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Moody's downgrades Minera Frisco's rating to B3/B1.mx; outlook stable

Moody's on April 6 downgraded Minera Frisco SAB de CV to B3/B1.mx from B2/Ba1.mx, reflectingthe rating agency's perception of higher credit risk for the mining sector as wellas to align ratings with the fundamental shift in credit conditions for miners aroundthe world.

The outlook is stable, based on measures the company has takento improve production and efficiency.

As of December 2015, Minera Frisco's 23.9 billion Mexican pesooutstanding debt was mostly comprised of a syndicated facility with step-up amortizations,including US$80 million this year and US$200 million in 2017.

The maturities compare with the company's cash balance of 117million pesos.

Although Minera Frisco reduced its debt by 3 billion pesos in2015 and generated free cash flow of 1.2 billion pesos, cash generation this yearwill be pressured by around US$130 million, related to an expansionary copper project.

Under the current environment, Moody's considers it is uncertainwhether the company will be able to cover its upcoming debt commitments with internalcash generation. Minera Frisco also has limited alternative sources of liquiditydue to having no committed credit lines.

However, Minera Frisco's production is expected to graduallyrecover, based on the resumption of rainfall-affected production, its continuedfocus of increasing ore recovery and the restart of the Maria mine. These will befurther supported by the start of the expansionary copper project by the end ofthe year.

Moody's expects little meaningful improvement in the company'scash flows and credit metrics over the next 12 to 18 months. "Despite our expectationsof operational improvement during this period, financial results will continue tobe affected by lower metals price, reducing the company's cash generation ability."

In December 2015, Moody's lowered Minera Frisco's global corporate family rating toB2 from B1, and to Ba1.mx from Baa2.mx for the national scale.

As of April 6, US$1 wasequivalent to 17.73 Mexican pesos.