DBRS Releases Report on the Corporación Nacional del Cobre de Chile (Codelco )

DBRS has today released a report on Corporación Nacional del Cobre de Chile (Codelco or the Company) that supports the recent confirmation of Codelco’s Issuer and Senior Unsecured Debt ratings at “A” with Stable trends. The rating confirmations and Stable trend reflect Codelco’s position as a world-leading and cost-competitive copper producer, with large reserve and resource bases.

Codelco is wholly owned by the Republic of Chile (rated AA (low), by DBRS), but its debt is not guaranteed by the Chilean government.

Codelco’s financial metrics have weakened but remain adequate for its current ratings with good coverage metrics but debt leverage and return measures are poor. The Company’s business profile remains stable although cost competitiveness has weakened.

Codelco’s 2013 five-year plan included approximately $27 billion of investment to refurbish and extend operations as well as to increase copper production to about 2.0 million tonnes by 2017 (2012 production was 1.8 million tonnes). The need for additional funding is expected due to continued cost pressures and volatile but weaker copper prices in the near to mid-term. DBRS therefore expects Codelco’s debt levels will increase further despite the Chilean government continuing to provide additional financial support for the Company’s expenditure plans and its funding needs.

Over the longer term, the ongoing industrialization and urbanization of China, India and other lesser-developed economies should provide ready markets for copper, which is widely used throughout the economies of the world. With improved copper prices, Codelco’s competitive operations (in addition to Codelco’s relationship with the Government of Chile) are expected to support the Company’s financial obligations.

Today’s report and the January 20, 2014, press release are available at www.dbrs.com or by contacting us at info@dbrs.com.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodology is Rating Companies in the Mining Industry (June 2011), which can be found on our website under Methodologies.