PEFINDO affirms “idA” ratings for PT J Resources Asia Pasifik Tbk and its bond

(March 12, 2020)--PEFINDO has affirmed its “idA” ratings for PT J Resources Asia Pasifik Tbk (PSAB) and its Shelf Registered Bond I of maximum of IDR3.0 trillion. The outlook for the corporate rating is “stable”.

An obligor rated idA has a strong capacity to meet its long-term financial commitments relative to that of other Indonesian obligors.

However, the obligor is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than higher-rated obligors.

The corporate rating reflects PSAB’s sizeable mining reserves and resources, expectation on a lower cash cost, and the high demand for gold. The rating is constrained by its aggressive capital structure, exposure to the fluctuation of gold prices and unfavorable weather, and risks related to the development of new mines.

The rating may be raised if PSAB improves its capital structure, as indicated by a debt to EBITDA ratio below 2.0x on a sustained basis, while maintaining its profitability margin and low cash cost position. This should also be supported by a sustained increase in its mining reserves and gold production volume. The rating will be lowered if it delays the project construction in Doup site which could result in significantly lower than projected production volume. Its rating could also be lowered if it aggressively finances the expansion with substantially larger debt than projected, without being compensated by stronger revenue and/or EBITDA. A significant drop in the price of gold may also trigger a rating downgrade, as this could adversely affect its financial profile.

PSAB was established in 2002 under the name PT Pelita Sejahtera Abadi, and started mining operations in 2012 after acquiring assets from Avocet Mining. Its operations cover the exploration, mining, and processing of gold. It has a geographically diverse portfolio of assets across Indonesia and Malaysia - in Penjom, Malaysia; Seruyung, North Kalimantan; and Bakan, Lanut, Pani, Doup, Bolangitang, and Bulagidun in North Sulawesi. As of December 31, 2019, it had three producing mines, two mines in the development stage, and two in the exploration stage. As of September 30, 2019, its shareholders were Jimmy Budiarto (92.50%), William Surnata (1.56%), Budikwanto Kuesar (1.52%), and the public (4.42%). (ends)