Ratings agency Moody’s has placed dozens of mining firms around the world on review for a credit downgrade as companies battle a slump in commodity prices due to oversupply and slowing growth in China. The list includes four Chinese mining companies, two from South East Asia and one from India, as well as their rated subsidiaries.
The agency also placed on review for downgrade 12 mining companies in Canada and four firms in Australia - Fortescue Metals, Newcrest Mining, South32 and Alcoa.
Moody’s said it would review the credit ratings of these companies to “recalibrate the ratings in the mining portfolio to align with the fundamental shift in the credit conditions of the global mining sector.”
A ratings downgrade makes borrowing more expensive for companies.
The affected major companies include Alcoa, Newmont Mining, Rio Tinto, AngloGold Ashanti and Gold Fields. Moody’s said the ratings review would also incorporate companies previously placed on review including Anglo American and BHP Billiton.
On review for possible downgrade in Asia are:
- Vinacomin Holding Corporation Limited - Long-term local currency corporate family rating at B2.
- PT Indika Energy Tbk - Long-term local currency corporate family rating at B3. Its subsidiaries Indo Energy Finance BV and Indo Energy Finance II BV - Foreign currency senior secured debt at B3.
- Vedanta Resources plc - Long-term foreign and local currency corporate family rating at Ba2; and foreign currency senior unsecured debt at B1.
Companies on review for possible downgrade in China are:
- Baosteel Resources International Company Ltd - Foreign and local currency currently rating Baa1. Subsidiary Baosteel Financing 2015 Pty Ltd - Foreign currency (senior unsecured regular bond/debenture) currently rating Baa1.
- China Minmetals Corporation - Foreign currently rating A3. Subsidiary Minmetals Bounteous Finance (BVI) Ltd - Local currency (senior unsecured regular bond/debenture) July 30, 2025, and July 30, 2020, both currently rating A3.
- Yanzhou Coal Mining Co Ltd - Foreign currency corporate family rating at Ba3. Subsidiary Yancoal International Trading Co Ltd - Foreign currency (senior unsecured regular bond/debenture) currently rating Ba3. Subsidiary Yancoal Int’l Resources Development Co Ltd - Foreign currency (senior unsecured regular bond/debentures) May 16, 2022, and May 16, 2017, currently rating Ba3.
- China National Gold Group Corporation - Issuer ratings (foreign currency and local currency) currently both Baa3.
“This broad ratings review will consider each mining company’s asset base, cost structure, likely cash burn and liquidity, as well as management’s strategy for coping with a prolonged downturn and the ability to execute on same,” Moody’s stated.
“Slowing growth in China, which consumes and produces at least half of base metals, and is a material player in the precious metals, iron ore and metallurgical and thermal coal markets is weakening demand for these commodities and driving prices to multi-year lows,” said Moody’s analyst Dylan Yeo. “China’s outsized influence on the commodities market, coupled with the need for significant recalibration of supply to bring the industry back into balance indicates that this is not a normal cyclical downturn, but a fundamental shift that will place an unprecedented level of stress on mining companies.”