We view AngloGold's $63 million share of a $400 million settlement related to silicosis and tuberculosis class action litigation in South Africa as having little impact on the company's overall risk profile. Collocott, Omega M
ArcelorMittal(BBB-/Negative/A-3)  
We see ArcelorMittal's exposure to ESG risks as in line with that of the metal & mining industry. Similar to other steel producers, the company has a large carbon footprint. The company has blast furnace operations in the NAFTA (20% of output) and Europe (40% of output), which we see as relatively more exposed given higher emissions of blast furnaces compared to mini-mill producers as well as given the more stringent regulations, notably in the EU. On the other hand, the company is very well diversified and has cleaner and more efficient EAF operations (20% of total output) in emerging markets, notably Brazil, Mexico, Kazakhstan, and Ukraine, where regulations are less demanding. Recently, the company communicated an objective of reducing its European operations' CO2 emissions by 30% by 2030 from the level in 2018. A key risk for the company will be the industrial and environmental turnaround of the heavily polluting Ilva steel plant in Italy, acquired in 2018. Since November the company has been in negotiations with the Italian government after it scrapped the guarantee of legal immunity over environmental risks during clean-up. We believe safety is also an important social risk for ArcelorMittal, given the impact on communities of restructuring measures that involve lay-offs, which in the past have resulted in conflicts in France and Belgium, and is an equally contentious point for Ilva. In addition, The company reduced its LTIFR to 0.7x in 2018, ahead of the industry's average, from more than 2.0x 10 years ago, though there were 10 fatalities in 2018. Jelasko, CPA, Elad
Befesa S.A.(BB/Stable/--)  
We see environmental factors as more supportive of Befesa's credit profile compared to other metal companies because its core business is the collection, management and recvling of hazardous waste of the steel and aluminium industry. Regulations in key markets require or incentivize customers to recycle waste and we expect regulations globally to become more stringent. A recent example is China, where the company is growing significantly. We also note that Befesa has been making progress in recent years to reduce the energy consumption and hazardous waste disposal in its smelters that produce metals out of collected waste. Boulier, Christophe
BHP Group Ltd.(A/Stable/A-1)  
We see exposure to ESG risks for BHP to be broadly in line with those of the metals and mining industry. That said, BHP was impacted by a significant environmental accident in 2015, with the tailings dam failure at the Samarco iron-ore mine in Brazil (50/50 joint venture with Vale). Samarco operated as a stand-alone entity, with no guarantees from its parent companies. With no other activities in Brazil, and with the limited size of Samarco in its overall portfolio, the impact on BHP's credit quality was limited. BHP did effect a very significant reduction in its emissions with the 2015 spin-off of South32's many energy-intensive businesses. Jelasko, CPA, Elad
Constellium N.V.(B/Stable/--)  
Environmental factors are more supportive of Constellium's credit profile compared to the broader industry, as its aluminum downstream activities make it less exposed than upstream companies that produce primary aluminum. At the same time, the company's resilience benefits from aluminum's more supportive characteristics, such as light weighting that supports growth in auto body sheet sales, and recyclability that drives preference for aluminum beverage cans as opposed to plastic bottles. For some of its metal input the company uses scrap in lieu of primary aluminum, which is not only more cost efficient but also translates into lower CO2 emissions. That said, Constellium's operations are still energy-intensive and thus exposed to GHG emission costs and regulations, albeit to a lesser extent than the upstream part of the value chain. Blot, Florent
Eurasian Resources Group S.a.r.l. (ERG)(B-/Negative/B)  
We assess ERG's management and governance as weak, weighing more negatively on its risk profile than industry or Kazakh peers. We see ERG's continued heavy capex (remaining a comparatively high at $800 million-$900 million in the next two years) as an example of a relatively aggressive management strategy during the challenging pricing environment. In addition, we note the evident underperformance versus previously presented financial ambitions. Also, there is an ongoing fraud investigation in the U.K. that could have financial consequences, the timing and size of which are hard to estimate at this point. The company's presence in emerging markets, notably Kazakhstan and DRC, is indicative of such higher exposure. We view environmental and social risks as comparable with peers. While copper, aluminum and ferroalloys have a significant environmental footprint, ERG's operations are in countries where environmental oversight is less stringent. The company is the main employer in certain cities in Kazakhstan, which creates social mandates that could reduce operating flexibility. But the company's importance to local economies also creates incentives for the Kazakh government to support the company. Gorin, Sergei
Ferrexpo PLC(B/Negative/B)  
We assess Ferrexpo's management and governance as weak, in comparison with industry peers. This assessment followed some questions around the company's donations to a local charity in Ukraine that led to the resignation of its auditor. An independent investigation conducted by the board concluded in August 2019 that none of the company's directors, managers, or employees were involved in any possible misappropriation of funds. Separately, recent press reports mentioned allegations of fraud and embezzlement by the CEO and largest shareholder, in relation to the Ukrainian F&C Bank that he owned until 2015. In October 2019, the CEO stepped down and the CFO became the acting CEO, as the investigation is ongoing. So far, we have not seen any impact on Ferrexpo's operational or financial metrics. We view Ferrexpo's environmental factors to be broadly in line with those of the metals and mining industry and we view its social practices to be in line with industry standards, based on the group's public reporting. Breaban, Ozana
Glencore PLC(BBB+/Stable/A-2)  
