The leading global ratings agency Fitch Ratings has affirmed Russia-based coal producer Raspadskaya's long-term foreign currency issuer default rating (IDR) and senior unsecured rating at 'B+' and its national long-term rating at 'A(rus)'. Fitch has simultaneously removed these ratings from rating watch negative (RWN) where they were placed on May 12, 2010 and assigned stable outlooks to the long-term IDR and national long-term rating.
"The rating action reflects Fitch's expectations that the company's Raspadskaya mine, which was shut down as a result of an explosion on May 9, 2010, will be fully operational by the end of Q1 2012 and that average coking coal concentrate prices during 2011 will remain at the level of Q4 2010," Fitch stated, adding that the company's other mines will also continue to ramp up during 2011 with total output increasing 20-25 percent by 2013 compared with 2009.
Fitch noted that with coal sales prices almost doubling in H2 2010 year on year, Raspadskaya's financial position and liquidity are strong with a cash balance of $90 million at the end of Q2 2010. Fitch estimates Raspadskaya's 2010 revenue at $680-730 million, with an EBITDAR margin of 40-45 percent. According to the agency's estimates, Raspadskaya should be able to fund the reconstruction activities at its Raspadskaya mine (estimated at $280 million) from internally generated cash flows and be in a strong position to either refinance or repay the $300 million eurobond due on May 22, 2012.
Raspadskaya's ratings continue to reflect its competitive cost position ($22/mt of concentrate in 2009), robust average mine lives at existing operations of over 70 years, and its conservative financial policy. Fitch favorably views the company's efforts to reduce its high dependency on the Raspadskaya mine, with its share in total output gradually declining from 65 percent in 2009.
Negative rating pressure could arise from a slower-than-expected ramp-up of production at Raspadskaya, Razrez Raspadsky and Raspadskaya-Koksovaya mines, as well as a drop in 2011 sales prices of more than 10 percent year on year, Fitch stated.