Fitch Upgrades Mineral Industri Indonesia to 'BBB'; Outlook Negative

(Fitch Ratings - Singapore/Jakarta - 20 May 2026)--Fitch Ratings has upgraded the Long-Term Issuer Default Rating (IDR) of PT Mineral Industri Indonesia (Persero) (MIND ID) to 'BBB', from 'BBB-'. The Outlook is Negative. Fitch has also upgraded MIND ID's senior unsecured rating and the rating on its outstanding senior unsecured notes to 'BBB', from 'BBB-'.

MIND ID's rating is now equalised with Indonesia's sovereign rating (BBB/Negative), under Fitch's Government-Related Entities (GRE) Rating Criteria. We believe that exceptional government support to MIND ID is virtually certain, based on our assessment of the state's responsibility and incentives to support. The Negative Outlook on MIND ID's rating reflects the risk of a downgrade of the sovereign rating.

We have revised our assessment of the state's support incentive due to contagion risk to 'Very Strong', from 'Strong'. We believe that MIND ID is recognised by market participants as a core GRE due to the importance of mining resources to the country. We "look through" the direct ownership of Indonesia's sovereign wealth fund, Danantara, in accordance with the GRE criteria.

Fitch has also revised MIND ID's Standalone Credit Profile (SCP) to 'bb', from 'bb-'. The revision is underpinned by an improved leverage profile. We forecast EBITDA net leverage to remain below 3.0x in 2026-2027 (2025: 2.0x) on healthy EBITDA and substantial dividend inflows, despite our expectations of higher capex and steady dividends to Danantara.

Key Rating Drivers

Strong State Incentives to Support: Fitch views MIND ID's role in the preservation of strategic assets as 'Strong'. Proper management of Indonesia's mineral resources is a key state priority and assets such as PTFI's Grasberg mine hold significant strategic value. The mine is in the first quartile of the global copper cost curve, according to research firm Wood Mackenzie, and generated EBITDA of USD5 billion in 2025. We believe a default by MIND ID would jeopardise its 51.2% stake in PTFI, incentivising the government to support MIND ID.

We assess the contagion risk of a default for the funding of the government and other GREs to be 'Very Strong', as MIND ID is widely considered to be a core GRE and a reference issuer in Indonesia. Our assessment is supported by MIND ID's high profile and the government's focus on managing domestic mineral resources efficiently.

State's Responsibility to Support: We regard the sovereign's involvement in MIND ID's decision-making and oversight as 'Very Strong'. The state owns 100% of MIND ID and appoints its directors and commissioners. It also receives monthly reports on key financial and operating parameters. The government has been closely involved in key acquisitions, such as additional stakes of around 42% in PT Freeport Indonesia (PTFI, BBB/Stable) in 2018 and another 14% in PT Vale Indonesia Tbk in 2024, and investments to improve downstream processing capability.

We assess precedents of support from the sovereign as 'Strong'. The government consolidated mining assets in 2017 to improve MIND ID's business profile and boost the parent's cash flow with dividends from subsidiaries. The government also did not seek any dividends from MIND ID in 2020 and 2021 when the SCP was assessed as weak.

Healthy Leverage Profile: We estimate MIND ID's EBITDA net leverage, adjusted for dividends from PTFI and minority interests in subsidiaries, to rise to 2.9x in 2026 (2025: 2.0x) but remain commensurate with the 'bb' SCP. We project weaker EBITDA in 2026 due to the impact of the Iran war on fuel costs and wage inflation. We forecast leverage to remain below 3.0x in 2027, incorporating higher dividends from PTFI and higher capex, and that net debt will continue to increase over 2026-2027 due to negative free cash flow.

Grasberg Dividends Likely to Rebound: We forecast annual dividends to MIND ID from PTFI to rebound to USD1.5 billion from 2027. Dividends declined to around USD1 billion in 2025, (2024: USD1.4 billion) and we expect them to be flat in 2026. PTFI is gradually ramping up output at Grasberg following the September 2025 mudslide, and we expect a gradual return to full capacity by 2028. A delay in the ramp-up due to unexpected operational challenges presents some risk to our dividend forecast.

