U.S. stocks rise on U.S.-Japan trade deal optimism; Tesla, Alphabet earnings due
Investing.com -- Moody’s Ratings has upgraded the Corporate Family Rating (CFR) and Senior Unsecured Notes of Compania de Minas Buenaventura S.A.A. (Buenaventura) to Ba3 from B1, with a stable outlook. This action follows significant improvements in the company’s liquidity after the issuance of $650 million in senior unsecured notes due in 2032 and the successful cash tender offer for the 5.5% $550 million in senior notes due in July 2026. These moves have extended Buenaventura’s maturity profile and secured additional funds to mitigate risk during the construction of the San Gabriel gold project, expected to start production towards the end of 2025.
Buenaventura utilized the proceeds from the new issuance to repay $401.4 million of the company’s bond due in July 2026, representing a 72.98% acceptance of the tender offer. The remaining 27.02% or $148.6 million is earmarked for debt repayment. As of December 2024, the company’s liquidity was bolstered by $478 million in cash, and $200 million in committed credit facilities due in July 2026. Buenaventura is also expected to generate around $325 million in funds from operations, including $160 million in dividends from its 19.58% stake in Sociedad Minera Cerro Verde S.A.A. (Cerro Verde).
The company’s capital expenditure (capex) related to the construction of San Gabriel will lead to a negative free cash flow of $180 million in 2025 and $50 million in 2026. The project is set to ramp up in the second half of 2025, contributing an average of 130 thousand ounces of gold for the first three years, at around $1,400 cash cost per ounce. As of December 2024, 71% of the project was completed, reducing the risk of significant cost overruns or delays. The company anticipates obtaining the operating permit during the third quarter of 2025 and producing the first gold bar in the fourth quarter.
The Ba3 ratings for Buenaventura reflect the company’s portfolio of assets in precious metals and copper, improved cost position, and production in its direct operations. The ratings also take into account Buenaventura’s record of adequate corporate governance practices and prudent liquidity management, further supported by dividends received from Cerro Verde. However, the company’s ratings are limited by its geographic concentration in Peru and its relatively modest operating scale compared to its global peers.
The stable outlook is based on the expectation that Buenaventura’s cost position and production will continue to improve and that liquidity will remain adequate in the next 12 to 18 months. The upgrade also takes into account governance and social considerations. The company’s overall exposure to governance risks was changed to 3 (G-3) from 4 (G-4), reflecting the company’s ongoing operational improvements and track record.
Positive rating pressure would require Buenaventura to maintain an adequate liquidity position to run its operations and meet debt obligations, to start up San Gabriel as planned, and to maintain a consistent performance in the company’s operations with an improvement in its cost position. An upgrade would also require Buenaventura to maintain its cash flow from operations minus dividends/total debt above 30% and leverage below 2.5x on a sustained basis.
Buenaventura’s ratings could be downgraded if the company experiences operational disruptions that limit the company’s cash flow generation capacity. Negative pressure could arise if there is any liquidity deterioration with sustained negative free cash flow due to higher than anticipated capex or lower than expected funds from operations. A leverage consistently above 3.5x or cash flow from operations minus dividends/total debt below 20% could also result in a downgrade.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.