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Industry News

  • December 2019
    • Ahok to Become Pertamina President Commissioner, Erick Thohir says
    • Lawsuit against Indonesian Coal Plant Reveals Permit Irregularities
  • November 2019
    • Stopping Nickel Export Spree
    • Govt Flip-Flops on Nickel Ban, Allows Exports Until January 2020
    • East Asia Minerals Corp. Announces Shares for Debt Transaction
    • Darma Henwa Scores US $1.19 Million in 3Q Profit
    • BOSS' Net Profit Fell by 94.07% YoY Due to Low Coal Prices
    • Bengkulu Woos Investors with 200 MW Coal-Fired Power Plant
    • The government is moving fast in investigating alleged nickel export irregularities that prompted its high-ranking officials to announce a sudden temporary export ban of the commodity, which plays an important role in a plethora of industrial operations,
    • Seven Firms Accused of Illegal Nickel Exports
    • Raid on Illegal Mines Turns Violent in Bangka Belitung
    • Raid on Illegal Mines Turns Violent in Bangka Belitung
  • October 2019
    • XCMG Debuts New Excavators And Truck At Mining Indonesia 2019
    • West Java Mining Company May Lose Permit After Causing Cliff Explosion that Sent Boulders Crashing On Houses
    • Inalum, Vale Indonesia Sign Agreement to Start Divestment
    • Gov't Orders Inalum to Acquire Stake in Vale Indonesia
    • Freeport Indonesia’s Spending On Copper Smelter Hits $150 Million
    • Floods in India May Help Revive the HBA
    • Explainer: How Do Miners Dispose of Their Waste in The Sea?
    • Coal Reference Price Continues Declining Trend
    • China Holds Import Purchases Due To Increased Domestic Supply

Indonesia State Firm Sells $5.5b in Bonds to Fund Stake Purchase

Indonesia's state mining holding company Inalum has sold US$4 billion (S$5.5 billion) in bonds to fund an acquisition of a majority stake in the Indonesian gold and copper mining unit of United States-based Freeport-McMoRan.

 

The deal would pave the way for President Joko Widodo to fulfil his pledge to gain greater control of the nation's natural resources, fanning nationalist sentiment as he gears up for next April's elections. Mr Joko is seeking a second and final five-year term in office.

 

The bonds were sold in four tranches: US$1 billion of three-year bonds at 5.5 per cent yield; US$1.25 billion (five-year, 6 per cent); US$1 billion (10-year, 6.875 per cent; and US$750 million (30-year, 7.375 per cent).

 

Bidders offered to buy about four times the amount on offer, a government official who was involved in the sale process told The Straits Times.

 

The fact that Inalum bonds were greatly oversubscribed and they rallied in the secondary market immediately after the sale indicated the initial bond sale offered overly attractive yields, analysts said. The joint global coordinators for the sale were BNP Paribas, Citi and MUFG.

 

On Sept 27, the Indonesian government signed an agreement to acquire a majority stake in Freeport Indonesia, which runs one of the world's largest gold and copper mines in Papua province.

 

The deal, a record acquisition in Indonesia, could be favourable for Mr Joko ahead of the legislative and presidential elections on April 17 next year.

 

Freeport entered Indonesia in the 1960s, around the time of a change in leadership from founding president Sukarno to Suharto.

 

It started developing the Grasberg mine in the early 1970s. With the country then facing a lack of infrastructure development, few industries and a cash-strapped government, the Freeport contract helped to improve the economy.

 

But politicians and observers have increasingly been questioning the contract terms, seen as more favourable to the company than to Indonesia.

 

The Inalum bond sale - the biggest dollar-denominated corporate security from a non-financial issuer in the country and among the largest in the Asian market this year, according to Bloomberg data - comes after Indonesian state oil company Pertamina managed to offload its US$750 million bond offering.

 

Bloomberg reported that the Asian dollar bond market that had been relatively quiet earlier in the week ahead of the US midterm elections, roared back to life yesterday. There is also speculation that US-China trade tensions could ease.

 

"Risk appetite is better now that the uncertainty is out of the way after the midterm elections," Bloomberg reported, citing Singapore-based senior fund manager Leo Hu at NN Investment Partners.

 

"The market is rallying in anticipation of the easing in trade tensions. We think ties between China and the United States are warming up and there is potential for a ceasefire."

 

Sentiment towards emerging market debt has also improved because of expectations that a gridlock in Washington - with Democrats now in control of the US House of Representatives - would curb the strengthening US dollar.

 

Source: Wahyudi Soeriaatmadja / Straits Times

09 November 2018

 

 

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