As the mining industry continues to suffer amidst a massive downturn, high debt, and low commodity prices, miners’ ratings are being heavily downgraded and many are left wondering who will be next to see their grade suffer.
To date a number of miners have seen their credit rating downgraded by investor services such as Fitch, Standard & Poor’s, and Moody’s, which have all become more bearish on the industry’s future.
BHP and Glencore were hit hard, going from A+ to A and BBB to BBB- respectively whilst Anglo American and Freeport McMoran were cut below the investment grade, while rating Anglo’s credit grade rated as junk only days before the miner carried out a massive restructure that will see it exit from Australia.
Now Moody’s believes the situation will continue to get worse, indicating it is looking at ratings downgrades for 175 mining and energy companies globally.
“We believe that the current severe downturn in the mining industry represents a fundamental shift in the operating environment and that, as a consequence, a wholesale recalibration of ratings is required,” Moody’s said in a recent sector comment.
“Stress on companies in the metals and mining industry could surpass what we saw during the 2008/2009 period.”
It has now released a graph highlighting how many companies are hovering above the junk status, and the perilous financial position that many miners are facing.
Of the 85 mining plays, 55 are under review, with 14 edging close to junk status, according to mining.com.
BHP and Coporaction Nacional del Cobre de Chile lead the pack with the highest grades at A1, followed by Rio Tinto and China Minmetals Corporation at A3 level.
South32 sits at a Baa1 rating, while Newmont faces a tougher future with a more speculative Baa2 rating.
Despite its size Vale sits at a Baa3 rating, alongside Newcrest, with both edging towards a junk rating.