Saudi Arabian Mining Company (Ma aden) Earnings Conference Call Second Quarter 2018 July 26, 2018 1
Reem M. Asaad Head of Investor Relations 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. 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. 3
Darren C. Davis President & Chief Executive Officer 4
Strong operational performance 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 FINANCIAL PERFORMANCE 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 STRONG COST 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 Margin 1 decreased slightly to 53% OUTLOOK 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 5
SAR million Rebase to 100 as on 1 Jan 2017 Mixed trends in the commodities markets despite volatility Commodity price movement Source: Bloomberg Underlying EBITDA and margins EBITDA EBITDA Margin 2,000 1,900 1,800 1,700 1,600 1,500 1,400 1,300 1,200 1,100 52% 55% 53% 49% 47% 43% 1,947 1,815 1,428 1,504 1,521 1,360 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 70% 60% 50% 40% 30% 20% 10% 0% 6
Phosphate market remained strong in Q2 DAP prices have continued to move up with a $13/tonne improvement in Q2 versus Q1 (+2%). Overall demand continues to be healthy including strong demand in India despite weakening of the Rupee. Supply growth has been slower than anticipated which has also helped to support prices. Chinese exports remain lower than 2017. Sulphur prices have fallen in Q2 as have ammonia prices. Average DAP Price Tampa Index (US$/t) 5 Jan 2017 28 Jun 2018 % Average quarterly change 2017 2018 Q1 Q2 Q3 Q4 Q1 Q2 420 410 400 390 380 370 360 350 340 330 320 310 10% 1% 5% 8% 10% 2% 7 Source: Ma aden SBU analysis, CRU, FMB and FERTECON
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. Aluminium Price Movement (US$/t) 2017 % Average quarterly change 2018 Q1 Q2 Q3 Q4 Q1 Q2 Al 9% 3% 6% 4% 2% 5% 2800 1% 12% 13% 33% 14% 35% Al2O3 700 2600 2400 2200 2000 1800 1600 1400 1200 650 600 550 500 450 400 350 300 250 1000 200 Alumina Aluminium 8 Source: Bloomberg, Ma aden SBU analysis, CRU June 2018
Both gold and copper prices under pressure Gold prices have continued to move downwards, driven by rising interest rates. Gold prices were -5% lower q-o-q. In Q2 copper prices remained under pressure as fears over trade impacted demand expectations. Fundamentals remain strong over the medium term but volatility in prices can be expected to continue. Gold (US$/oz) and copper (US$/t) price movement Cu 2017 2018 Q2 Q3 Q4 Q1 Q2 2% 9% 12% -7% -1% % Average quarterly change -1% 3% 2% 2% -5% Au 7500 7000 1360 1340 6500 1320 6000 5500 1000 500 1300 1280 1260 0 0 Jul 17 Aug Sept Oct Nov Dec Jan 18 Feb Mar Apr May Jun Copper Gold 9 Source: Bloomberg, CRU June 2018, SBU secondary analysis
Ali S. Al-Qahtani Chief Financial Officer 10
All of our businesses except phosphate grew profitability in Q2-2018 compare to same quarter last year Consolidated Phosphate Q2-18 vs. 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 Q2-18 vs. 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 11
Growing volumes and improved prices driving earnings SAR MN Net income bridge Q2 2018 vs. Q2 2017 +45% Key factors Aluminium Alumina APF Gold Key factors Alumina APF Gold Key factors MPC Gold 434 274 110-194 -70 186-55 -4-10 -49 1 7 630 Net profit Q2-17 Price effect Volume effect* Cost effect Depn. & amort. Inventory Change Sales, mktg. & log. G&A Explo. & tech. serv. Finance costs Impair & write-off Others Net profit Q2-18 * Including the volume effect of main raw materials 12
Decline in sales volumes and average realized prices resulted in lower earnings SAR MN Net income bridge Q2 2018 vs. Q1 2018-16% Key factors APF Alum Alumina IM Key factors Aluminium Ammonia Gold IM 754 13 19 4 44 19 39 630-175 -28-16 -7-36 Net profit Q1-18 Price effect Volume effect* Cost effect Depn. & amort. Inventory Change Sales, mktg. & log. G&A Explo. & tech. serv. Finance costs Impair & write-off Others Net profit Q2-18 * Including the volume effect of main raw materials 13
Operational performance 14
