The number of mining companies landing in the junk bin is getting bigger. Kinross Gold Corp. became the latest miner to have its credit rating cut to junk after Standard & Poor’s on Thursday lowered its rating to BB+ from BBB-.
The agency earlier the same day placed Anglo American Plc below investment grade, following similar cuts by Moody’s Investors Service and Fitch Ratings this week. Freeport-McMoRan Inc. was cut to junk by S&P last week, less than a month after Moody’s did the same.
While mining shares are benefiting from gains this year, they’re recovering from multi-year lows. Even though metals prices have rebounded, they’re still trading close to their cost of production, eroding profit margins. As companies struggle to stem global gluts by curtailing output, some are also selling assets to generate cash and pay down debt.
By contrast, Kinross in November said it would spend $610 million to buy assets in Nevada from Barrick Gold Corp., joining rival Newmont Mining Corp. in a bid to ramp up output as its method of combating falling metal prices.
“The stable outlook on Kinross reflects our view that the company will maintain an intermediate financial risk profile over the next 12 months,” the ratings agency said in a statement.
“We expect the company’s competitive position to remain weaker than its investment-grade peers over the next two years, which primarily reflects Kinross’ comparatively higher cost structure.”
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