CHICAGO--(BUSINESS WIRE)--Link to Fitch Ratings' Report: 2014 Outlook: Latin American Metals and Mining (Fine-Tuning Cost Structures to Lower Commodity Price Scenario)
Latin American metals and mining companies rated by Fitch Ratings are well placed in the cost curve to deal with the lower commodity pricing scenario expected in 2014. The majority of these companies benefit from competitive production costs, strong liquidity and low leverage. Vertical integration and significant value from by-products in many cases have helped to keep their production costs relatively low.
'Over the last three years, Fitch has observed management focus on cutting costs and concentrate on cheaper Brownfield expansion projects, while delaying or cancelling expensive Greenfield enterprises, and in some cases seeking-out JV partners to reduce the costs of future projects,' said Jay Djemal, Director in Fitch's Latin America Corporate Group.
'Management has generally demonstrated a conservative approach to leverage with swift and aggressive cost cutting, especially for capex, in response to declining commodity prices, and this has placed their capital structures in a robust position to better tackle the lower pricing and volume surplus environment expected for 2014,' added Djemal.
Lower than envisaged commodity prices over a prolonged period driven by lower demand from China and inability to further reduce fixed costs could combine to present significant challenges to the industry in 2014. Other risks include protracted labor strikes, spiraling leverage due to aggressive debt-funded acquisitions at a time of possible industry consolidation, increased resource nationalism, and capital expenditure overruns.
Fitch's special report '2014 Outlook: Latin American Metals and Mining - Fine-Tuning Cost Structures to Lower Commodity Price Scenario' is available at 'www.fitchratings.com' or by clicking on the above link.
Additional information is available at 'www.fitchratings.com'.