06 May 2004 04:56
S&P affirms Alrosa ratings, outlook stable
MOSCOW. May 6 (Interfax) - Standard & Poor's Ratings Services affirmed its 'B' long-term corporate
credit rating on Russian diamond mining company Alrosa Co. Ltd. (Alrosa), and its 'B' senior unsecured debt
rating on related entity Alrosa Finance S.A. following a review. The outlook is stable, the agency said in a
press-release.
"Alrosa has maintained its solid position in the relatively stable diamond industry, with rich reserves and
lucrative sales to the South African diamond giant De Beers," said Standard & Poor's credit analyst Elena
Anankina. "The ratings are constrained, however, by ALlrosa's significant leverage and high capital
investments, which limit free cash flow generation."
Alrosa has accumulated significant debt to finance its ongoing heavy capital expenditures, which are essential to
maintain and increase production levels in coming years. Alrosa needs to continue investing in new open pits and
switching to underground mining because its largest Udachny pit--which represents about one-half of the company's
total output by value--is already about 500 meters deep.
After four years of negative free cash flow, Alrosa's debt peaked at $1.4 billion at September 30, 2003, but the
company managed to reduce this to $1.2 billion by year-end December 31, 2003. The company has started to recover from
its recent decline in production: a full year of underground production at the company's International mine and the
commissioning of the Nyurba open pit in 2003 helped to offset the closure of Mir, Alrosa's largest open pit, in
2002.
Alrosa is expected to continue with its sales to De Beers while gradually diversifying its exports. It is also
expected that the final ruling of the European Commission regarding its objections to the trade agreement between Alrosa
and De Beers will not trigger any significant pressure on Alrosa's business and financial profiles.
In the mid to long term, the ratings will be largely driven by changes in the fundamentals of the diamond industry,
which is gradually becoming more competitive, and by the company's progress in its capital expenditure program. [RU
ASIA EUROPE EEU EMRG DIA MIN AAA]
[Interfax] |
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