MINING giants BHP Billiton and Rio Tinto credit rating reduced

MINING giants BHP Billiton and Rio Tinto have suffered credit rating downgrades but analysts say the move is unlikely to affect their ability to borrow.

RATINGS agency Fitch downgraded its credit rating outlook for BHP and Rio on Thursday in the wake of sliding iron ore prices.

Fitch reaffirmed BHP and Rio’s respective A+ and A- ratings but placed both companies on negative watch.

The agency noted lower prices for copper, nickel and especially iron ore.

"The rating actions follow an industry review, which included an analysis of forecast operational and financial profiles for each company over the next three to four years and incorporated Fitch’s new price assumptions on major commodities," Fitch said in a statement. It added that the short term effect of the recent South32 spin-off on BHP Billiton’s credit profile was "marginally negative" due to weaker projected cash flow.

Morningstar resources analyst Mathew Hodge said the downgrades were a reflection of the commodities cycle.

"It won’t really affect their ability to raise money or the price," Mr Hodge said.

"They’re still very strong credit names."

Shares in BHP Billiton were up 43 cents, or 1.5 per cent, at $28.08 and Rio Tinto shares were 87 cents higher at $56.94 at 1048 AEST.

The iron ore price is trading around $US64.30 a ton, more than 35 per cent above the 10 year low of $US47 hit in February. -
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