Notes to the consolidated financial statements for the year ended December 31, 2016

All amounts in Saudi Riyals unless otherwise stated

1. General information

Saudi Arabian Mining Company (“Ma’aden”) (the “Company”) was formed as a Saudi joint stock company pursuant to the Council of Ministers Resolution No. 179 dated 8 Zul Qaida 1417H (corresponding to March 17, 1997) and Royal Decree No. M/17 dated 14 Zul Qaida 1417H (corresponding to March 23, 1997), with Commercial Registration No. 1010164391 dated 10 Zul Qaida 1421H (corresponding to February 4, 2001). The Company has an authorized and issued share capital of Saudi Riyals (“SAR”) 11,684,782,610 divided into 1,168,478,261 ordinary shares with a nominal value of SAR 10 each (Note 29).

The objectives of the Company and its subsidiaries (the “Group”) are to be engaged in various projects related to all stages of the mining industry, including development, advancement and improvement of the mineral industry, mineral products and by-products.

These activities exclude:

  • petroleum and natural gas and materials derived there from;
  • any and all hydrocarbon substances, products, by-products and derivatives and
  • activities related to all stages of the oil industry and the industries associated therewith and supplementary thereto.

The Group’s principal mining activities are at the Mahd Ad’ Dahab, Bulghah, Al-Amar, Sukhaybarat, As Suq, Ad Duwayhi, Al-Jalamid, Az Zabirah, Al-Ghazallah and Al-Ba’itha mines. Currently the Group mainly mines gold, phosphate rock, bauxite, low-grade bauxite, kaolin and magnesite.

On February 14, 2012 the Board of Directors approved a plan, developed by the Company in collaboration with its joint venture partner Alcoa Corporation (previously Alcoa Incorporated) (Note 28), to extend the product mix of their aluminium complex, currently under construction at Ras Al-Khair, to include:

  • automotive heat treated and non-heat treated sheet,
  • building and construction sheet and
  • foil stock sheet

2. Group structure

The Company has the following subsidiaries and jointly controlled entities, all incorporated in the Kingdom of Saudi Arabia:

 Effective ownership
 as at December 31,
 Subsidiaries  Type of company  2016  2015
 Ma’aden Gold and Base Metals Company (“MGBM”)  Limited liability  company  100%  100%
 Ma’aden Infrastructure Company (“MIC”)  Limited liability  company  100%  100%
 Industrial Minerals Company (“IMC”)  Limited liability  company  100%  100%
 Ma’aden Aluminium Company (“MAC”)  Limited liability  company  74.9%  74.9%
 Ma’aden Rolling Company (“MRC”)  Limited liability  company  74.9%  74.9%
 Ma’aden Bauxite and Alumina Company (“MBAC”)  Limited liability  company  74.9%  74.9%
 Ma’aden Phosphate Company (“MPC”)  Limited liability  company  70%  70%
 Ma’aden Wa’ad Al Shamal Phosphate Company  (“MWSPC”)  Limited liability  company  60%  60%
 Jointly controlled entities
 Sahara and Ma’aden Petrochemicals Company  (“SAMAPCO”)  Limited liability  company  50%  50%
 Ma’aden Barrick Copper Company (“MBCC”)  Limited liability  company  50%  50%

 

The financial year end of all the subsidiaries and jointly controlled entities coincide with that of the parent company.

2.1 MGBM

The company was incorporated on August 9, 1989 in the Kingdom of Saudi Arabia.
The objectives of the company are:

  • the exploration and mining of gold and associated minerals within their existing mining lease area by way of drilling, mining, concentrating, smelting and refining;
  • extract, refine, export and sell such minerals in their original or refined form and
  • construct, operate and maintain all mines, buildings, highways, pipelines, refineries, treatment plants, communication systems, power plants and other facilities necessary or suitable for the purposes of the lease.

On April 1, 2016, the company announced the commencement of commercial production at Ad Duwayhi mine.

2.2 MIC

The company was incorporated on August 18, 2008 in the Kingdom of Saudi Arabia.
The objectives of the company are to:

  • manage the infrastructure project to develop, construct and operate the infrastructure and
  • provide services to Ras Al-Khair area and other mining and industrial locations in the Kingdom of Saudi Arabia.

2.3 IMC

The company was incorporated on March 31, 2009 in the Kingdom of Saudi Arabia.
The objectives of the company are:

  • the exploitation of industrial minerals within the existing mining lease areas by way of drilling, mining, concentrating, smelting and refining and
  • extract, refine, export and sell such minerals in their original or refined form.

The company currently operates a kaolin and low grade bauxite mine in the central zone of Az Zabirah and a high grade magnesite mine at Al-Ghazallah and a processing plant at Al-Madinah Al-Munawarah which partially commenced operations during 2011 and the remaining project is still in a development stage.

2.4 MAC

The company was incorporated on October 10, 2010 in the Kingdom of Saudi Arabia and is owned:

  • 74.9% by Saudi Arabian Mining Company (“Ma’aden”) and
  • 25.1% by Alcoa Saudi Smelting Inversiones S.L. (“ASSI”), a foreign shareholder, a company wholly owned by Alcoa Corporation (previously Alcoa Incorporated), which is accounted for as a non-controlling interest in these consolidated financial statements (Note 32.1).

The objectives of the company are the production of primary aluminium products:

  • ingots;
  • T-shape ingots;
  • slabs and
  • billets.

2.5 MRC

The company was incorporated on October 10, 2010 in the Kingdom of Saudi Arabia and is owned:

  • 9% by Saudi Arabian Mining Company (“Ma’aden”) and
  • 1% by Alcoa Saudi Rolling Inversiones S.L. (“ASRI”), a foreign shareholder, a company wholly owned by Alcoa Corporation, which is accounted for as a non-controlling interest in these consolidated financial statements (Note 32.2).

The objectives of the company are the production of:

  • can body sheets and 
  • can ends stock.

The company is currently in its commissioning phase.

2.6 MBAC

The company was incorporated on January 22, 2011 in the Kingdom of Saudi Arabia and is owned:

  • 9% by Saudi Arabian Mining Company (“Ma’aden”) and
  • 1% by AWA Saudi Limited (“AWA”), a foreign shareholder, which is owned 60% by Alcoa Corporation and 40% by Alumina Limited, an unrelated third party, which is accounted for as a non-controlling interest in these consolidated financial statements (Note 32.3).

The objectives of the company are to:

  • produce and refine bauxite and
  • produce alumina.

The company started commercial production on October 1, 2016.

2.7 MPC

The company was incorporated on January 1, 2008 in the Kingdom of Saudi Arabia and is owned:
• 70% by Saudi Arabian Mining Company (“Ma’aden”) and
• 30% by Saudi Basic Industries Corporation (“SABIC”) which is accounted for as a non-controlling interest in these consolidated financial statements (Note 32.4).

The objectives of the company are to:

• exploit the Al-Jalamid phosphate deposits;
• utilize local natural gas and sulphur resources to manufacture Phosphate fertilizers at the processing facilities at Ras Al-Khair and
• produce ammonia as a raw material feed stock for the production of fertilizer with the excess ammonia exported and sold domestically.

2.8 MWSPC

The company was incorporated on January 1, 2008 in the Kingdom of Saudi Arabia and is owned:

  • 70% by Saudi Arabian Mining Company (“Ma’aden”) and
  • 30% by Saudi Basic Industries Corporation (“SABIC”) which is accounted for as a non-controlling interest in these consolidated financial statements (Note 32.4).

The objectives of the company are to:

  • exploit the Al-Jalamid phosphate deposits;
  • utilize local natural gas and sulphur resources to manufacture Phosphate fertilizers at the processing facilities at Ras Al-Khair and
  • produce ammonia as a raw material feed stock for the production of fertilizer with the excess ammonia exported and sold domestically.

2.9 SAMAPCO

The company was incorporated on August 14, 2011 in the Kingdom of Saudi Arabia and is owned:

  • 50% by Saudi Arabian Mining Company (“Ma’aden”) (Note 18.1) and
  • 50% by Sahara Petrochemicals Company.

SAMAPCO is a joint venture project and is accounted for as an investment in a jointly controlled entity under the equity method of accounting in these consolidated financial statements.

The objectives of the company are the production of:

  • concentrated caustic soda;
  • chlorine and
  • ethylene dichloride.

The operations of the company includes the production and supply of:
concentrated caustic soda (“CCS”) feed stock to the alumina refinery at MBAC and to sell any excess production in the local wholesale and retail markets and
ethylene dichloride (“EDC”) in the international and local wholesale and retail markets.

SAMAPCO has started commercial production on July 1, 2014.

2.10 MBCC

The company was incorporated on November 2, 2014 in the Kingdom of Saudi Arabia and is owned:

  • 50% by Saudi Arabian Mining Company (“Ma’aden”) (Note 18.2) and
  • 50% by Barrick Middle East PTY Limited (“Barrick”).

MBCC is a joint venture project and is accounted for as an investment in a jointly controlled entity under the equity method of accounting in these consolidated financial statements.

The objectives of the company are the production of copper and associated minerals within their existing mining lease area by way of drilling, mining, concentrating, smelting and refining.

MBCC has started commercial production at the Jabal Sayid mine on July 1, 2016.