Further Surge in Dividends Unlikely: We assume IDR21 trillion-23 trillion of annual dividends to Danantara from MIND ID during 2026-2028. MIND ID's dividends almost doubled in 2025, but we expect further increases to be limited due to PTFI's gradual output ramp-up and a likely increase in MIND ID's capex. Danantara has significant investment plans in 2026 and it is unclear whether the fund's mandate will expand to support the government's policy priorities. These factors may cause dividends from MIND ID to be higher than our forecast.

Higher Capex Likely: We expect MIND ID's capex, including investments in joint ventures (JVs), to increase due to its focus on downstream capacity additions. Its subsidiary PT Aneka Tambang Tbk (ANTAM) is investing in nickel processing projects under JVs, and we think another subsidiary, PT Indonesia Asahan Aluminum (INALUM), may expand its aluminium smelting capacity. INALUM and ANTAM also plan to increase alumina refining capacity. Fitch is likely to proportionally consolidate MIND ID's strategically important JVs that carry significant debt, such as the nickel processing plants.

Commodity Diversification; Improving Vertical Integration: MIND ID produces various commodities, including thermal coal, nickel, bauxite, tin, aluminium, copper and gold, through subsidiaries and key associates. Vertical integration should improve with the ramp-up of the first phase of its alumina refinery in 2026.

Peer Analysis

PT Pertamina (Persero) (BBB/Negative) has 'Very Strong' precedents of support compared with 'Strong' for MIND ID as it receives regular compensation for fuel sold below market prices. Fitch views Pertamina's role in the preservation of government policy as 'Very Strong', as it plays a key role in the nation's energy security. We deem the contagion risk for the Indonesian state and other GREs from a default by Pertamina or MIND ID as 'Very Strong', as they are widely viewed as reference issuers.

PT Hutama Karya (Persero) (HK, BBB-/Negative, AA+(idn)/Stable) and China Baowu Steel Group Corporation Limited (A/Stable) have lower support scores than MIND ID. We believe the state's incentive to support MIND ID is higher due to the 'Very Strong' contagion risk, compared with 'Strong' for HK and Baowu. We think MIND ID has a higher profile among fellow GREs, and the financial consequences for the state and other GREs from a default would be more severe.

MIND ID's SCP can be compared with the ratings of Freeport-McMoRan Inc. (FCX, BBB/Stable), Vedanta Resources Limited (VRL, BB-/Stable) and PT Golden Energy Mines Tbk (GEMS, BB-/A+(idn)/Stable). FCX's stronger credit profile is underpinned by a larger EBITDA scale and lower leverage than MIND ID. VRL benefits from commodity diversification like MIND ID, and has a similar leverage profile. However, VRL's rating is dragged down by one notch due to governance-related risks. GEMS's business profile is weaker than MIND ID's due to a lack of diversification and smaller EBITDA scale.

Fitch’s Key Rating-Case Assumptions

Fitch's Key Assumptions Within the Rating Case for MIND ID group:

- Coal sales volume to increase to 51 million tonnes by 2028, from 45 million tonnes in 2025;

- Average nickel ore sales volume of 14.7 million wet metric tonnes (WMT) over 2026-2028 (2025: 14.6); average ferronickel sales of 19 kilotonnes (kt) over 2026-2028 (2025: 10kt);

- Aluminium output of around 275kt from 2026 (2025: 280kt);

- Average annual tin sales of 20kt over 2026-2028 (2025: 17kt);

- Average annual dividend received from PTFI and other non-consolidated investments of USD1.4 billion over 2026-2028 (2025: USD1.1 billion);

- Cumulative capex, including share of investments in joint projects, of USD3 billion over 2026-2028;

- Average annual dividend payment to Danantara of IDR22 trillion over 2026-2028 (2025: IDR20 trillion).

