Moody's reviews Codelco for downgrade

Moody's Investors Service said it placed Corporacion Nacional del Cobre de Chile’s A3 long-term ratings and the baa3 baseline credit assessment under review for downgrade.

“The review action recognizes the major operational challenges currently faced by Codelco, which, together with structural declines in ore grades, have led to significant declines in production volumes, from average levels of 1.7 million-1.8 million tons (including affiliates El Abra and Anglo American Sur SA) until 2021, to 1.55 million tons in 2022 and 1.45 million tons in the 12 months that ended in July 2023.

“The decline in the company's production was mainly driven by operational difficulties due to adverse weather conditions during the first half of 2023, as well as maintenance activities, primarily in Central Southern operations. Additionally, lower ore grades at Ministro Hales and Gabriela Mistral operations, along with reduced mineral processing at the Chuquicamata open pit, significantly affected production, which was partially offset by higher mineral volumes and higher grades from the underground mine,” Moody’s said in a statement.

In July, Codelco trimmed its production guidance to 1.31 million-1.35 million tons from 1.35 million-1.42 million tons for the full year 2023, which is the lowest level since 2009.

“The review process will focus on Codelco's initiatives towards improving production volumes (absent one-offs) and productivity while reducing costs and expenses, and its progress towards maintaining liquidity while it continues to meet its capital spending requirements. It is unlikely that the review process will result in a downgrade of more than one notch,” Moody’s explained.

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