Fitch Ratings has affirmed its credit rating of Minsur SA at BBB-, with a stable outlook. Minsur was initially rated by Fitch and Moody’s a year ago in the run up to a US$450 million bond issue. In a statement Fitch said that low production costs, a forecast modest increase in leverage from historically low levels and a robust liquidity position were some of the key drivers in its assessment, although it noted that high planned capital expenditure up to 2018 and falling ore grades at the San Rafael mine were negative influences.
In forecasting the company’s financial position the ratings agency assumed that tin prices would average $21,000/t in 2015-2017, while annual average sales volumes would fall from 28,000 tpy recently to 24,000 tpy in the next three years. However production will be boosted from the second half of 2017 by the planned start-up of the Bofedall II tailings project, which is expected to produce 6,300 tpy of tin from high grade tailings at a cash cost of only $1,800/t. This compares with cash costs at the San Rafael mine of $8,119/t in the first nine months of 2014. The tailings project had been expected to ramp up during 2016 but has been delayed “due to obtaining the required permits and plant adjustments required”.
Other drivers considered by Fitch were Minsur’s increasing diversification away from tin, its status as a supplier of sustainable, conflict-free tin and “adequate and geographically diversified” reserves. As of September 30 2014 Brazilian subsidiary Taboca had resources of 420,000 tonnes (27 year mine life) and San Rafael’s reserves and resources amounted to 256,000 tonnes (10 year life). “San Rafael has been operating for 40 years and has exhibited a track record of replenishing and extending reserves throughout that time with the company spending considerably on exploration activities annually” Fitch said.
