(Fitch Ratings - Singapore/Jakarta - 04 Jun 2025)--Fitch Ratings has affirmed the Long-Term Issuer Default Rating (IDR) of PT Mineral Industri Indonesia (Persero) (MIND ID) at 'BBB-'. The Outlook is Positive. Fitch has also affirmed MIND ID's senior unsecured rating and the rating on its outstanding senior unsecured notes at 'BBB-'.
MIND ID is rated on a top-down basis, one notch below the Indonesia's sovereign rating (BBB/Stable). This is underpinned by our belief that exceptional government support to MIND ID is extremely likely, based on our assessment of the state's responsibility and incentives to support under our Government-Related Entities (GRE) Rating Criteria. We look through the direct ownership of Indonesia's new sovereign wealth fund, Danantara.
The Positive Outlook is driven by our view that MIND ID's Standalone Credit Profile (SCP) may be revised up from 'bb-', as we assess a stronger financial profile due to a better leverage profile. MIND ID has a robust business profile, underpinned by its commodity diversification and healthy mining cost positions. A higher SCP would lead to MIND ID's IDR being equalised with the sovereign's rating under our criteria.
We forecast EBITDA net leverage to remain below 3.0x during 2025-2026 (2024: 1.5x) on substantial dividend inflows despite our expectations of high capex and shareholder returns. However, we await further visibility on MIND ID's plans under Danantara for capex and dividends.
Key Rating Drivers
State's Responsibility to Support: We regard the sovereign's involvement in MIND ID's decision-making and oversight as 'Very Strong'. The state owns 100% of MIND ID and appoints its directors and commissioners. It also receives monthly reports on key financial and operating parameters. The government has been closely involved in key acquisitions, such as additional stakes of around 42% in PT Freeport Indonesia (PTFI, BBB/Stable) in 2018 and 14% in PT Vale Indonesia Tbk in 2024, and investments to improve downstream processing capability.
We assess precedents of support from the sovereign as 'Strong'. The government consolidated mining assets in 2017 to improve MIND ID's business profile and boost the parent's cash flow with dividends from subsidiaries. The government also did not seek any dividends from MIND ID in 2020 and 2021 when the SCP was assessed as weak.
Strong State Incentives to Support: Fitch views MIND ID's role in the preservation of strategic assets as 'Strong'. Proper management of Indonesia's mineral resources is a key state priority and assets such as PTFI's Grasberg mine hold significant strategic value. The mine is in the first quartile of the global copper cost curve and generated EBITDA of USD7 billion in 2024.
We believe MIND ID's 51.2% stake in PTFI would be jeopardised if it were to default, incentivising the government to support MIND ID. In addition, the contagion risk of a default on the funding of the government and other GREs is 'Strong', given the high-profile nature of MIND ID's investments and its large debt.
Impact from Shareholding Change Unlikely: The state's stake in MIND ID was transferred to a Danantara operational holding company in March 2025. However, the state directly retains a Series A Dwiwarna (Golden) share, granting special powers in matters such as the appointment of MIND ID's management. We think material adverse changes to MIND ID's dividend payments and capex strategy due to the shareholding change are unlikely. Still, we await clarity on Danantara's plans to increase investments in sectors such as downstream processing.
Large Dividends from PTFI: We forecast PTFI to pay average annual dividends of USD1.3 billion during 2025-2026, with an operating cash flow well in excess of planned annual capex despite assuming weaker product prices. PTFI received government approval in March 2025 to export copper concentrate for six months. It may need further export approvals until its Manyar smelter ramps up to full capacity around end-2025. However, we expect the government to allow exports to prevent a material impact on PTFI's operations, which would also hit tax payments and dividends to MIND ID.
Potential for SCP Revision: We expect leverage to increase to 2.6x by 2026 (2024: 1.5x). However, our forecast is below the 3.0x threshold at which we could revise the SCP to 'bb', leading to an IDR upgrade. We forecast weaker EBITDA, based on an assumption of lower prices for most commodities, and high capex and dividends. We also forecast an increase in debt due to negative FCF.
Commodity Diversification, Healthy Cost Positions: MIND ID produces various commodities, including thermal coal, nickel, bauxite, tin, aluminium, copper and gold, through subsidiaries and key associates. The nickel, bauxite and copper assets, especially the Grasberg mine, which generates a large dividend income for MIND ID, have healthy positions within the first half of global cost curves, according to research firm CRU.
Improving Vertical Integration: MIND ID's exposure to downstream businesses has improved in the past two years with the start of a 1,320MW coal-fired power plant and additional capacity for ferronickel production and tin smelting. The group is targeting the start of commercial operations at its alumina refinery in 2025, which will improve upstream integration by providing raw material for aluminium smelting.
Capex and Investments to Continue: We expect MIND ID to invest in more downstream projects - such as nickel processing plants for electric battery production - over the next five years, either directly or through joint ventures (JVs). As a result, capex and investment outflows are likely to remain high. Fitch may undertake proportional consolidation of MIND ID's strategically important JVs that carry large debt. This, and capex exceeding Fitch's expectations, could affect MIND ID's financial profile and SCP.