Phosphate Performance Operational performance 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 noncommercial 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. Ammonium phosphate fertilizer (Kt) Production Sales Avg Prices 750 700 393 406 650 355 600 789 733 755 550 728 668 750 500 450 400 Q2 2017 Q1 2018 Q2 2018 Ammonia (Kt) Production Sales Avg Prices 700 600 500 400 329 328 300 555 598 277 200 393 350 100 507 301 0 Q2 2017 Q1 2018 Q2 2018 US$/t 450 400 350 300 250 200 US$/t 500 450 400 350 300 250 200 150 100 15
Aluminium Performance Operational performance During the Q2 2018, 236K tonnes of primary aluminium were produced, an increase of 8% compared to the same quarter last year. Produced 455K tonnes of alumina, an increase of 30% compared to same quarter last year and exports of 63K tonnes made during this quarter. Ma aden continues to focus on increasing production from both the smelter and the alumina refinery above nameplate capacity. Cost performance During the quarter, aluminium cash costs increased due to higher input costs, in particular alumina, pitch and coke prices. Alumina cash cost also increased due to the higher production despite key input prices notably caustic soda compare to same quarter last year. Projects The rolling mill operation continues to ramp up production. Primary aluminium (Kt) 250 200 150 100 50 - US$/t Production External Sales Avg LME Prices 2,400 2,337 2,269 2,300 2,200 219 233 236 2,100 2,018 156 151 2,000 155 1,900 1,800 Q2 2017 Q1 2018 Q2 2018 US$/t Production External Sales Avg API Prices Alumina production (Kt) 500 600 450 400 484 500 350 300 395 400 250 300 455 200 389 349 200 150 100 100 50 63 63 - - Q2 2017 Q1 2018 Q2 2018 16
Gold and Copper Performance Operational performance Gold production reached 103k ounces in Q2, a 47% increase compared to the same quarter last year. Production growth reflects the continued ramping up of the Ad Duwayhi mine compared to the same quarter last year. Copper production reached 12kt of copper from the Jabal Sayid operations, a 13% increase compared to the same quarter last year. Gold ( 000 ounces) Production Sales Avg Prices 140 120 100 1348 80 1263 1279 60 118 118 40 70 69 103 103 20 0 Q2 2017 Q1 2018 Q2 2018 US$/oz 1500 1400 1300 1200 1100 1000 Cost performance Copper volumes (Kt)¹ $/t 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. 14 12 10 8 6 Production Sales Price 12.5 12.0 12.0 10.6 10.7 6856 6525 5974 7.3 9000 8000 7000 6000 4 2 5000 0 Q2 2017 Q1 2018 Q2 2018 4000 17 ¹ Ma aden attributable production & sales @ 50%
Financial position 18
7,333 49,881 2,125 8,631 27,252 Financial position Balance sheet 12,914 44,128 26,294 11,888 Other non current assets Capital work in progress Mine, plant, property & equipment Current assets Assets As at 30 June 2018 All numbers are in SAR millions Equity Non controlling interest Other non current liability Total Debt Current Liability Equity and liabilities Long term borrowing MIC, 2% By business MGBM, 2% MRC, 9% MBA C, 15% 5% Floating MWS PC, 34% MPC, 18% 95% MAC, 20% Type of loan Fixed SIDF, 8% 49% By source PIF, 33% SAR Bank s, 59% Banks PIF SIDF 51% USD 19
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 Cash & Cash Equivalent Long Term Borrowing Debt/Total Capital Net debt Net debt: EBITDA SRbn 60 9.2x 11x 12.6x 8.2x 6.1x 6.1x 70% 50 57% 56% 62% 61% 60% 60% 60% 40 30 20 10 0 33 40 47 47 47 47 54 54 53 53 45 45 12 5 7 7 6 6 2014 2015 2016 2017 Q1 2018 Q2 2018 50% 40% 30% 20% 10% 0% 1 see appendix 2 2016 restated as per IFRS 20
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 21
Q&A 22
Appendix 23
Schedule debt repayment profile 3,000 USD Millions 2,500 2,227 MIC MGBM MWSPC 2,000 1,500 1,000 675 695 1,117 1,164 1,565 1,946 1,227 1,717 1,004 MBAC MRC MAC MPC 721 715 500 482 390-2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 As at 30 June 2018 24
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% 25
Non-IFRS Financial Measures 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. 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 26
Thank You! Copyright 2018 Ma aden. All rights reserved. 27