ESG considerations are less supportive of Glencore's credit profile, relative to peers in the metals and mining industry. Relative higher social and governance risks stem in our view from operations in some countries that lag industry standards and where there are ongoing social tensions between local communities, governments, and foreign companies: in the case of Glencore these comprise notably the Democratic Republic of Congo (DRC) and, to a lesser extent, Zambia and South Africa. The company is dealing with several investigations, including the U.S. Department of Justice (DoJ). Should they lead to future hefty fines and penalties, they could weigh on financials and our governance assessment. In addition, we also see Glencore as comparatively more exposed to environmental factors, given its material share of coal activities (about 40% of the EBITDA in 2018), which can be subject to increased investor scrutiny in the coming years. The company is addressing its coal exposure by capping its future production and investing in copper, nickel and cobalt, which can facilitate emission reductions. Regarding safety, Glencore posted somewhat higher fatalities at mines than industry averages (13 fatalities in 2018, compared with three fatalities for Rio Tinto). Management attributes these in part to its standards and values not yet being fully assimilated at certain assets, notably in less developed countries. Jelasko, CPA, Elad
MMC Norilsk Nickel PJSC (Nornickel)(BBB-/Stable/--)  
We see Nornickel's credit exposure to ESG risks as in line with that of the broader metals and mining industry, as its high environmental footprint is mitigated by less stringent regulations in Russia. Nornickel has a relatively high volume of sulfur dioxide emissions (which is typical for nickel industry) but has completed a large-scale reconfiguration of its downstream assets, which allowed for shutdown of an outdated nickel smelter in Norilsk in 2016. This resulted in a 30%-35% reduction in SO2 emissions in residential areas already in 2017, by the company's estimates. The company targets reducing SO2 emissions by 90% by 2023 (relative to the 2015 level) by investing up to $3.5 billion into total environmental capex, which includes SO2 capturing, production of sulfuric acid, and its neutralization. A key supportive environmental factor relates to the fact that demand for Nornickel's key products (nickel, copper, palladium and platinum) is supported by the long term trends of more stringent car emissions regulations and electrification. Gorin, Sergei
Rio Tinto PLC(A/Stable/A-1)  
We see ESG risks for Rio Tinto as broadly in line with those of the metals and mining industry. Rio Tinto set a public objective to reduce its greenhouse gas emissions intensity by 24% between 2008 and 2020 and achieved a nearly 29% reduction at the end of 2018. Rio Tinto sold its coal mining assets, reducing environmental and social risks related to that industry. In addition, a large proportion of the company's aluminum smelters are hydro-powered, resulting in lower emissions and costs compared to other aluminum producers. Breaban, Ozana
Sibanye Gold Ltd.(B+/Negative/--)  
Social factors are less supportive of Sibanye's risk profile primarily because of recent safety-related incidents, as well as historical labor and local community unrest at its highly labor-intensive gold and platinum-group metals (PGM) mining operations in South Africa. Sibanye's South African operations contributed about 66% of group revenue and 40% of group EBITDA in 2018, which we see as a country with higher social risks including from wage negotiations, strikes, and regulations. In addition, Sibanye's gold production was materially reduced in 2018 following mining related fatalities in at least four separate incidents that were attributed to seismic events, and again in 2019, when a five month long strike at its gold operations heavily reduced production. However, recent South Africa Labor law changes (with secret balloting now required) and Sibanye's ability to conclude a sub-inflation three-year PGM wage settlement in late 2019 without unrest may signal a calmer labor environment. We view environmental safety of tailings storage facilities, mine site rehabilitation and water and energy use as Sibanye's most potentially impactful environmental management issues, although these appear manageable at this time. Singh, Rishav
SSAB AB(BB+/Stable/B)  
We believe SSAB is more exposed to environmental factors compared to the metals and mining industry average, because 70% of its steel production comes from blast furnace operations in Sweden (2 plants) and Finland (1) , with high levels of emissions while the regulations are very stringent. Tighter environmental regulations could make these facilities less competitive compared to less carbon-intensive EAFs or steel works located in countries that are more lenient. As a first step, SSAB aims to cut its CO2 emissions in Sweden by 25% (known as “fossil free Sweden 2045) by as early as 2025, through conversion of the blast furnace in Oxelösund to an EAF. At the same time, we note that SSAB is ahead of most peers in seeking a solution for fossil-free steel making, in line with Sweden's zero carbon target by 2045. The company is piloting a hydrogen-based ironmaking process (HYBRIT) which, if successful, could drastically reduce the carbon footprint of its operations: one pilot plant is to start up in 2020. SSAB's plan to convert its blast furnaces to EAFs using the HYBRIT technology by 2040 would likely involve an expensive transition and thus supportive policies. Blot, Florent
North America

Table 2

Company/Issuer Credit Rating/Comments Analyst
AK Steel Holding Corp.(B/Stable/--)  
Environmental and worker safety considerations are less supportive of AK Steel's credit quality. While AK Steel operates some newer EAFs, a majority of AK Steel's production comes from older integrated steel manufacturing technology with blast furnaces. AK Steel's integrated steel mills contribute, however, to 90% of the company's CO2 emissions, and tighter environmental regulations could make these facilities less competitive compared to EAFs, which are increasing their share of global steel production. AK Steel's focus on employees' safety translated into a relatively low injury rate of 0.64 per 200,000 labor hours in 2018. McStay, Clara
Alcoa Corp.(BB+/Stable/--)  
Environmental and health and safety considerations are among the most significant ESG factors for Alcoa's credit quality. The company experienced at least one fatality in four of the five years to 2018, but none since 2017. Fatality and serious injury measures generally improved in the five years to 2018, and other lost-time indictors are generally below the U.S. manufacturing average. The persistence of safety issues could hurt ratings, particularly if the combination of higher operating costs and penalties drag on the company's earnings and reinvestment. Labor unions represent about 10,000 of Alcoa's 14,000 employees, and the company renegotiates a new contract every year or two. The company had an eight-week strike at its bauxite mines in 2018 and an 18-month lockout at a smelter. Aluminum smelting emits significant GHGs directly from the consumption of carbon anodes, and is electricity-intensive, exposing the company to changes in emissions standards, electricity markets, fuels for generation, and ultimately power costs and availability. Also, many of Alcoa's operations are geographically remote but near environmentally sensitive areas. Alcoa's governance appears at least on par with other U.S.-based multinational public companies. Since its separation from Arconic Inc. in 2016, the company has carried out a clear strategy of business simplification and cost reduction, which are keys to success for commodity producers. Marleau, CFA, Donald
