Freeport Indonesia: Initiating Coverage

Lakshmanan R, CFA, FRM - Head of South & Southeast Asia Corporates
Jonathan Tan Jun Jie - Analyst, South & Southeast Asia Corporates
Nicole Chua - Analyst, China Property

  • PT Freeport Indonesia (PTFI) operates the Grasberg Mine in Papua, Indonesia, which is one of the largest copper and gold mines in the world based on mineral reserves and production volumes.
  • PTFI’s key shareholders are PT Mineral Industri Indonesia (MIND ID, Indonesia’s state-owned mining holding company owns a 51.2% stake) and Freeport-McMoRan (FCX, US-based mining company holding a 48.8% stake).
  • Key credit strengths include PTFI’s large reserve base and long reserve life, low operating costs, low leverage, clean capital structure, sound FX hedging, and meaningful state linkage with the Government of Indonesia through MIND’s ownership (could further increase in the medium to long-term).
  • Key credit risks include single-asset risk, mining regulatory risk, commodity price risk, persisting high dividends and capex, and unfavorable ESG sentiment from toxic waste disposal.
  • We believe PTFI’s 3 $ bonds trade fairly to similar-maturity bonds of MIND ID, FCX, and Indonesian state-owned geothermal company Pertamina Geothermal (PGEO).

PTFI operates the Grasberg Mine in Papua, Indonesia, which is one of the largest copper and gold mines in the world based on mineral reserves and production volume. PTFI processes the mined ore into copper concentrate (containing copper + gold + silver content) and sells them under long-term $-denominated sales contracts. These contracts are priced based on average monthly LME copper and London Bullion Market Association (LBMA) gold benchmark prices for a specified month near the shipment date.

There are 3 active mining concessions within the Grasberg mining district, which are the Grasberg Block Cave (GBC), Deep Mill Level Zone (DMLZ), and Big Gossan. The former two concessions are the main contributors to PTFI’s total production. GBC contributed 67% and 72% of PTFI’s total FY23 copper and gold production respectively, while DMLZ contributed 24% and 23% of PTFI’s total FY23 copper and gold production respectively. PTFI began developing a new underground ore body, Kucing Liar, in 2021 and expects production to commence in 2028.

PTFI also owns a non-controlling 39.5% stake in PT Smelting (PTS), which owns and operates a 1 mtpa copper smelter and refinery in Gresik, Indonesia. PTFI supplies PTS with 100% of the copper concentrate required for PTS to produce 205 kilo metric tons of copper annually. PTFI’s stake in PTS will be lifted to 65% in mid-2024 as part of an agreement entailing a debt-to-equity swap post the completion of a 30% capacity expansion program by PTS in Dec-2023.

PTFI’s Grasberg mining license (IUPK) is granted by the Government of Indonesia (GoI) and ends in Dec-2031, with the option to extend it to Dec-2041 subject to PTFI’s successful construction of an additional 2 mtpa of smelting capacity in Indonesia by end-2024 (negotiated from an initial 2023 deadline due to COVID-19 disruptions). This will be achieved by: 1) Constructing a 1.7 mtpa greenfield copper smelter in Manyar, East Java province by end-2024; 2) Expanding PTS’ existing copper smelter capacity to 1.3 mtpa from 1.0 mtpa by end-2023 (already completed successfully).


PTFI was incorporated in 1967 following a mining expedition conducted by US mining company Freeport-McMoRan (FCX) to Indonesia. PTFI discovered the Grasberg deposit in 1988 and began open-pit mining of the ore body in 1990. In 1991, PTFI signed a new contract of work (CoW) with the GoI, entailing a 30-year term and two subsequent 10-year extensions. In the same year, the GoI acquired a 9.36% stake in PTFI and in 1993, PTFI signed a joint venture deal with Rio Tinto Indonesia (RTI), where RTI would get a 40% interest in production from all concessions in the Grasberg mine.

Would you like access to the full report?
Receive a complimentary copy of Freeport Indonesia: Initiating Coverage.

Our Products

We’re proud to be the trusted resource for these credit research consumers:


The independent research and actionable ideas you need to help guide investment and risk management decisions.

Risk Products

From BondScore to Credit Quality Score and Fallen Angel Score, these products give you an analytial edge.

Covenant Review

In-depth analysis and impact assessment on current and future leveraged finance deals from the market’s trusted authority on bond and loan covenants.

LevFin Insights

News and analysis covering the debt capital markets including leveraged loans, high yield, secondary trading, CLOs, middle market and BDCs.

Markets Served

We’re proud to be the trusted resource for these credit research consumers:


From mutual funds, pensions and hedge funds to the world’s largest insurers, managers at these institutions are guided by our credit research


Financial intermediaries-the world’s broker-dealers, market makers and liquidity providers-rely on our credit insights each day


Brokers, financial advisors and private wealth managers entrusted with their clients’ assets leverage our intellectual capital when it comes to the credit markets