Saudi Arabian Mining Company (Ma’aden) Arabian Mining Company (Ma’aden) ... beliefs and...

Earnings Call Presentation Q2, 2017 1

Saudi Arabian Mining Company (Ma’aden) Earnings Conference Call Q2 2017

August 1, 2017


Walid Al-Hakim

Head 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.

Forward looking statement


Khalid Al-Mudaifer

President & Chief Executive Officer


Ramp-up continues, delivered strong quarter performance

Production

■ 70 K ounces of gold, up 17% vs Q2 2016

■ 349 K tonnes of alumina, up 8% vs Q2 2016

■ 219 K tonnes of primary aluminium, in line with Q2 2016

■ 555 K tonnes of ammonia, up 85% vs Q2 2016

■ 668 K tonnes of ammonium phosphate fertilizer, in line with Q2 2016

Outstanding cost

performance

Strong financial

performance

■ Sales SAR 2,995 mn, up 17% vs Q2 2016

■ EBITDA SAR 1,509 mn, up 54% vs Q2 2016

■ Net income SAR 434 mn, up 146% vs Q2 2016

■ Net cash from operation SAR 649 mn, up 40%

Growth projects

underway

■ Continued focus on efficiency, productivity and throughput

■ Reduced cash cost in all our products

■ Margins continue to increase

■ First Ammonium Phosphate fertilizer was produced from Wa’ad Al Shamal plant

in July 2017

■ Feasibility of our new Mansourah / Massarah mines is being finalised

■ Feasibility study for the third phosphate project is progressing well

Strong operating performance, supportive market conditions, benefits of low cost operations

reflecting in healthier results


Margin improvement with price and volume increase

978

241

1,437 1,509

41%

37%

53%

50%

20%

25%

30%

35%

40%

45%

50%

55%

60%

0

200

400

600

800

1000

1200

1400

1600

Q3 2016 Q4 2016 Q1 2017 Q2 2017

EBITDA

EBITDA Margins

SA

R m

illio

n

Rebase t

o 1

00 a

s o

n 1

Mar

2016

Source: Bloomberg

Commodity price movement

EBITDA and margins

40

50

60

70

80

90

100

110

120

130

140

1-Apr-16 1-Jun-16 1-Aug-16 1-Oct-16 1-Dec-16 1-Feb-17 1-Apr-17 1-Jun-17

Aluminium Copper Gold DAP Ammonia

Restated 2016 numbers as per IFRS

Earnings Call Presentation Q2, 2017 7 Source: Ma’aden SBU analysis, CRU , FMB and FERTECON

■ Ammonium phosphate fertilizer price ~US$357/t (Avg. Tampa FOB) and Ammonia price averaged ~US$ 316/t (Avg. ME FOB)

■ Q2 Phosphate demand was low in India in Q2 mainly due to a new tax scheme (GST) and flat in South America

■ On the supply side, China and Oceania local markets are out of season and have capacity for more exports. OCP’s new project

(JPH-3: ~1 million tonne) is ramping up

■ In Q2, Phosphate producers benefitted from weaker raw material costs (Ammonia, Sulphur and Phosphoric Acid)

■ Additional supplies expected in H2 2017 from MWSPC and Morocco which may exert further pressure on prices

Phosphate market softened in Q2 backed by growing supply

from China and North Africa

Average DAP Price Tampa Index (US$/t)

% Quarterly change

1-Jan-16 1-Apr-16 1-Jul-16 1-Jan-17 1-Oct-16 31-Mar-17 29-July-17

Avg. DAP Prices

Q4 Q1

-7% 19%

Q3 Q2 Q1

-2% -4% -9%

Q2

-8%

310

320

330

340

350

360

370

380

390

400


Recovery of aluminium prices continued in Q2 2017

■ Aluminum price averaged US$1,909/tonne (LME), up 32% vs Q2 2016 and up 12% vs Q1 2016

■ Japanese premiums increased in Q2 2017, due to expectations of Chinese supply regulations

