Saudi Arabian Mining Company (Ma’aden)1 Earnings Call Presentation Q2 2018 Saudi Arabian Mining...

Earnings Call Presentation Q2 201811

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

July 26, 2018


Reem M. AsaadHead of Investor Relations


Forward looking statement

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.


Darren C. DavisPresident & Chief Executive Officer


PRODUCTION

■ 103K ounces of gold, up 47% vs. Q2 2017

■ 236K tonnes of primary aluminium, up 7% vs. Q2 2017

■ 507K tonnes of ammonia, lower 8.6% vs. Q2 2017

■ 789K tonnes of ammonium phosphate fertilizer, up 18% vs. Q2 2017

■ 455K tonnes of alumina, up 30% vs. Q2 2017

STRONG COST

PERFORMANCE

STRONG

FINANCIAL

PERFORMANCE

■ Mixed picture on raw materials prices

■ Phosphate benefiting from lower raw materials costs

■ Aluminium business benefiting from full value chain integration and stable

operations despite increased raw materials costs

■ Underlying EBITDA Margin1 decreased slightly to 53%

OUTLOOK

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

■ Sales SAR 3,414 million, up 14% vs. Q2 2017

■ Operating income SAR1,045 million, up 29% vs. Q2 2017

■ Net profit SAR 630 million, up 45% vs. Q2 2017

■ Price outlook generally neutral but uncertainty due to trade tensions

■ Mansourrah & Massarah Gold Project BFS completed

■ International opportunities under review

1 see appendix for details

Strong operational performance


1,428 1,5041,360

1,521

1,9471,815

52% 49%43%

47%55% 53%

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 Q2 2018

EBITDA EBITDA Margin

SA

R m

illio

nR

ebase 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


% Average quarterly change

Phosphate market remained strong in Q2

■ DAP prices have continued to move up with a $13/tonne improvement in Q2 versus Q1 (+2%).

■ Overall demand continues to be healthy including strong demand in India despite weakening of the Rupee.

■ Supply growth has been slower than anticipated which has also helped to support prices.

■ Chinese exports remain lower than 2017.

■ Sulphur prices have fallen in Q2 as have ammonia prices.

10% 1% 5% 8% 10%

2017

Q1 Q2 Q3 Q4 Q1 Q2

2018

2%

Average DAP Price Tampa Index (US$/t) 5 Jan 2017 – 28 Jun 2018

310

320

330

340

350

360

370

380

390

400

410

420

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


Aluminium Price Movement (US$/t)

Source: Bloomberg, Ma’aden SBU analysis, CRU June 2018

% Average quarterly change

Aluminium market fundamentals remain strong

■ Aluminium prices were broadly flat q-o-q (+5%) but considerable volatility seen during Q2.

■ Some weakening in demand growth but slower growth in supply is offsetting and a small global deficit likely in 2018.

■ Trade tensions could outweigh the market fundamentals.

■ Alumina prices remain elevated (+35% in Q2) due to supply side issues which may take some time to resolve.

■ Raw material prices remain a concern, notably caustic soda, coke and pitch.

Al

Al2O31% 12% 13%

9% 3% 6%

33%

4%

14%

2%

2017

Q1 Q2 Q3 Q4 Q1 Q2

2018

35%

5%

1000

1200

1400

1600

1800

2000

2200

2400

2600

2800

200

250

300

350

400

450

500

550

600

650

700

Alumina Aluminium

Earnings Call Presentation Q2 201899 Source: Bloomberg, CRU June 2018, SBU secondary analysis

Both gold and copper prices under pressure

■ Gold prices have continued to move downwards, driven by rising interest rates.

■ Gold prices were -5% lower q-o-q.

■ In Q2 copper prices remained under pressure as fears over trade impacted demand expectations.

■ Fundamentals remain strong over the medium term but volatility in prices can be expected to continue.

Gold (US$/oz) and copper (US$/t) price movement % Average quarterly change

Au

2% 9% 12% -7% -1%

-1% 3% 2% 2% -5%

2017 2018

Q2 Q3 Q4 Q2Q1

Cu

0

7500

6500

6000

5500

1000

500

0

7000

1360

1340

1320

1300

1280

1260

Jul’17 Aug Sept Oct Nov JunFebJan’18Dec MayAprMar

Copper Gold


Ali S. Al-QahtaniChief Financial Officer


All of our businesses except phosphate grew profitability in

Q2-2018 compare to same quarter last year

Consolidated Phosphate

Q2-18vs.

