Moody’s praises gold, platinum mines’ restructuring
MOODY’S Investors Service has praised the restructuring initiatives by gold and Platinum Group Metals (PGM) miners in a bid to protect their sustainability and profitability, saying these were benefiting their credit profiles.
In a report yesterday, Moody’s vice-president and senior analyst Douglas Rowlings said the changes would also shore up the production profiles of gold miners following a cycle of under-investment in reserve development since 2013.
“South African mining groups’ restructuring initiatives will protect their credit quality by returning South African operations to a state in which they are free-cash-flow-generating,” Rowlings said.
“Improved free-cash-flow generation and accumulating offshore cash balances will be channelled towards expansion opportunities outside South Africa, reducing their operating risk profiles.”
The report said the restructuring of operations would be positive for the credit profiles of AngloGold Ashanti, which is on Baa3 positive rating, Gold Fields (Ba1 positive) and Sibanye Gold (Ba2 stable).
The profitability of South African gold and PGM mining operations has been under increasing pressure because of the low, but slightly improved, gold and PGM price environment.
According to the Fraser Institute, a Canadian think tank, the lack of clarity and certainty over South African mining policy was increasing the risk attached to mining operations in the country, reflected in the continued lowering of South Africa’s attraction for investors.
Moody’s said it expected mining companies to keep a tight rein on capital expenditure if there was no framework that provides policy predictability and certainty.
“Many mines’ useful lives could be extended with new equipment and infrastructure to reduce costs and improve entry to ore bodies,” Rowlings said.
“If the substantial expansionary investment required to reconfigure loss-making mining operations and make them profitable is not forthcoming, mines will either be restructured or closed.” – ANA