3. Basis of preparation

The accompanying consolidated financial statements have been prepared under the historical cost convention on the accrual basis of accounting and in compliance with the accounting standards promulgated by the Saudi Organization for Certified Public Accountants (“SOCPA”).
These consolidated financial statements are presented in SAR which is both the functional and reporting currency of the Group.

Effective from January 1, 2017, the Group is required to perform their financial reporting in accordance with the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and adopted and endorsed by SOCPA which might require the Group to adopt certain accounting policies that are different from those currently being adopted.

4. Summary of significant accounting policies

The significant accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all years presented. 

4.1 Basis of consolidation

Subsidiaries
Subsidiaries are entities over which the Group has the power to govern the financial and operating policies to obtain an economic benefit, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.
Inter-company investments, transactions, balances and unrealized gains or losses on transactions between Group companies are eliminated. The accounting policies of all the subsidiaries are in consistency with those adopted by the Group.

Jointly controlled entities
A joint venture exists where the Group has a contractual arrangement with one or more parties to undertake activities typically, however not necessarily, through entities that are subject to joint control.
The Group recognises its interests in jointly controlled entities using the equity method of accounting. The Group’s share of the results of joint ventures is based on the financial statements prepared up to a date of the consolidated statement of financial position date, adjusted to conform with the accounting polices of the Group, if any. Intragroup gains on transactions are eliminated to the extent of the Group’s interest in the investee. Intragroup losses are also eliminated unless the transaction provides evidence of impairment in the asset transferred.

4.2 Foreign currency translation

Foreign currency transactions are translated into SAR at the rates of exchange prevailing at the time of the transactions. Monetary assets and liabilities denominated in foreign currencies at the consolidated statement of financial position date are translated at the exchange rates prevailing at that date. Gains and losses from settlement and translation of foreign currency transactions are included in the consolidated statement of income.

4.3 Cash and cash equivalents

Cash and cash equivalents includes cash on hand, cash in banks and time deposits with an original maturity of three months or less at the date of acquisition, which are convertible to known amounts of cash and are subject to an insignificant risk of changes in value.

Restricted cash and cash equivalents are excluded from cash and cash equivalents for the purpose of the consolidated statement of cash flows.

 Restricted cash and cash equivalents are related to the following:

  • cash accumulated in the debt service reserve account for the next scheduled repayment of long-term borrowings, six months prior to the due date, as per the financing agreements and
  • employees’ savings plan obligation

4.4 Short-term investments

Short-term investments include placements with banks and other short-term highly liquid investments with original maturities of more than three months but not more than one year from the date of acquisition.

4.5 Trade receivables

Trade receivables are carried at the original sales invoice amount less an allowance for doubtful debts (if any). An allowance for doubtful debts is established when there is objective evidence that the Group will not be able to collect all the amounts due according to the original terms of the receivables. Such allowances are charged to the consolidated statement of income and reported under “General and administrative expenses”. When a trade receivable is uncollectible, it is written-off against the allowance for doubtful debts. Any subsequent recoveries of amounts previously written-off are credited against “General and administrative expenses” in the consolidated statement of income.

4.6 Inventories

Finished goods

Finished goods are measured at the lower of unit cost of production or net realizable value. The unit cost of production is determined as the total cost of production divided by the saleable unit output.
Production costs include:

  • labor costs, materials and contractor expenses which are directly attributable to the extraction and processing of ore;
  • the depreciation of mining properties and leases of property, plant and equipment used in the extraction and processing of ore and the amortization of any deferred stripping assets;
  • production overheads and
  • the revenue generated from the sale of by-products is credited against production costs.

By-products are valued at net realizable value, with reference to the spot price of the commodities ruling at the reporting date.

Work-in-process
The cost of work-in-process is determined using unit cost of production for the period based on the percentage of completion at the applicable stage and includes:

  • labor costs, materials and contractor expenses which are directly attributable to the extraction and processing of ore;
  • the depreciation of mining properties and leases of property, plant and equipment used in the extraction and processing of ore and the amortization of any deferred stripping assets and
  • production overheads;

Ore stockpiles
Ore stockpiles represent ore that has been extracted and is available for further processing. The cost of ore stockpiles is measured at the lower of unit cost of production or net realizable value. If there is significant uncertainty as to when the stockpiled ore will be processed, the cost is expensed as incurred. Where the future processing of this ore can be predicted with confidence because it exceeds the mine’s cut-off grade and is economically viable, it is valued at the lower of unit cost of production or net realizable value. Recoverable quantities and grades of stockpiles and work-in-process are assessed primarily through surveys and assays.

Spare parts, consumables and raw materials
Spare parts, consumable and raw materials are valued at the weighted average cost basis less an allowance for obsolete and slow moving items or net realized value.
Net realizable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses.

4.7 Financial assets and liabilities

Financial assets and liabilities carried on the consolidated statement of financial position principally include cash and cash equivalents, short-term investments, trade and other receivables, projects and other payables, accrued expenses and borrowings.

A financial asset and liability is offset and net amount reported in the consolidated financial statements, when the Group has a legally enforceable right to set-off the recognized amounts and intends either to settle on a net basis, or to realize the asset and liability simultaneously.

4.8 Property, plant and equipment

   Number of years
   
 • Buildings  9 – 40
 • Heavy equipment  5 – 40
 • Mobile and workshop equipment  5 – 10
 • Laboratory and safety equipment  5
 • Civil works  4 – 50
 • Fixed plant and heap leaching facilities  4 – 20
 • Other equipment  4 – 20
 • Office equipment  4 – 10
 • Furniture and fittings  4 – 10
 • Computer equipment  4 – 5
 • Motor vehicles  4
 • Mining assets  Units of production  method / over the  life of the mine

Maintenance and normal repairs which do not materially extend the estimated economic useful life of an asset or increase its production capacity are charged to the consolidated statement of income as and when incurred.

Major renewals and improvements, if any, are capitalized and the assets so replaced are retired. Gains and losses on disposals are determined by comparing proceeds with the carrying amount and are included in the consolidated statement of income.

Borrowing costs related to qualifying assets are capitalized as part of the cost of the qualified assets until the commencement of commercial production.

4.9 Capital work-in-progress

Assets in the course of construction are capitalized in the capital work-in-progress account. On completion, the cost of the related asset is transferred to the appropriate category of property, plant and equipment. The cost of property, plant and equipment comprises its purchase price and any costs directly attributable to bringing it into working condition for its intended use. Costs associated with commissioning the plant are capitalized net of the proceeds from the sale of any production during the commissioning period. Capital work-in-progress is not depreciated.

4.10 Exploration and evaluation assets

Exploration expenditures are the costs incurred in the initial search for mineral deposits with economic potential or in the process of obtaining more information about existing mineral deposits.

Exploration expenditures typically include costs associated with:
acquisition of exploration rights to explore;

  • topographical, geological, geochemical and geophysical studies;
  • exploration drilling;
  • trenching;
  • sampling and
  • activities in relation to evaluating the technical feasibility and commercial viability of extracting a mineral resource.

Evaluation expenditures are the costs incurred to establish the technical and commercial viability of developing mineral deposits identified through exploration activities or by acquisition.

Evaluation expenditures include the cost of:

  • establishing the volume and grade of deposits through drilling of core samples, trenching and sampling activities in an ore body that is classified as either a mineral resource or a proven and probable reserve;
  • determining the optimal methods of extraction and metallurgical and treatment processes;
    studies related to surveying, transportation and infrastructure requirements in relation to both production and shipping;
  • permitting activities and
  • economic evaluations to determine whether development of the mineralized material is commercially justified, including scoping, prefeasibility and final feasibilities studies.

All exploration and evaluation costs are expensed until it is concluded that a future economic benefit is more likely to be realized than not, i.e. ‘probable’. The information used to make that determination depends on the level of exploration as well as the degree of confidence in the ore body. Exploration and evaluation expenditures are capitalized if management determines that probable future economic benefits will be generated as a result of the expenditures.

Exploration and evaluation expenditure relating to extensions of mineral deposits which are already being mined or developed, including expenditure on the definition of mineralization of such mineral deposits, is capitalized as mine development cost following the completion of an economic evaluation equivalent to a feasibility study.

All exploration and evaluation costs incurred after it is concluded that economic benefit is more likely to be realized than not, i.e. ‘probable’ are capitalized as “Exploration and evaluation assets” only until the technical feasibility and commercial viability of extracting of mineral resource are demonstrable. Once the technical and commercial viability is demonstrable i.e. economic benefit will or will not be realized, the asset is tested for impairment and any impairment loss is recognized. Based on the final technical scope, receipt of mining license and commercial feasibility, if the economic benefit will be realized and management intends to develop and execute the mine, only then is the exploration and evaluation asset reclassified to “Capital work-in progress”.

Cash flows attributable to capitalized exploration and evaluation expenditures are classified as investing activities in the consolidated statement of cash flow. Once the commercial production stage is reached, the capitalized capital work-in-progress is reclassified to “Property, plant and equipment”.

For the purposes of exploration and evaluation assets only, one or more of the following facts and circumstances are considered for identifying that exploration and evaluation asset may be impaired.

These include the following:

  • the period for which the Group has the right to explore in the specific area has expired during the period or will expire in the near future, and is not expected to be renewed.
  • substantive expenditure on further exploration and evaluation of mineral resources in the specific area is neither budgeted nor planned.
  • exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources and the Group has decided to discontinue such activities in the specific area.
  • sufficient data exist to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale.

