PEFINDO has affirmed its idA rating for PT Timah Tbk (TINS) with stable outlook

(April 16, 2024)--PEFINDO also has affirmed its idA ratings for TINS’s Shelf-Registered Bond (SR) I and MTN I as well as idA(sy) rating for TINS’ SR Sukuk Ijarah I. Despite significant decline on TINS’ financial performance in the year 2023 (FY2023) compounded by current illegal mining case, PEFINDO has anticipated these concerns during our rating assessment in September 2023. TINS’ exposure to the risk from illegal mining practices in the Company’s mining license permit (IUP) areas may lower tin ore supply for its smelter production. TINS’ debt to EBITDA ratio weakened to 8.4x in FY2023 due to dropped in EBITDA of 80% on year-on year (YoY) from lower production affected by illegal mining. However, we view this condition as temporary and we project that TINS’ debt to EBITDA ratio to recover to around 4.8x in 2024-2026 following the higher production resulted from the initiatives to improve governance in tin mining industry.

The corporate rating reflects TINS’ strong market position, vertically integrated operations, and strong support from the shareholder. These strengths are partly offset by its moderate financial condition, its exposure to risk from illegal mining, and its exposure to the volatility of tin prices.

The rating may be raised if TINS demonstrates intensive deleveraging to a conservative level by conducting cost-efficiency and generating a strong EBITDA, as well as strengthening its downstream business on a sustained basis. The rating may be lowered if it incurs significantly higher debt than projected without being compensated by better business performance, or if the financial performance significantly worsens below our anticipated projections financial performance, or if the fluctuation of global tin price significantly impairs its revenue and profitability.

Founded in August 1976, TINS is a vertically integrated mining company in Indonesia focused on producing tin ingots. Its main mining operations are in Pangkal Pinang, Bangka Belitung. As of December 31, 2023, its A class share was owned by the Indonesian government, and its B class shares by PT Mineral Industri Indonesia (Persero) (65.0%) and the public (35.0%). (ends)