Saudi Arabian Mining Company (Ma aden) Earnings Conference Call Q2 2017 August 1, 2017 Earnings Call Presentation Q2, 2017 1
Walid Al-Hakim Head Investor Relations Earnings Call Presentation Q2, 2017 2
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. Earnings Call Presentation Q2, 2017 3
Khalid Al-Mudaifer President & Chief Executive Officer Earnings Call Presentation Q2, 2017 4
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 Continued focus on efficiency, productivity and throughput Reduced cash cost in all our products Margins continue to increase 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 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 Earnings Call Presentation Q2, 2017 5
SAR million Rebase to 100 as on 1 Mar 2016 Margin improvement with price and volume increase Commodity price movement 140 130 120 110 100 90 80 70 60 Aluminium Copper Gold DAP Ammonia 50 Source: Bloomberg 40 1-Apr-16 1-Jun-16 1-Aug-16 1-Oct-16 1-Dec-16 1-Feb-17 1-Apr-17 1-Jun-17 1600 1400 1200 1000 800 600 400 200 0 EBITDA and margins EBITDA EBITDA Margins 978 41% 37% 241 1,509 1,437 53% 50% Q3 2016 Q4 2016 Q1 2017 Q2 2017 60% 55% 50% 45% 40% 35% 30% 25% 20% Earnings Call Presentation Q2, 2017 Restated 2016 numbers as per IFRS 6
Phosphate market softened in Q2 backed by growing supply from China and North Africa 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 Average DAP Price Tampa Index (US$/t) 400 390 380 370 360 350 340 330 320 Avg. DAP Prices Q1-9% Q2-4% Q3-2% 310 1-Jan-16 1-Apr-16 1-Jul-16 1-Oct-16 1-Jan-17 31-Mar-17 29-July-17 Q4 Q1-7% 19% Q2-8% Earnings Call Presentation Q2, 2017 % Quarterly change Source: Ma aden SBU analysis, CRU, FMB and FERTECON 7
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) 2,200 Q1 3% Q2 7% Q3 1% Q4 Q1 1% 16% Q2 2% 2,000 1,800 1,600 1,400 1,200 1,000 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 Earnings Call Presentation Q2, 2017 Source: Bloomberg, Ma aden SBU analysis, CRU Mar 2017, Harbor Mar 2017 8
Gold firm and copper is sustaining its recovery 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 Gold and copper price movement (US$/t) Cu 6,500 Copper Gold 6,000 5,500 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1-Apr-16 1-Jun-16 1-Aug-16 1-Oct-16 1-Dec-16 1-Feb-17 1-Apr-17 1-Jun-17 Au 1,500 1,400 1,300 1,200 1,100 1,000 900 800 700 600 Earnings Call Presentation Q2, 2017 Source: Bloomberg, CRU Mar 2017, SBU secondary analysis 9
Darren C. Davis Chief Financial Officer Earnings Call Presentation Q2, 2017 10
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% Earnings Call Presentation Q2, 2017 11
Core of our business built on world scale competitive phosphate and aluminium businesses aluminium phosphate gold & base metals Revenues Price strength aluminium and phosphate businesses Negative price impact on the ammonia business Production driven growth for all businesses 43% SAR 2,552 mn 12% SAR 977 45% 39% SAR 2,995 mn 11% SAR 1,509 mn 50% +17% EBITDA Positive direction on prices and costs for aluminium and phosphate Ammonia price drop Margins are improving on efficiency and cost reduction 39% 15% 46% 38% 11% 51% +54% Q2 2016 Q2 2017 Earnings Call Presentation Q2, 2017 12
Strong operating performance, supportive market conditions and benefits of low cost operations reflecting in stronger results Net income bridge Q2 2017 vs Q2 2016 SAR MN 700 +146% 600 77 21 11 1 131 500 127 53 434 400 300 227 200 176 100 0 Q2 2016 IFRS Price effect Volume effect Cost effect Sales, marketing logistics G&A Write-off PPE Finance charges Others Q2 2017 IFRS Earnings Call Presentation Q2, 2017 13
Strong operating performance, supportive market conditions and benefits of low cost operations reflecting in stronger results Net income bridge Q1 2017 vs Q2 2017 SAR MN 700 +27% 600 500 400 341 266 162 18 5 17 15 12 8 434 300 200 100 0 Q1 2017 IFRS Price effect Volume effect Cost effect Sales, marketing logistics G&A Write-off PPE Finance charges Others Q2 2017 IFRS Earnings Call Presentation Q2, 2017 14
Operational performance Earnings Call Presentation Q2, 2017 15
