Mongolian Mining, which accounts for 42 per cent of the country's coal exports to China, has been downgraded by credit rating agency Moody's Investors Service because of concerns it may not be able to pay its debts.
The rating was cut by a level to Caa2, the fourth-lowest non-investment grade, Moody's said on Wednesday.
The Ulan Bator-based company was negotiating waivers and relaxation of its bank covenants, it said.
Miners in Mongolia are under pressure after the country's coal exports dropped 20 per cent in the first nine months of this year and prices declined. Mongolian Mining is seeking to reschedule loan repayments after it reported a first-half loss of US$25.2 million, chief executive Battsengel Gotov said in August.
"Its cash balance will be insufficient to address debt-servicing requirements" in the second half of this year and next year, Moody's said.
Mongolian Mining expected to increase cash and reduce debt-servicing requirements next year after a possible loan restructuring and sale of its paved road, chief financial officer Ulemj Baskhuu said on Wednesday.
"The coking coal price weakness has impacted the company earnings and liquidity position," Baskhuu said. "However, because of the successful cost-cutting measures and improvements in operational efficiencies, we were able to mitigate this impact. With regards to the downgrade, I believe that agency opinion and timing is an independent view."