Algoma Steel Inc.(B-/Negative/--)  
Environmental risks are less supportive of Algoma Steel's credit profile because of the higher emissions of its blast furnace relative to North American peers that produce steel from scrap metal from EAFs. In addition, we believe Algoma Steel's history of operating under creditor protection has reduced its capacity for reinvestment in its assets, adding exposure to environmental and safety risks. However, the company has taken measures to reduce its environmental impact, including commissioning its co-generation facility in 2009, which contributed to significant reduction in the company's nitrogen dioxide, sulfur dioxide, and carbon dioxide emissions. Adalja, CFA, Phalguni
Alliance Resource Partners L.P.(BB+/Stable/--)  
As a U.S. coal producer, Alliance is highly exposed to environmental and social factors. Alliance mines thermal coal with approximately 95% of production sold to U.S. electric power plants. These plants are a primary contributor to GHG emissions and Alliance and other U.S. thermal coal producers contend with social and other pressures that will continue to cause thermal coal's share of domestic electricity generation to drop. The company is intensifying efforts to diversify into oil and gas production, which could weaken the company's currently strong liquidity position. Vitta, Chiza B
Arch Coal Inc.(BB-/Stable/--)  
Arch Coal is more exposed to environmental and social risks than the industry in general, as thermal coal mining accounts for about 50% of the company's revenues. This coal is primarily destined for coal-fired electricity plants, the share of which is forecast to fall to about 25% over the next five years, from nearly 45% a decade ago. Metallurgical coal accounts for the other 50% of revenues and most of the company's EBITDA. It is principally sold to coal-fired blast oxygen steel furnaces, which are also more exposed to environmental risks; this is because they are large contributors of greenhouse gases and may lose share in steel production to EAFs that have lower energy utilization and emit fewer pollutants. Vitta, Chiza B
Arconic Corp.(BB/Stable/--)  
Arconic's governance and exposure to social factors are high compared to peers'. Specifically, the company has experienced several episodes of organizational disruption in its first 24 months of operating as a stand-alone business because of management changes and shareholder activism. The company also faces pressure from courts, investigators, investors, and politicians because of the Grenfell Tower fire. Arconic's French subsidiary manufactured the Reynobond PE exterior building panels, although production of the panels has been discontinued. The potential financial liabilities arising from the Grenfell fire are difficult to estimate, though the company's reputation in the construction segment may suffer as various lines of inquiry proceed. The Grenfell overhang affects the company's strategic options as it aims to separate its aluminum rolled products business from its aerospace business. Marleau, CFA, Donald
Barrick Gold Corp.(BBB/Stable/A-2)  
The environmental and social risks faced by Barrick are generally on par with the broader global metals and mining sector. Barrick is one of the largest gold producers in the world, with operations that are intensive users of energy and water and require the use of hazardous chemicals, a key source of environmental risk exposure for the gold industry in general. The company faced legal consequences--the financial impact of which was limited--after several cyanide spills at its Veladero mine in Argentina; it has since sold half of its stake in Veladero. The company also operates large mines in certain high-risk jurisdictions (Mali and the DRC), which we believe presents heightened social risk exposure. However, we consider Barrick to have good disclosure regarding sustainability. Moreover, the company has achieved high rates of recycled water use, with steadily improved health and safety metrics, and reduced energy use. Adalja, CFA, Phalguni
Cleveland-Cliffs Inc.(B+/Watch Neg/--)  
Cleveland-Cliffs' ESG risks are in line with those of the metals and mining industry. The company operates four iron ore mines near the Great Lakes, and matters associated with water quality are an important focus. The company is spending $10 million on various water treatment, air quality, dust control, tailings management, selenium management, and other environmental initiatives. Cleveland-Cliffs predominantly serves steel producers that employ blast oxygen furnaces (BOF) taking in iron ore and coal as primary inputs and have a higher carbon footprint. We view the introduction of a new hot briquette iron plant as a significant step towards serving less environmentally impactful EAF steel producers. Vitta, Chiza B
CONSOL Energy Inc.(B+/Stable/--)  
Environmental and social factors are less supportive of CONSOL's credit profile. The company is one of the most profitable thermal coal producers in the U.S., partly because it sells a substantial amount of its coal to export markets, offsetting the long-term decline in the domestic market. However, environmental regulation abroad will likely have a negative influence on sales prospects for the company at some point in the future. Vitta, Chiza B
Covia Holdings Corp(BB-/Stable/--)  
ESG risks are in line with those of the broader metals and mining industry. Covia produces silica and other minerals for various industrial end markets, including oil and gas exploration and production companies that use hydraulic fracturing technology to extract oil and gas from shale formations. This is relatively new technology compared to conventional mining and drilling methods, and its full environmental impact and any related regulatory responses continue to evolve. Covia was established in 2018 and is majority owned by Antwerp-based Sibelco NV SCR. Vitta, Chiza B
Drummond Co. Inc.(BB/Stable/--)  
As a thermal coal producer in Colombia, Drummond's credit profile is more exposed to environmental and social factors. Exports to the U.S. and the European Union have fallen as coal-powered electric generation loses share to cheaper and cleaner alternatives. As a consequence, the company is shifting shipments to Asian markets. Drummond is also exposed to social risks in Colombia, as union employee strikes and rail restrictions caused operational disruptions in the past. The company has unionized workforce and operates under collective bargaining agreement that required periodic renegotiation (every 3-4 years). Dimova, Vania
