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Gold/Mining/Energy : Mining News of Note -- Ignore unavailable to you. Want to Upgrade?

To: LoneClone who wrote (38464)	6/11/2009 8:07:15 PM
From: LoneClone	Read Replies (1) \| Respond to of 195353

As mining, metals cash flow plummet, Latin American miner refinancing risks limited While the refinancing risks for Latin American mining and metals companies are limited, Fitch Ratings forecasts global mining and metals cash flows will plummet. Author: Dorothy Kosich Posted: Wednesday , 10 Jun 2009 RENO, NV - mineweb.net Compared to their global peers, Latin American mining and metals companies are better positioned to withstand the pressures of the global downturn, Fitch Ratings said in its "Metals and Mining Latin American Special Report." Nevertheless, Fitch Managing Director Joe Bormann advised, "Industry management will be tested during 2009 as they face a dramatic drop in EBITDA amid falling volumes and depressed prices. Defaults are unlikely over the next 12 months although there could be some covenants that are breached, particularly those that tie cash flow to equity or debt." However, Fitch notes Latin American mining and metals companies have enjoyed a higher EBITDA, healthy cash positions, and limited debt refinancing needs. "Some of the similarities of these companies are their strong capital structures, an ability to generate significant cash flows during troughs in the cycle due to their position in the lowest quartile of the industry cash cost curve and a manageable debt amortization schedule," Bormann said. "Many also enjoy strong positions versus their customers in their domestic markets." The strong liquidity position of most Latin American mining and metals companies, along with their limited debt refinancing, resulted in limited activity in the debt capital markets during the first half of this year, Bormann noted. "This contrasts with considerable bond issuance by companies outside the region that have higher refinancing needs." The only Latin American company to register a bond was Chilean steel producer and iron ore miner, CAP S.A. In his analysis, Bormann predicts that many metals and mining companies "will see their EBITDA fall by more than 50% during 2009 as volumes disappear and prices remain depressed." However, Fitch notes, "Most Latin American metals and mining companies have responded to the crisis by delaying capital expenditure projects and have refocused their efforts on working capital and cash flow management. They have also take strides to lower their costs, such as headcount reductions and the temporary closure of mills and mines." In considering the credit quality of companies in mining, Fitch takes into account the cash costs, supply and demand dynamics, sovereign risk, capital structure and access to financing. "These credit drivers remain unchanged in the face of current market turbulence." Fitch also considers the lead times taken to bring new capacity on line and the ability of the mining and metals industries to quickly curtail production. "Long lead times for new copper and iron ore mines sustained very high price levels in recent years," Borman said. "Companies within these two industries have also been able to reduce output quickly during 2009." However, Bormann noted that limited end uses for nickel and the risk of product substitution "have contributed to very weak nickel prices during the past 12 months.