(Alliance News) - Moody's Investors Service late Tuesday downgraded copper producer Taseko Mines Ltd's corporate family rating to Caa1 from B3, with the ratings outlook changed to negative from stable.
"The downgrade of Taseko's rating is driven by the company's high leverage and Moody's expectation of continued weakness in copper prices", said Jamie Koutsoukis, Moody's vice-president, senior analyst.
Moody's said weaknesses in Taseko's credit profile, including its exposure to copper prices, has left it vulnerable to shifts in market sentiment in these "unprecedented" operating conditions.
The negative outlook, meanwhile, reflects the risk that Taseko's performance and credit metrics will continue to weaken unless the price of copper improves. It also incorporates Moody's view that Taseko will continue to generate negative free cash leading to a weaker liquidity profile.
Looking ahead, Moody's said the ratings could be downgraded if it becomes more likely that Taseko will not be able to refinance its debt prior to the June 2022 maturity, the company experiences operating challenges at Gibraltar, or if liquidity weakens further.
More positively, Taseko's ratings could be upgraded if there is a sustained recovery in commodity prices that improve the company's profitability and the company is able to generate sustained positive free cash flow, Moody's said.
Taseko shares closed up 21% at CAD0.38 in Toronto on Tuesday. They were untraded in London early Wednesday.
By Evelina Grecenko; evelinagrecenko@alliancenews.com
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Taseko Mines L. (TKO)