By Johannesburg‚ Dec 6 (I-Net Bridge) - Moody's Investors Service has downgraded the global scale issuer rating of Gold Fields (GFI) and the senior unsecured rating of Gold Fields Orogen Holding (BVI) to Ba1 from Baa3. The outlook on the ratings is negative.
This ratings agency said the action was prompted by the company’s announcement last week that it planned to unbundle its South African mining assets - the Kloof-Driefontein Complex and Beatrix mines - into a newly formed entity‚ Sibanye Gold‚ to be finalised by mid-February next year.
“Gold Fields’ planned unbundling of its two South African mining assets ... will initially lead to an overall weaker credit profile after the transaction is concluded‚ hence the one-notch downgrade to Ba1‚” said Gianmarco Migliavacca‚ analyst at the agency. “The rationale for the downgrade to Ba1 is driven by an overall weaker scale‚ geographic diversification and liquidity profile.”
Migliavacca said the downgrade also reflected near-term deterioration of cash flow metrics‚ as the unbundled - more mature - assets contributed more positive free cash flow compared to the company's South Deep mining project which is still in a ramp-up phase and is therefore reporting negative free cash flow generation.
The negative outlook assigned to company’s ratings is primarily driven by the near-term deterioration of free cash flow and higher reliance of cash flows from its operations in Ghana in the short to medium term‚ until the South Deep project is complete and can contribute towards healthy positive free cash flows.