PEFINDO has affirmed its “idBBB” ratings to PT Kapuas Prima Coal Tbk (ZINC) and its Bond I Year 2018

(October 13, 2022)--The outlook for the corporate rating is maintained at “positive” to reflect our expectation that ZINC’s business position and cash flow protection measures will improve as results of more integrated business expansions in the near term following the operation of its lead smelter in the second half of 2022 (2H2022). We expect its lead smelter will increase overall mining annual production of around 220 thousand tons concentrate in 2023 from the previous production of 130 thousand tons concentrate in 2021. ZINC will generate EBITDA of minimum IDR280 billion in 2023-2025 that is expected to reduce its debt leverage, which will improve its capital structure, cash flow protection, and liquidity in the near future, with the projected funds from operation to debt ratio of 28.2% on average in 2023 – 2024 from 6.2% at the end of June 2022.

The rating reflects ZINC’s adequate reserves and resources profile, as well as its vertically integrated operations after the operation of lead and zinc’s smelters. The rating is constrained by its moderate capital structure, small capacity compared to global peers, and exposure to fluctuating commodity prices.

The rating may be raised following ZINC’s successful business expansion in the near term, which would generate significant cash flow and result to financial leverage improvement. The outlook may be revised to stable without any rating upgrade if the Company fails to increase revenue from its mining expansion and the lead smelter which lead to a stagnant revenue generation, or if price fluctuations in the global zinc, lead, and silver markets significantly impair our anticipated revenue and profitability. We have not incorporated the possibility of zinc smelter to be consolidated in the Company’s financial projection.

Established in 2005, ZINC engaged in exploration and production activities for industrial metals: zinc (Zn), lead (Pb), silver (Ag), and iron ore (Fe). The Company currently operates three blocks of underground pits named Gossan, Karim, and Ruwai in Lamandau, Central Kalimantan, with an estimated raw ore production capacity of around 642,000 tons per annum in 2022. Publicly listed in 2017, its shareholders were Sim Anthony (14.42%), Kioe Nata (12.33%), Budimulio Utomo (10.15%), PT Sarana Inti Selaras (9.72%), Haroen Soedjatmiko (9.57%), William (9.16%), Nomura Bank Ltd. (6.67%) and the public 27.89% as of October 4, 2022. (ends)