Fitch Affirms Freeport Indonesia at 'BBB'; Outlook Stable

(Fitch Ratings - Singapore/Hong Kong - 25 Feb 2026)--Fitch Ratings has affirmed the Long-Term Issuer Default Rating (IDR) of copper and gold producer PT Freeport Indonesia (PTFI) at 'BBB'. The Outlook is Stable. Fitch has also affirmed the ratings of PTFI's US dollar senior unsecured notes at 'BBB'.

PTFI's rating benefits from a notch of uplift from its Standalone Credit Profile (SCP) of 'bbb-' due to potential support from its 48.76% shareholder, Freeport-McMoRan Inc. (FCX, BBB/Stable). PTFI is on track for a full operational recovery by 2027 from the impact of a mud rush incident at its Grasberg mine, and its SCP is supported by its low-cost operations and modest leverage profile. However, the SCP is constrained by asset concentration and exposure to regulatory risk in Indonesia.

Key Rating Drivers

Output Recovery on Track: PTFI expects production to recover to around 85% of normal levels in 2H26. Operations at the key Grasberg Block Cave mine were suspended in September 2025 due to a sudden rush of wet material. PTFI should obtain over 75% of its full-year copper sales in 2H26, according to its production plan that aims to fully restart operations in 2027. The company says it is on track to achieve its production guidance based on progress on mud removal and repairs, and we do not anticipate any significant risks.

Financial Metrics to Remain Robust: We forecast EBITDA net leverage to remain below 1.0x (2025E: 0.5x) in the next three years, despite an assumption of weaker copper and gold prices. We expect operating cash flow to be significantly higher than annual capex of USD2 billion. PTFI's planned projects include Grasberg underground development, supporting mill and power infrastructure, and a new gas-fired combined cycle facility. We forecast dividends of USD2 billion-3 billion annually. However, PTFI could adjust dividends should EBITDA weaken, to maintain a modest leverage profile.

Large, Low-Cost Operations: PTFI mines one of the world's largest copper and gold deposits at Grasberg. We expect annual EBITDA to recover to over USD5 billion from 2027, based on its mining plan and Fitch's price deck. PTFI's position in the first quartile of the global copper cost curve ensures healthy profitability even at weak metal prices. The output of gold and other by-products allowed PTFI to report net cash credit of USD0.55 per pound (lb) of copper in 2025, compared with USD0.28/lb of net credit in 2024 and USD0.10/lb of net cost in 2023.

Asset Concentration, Regulatory Risk: PTFI's rating is constrained by its single-asset operation in Indonesia, which has a history of regulatory changes and active government involvement in the mining sector. The mud rush incident followed a fire that delayed the start of PTFI's new Manyar smelter in October 2024. PTFI has not been fined for these incidents in the absence of evidence of human error, and we expect it to take adequate preventive steps in future. However, a further impact on operations could lead us to lower our assessment of PTFI's management quality, which may affect the rating.

FCX-Driven Rating Uplift: Fitch provides a one-notch uplift on PTFI's SCP to reflect the likelihood of support from FCX, under our Parent and Subsidiary Linkage (PSL) Rating Criteria. We treat FCX as the parent for our PSL analysis although government-owned PT Mineral Industri Indonesia (Persero) (MIND ID, BBB-/Positive) owns a larger 51.24% stake in PTFI, as FCX holds operating control through majority representation in PTFI's operating committee. FCX provides tangible support in the form of a shareholder loan facility and the inclusion of PTFI as a co-borrower in its credit facility.

Approach Unaffected by Stake Transfer: PTFI has signed a memorandum of understanding (MoU) with the Indonesian government for a life-of-resource extension of its special mining business licence, under which FCX will transfer a 12% stake in PTFI to government interests in 2041. The existing governance and operating structure will remain, according to the MoU. Fitch's rating approach is unchanged despite FCX agreeing to divest an additional stake in PTFI, since FCX will retain operating control.

Analytical Overlay Constrains Uplift: Fitch applies an analytical overlay to arrive at the one-notch rating uplift for PTFI, instead of equalising PTFI's rating with FCX's based on high strategic and medium operational incentives for support and the one-notch difference in SCPs. This is to avoid overstating the benefit of the relationship, given the presence of another significant shareholder.

PTFI accounted for 30% of FCX's 2025 consolidated copper output despite the reduction in 4Q25, and almost all of its gold. PTFI lowers FCX's average unit costs and provides commodity diversification through gold. There is also significant management overlap.

Peer Analysis

PTFI's SCP of 'bbb-' can be compared with the ratings of miners Southern Copper Corporation (SCC, BBB+/Stable), Vale S.A. (BBB+/Stable) and Northern Star Resources Ltd (NST, BBB-/Stable).

