Moody's Investors Service comments that Minsur S.A.'s (Minsur -- Ba3, positive) agreement with Inversiones Alxar S.A, a subsidiary of Empresas Copec S.A. of Chile, for the sale of a 40% stake in the Mina Justa copper project in Peru is credit positive.
The transaction, announced on April 24, will reduce Minsur's investment requirements in the US$1.6 billion Mina Justa project. In addition, Minsur will be the operator of the project through its 60% interest.
Nonetheless, as about 50% of the total amount to be spent in the project will be funded with debt, and the full amount of debt will be consolidated at Minsur's balance sheet, leverage will increase during the construction phase, expected to happen during 2018 through the end of 2020.
On a pro forma basis, peak adjusted leverage measured by gross debt to EBITDA will be 5.9x at the end of 2020 from 2.5x at the end of 2017.
But the cash flows from Mina Justa, which could be more than three times higher than current levels (US$257 million as reported EBITDA for the fiscal year 2017) starting in 2021, will help reduce leverage towards 2.0x.