Moody’s placed dozens of mining firms around the world on review for a credit downgrade on Friday as companies battle a slump in commodity prices due to oversupply and slowing growth in China.
Moody’s said it would review the credit ratings of 12 mining companies in Europe, Middle East and Africa (EMEA) and 11 firms in the United States to “recalibrate the ratings in the mining portfolio to align with the fundamental shift in the credit conditions of the global mining sector.”
The ratings agency also placed on review for downgrade 12 mining companies in Canada and four firms in Australia.
A ratings downgrade makes borrowing more expensive for companies.
The affected companies included Alcoa, Newmont Mining , Rio Tinto , AngloGold Ashanti, and Gold Fields.
Moody’s said the ratings review would also incorporate companies that had been placed on review previously, which include Anglo American and BHP Billiton .
“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 said.
“Moody’s believes that this downturn will mark an unprecedented shift for the mining industry. Whereas previous downturns have been cyclical, the effect of slowing growth in China indicates a fundamental change that will heighten credit risk for mining companies.”
Mining companies globally have been hit by plummeting commodity prices, forcing them to slash jobs, costs, capital expenditure and dividends.
Commodities trader Glencore’s credit rating was last month downgraded to one notch above junk status by Moody’s which cited likely weak mining market conditions over the next two years.