Once it has been identified that exploration and evaluation asset may be impaired, the entity performs an impairment and the reversal of impairment on exploration and evaluation assets, as specified in note 4.13.

4.11 Stripping ratio and deferred stripping expense

The Group defers waste mining costs and has estimated the average of the waste-to-ore ratio for the quantities contained within the final pit design of the mine. This average is used to calculate the annual waste mining costs to be expensed as follows:
Average ratio of waste to ore mined x Quantity of ore mined x Average unit cost of total tonnes mined
In periods when the actual costs of waste are higher than the costs expensed according to this formula, the difference is deferred to be expensed in a future period when the actual costs are less than the amount to be expensed.

Stripping cost incurred during the development stage of an open pit mine in order to access the underlying ore deposit are capitalized prior to the commencement of commercial production. Such costs are then amortized over the remaining life of the component of the ore body (for which access has improved), using the unit of production method over proven and probable reserves.

Production stripping costs in an open pit mine is capitalized as deferred stripping expense to the extent that it is probable that the future economic benefits will flow to the company through improved access to the particular component of the ore body. The Deferred stripping expense asset is depreciated / amortized using the unit of production method, based on the proven and probable reserves contained in the component, which is expected to be shorter than the life-of-the mine. The depreciation / amortization of the deferred stripping expense is considered to be a period production cost and is recorded in inventory (and subsequently as a cost of sale when the inventory is sold).

4.12 Intangible assets

Intangible assets are measured at cost less accumulated amortization and accumulated impairment losses, where applicable. Intangible assets are amortized over the shorter of their estimated economic / statutory useful lives using the straight-line method. Amortization methods, residual values and estimated economic useful lives are reviewed at least annually.

Pre-operating expenses and deferred charges deemed of having future economic benefits are capitalized as Intangible assets and are amortized when completed over seven years.

4.13 Asset impairment

The Group assesses its assets at each reporting date for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell or value-in-use based on the estimated future undiscounted cash flows.

Assets that suffered impairment are reviewed for possible reversal of the impairment at each reporting date. When it becomes evident that the circumstances which resulted in the impairment no longer exist, the impairment amount is reversed (with the exception of goodwill) and recorded as other income in the consolidated statement of income in the year in which such reversal is determined.

4.14 Projects, other payables and accrued expenses

Liabilities in respect of contract costs for capital projects, including trade payables, are recognized at amounts to be paid for goods and services received. The amount recognized is the present value of the future obligations; unless they are due in less than one year.

Liabilities in respect of other payables are recognized at amounts to be paid for goods and services received.

4.15 Zakat, income tax and withholding tax

The Company is subject to zakat in accordance with the regulations of the General Authority for Zakat and Tax (GAZT). A provision for zakat for the Company and zakat related to the Company’s wholly owned subsidiaries is charged to the consolidated statement of income. Differences, if any, at the finalization of final assessments are accounted for when such amounts are determined.

Foreign shareholders in subsidiaries are subject to income tax which is included in non-controlling interest in the consolidated statement of income.

The Group withholds taxes on certain transactions with non-resident parties in the Kingdom of Saudi Arabia as required under Saudi Arabian Income Tax Law.

4.16 Severance fees

Effective from year 2005 onwards, as per Article No. 71 of the Saudi Mining Investment Code issued based on the Royal Decree No. 47/M dated 20 Sha’aban 1425H (corresponding to October 4, 2004), the Group is required to pay to the Government of Saudi Arabia severance fee representing 25% of the annual net income per mining license or the equivalent of the hypothetical income tax, whichever is the lower. The Zakat due shall be deducted from gross severance fee and the net severance fee amount is shown as part of cost of sales in the consolidated statement of income (Note 34).

However, the minimum severance fee payable for a small mine license based on sales is:

 Minerals  Basis  Rate per

 metric tonne

 Low grade bauxite  Actual metric tonnes sold  SAR 1.50
 Kaolin  Actual metric tonnes sold  SAR 2.25
 Magnesia  Actual metric tonnes sold  SAR 4.50

 

The minimum severance fee payable is SAR 90,000 if the minimum mining capacity is not achieved. Provision for severance fees is charged to the cost of sales in the statement of income and not included in the valuation of inventory.

4.17 Provisions

Provisions are recognized when the Group has:

  • a present legal or constructive obligation as a result of a past event;
  • it is probable that an outflow of economic resources will be required to settle the obligation in the future and
  • the amount can be reliably estimated.

4.18 Employees’ termination benefits

Employee termination benefits are payable as a lump sum to all employees employed under the terms and conditions of Saudi Labor and Workman Law on termination of their employment contracts. The liability is calculated as the current value of the vested benefits to which the employee is entitled, should the employee leave at the consolidated statement of financial position date. Termination payments are based on employees’ final salaries and allowances and their cumulative years of service, as defined by the conditions stated in the laws of the Kingdom of Saudi Arabia.

4.19 Employees’ savings plan program

In accordance with Article 145 of the Labor Regulations, and in furtherance to Article 76 of the Company’s Internal Work Regulation approved by resolution No.  424 dated 6th of Rabi II 1420H (corresponding to July 19, 1999) issued by His Highness the Minister of Labor and Social development, a Savings Plan Program was introduced to encourage the Saudi employees of the Group to save and invest their savings in areas more beneficial to them, to secure their future and as an incentive for them to continue working with the Group.

Participation in the Savings Plan Program is restricted to Saudi Nationals only and optional with employees required to contribute a monthly minimum installment of 1% to a maximum of 15% of their basic salary subject to a minimum of SAR 300 per month.

The Group will contribute an amount equaling 10% per year of the monthly savings of each member per annum for the first year and increase it by 10% per year and the years thereafter until it reaches 100% in the 10th year, which will in turn be credited to the savings accounts of the member. The Group’s portion is charged to the consolidated statement of income on a monthly basis. The Group’s portion will only be paid upon termination or resignation of the employee.

4.20 Home owners plan

The interest cost associated with the funding of the acquisition or construction of the employees’ house is borne by the Group in accordance with the approved Home owners plan, and expenses as part of finance cost.

4.21 Mine closure and reclamation

The mining, extraction and processing activities of the Group normally give rise to obligations for mine closure or reclamation. Mine closure and reclamation works can include facility decommissioning and dismantling; removal or treatment of waste materials; site and land rehabilitation. The extent of work required and the associated costs are dependent on the requirements of current laws and regulations.

The full estimated costs are capitalized as part of mining assets under property, plant and equipment and then amortized as an expense over the expected life-of-mine on a straight-line basis.

Adjustments to the estimated amount and timing of future closure and reclamation cash flows are a normal occurrence in light of the significant judgments and estimates involved. Factors influencing those changes include:

  • revisions to estimated ore reserves, mineral resources and lives of mines;
  • developments in technology;
  • regulatory requirements and environmental management strategies and
  • changes in the estimated extent and costs of anticipated activities, including the effects of inflation and
  • changes in economic sustainability.

The costs for reclamation of ongoing site damage arise from rectifying work and are reported through the consolidated statement of income, as part of Cost of sales. Mine closure and reclamation costs should be provided at the present value of the expenditures expected to settle the obligation, using estimate cash flows based on current prices, without any adjustment for inflation.

The appropriate discount rate to be used should be based on the company’s weighted average cost of capital or if it’s not available then the borrowing rate currently available to the entity for a long term loan for a similar period for which the provision is created. The provision for Mine closure and reclamation costs will accordingly increase over time, as the discount unwinds. The unwinding of the discount is recorded as a charge through financial charges within the consolidated statement of income.

Costs arising from unforeseen circumstances, such as the contamination caused by unplanned discharges, are recognized as an expense and liability when the event gives rise to an obligation which is probable and capable of reliable estimation. The timing of the actual closure and reclamation expenditure is dependent upon a number of factors such as:

  • the life-of-mine;
  • developments in technology;
  • the operating license conditions;
  • the environment in which the mine operates and
  • changes in economic sustainability.

4.22 Leasing

Leases are classified as capital leases whenever the terms of the lease transfer substantially all of the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Assets held under capital leases are recognized as assets of the Group at the lower of the present value of the future minimum lease payments or the fair market value of the assets at the inception of the lease. Depreciation is provided over the estimated economic useful lives of the assets.

Finance costs, which represent the difference between the total lease commitments and the lower of the present value of the future minimum lease payments or the fair market value of the assets at the inception of the lease, are charged to the consolidated statement of income over the term of the relevant lease in order to produce a constant periodic rate of return on the remaining balance of the obligation for each accounting year.

Rentals payable under operating leases are charged to the consolidated statement of income on a straight-line basis over the term of the operating lease.

4.23 Borrowings

Borrowings are initially recognized at the proceeds received, net of transaction costs incurred, if any. Subsequent to initial recognition long-term borrowings are measured at amortized cost using the effective interest rate method. Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets are capitalized as part of the cost of those assets. Other borrowing costs are charged to the consolidated statement of income.

Transaction costs incurred upfront which are amortized over the term of the loan, capitalized as part of the cost of the qualifying asset until the commencement of commercial production and then charged to the consolidated statement of income as an expense.

