Release: Moody's upgrades Antam to Ba3; outlook stable

(Singapore, January 16, 2008) -- Moody's Investors Service has upgraded PT Aneka Tambang (Persero) Tbk's (Antam) corporate family rating to Ba3 from B1. This concludes the review for possible upgrade which commenced on 22 October 2007.

At the same time, PT Moody's Indonesia has assigned Antam a national scale rating of Aa3.id. The outlook for both ratings is stable.

"The upgrade recognizes Antam's strengthened credit fundamentals, driven in turn by continued strength in the base metals industry, including the persistence of high nickel prices into 2008, because of favorable global demand as well as tight supply," says Kathleen Lee, Moody's lead analyst for Antam.

"Moreover, unprecedented levels of strong cash have placed Antam in an enviable net cash position, amounting to about US$460 million as of 30 September 2007," says Lee, adding, "This gives it significant leverage to undertake various acquisitions and/or downstream projects into alumina processing and even further downstream into stainless steel production."

"All such activities will broaden its long-term earnings base," says Lee.

That said, the rating recognizes Antam's small size and limited diversity with close to 90% of revenues from nickel production, as well as its aggressive debt-funded acquisitions and plans to invest in gold reserves and its pipeline of downstream projects.

"The final Ba3 rating further factors in medium support from the Indonesian government, given its 65% ownership in Antam under joint default analysis for government-related issuers, which has provided a one-notch rating uplift," says Lee.

The rating outlook is stable, incorporating Moody's expectation of some moderation in nickel and ferro-nickel prices. Cash generation and financial flexibility are expected to remain supportive in the near term for the company's aggressive growth plan.

The ratings would experience upward pressure if Antam can successfully grow its productive capacity over the next few years, while maintaining its sound financial and liquidity profiles.

On the other hand, Moody's would consider a downgrade if there is a weakening in its underlying credit strength due to a) industry fundamentals deteriorating beyond Moody's expectations, b) major problems continue to emerge after repairs at its FeNi III plant, or c) higher-than-anticipated investments in its expansion projects, such as the Tayan chemical-grade alumina project and FeNi IV plant, resulting in a deterioration in debt protection measures with EBIT interest coverage less than 6x and CFO (less dividends)/Adjusted Debt below 20% on a sustained basis.

The rating could also be lowered if there is a weakening in support from the government. This could result from a sell-down of the government's majority ownership or from a broader trend evidencing a change in the government's strategy towards Antam.

A change in the Indonesian government rating would have no impact on Antam's rating. (end of release)