saudi arabian mining company (ma’aden)...721ammonia production at mpc and mwspc stable 726 753 637...

Earnings Call Presentation Q1 2018 1 1

Saudi Arabian Mining Company (Ma’aden) Earnings Conference Call – First Quarter 2018

May 3, 2018


Reem Asaad

Manager of Investor Relations


This presentation contains statements that are, or may be deemed to be, forward looking statements, including statements about the beliefs

and expectations of Saudi Arabian Mining Company (the "Company"). These statements are based on the Company's current plans,

estimates and projections, as well as its expectations of external conditions and events. Forward-looking statements involve inherent risks

and uncertainties and speak only as of the date they are made. As a result of these risks, uncertainties and assumptions, a prospective

investor should not place undue reliance on these forward-looking statements. A number of important factors could cause actual results or

outcomes to differ materially from those expressed in any forward-looking statements. The Company is not obliged to, and does not intend to,

update or revise any forward- looking statements made in this presentation whether as a result of new information, future events or otherwise.

This communication has been prepared by and is the sole responsibility of the Company. It has not been reviewed, approved or endorsed by

any financial advisor, lead manager, selling agent, receiving bank or underwriter retained by the Company. This communication is provided

for information purposes only. In addition, because this communication is a summary only, it may not contain all material terms and this

communication in and of itself should not form the basis for any investment decision.

The information and opinions herein is believed to be reliable and has been obtained from sources believed to be reliable, but no

representation or warranty, express or implied, is made with respect to the fairness, correctness, accuracy reasonableness or completeness

of the information and opinions. There is no obligation to update, modify or amend this communication or to otherwise notify you if

information, opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.

You are strongly advised to seek your own independent advice in relation to any investment, financial, legal, tax, accounting or regulatory

issues discussed herein. Analyses and opinions contained herein may be based on assumptions that if altered can change the analyses or

opinions expressed. Nothing contained herein shall constitute any representation or warranty as to future performance of any financial

instrument, credit, currency, rate or other market or economic measure. Furthermore, past performance is not necessarily indicative of future

results. The Company disclaims liability for any loss arising out of or in connection with your use of, or reliance on, this communication.

These materials may not be published, distributed or transmitted and may not be reproduced in any manner whatsoever without the explicit

consent of Ma’aden’s management. These materials do not constitute an offer to sell or the solicitation of an offer to buy the securities in any

jurisdiction.

Non-IFRS Financial Measures

Some of the financial information included in this presentation is derived from Ma’aden consolidated financial statements but are not terms

defined within the International Financial Reporting Standards (IFRS) as applied In the Kingdom of Saudi Arabia. Such information is provided

as the Company believes they are useful measures for investors. A reconciliation of this information with the consolidated financial statements

is included in the presentation.