■ China appears to be heading towards a balanced market in 2017

■ Prices have improved partly due to Chinese announcements of production cuts due to expected implementation of new

environmental policies and supply side reforms

Aluminium Price Movement (US$/t)

Source: Bloomberg, Ma’aden SBU analysis, CRU Mar 2017, Harbor Mar 2017

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2-Jan-15 2-Apr-15 2-Jul-15 2-Oct-15 2-Jan-16 2-Apr-16 2-Jul-16 2-Oct-16 2-Jan-17 2-Apr-17

Q4 Q1

1% 16%

Q3 Q2 Q1

1% 7% 3%

Q2

2%


Gold firm and copper is sustaining its recovery

Gold and copper price movement (US$/t)

■ Gold prices averaged US$1,263 / ounce similar to Q2 2016; Copper prices increased by 24% in Q2 2017 averaging US$

5,754 / tonne

■ World economic growth forecast, particularly Chinese structural reforms remain on track supporting the price outlook

■ Production disruption at world’s three largest copper mines helped to support copper prices, despite financial market

weakness and industrial metals sell-off. Copper prices are expected to be driven by sustainability of Chinese demand into

the second half of 2017 and US infrastructure spending

Source: Bloomberg, CRU Mar 2017, SBU secondary analysis

600

700

800

900

1,000

1,100

1,200

1,300

1,400

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

6,000

6,500

1-Apr-16 1-Jun-16 1-Aug-16 1-Oct-16 1-Dec-16 1-Feb-17 1-Apr-17 1-Jun-17

Copper Gold

Au Cu


Darren C. Davis

Chief Financial Officer


Second quarter of 2017 showed the underlying strength of

our business

(All numbers are in SAR million, except as mentioned)

Comparative analysis - quarterly

Q2-16A vs. Q2-17A Q1-17A vs. Q2-17A

Q2-16 Q1-17 Q2-17 SR % SR %

Sales 2,552 2,717 2,995 443 17% 278 10%

Cost of sales -1,971 -1,792 -1,983 -12 1% -191 11%

Gross profit 581 926 1,012 431 74% 86 9%

Gross profit margin% 23% 34% 34%

Selling, marketing and logistic expenses -114 -98 -93 21 -18% 5 -5%

General and administrative expenses -86 -80 -97 -11 12% -17 21%

Exploration and technical services expenses -11 -10 -14 -3 27% -4 35%

Write-off / impairment of plant and equipment -1 -16 -1 1 -50% 15 -97%

Operating profit 369 722 808 439 119% 85 12%

Operating income margin% 14% 27% 27%

Share in net income of jointly controlled entity 11 22 22 11 102%

Income from time deposits 44 23 19 -25 -57% -4 -17%

Finance cost -220 -363 -351 -131 59% 12 -3%

Other income / (expense) 2 -26 -32 -34 -2226% -6 -23%

Profit before zakat and income tax 194 366 465 271 140% 99 27%

Zakat and income tax expense -18 -26 -31 -13 73% -5 21%

Profit / (loss) for the period 176 341 434 258 146% 94 28%

Profit /(loss) % 7% 13% 14%

Profit / (loss) attrib. to shareholders' of the parent co. 171 276 356 185 108% 81 29%

Non-cont. interest's share of the period's profit / (loss) 5 65 78 73 1456% 13 20%