Phosphate performance Operational 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) 750 721 703 700 669 650 332 600 550 500 450 Ammonia (Kt) Production Sales Avg Prices 733 668 355 637 320 400 Q2 2016 Q1 2017 Q2 2017 Production Sales Avg Prices 700 599 600 555 500 400 400 393 340 300 300 277 200 154 152 100 0 Q2 2016 Q1 2017 Q2 2017 US$/t 380 360 340 320 300 280 260 240 220 200 US$/t 450 400 350 300 250 200 150 100 Earnings Call Presentation Q2, 2017 16
Aluminium performance Operational performance During the second quarter of 2017, Ma aden produced 219,000 tonnes of primary aluminium, in line with the same period of last year. Ma aden s bauxite mine and alumina refinery is operating well During Q2, Ma aden produced 349,000 tonnes of alumina, an increase of 8% compared to Q2 2016. Cost performance During the second quarter, our aluminium cash cost decreased significantly, by decreased fixed costs through strong cost control measures, reduction in some raw material consumption, and notably lower cost of alumina However, we see some headwinds with the prices of key inputs such as caustic soda and coke prices increasing Projects Primary aluminium (Kt) Production Sales Avg LME Prices 240 230 228 227 1909 220 219 219 220 1793 217 210 1550 200 190 180 Q2 2016 Q1 2017 Q2 2017 Alumina production (Kt) 390 369 349 340 324 290 240 US$/t 2000 1900 1800 1700 1600 1500 1400 1300 1200 1100 1000 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 190 140 90 Q2 2016 Q1 2017 Q2 2017 Earnings Call Presentation Q2, 2017 17
Gold and Copper performance Operational performance 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. Gold ( 000 ounces) 74 72 70 68 66 64 62 60 58 56 54 Production Sales Avg Prices US$/oz 1300 71 70 70 1280 1280 69 1260 1263 1240 1238 1220 63 1200 60 1180 1160 1140 1120 1100 Q2 2016 Q1 2017 Q2 2017 Copper volumes (Kt) US$/lb 12 Production Sales Price 10.6 10.7 3 10 2.64 2.61 2.5 8 2.11 7.0 7.5 2 6.0 6 1.5 4 1 2.5 2 0.5 0 Q2 2016 Q1 2017 Q2 2017 0 1 Ma aden attributable production & sales @ 50% Earnings Call Presentation Q2, 2017 18
Financial position Earnings Call Presentation Q2, 2017 19
4,193 53,262 2,647 8,073 25,974 Financial position Balance sheet 11,457 44,805 26,738 11,149 Other non current assets Capital work in progress Plant, property & equipment Current assets All numbers are in SAR millions Equity Non controlling interest Other non current liability Long term borrowing Current Liability Long term borrowing By business By source 4% 5% 20% 33% 45% 62% 31% MPC WAS Aluminium Others Banks PIF SIDF Type of loan 5% 47% 53% Assets Liability 95% As at 30 June 2017 Floating Fixed SAR USD Earnings Call Presentation Q2, 2017 20
Financial strategy Maintain liquidity Optimize capital structure Ensure stable foundation for future growth Cash & Cash Equivalent Long Term Borrowing Debt/Total Capital Net debt 60 29 33 40 47 47 47 63% 50 40 45 45 62% 54 62% 54 53 61% 62% 61% 60% 59% 30 33 58% 20 10 4 57% 57% 12 5 56% 7 7 6 57% 56% 55% 54% 0 2013 2014 2015 2016 Q1 2017 Q2 2017 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 53% Earnings Call Presentation Q2, 2017 21
Summary Production ramp-up continues Continued focus on volumes: ramping up new capacities and increasing throughput at existing operations 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 Growth projects underway Wa ad Al Shamal first ammonium phosphate fertilizer produced in July 2017 Strong pipeline of attractive new projects Earnings Call Presentation Q2, 2017 22
Q&A Earnings Call Presentation Q2, 2017 23
Appendix Earnings Call Presentation Q2, 2017 24
Debt repayment profile 2500 2000 2,067 Al numbers are in US$ million MIC MGBM 1,712 1,631 WAS MBAC MRC 1500 MAC 1,132 1,269 1,198 1,321 MPC 1000 873 998 806 633 575 575 500 288 0 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 As at 31 December 2016 Earnings Call Presentation Q2, 2017 25
Sales summary Particulars Q2 2017 Q1 2017 (All numbers are in 000 tonnes except as mentioned) % 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% - Earnings Call Presentation Q2, 2017 26
Thank You! Copyright 2016. Ma aden. All rights reserved. Earnings Call Presentation Q2, 2017 27