S&P trims Eurasian Resources

S&P said it downgraded Eurasian Resources Group’s long-term rating to B- from B expecting weak results on depressed ferrochrome and cobalt prices and delays in its Metalkol Roan Tailings Reclamation project.

“We think ERG will post FFO to debt in the 6%-11% range in the next two years under the current depressed FeCr market environment and because of the delays in the benefits from the Metalkol RTR project. High carbon FeCr CIF China import currently trades at a low $0.67 per pound (/lb) for, having fallen from $0.85/lb in April 2019, and we note that FeCr represented 56% of ERG’s EBITDA in the first six months of 2019.

The company is reviewing its capital spending plans to offset the performance issues, but S&P said it still sees spending as a challenge for Eurasian Resources’ cash flow. “We see ERG’s continued heavy capex (remaining a comparatively high at $800 million-$900 million in the next two years) as an example of relatively aggressive strategy during the challenging pricing environment,” the agency said.

The outlook is negative.

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