Peer Analysis
PT Pertamina (Persero) (BBB/Stable) has 'Very Strong' precedents of support compared with 'Strong' for MIND ID due to regular compensation for fuel sold below market prices. Fitch views Pertamina's role in the preservation of government policy as 'Very Strong', as it plays a key role in the nation's energy security. Fitch also deems the contagion risk for the Indonesian state and other GREs from a default by Pertamina as 'Very Strong', as it is widely considered a reference issuer.
We assess the sovereign's incentive to support PT Hutama Karya (Persero) (HK, BBB-/AA+(idn)/Stable) as 'Strong', consistent with our assessment of MIND ID. However, the state's responsibility to support HK is deemed to be higher than for MIND ID due to 'Very Strong' precedents of support.
China Baowu Steel Group Corporation Limited's (A/Stable) support score is the same as that of MIND ID. We think the government's control over MIND ID's decision-making and execution is greater than the 'Strong' for Baowu. However, Baowu's support precedent assessment is higher, at 'Very Strong', as the Chinese state provided significant support during its creation in 2016, which was sustained through asset transfers.
MIND ID's SCP can be compared with the ratings of Freeport-McMoRan Inc. (FCX, BBB/Stable) and PT Golden Energy Mines Tbk (GEMS, BB-/A+(idn)/Stable). FCX's stronger credit profile is underpinned by a larger EBITDA scale and lower leverage than MIND ID. GEMS's business profile is weaker than MIND ID's due to a lack of diversification and smaller EBITDA scale. However, GEMS's financial profile is significantly stronger due to a net cash position.
Key Assumptions
Fitch's Key Assumptions Within the Rating Case for MIND ID group:
- Coal sales volume to increase to 47 million tonnes by 2027, from 43 million tonnes in 2024;
- Nickel ore sales volume to increase to 12 million wet metric tonnes (WMT) by 2027, from 8 million WMT in 2024; ferronickel sales to increase to 30 kilotonnes (kt) by 2027 (2024: 19kt);
- Aluminium output at around 275kt from 2025, similar to 2024;
- Annual tin sales to increase to 21kt by 2027, from 18kt in 2024;
- Average annual dividend income from PTFI and other non-consolidated investments of USD1.3 billion over 2025-2027 (2024: USD1.5 billion);
- Cumulative capex, equity investments and acquisition-related outflow of USD2.2 billion over 2025-2027;
- Average annual dividend payment to the government of USD1 billion over 2025-2027.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade:
- Negative rating action on the sovereign;
- Weakening of the likelihood of state support;
- The rating Outlook on MIND ID could be revised to Stable if EBITDA net leverage, including net dividend inflows from PTFI and minority stakes, is likely to be above 3.0x.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade:
- Positive rating action on the sovereign, provided there is no significant weakening of the likelihood of the government extending support to MIND ID;
- Strengthening of the likelihood of state support;
- MIND ID's EBITDA net leverage is sustained below 3.0x.
For the sovereign rating of Indonesia, the following sensitivities were outlined by Fitch in our rating action commentary of 11 March 2025:
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
- Public Finances: A material increase in the overall public debt burden closer to the level of 'BBB' category peers, resulting, for example, from a substantial rise in fiscal deficits, or materialisation of contingent liabilities.
- External Finances: A sustained decline in FX reserve buffers, resulting, for example, from outflows stemming from deterioration in investor confidence or large FX interventions.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
- Public Finances: A marked improvement in the government revenue ratio closer to the level of 'BBB' category peers, including from better tax compliance or a broader tax base, which would strengthen public finance flexibility.
- External Finances: A material reduction in external vulnerabilities, for instance, through a sustained increase in FX reserves or lower exposure to commodity price volatility.
- Structural: Significant improvement in structural indicators, such as governance standards, closer to those of 'BBB' category peers.
Liquidity and Debt Structure
MIND ID has sufficient cash and undrawn facilities to cater to the debt due in 2025 despite negative FCF, based on our estimates. There are no large debt maturities in 2026 and 2027, and the group's liquidity is supported by robust and extensive banking relationships and a healthy business profile.
MIND ID had readily available cash, which we define as inclusive of time deposits and 70% of investments in various debt securities, of around IDR37 trillion on a consolidated basis as of end-2024. In addition, MIND ID had USD1 billion (IDR16 trillion) in undrawn committed facilities with maturities in 2028 and 2029. MIND ID had around IDR21 trillion of debt due in 2025, excluding USD750 million under a revolving credit facility which matures in 2029.
At the holding-company (holdco) level, MIND ID had cash, including 70% of investments in debt securities, of around USD770 million as of end-2024. The cash and USD1 billion of undrawn facilities should enable the holdco to repay USD1 billion of notes in 2025.
Issuer Profile
MIND ID is wholly owned by the Indonesian government and acts as the parent for the state's mining assets. Its various subsidiaries and associates are involved in mining and processing a diverse range of commodities.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
Public Ratings with Credit Linkage to other ratings
MIND ID's IDR, senior unsecured rating and ratings on outstanding bonds are one notch below Indonesia's rating.
MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS
Click here to access Fitch's latest quarterly Global Corporates Macro and Sector Forecasts data file which aggregates key data points used in our credit analysis. Fitch's macroeconomic forecasts, commodity price assumptions, default rate forecasts, sector key performance indicators and sector-level forecasts are among the data items included.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores. (ends)
