Fitch affirms Samarco

Fitch Ratings said it affirmed Samarco Mineracao SA's local- and foreign-currency issuer default ratings at BBB and its national scale rating at AA+(bra).

The outlook for the issuer default ratings is stable, and the agency said it revised the outlook for the national scale rating to stable from positive due to a larger-than-expected drop in pellet prices and sharp deterioration in volumes.

The affirmation reflects Samarco's resilient financial profile and conservative capital structure amid challenging trading conditions, its solid ownership composition (owned 50% each by Vale SA and BHP Billiton Ltd.) and its favorable competitive position as a low-cost producer and exporter of iron ore pellets, the agency said.

Samarco's ratings also incorporate the potential volatility of its revenue stream, primarily due to the company's exposure to conditions in the world steel industry, Fitch said, and relative to the major iron ore producers, the company lacks diversity in its iron ore product mix.

The total debt-to-operating EBITDA ratio was 1.3 times for 2008.

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