Fitch Ratings has affirmed the Long-Term (LT) Foreign and Local Currency Issuer Default Ratings (IDRs) of Minsur S.A. at 'BBB-'. The rating outlook is revised to stable from negative.
Fitch has also affirmed the company's US$450 million senior unsecured 6.25% notes due 2024 at 'BBB-'.
Minsur's ratings reflect the company's business position as one of the world's largest and lowest-cost integrated producers of tin and gold in Peru and tin, niobium and tantalum in Brazil.
The revision in the rating outlook to stable reflects the startup of its copper asset Mina Justa, which improves the company's scale and product diversification. The outlook of stable is further underpinned by a strong copper market that should allow the company to deleverage quickly.
Key rating drivers
Significant Copper Mine Start: The startup of the Mina Justa mine after more than US$1.6 billion of capex increases Minsur's product diversification and FCF generation. Fitch forecasts that the share of tin in the revenue will drop to about 35% in 2022 from 71% in 2020, while copper will now account for approximately 60% of sales.
Mina Justa's cash cost is expected to be in the second quartile of the global copper cost curve with levels below US$1.00/lb during the first four years of operation, when output will average above 140,000 metric tons per year (MT/yr). EBITDA is projected to be higher than US$900 million per year on average during this time period, 3.5x that of the prior four years.
Turning FCF Positive: Minsur's net FCF is projected to be positive in 2021 following an outflow of US$450 million in 2020. The company's consolidated net debt should be around US$1.1 billion at YE 2021, a similar figure to one year prior. As Mina Justa achieves full production amid a supportive copper environment, net debt is expected to decline to less than US$700 million in 2022. Following the conclusion of the project, capex will lower significantly since reaching US$554 million in 2020.
Editor's note: Information provided by Fitch Ratings.
(END) NDP/MVB