Forward looking statement


Khalid Al-Mudaifer

President & Chief Executive Officer


PRODUCTION

■ 118K ounces of gold, up 66% vs. Q1 2017

■ 233K tonnes of primary aluminium, up 2% vs. Q1 2017

■ 598K tonnes of ammonia, in line with Q1 2017

■ 753K tonnes of ammonium phosphate fertilizer1, up 4% vs. Q1 2017

■ 389K tonnes of alumina, up 5% vs. Q1 2017

STRONG

FINANCIAL

PERFORMANCE

IMPROVED

PROFITABILITY

■ Improved prices across the portfolio, year-on-year

■ Sales SAR 3,564 million, up 32% vs. Q1 2017

■ Operating income SAR1,172 million, up 62% vs. Q1 2017

■ Net income SAR 754 million, up 121% vs. Q1 2017

OUTLOOK

■ Despite improved pricing environment, cost pressures remained evident

■ Raw material costs in both phosphate and aluminium continued to increase

■ Maintained focus on efficiency helped to mitigate the impact of cost increases

■ Underlying EBITDA Margin1 increased to 55%

■ Price volatility in our commodities remains high but underlying market

fundamentals remain supportive

■ Strong pipeline of development projects designed to grow profitably

■ International opportunities remain a target

Production growth and price recovery delivers strong results

1 excluding pre-commercial production from MWSPC. 2 see appendix for details


1,416 1,475 1,360

1,521

1,947

52% 49%

43% 47%

55%

0%

10%

20%

30%

40%

50%

60%

70%

1,100

1,200

1,300

1,400

1,500

1,600

1,700

1,800

1,900

2,000

Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018

EBITDA EBITDA Margin

SA

R m

illio

n

Rebase t

o 1

00 a

s o

n 1

Jan 2

017

Source: Bloomberg

Commodity price movement

Underlying EBITDA and margins

Mixed trends in the commodities markets despite volatility

40

60

80

100

120

140

160

Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18

Aluminium Alumina Copper Gold DAP Ammonia


200

250

300

350

400

450

500

2017 2018

Q1 Q2 Q3 Q4 Q1

Source: Ma’aden SBU analysis, CRU , FMB and FERTECON

Average DAP Price Tampa Index (US$/t) % Average quarterly change

Avg. DAP Prices

10% 1% 5% 8%

Phosphate market remained firm in Q1-2018

■ DAP prices moved up by ~8% in Q1 – 2018, with an average of ~US$393/t (Avg. Tampa FOB)

■ Phosphate demand in Q1 was strong in Australia, East Africa, US, and China

■ Plant closures, delays in project ramp-ups and strong domestic Chinese market impacted the supply side

■ Increase in Indian subsidy by 16% has encouraged Indian demand positively

8%


2017 2018

Q1 Q2 Q3 Q4 Q1

Aluminium Price Movement (US$/t)

Source: Bloomberg, Ma’aden SBU analysis, CRU June 2017

% Average quarterly change

Aluminium dipped in Q1-2018 but outlook more positive

■ Aluminium price averaged US$ 2,159/ton (LME), up 17 % vs. Q1 2017 and up 2 % vs. Q4 2017

■ Primary Aluminum demand growth continues with estimates for 2018 of 4-5%

■ Global trade issues remain a major risk factor and have led to significant volatility in pricing

■ Alumina refinery supply interruptions continue to support prices

Al

Al2O3 1% 12% 13%

9% 3% 6%

33%

4%

14%

2%

1400

1500

1600

1700

1800

1900

2000

2100

2200

2300

2400

200

250

300

350

400

450

500


0

200

400

600

800

1000

1200

1400

1600

4,500

5,000

5,500

6,000

6,500

7,000

7,500

8,000

Copper

Gold

2017 2018

Q1 Q2 Q3 Q4 Q1

Gold and copper price movement (US$/t)

Source: Bloomberg, CRU June 2017, SBU secondary analysis

1% 3% 2%

11% 3% 12% Cu

% Average quarterly change

Au 0%

7%

Gold price remains strong but copper off its 2017 highs

■ The geopolitical environment continued to provide support to gold prices over 2017 and into 2018

■ Copper weakened after a strong recovery in 2017 but supply deficits are still expected in 2018 given continued strong

demand and limited supply growth

4%

2%


Darren C. Davis

Chief Financial Officer


Consolidated Phosphate

FY2017 vs.

Prev. Yr. FY2017 vs.

Prev. Yr.

Revenue (SRmn) 12,086 28% Revenue (SRmn) 5,461 31%

EBITDA* (SRmn) 5,762 56% EBITDA* (SRmn) 2,465 58%

EBITDA margin 48% EBITDA margin 45%

43% of Group EBITDA

Aluminium Gold

FY2017 vs.

Prev. Yr. FY2017 vs.

Prev. Yr.

Revenue (SRmn) 5,032 18% Revenue (SRmn) 1,593 52%

EBITDA* (SRmn) 2,499 42% EBITDA* (SRmn) 798 112%

EBITDA margin 50%

EBITDA margin 50%

43% of Group EBITDA

14% of Group EBITDA

All of our businesses grew profitability in Q1 2018

Consolidated Phosphate

Q1-18vs.

LY Qtr.

vs.

Prev. Qtr.Q1-18

vs.

LY Qtr.

vs.

Prev. Qtr.

Revenue (SRmn) 3,564 32% 10% Revenue (SRmn) 1,542 23% 17%

EBITDA¹ (SRmn) 1,947 36% 28% EBITDA¹ (SRmn) 771 36% 40%


40% of Group EBITDA

Aluminium Gold

Q1-18vs.

LY Qtr.

vs.

Prev. Qtr.Q1-18

vs.

LY Qtr.

vs.

Prev. Qtr.

