Anglo American gets S&P downgrade
JOHANNESBURG (miningweekly.com) – Standard & Poor's (S&P) Rating Services this week downgraded its long-term corporate credit rating on Anglo American to 'BBB' from ‘BBB+’ as continued high capital expenditure (capex) and volatile conditions in the commodity sector were expected to weigh on the group’s debts.
The ratings agency said in a statement that the diversified miner’s operating cash flow would fall further into the red during 2013/14 than was initially forecast, on a sustained $7-billion a year capex.
“We consequently forecast that Anglo American's adjusted funds from operations to debt will decline to 35% to 45% in 2013 and to 25% to 35% in 2014, under our pricing assumptions, compared with a range of 45% to 50% that we consider commensurate with a 'BBB+' rating,” S&P added.
The agency rated the mining giant as stable, with no expectations of a further downgrade owing to its strong liquidity and diversified commodity portfolio.
“We continue to assess the company's business risk profile as strong, owing to the group's low-cost positions in most segments, healthy margins and new production from important projects in the coming years,” it noted.
S&P commented that the global miner may turnaround in 2015 if management actions and higher commodity prices enabled the company to contain debt increases during the next two years, pushing the ratio of funds from operations above 45%.
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