Dec 12 – Standard & Poor’s Ratings Services today said its ratings and
outlook on Inmet Mining Corp. (B+/Stable/–), including its issue-level
and recovery ratings, are unchanged following the company’s up to US$500 million
proposed senior unsecured notes offering. We expect the notes will rank equally
with all of Inmet’s existing and future unsecured and unsubordinated
indebtedness.
In our opinion, the proceeds from the proposed notes offering enhance
financial flexibility, particularly by providing clarity on funding Inmet’s
portion of the remaining estimated capital expenditures at the Cobre Panama
construction project. At the same time, the company’s higher pro forma debt
balance will increase its sensitivity to a moderate change in base metals
prices. We estimate that a 20% decline in copper prices–relative to our base
case assumption for copper of US$3.50 per pound through next year–would
likely result in the company’s adjusted debt-to-EBITDA leverage ratio
surpassing 4.5x, a key threshold for downgrading Inmet.
The stable outlook on Inmet reflects our view that contemporary base metals
prices should support the company’s credit measures with funds from operations
(FFO) generation reinforcing its liquidity in a period of extraordinarily
large growth capital expenditures. Under our base case assumption, we expect
Inmet to generate an average adjusted debt-to-EBITDA leverage ratio under 4x
and an average adjusted FFO to debt of close to 15% in the next few years.
Inmet operates three mines in Finland, Spain, and Turkey, and holds a majority
interest in the Cobre Panama construction project in Panama.
