The notes benefit from the same upstream guarantees as the credit facility and rank equally with existing private notes aggregating
The Rating Outlook is Stable.
KEY RATING DRIVERS
Yamana's ratings reflect its sizeable reserves, very low cash cost position, average geopolitical risk, and limited capital spending compared to the potential for substantial future growth combined with Yamana's commitment to maintain a conservative capital structure given its exposure to gold prices. In weak gold markets, the company has the ability to defer development and exploration and focus on preservation of its capital structure.
Yamana is very low on the cost curve compared to peers. It is solidly in the lowest quartile, benefitting on a by-product basis from a comparatively large percentage of sales coming from silver and copper. In 2013, the company had production of 1.2 million gold-equivalent ounces (GEO) at an all-in sustaining cost of
The company has a high degree of operating mines, low capital requirements, and pro forma for the Osisko transaction, high mid-tier production. For its size, production by mine is fairly diversified, with no foreseeable large risks from new mine construction cost overruns or delays, as a majority of projects are at least in the commissioning phase, with the exception of
Yamana operates in
Latest 12 months (LTM) ended
Liquidity pro forma for the Osisko transaction is moderate, with
Fitch expects Yamana to remain in compliance with its covenants and have sufficient liquidity to support its operations.
Fitch estimates schedule maturities of debt, pro forma for the new notes and Osisko debt, as of
The Stable Outlook reflects Fitch's expectation that total debt/EBITDA will not exceed 3.0x on a sustained basis, and will generally trend to below 2.0x. Should internal cash generation fall behind expectations, Fitch expects expansion expenditures to be cut or to be supported by new equity issuances or non-core asset sales.
Negative: Future developments that may, individually or collectively, lead to negative rating action include:
--Gold prices and internally generated cash flow deteriorate without an equal management response in the form of reduced spending, asset sales or the raising of equity;
--Expectations that total debt/operating EBITDA will be greater than 3.0x on a sustained basis.
Positive: Not anticipated given size and sensitivity to metals prices but future developments that may lead to a positive rating action include:
--Significant reduction in borrowing and positive free cash flow on a sustained basis.
--Revolving Credit Facility 'BBB-';
--Senior Unsecured Term Loan due 2016 'BBB-';
Additional information is available at 'www.fitchratings.com'.
--'Corporate Rating Methodology' (
Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage
70 W. Madison
Source: Fitch Ratings
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