Revenue (SRmn) 1,426 26% 4% Revenue (SRmn) 595 82% 8%

EBITDA¹ (SRmn) 838 20% 16% EBITDA¹ (SRmn) 338 104% 35%


43% of Group EBITDA 17% of Group EBITDA

¹ see appendix for details


341

286

562

-276

-64 -22 -22 -5 -7 -1 -3 -36

754

Net income bridge Q1 2017 vs. Q1 2018

Q1 2017 Volume

effect

Price

effect

Cost

effect

Sales,

marketing

logistics

G&A Finance

charges

Others Q1 2018

SAR MN

Key factor

All products ↑

Key factors

Aluminium ↑

Alumina ↑

APF ↑

Gold ↑

Key factors

Aluminium ↑ Alumina ↑ APF ↑

Write-off

& impair.

Growing volumes and improved prices driving earnings

Depn.&

amort.

Invty.

change Explo. &

tech.

Serv.


-198 192

154 -179

-76 157

62 39 4

153

473

-28

754

Net income bridge Q4 2017 vs. Q1 2018

Q4 2017 Volume

effect

Price

effect

Cost

effect

Sales,

marketing

logistics

G&A Finance

charges

Others Q1 2018

SAR MN

Key factors

Aluminium ↑

APF ↑

Gold ↑

Key factors

Aluminium ↑

Alumina ↑

APF ↑

Write-off

& impair.

Growing volumes and improved prices driving earnings

Depn.&

amort.

Invty.

change Explo. &

tech.

Serv.

Key factors

APF ↑

Ammonia ↑

Alumina ↑

Gold ↑

Key factor

2017 year end impartment of

Aluminium rolling business

Key factor

One-off MAC refinancing

charges in 2017


Operational performance


Phosphate Performance

Ammonium phosphate fertilizer (Kt)

Ammonia (Kt)

721 726

753

637 667

728 320

363

393

200

250

300

350

400

450

400

450

500

550

600

650

700

750

Q1 2017 Q4 2017 Q1 2018

Production Sales Avg Prices

599

539

599

466

311 354 249

327 326

100

150

200

250

300

350

400

450

500

0

100

200

300

400

500

600

700

Q1 2017 Q4 2017 Q1 2018

Production Sales Avg Prices

US$/t

US$/t


■ During Q1 2018, Ma’aden produced 753K tonnes

of ammonium phosphate fertilizer from MPC, a

4% increase on the quantities produced in the

same quarter last year and a new record

■ Sales were impacted by delayed shipments due

to bad weather at quarter end

■ Ammonia production at MPC and MWSPC stable

but sales of ammonia lower as MWSPC

consumed ammonia in DAP production during the

ramp-up phase

■ Production ramp-up at MWSPC remains on track

Cost performance

■ DAP and MAP costs were impacted by higher

Sulphur prices


Aluminium Performance

Primary aluminium (Kt)

Alumina production (Kt)

228 229 233

176 174 163

1836

2171 2230

1000

1200

1400

1600

1800

2000

2200

2400

100

120

140

160

180

200

220

240

Q1 2017 Q4 2017 Q1 2018

Production External sales Avg LME PricesUS$/t

369 403 389

30 63

343

442

389

0

50

100

150

200

250

300

350

400

450

500

0

50

100

150

200

250

300

350

400

450

Q1 2017 Q4 2017 Q1 2018

Production External sales Avg Prices (API)

US$/t


■ During the Q1 2018, 233K tonnes of primary

aluminium were produced, an increase of 2%

compared to the same quarter last year

■ Produced 389K tonnes of alumina, an increase of

5% compared to same quarter last year and

exports resumed with a shipment of 63K tonnes

made during this quarter

■ Ma’aden continues to focus on increasing

production from both the smelter and the alumina

refinery above nameplate capacity

Cost performance

■ During the quarter, aluminium cash costs

increased due to higher input costs, in particular

pitch and coke prices

■ Alumina cash cost also increased due to the

increase in key inputs, notably caustic soda

Projects

■ The rolling mill operation continues to ramp up

production


Gold and Copper Performance

Gold (‘000 ounces)

