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(The following statement was released by the rating agency) LONDON, March 14 (Fitch) Fitch Ratings has downgraded Anglo American Plc's (AA) Long-term Issuer Default Rating (IDR) and senior unsecured ratings to 'BBB' from 'BBB+'. The Outlook has been revised to Negative from Stable. At the same time the agency has affirmed the ratings of BHP Billiton Plc/Ltd (BHPB; A+/Stable) and Rio Tinto Plc/Ltd (RT; A-/Stable). A full list of affected ratings is included below. KEY RATING DRIVERS The downgrade of Anglo American's ratings reflects our view that the company will now not be able to maintain funds from operations (FFO) gross leverage below 2.25x over the next three years. This follows details provided by new company management regarding the extent of operational difficulties at several mine sites, as well as updated company guidance regarding debt levels over the next two years. We now expect FFO-adjusted gross leverage to peak at between 3.0x and 3.5x in 2015 before gradually declining thereafter. These forecasts incorporate Fitch's mid-cycle commodity price assumptions, including a long-term iron ore price of USD100 per tonne and copper at USD6,000 per tonne. Free cash flow generation is expected to remain negative over the next three years. We view the renewed operational focus of Anglo American's new CEO Mark Cutifani as a positive development, albeit that the operational issues revealed at some sites were greater than we had previously understood, and that a resolution to these issues will, in some cases, take multiple years and involve additional costs. The Negative Outlook reflects uncertainty as to whether Anglo American will be able to reduce FFO gross leverage below 3.0 by end-2016 given continued cost pressures (for labour and electricity) in its South African operations and the residual risk of cost overruns in key development projects. The ratings affirmations with a Stable Outlook for BHPB and RT reflect Fitch's view that both companies are taking appropriate actions to adjust to the current weaker commodity price environment. These actions include material reductions in both capex and operating cost, and asset disposals. FFO gross leverage for both companies at end-2013 were elevated for their respective rating levels but we expect them to decline to within our guidelines over the rating horizon. BHPB is forecast to remain free cash positive over the next three years while we expect RT to return to positive free cash flow in 2015. Rating differentials continue to be driven by comparative profitability levels and operational factors such as commodity mix and diversification, and the cost position of individual operations. In this respect, BHPB continues to be positively differentiated from its peers by its ownership of substantial, and highly profitable, oil & gas operations. Also, while each of the companies are meaningful producers of iron ore, copper and coal, at present, BHPB's and RT's still highly profitable iron ore operations are substantially larger than those of Anglo American. Liquidity and capital markets access remain strong for each company and does not represent a major differentiating factor. Today's 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. Over this period, Fitch expects general commodity prices - including specifically for iron ore and copper - to show a gradual decline towards mean levels as commodity demand growth in China and other emerging markets slows in relative terms. RATING SENSITIVITIES Anglo American Positive: Future developments that could lead to positive rating actions include: - Completion of the group's current portfolio restructuring programme, including full production at key development projects (e.g. Minas-Rio iron ore), leading to a sustained increase in profitability and cash flow margins to levels comparable with RT Negative: Future developments that could lead to negative rating action include: - Expectation that FFO gross leverage will be sustained above 3.0x by end-2016 BHPB Positive: Upside potential is limited by industry cyclicality and the company's stated policy of managing its capital structure consistent with a strong single 'A' range rating Negative: Future developments that could lead to negative rating action include: - Evidence of a shift away from funding capex and dividends with operating cash flows - Inability to maintain FFO-adjusted gross leverage at less than 1.5x on average across the commodity price cycle (FYE 13: 2.05x) RT Positive: Future developments that could lead to positive rating actions include: - Sustained FFO gross leverage below 1.5x (FYE13: 1.97x), together with sustained positive free cash flow (post capex and shareholder distributions), could result in a one-notch upgrade to 'A' Negative: Future developments that could lead to negative rating action include: - Increase in FFO gross leverage above 2.0x for two successive years - Problems at core operations or delays in bringing new development programmes into production, resulting in a material reduction in production volumes or depletion of reserves over time - Large debt-funded acquisitions and/or a significant increase in capex resulting in sustained negative free cash flow FULL LIST OF RATING ACTIONS Anglo American: Long-term IDR: downgraded to 'BBB' from 'BBB+'; Outlook revised to Negative from Stable Short-term IDR: affirmed at 'F2' Anglo American Capital Plc: Senior unsecured debt: downgraded to 'BBB' from 'BBB+' BHPB: Long-term IDR: affirmed at 'A+'; Outlook Stable Senior unsecured debt: affirmed at 'A+' Short-term IDR: affirmed at 'F1' BHP Billiton Finance (USA) Ltd: Senior unsecured debt: affirmed at 'A+' BHP Billiton Finance Ltd: Senior unsecured debt: affirmed at 'A+' Petrohawk Energy Corp: Senior unsecured debt: affirmed at 'A' WMC Finance (USA) Ltd: Senior unsecured debt: affirmed at 'A+' RT: Long-term IDR: affirmed at 'A-'; Outlook Stable Senior unsecured debt: affirmed at 'A-' Short-term IDR: affirmed at 'F2' Rio Tinto Finance (USA) Ltd: Senior unsecured debt: affirmed at 'A-' Rio Tinto Alcan Inc: Senior unsecured debt: affirmed at 'A-' Contact: Principal Analyst Sara Salomoni/Maria Yakushina Analyst +44 20 3530 1641/1315 Supervisory Analyst Peter Archbold, CFA Senior Director +44 20 3530 1172 Fitch Ratings Limited 30 North Colonnade London E14 5GN Committee Chair Raymond Hill Senior Director +44 20 3530 1079 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com. 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