Islamic Finance

Indonesia state-owned tin mining company to issue 700 bln rupiah sukuk

JAKARTA – Indonesia’s state-owned tin mining company PT Timah plans to sell 700 billion Indonesian rupiah ($52.5 million) worth of sukuk to boost its mining and refinery activities and recondition its facilities to increase production capacity, Mochtar Riza Pahlevi Tabrani, its CEO told reporters in Jakarta on August 24.

Timah will issue 300 billion rupiah in two tranches in October. The first tranche will mature after three years with an annual coupon rate of between 8.5 percent and 9 percent. The second tranche will be due after five years and offer an annual rate of 8.75 percent to 9.25 percent.

The company will issue the remaining 400 billion rupiah in another sukuk later this year.

As of March, Timah had 752,644 tons of tin resources and 323,618 tons of reserves, with a lifespan of around 20 years and 10 years, respectively. The company aims to produce 30,000 to 33,000 tons of tin this year, up from 25,000 tons last year.

Tabrani said that Timah’s alluvial tin deposits had started thinning out, forcing the company to start exploring its primary deposits that contain ores with lower tin content. Timah needs to boost its production facilities to process low-grade ores. It has set aside 2.3 trillion rupiah for capital expenditure in 2017, around 40 percent of which has been utilized to date.

Tabrani estimates tin production globally reached 341,390 MT (metric tons) last year, while demand of the commodity reached 352,700 MT. Timah can leverage its position as third largest tin producer in the world to meet the 11,310 MT gap, according to Tabrani.

Timah’s sukuk is rated 'idA+' with a stable outlook from local rating agency Pefindo. Bahana, BNI, Danareksa, DBS Vickers Securities and Mandiri Sekuritas are lead arrangers on the issue.

Indonesia's corporate sukuk outstanding from 2012 to July 2017 stood at 14.3 trillion rupiah from the sale of 69 tranches, according to the Financial Services Authority (OJK).

This represents 4.3 percent of the 332 trillion rupiah corporate bonds for the same period. These sukuk were issued by 18 corporates and does not include the RNI sukuk of 200 billion rupiah issued in early August.

($1 = 13,338 Indonesian rupiah)

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