BHP Group Limited operates as an international resources company. The Company explores and
mines minerals such as coal, iron ore, gold, titanium, ferroalloys, nickel, and copper properties,
as well as offers petroleum exploration, production, and refining services. BHP Group serves
customers worldwide. Beyond iron ore, its activities include exploration and development of
untapped resources, extraction and processing of commodities, as well as rehabilitation and
closure of operational sites, primarily in Australia and the Americas. BHP has significant annual
productions of iron ore (more than 230 Mt), petroleum (some 210 MMBoe), coal (70 Mt), and
copper (63 Kt).
Rio Tinto Limited is an international mining company. The Company has interests in mining for
aluminum, borax, coal, copper, gold, iron ore, lead, silver, tin, uranium, zinc, titanium dioxide
feedstock, diamonds, talc and zircon. Rio Tinto Limited, one of the world’s largest mining
operations (along with BHP Billiton and Vale), is the Australian half of dual-listed sister
companies, with Rio Tinto plc taking up residence in London. Although each company trades
separately, the two Rio Tintos operate as one business. Rio Tinto explores for a variety of
commodities: bauxite, coal, copper, diamonds, gold, iron ore, minerals (borates and titanium
dioxide), nickel, and potash. Iron ore makes up about 44% of the group’s sales. It also produces
aluminum through its Rio Tinto Alcan unit. Most of its businesses are in Australia and North
America, but it is expanding its operations in China and Mongolia.
Please refer to data available on Yahoo Finance, the company annual report and website to learn
more about BHP Billiton and Rio Tinto.
Purpose of this Assignment
As both BHP Billiton and Rio Tinto are local resources companies – which are publicly listed
companies and also have debt issuances in the investment market via bonds – you have been
assigned to evaluate any risks associated with investing in these companies.
Question One (Total: 15 Marks)
Compare and contrast the credit ratings assigned by either Fitch, Moody’s or S&P Ratings (any
single agency can be used for comparison) to these companies. Based on your research, please
describe the key reasons for difference or similarities in ratings assigned to each. Please provide
some supporting information from their financial statements FY2020.
(2 pages maximum)
Question Two (Total: 10 Marks)
Below are examples of bonds issued by BHP Billiton and Rio Tinto. Calculate the credit risk
premium based on the current yields for each bond.
(5 Marks)