Fresnillo Tightens Debut

Mexican precious metals mining company Fresnillo has raised $800m in its debut bond sale, tightening the 10-year bond by 25bp, while deciding against an additional 30-year tranche due to tepid demand. Despite the tightening, the BBB/Baa2 credit drew more than $4bn in orders. The silver and gold miner priced the 2023 at 99.242 with a 5.50% coupon to yield 5.60%, or UST+300bp, at the tight end of 300bp-area guidance and earlier 325bp-area talk. The bond was up 0.50 in the grey late Thursday, investors say. “There is apparently frenzy and everybody wants to participate in the deal. Fresnillo is a good credit and people can’t get enough of stable credits,” says an East Coast EM portfolio manager. “It looks cheap to US mining comps, but looks rich to fair value to other LatAm names. At 300bp, I’d rather own Volcan in Peru,” says a bond trader, noting expectations that gold and silver prices will drop in the medium to short-term. With Barrick Gold and Newmont trading around 200bp, Fresnillo offers value at 300bp, he says, but the other mining companies have a diversification component away from precious metals. Investors say there was not enough demand for Fresnillo at 30 years, and it was better to focus on having a single, more liquid tranche. The miner plans to use proceeds to fund current investments and a development plan. Moody’s Baa2 rating reflects the expectation that per-ounce gold and silver prices will remain in the range of $1,200 and $20, respectively, over the next 12-18 months, which will support operating cash flow. Fresnillo is the world’s largest silver company and second-largest gold mining company in Mexico in terms of production. Citi, Deutsche Bank and JPMorgan managed the 144A/RegS offering, listed in Ireland and governed by New York law.