PEFINDO increases rating of Merdeka Copper

(August 11, 2022)--The rating action reflects MDKA’s stronger overall credit profile by having more diverse business and vertically integrated operation in the near term. This is a result of MDKA’s corporate action to acquire 55.67% shares of PT Merdeka Battery Materials (MBM, formerly known as PT Hamparan Logistik Nusantara) in May 2022 which already operated two rotary kiln electric furnace (RKEF) smelters and will operate another RKEF smelter and nickel mine in the near term. The outlook for the corporate rating is “stable”.

The corporate rating reflects MDKA’s vertically integrated operations in the near term, more diverse business, and sizeable reserves and resources. The rating constrained by its moderate financial policy and capital structure and exposure to fluctuating commodity prices.

The rating may be raised if MDKA successfully operates its new projects and generates higher revenue than projected which followed by maintaining its profit margins which will improve MDKA’s financial figures on a sustained basis. The rating may be lowered if MDKA generates lower revenue and/or profit margins than projected due to underperformed new projects, aggressively finances its capital expenditure with substantial debt, which may trigger a more aggressive capital structure. A significant deterioration of the commodity prices, particularly gold, copper, and nickel may also trigger a rating downgrade, as this will adversely affect its financial profile.

MDKA was established in 2012 and is engaged in mining activities. It has several projects located in Tujuh Bukit at Banyuwangi and Pani at Gorontalo for gold mining, Wetar Island, Maluku, for copper mining, Acid Iron Metal (AIM) project at Indonesia Morowali Industrial Park, and RKEF smelters in Morowali, Central Sulawesi. As of July 31, 2022, its shareholders consisted of PT Saratoga Investama Sedaya Tbk (18.345%), PT Mitra Daya Mustika (12.058%), Garibaldi Thohir (7.358%), PT Suwarna Arta Mandiri (5.588%), ISV SA Brunp & CATL Co., Limited (5.000%), and others, including the public and MDKA’s treasury shares (51.651%). (ends)