Foresight Energy L.P.(SD/--/--)  
As a U.S. coal miner, Foresight is more exposed to environmental and governance factors than the mining industry is in general. The company missed an interest payment in 2019 because of the structural shift to cheaper and cleaner sources for electric generation and on a drop in thermal coal export prices. Foresight is majority owned and effectively controlled (in our view) by Murray Energy Corp., which also missed an interest payment in 2019 and filed for Chapter 11 protection shortly thereafter. Dimova, Vania
Freeport-McMoRan Inc.(BB/Stable/--)  
Freeport is more exposed to environmental and social factors than its international mining peers. The company operates mines in multiple countries and must adhere to numerous and ever-changing environmental and safety regulations. At the end of 2018 the Indonesian government became a majority owner of the Grasberg mine (which constituted over 50% of Freeport's 2018 consolidated operating income) following pressure from the Indonesian Parliament and Ministry of Environment and Forestry (the MOEF) concerning the mine's impact on river systems and forests. The Grasberg mine in particular has been at the center of tensions among mine workers, law enforcement, the military, community activists, and various political factions. In certain cases, these tensions escalated into violence and operations had to be temporarily halted. Dimova, Vania
Gopher Resource, LLC(B/Stable/--)  
Environmental considerations are less supportive of Gopher's credit profile relative to the industry. Gopher participates in the lead-acid battery recycling industry, which is heavily regulated due to its potential environmental impact. While the company has only faced four actions from the environmental protection agency (EPA), such regulatory risk is intrinsically higher and a constraining credit factor. This can lead to severe disruption in cash flows--similar to what occurred with lead-acid battery manufacturer Exide Technologies, which was forced to permanently close a facility in 2015. McStay, Clara
Murray Energy Corp.(D/--/--)  
Environmental and governance factors are less supportive of Murray Energy Corp.'s credit profile. Transition to lower-carbon emission sources for electricity generation is one of the key drivers of declining demand and weakening profit margins for U.S. coal companies. According to the U.S. Energy Information Administration (EIA), coal's share of domestic electricity generation will fall to about 25% over the next five years, from nearly 45% a decade ago. Another important social factor is safety: Murray is required to comply with health and safety regulations in the U.S. and the Republic of Colombia. In 2015, Murray idled its Hillsboro mining complex (operated by subsidiary Foresight Energy L.P.) due to a major fire incident. The complex remained idled until January 2019 and incurred asset impairments and litigation costs. Murray missed an interest payment in 2019 and filed for Chapter 11 protection shortly thereafter as the negative trend affecting the U.S. coal industry was exacerbated by Murray's heavy debt load, accumulated when the company was an industry consolidator not long ago. Dimova, Vania
Natural Resource Partners L.P.(B+/Stable/--)  
Environmental and social factors are less supportive of NRP's credit profile, because NRP is a lessor of coal mines and other properties. While not a coal miner, the company is materially exposed to coal mining companies. However, such risk is somewhat mitigated by the minimum royalty payments of its long-term lease contracts, even if no mining activity occurs. Dimova, Vania
Newmont Corp.(BBB/Positive/--)  
We view Newmont's exposure to environmental and social risks as broadly in line with that of its mining industry peers. Newmont is the largest gold producer globally, and we believe its significant operating breadth helps to mitigate its exposure to environmental and social risk. The company has a large presence in lower-risk countries, namely the U.S., Canada, and Australia, with limited exposure to high-risk jurisdictions, unlike many of its global mining peers. In addition, its total greenhouse gas emission intensity has declined over the past five years, its water recycling rate is favorable at over 70%, and it is on track to achieve other sustainability targets. However, the company experienced several fatalities at its operations in 2018, higher than those witnessed at comparable companies, which we believe highlights the risks inherent in its mining operations. Bilous, Jarrett
Novelis Inc.(BB-/Stable/--)  
ESG factors are more supportive of Novelis' credit profile, largely because its aluminum downstream operations are less environmentally sensitive compared to companies with upstream operations. At the same time, we expect some of aluminum's supportive characteristics, such as its light weight, to fuel higher-growth automotive shipments while others, such as its recyclability, to benefit its more mature can business. That said, Novelis' operations are still energy-intensive and thus exposed to GHG emission costs and regulations. Novelis operates numerous aluminum processing facilities that are well diversified globally. Its aluminum recycling facility in Germany is the largest such facility in the world, and modern by industry standards. In our view, the company's high share (over 60%) of recycled content and reduced reliance on primary aluminum for production have contributed to above-average margins relative to other metals processors and distributors. Adalja, CFA, Phalguni
Nucor Corp.(A-/Stable/A-1)  
Environmental and worker safety factors are more supportive of Nucor's credit quality compared to that of the industry, especially that of BOF-dependent peers. The company produces steel using EAFs, which have lower energy utilization and emit significantly fewer pollutants compared to the BOF production method. The company's EAF mills use 73% scrap steel for feedstock compared to 25% for BOF, contributing to its smaller environmental footprint compared to older integrated producers. In addition, Nucor's 2018 employee injury rate of about 1.19 per 200,000 labor hours was about 50% lower than the average for steel mills in North America, indicating relatively sound preventive risk programs. Ferara, William R
Peabody Energy Corp.(B+/Stable/--)  
Environmental and social factors are less supportive of Peabody's credit profile. As a U.S.-based coal producer, Peabody contends with environmental and social pressures that will continue to cause thermal coal's share of domestic electricity generation to drop to about 25% over the next five years, (from nearly 45% a decade ago). This trend has affected coal prices and credit quality of all U.S. coal producers. A smaller, positive environmental factor relates to Peabody's leading practices in land restoration, where it reclaims 1.4 acres for every acre disturbed. We also recognize Peabody's safety record (less than 1.5 accidents per 200,000 hours worked, compared to the 3.7 industry average). Dimova, Vania