4.24 Revenue recognition

Revenue is recognized when all the following conditions are met:

  • the significant risks and rewards of ownership of goods / services have been transferred to the buyer;
  • neither continuing managerial involvement to the degree usually associated with ownership, nor effective control over the goods sold, has been retained;
  • the amount of revenue can be measured reliably;
  • it is probable that the economic benefits associated with the sale will flow to the Group and
  • the costs incurred or to be incurred in respect of the sale can be measured reliably.

Revenues are shown net of all discounts and rebates and after eliminating sales within the Group.

Sales revenue is commonly subject to an adjustment based on an inspection of the product by the customer or post assay finalization. In such cases, sales revenue is initially recognized on a provisional basis using the Company’s best estimate of the product at the current market price and adjusted subsequently within revenue at the quantity and market price when finalized.

Revenue from the sale of by-products is credited against production costs.
Investment income consists of earnings on bank deposits and is recognized on an accrual basis.

4.25 Selling, marketing and logistic expenses

Selling, marketing and logistic expenses comprise of all costs for selling and marketing the Group’s products and include expenses for advertising, marketing fees and other sales related overheads. Basis of allocations between selling, marketing and logistic expenses and cost of sales, when required, are made on a consistent basis.

4.26 General and administrative expenses

General and administrative expenses include direct and indirect costs not specifically part of cost of sales as required under generally accepted accounting standards. Allocations between general and administrative expenses and cost of sales, when required, are made on a consistent basis.

5. Critical accounting estimates, assumptions and judgments

The preparation of consolidated financial statements in conformity with accounting standards generally accepted in the Kingdom of Saudi Arabia, requires the Group’s management to make estimates and assumptions that affect amounts reported in the consolidated financial statements and accompanying notes.

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The accounting estimates will, by definition, seldom equal the related actual results.

5.1 Critical judgements in applying accounting standards

The following critical judgements have the most significant effect on the amounts recognized in the consolidated financial statements:

  • economic useful lives of property, plant and equipment;
  • impairment and reversal of impairment of assets and
  • zakat and income taxes

Economic useful lives of property, plant and equipment
The Group’s property, plant and equipment, are depreciated on a straight-line basis over the economic useful lives or on a unit of production basis for certain mining assets and processing plants over the life-of-mine. When determining the life-of-mine, assumptions that were valid at the time of estimation, may change when new information becomes available.

The factors that could affect the estimation of the life-of-mine include the following:

  • changes in proven and probable ore reserves;
  • the grade of ore reserves varying significantly from time to time;
  • differences between actual commodity prices and commodity price assumptions used in the estimation and classification of ore reserves;
  • unforeseen operational issues at mine sites and
  • changes in capital, operating, mining, processing and reclamation costs, discount rates could possibly adversely affect the economic viability of ore reserves.

Any of these changes could affect prospective depreciation of mining assets and their carrying value. The economic useful lives of non-mining property, plant and equipment is reviewed by management periodically. The review is based on the current condition of the assets and the estimated period during which they will continue to bring economic benefit to the Group.

Impairment and reversal of impairment of assets
The Group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets are impaired or whether there is any indicator that an impairment loss recognized in previous years may no longer exist or may have decreased.

Zakat and income tax
During the year ended December 31, 2016 an amount of SAR 44,082,363 was paid to GAZT pertaining to the year ended December 31, 2015 (during the year ended December 31, 2015 an amount of SAR 54,147,978 was paid to GAZT pertaining to the year ended December 31, 2014).

No zakat assessments were finalized by the GAZT and where the final zakat outcome of these matters is different from the amounts that were initially paid, such differences will impact the zakat provisions in the year in which such determinations are made.

5.2 Key sources of estimation uncertainty

The following are the key sources of estimation uncertainty that have a significant risk of causing a material adjustment to the carrying amounts of the assets and liabilities within the next financial year:
ore reserve and mineral resource estimates;

  • mine closure and environmental obligation;
  • allowances and
  • contingencies

Ore reserve and mineral resource estimates
There is a degree of uncertainty involved in the estimation and classification of ore reserves and mineral resources and corresponding grades being mined or dedicated to future production. Until ore reserves or mineral resources are actually mined and processed, the quantity of ore reserve and mineral resource grades must be considered as estimates only. What is more, the quantity of ore reserves and mineral resources may vary depending on, amongst other things, metal prices and currency exchange rates.

The ore reserve estimates of the Group have been determined based on management long-term commodity price, forecasts cut-off grades and costs that may prove to be inaccurate. Any material change in the quantity of reserves, grades or stripping ratio may affect the economic viability of the properties. In addition, there can be no assurance that gold recoveries or other metal recoveries in small scale laboratory tests will give the same result in larger scale tests under on-site conditions or during production.

Fluctuation in commodity prices, the results of drilling, metallurgical testing and production and the evaluation of mine plans subsequent to the date of any estimate may require estimates to be revised. The volume and grade of ore reserves mined and processed and recovery rates may not be the same as currently anticipated. Any material reductions in estimates of ore reserves and mineral resources, or of the Group’s ability to extract these ore reserves, could have a material adverse effect of the Group’s business, prospects, financial condition and operating results.

Mine closure and environmental obligations
The Group’s mining and exploration activities are subject to various environmental laws and regulations. The Group estimates environmental obligations based on management’s understanding of the current legal requirements in the various jurisdictions in which it operates, terms of the license agreements and engineering estimates. Provision is made, for decommissioning and land restoration costs as soon as the obligation arises. Actual costs incurred in future years could differ materially from the amounts provided. Additionally, future changes to environmental laws and regulations and life-of-mime estimates could affect the carrying amount of this provision.

Allowances
The Group also creates an allowance for obsolete and slow-moving spare parts. At December 31, 2016, the allowance for obsolete slow-moving items amounted to SAR 15,853,329 (December 31, 2015: SAR 15,984,849) (Note 10). These estimates take into consideration fluctuations of price or cost directly relating to events occurring subsequent to the consolidated statement of financial position date to the extent that such events confirm conditions existing as at the end of the year.

Contingencies
By their nature, contingencies will only be resolved when one or more future events occur or fail to occur. The assessment of such contingencies inherently involves the exercise of significant judgment and estimates of the outcome of future events.

6. Segmental information

6.1 Business segment

The following are the key sources of estimation uncertainty that have a significant risk of causing a material adjustment to the carrying amounts of the assets and liabilities within the next financial year:
ore reserve and mineral resource estimates;

  • mine closure and environmental obligation;
  • allowances and
  • contingencies

Ore reserve and mineral resource estimates

There is a degree of uncertainty involved in the estimation and classification of ore reserves and mineral resources and corresponding grades being mined or dedicated to future production. Until ore reserves or mineral resources are actually mined and processed, the quantity of ore reserve and mineral resource grades must be considered as estimates only. What is more, the quantity of ore reserves and mineral resources may vary depending on, amongst other things, metal prices and currency exchange rates.

The ore reserve estimates of the Group have been determined based on management long-term commodity price, forecasts cut-off grades and costs that may prove to be inaccurate. Any material change in the quantity of reserves, grades or stripping ratio may affect the economic viability of the properties. In addition, there can be no assurance that gold recoveries or other metal recoveries in small scale laboratory tests will give the same result in larger scale tests under on-site conditions or during production.

Fluctuation in commodity prices, the results of drilling, metallurgical testing and production and the evaluation of mine plans subsequent to the date of any estimate may require estimates to be revised. The volume and grade of ore reserves mined and processed and recovery rates may not be the same as currently anticipated. Any material reductions in estimates of ore reserves and mineral resources, or of the Group’s ability to extract these ore reserves, could have a material adverse effect of the Group’s business, prospects, financial condition and operating results.

Mine closure and environmental obligations

The Group’s mining and exploration activities are subject to various environmental laws and regulations. The Group estimates environmental obligations based on management’s understanding of the current legal requirements in the various jurisdictions in which it operates, terms of the license agreements and engineering estimates. Provision is made, for decommissioning and land restoration costs as soon as the obligation arises. Actual costs incurred in future years could differ materially from the amounts provided. Additionally, future changes to environmental laws and regulations and life-of-mime estimates could affect the carrying amount of this provision.

Allowances

The Group also creates an allowance for obsolete and slow-moving spare parts. At December 31, 2016, the allowance for obsolete slow-moving items amounted to SAR 15,853,329 (December 31, 2015: SAR 15,984,849) (Note 10). These estimates take into consideration fluctuations of price or cost directly relating to events occurring subsequent to the consolidated statement of financial position date to the extent that such events confirm conditions existing as at the end of the year.

Contingencies

By their nature, contingencies will only be resolved when one or more future events occur or fail to occur. The assessment of such contingencies inherently involves the exercise of significant judgment and estimates of the outcome of future events.

A business segment is a group of assets, operations or entities:

  • engaged in revenue producing activities;
  • results of its operations are continuously analyzed by management in order to make decisions related to resource allocation and performance assessment and
  • financial information is separately available.

The Group’s operations consist of the following business segments:

  • Phosphate Strategic Business Unit segment,

consist of operations related to:

MPC the mining and beneficiation of phosphate concentrated rock at Al-Jalamid. The utilization of natural gas and sulphur to produce phosphate fertilizers as well as ammonia products at Ras Al-Khair.

IMC the mining of industrial minerals at a kaolin and low grade bauxite mine in the central zone of Az Zabirah and a high grade magnesite mine at Al-Ghazallah and a processing plant at Al-Madinah Al-Munawarah.

