Moody's places Antam's rating on review for possible downgrade
Tuesday, January 14 2014 - 11:12 AM WIB
The review was prompted by the implementation of the mineral export ban in Indonesia, which came into effect on Sunday 12 January 2014 banning the export of nickel and bauxite ores, among others.
The sales of unprocessed nickel ore represented 33% of Antam's revenue in the nine months to 30 September 2013. All of Antam's nickel ore sales are generated through export. Antam expects the ban will deprive it of around $300 million of revenue in 2014.
"There is a very high level of uncertainty around the full effect of the ban, and we believe further clarifications from the Indonesian government and Antam are needed to fully assess its net effect on Antam's credit profile", says Brian Grieser, a Moody's Vice President -- Senior Analyst.
Full details on the implementation of the ban are yet to emerge. On Saturday, one day before the ban came into force, the Indonesian government agreed last minute carve outs that are expected to grant temporary exemptions to copper, manganese, zinc, lead and iron concentrate exporters until 2017. The impact of the ban could be partially mitigated by potential improvement in Antam's ferronickel business, which we expect will not be impacted by the ban, and the growth of its alumina business, given the expectation for bauxite refining capacity to come online in April 2014.
Moody's review will focus on a) the full impact of the mining ban on Antam's revenue base, cost structure and cash generation; b) the company's capital spending plans for 2014 and 2015, c) the mitigating impact on Antam's profitability generated by the new chemical-grade alumina plant in Tayan; and d) the need to reassess the Indonesian government's support incorporated in the rating, which provides 1 notch uplift from Antam's baseline credit assessment of b1.
"We need to better understand the rationale behind the exemptions granted by the Indonesian government to some miners, in order to reassess the government support reflected in the current Ba3 CFR", adds Grieser, who is also the lead analyst for Antam.
Moody's expects to finalize its review within 30-60 days.
Established in 1968, PT Aneka Tambang (Persero) Tbk ("Antam") is Indonesia's second-largest nickel producing company, possessing one of the country's largest nickel and bauxite reserves. It also owns considerable gold reserves. The company is 65%-owned by the Indonesian government and is listed on the Indonesia and Australian stock exchanges. (ends)