SCC's and Vale's ratings are better than PTFI's SCP, due mainly to their higher asset and country diversification. SCC is the fifth-largest copper producer in the world, mining close to 1 million tonnes of copper from Mexico and Peru with the largest reserves and lowest costs of the industry. Vale is one of the largest producers of iron ore and the sixth largest producer of nickel, with a presence in over 15 countries.

NST is rated at the same level as PTFI's SCP, with the benefit from NST's higher asset diversification being offset by its weaker cost position in the second half of the industry cost curve. NST produces around 1.6 million ounces of gold annually from three production centres in Australia and the US.

Fitch’s Key Rating-Case Assumptions

Fitch's Key Assumptions Within Our Rating Case for the Issuer:

- Copper price of USD9,500/tonne (USD4.3/lb) in 2026, USD8,500/tonne in 2027 and USD8,000 in 2028, per Fitch's price deck

- Gold price of USD3,400 per ounce (oz) in 2026, USD2,500/oz in 2027 and USD2,000/oz in 2028, per Fitch's price deck

- Copper sales of 0.9 billion lb in 2026, 1.5 billion lb in 2027 and 1.7 billion lb in 2028

- Gold sales of 0.8 million oz in 2026, 1.2 million oz in 2027 and 1.4 million oz in 2028

- EBITDA margin of 57% in 2026, 62% in 2027 and 60% in 2028 (2025E: 57%)

- Capex of USD1.8 billion in 2026, and USD2.2 billion each in 2027 and 2028

- Dividend payments of USD2.0 billion in 2026, and USD2.6 billion each in 2027 and 2028

- Insurance receipts of USD700 million in 2026.

Corporate Rating Tool Inputs and Scores

Fitch scored the issuer as follows, using our Corporate Rating Tool (CRT) to produce the SCP:

- Business and financial profile factors (assessment, relative importance): management (bbb-, lower), sector characteristics (bbb+, moderate), market and competitive positioning (bbb, moderate), diversification and asset quality (bb+, moderate), company operational characteristics (bb, higher), profitability (a-, moderate), financial structure (a+, moderate), and financial flexibility (a, moderate).

- The quantitative financial subfactors are based on custom CRT financial period parameters: 10% weight for the forecast year 2025, 10% for the forecast year 2026, 10% for the forecast year 2027 and 70% for the forecast year 2028.

- The governance impact assessment of 'good' results in no adjustment.

- The operating environment impact assessment of 'bbb+' results in no adjustment.

- The SCP is 'bbb-'.

To derive the Long-Term IDR:

- Application of Fitch's PSL criteria results in a bottom up +1 approach.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to negative rating action/downgrade:

- Negative rating action on FCX or lower incentives for FCX to support PTFI

- Weakening of PTFI's SCP, driven by EBITDA net leverage sustained above 2.0x or adverse material changes to PTFI's licence terms.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

- We do not expect positive rating action on PTFI in the medium term. The current rating already reflects the potential support from FCX, and upward revision of the SCP is unlikely due to asset concentration in Indonesia. Improved diversification may result in a higher SCP and rating.

For FCX's rating, the following sensitivities were outlined by Fitch in a rating action commentary on 12 March 2025:

Factors that could, individually or collectively, lead to negative rating action/downgrade:

- EBITDA leverage sustained above 2.0x.

- Expectations of negative FCF on average.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

- EBITDA leverage sustained at or below 1.3x.

Liquidity and Debt Structure

PTFI had USD3.25 billion of debt outstanding as of end-2025, comprising USD3.0 billion of senior unsecured notes and USD250 million under a senior unsecured revolving credit facility (RCF). It does not have any debt maturities in 2026, and USD750 million of notes are due in April 2027.

We estimate PTFI had readily available cash of around USD600 million at end-2025. In addition, it has USD1.5 billion undrawn under the RCF, which matures in November 2028. PTFI can also draw USD500 million under FCX's RCF, which matures in October 2027. Lastly, PTFI can tap a USD2.0 billion revolving credit note from FCX.

We think PTFI's liquidity profile is robust, with adequate headroom to meet debt obligations alongside capex and dividend payments in the next two years.

Issuer Profile

PTFI operates the Grasberg mineral district in Papua, Indonesia, which has one of the world's largest copper and gold mines. It generated net revenue of USD9 billion in 2025. PTFI is 48.76% owned by FCX and 51.24% by MIND ID.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

Public Ratings with Credit Linkage to other ratings

PTFI's rating benefits from a one-notch uplift from its SCP due to its linkages with its shareholder, FCX.

MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS

Click here to access Fitch's latest quarterly Global Corporates Sector Forecasts Monitor data file which aggregates key data points used in our credit analysis. Fitch's macroeconomic forecasts, commodity price assumptions, default rate forecasts, sector key performance indicators and sector-level forecasts are among the data items included.

Climate Vulnerability Signals

The results of our Climate.VS screener did not indicate an elevated risk for PTFI.

ESG Considerations

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores. (ends)