Rio Tinto's credit metrics could improve over the next 12-18 months, which has prompted Standard & Poor's to revise Rio's outlook from "stable" to "positive."
"This is supported by a rebound in metals and minerals prices and lower debt, and comes despite the group's plans to increase capital expenditure and dividends from 2010 onward compared with 2009," said S&P Credit Analysts Alex Herbert and Paulina Grabowiec.
Nevertheless, the analysts warned, "We view proposals in Australia for a 40% ‘resources super profits tax' as potentially negative to Rio Tinto's future cash flows. If implemented in its current form, this would increase Rio Tinto's tax expenses from 2012 and could affect the amount and timing of capex in Australia."
S&P considers Rio Tinto's liquidity to be adequate, as it was significantly strengthened last year. "We believe that debt maturities are manageable, including about $3.3 billion due in 2013 and about $2.8 billion in 2014, that that Rio Tinto will continue to have good access to debt capital markets."
Meanwhile, S&P affirmed its ‘BBB+' long-term and ‘A-2' short-term corporate credit and debt ratings on the group.
Author: Dorothy Kosich, Mineweb.com