S&P revises Codelco view to negative

S&P revised the outlook on Corporacion Nacional del Cobre de Chile to negative from stable and affirmed Codelco’s A+ rating.

Codelco’s leverage will top 6x through 2021 assuming no material price hikes and no capital injections from the government, the agency said.

“Internal cash flow will fall short of our previous estimations by $1 billion in 2019 because of lower prices and less output. In the past few quarters, copper prices dipped nearly 10% while copper output shrank by 50,000 tons, mainly as a result of poorer ore grades than anticipated,” said S&P in a press release.

Capital spending remains at $4 billion per year while internal cash flow generation makes up for only half. Such a cash shortfall is making debt rise faster than the agency said it expected. “We estimate adjusted debt levels of $17.5 billion by the end of the year and nearly $20 billion in 2020, all else equal,” the agency said.

The negative outlook means S&P sees a one-in-three chance Codelco will be downgraded to A within 18 months.

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