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Are BHP Billiton Limited and Rio Tinto Limited set to write off billions?

On Friday, US-listed mining company Cliffs Natural Resources saw its shares smashed down 8%, after the company wrote US$6 billion off its coal and iron ore assets, thanks to falling commodity prices.

Cliffs also said the non-cash charge would put it in breach of its debt covenants, and was working with its bankers to amend the covenant.

Coal prices have halved over the past three years, while iron ore prices recently hit five-year lows.

Coal and iron ore combined represent 56% of BHP Billiton Limited’s (ASX: BHP), while iron ore is 92% of Rio Tinto Limited’s (ASX: RIO) net profit after tax in their most recent reporting periods.

So has the value of the two giant miners’ assets also fallen, and could shareholders see the two resources companies write off billions on their coal and iron ore assets, like Cliffs did?

At the end of June, Rio had US$112.6 billion in total assets, of which US$73.3 billion is in property, plant and equipment, and US$7.6 billion of intangible assets. But the miner has sold a number of assets, including its coal assets in Mozambique since then, but did not say if the sale would result in any writedowns.

BHP, on the other hand, had US$151.4 billion in total assets at the end of June 2014, with US$108.8 billion in property, plant and equipment, but just US$5.4 billion in intangibles. The company is also in the process of spinning off a number of its non-core assets into a new company, which may results in adjustments to its balance sheet assets.

BHP was forced to writedown the value of some of its recently-acquired North American petroleum assets in the 2013 financial year, after gas prices virtually halved.

But many of Rio’s and BHP’s major assets are long life assets – over 50 years at current production rates – any writedowns are unlikely to have a material impact on either miner in the long term, unlike Cliffs Natural Resources.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

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