DBRS Morningstar Comments on Capping Ratings for Mining Issuers
This commentary discusses the rating process that DBRS Morningstar follows to address the volatile mining commodity prices and resulting cyclicality of credit metrics. Our approach is to temper the potential uplift from very strong credit metrics to typically one notch, or in some cases two notches, above a company’s business risk assessment (BRA) profile. As a result, the primary path for management to improve the overall final rating should be to structurally improve the business risk profile either through high-return organic growth or accretive mergers and acquisitions (M&A) activity that results in longer life but similar quality reserves, reduced operating cost structures, broader product diversification, and/or an improvement in the political risk profile.
DBRS Morningstar is a global credit ratings business with 700 employees in eight offices globally. DBRS and Morningstar Credit Ratings are committed to empowering investor success, serving the market through leading-edge technology and raising the bar for the industry.
Together, we are the world’s fourth largest credit ratings agency and a market leader in Canada, the U.S. and Europe in multiple asset classes. We rate more than 2,600 issuers and 54,000 securities worldwide and are driven to bring more clarity, diversity and responsiveness to the ratings process. Our approach and size provide the agility to respond to customers’ needs, while being large enough to provide the necessary expertise and resources. For more details visit us at dbrs.com.
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