MWSPC the development of a mine to exploit the Al-Khabra phosphate deposit. The project is in the development stage, however, ammonia plant has commenced trial production during the third quarter of 2016 and the company announced commencement of commercial production of the ammonia plant with effect from January 1, 2017.

Phosphate and Industrial Minerals division under Corporate related cost and exploration expenses in Ma’aden Corporate has been allocated to this segment.

MIC is responsible for the development, construction and delivery of services to Ma’aden entities in the Ras Al-Khair area and other mining and industrial locations in the Kingdom of Saudi Arabia. Therefore, a 33% proportionate share of MIC’s revenues, costs, assets and liabilities have been allocated to this segment.

  • Aluminium Strategic Business Unit segment,

consists of the operations related to:

MAC operates the smelter at Ras Al-Khair and it currently processes the alumina feedstock that it purchases from MBAC and Alcoa and produces aluminium products. MAC started commercial production on September 1, 2014.

MRC the constructing of a rolling mill project is in the commissioning phase.

MBAC the mining of bauxite at the Al-Ba’itha mine and the transportation thereof to its refinery at Ras Al-Khair. MBAC started commercial production on October 1, 2016.

SAMAPCO a jointly controlled entity that produces concentrated caustic soda, chlorine and ethylene dichloride and supply all the required feedstock for use in the alumina refinery at MBAC, any excess production is sold in the international and domestic market. SAMAPCO started commercial production on July 1, 2014.

Automotive sheet project include automotive heat treated and non-treated sheet, building and construction sheet and foil stock sheet. The project is in the development stage (Note 1).

– Aluminium division under Corporate related cost and external sales revenue have been allocated to this segment.

– MIC is responsible for the development, construction and delivery of services to Ma’aden entities in the Ras Al-Khair area and other mining and industrial locations in the Kingdom of Saudi Arabia. Therefore, a 67% proportionate share of MIC’s revenues, costs, assets and liabilities have been allocated to this segment.

  • Gold and Base Metals Strategic Business Unit segment,

consists of operations related to:

MGBMthat operates five gold mines, i.e. Mahd Ad Dahab, Al-Amar, Bulghah, As Suq and Ad Duwayhi (which came into commercial production on April 1, 2016) and a processing plant at Sukhaybarat which are located in different geographical areas in the Kingdom of Saudi Arabia.

MBCC a jointly controlled entity that produces copper and associated minerals located in the southeast of Al-Madinah Al-Munawarah. MBCC started commercial production on July 1, 2016.

Gold and base metals division under Corporate – related cost and exploration expenses in Ma’aden Corporate has been allocated to this segment.

  • Corporate

Is responsible for effective management and governance including funding of subsidiaries and jointly controlled entities that carry out various projects related to all stages of the mining industry, including development, advancement and improvement of the mineral industry, mineral products and by products.

 

 Notes  Phosphate  Aluminium  Gold and

 base metals

 Corporate  Total
 December 31, 2016
 Sales  33  4,205,441,851  4,252,091,633  1,048,707,732  –  9,506,241,216
 Gross profit  731,014,209  990,484,643  324,773,901  –  2,046,272,753
 Income from short-term  investments  38  9,517,140  351  –  142,118,647  151,636,138
 Net income / (loss)  attributable to  shareholders’ of the parent  company    122,949,453  299,581,330  120,009,375  (141,901,078)  400,639,080
 Property, plant and  equipment  13  15,136,810,273   31,294,466,162   2,302,164,459   154,110,127  48,887,551,021
 Capital work-in-progress  14  25,582,932,152  8,719,761,172  294,843,609  39,745,457  34,637,282,390
 Exploration and  evaluation assets  15  44,652,530  –  225,151,000  –  269,803,530
 Deferred stripping  expense  16  6,797,356  –  70,546,920  –  77,344,276
 Intangible assets   17  94,853,821  250,771,085  8,800,450  14,697,852  369,123,208
 Jointly controlled entities  18  –  295,260,561  832,406,115  –  1,127,666,676
 Total assets  45,704,594,694  43,277,873,838  4,158,312,183  3,932,521,552   97,073,302,267 
Obligation under capital lease 25 26,783,121 26,783,121
Long-term borrowings 27.6 27,878,968,248 25,195,651,734 901,051,061 53,975,671,043
December 31, 2015
Sales 33 5,488,120,120 4,762,790,070 705,215,748 10,956,125,938
Gross profit 1,573,632,405 633,938,596 231,473,201 2,439,044,202
Income from short-term investments 38 4,649,146 1,308,870 204,583 29,421,278 35,583,877
Net income / (loss) attributable to shareholders’ of the parent company 778,571,323 95,350,777 29,693,379 (298,441,534) 605,173,945
Property, plant and equipment 13 16,018,926,848 20,096,644,324 394,163,343 172,454,032 36,682,188,547
Capital work-in-progress 14 18,158,641,217 19,985,250,415 2,221,964,021 36,578,184 40,402,433,837
Exploration and evaluation assets 15 30,299,653 202,933,922 233,233,575
Deferred stripping expense 16 11,321,503 32,851,488 44,172,991
Intangible assets 17 108,102,300 237,527,524 10,993,133 15,803,605 372,426,562
Jointly controlled entities 18 372,774,239 828,680,585 1,201,454,824
Total assets 39,961,604,497 43,841,700,223 4,068,524,729 1,505,796,405 89,377,625,854
Obligation under capital lease 25 39,164,377 39,164,377
Long-term borrowings 27.6 20,096,862,780 25,066,983,321 235,191,897 45,399,037,998

6.2 Geographical segment

A geographical segment is a group of assets, operations or entities engaged in revenue producing activities within a particular economic environment that are subject to risks and returns different from those operating in other economic environments. The Group’s operation is conducted only in the Kingdom of Saudi Arabia and therefore all the non-current assets of the Group is located within the Kingdom of Saudi Arabia. All the subsidiaries and jointly controlled entities included in the above consolidated numbers are incorporated in the Kingdom of Saudi Arabia.

7. Cash and cash equivalents

 December 31, 2016  December 31, 2015
 Term deposits with original maturities equal to or less than three months at the date of  acquisition
 unrestricted  3,953,142,872  3,397,121,398
 restricted  –  544,554,663
 Sub-total  3,953,142,872  3,941,676,061
 Cash and bank balances
 unrestricted  357,230,436  317,824,870
 restricted  59,341,221  48,808,593
 Sub-total  416,571,657  366,633,463
 Total  4,369,714,529  4,308,309,524

Restricted cash and cash equivalents are related to the following:

 Cash accumulated in the debt service reserve account for the next  scheduled repayment of long-term borrowings, six months prior to the  due date, as per the financing agreement (Note 27.7)  –  1,539
 Employees’ savings plan obligation (Note 4.19 and 24.2)  59,341,221  48,807,054
 Sub-total  59,341,221  48,808,593
 Balance portion accumulated for the scheduled repayment of long-  term  borrowings, six months prior to due date, invested and included  in short-term deposits with original maturities equal to or less than  three months at the date of acquisition (Note 27.7)  –  544,554,663
 Total restricted cash  59,341,221  593,363,256
 Total unrestricted cash  4,310,373,308  3,714,946,268

8. Short-term investments

December 31, December 31,
2016 2015
Term deposits with original maturities of more than three months and less than a year at the date of acquisition 2,711,000,000 899,052,989
             

9. Trade and other receivables

       December 31,  December 31,
     Notes  2016  2015
   Trade receivables      
   Other third party receivables    885,073,675  657,438,173
 Due from Alcoa Inespal, S.A.  42.2  88,987,620  87,897,065  
 Due from SABIC  42.2  195,110,098  407,155,456  
   Sub-total    1,169,171,393  1,152,490,694
   Due from Saudi Ports Authority    7,439,820  5,896,500
   Allowance for doubtful debts*    (3,512,475)  (3,200,000)
   Sub-total    3,927,345  2,696,500
   Due from Saudi Mining Polytechnic (“SMP”)  42.2  3,951,089  2,166,504
   Insurance claims**     –  13,304,480
   Withholding tax receivable    446,724  31,850,982
   Investment income receivable    15,914,150  8,936,151
   Due from SABIC  42.2  28,807,037  –
   Other      50,700,940  40,698,300
   Total    1,272,918,678  1,252,143,611
                  

*Movement in the allowance for doubtful debts is as follows:

     2016  2015
 January 1    3,200,000  –
 Increase in allowance for doubtful debts  36  312,475  3,200,000
 December 31    3,512,475  3,200,000

 

**Insurance claims relate to:

   December 31,  December 31,
   2016  2015
 • one of the aluminium pot lines on which the production was  halted in October 2013. The temporary shutdown was undertaken  after a period of pot instability. The pot line has been restored  during second quarter of 2014  –  9,892,253
 • an ammonia reformer and conveyor belt claim  –  3,412,227
 Total  –  13,304,480

10. Inventories

 December 31, 2016  December 31, 2015
 Finished goods – ready for sale  293,875,243  243,049,951
 Work-in-process  496,309,809  583,756,631
 Stockpile of mined ore  189,409,046  173,176,988
 By-products  3,124,158  710,227
 Sub-total  982,718,256  1,000,693,797
 Spare parts and consumables materials  1,316,552,321  1,312,816,035
 Allowance for obsolete slow-moving spare parts and consumable  materials*  (15,853,329)  (15,984,849)
 Sub-total  1,300,698,992  1,296,831,186
 Raw materials  832,956,069  644,322,504
 Sub-total  2,133,655,061  1,941,153,690
 Total  3,116,373,317  2,941,847,487

The spare parts inventory primarily relates to plant and machinery.