Steel Dynamics Inc. (SDI)(BBB-/Stable/--)  
Environmental and worker safety considerations are more supportive of SDI's credit quality. The company produces steel using EAFs, which have lower energy utilization and emit fewer pollutants compared to traditional BOFs, that are among the largest contributors to greenhouse gases. The company's EAF mills use 80% scrap steel for its feedstock compared to 25% for BOFs, meaning it has a smaller environmental footprint compared to older, integrated producers. SDI's steel mills reuse nearly all of their water, which is positive from an environmental perspective and is also cost efficient. SDI's employee injury rate has significantly improved over the years and is now approaching 1 per 200,000 labor hours from over 2 in 2015, indicating relatively sound risk prevention programs. Ferara, William R
Teck Resources Ltd.(BBB-/Stable/--)  
We believe Teck's exposure to environmental and social risks is roughly in line with those of its global peers. The company primarily produces metallurgical coal and base metals from several open pit mining sites in the Americas. In addition, the company operates one of the world's largest zinc and lead smelting and refining facilities. From these operations, Teck has high exposure to GHG emissions, and to hazardous substances and waste. The company has demonstrated strong governance of its risk exposure, with high transparency on performance and targets. As a consequence, Teck is consistently named to the Dow Jones Sustainability World Index (comprising companies with sustainability practices in the top 10% of the 2,500 largest companies in the S&P Global Broad Market Index). Adalja, CFA, Phalguni
United States Steel Corp.(B/Negative/--)  
U.S. Steel is more exposed to environmental and social factors than most metals and mining peers because of its exposure to air and water quality matters, as well as worker safety and relations. The American steel manufacturing and fabrication industry is heavily regulated, and a company like U.S. Steel owns assets that have been operating since before 1900. Even with industry-standard practices today, the company remains exposed to a combination of current environmental risks and contamination that may have occurred decades ago. The company's recently proposed investments in the assembly of EAFs and new casting and rolling equipment with offgas electricity cogeneration should significantly help reduce emissions from some of its oldest assets, supported by a new target to reduce its GHG intensity by 20% by 2030. U.S. Steel could mitigate some of its environmental risks through modernizing investments over the next few years, including the potential complete acquisition of EAF steelmaker Big River. The company has reduced employee-related injuries by almost 90% in the past 10 years by improving safety training and procedures. Marleau, CFA, Donald
Wolverine Fuels LLC(NR/--/--)  
As a U.S. thermal coal producer, Wolverine is exposed to environmental and social factors. The company services two anchor utility customers, Pacificorp and Intermountain Power Agency (IPA) in the Western U.S., both of which have announced commitments to retire some of their coal-fired generation. One supply contract, accounting for 14% of Wolverine's 2019 volumes, expires in 2024 and will not be renewed due to conversion to natural-gas-fired generation. Dimova, Vania
Latin America

Table 3

Company/Issuer Credit Rating/Comments Analyst
Companhia Siderurgica Nacional (CSN)(B/Stable/--)  
We see Brazil-based CSN's environmental exposure as heightened compared to the broader industry, given the low-probability but high-impact risks associated with potential for upstream tailing dams to collapse. CSN has deactivated six of its seven wet dams, with the goal to dry-stack 100% of its waste material in the final stage of conclusion. In addition, CSN's credit quality is more influenced than that of industry and domestic peers by governance risk factors. We assess its management and governance as fair, given that some of the management's actions, such as past investments, shareholder structure, and shareholder remuneration strategy, have undermined CSN's credit metrics. Moreover, we view decision-making as too concentrated with the controlling shareholder. Matelli, Bruno
Corporacion Nacional del Cobre de Chile (Codelco)(A+/Negative/--)  
We see Codelco, the world's largest copper producer, as having comparable environmental and social risks to the industry more broadly. Because its operations are located in Northern Chile, where urbanization is low due to water scarcity and remoteness, its exposure to waste and land-use risks is rather low. Instead, Codelco is materially exposed to events of water stress, for which it targets reducing water usage (per ton of copper treated) by 10% in 2020, and building a desalination plant in the next five years, which would benefit its environmental profile. Despite that, its water intensity levels compare well with industry averages. On the social front, Codelco lacks gender diversity, with women representing only 10% of its workforce, and has suffered strikes in the past, a recurrent issue for big miners in Chile especially in times when labor contracts are renegotiated. But the company has dealt well with those situations. And because it is 100% government-owned and has a long track record in Chile, we see it as a strategic asset for the country, contributing to a sense of pride for the Chilean society. That makes it easy to engage with surrounding communities. Ocampo, Diego
Gerdau S.A.(BBB-/Positive/--)  
We believe Brazil-based Gerdau's environmental risk exposure is comparable to that of the broader industry. On one hand Gerdau is exposed to the decommissioning of one upstream tailing dam in Minas Gerais; these types of dams bear a higher risk of collapse than other types of dams because of their design. On the other hand, Gerdau produces 50% of its steel in EAFs, which pollute significantly less than blast furnaces and are fed with scrap metal. In addition, governance issues were raised related to Gerdau in 2016 when allegations of tax evasion took a toll on the company's reputation, leading us to revise our management and governance score to fair from satisfactory, but with no change to the overall rating. Although investigations are ongoing, we believe the company has improved compliance and internal controls considerably, and has transitioned to a fully professionalized executive team, moving family members to the board level. Bedran, Flavia M
