Mining returns in Peru will strengthen in 2018-19 as recent investments begin to boost their production in an environment of benign commodity prices, Moody's Investors Service affirmed in its latest report.
"Despite a drop in capital spending needs, more efficient operations and higher metal prices
, mining companies have not yet been able to materially reduce debt levels and adjust their capital structures, which would provide more
buffer in periods of difficult market conditions," Moody's expressed.
Yet, leverage has declined based on stronger EBITDA in 2017 and early 2018.
A broad-based recovery in commodity prices starting in late 2016 has continued through 2018, allowing mining companies in Peru
to adjust their operations, focusing on efficiencies and cost cuts.
Demand growth —mostly from China— has eased in recent years, and prices are weaker than earlier in the decade, reducing returns on new projects.
According to the credit rating agency, declining ore grades have forced mining producers to invest in exploration
and development for future growth, but with capital spending at normalized levels.
Among expansions for rated mining companies, Minsur
(Ba3 stable) is mostly focused on its greenfield Mina Justa copper project, which will strengthen its long-term business profile and significantly raise its cash generation starting in 2021.
will produce 100,000 tons of copper annually during the mine's estimated 18-year lifetime, and Minsur anticipates 150,000 tons of annual production for the first four years.
Nexa Resources (Ba2 stable) will continue to focus on integrating its units and production processes, and in Peru will develop its strategic projects in Cerro Lindo, Magistral, and Pukaqaqa.