*Movement in the allowance for obsolete slow-moving spare parts and consumables materials is as follows:

 2016  2015
 January 1  15,984,849  15,359,183
 Increase in allowance for obsolescence (Note 34)  (131,520)  625,666
 December 31  15,853,329  15,984,849

11.  Advances and prepayments

   December 31,  December 31,
   2016  2015
 Current portion    
 Advances to contractors  119,463,370  172,113,193
 Advances to employees  14,012,651  12,889,197
 Prepaid rent  9,335,197  14,396,416
 Prepaid insurance  8,060,774  44,442,651
 Other prepayments  3,922,170  4,874,582
 Sub-total  154,794,162  248,716,039
     
 Non-current portion    
 Other prepayments  29,730,480  21,645,868
 Total  184,524,642  270,361,907

12. Due from joint venture partners

     December 31,  December 31,
   Notes  2016  2015
 Due from Mosaic  42.2  –  450,000,000
 Due from SABIC  42.2  –  270,000,000
 Total    –  720,000,000

On August 5, 2013, the Company entered into an agreement with Mosaic and SABIC to jointly develop a fully integrated phosphate production facility known as the Umm Wu’al phosphate project (Note 2.8).

As per the agreement Mosaic and SABIC are liable to pay contractual dues to Ma’aden of SAR 1.44 billion in two installments for the historical cost incurred by Ma’aden on the project. First installment, 50% of SAR 1.44 billion, was received by Ma’aden during the year ended December 31, 2013 and the remaining 50% of SAR 1.44 billion due on June 30, 2016 was received in full.

13. Property,plant and equipment

Property, plant and equipment of MAC, MRC, MBAC and MGBM with a net book value before consolidation elimination at December 31, 2016 of SAR 33,283,863,678 (December 31, 2015: SAR 35,706,647,560) are pledged as security to SIDF and other lenders (Note 27.9).

Property, plant and equipment of MBAC with a net book value at December 31, 2016 of SAR 45,365,593 (December 31, 2015: SAR 45,947,425) was acquired under a capital lease and are pledged as security to the lessor (Note 25).

 

   Notes  Year ended  Year ended
   December 31,  December 31,
   2016  2015
 Allocation of depreciation charge for the year to:      
 Capital work-in-progress  14  55,551,096  63,439,623
 Cost of sales  34  2,397,846,116  2,171,612,693
 General and administrative expenses  36  31,348,323  34,748,428
 Exploration and technical services expenses  37  2,538,701  3,269,930
Total    2,487,284,236  2,273,070,674
  1. Capital work-in-progress
    Notes  Phosphate  Industrial minerals   Infra-structure  Corporate  Total  
 Cost                  
 January 1, 2015    6,977,902,237  89,027,132  17,086,825,945  1,711,662,424  45,875,923  1,171,865,034  27,083,158,695  
 Additions during the year    11,435,440,779  16,188,982  1,856,499,035  567,185,003  5,954,651  142,084,133  14,023,352,583  
 Transfer to property, plant and  equipment  13  (26,685,001)  (4,805,545)  (187,734,216)  (85,281,349)  (9,306,019)  (7,720,832)  (321,532,962)  
 Transfer from exploration and  evaluation assets  15  –  –  –  2,147,943  –  –  2,147,943  
 Transfer to intangible assets  17  (14,429,805)  –  (22,798,085)  –  (292,770)  –  (37,520,660)  
 Provision for mine closure  capitalized  26.1  –  –  –  26,250,000  –  –  26,250,000  
 Advances to contractors, net    (323,541,209)  –  (21,218,078)  –  (13,600,845)  (15,061,630)  (373,421,762)  
 December 31, 2015    18,048,687,001  100,410,569  18,711,574,601  2,221,964,021  28,630,940  1,291,166,705  40,402,433,837  
 Additions during the year    7,649,832,956  26,138,396  954,890,798  207,134,104  11,919,021  126,565,032  8,976,480,307  
 Transfer to property, plant and  equipment  13  (43,611,313)  (492,660)  (12,293,445,634)  (2,100,163,072)  (19,377,639)  (56,064)  (14,457,146,382)  
 Transfer to intangible assets  17  –  –  (35,977,468)  –  (1,076,344)  (3,661,418)  (40,715,230)  
 Write-off during the year    –  –  –  (34,091,444)  –  –  (34,091,444)  
 Advances to contractors, net    (204,613,492)  –  (4,910,728)  –  (154,478)  –  (209,678,698)  
 December 31, 2016    25,450,295,152  126,056,305  7,332,131,569  294,843,609  19,941,500  1,414,014,255   34,637,282,390  
                   
 Advances to contractors  capitalized as part of additions  to capital work-in-progress                  
 December 31, 2015    520,538,164  –  4,910,728  –  5,106,251  –  530,555,143  
 December 31, 2016    315,924,672  –  –  –  4,951,773  –  320,876,445  
                   
 Depreciation capitalized as  part of capital work-in-  progress during the year                  
 December 31, 2015  13  –  –  60,981,176  –  2,458,447  –  63,439,623  
 December 31, 2016  13  –  –  52,052,474  –  3,498,622  –  55,551,096  
                   
 Amortization capitalized as  part of capital work-in-progress  during the year                  
 December 31, 2015  17  –  –  5,729,831  –  –  –  5,729,831  
 December 31, 2016  17  –  –  9,032,051  –  544,093  –  9,576,144  
                   
 Amortization of transaction  cost capitalized as part of  capital work-in-progress during  the year                  
 December 31, 2015  27.2  15,729,190  –  –  –  –  –  15,729,190  
 December 31, 2016  27.2  36,551,710  –  –  –  –  –  36,551,710  
                   
 Borrowing cost capitalized as  part of capital work-in-progress  during the year                  
 December 31, 2015  39.1  211,518,555  –  231,491,396  –  –  –  443,009,951  
 December 31, 2016  39.1  354,963,358  –  292,242,031  –  –  –  647,205,389  
                         
                               

 

Capital work-in-progress includes borrowing cost relating to the qualifying assets of MAC, MRC, MBAC, MWSPC and MGBM.

The net book value of MAC, MRC, MBAC, MWSPC and MGBM before consolidation elimination at December 31, 2016 of SAR 31,183,895,066 (December 31, 2015: SAR 37,197,115,376) are pledged as security to SIDF and other lenders (Note 27.9).

15. Exploration and evaluation assets

   Notes  Corporate  Gold and base  metals  Total
 January 1, 2015    21,254,693  154,251,619  175,506,312
 Additions during the year    29,351,453  50,830,246  80,181,699
 Transfer to capital work-in-progress  14  –  (2,147,943)  (2,147,943)
 Impairment during the year  37  (20,306,493)  –  (20,306,493)
 December 31, 2015    30,299,653  202,933,922  233,233,575
 Additions during the year    14,352,877  22,217,078  36,569,955
 December 31, 2016    44,652,530  225,151,000  269,803,530

 

16. Deferred stripping expense

   Notes  Phosphate  Gold and base  metals  Total
 Cost        
 January 1, 2015    75,666,881  25,763,766  101,430,647
 Stripping cost incurred during the year    18,704,693  12,974,499  31,679,192
 December 31, 2015    94,371,574  38,738,265  133,109,839
 Stripping cost incurred during the year    –  44,348,857  44,348,857
 December 31, 2016     94,371,574  83,087,122  177,458,696
         
 Accumulated amortization        
 January 1, 2015    47,962,554  4,385,110  52,347,664
 Expensed to cost of sales during the  year  34  35,087,517  1,501,667  36,589,184
 December 31, 2015    83,050,071  5,886,777  88,936,848
 Expensed to cost of sales during the  year  34  4,524,147  6,653,425  11,177,572
 December 31, 2016    87,574,218  12,540,202  100,114,420
         
 Net book value        
 December 31, 2015    11,321,503  32,851,488  44,172,991
 December 31, 2016    6,797,356  70,546,920  77,344,276

17. Intangible assets

   Notes  Phosphate  Aluminium    Gold and base  metals  Infra-structure  

 Corporate

 

 Total

                 
 Cost                
 January 1, 2015    50,689,149  114,536,319    22,538,663  297,876,390  17,648,402  503,288,923
 Additions during the year    –  –    –  –  3,992,516  3,992,516
 Transfer from property, plant and  equipment  13  885,255  –    –  –  –  885,255
 Transfer from capital work-in-  progress  14  14,429,805  22,798,085    –  292,770  –  37,520,660
 December 31, 2015    66,004,209  137,334,404    22,538,663  298,169,160  21,640,918  545,687,354
 Additions during the year    –  –    1,285,986  –  –  1,285,986
 Transfer from capital work-in-  progress  14  –  35,977,468    –  1,076,344  3,661,418  40,715,230
 December 31, 2016    66,004,209  173,311,872    23,824,649  299,245,504  25,302,336  587,688,570
                 
 Accumulated amortization                
 January 1, 2015    15,535,672  12,230,133    8,167,624  55,868,944  1,610,005  93,412,378
 Charge for the year    18,442,934  39,730,141    3,377,906  14,070,125  4,227,308  79,848,414
 December 31, 2015    33,978,606  51,960,274    11,545,530  69,939,069  5,837,313  173,260,792
 Charge for the year    9,902,348  18,245,602    3,478,669  8,910,780  4,767,171  45,304,570
 December 31, 2016    43,880,954  70,205,876    15,024,199  78,849,849  10,604,484  218,565,362
                 
 Net book value                
 December 31, 2015    32,025,603  85,374,130    10,993,133  228,230,091  15,803,605  372,426,562
 December 31, 2016    22,123,255  103,105,996    8,800,450  220,395,655  14,697,852  369,123,208

 

Intangible assets of MAC, MRC and MBAC with a net book value at December 31, 2016 of SAR 103,105,996 (December 31, 2015: SAR 85,374,130) are pledged as security to SIDF and other lenders (Note 27.9).

