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Moody’s downgrades HudBay, expects company to take on more debt

A HudBay operation in Peru.

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HudBay Minerals Inc. was downgraded Wednesday by Moody's Investors Service, which said it expects the mining company will need to borrow more to fund its growth during a period of lower metals prices.

Moody's said its corporate family rating for Toronto-based HudBay has been lowered a notch to B3 from B2. On the Moody's rating scale, anything below triple-B is considered below investment grade.

Lower ratings tend to make it more difficult and expensive for companies to issue new debt securities, which are an alternative to issuing shares to raise money.

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Moody's says it believes HudBay will likely require additional capital of about $400 million to develop its various projects and will at least partly fund that requirement with debt rather than equity.

Moody's also notes that weaker-than-expected metal prices have reduced the miner's earnings and weakened its liquidity.

Moody's says the rating is driven by the company's small scale.

The service also downgraded HudBay's probability of default rating to B3-PD from B2-PD, affirmed its B3 senior unsecured notes ratings and affirmed its speculative grade liquidity rating at SGL-3, pegging the ratings outlook as stable.

On the Moody's rating scale, anything below triple-B is considered below investment grade.

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