Freeport Indonesia seeks to raise USD3bn in bonds for copper smelter

  • Gold and copper mining giant PT Freeport Indonesia (PTFI) is set to raise USD3bn from the issuance of US dollar-denominated senior notes to finance its copper smelter project development in Gresik, East Java.
  • The bonds, which will be issued on 14 Apr 22, come in three tranches with coupons ranging from 4.76% to 6.2% and maturity dates from 2027 to 2052.
  • PTFI will sell the bonds in the United States, mainly to institutional buyers. The company explicitly said the bonds may not be offered or sold to Indonesian citizens or to foreign individuals and entities in Indonesia.
  • PTFI spokesman Riza Pratama said that PTFI decided to issue long-term senior notes because the smelter project was also a long-term investment.
  • “Other funding mechanisms, such as bank loans, generally have shorter tenors. Considering PTFI’s strong financial profile, it is possible that the company can obtain an investment-grade rating of Baa3 from Moody’s and BBB- from Fitch for these senior notes,” he said.
  • PTFI’s copper smelter, developed by Japan-controlled PT Chiyoda International Indonesia, would cost an estimated USD3bn. The smelter, which had begun construction in October last year, is scheduled for completion in 2024.
  • The smelter is expected to process 1.7 million tons of copper concentrate annually into 600,000 tons of copper cathode, which can be further processed into electrical wiring, pipes and car batteries, among other products.
  • Separately, Dany Amrul Ichdan, institutional relations director of state-owned mining holding company MIND ID, said PTFI decided to issue senior notes when taking into account the trend of rising US interest rates as the US Federal Reserve lays out plans to raise benchmark rates.
  • Indonesia, through MIND ID and the Papua regional administration, owns 51.24% of Freeport Indonesia. US-based Freeport McMoRan owns the remaining 48.76%.
  • “PTFI requires quite large funding in capital expenditure in US dollars. Senior notes issuance will provide certainty in capital expenditure availability and interest payable during the smelter’s construction phase,” he told

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