Grupo Mexico S.A.B. de C.V. (GMX)(BBB+/Stable/--)  
We view copper producer GMX as having relatively higher environmental exposure than the industry, even if several environmental incidents and social tensions that resulted in miner fatalities, project delays (like Tia Maria), fines, and cleanup costs, have not significantly affected its operations or financials. However, we believe environmental and social risks are becoming more important for GMX's credit quality. The recent partial, temporary closure of GMX's Guaymas facility, after the spill of about 3,000 liters of sulfuric acid into the Sea of Cortez, leads us to believe the government might further investigate GMX's operations and could take unprecedented measures including fines and partially closing or suspending the company's concessions. Although these risks are not in our base-case scenario, if they materialize, they could affect GMX's top- and bottom-line results, and ultimately its credit quality. Also, Mexican environmental authorities are likely to stiffen safety requirements in the future that could increase compliance costs for GMX. In the past two years, GMX has proactively invested in labor security and environmental safety, deploying $950 million. Michel, Alexandre P
PT Vale Indonesia Tbk(BB/Stable/--)  
Environmental factors are less supportive of Indonesia-based PT Vale's credit quality compared to the broader industry. Its nickel ore processing and nickel-in-matte operations emit more pollutants than other metals operations. This is due to the emissions of sulfur dioxide and intensive energy use--including high-speed diesel, high-sulfur fuel oil, and coal-fired thermal plants. The company is reducing environmental impacts through investments in hydroelectric plants (which supply one-third of PT Vale's energy) and waste management and waste processing facilities. Social risks strongly influence Indonesia's regulatory framework, which impacts PT Vale more than peers. For instance, it required the sale of 20% of the company to local investors as well as more local value-added nickel production. Matelli, Bruno
Vale S.A.(BBB-/Negative/--)  
Brazil-based Vale is significantly more exposed to ESG risks than the industry in general, following the second accident in the company's dams in less than four years, which triggered our CreditWatch and underpins the negative outlook and weak management and governance assessment. These environmental and social catastrophes resulted in many deaths, the impairment of critical water supplies, and the displacement of entire communities. Almost five years after the first dam incident at Samarco, the company may start operating on a limited basis in 2020. Vale remains mired in legal proceedings that claim billions of dollars in remedy costs, while the provisions for the second accident already passed $6 billion. Vale will remain exposed to environmental risks as long as its eight upstream dams are not fully decommissioned. The risk of collapse of any of their mines may be deemed as low and perhaps the consequences of such an event would be far less damaging for the surrounding communities, local environment, and the company itself, given Vale's preventive measures. However, another accident of a similar nature wouldn't be compatible with the type of risks we expect to see in an investment-grade rated entity. Bedran, Flavia M
Asia-Pacific

Company/Issuer Credit Rating/Comments Analyst
Aluminum Corp. of China Ltd. (Chalco)(BBB-/Stable/--)  
Exposure to environmental factors are high for aluminum producer Chalco’s credit profile compared to global peers', due to the Chinese government’s stance to curb production during winter time to control emission for environmental concern. Chalco has a generally good environmental protection record in the past years. The company developed its own technology for red mud ecological restoration, reducing pollution. While the company depends on coal-fired power for the production of aluminum, it has lowered its emission of sulfur dioxide, nitrogen oxide, and dust and exceeded its targets in 2018. Ge, Calvin
Baoshan Iron & Steel Co. Ltd.(A-/Stable/--)  
Baoshan's ESG risks are in line with those of the overall steel industry, as Baoshan is likely to benefit from China's efforts to phase out noncompliant steel capacity. The company spends around 10% to 15% of its maintenance capital on environmental upgrades every year, leading to reduction in the emission of pollutants such as sulfur dioxide and nitrogen oxide. It is also reducing coal consumption in its steelmaking process, resulting in cost savings. Li, Christine
BlueScope Steel Ltd.(BBB-/Stable/--)  
Australia-based steel maker BlueScope is exposed to some higher social risk factors than peers, with the Australian Competition and Consumer Commission (ACCC) commencing civil proceedings against BlueScope in August 2019, alleging a former employee had engaged in cartel conduct. BlueScope continues to cooperate with the investigation. An adverse outcome could have significant ramifications on BlueScope's compliance with competition law, its license to operate, and corporate governance. From an environmental perspective, BlueScope's operations are comparable to those of the industry: its Australian assets include integrated blast furnace operations at Port Kembla Steelworks which generate comparatively higher emissions. Nevertheless, BlueScope managed to reduce its absolute emissions in Australia by around 40% when it closed a blast furnace in 2011. In the U.S. the company's North Star operation is one of the most efficient mini-mills in the market and composed of dual electric arc furnaces. Capacity expansions at North Star will further weigh its exposure toward more-efficient EAF operations. Its steelmaking sites make up about 92% of its emissions (scope 1 and 2) and the company has committed to reducing GHG emissions by 1% annually through 2030 (-1.2% achieved in FY2019). Hoang, Minh
China Baowu Steel Group Corp. Ltd.(A-/Stable/--)  
Baowu is the parent of Baoshan, and also has ESG risks that are in line with those of the overall metals and mining industry in China. Like Baoshan, it is a beneficiary of China’s efforts to phase out noncompliant steel capacity. Baowu also spends 10% to 15% of maintenance capital on environmental upgrades. Li, Christine
China Hongqiao Group Ltd.(B+/Positive/--)  
As an aluminum producer in China, Hongqiao is more exposed to ESG risks than global peers, due to government curbs on production during winter to control emissions. The company was also required to shut down 29% of its total capacity in 2017. Additionally, we assess the company’s management and governance as weak, and thus less supportive than other Chinese corporates'. A short-seller report in 2017 delayed the 2016 annual report by over of year and the company was only able to publish a rebuttal report eight months later. Ge, Calvin
