Volcan Mines Debut Deal

Peru’s Volcan Compania Minera priced a $600m 10-year bond Thursday, its debut in the international bond market. The Peruvian mining bond came at par to yield 5.375% after revising guidance from 5.625% to 5.5% area, well inside initial 5.75% whispers. Books reached around $4.5bn in demand. Southern Copper was thought to be the closest comp, though there were ratings differentials, not to mention Volcan’s smaller size. With Southern Copper’s 2020s trading at 4%, investors saw Volcan coming with a 50bp-60bp premium to its larger peer. One participating investor, however, calculated an 80bp differential between an interpolated 260bp spread on Southern Copper’s existing bonds and Volcan’s 343bp level. Investors were also drawn by the credit’s upside potential. “Volcan has substantial upside and given that 25% of the land is under development, that shows it can be a much stronger credit than it is now,” adds a second participating portfolio manager. Participation came from US (50%), Europe (30%) and LatAm (20%). Proceeds are expected to be used to finance energy projects. The borrower is involved in the extraction, concentration, treatment and commercialization of polymetallic ores such as zinc, lead, and silver. The bonds traded up 1 point in the grey Wednesday.