Moody’s Rating
“The important thing for Minera Frisco is that the operations are going well,” Elias said in a phone interview. “The results are a reflection of temporary effects of a fall in metal prices and the devaluation of the peso versus the dollar.”
Moody’s Investors Service said in a statement Monday that it sees Frisco increasing production with new projects, improving operating efficiency and reducing debt.
Indeed, one of the biggest obstacles to a turnaround is the company’s high debt load; with limited capacity to borrow more, and with cash flow sapped by falling gold prices, Frisco has fewer resources to invest in future production, according to Credit Suisse Group AG.
The company’s net debt is 4.5 times its earnings before interest, taxes, depreciation and amortization, according to Javier Santiago, a mining analyst at BBVA Bancomer in Mexico City. That’s the highest ratio among the country’s four biggest mining companies.
‘Tight Liquidity’
Frisco’s Munguia said the official ratio it reports to lenders is lower, at 3.86 times.
The company’s cash flow from operations dwindled to 787.7 million pesos ($48.7 million) in the second quarter, down 67 percent from a year earlier. Frisco’s milling and deposit production dropped 5 percent as the Maria copper mine in the northern Mexican state of Sonora completed its production cycle.
Frisco’s “tight liquidity position is a strong constraint on exploration spending,” Credit Suisse analyst Ivano Westin wrote in a July 23 report. Westin has a sell rating on the stock, with a 12-month price target of 8.4 pesos per share. On Monday, it closed at 10.06 pesos in Mexico City.