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Standard and Poor's downgrades Brazilian miner Vale's rating on weak iron ore price outlook
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Standard & Poor's has downgraded its credit rating for Vale from A- to BBB+, citing weak iron ore prices at a time when the Brazilian miner is investing heavily in expanding its iron ore productioncapacity.
"Market fundamentals for iron ore continue to weaken, eroding Vale's operating cash flow generation, while its capital expenditure will remain high," S&P analysts in Brazil said January 26.
The ratings agency, which like Platts is part of McGraw Hill Financial, said it expected Vale's credit metrics to remain "somewhat weak" in 2015 before improving in 2016 and rebounding in 2017 when the company's iron ore expansion program had been completed.
S&P has based its view on the premise that Vale will produce 340 million mt of iron ore in 2015 and 370 million mt in 2016, before peaking at 410 million mt in 2017.
By Paul Bartholomew in Melbourne
Source: Platts
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