Companies don't normally cheer a downgrade. But the revelation that Rio Tinto's detainees in China may face lesser charges of bribery and obtaining trade secrets – rather than earlier claims of spying on state interests – should be heartening. Five weeks after the four executives were seized, jurisdiction will be passed down from the Shanghai State Security Bureau to the local police. If convicted, the quartet faces fines and finite jail terms, rather than life imprisonment, or worse.
The more moderate line should be welcomed – not least by Yanzhou Coal, which seems to be on the brink of announcing an agreed $3bn bid for Australia's Felix Resources, and would not be thrilled at an escalation of the diplomatic row. But it is only small consolation for Rio. The investigation may rumble on for another six or so months before formal charges are laid. And news of the arrests came on the day that arch-rival BHP Billiton, the most highly-rated of the big miners, turned the screw with forecast-beating full-year figures.
While BHP's peers have begged investors for cash while shutting down capital spending, it has done the opposite: capex and dividends are actually up. Gearing is a sector-low 12 per cent. And if Rio's stand-off with CISA, China's lead negotiator in setting annual contracts with steel mills, channels more volumes to spot markets, BHP should benefit handsomely: almost a third of its Australian iron ore shipments in the year to June were outside the benchmark system. All that explains investors' love-in with the shares. Since the sector trough last November, BHP's valuation has more than tripled on a price/sales basis, while others have merely doubled.