Fitch Ratings: Regulatory, Concentration Risks to Affect APAC Miners’ Operations, Credit Metrics

(Fitch Ratings-Jakarta-06 November 2023)--Evolving regulations in APAC jurisdictions will continue to influence miners’ operations, cash flow and credit metrics, says Fitch Ratings. Regulations in developing APAC countries such as Indonesia and Mongolia are generally less robust and stable than those in developed countries.

Smelter construction requirements have increased PT Freeport Indonesia’s (PTFI, BBB-/Positive) capex and funding requirements. Furthermore, a delay in exporting copper concentrate due to a ban on copper concentrate exports will affect PTFI’s revenue generation in 2023 and, to some extent, dividend to PT Mineral Industri Indonesia (Persero) (MIND ID, BBB-/Stable). MIND ID’s acquisition of an additional stake in PT Vale Indonesia Tbk, as part of Vale Indonesia’s mandatory share divestment to a local company, will affect MIND ID’s funding strategy and business profile.

Volatile regulations in Mongolia had a significant impact on Mongolian Mining Corporation’s (MMC, B/Stable) cash flow generation. A changing royalty rate and price gap with the reference price eroded MMC’s profit margin.

Concentration in terms of commodity, asset and country will remain key features for PTFI, Zhaojin Mining Industry Company Limited (BB+/Stable) and MMC. However, PTFI compensates for its country, asset and commodity concentration with its large scale and robust cost position. On the other hand, MMC’s limited financial flexibility will continue to restrict its ability to diversify away from coking coal, its operational base in Mongolia and customers in China. (ends)