OREANDA-NEWS. May 19, 2010. Moody's Investors Service has assigned a Corporate Family Rating of Ba2 to Eurasian Natural Resources Corporation PLC, a vertically integrated Kazakh mining company. The outlook is stable. This is the first time that Moody's has rated ENRC Plc., reported the press-centre of KASE. 

The Ba2 issuer rating for ENRC recognizes the company's (i) good access to high grade and long reserve life mining assets in Kazakhstan with more than 35 years of reserves at current production levels, which offer ENRC a privileged access to the Chinese and more generally to the Asian and Eurasian markets, (ii) favorable cost structure thanks to the group's high quality mining assets as well as the group's high level of vertical integration (self sufficiency in metals, downstream integration in smelting and refining as well as the access to captive power and transportation assets), (iii) conservative balance sheet structure that benefited from the retention of the group's solid cash flow generation during the cyclical upturn experienced by the sector mining sector up to mid 2008 and of the IPO proceeds of December 2007, (iv) strategy to diversify the group's product portfolio in natural resources to reduce the group's exposure to certain customers, metals and regions and (v) experienced management.

The rating is constrained by (i) ENRC's exposure to volatile metals markets and its revenue and earnings concentration on ferrochrome and iron ore, (ii) the group's strong customer concentration with MMK and UC Rusal accounting for 15% and 8% of fiscal year 2009 group revenues, (iii) the company's limited geographical diversification in terms of location of assets, which implies some degree of political risk and foreign exchange exposure, but also in terms of location of end customers although Moody's notes that the company's acquisitions in Africa have improved the group's geographical profile and metals diversity, (iv) the capital intensiveness of the business which will require large capital expenditures to maintain current production levels in the short to medium term, and (v) the fairly high event risk linked to the successful execution of the group's corporate strategy.

The liquidity profile of the group is adequate. ENRC had USD830 million of cash and cash equivalents on balance sheet at fiscal year-end 2009. The liquidity needs of ENRC over the next twelve months mainly consisting of the payment for the acquisitions announced since the beginning of fiscal year 2010, material capex (partly discretionary) and modest working capital requirements are expected to be covered from operating cash flows, cash on balance sheet as well as drawings under a new USD400 million credit facility from the Development Bank of Kazakhstan.

The stable outlook reflects Moody's expectation that ENRC will maintain a prudent balance sheet strategy going forward and will continue to benefit from supportive demand fundamentals for its products. The stable outlook also reflects the agency's expectation that ENRC will pursue its diversification strategy to improve the business profile and earnings resilience of the group over time at a prudent pace. The agency will closely monitor the execution of the strategy, which bears some execution risk.

The principal methodology used in rating ENRC Plc was the 'Global Mining Industry' methodology, which can be found at www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website.