Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Ratings agency’s have got it in for the mining sector where all companies are struggling with low commodity prices and many have to cope with high debt loads.
Within the last few weeks Moody’s Investor Services cut the ratings of seven large miners. Two majors – Anglo American and Freeport McMoRan – were cut to below investment grade for the first time.
Moody’s took Freeport McMoRan down a full four pegs while the besieged Anglo slipped three rungs. Fitch Ratings also cut Anglo to junk this week adding that the outlook for the UK-listed firm is negative.
Moody’s recently said stress on companies in the industry “could surpass what it saw during the 2008/2009 period,” adding that the current downturn is like no other and “a wholesale recalibration of ratings is required.”
Out of a total 85, 55 companies are under review at Moody’s. Of these 60% already don’t make the investment grade and 14 are hovering not far above junk status.
These include some big names like Newmont, Vale, Kazatomprom, Grupo Mexico, Fresnillo, Barrick Gold and Goldcorp.
Things are beginning to look up for precious metals miners, but others on the list below may find it difficult to avoid the dreaded junk status.
6 Comments
Ronald West
How about downgrading Moody’s to junk. The same folks who fraudulently put AAA stamps on junk mortgages that nearly collapsed the entire financial system just 7 short years ago. How quickly the fools forget.
Mark
Good. Just means that it will be cheaper for these companies, particularly in the gold sector, whose cashflow is rapidly improving, to buy back their debt. And will put somewhat of a straightjacket on the sector in terms of capex until gold prices rise further.
Art Easian
Even closer to the Bone – Downgrade the Clinton’s who sponsored the housing bill that set the disaster up to be scammed. I understand one of them is running for president of the USA.
John Roberts
After knowing Moody’s prior behaviour I’m sure companies wouldn’t find it hard to get their ratings back up. Standard and Poor’s might be a better option.
John Stil
100% all the rating agencies are holier than thou , and have caused billions in losses and their excuse is ” we only offered an opinion “
Henri-Michel
Interesting overview… And what about the Cliffs Natural Resources rating?