EPS (SR) 0.15 0.24 0.31 0.2 108% 0.1 29%


Core of our business built on world scale competitive

phosphate and aluminium businesses

45%

43%

12%

46%

39%

15%

Revenues

EBITDA

Price strength

aluminium and

phosphate businesses

Negative price impact

on the ammonia

business

Production driven

growth for all

businesses

Positive direction on

prices and costs for

aluminium and

phosphate

Ammonia price drop

Margins are improving

on efficiency and cost

reduction

aluminium phosphate gold & base metals

SAR 977

SAR 2,552 mn

Q2 2016

+17%

+54%

50%

39%

11%

SAR 1,509 mn

SAR 2,995 mn

Q2 2017

51% 38%

11%


Strong operating performance, supportive market conditions and

benefits of low cost operations reflecting in stronger results

Net income bridge Q2 2017 vs Q2 2016

227

127

77

21 11 1

131

53

0

100

200

300

400

500

600

700

176

434

Q2 2016

IFRS

Price

effect Volume

effect

Cost

effect

Sales,

marketing

logistics

G&A Write-off

PPE

Finance

charges

Others Q2 2017

IFRS

SAR MN

+146%


Strong operating performance, supportive market conditions and

benefits of low cost operations reflecting in stronger results

Net income bridge Q1 2017 vs Q2 2017

266

162

18 5 17 15 12 8

0

100

200

300

400

500

600

700

341

434

Q1 2017

IFRS

Price

effect Volume

effect

Cost

effect

Sales,

marketing

logistics

G&A Write-off

PPE

Finance

charges

Others Q2 2017

IFRS

SAR MN

+27%


Operational performance


Phosphate performance


■ During Q2, Ma’aden produced 668,000 tonnes

and sold 733,000 tonnes of ammonium

phosphate fertilizer. Production was in line with

Q2 2016, whilst sales increased by 4%.

■ Ma’aden produced and sold (external) a record

555,000 tonnes and 393,000 tonnes of ammonia,

an increase of 85% and 155% respectively as

compared to the same quarter last year.

■ The increased production and sales volume is

largely attributed to the start of commercial

operations of Ma’aden Wa’ad Al Shamal

ammonia plant.

Cost performance

■ During the quarter ammonium phosphate fertilizer

cash cost was maintained at the same level as in

the corresponding quarter of last year.

Project

■ First ammonium phosphate fertilzer was

produced in July 2017 from Ma’aden Wa’ad Al

Shamal Phosphate Company

Ammonium phosphate fertilizer (Kt)

Ammonia (Kt)

669

721

668

703

637

733

332 320

355

200

220

240

260

280

300

320

340

360

380

400

450

500

550

600

650

700

750

Q2 2016 Q1 2017 Q2 2017

Production Sales Avg Prices

300

599 555

154 152

393

400

277

340

100

150

200

250

300

350

400

450

0

100

200

300

400

500

600

700

Q2 2016 Q1 2017 Q2 2017

Production Sales Avg Prices

US$/t

US$/t


Aluminium performance


■ During the second quarter of 2017, Ma’aden

produced 219,000 tonnes of primary aluminium, in

line with the same period of last year.

■ Ma’aden’s bauxite mine and alumina refinery is

operating well

■ During Q2, Ma’aden produced 349,000 tonnes of

alumina, an increase of 8% compared to Q2 2016.

Cost performance

■ During the second quarter, our aluminium cash

cost decreased significantly, by decreased fixed

costs through strong cost control measures,

reduction in some raw material consumption, and

notably lower cost of alumina

■ However, we see some headwinds with the prices

of key inputs such as caustic soda and coke prices

increasing

Projects

■ The rolling mill operation continues to ramp up

production and is making steady progress in

penetrating the market for can sheets in the

Middle East region and beyond

Primary aluminium (Kt)

Alumina production (Kt)

220

228

219 219

227

217

1550

1793

1909

1000

1100

1200

1300

1400

1500

1600

1700

1800

1900

2000

180

190

200

210

220

230

240

Q2 2016 Q1 2017 Q2 2017

Production Sales Avg LME PricesUS$/t

324

369 349

90

140

190

240

290

340

390

Q2 2016 Q1 2017 Q2 2017


Gold and Copper performance

Gold (‘000 ounces)

Copper volumes (Kt)


■ During the quarter, Ma’aden’s production of gold

increased by 17% to 70,000 ounces compared

to the same quarter last year, this was mainly

due to increased volumes from Ad Duwayhi

mine

■ During the quarter, we produced 10,600 tonnes

and sold 10,700 tonnes of copper concentrate

from the Jabal Sayid copper mine, which is

operating well to reach its rated capacity

Cost performance

■ Continued focus on costs helped Ma’aden to

maintain its overall annual gold cash cost

objectives. Although some throughput issues

during the quarter impacted production which in

turn translated to an increase in cash cost.

