Amidst mining slowdown, Chile’s Antofagasta looks to issue new debt
Published: 20 January 2016 12:04
Chilean Antofagasta is looking to issue a new bond, according to reports. Against the backdrop of the plight of emerging markets, the mining industry is struggling amid a wider commodities slowdown.
The copper mining group Antofagasta in Chile has reputedly hired JP Morgan and Citi to lead a possible cross border issuance. Although no size and tenor of the bond is currently available, it is usual for debut borrowers to issue benchmark-size 10 year bonds.
The news comes despite the fact that copper production by Antofagasta fell 11% in 2015.
“Chile may be the leading market in Latin America, but there is also still a global commodity slump,” said John Stanner, Director of Rally Financial Group and a mining and metals advisor.
Emerging markets have fallen out of favour as of late due to an industrial slowdown in China, which consumes most of their exports, coupled with a US interest rate rise which has led to higher borrowing costs. Even the high yields offered on emerging market bonds are not effective at offsetting investor uncertainty.
Many economies in Latin America are suffering in the current climate. Brazil, Venezuela and Ecuador are feeling the pinch under the drawn out commodity slump and Argentina is struggling to regain access to the global capital markets.
The mining industry has not fared well with slowing global demand for commodities. Zambia is Africa’s second largest metal producer and relies heavily on copper. Last year the country saw yields on its debt soar; its currency, the kwacha slide 5% against the dollar and its Eurobonds fall to new record lows after Moody’s reduced the country’s credit rating to B2, 5 notches into junk territory largely on copper performance.
The mining crisis didn’t just affect Africa. Many Latin American mining companies have seen their ratings downgraded.
Vale, the Brazilian mining company and world’s largest iron ore exporter had its rating downgraded to Baa3 with a negative outlook by Moody’s in December 2015. This year the ratings agency has placed the company under review for a possible downgrade to junk.
However, other emerging markets, mainly in the Latin American region have shown a strong resilience in the face of a global economic slowdown alongside a lack of investor interest. Peru, Mexico and Chile have all been performing well this year.
The latter two have already issued large bonds that were very popular among international investors. The Dominican Republic issued the first sub investment grade bond in Latin America this year amid high demand.
As Antofagasta is based in a country seen to have one of the most positive outlooks for an emerging market in Latin America for this year amongst international investors, it could stand a chance of attracting interest for any bond it issues, but copper woes will not disappear overnight.
ABOUT THE AUTHOR
Miners & Investors is a trusted provider of analysis, and commentary that helps illuminate the most significant issues, events and trends impacting the Latin American Mining and Investment markets.
- The Miner Roadshow – An opportunity for miners in Latin America to attract investment
- 5 mining projects to watch out for in Latin America
- Diego Temperley of Auscham on the potential of Mining and development of Lithium in Argentina
- CEO of Minsur talks about latest achievements and commitment to sustainability
- How mining companies with strong CSR Programs benefit all stakeholders
17 Apr 2018
13 Dec 2017