EM LATAM CREDIT: Volcan: New 7-Year Fair Value

(VOLCAN; B3pos/NR/B-pos)

IPT 7Y: Mid-high 8s FV 7Y: 7.75% Area

• Peru polymetallic miner Volcan proposed issuing USD 144a/Reg S, senior secured notes maturing 2032 with a likely size of USD600-750mn according to Moody’s, and an expected rating of (B3/NR/B-). Use of proceeds will be primarily to refinance debt including a tender offer of existing USD299.872mn senior secured 2030 notes, USD68mn senior unsecured 2026 notes and an outstanding USD330mn syndicated loan. The tender offer for 2030 notes contains a consent solicitation to substantially eliminate restrictive covenants and events of default in the indenture and a collateral release condition contingent on the full repurchase of the 2030 notes at which point the new notes would become senior unsecured with covenants like the 2026 notes, according to Fitch.
• We consider that prior to the announcement of the tender, the senior secured 2030 notes were quoted in a range of 7.25-8% yield since the beginning of Sept. 2025 and they were yielding around 9% as recent as June 2025 so that might induce the need for a larger new issue concession. The company will still have a high-cost structure until the new Romina mine comes online in 2026 and high capex needs for another year. Volcan has been able to generate free cash flow thanks to high silver prices, but its main zinc commodity has not yet recovered. The company nearly went bankrupt in the recent past, but the restructuring of liabilities led to a lower levered balance sheet and fewer maturities for the next 5 years.
• Peruvian precious metal miner Buenaventura (BUENAV; NR/BB-/BB) has 2032 callable notes quoted at a 5.84% yield, g-spread of 230bp to the 2030 call date. While both Volcan and Buenaventura have limited geographic diversification being Peru-centric, Buenaventura is more focused on the currently much more profitable gold and silver mining segment while Volcan is more base metal, primarily involved in zinc. Zinc prices plummeted in 2023 and have failed to recover but fortunately for now silver prices remain high to support cash flow generation coming from Volcan’s silver production.
• Colombia gold miner Aris Mining (ARISCN; B1/B+/B+) has 4-year notes yielding 6.57%, g-spread of 310bp. Extending that out to 7-years we estimate would yield 7.25% in 7-years. The company has a similar small scale and lack of geographic diversification, but gold has been more profitable than nickel. Colombia has had some mining accidents recently and a worse political climate than Peru.
• Canada based First Quantum Minerals (FMCN; NR/Bneg/B) focused on base and precious metals mining in Zambia has 7.5-year notes yielding 6.46% to the 2030 call date, g-spread of 292bp and 8.5-year notes quoted 6.61% to the Feb 2031 call. First Quantum is trying to regain its copper mining concession in Panama. Meanwhile, the company has become more reliant on Zambia which constrains the Fitch credit rating.
• India holding company Vedanta Resources LTD (VEDN; B2/NR/B+) with substantial zinc and silver mining assets priced a 7NC2-year senior unsecured note in late Sept. 2025 at 9.125% which is now quoted at 9.48%. However, the new VOLCAN notes should trade at a lower yield than VEDLN 32s. VEDLN has governance issues according to Fitch, as well as issuing out of the holding company which results in structural subordination and has other interests outside of the mining sector so less of a pure play compared to Volcan.
• Nexa (NEXA; Ba2/BBB-/BBB-) is a major Latin America base metals miner majority owned by Brazil conglomerate Votorantim. Nexa 34s were last quoted 5.81%, g-spread of 195bp. Minsur is a Peruvian tin miner with 2031 notes quoted 5.3%, g-spread of 162bp but Minsur has lower leverage than Volcan and tin prices have done better than Zinc.