Industrial minerals hold further growth opportunities

Ma’aden’s industrial minerals serve niche local, regional and global markets and we have earned a reputation over the years for consistent quality and delivery. Although the business represents a relatively small portion of Ma’aden’s business, the range of products and the Saudi resource potential hold further growth opportunities. Our operations include a kaolin and low grade bauxite mine in the central zone of Az Zabirah deposit in Saudi Arabia’s Hail province, a high grade magnesite mine at Al Ghazalah and its processing plant at Al Madinah Al Munawarah.

Historically, industrial minerals and inorganic compounds offer robust margins, consistent demand and are less prone to wide cyclical price fluctuations. However, 2016 was an exceptional year as oversupply and lower demand affected our revenues.
Our 2025 strategy envisages continued growth into new industrial mineral products based on our anticipated success in exploring for promising minerals.

Industrial Minerals Company (IMC), our wholly owned subsidiary, produces:

• kaolin
• low-grade bauxite (LGB) and
• caustic calcined magnesia (CCM)

Our operations include a kaolin and low grade bauxite mine in the central zone of Az Zabirah deposit in Saudi Arabia’s Hail province, a high grade magnesite mine at Al Ghazalah and its processing plant at Al Madinah Al Munawarah.
Kaolin is valued for its whiteness and is primarily used as filler and coating pigment in paper, paints and plastics, with paper being the largest market. It is also used in ceramics (the second largest end-market), fiberglass, white cement and refractories. It is also needed in the production of phosphate fertilizers.

LGB is used as an additive in the production of cement, fire-resistant insulation products, in refractory materials and ceramic proppants.

CCM is used in a variety of applications such as the production of abrasive stones, animal feed, fertilizer, magnesium chemicals, pulp and paper; it is also used in waste water treatment and metallurgy.

Although Ma’aden’s industrial minerals have gained a reputation for purity and quality, the worldwide slowdown in construction activities in 2016 led to a decline in demand from cement and steel industries for LGB and CCM respectively. Driven by a sluggish steel market, a number of producers converted part of their production from refractory applications in magnesite to CCM, leading to a glut in the market. We expect to see a slight recovery in the steel industry in 2017, but it is unlikely to be strong enough to recover previous price levels.

Though our revenues from industrial minerals declined 19 percent in 2016, our focus on excellence resulted in a number of achievements, both in marketing and operations. We expanded our customer base in the region during the year.

At our Al Ghazala mine, we introduced optical sorting technology to increase the utilization of low grades, leading to a 40 percent reduction in inventory. At the Az Zabirah mine, introduction of new self-mining and blending technology led to significant reduction in the cost of LGB ore mining.

Our technical studies on kaolin refining have identified the possibility of reducing impurities further. This will enable IMC to produce new value-added products.

We improved our stripping ratio by upgrading lower grade resource through the development of low-cost processing methods. We have also identified cost saving initiatives at our plants.