JAKARTA (TheInsiderStories) – Tin producer, PT Timah Tbk (IDX: TINS) is exploring a loan facility amounting to US$100 million from its parent, PT Indonesia Asahan Aluminium (MIND ID), said the company yesterday. The funds will be used to refinance bank loans and for working capital.
Finance director, Wibisono, said that his party has proposed the coupon rate of the loan below 2.5 percent with a tenure one year period. The company hopes that MIND ID will grant the loan before the end of 2020.
“We are trying to replace some of our US Dollar debts into shareholder loan. This is a natural hedge strategy to avoid a high fluctuation in the exchange rate so the impact will not hit our profit and loss,” he told reporters on Tuesday (11/10).
As early November, the miner has bank loans Rp6.6 trillion ($471.43 million). Of that amount, the company’ dollar debt reached $126 million. Now, the issuer has withdrawn a loan of around $30 million for the expansion of the ausmelt furnace smelter in Muntok, Bangka Belitung. The completion of the smelter is targeted on January 2022 with total costs $80 million.
State-owned construction firm, PT Wijaya Karya Tbk (IDX: WIKA) acted as the contractor of the project. This project is assisted by the Finnish export finance agency, Finnvera, along with MUFG Bank and Indonesia Eximbank. His company also looking strategic partners for rare earth mineral projects.
In June, the miner has cut its tin sales to 55,000 metric tones (MT) due to lower demand. The amount lower than the realization of sales in 2019 amounting to 67,704 MT. The limiting production operations in South America and the tendency of larger producers such as China to use their own production are driving the downsizing. At present, the state-owned firm’ market share in the global market reached 20 percent.
For this year, Timah plans to adjust the capital expenditure from Rp2.5 trillion to Rp1.5 trillion caused of the pandemic. The company also will cut its operational expenditure by 30 percent to maintain cash flow liquidity during the epidemic.
He admitted that the pandemic caused the company to temporarily suspend a number of projects, like the smelter project in Nigeria, Africa. In 2017, the producer planned to invest billions of dollars in the Nigerian minerals and mining sector and has signed a joint venture agreement with Topwide Ventures Ltd., to explore, mining, processing and refining, transportation, sales and marketing of tin and mineral derivatives that exist in the African Continent.
In addition, Timah also has paid its debt that matured in Sept. 28 with total amount Rp1.2 trillion. The management also decided not to continued the buy back shares program was scheduled on March 16 to June 16. Earlier, the company prepared Rp100 billion for the program helped by PT Danareksa Sekuritas.
“Along with the COVID-19 pandemic, our focus now is to maintain cash flow to be able to carry out business development in the midst of a pandemic,” said Wibisono.
Timah, he continues, strives to pursue cost efficiency on all production lines to reduce the company’s production and operating expenses. Raw material costs, for example, have been reached with third parties for more economical compensation.
In the third quarter of 2020, the miner still posted a net loss Rp255.16 billion, better than the loss in the second quarter of Rp390.07 billion. Refined tin sales down 9.49 percent to 45,548 tones and affected the company’ revenues. Until September, the revenues fell by 18.42 percent to Rp11.88 trillion from a year ago Rp14.56 trillion.
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