China Minmetals Corp.(BBB+/Stable/--)  
China Minmetals' exposure to ESG risks is similar to that of the broader metals and mining industry. It has mining, refining, and construction operations, all of which face tighter curbs on pollution from the Chinese government. The company has invested in environmental and safety improvements in recent years, reducing energy consumption in each of the past three years. Social risks are modest and mainly related to local activism at the Las Bambas mine in Peru, which contributes less than 5% of the company’s overall revenue. Li, Christine
Fortescue Metals Group Ltd.(BB+/Stable/--)  
Australian iron-ore miner Fortescue incurs ESG risks comparable with those of industry peers. The company has no exposure to tailings storage facilities and its carbon emissions compare favorably to key peers. Fortescue remains on track to achieve its stated 25% decrease in emissions intensity in electricity generation from fiscal year (FY) 2015 levels, and 5% decrease in emissions intensity in energy consumption in the production process from FY2017 levels. As of FY2019, Fortescue had achieved 17% reduction in electricity generation and an 8.1% reduction in energy consumption. Fortescue is a large employer of indigenous Australians, which reinforces its social license to operate. Hoang, Minh
Geo Energy Resources Ltd.(B-/Negative/--)  
We see governance and environmental factors as less supportive of Indonesian coal mining group Geo Energy’s creditworthiness. In our view, the company has fallen short on the execution of its strategic plans. In particular, Geo has yet to invest in proceeds from a $300 million bond raised in 2017. The notes have a put option in April 2021, which bondholders can exercise in the absence of investment in reserves. The notes acceleration would pressure the company’s liquidity. Nevertheless, the company is currently in the final stages of closing an acquisition, which could potentially address the aforementioned issue. Environmental risks have influenced Geo's credit quality more than that of global peers, albeit similar to those faced by other coal mining companies, which all face probable declining demand in the long term. The company’s existing mines are exposed to flooding risk, as seen with operations at one of its mines in South Kalimantan stopping for around one week in June 2019 due to prolonged flooding. However, the company's planned mine acquisitions in South Sumatra will diversify its operations and could temper the impact of such incidents. The company has a sound safety record with no major injuries or fatalities, and we view social factors as less material. Goh, Isabel
Mongolian Mining Corp.(B-/Stable/--)  
Mongolian Mining Corp.'s exposure to environmental and social risk is generally comparable to that of its global peers. The company produces metallurgical coal in Mongolia and exports to China, where coal consumption is less restrictive than developed markets. The company actively manages environmental and social risk through a health, safety, and environmental management system based on international standard. Mongolian Mining has made continuous investments in safe and healthy work environments and social infrastructure. The company has reported declining LTIFR, from 1.24 per million man-hours worked in 2014, to 0.35 in 2018. The company had one fatality during the past five years. We view the impact of the company’s management and governance to be neutral. Although the company made distressed debt restructuring in 2016-2017, we believe it was predominantly driven by weak market condition, rather than credit negative actions by the board or the management. The company also demonstrates high transparency on operational data and targets, and ESG reporting. Lin, Allen
Newcrest Mining Ltd.(BBB/Stable/--)  
We see Australia-based gold miner Newcrest's ESG exposure as similar to that of the broader industry. Newcrest has a climate change policy in place and a committed target of 30% reduction in GHG emissions per tonne of ore treated by 2030 against the 2018 baseline. We view containment and environmental safety of tailings and mine site rehabilitation, and responsible use of cyanide in gold extraction processes, as potentially the most impactful environmental management issues. Still, Newcrest is a member of the cyanide code and all operating mines have been externally certified to the cyanide code apart from Red Chris, which was acquired in 2019. In 2018, Newcrest's Cadia mine site experienced a tailings dam embankment slump incident where limited tailings material from its northern facility was released and contained within its southern facility. There was no environmental impact and no injuries, but this incident resulted in lower gold production and lower earnings from the asset. It also prompted inspections and a review of all tailings dams in its portfolio to ensure structural integrity and safety. Hoang, Minh
POSCO(BBB+/Stable/--)  
The high exposure of the metals and mining sector to environmental and social factors stem from the environmental impact of mining, with significant emission of CO2 and pollutants. As such, safety and energy efficiency management are critical factors for the industry. We believe POSCO's ESG factors are broadly in line with those of industry peers. Given its operations in integrated steel plants with blast furnaces, POSCO tracks and discloses key environmental metrics such as energy consumption, GHG emission levels, air pollutants, water usage, and waste generation. Accordingly, POSCO has been in RobecoSAM's Dow Jones Sustainability Index for 13 consecutive years. The company has also been recognized for its efforts by CDP, the global carbon information disclosure project. On the social front, POSCO has been improving safety measures for its employees and has reduced the number of accident cases (including partner companies) in 2018. The company's LTIFR (lost time injury frequency rate) was 0.03 in 2018, compared with the global steel industry average of 1.25, based on data from the company and the World Steel Association. Park, Shawn
PT Bumi Resources Tbk.(CCC+/Stable/--)  
Bumi’s credit quality reflects the company’s weak governance in the past. The company’s subpar financial disclosure and transparency policy led to financial irregularities, aggressive financial policy, and ultimately to debt restructuring. In our view, this risk will persist at least over the next 2-3 years, but is limited to lenders under the debt restructuring program. BUMI has assigned KPMG to conduct cash monitoring as part of internal control to ensure its debt servicing capability. Concurrently, the company is on its four-year roadmap to ensure sound corporate governance practice by 2022. Bumi’s mining operations largely comply with national and international environmental standards. The company has well-articulated procedures, goals, and achievements with regards to its mining and exploration, reclamation, water management, waste disposal, air quality, and vegetation plans. Following a due diligence by an independent party, the company is committed to improve and implement human rights policy and social engagement procedures to comply with International Finance Corporation’s Performance Standard. Tang, Pauline
