Mining giant BHP Billiton's credit rating was cut by Standard & Poor's on Tuesday as it is battered by plunging global commodity prices, with the agency warning of further downgrades.
The decision comes as miners around the world are buffeted by an income slump, with the cost of key materials such as oil, iron ore, copper and aluminium at multi-year lows owing to a global economic slowdown, most painfully in key customer China.
Iron ore, Australia's largest export, has seen its price tumble to below $40 a tonne, since peaking near US$200 a tonne in 2011.
The move will put pressure on chief executive Andrew Mackenzie, who has pledged to keep the firm's A-grade rating in the face of price headwinds.
"In this environment, we are also committed to protecting our strong balance sheet so we have the financial flexibility to manage further volatility and take advantage of the expected recovery in copper and oil over the medium term," he said last month in an operational update.
S&P downgraded the world's number one miner to A from A+ and placed it -- along with rival Rio Tinto -- on negative credit watch, it said in a statement. Rio currently has a A- rating under S&P.
"The rating cut was very widely expected," CLSA's head of resources research Andrew Driscoll told AFP.
"It's becoming increasingly clear to the investment community that as commodity prices have deteriorated, it's an increasing challenge for the major mining companies to maintain credit ratings amidst lower operating cash flows and their progressive dividend distributions."
S&P said it forecast a "material drop in BHP Billiton's results in the coming 18 months, with key credit metrics well below the levels we consider to be consistent with an 'A+' rating".
BHP shares sank 1.18 percent to Aus$15.07 in afternoon trade in Sydney, while Rio was 2.00 percent lower at Aus$38.19.
The Anglo-Australian miner said in a statement Tuesday that the company "has the strongest credit rating in the sector and remains committed to maintaining its strong balance sheet through the cycle".
The CLSA's Driscoll said BHP could cut its dividend when it announces its interim 2016 financial year results on February 23, in order to strengthen its balance sheet.
S&P's investment-grade rating is usually seen to be at least BBB-, with lower credit ratings raising the cost of borrowing. A "junk" rating is BB+ or lower.