PEFINDO: PT J Resources Asia Pasifik Tbk raised to “idBBB+”, outlook revised to “stable”

(January 10, 2022)--PEFINDO has raised its ratings for PT J Resources Asia Pasifik Tbk (PSAB) and its Shelf Registered Bond I to “idBBB+” from “idBBB” and revised the outlook for corporate rating to “stable” from “CreditWatch Negative”. These rating actions follow PSAB’s capability in repaying USD91 million loans at the end of December 2021 as demanded by one of its creditors, using the proceeds from the whole divestment of PT Gorontalo Sejahtera Mining, one of its subsidiaries. The remining funds from the divestment proceeds will be used to reduce its bank loans further and working capital level, as well as for liquidity buffer. We are of the view that the divestment has minimum impact to PSAB’s overall business profile, considering the divested mining asset is still in exploration phase and therefore the potential revenue generation in the medium term from this asset has not been incorporated in our rating assessment. PSAB’s reserves after the divestment are still regarded as sizable to cover more than 10 years of mining life. The loan settlement has also eased PSAB’s financial indicators and provided more flexibility in obtaining external funding sources, including to repay the near-term financial liabilities.

An obligor rated idBBB has an adequate capacity to meet its long-term financial commitments relative to those of other Indonesian obligors. However, adverse economic conditions or changing circumstances are more likely to weaken its capacity to meet its financial commitments. The plus (+) sign indicates that the rating is relatively strong within its category.

The corporate rating reflects PSAB’s sizeable mining reserves and resources, expectations of low 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 risks related to the development of new mines.

The rating may be raised if PSAB fully operates its Doup project and improves its capital structure, as indicated by a debt to EBITDA ratio below 2.5x on a sustained basis, while maintaining its profit margin and low cash cost position which will further positively affect its liquidity profile. This should also be supported by a sustained increase in its mining reserves and gold production volume. The rating may be under pressure if it fails to secure loan facilities in the upcoming months resulting in delays of the construction of Doup project which may result in significantly lower production volume than projected. Its rating may be lowered if it aggressively finances the expansion with substantially larger debt than projected, without being compensated for by a stronger revenue and/or EBITDA. A significant drop in the price of gold may also trigger a rating downgrade, as this may adversely affect its financial profile.

PSAB was established in 2002 under the name PT Pelita Sejahtera Abadi and commenced 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, specifically in Penjom, Malaysia; Seruyung, North Kalimantan; and Bakan, Lanut, and Doup in North Sulawesi. The Company owned three producing mines, one mine in construction stage, and one mine in the development stage. As of September 30, 2021, its shareholders consisted of Jimmy Budiarto (92.50%), Sanjaya J (0.02%), and the public (7.48%). (ends)