South32 Ltd.(BBB+/Stable/A-2)  
We view Australia-headquartered diversified mining company South32 as having ESG exposures comparable with those of the broader industry. Its presence across multiple commodities and assets should help mitigate ESG risk factors from one-off events. Nevertheless, the company remains exposed to some higher environmental risk commodities, such as met coal (12.7% of FY19 revenues) alumina (24.4% of FY19 revenues) and aluminum smelting operations (22.3% of FY19 revenues). South32 continues to manage these risks across its portfolio, taking steps to divest some commodities (such as thermal coal through its South Africa Energy Coal divestment) and shift focus towards cleaner base metals. Hoang, Minh
Tata Steel Ltd.(BB-/Stable/--)  
Indian Tata Steel's environmental, social, and governance performance is broadly in line with that of its sector and regional peers. In addition to compliance with regulations, the company has active programs to reduce environmental impacts, which in our opinion is commensurate with the significant environmental impact of the steel-making process. That said, the periodic renewal or continuity of local resource use, land use, and pollution permit requirements at the India iron ore mining operations is an ongoing business risk that sets them apart from global peers. On social factors, Tata Steel's labor, vendor, and community-relationship initiatives are on par with those of large metals and mining companies we rate. Tata Steel demonstrates satisfactory governance standards led by an independent board that is an active decision-making body in areas such as business ethics, management remuneration, and grievance resolution. Patwardhan, Harshada
Vedanta Resources Ltd.(B/Stable/--)  
Environmental and social factors, notably interactions with local communities, are less supportive of Vedanta’s credit profile compared to peers. These factors have affected the group’s overall profitability in the past. The group has a mixed record of stakeholder engagement in its mining operations. The environmental compliance record at its key zinc and oil production operations in India is reasonably good. Partnerships with government or state-owned enterprises in these businesses provide added oversight for such compliance. That said, the group has faced issues with the local authorities as evidenced by the closure of its copper smelting operation in South India for alleged violation of environmental standards, involving air and water pollution. We understand that this matter is still under contention. In addition, Vedanta’s iron ore operations in the Indian states of Goa and Karnataka have faced mining and export bans from time to time, at least partially due to environmental issues. In July 2019, the group’s KCM operations in Zambia, about 7% of the total assets, were liquidated by the government due to local resource related policies. Vedanta’s labor relations and health and safety standards are not materially different from similar size peers. Patwardhan, Harshada
Yanzhou Coal Mining Co. Ltd.(BB/Stable/--)  
Chinese coal miner Yanzhou has environmental and social risks comparable to those of the broader mining industry. Coal has inherent environmental risks but enjoys more policy support in China than in developed markets. In addition, Yanzhou manages those risks more effectively compared to smaller peers in China through investments in environmental and safety improvements. The discharge of pollutants meets local discharge standards and Yanzhou has maintained a generally good safety record in the past few years. Wong, Crystal
Zijin Mining Group Co. Ltd.(BBB-/Watch Neg/--)  
China-based Zijin’s ESG risk profile is generally in line with that of competing gold miners. Like others, it has high environmental exposure related to the use of sodium cyanide in the production process, discharge of waste water, and the emission of waste gas. The company did have two notable accidents in 2010 (leakage of copper containing acidic wastewater into a river and a tailings dam collapse). Zijin has since paid restitution and strengthened environmental protection measures. We view its community relationships to be generally good and are not aware of additional environmental or social issues since the 2010 accidents. Lin, Allen

This report does not constitute a rating action.

Primary Credit Analysts:Donald Marleau, CFA, Toronto (1) 416-507-2526;
donald.marleau@spglobal.com
James E Fielding, Centennial (1) 212-438-2452;
james.fielding@spglobal.com
Simon Redmond, London (44) 20-7176-3683;
simon.redmond@spglobal.com
Andrey Nikolaev, CFA, Paris (33) 1-4420-7329;
andrey.nikolaev@spglobal.com
Diego H Ocampo, Buenos Aires (54) 114-891-2116;
diego.ocampo@spglobal.com
Jarrett Bilous, Toronto (1) 416-507-2593;
jarrett.bilous@spglobal.com
Secondary Contacts:Phalguni Adalja, CFA, Toronto + 1 (416) 507 3212;
phalguni.adalja@spglobal.com
Flavia M Bedran, Sao Paulo + 55 11 3039 9758;
flavia.bedran@spglobal.com
Florent Blot, CFA, Paris + 33 1 40 75 25 42;
florent.blot@spglobal.com
Christophe Boulier, Paris (39) 02-72111-226;
christophe.boulier@spglobal.com
Ozana Breaban, London + 442071763302;
Ozana.Breaban@spglobal.com
Omega M Collocott, Johannesburg (27) 11-214-4854;
omega.collocott@spglobal.com
Vania Dimova, New York + 1 (212) 438 0447;
vania.dimova@spglobal.com
William R Ferara, New York (1) 212-438-1776;
bill.ferara@spglobal.com
Calvin Ge, Hong Kong (852) 2533-3560;
calvin.ge@spglobal.com
Isabel Goh, Singapore (65) 6597-6110;
isabel.goh@spglobal.com
Sergei Gorin, Moscow (7) 495-783-4132;
sergei.gorin@spglobal.com
Minh Hoang, Sydney (61) 2-9255-9899;
minh.hoang@spglobal.com
Elad Jelasko, CPA, London (44) 20-7176-7013;
elad.jelasko@spglobal.com
Christine Li, Hong Kong (852) 2532-8005;
Christine.Li@spglobal.com
Allen Lin, Hong Kong (852) 2532-8004;
allen.lin@spglobal.com
Bruno Matelli, Sao Paulo (55) 11-3039-9762;
bruno.matelli@spglobal.com
Clara McStay, New York + 1 212 438 1705;
Clara.McStay@spglobal.com
Alexandre P Michel, Mexico City + 52 55 5081 4520;
alexandre.michel@spglobal.com
Shawn Park, Hong Kong (852) 2532-8014;
shawn.park@spglobal.com
Harshada Patwardhan, Singapore + 65 6597 6152;
harshada.patwardhan@spglobal.com
Rishav Singh, Johannesburg (27) 11-214-4856;
rishav.singh@spglobal.com
Pauline Tang, Singapore (65) 6239-6390;
pauline.tang@spglobal.com
Chiza B Vitta, Farmers Branch (1) 214-765-5864;
chiza.vitta@spglobal.com
Crystal Wong, Hong Kong (852) 2533-3504;
crystal.wong@spglobal.com

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