■ Jabal Sayid’s continued focus on cost has

helped Jabal Sayid to reduce its C1 cash cost

by almost 30% compared to the same quarter

last year due to increased volumes and better

efficiencies.

1 Ma’aden attributable production & sales @ 50%

6.0

7.0

10.6

2.5

7.5

10.7

2.11 2.64 2.61

0

0.5

1

1.5

2

2.5

3

0

2

4

6

8

10

12

Q2 2016 Q1 2017 Q2 2017

Production Sales Price

60

71 70

63

70 69 1280

1238

1263

1100

1120

1140

1160

1180

1200

1220

1240

1260

1280

1300

54

56

58

60

62

64

66

68

70

72

74

Q2 2016 Q1 2017 Q2 2017

Production Sales Avg Prices US$/oz

US$/lb


Financial position


All numbers are in SAR millions

4,1

93

53,2

62

2,6

47

8,0

73

25,9

74

Current Liability

20%

31%

45%

4%

MPC WAS Aluminium Others

62%

33%

5%

Banks PIF SIDF

Long term borrowing

By business By source

11

,457

44,8

05

26

,738

11

,149

Capital work

in progress

Plant, property

& equipment

Current assets

Other non

current assets

Equity

Long term

borrowing

Other non current

liability

Assets Liability

As at 30 June 2017

Balance sheet

95%

5%

Floating Fixed

47%

53%

SAR USD

Type of loan

Financial position

Non controlling

interest


1 Long term borrowings / (long term borrowings + total equity) 2 Long term borrowings – cash equivalents and short tern investments 3 Restated with IFRS from 2016 onwards

Financial strategy

■ Maintain liquidity

■ Optimize capital structure

■ Ensure stable foundation for future growth

4

12

5 7 7 6

33

45 45

54 54 53

57% 57%

56%

62% 62%

61%

53%

54%

55%

56%

57%

58%

59%

60%

61%

62%

63%

0

10

20

30

40

50

60

2013 2014 2015 2016 Q1 2017 Q2 2017

Cash & Cash Equivalent Long Term Borrowing Debt/Total Capital

29 33 40 47 47 47

Net debt


Summary

Leading position in fundamentally attractive commodities

▪ Better overall price environment in Q2 2017 but some concerns for the balance of the

year, particularly in DAP

Underpinned outstanding cost performance

▪ Strong cost performance allows us to see the full benefits of improved commodity

prices

Production ramp-up continues

▪ Continued focus on volumes: ramping up new capacities and increasing throughput at existing

operations

Growth projects underway

▪ Wa’ad Al Shamal first ammonium phosphate fertilizer produced in July 2017

▪ Strong pipeline of attractive new projects


Q&A


Appendix


0

500

1000

1500

2000

2500

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

MIC

MGBM

WAS

MBAC

MRC

MAC

MPC

633

873

998

1,132

1,269

1,712

2,067

1,198

1,321

1,631

806

575 575

288

Debt repayment profile

Al numbers are in US$ million

As at 31 December 2016


Sales summary

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

Particulars Q2

2017

Q1

2017

%

change

q-o-q

Q2

2016

%

change

y-o-y

Phosphate business

Ammonium phosphate

fertilizer 733 637 15% 703 4%

Ammonia MPC 111 152 -27% 154 -28%

Ammonia MWSPC 282 315 -10% -

Aluminium business

Alumina 349 384 -9% 324 8%

Primary Aluminium 217 227 -4% 219 -1%

Gold & base metals

business

Gold (‘000 ounces) 69 70 -1% 63 9%

Copper 10.7 7.5 42% -


Thank You!

Copyright © 2016. Ma’aden . All rights reserved.

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