LY Qtr.

vs.

Prev. Qtr.Q2-18

vs.

LY Qtr.

vs.

Prev. Qtr.

Sales (SRmn) 3,414 14% -4% Sales (SRmn) 1,484 0% -4%

EBITDA* (SRmn) 1,815 21% -7% EBITDA* (SRmn) 725 -6% -6%

EBITDA margin 53% 3% -1% EBITDA margin 49% -3% -1%

40% of Group EBITDA

Aluminium Gold

Q2-18vs.

LY Qtr.

vs.

Prev. Qtr.Q2-18

vs.

LY Qtr.

vs.

Prev. Qtr.

Sales (SRmn) 1,435 23% 1% Sales (SRmn) 495 51% -17%

EBITDA* (SRmn) 826 43% -1% EBITDA* (SRmn) 263 72% -22%

EBITDA margin 58% 8% -1% EBITDA margin 53% 7% -4%

46% of Group EBITDA 14% of Group EBITDA


434

274

110

-194 -70

186

-55-4 -10 -49

1 7 630

Net income bridge Q2 2018 vs. Q2 2017SAR MN

Growing volumes and improved prices driving earnings

+45%

Key factors

Aluminium ↑

Alumina ↑

APF ↑

Gold ↑

Key factors

Alumina ↑

APF ↑

Gold ↑

Key factors

MPC

Gold

Price

effect

Volume

effect*

Cost

effect

Sales, mktg.

& log.

G&A Finance

costs

OthersNet

profit

Q2-17

Net

profit

Q2-18

Impair &

write-off

Depn. &

amort.

Explo.

& tech.

serv.

Inventory

Change

* Including the volume effect of main raw materials

↑

↑


754 13

-175

19 4 44

-28 -16 -7 -36

19 39 630

Net income bridge Q2 2018 vs. Q1 2018SAR MN

Decline in sales volumes and average realized prices

resulted in lower earnings

-16%

Key factors

APF ↑

Alum ↑

Alumina ↑

IM ↑

Key factors

Aluminium

Ammonia

Gold

IM

Price

effect

Volume

effect*

Cost

effect

Sales, mktg.

& log.

G&A Finance

costs

OthersNet

profit

Q1-18

Net

profit

Q2-18

Impair &

write-off

Depn. &

amort.

Explo.

& tech.

serv.

* Including the volume effect of main raw materials

Inventory

Change

↑

↑

↑

↑


Operational performance


Phosphate Performance

Ammonium phosphate fertilizer (Kt)

Ammonia (Kt)

668

755789

733 728 750

355

393406

200

250

300

350

400

450

400

450

500

550

600

650

700

750

Q2 2017 Q1 2018 Q2 2018

Production Sales Avg Prices

555 598

507

393 350301

329 328

277

100

150

200

250

300

350

400

450

500

0

100

200

300

400

500

600

700

Q2 2017 Q1 2018 Q2 2018


US$/t

US$/t


■ Record production and sales volume of DAP both q-o-q

and over corresponding quarter of last year.

■ Ammonia production is consistent but low in Q2 2018

due to a planned turnaround shutdown.

■ Ammonia sales volume is lower in line with the

production and increased consumption in non-

commercial DAP from MWSPC.

Cost performance

■ During Q2, cash cost of ammonium phosphate fertilizer

was lower compared to Q1 in line with softening in

sulfur price.


Aluminium Performance

Primary aluminium (Kt)

Alumina production (Kt)

US$/t

US$/t


■ During the Q2 2018, 236K tonnes of primary

aluminium were produced, an increase of 8%

compared to the same quarter last year.

■ Produced 455K tonnes of alumina, an increase of 30%

compared to same quarter last year and exports 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 alumina, pitch

and coke prices.

■ Alumina cash cost also increased due to the higher

production despite key input prices notably caustic

soda compare to same quarter last year.

Projects

■ The rolling mill operation continues to ramp up

production.

219 233 236

155 156 151

2,018

2,269

2,337

1,800

1,900

2,000

2,100

2,200

2,300

2,400

-

50

100

150

200

250

Q2 2017 Q1 2018 Q2 2018

Production External Sales Avg LME Prices

349 389

455

63 63

395

484

-

100

200

300

400

500

600

-

50

100

150

200

250

300

350

400

450

500

Q2 2017 Q1 2018 Q2 2018

Production External Sales Avg API Prices


Gold and Copper Performance

Gold (‘000 ounces)

Copper volumes (Kt)¹

¹ Ma’aden attributable production & sales @ 50%

US$/oz

$/t


■ Gold production reached 103k ounces in Q2, a 47%

increase compared to the same quarter last year.

