EM ASIA CREDIT: Freeport Indonesia: State involvement may rise
(FRIDPT, Baa3/NR/BBB)
"*DANANTARA SAYS INDONESIA EYES ADDL 12% FREEPORT STAKE: TECHNOZ" - BBG
Operational control key for ratings, though spreads contained.
Danantara, Indonesia’s sovereign wealth fund, was reported overnight to be seeking an increased stake in Freeport Indonesia (PTFI).
Danantara owns MIND ID (Mining Industry Indonesia), the main shareholder of PTFI, currently holding a 51% stake. Plans to increase this stake by another 10% have been in place since 2023, with recent headlines indicating only a modest increase.
For now, we see limited impact on valuations. We don't expect the higher stake to materially enhance sovereign support, given PTFI’s clear strategic importance to Indonesia (see below). However, we note Freeport-McMoRan (FCX), the parent company and 48.7% owner operating the Grasberg mine, provides credit support to PTFI (reflected in a one-notch Fitch rating uplift). Since the proposed stake increase is linked to mining lease extensions, support is expected to continue.
The critical factor will be who maintains operational control. If FCX retains operational control, ratings should remain stable; if control shifts, a downgrade to BBB- is possible, aligning Fitch with Moody’s ratings. We expect limited spread impact from this outcome.
Freeport Indonesia operates one of the world’s largest copper and gold deposits in the Grasberg mineral district in Papua, with exports mainly within Asia.
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Fig 1 : GBP/JPY Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
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