DBRS Publishes Report on the Credit Metrics of its Public Mining Ratings

DBRS Limited (DBRS) has today published a compilation of its public mining-oriented ratings along with a summary of associated key financial metrics for the latest 12-month period as calculated by DBRS.

Credit metrics in the mining sector are being squeezed by declining prices across a broad range of commodities brought on by the oversupply of those commodities and leading to reduced earnings and cash flow. The decline in prices has largely been ongoing since 2011, and mining companies have put the brakes on in terms of cash outflows, including gearing down the initiation of new large-scale capital projects, to balance out reduced cash generation and various cash uses.

Credit metrics are being depressed due to the boom-bust commodity price cycle that characterizes the mining business. If commodity consumption grows and shortages develop, such metrics should improve, provided that the miners continue their restraints on new capacity investments.

Among other key factors, DBRS takes into consideration the normal cycle and focuses on the fundamental strength and cost-competitiveness of a company’s business profile in its rating analysis. The desire is to assess if miners are able to maintain a balance between spending needs and outflows such as expansion capital, dividends and share buybacks. Notwithstanding, greater concern and risk of downgrades remain with those miners that have excessive debt (often as a result of acquisitions or high expansion expenditures for projects, particularly those that are not completed) and liquidity issues.

Notes:
The primary methodology applicable to companies in the mining sector is Rating Companies in the Mining Industry (September 2014), which can be found on our website under Methodologies.

For the “The Brakes are on in the Mining Sector: DBRS Public Mining Ratings by Rating Category with Key Metrics – July 2015” report, DBRS methodologies or for more information on this industry, visit www.dbrs.com or contact us at info@dbrs.com.