Copper volumes (Kt)¹

¹ Ma’aden attributable production & sales @ 50%

3.5

5.3 6.0

3.7

4.8

6.2 5820

7496

6526

4000

5000

6000

7000

8000

9000

0

1

2

3

4

5

6

7

Q1 2017 Q4 2017 Q1 2018

Production Sales Price

71

114 118

70

115 118 1238

1281

1348

1000

1100

1200

1300

1400

1500

0

20

40

60

80

100

120

140

Q1 2017 Q4 2017 Q1 2018

Production Sales Avg PricesUS$/oz

$/t


■ Gold production reached 118,000 ounces in Q1,

a 69% increase compared to the same quarter

last year

■ Production growth reflects the continued

ramping up of the Ad Duwayhi mine

■ Copper production reached 6kt of copper from

the Jabal Sayid operations, a 71% increase

against Q1 last year

Cost performance

■ Cash costs per ounce of gold decreased,

primarily as a result of higher volumes and

higher grades at the Ad Duwayhi mine

■ Cash costs of copper also continued to decline


Financial position


4,2

20

53,2

79

2,0

88 8,5

48

26,7

34

Current

Liability

All numbers are in SAR millions

18%

34%

44%

4%

MPC WAS Aluminium Others

60%

33%

7%

Banks PIF SIDF

Long term borrowing

By business By source

12,2

53

44,5

46

26,0

32

12,0

38

Capital work

in progress

Mine, plant,

property &

equipment

Current assets

Other non

current assets

Equity

Total Debt

Other non current

liability

Assets Equity and

liabilities As at 31 March 2018

Balance sheet

95%

5%

Floating Fixed

51%

49%

SAR USD

Type of loan

Financial position

Non controlling

interest


12 5 7 7 6

45 45 54 54 53

57%

56%

62%

61%

60%

53%

54%

55%

56%

57%

58%

59%

60%

61%

62%

63%

0

10

20

30

40

50

60

2014 2015 2016 2017 Q1 2018

Cash & Cash Equivalent Long Term Borrowing Debt/Total Capital

6.1x 8.2x 12.6x 11x 9.2x

Net debt 1

SRbn

33 40 47 47 47

Capital Structure

■ Our ongoing refinancing programme continues and in Q1 2018 we issued our first sukuk by Ma’aden Phosphate

Company

■ Our liquidity position remains strong with cash on hand of SAR6B and our undrawn SAR7.5B corporate revolver

■ We continue to explore further refinancings and optimisations of our debt structure

1 see appendix 2 2016 restated as per IFRS

Net debt: EBITDA


Summary

Fundamentally attractive commodities seeing sustained

recovery

▪ Our belief in the long term fundamentals of our core products is evidenced in the

sustained recovery in prices

▪ 2018 expected to be a volatile pricing environment but generally positive in terms of

trends

Growing production

▪ Production growth continues and allows for lower unit costs and the opportunity to benefit from

the improved pricing environment

▪ Further upsides to production are being pursued

Raw material costs are a concern but efficiency is mitigating

▪ We have seen significant increases in raw material costs but have been able to improve

profitability nonetheless through greater efficiency

Positive outlook for growth

▪ Increased cashflow allows us to improve our capital structure whilst still pursuing profitable

growth projects

▪ International opportunities also remain under review


Q&A


Appendix


Schedule debt repayment profile

As at 31 March 2018

-

500

1,000

1,500

2,000

2,500

3,000

2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031

USD Millions

MIC

MGBM

MWSPC

MBAC

MRC

MAC

MPC

695

1,117 1,164

1,565

1,946

2,227

1,227

1,717

1,004

721 715

390

495 662


Sales summary

(All numbers are in ‘000 tonnes except as mentioned)

Particulars Q1 2018 Q1 2017

%

change

Phosphate business

Ammonium phosphate fertilizer 728 637 14%

Ammonia MPC 125 152 -18%

Ammonia MWSPC 229 315 -27%

Aluminium business

Alumina 63 30 110%

Primary Aluminium 163 176 -7%

Precious and base metals business

Gold (‘000 ounces) 118 70 69%

Copper 6.2 3.7 68%




Some of the financial information included in this presentation is derived from Ma’aden consolidated

financial statements but are not terms defined within the International Financial Reporting Standards

(IFRS) as applied In the Kingdom of Saudi Arabia. Such information is provided as the Company

believes they are useful measures for investors. An explanation of these terms is provided below.

■ Debt: Total Capital = (Long-term borrowings + Current portion long-term borrowings) / (Long-term

borrowings + Current portion of long-term borrowings + Total equity)

■ Operating Cashflow = Net cash generated from operating activities

■ Underlying EBITDA: Earnings before interest, tax, depreciation and amortization, impairment and

asset write offs.

■ Underlying EBITDA Margin: Underlying EBITDA / Sales

saudi arabian mining company (ma’aden)...721ammonia production at mpc and mwspc stable 726 753 637...

Documents