24th Apr 2020 17:07
(Alliance News) - Moody's Investors Service on Friday affirmed its Baa2 long term issuer rating for Anglo American PLC, however changed its outlook to negative from stable.
The credit agency's outlook change reflects its expectation that the miner's operating and financial performance will suffer from the disruption of mining operations and decline in certain commodity prices, caused by the Covid-19 pandemic.
In particular, Anglo American's South African mines have been affected by the government-imposed lockdown effective from March 27, that has been extended to the end of April even though most of the company's mines have been allowed to operate, albeit at a reduced workforce and production level.
Anglo American on Thursday revised its diamond, platinum, palladium, thermal and Kumba iron production guidance lower, while maintaining its copper, Minas-Rio iron, metallurgical coal and nickel guidance.
For 2020, Anglo is guiding copper production between 620,000 and 670,000 tonnes.
Diamond production was revised 7 million carats lower to fall between 25 million and 27 million. Platinum production is expected 0.5 million ounces lower, to between 1.5 million and 1.7 million.
Palladium is now expected 0.2 million to 0.4 million ounces lower, at around 1.0 million and 1.2 million. Kumba iron is expected to slip between 3.5 million to 4.million tonnes to 37 million to 39 million. And, finally, thermal coal is expected about 4 million tonnes lower at about 22 million.
However, the Baa2 rating affirmation reflect Anglo American's solid position with its diversified portfolio of mining assets, conservative financial policy as well as its materially improved financial profile since the last industry downturn.
In addition, Moody's said the negative impact of the pandemic will be partly offset by production cost reduction due to weaker currencies in most countries where Anglo American operates. The group is also targeting cost savings of USD500 million in 2020 and a USD1 billion reduction in capital expenditure.
"Changing the outlook on Anglo American's ratings to negative reflects the impact that the coronavirus crisis will have on the company's financial profile in 2020 and it reflects our recent rating action on the Government of South Africa sovereign rating which we downgraded to Ba1
with a negative outlook," said Senior Vice President Sven Reinke.
"While we recognise Anglo American's strong liquidity and financial flexibility and believe that a normalisation of commodity demand and commodity prices will support a recovery of its credit metrics in 2021-22, we consider the speed of the recovery as less certain. A further material increase of the coronavirus related operational disruptions or a slower than currently expected recovery as well as a further downgrade of the South African sovereign rating could result in the risk of a further rating downgrade to Baa3," Reinke added.
Shares in Anglo American closed 0.7% lower at 1,397.80 pence on Friday in London, while its Johannesburg shares were 0.2% higher at ZAR329.57.
By Dayo Laniyan; [email protected]
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