Moody's upgrades Peruvian miner Buenaventura

Moody's upgraded Peruvian precious metals miner Buenaventura and raised the outlook from stable to positive.

The ratings agency raised the company’s corporate family rating and senior unsecured notes to ‘B1’ from ‘B2’ on increased production from new infrastructure and mine plan improvements at El Brocal, Yumpag and Ucchuchacua, Moody’s said in a report.

According to Moody's, the mines will contribute 59% of Buenaventura’s cash flow by 2025 and will gradually reduce the dependence on dividends from its share in the Cerro Verde copper mine.

"Consolidated Ebitda generation and cost position will improve further, once San Gabriel mine is fully operational, in the second half of 2025 leading to self-sustained direct operations and reducing the company's dependency on dividends from its 19.58% stake in Sociedad Minera Cerro Verde," the report says.

At San Gabriel, a gold project in Moquegua region, the company recently raised estimated capex from US$470mn to US$650mn and this year’s amount from US$220m to US$280mn. The mine is expected to produce 130,000oz of gold and 69,000oz of silver during the first three years.

OUTLOOK

Moody's expects Buenaventura to continue improving the cost situation of its direct operations and to maintain good liquidity due to improved metals prices, dividends, cost structure and a conservative corporate profile of its management.

The miner had US$172mn in cash at the end of June and other sources of liquidity include US$200mn in credit lines, US$170mn from asset sales and about US$120mn from dividends.

"However, capex associated with the construction of San Gabriel will drive negative free cash flow to US$160mn on average in the 2024-2026 period. We expect the company to maintain enough liquidity sources including cash flow from direct operations and committed facilities, to fund its expansion plan," the report says.

"Buenaventura has US$550mn in senior unsecured notes maturing in July 2026, we expect the company to refinance those at least 12 months in advance."

"Our efforts are focused on mitigating the risks associated with the construction of San Gabriel, meeting the established deadlines and capex, and continuing to optimize the reduction of costs in our operations to increase profitability and maintain a solid financial position," Buenaventura said in a statement to the market.