JOHANNESBURG (miningweekly.com) – A rebound in capital spending from the deep cuts made in 2016 is expected this year, along with the resumption in some dividends as excess cash is built up, Moody’s Investors Service’s said on Friday.

This followed the release of Moody’s yearly mining liquidity study, which showed recovering metal prices, cost cutting initiatives and stricter financial discipline had bolstered the first quarter liquidity of high-yield miners in Europe, the Middle East and Africa (Emea).

“Almost all high-yield miners now have adequate to strong liquidity, which is very much in contrast with the past two years when 20% of all rated miners in the region were weak in liquidity terms," said Moody’s VP senior credit officer Gianmarco Migliavacca.

The Mining Industry Liquidity Study 2017 analysed the liquidity of 17 rated mining companies – three investment grade and 14 high-yield – across the Emea region, noting that the improvement in all, but one, of the companies reflected the positive impact on balance sheets and cash flows of a better-than-expected recovery in metal prices during the second half of 2016 and the first quarter of this year.

High-yield miners have further mitigated refinancing risk by pushing a large amount of 2017/18 maturities to 2019 and beyond, leaving near-term maturities much lower than a year ago, as most companies managed to repay or reschedule the bulk of these commitments, it added.

The 2017 banking facility drawdown had also decreased, with the average use of committed revolving credit facilities falling to 28% in March this year, a level close to 2013 pre-crisis levels, as performance improvements and stronger cash balances reduced reliance on such facilities.

“Financial covenant compliance is no longer an issue this year for some high-yield miners as all miners are expected to remain in compliance,” Moody’s added.

“Cash balances and available bank facilities remain the key liquidity sources for Emea miners this year, but positive free cash flow is back as additional projected source of liquidity.

“Return to positive free cash flow and the doubling of average availability under revolving credit facilities among high-yield miners are two major liquidity improvements compared with last year.”