■ Production growth reflects the continued ramping up of

the Ad Duwayhi mine compared to the same quarter

last year.

■ Copper production reached 12kt of copper from the

Jabal Sayid operations, a 13% increase compared to

the same quarter 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 compared to the same quarter last year.

■ Cash costs of copper also continued to decline.

70

118103

69

118103

1263

1348

1279

1000

1100

1200

1300

1400

1500

0

20

40

60

80

100

120

140

Q2 2017 Q1 2018 Q2 2018


10.612.0

12.0

10.7

12.5

7.35974

65256856

4000

5000

6000

7000

8000

9000

0

2

4

6

8

10

12

14

Q2 2017 Q1 2018 Q2 2018

Production Sales Price


Financial position


7,3

33

49,8

81

2,1

25

8,6

31

27,2

52

Current

Liability

All numbers are in SAR millions Long term borrowing

By business By source

12,9

14

44,1

28

26,2

94

11,8

88

Capital work

in progress

Mine, plant,

property &

equipment

Current assets

Other non

current assets

Equity

Total Debt

Other non current

liability

Assets Equity and

liabilitiesAs at 30 June 2018

Balance sheet

95%

5%

Floating Fixed

51%

49%

SAR USD

Type of loan

Financial position

Non controlling

interest

Banks,

59%

PIF, 33%

SIDF, 8%

Banks PIF SIDF

MWSPC, 34%

MAC, 20%

MPC, 18%

MBAC,

15%

MRC, 9%

MIC, 2%

MGBM, 2%


125 7 7 6 6

45 45

54 54

5353

57% 56%

62% 61% 60% 60%

0%

10%

20%

30%

40%

50%

60%

70%

0

10

20

30

40

50

60

2014 2015 2016 2017 Q1 2018 Q2 2018

Cash & Cash Equivalent Long Term Borrowing Debt/Total Capital

6.1x8.2x12.6x11x9.2x 6.1x

Net debt1

SRbn

33 40 47 47 47

Capital Structure

■ Our ongoing refinancing program continues and in July 2018 we successfully closed the refinancing of Ma’aden

Bauxite & Alumina Company on much improved terms

■ Also in July we executed the first of a series of interest rate hedges

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

1 see appendix

2 2016 restated as per IFRS

Net debt: EBITDA

47


Summary

Fundamentals for our commodities remain strong

▪ Fundamentals in phosphate, aluminium, alumina and copper all remain strong

▪ Some weakness in gold and ammonia but both remain highly profitable

▪ Global trade tensions are a concern for the balance of the year

Strong production performance

▪ Gold production levels stabilising after ramp up of the Ad-Duwayhi mine

▪ Strong production outlook at MPC, Aluminium Smelter and Alumina Refinery

▪ Some challenges in Wa’ad Al Shamal production but ramp up continues

Maintaining pressure on costs

▪ With stable production, focus continues on efficiency and cost reduction

▪ Focus on digitisation initiatives to improve performance

Outlook for growth remains strong

▪ Mansourrah & Massarah Gold project BFS completed

▪ International opportunities under review


Q&A


Appendix


Schedule debt repayment profile

As at 30 June 2018

482

675 695

1,117 1,164

1,565

1,946

2,227

1,227

1,717

1,004

721 715

390

-

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


Sales summary

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

Particulars Q2 2018 Q2 2017

%

change

Phosphate business

Ammonium phosphate fertilizer 750 733 2%

Ammonia MPC 107 111 -4%

Ammonia MWSPC 194 282 -31%

Aluminium business

Alumina 63 0 100%

Primary Aluminium 151 155 -3%

Precious and base metals business

Gold (‘000 ounces) 103 69 49%

Copper 7.3 10.7 -32%




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

■ Net Debt = (Short-Term Debt + Long-Term Debt) - Cash and Cash Equivalents


Thank You!Copyright © 2018 Ma’aden. All rights reserved.

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Saudi Arabian Mining Company (Ma’aden)1 Earnings Call Presentation Q2 2018 Saudi Arabian Mining...

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