According to Fitch Ratings’ special report Latin American Metals and Mining Outlook – Bruised but Not Beaten, published February 4, following a period of sustained strong revenue growth, Latin American metals and mining companies face more than a 50% drop in their EBITDA during 2009. Following periods of high demand and high prices which peaked in mid-2008, these companies amassed strong cash positions on their balance sheets and are well positioned entering the downturn. ‘The next 12 months will prove difficult for these companies,’ says Jay Djemal, Associate Director, and lead author of the report, in Fitch’s Latin American Corporate Team. ‘Leverage and interest covenants may be breached by some Latin American metal and mining companies as a result of the tightening cash flows due to the subdued demand and low metal prices. But very strong cash positions mean it is unlikely that any of the big players will default on their debt obligations.’

Many companies announced delays in their capital expenditure projects and have reduced their production levels in response to this cash flow pressure to reflect the economic reality of demand. In addition, these companies have reduced their workforce or negotiated with unions to place employees on partially paid leave, while also temporarily closing mills and mines. Tight controls on working capital have also been imposed.

The median cash/short term debt coverage ratio for the group of the Fitch rated Latin American metals and mining companies as of the last twelve months (LTM) ending September 30, 2008 was 1.6 times, a fall from the 2.5 times peak seen in 2006. Median short-term debt for the same period accounted for just 21% of total debt, with the majority of large amortisations not being due until after 24 months. The companies listed in the report include: CAP S.A., CSN, Gerdau, Vale, Samarco, Usiminas, Siderar, Sidetur, Ternium Mexico, Codelco, Southern Copper Corporation, Minera Escondida, Molymet, Alcoa Aluminio and Clarendon Alumina Production Ltd. The report provides the liquidity positions and outlook of these companies as of LTM ending September 30, 2008.

Fitch’s rating definitions and the terms of use of such ratings are available on the agency’s public site, http://cts.businesswire.com/ct/CT?id=smartlink&div=bdafifjgaa&url=http%3A%2F%2Fwww.fitchratings.com&esheet=5890269&lan=en_US&anchor=www.fitchratings.com&index=1.