Financial Flexibility Could Be a Saving Grace for Iron Miners, S&P Credit Analysts

Mineweb today drew attention to observations from Standard & Poor’s Ratings Services that iron ore prices could hurt some iron miners if they end up staying at $90 a ton for 2015. S&P analysts said that although larger companies would likely be able to adapt while some smaller, more iron focus companies might be put at a greater risk, either might just be able to weather the storm with good management and financial strategies.

The article quoted credit analysts May Zhong, Diego H. Ocampo, Andrey Nikolaev, Amanda Buckland, Elad Jelasko, and Xavier Jean as saying:

In particular, miners with large iron ore exposure, but are unable to cut costs and are saddled with debt, will face a severe deterioration in earnings and credit metrics. Whether this deterioration triggers a downgrade depends critically on a mining company’s financial flexibility. If a miner can defer its capital expenditure and conserve cash, its credit quality should be able to withstand sliding iron ore prices.