Moody's places First Quantum Minerals' ratings on review for downgradeGlobal Credit Research - 03 Dec 2013
London, 03 December 2013 -- Moody's Investors Service has today placed all the ratings of First Quantum Minerals ('FQM'; rated Ba3) on review for downgrade following the disclosure by the company, in a press release dated 27 November 2013, that a dispute has arisen with certain bondholders who are claiming that a breach of terms has occurred under the indentures of two bonds of FQM (Akubra) Ltd ('FQM Akubra') totalling nearly $2 billion. FQM Akubra is a subsidiary of FQM that amalgamated with Inmet Mining Corporation ('Inmet') earlier this year following the completion of a tender offer for Inmet made by FQM.
"The review for downgrade reflects our concerns regarding the potential negative consequences for FQM of a legal dispute involving nearly $2 billion worth of notes," says Gianmarco Migliavacca, a Moody's Vice President -- Senior Analyst and lead analyst for FQM. "The dispute creates uncertainty and could end up with an acceleration of the debt, which could have a negative impact on the company's liquidity position if not proactively addressed by management, although acceleration is not considered a likely outcome at this stage."
A full list of affected ratings is provided towards the end of this press release.
RATINGS RATIONALE
The initiation of the review is ultimately driven by the possibility that any resolution of the legal dispute could negatively affect FQM's liquidity position, should the dispute lead to the company having to redeem the bonds early or make any other compensatory payments. Should the dispute remain unresolved for a period of time, it could also negatively affect the company's ability to raise further funding to pursue its substantial capex plan, particularly with respect to its key projects, including Sentinel and Cobre Panama, while also taking into consideration the June 2014 maturity of FQM Akubra's $2.5 billion Revolving Credit Facility.
The review will focus on the potential risks that this dispute is creating and the extent to which any contingency plans the company is pursuing will mitigate those risks.
AFFECTED RATINGS
First Quantum Minerals Ltd
- Corporate family rating -- Ba3
- Probability of default rating -- Ba3-PD
- $350 million of 7.25% senior notes due 2019 -- B2/LGD6
FQM (Akubra) Ltd (formerly Inmet Mining Corporation)
- $1,500 million of 8.75% senior notes due 2020 -- B1/LGD5
- $500 million of 7.5% senior notes due 2021 -- B1/LGD5
The principal methodology used in these rating was the Global Mining Industry published in May 2009. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.
First Quantum Minerals Ltd (FQM), headquartered in Canada and listed on the Toronto, London and Lusaka Stock Exchanges, is a medium-sized mining company with a large operation in Zambia, where it manages Kansanshi, a large and low-cost copper and gold deposit. FQM also operates a small copper and gold mine in Mauritania, a junior nickel mine in Australia and a junior nickel-copper mine in Finland. Following the acquisition of Inmet, FQM has gained access to one of the world's largest copper deposits, Cobre Panama, as well as to small copper and zinc mining operations in the EMEA region. The pro-forma combined revenues of FQM and Inmet in 2012 were just above $4.0 billion.