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 (bbb, higher), company operational characteristics (bb+, moderate), profitability (b, moderate), financial structure (bb-, higher), and financial flexibility (bb+, moderate).

The quantitative financial subfactors are based on custom CRT financial period parameters: 25% weight for the historical year 2025, 25% for the forecast year 2026, 25% for the forecast year 2027 and 25% for the forecast year 2028.

The governance assessment of 'good' has no impact.

The operating environment assessment of 'bbb' has no impact.

The SCP is 'bb'.

To derive the Long-Term IDR:

Application of Fitch's Government-Related Entities Rating Criteria results in an equalised approach.

RATING SENSITIVITIES

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade:

- Negative rating action on the sovereign.

- Weakening of the likelihood of state support.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade:

- The Outlook will be revised to Stable if the Outlook on the sovereign's IDR is revised to Stable, provided there is no weakening in the likelihood of government support.

For the sovereign rating of Indonesia, the following sensitivities were outlined by Fitch in our rating action commentary of 4 March 2026:

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade:

- Macro: Buildup of macroeconomic vulnerabilities, for example from a further weakening of policy framework.

- Public Finances: A material increase in the overall public debt burden, resulting, for example, from a substantial rise in fiscal deficits, or materialisation of contingent liabilities.

- External Finances: A sharp decline in FX reserve buffers, resulting, for example, from outflows stemming from deterioration in investor confidence or further weakening in governance.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade:

- Macro: Increased confidence that disciplined policies will continue to support macroeconomic stability, which could lead to a revision of the Outlook to Stable.

- Public Finances: A marked improvement in the government revenue ratio closer to the level of 'BBB' category peers, including from better tax compliance or a broader tax base, which would strengthen public finance flexibility.

- External Finances: A material reduction in external vulnerabilities, for instance, through a sustained increase in FX reserves or lower exposure to commodity price volatility.

Liquidity and Debt Structure

MIND ID has sufficient cash and undrawn facilities to cover the debt due in 2026 despite negative free cash flow, based on our estimates. Debt due in 2027 is relatively small, and the group's liquidity is supported by robust and extensive banking relationships and a healthy business profile.

MIND ID had readily available cash, which we define as inclusive of time deposits and 70% of investments in various debt securities, of IDR33 trillion on a consolidated basis as of end-2025. It had USD865 million (IDR14 trillion) in undrawn committed facilities at the holding company level with maturities in 2028 and 2029, and obtained a new syndicated loan facility of USD1 billion in April 2026. MIND ID had around IDR21 trillion of debt due in 2026, excluding USD885 million under revolving credit facilities maturing in 2029.

At the holding company level, MIND ID had cash, including 70% of investments in debt securities, of around USD340 million as of end-2025. The cash and undrawn facilities should enable the holding company to repay USD810 million of bank debt due in 2026, adjusting for amounts under revolving credit facilities.

Issuer Profile

MIND ID is wholly owned by the Indonesian government and acts as the parent for the state's mining assets and operations, except for rare-earth minerals. Its various subsidiaries and associates are involved in mining and processing a diverse range of commodities, such as thermal coal, nickel, bauxite, aluminium, tin, copper and gold.

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

MIND ID's IDR, senior unsecured rating and ratings on outstanding bonds are equalised with Indonesia's rating.

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 Climate.VS for 2035 for MIND ID is 57. MIND ID's signal is elevated due to the thermal coal sales by its subsidiary, PT Bukit Asam Tbk, which contributed around 30% of MIND ID's consolidated revenue in 2025. Key transition risks arise from policies designed to phase out the usage of thermal coal, the single largest source of greenhouse gas emissions. These risks currently have a limited impact on MIND ID's credit profile.

The Climate.VS does not account for its exposure to copper through its large stake in PTFI, and to additional nickel output through the stake in PT Vale Indonesia Tbk. The Climate.VS for copper and nickel are relatively low. In addition, risks to the thermal coal business are alleviated as the majority of sales are to the domestic market, where coal use is likely to be phased out at a slow pace.

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)