Intangible assets for infrastructure comprises the infrastructure and support services assets at Ras Al Khair that were transferred to Royal Commission of Jubail and Yanbu (“RCJY”) as stated in the Implementation Agreement signed between Ma’aden and RCJY. The cost of the intangible assets comprises its purchase price and any costs directly attributable to bringing such assets to working condition for their intended use. Such intangible assets are carried at historical cost less accumulated amortization. Amortization is provided over the remaining period of LUSA (Land Usage and Service Agreement) term.

18. Investment in jointly controlled entities

     December 31,  December 31,
   Notes  2016  2015
       
 SAMAPCO  18.1  295,260,561  372,774,239
 MBCC  18.2  832,406,115  828,680,585
 Total    1,127,666,676  1,201,454,824

18.1 SAMAPCO

     December 31,  December 31,
   Notes  2016  2015
       
 Shares at cost  49  450,000,000  450,000,000
 Share of the accumulated loss    (202,737,858)  (125,224,180)
 Carrying value of investment    247,262,142  324,775,820
 Long-term loan  42.2  47,998,419  47,998,419
 Total  18  295,260,561  372,774,239

 

Share of the accumulated loss in SAMAPCO

   2016  2015
     
 January 1  (125,224,180)  (33,593,314)
 Share in net loss for year  (77,513,678)  (91,630,866)
 December 31  (202,737,858)  (125,224,180)

18.2 MBCC

The investment of 50% in the issued and paid-up share capital (Note 2.10) is as follows:

     December 31,  December 31,
   Notes  2016  2015
       
 Shares at cost  49  202,482,646  202,482,646
 Share of the accumulated loss    3,725,530  –
 Carrying value of investment    206,208,176  202,482,646
 Long-term loan  42.2  626,197,939  626,197,939
 Total  18  832,406,115  828,680,585

 

During the year ended December 31, 2014, the Company entered into a loan agreements with MBCC. The purpose of this loan facility is to provide funding to MBCC for business. The loan is non-interest bearing with no fixed repayment date.

Share of the accumulated loss in MBCC

   2016  2015
     
 January 1  –  –
 Share in net loss for year  3,725,530  –
 December 31  3,725,530  –

19. Long-term investment

   December 31,  December 31,
   2016  2015
 Securities with original maturities of more than a year at the date of  acquisition  50,000,000  50,000,000

20. Projects and other payables

   December 31,  December 31,
   2016  2015
 Current portion    
 Projects  209,652,421  780,749,784
 Trade  812,591,665  649,763,200
 Retentions  101,896,885  126,592,142
 Advances from customers  245,066,728  232,969,329
 Other  38,992,663  19,938,546
 Sub-total  1,408,200,362  1,810,013,001
     
 Non-current portion    
 Retentions and other payables  1,980,257,388  1,251,081,664
 Non-refundable contributions*  126,080,875  83,305,965
 Sub-total  2,106,338,263  1,334,387,629
 Total  3,514,538,625  3,144,400,630

Project payables mainly represents the liability in respect of contracts cost arising from MRC, MBAC and MWSPC.

*Contributed by one of the MAC’s and MWSPC’s contractors to support the companies’ objective to establish a social responsibility fund for the development of a community project.

Accrued expenses

     December 31,  December 31,
   Notes   2016  2015
       
 Projects     1,643,252,732  3,542,581,483
 Trade     637,160,076  635,989,401
 Employees     291,501,970  246,454,809
 Accrued expenses – Alcoa Corporation  42.2  32,190,363  67,026,655
 Accrued expenses – Mosaic  42.2  4,475,402  14,983,460
 Finance charges     20,857,795  13,889,780
 Total     2,629,438,338  4,520,925,588

 

Accrued expenses for projects mainly represents the contracts cost accruals in relation to MRC, MBAC and MWSPC.
Accrued expenses for Alcoa corporation. mainly represents the personnel and other cost accruals related to the Alcoa corporation. employees seconded to MAC, MRC and MBAC.
Accrued expenses for Mosaic mainly represents the personnel and other cost accruals related to the Mosaic employees seconded to MWSPC.

22. Zakat

22.1 Components of zakat base

Components of zakat base

The significant components of the zakat base of each company under the zakat and income tax regulation are as follows:

  • shareholders’ equity at the beginning of the year;
  • provisions at the beginning of the year;
  • long term borrowings;
  • adjusted net income;
  • spare parts and consumable materials:
  • net book value of property, plant and equipment;
  • net book value of capital work-in-progress;
  • net book value of exploration and evaluation assets;
  • net book value of intangible assets;
  • carrying value of investment in a jointly controlled entity; and
  • other items.

Zakat is calculated at 2.5% of the higher of the zakat base or adjusted net income.

22.2 Zakat payable

   Notes  2016  2015
       
 January 1    50,962,237  58,735,918
 Provision for zakat    78,428,404  46,374,297
 Current year  22.3  85,308,278  50,962,237
 Prior year over provision    (6,879,874)  (4,587,940)
       
 Paid during the year to GAZT    (44,082,363)  (54,147,978)
 December 31  22  85,308,278  50,962,237

22.4 Status of final assessments

The Company and its subsidiaries received provisional zakat certificates from the years ended December 31, 2008 to December 31, 2015, however, no zakat assessments were finalized by the GAZT.

23. Severance fees payable

   Notes  2016  2015
 January 1    16,096,147  29,638,170
 Provision for severance fee  34  8,278,039  17,934,852
 Current year  23.1  8,270,636  16,096,147
 Previous year under provision    7,403  1,838,705
 Paid during the year to the authorities    (16,103,550)  (31,476,875)
 December 31    8,270,636  16,096,147

In accordance with the Saudi Mining Code based on the Royal Decree No. 47/M dated 20 Sha’aban 1425H (corresponding to October 4, 2004), the Group is required to pay to the Government of Saudi Arabia severance fees, representing 25% of the annual net income per mining license, as defined, or the equivalent of a hypothetical income tax, based on the annual net income, whichever is lower. The zakat due shall be deducted from this amount. Therefore the net income for each mining license registered in the name of MGBM, MPC and MBAC is subject to severance fees.

Severance fees are paid by IMC, the registered holder of a small mining license, at a fixed tariff per tonnes sold of low grade bauxite, kaolin and magnesia.
Severance fees are shown as part of cost of sales in the consolidated statement of income.

23.1 Provision for severance fees consists of:

   Notes  Year ended  Year ended
   December 31,  December 31,
   2016  2015
 Gold mines  23.2  6,949,653  14,323,021
 Low grade bauxite    952,382  1,383,664
 Kaolin    246,268  240,154
 Magnesia    122,333  149,308
 Total  23  8,270,636  16,096,147

23.2 The provision for severance fees payable by gold mines is calculated as follows:

 Notes  Year ended  Year ended
 December 31,  December 31,
 2016  2015
 Net income from operating mines before severance fee for  the year  125,745,830  72,914,394
 25% of the year’s net income as defined  31,436,457  18,228,599
 Hypothetical income tax based on year’s taxable net  income   6,949,653  15,399,269
 Provision based on the lower of the above two computations  6,949,653  15,399,269
 Provision for zakat  22.3  –  (1,076,248)
 Net severance fee provision for the year  23.1  6,949,653  14,323,021

24. Employees’ benefits

 December 31,  December 31,
 Notes  2016  2015
 Employees’ termination benefits  24.1  365,791,848  304,497,276
 Employees’ savings plan  7, 24.2  59,341,221  48,807,054
 Total    425,133,069  353,304,330

24.1 Employees’ termination benefits

  2016 2015
January 1 304,497,276 254,443,608
Provision for the year 80,095,845 79,567,555
Paid during the year (18,801,273) (29,513,887)
December 31 365,791,848 304,497,276

24.2 Employees’ savings plan

  Notes 2016 2015
January 1   48,807,054 35,931,821
Contribution for the year   26,408,207 23,582,534
Withdrawals during the year   (15,874,040) (10,707,301)
December 31 4.19,7 59,341,221 48,807,054

25. Obligation under capital lease

During 2013, MAC on behalf of MBAC entered in a capital lease agreement with a financial institution. The lease payments under such agreements are due in monthly installments. The amounts of future payments under the leases are as follows:

  December 31, December 31,
  2016 2015
Future minimum lease payments 29,904,027 45,506,127
Less: Financial charges not yet due (3,120,906) (6,341,750)
Net present value of minimum lease payments 26,783,121 39,164,377
Less: Current portion shown under current liabilities (13,441,040) (12,131,184)
Long term portion of obligation under capital leases 13,342,081 27,033,193

 

Maturity profile

  December 31, December 31,
  2016 2015
Minimum lease payment falling due during years ending December 31:    
2016 15,602,100
2017 15,602,100 15,602,100
2018 14,301,927 14,301,927
Total 29,904,027 45,506,127

The present value of minimum lease payments has been discounted at an effective interest rate of approximately 0.858% per month. The leased assets as at December 31, 2016 of SAR 45,365,593 (December 31, 2015: SAR 45,947,425) are pledged as security to the lessor (Note 13).

