PEFINDO assigns “idA” rating for PT Merdeka Copper Gold Tbk’s proposed bond
Tuesday, March 30 2021 - 02:53 PM WIB
(March 29, 2021)--PEFINDO has assigned its “idA” rating for PT Merdeka Copper Gold Tbk’s (MDKA) proposed Shelf Registered Bond II Year 2021 of maximum of IDR3.0 trillion. The bond proceed will be used to refinance maturing bond to be due in 2021, finance its capital expenditure in addition to meeting the working capital requirement. At the same time, PEFINDO also affirmed its “idA” ratings for MDKA and its Shelf Registered Bond I/2020. The outlook for the corporate rating is “stable”.
An obligor rated idA has a strong capacity to meet its long-term financial commitments relative to that of other Indonesian obligors.
However, the obligor is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than higher-rated obligors.
The corporate rating reflects MDKA’ low cash cost position, potentially higher revenue stream from its Acid Iron Metal (AIM) project, and the high demand for gold. The rating is constrained by its limited mining reserves, exposure to the fluctuation of gold prices and unfavorable weather, and risk of developing new areas.
The rating may be raised if MDKA improves its mining profile by enlarging its gold and copper reserves and a better progress regarding the AIM project. This should be followed by maintaining a conservative capital structure and strong cash flow protection measures, while maintaining good profitability margins. The rating will be lowered if it aggressively finances its capital expenditure (capex) with substantial debt, which could trigger a more aggressive capital structure as indicated by a debt to EBITDA ratio above 3.0x on a sustained basis without being compensated by a stronger business profile. A significant drop in the price of gold may also trigger a rating downgrade, as this could adversely affect its financial profile. We note that it has long-term projects located in Pani and Banyuwangi (Tujuh Bukit Copper project) which in our view will require significant capex. The potential capex and revenue related to those projects are not yet included in the financial projection.
MDKA was established in 2012 and engages in mining activities. It has two projects located in Bukit Tumpang Pitu, Banyuwangi for gold mining and Wetar Island, Maluku for copper mining. As of September 30, 2020, its shareholders were PT Saratoga Investama Sedaya Tbk (19.13%), PT Mitra Daya Mustika (13.47%), Garibaldi Thohir (8.20%), PT Suwarna Arta Mandiri (6.33%), Pemda Kabupaten Banyuwangi (5.23%), and others including the public (47.64%). (ends)