HudBay Minerals Inc.s Proposed US$1 Billion Senior Unsecured Notes Assigned #B# Issue Ratings (Recovery Rating: #3#)

Stocks and Financial Services Press Releases Tuesday November 29, 2016 09:04
TORONTO--29 Nov--S&P Global Ratings

TORONTO (S&P Global Ratings) Nov. 28, 2016--S&P Global Ratings today said it assigned its 'B' issue-level rating and '3' recovery rating to Toronto-based HudBay Minerals Inc.'s proposed US$1 billion senior unsecured note issuance. The '3' recovery rating indicates our expectation for meaningful (50%-70%; upper half of the range) recovery for lenders in the event of a payment default.

The company intends to use the proceeds from this offering to redeem its US$920 million of senior notes outstanding due 2020. We expect the proposed senior unsecured notes will be composed of two tranches, including notes due 2023 and notes due 2025. The modest increase in gross debt does not materially impact our estimate of the company's credit measures or view of the corporate credit rating.

"Our 'B' long-term corporate credit rating and stable outlook on HudBay primarily reflect our view of the company's limited operating diversity, large debt load, and the high sensitivity of its credit metrics to base metals price volatility. The rating also incorporates Hudbay's favorable cash cost position, led by its flagship Constancia copper mine in Peru, and commodity production diversity provided by the company's Manitoba operations. We expect the company to generate an adjusted debt-to-EBITDA ratio in the mid-4x area and near breakeven free cash flows through 2017. In addition, we estimate the company's liquidity position to remain relatively stable over this period. Our estimates in 2017 are underpinned by an average copper price of US$2.20 per pound and average zinc price of US$1.00 per pound, with modestly lower copper output relative to 2016 levels.

For our complete corporate credit rating rationale on HudBay, please see our research report published Oct. 28, 2016, on RatingsDirect.

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