26. Provision for mine closure and reclamation

     December 31,  December 31,
   Notes  2016 015
       
Gold mines 26.1 131,045,895 133,545,896
Al-Ba’itha bauxite mine 26.2 21,716,534 20,251,378
Low grade bauxite, kaolin and magnesite mines 26.3 4,314,600 4,314,600
Total   157,077,029 158,111,874

The movement in the provision for mine closure and reclamation for each of the mines along with the year in which they commenced commercial production and expected date of closure is as follows:

26.1 Gold mines

  Notes Al Hajar

mine

Bulghah

mine

       
January 1, 2015   1,881,991 24,948,007
Adjustment on provision during the year 13
Additions during the year 14
Utilization during the year   (1,881,991)
December 31, 2015 26 24,948,007
Utilization during the year  
December 31, 2016 26 24,948,007
       
Commenced commercial  production in   2001 2001
Expected closure date in   2016 2018

26.2 Al-Ba’itha bauxite mine

  Notes Total
January 1, 2015   18,856,531
Accretion of provision during the year 39 1,394,847
December 31, 2015 26 20,251,378
Accretion of provision during the year 39 1,465,156
December 31, 2016 26 21,716,534
     
Commenced commercial production in   2014
Expected closure date in   2059

26.3 Low grade bauxite, kaolin and magnesite mines

  Notes Az Zabirah

mine

Al-Ghazallah

 mine

Total
January 1, 2015   1,600,000 450,000 2,050,000
Additions during the year 13 2,264,600 2,264,600
December 31, 2015 26 3,864,600 450,000 4,314,600
December 31, 2016 26 3,864,600 450,000 4,314,600
         
Commenced commercial  production in   2008 2011  
Expected closure date in   2026 2028  

 

The provision for mine closure and reclamation represents the full amount of the estimated future closure and reclamation costs for the various operational mining properties, based on information currently available including closure plans and applicable regulations. Future changes, if any, in regulations and cost assumptions may be significant and will be recognized when determined.

The provision for mine closure and reclamation relates to the Group’s gold, bauxite, low grade bauxite, kaolin and magnesite mining activity. An updated estimation of the phosphate mine and plant closure and rehabilitation works including facility decommissioning and dismantling; removal or treatment of waste materials; site and land rehabilitation is in progress.

27. Long-Term borrowings

27.1 Facilities approved

MAC, MRC, MBAC and MWSPC entered into Common Terms Agreements (“CTA”) with the Public Investment Fund, Saudi Industrial Development Fund and consortiums of local financial institutions;
• the Company (Ma’aden) entered into a Shariah compliant Syndicated Revolving Credit Facility Agreement;
• MGBM entered into two secured loan arrangements with Saudi Industrial Development Fund (“SIDF”) and
• MIC and MPC entered into Murabaha Facility Agreement (“MFA”) with Murabaha facility participants.

The Group facilities granted comprise of the following as at December 31, 2016:

The CTAs impose the following conditions and financial covenants on each of the borrowing legal entities of the Group and if the conditions are met, the financial institutions will provide the long-term borrowing:

  • the limitation on the creation of additional liens and/or financing obligations by MAC, MRC, MBAC and MWSPC, unless specifically allowed under the CTA;
  • financial ratio maintenance;
  • maximum capital expenditures allowed;
  • restriction on dividend distribution to shareholders and
  • restriction on the term of the short-term investment with maturities of not more than six (6) months from the date of acquisition, of any Saudi Arabian commercial bank or any other international commercial bank of recognized standing.

 The MFAs imposed certain conditions and special covenants which include:

safeguarding the entities’ existence as a limited liability company validly existing under the laws of the Kingdom of Saudi Arabia;

  • restriction to substantial change in the general nature of company’s business, unless specifically allowed under the MFA;
  • restriction to enter into a single transaction or a series of transactions and whether voluntary or involuntary to sell, lease, transfer or otherwise dispose of any asset, unless specifically allowed under the MFA;
  • payment obligations under MFA at all times rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors except those creditors whose claims are mandatorily preferred by laws of general application to companies;
  • financial ratio maintenance and
  • restriction on dividend distribution to shareholders.

 MAC facility
On November 26, 2012, the contracts for US Dollar procurement and Saudi Riyal procurement were revised to increase the respective facility amounts. Accordingly, the CTA was also revised to reflect the new facility arrangement.

**Facility Agents:

  • Standard Chartered Bank acts as inter-creditor agent and as commercial facility agent,
  • Bank Al Jazira acts as US Dollar procurement facility agent, as Saudi Riyal procurement facility agent, as US Dollar Wakala facility agent and as Saudi Riyal Wakala facility agent,
  • SABB Securities Limited acts as onshore security agent and
  • Riyad Bank, London Branch acts as offshore security trustee and agent.

MRC facility

*Facility Agents:

  • Riyad Bank acts as Inter-creditor agent

Bank Al Jazira acts as Riyal procurement facility agent

  • Banque Saudi Fransi acts as onshore security agent
  • Riyad Bank, London Branch acts as offshore security Trustee and Agent

MBAC facility

**Facility Agents:

  • HSBC Saudi Arabia Limited acts as Inter-creditor Agent and as Commercial Facility Agent,
  • National Commercial bank acts as Dollar Procurement Facility Agent and Riyal Procurement Facility Agent,
  • Bank Al Jazira acts as Wakala Facility Agent,
  • HSBC Saudi Arabia Limited acts as Onshore Security Agent and
  • Riyad Bank, London Branch acts as Offshore Security Trustee and Agent.

MWSPC facility

**Facility Agents:

  • Islamic Development Bank and HSBC Saudi Arabia act as agents for procurement facility and
  • Mizuho Corporate Bank Limited and Sumitomo Mitsui Banking Corporation act as agents for commercial facility.

Saudi Arabian Mining Company (“Ma’aden”)

On December 18, 2012, the Company entered into a Shariah compliant Syndicated Revolving Credit Facility Agreement (“Murabaha Facility Agreement”) and other agreements (together referred to as “financing agreements”) totaling to SAR 9 billion. Final maturity for repayment of the loan is five years from the date of signing of the agreement. The facility is with a syndicate of local and international financial institutions, comprising of the following financial institutions:

Al-Rajhi Bank

  • Arab National Bank
  • Bank Al-Bilad
  • Bank AlJazira
  • Banque Saudi Fransi
  • J.P.Morgan Chase Bank, N.A., Riyadh Branch
  • Riyad Bank
  • Samba Financial Group
  • The National Commercial Bank
  • The Saudi British Bank
  • The Saudi Investment Bank

The financial covenants and conditions include the following with respect to standalone parent company only:

  • EBITDA to Interest ratio shall not be less than three times otherwise dividend block will be triggered; and
  • the total net debt to tangible net worth (parent company only) shall be less than or equal to three times otherwise an event of default will be triggered which is subject to a cure period of six months, or nine months if the Company has acted expeditiously to cure such breach by initiating the process for a rights issue.

MGBM facilities

The company entered into two secured loan arrangements with Saudi Industrial Development Fund (“SIDF). The facilities granted to the company comprise of the following:

Date approved Purpose Facilities
     
March 24, 2015 To provide funding for the production of a semi alloy of gold at As Suq mine 179,000,000
     
April 26, 2015 To provide funding for the capital expenditure of the new gold mine at

Ad-Duwayhi and water pipeline

1,200,000,000
Total facilities granted   1,379,000,000

 

The financing arrangements impose certain conditions and special covenants which include:

  • the limitation of the creation of additional liens and/or financing obligations by the Company, unless specifically allowed under the loan agreement,
  • financial ratio maintenance, maximum capital expenditures allowed,
  • restriction on dividend distribution to shareholders, and
  • restriction on the term of the short-term investment with maturities of not more than six (6) months from the date of acquisition, of any Saudi Arabian commercial bank or any other international commercial bank of recognized standing.

MIC facility

On December 30, 2015 the company entered into a Murabaha Facility Agreement (“MFA”) with HSBC Saudi Arabia Limited, comprising of:

Murabaha facility Facility granted
HSBC Saudi Arabia Limited – as agent for the Murabaha  facility participants 1,000,000,000

 

The facility was drawn down on February 17, 2016.

MPC facility

On June 15, 2008 the company had entered into a CTA with a consortium of financial institutions, however, the facility had been repaid in full from a drawing on March 30, 2016 under a new MFA signed by the company on February 25, 2016 with a Murabaha facility participants comprising of:

Murabaha facility Total

facilities

granted

Riyad Bank – as agent for the Murabaha  facility participants 11,493,750,000

The details of the CTA signed on June 15, 2008 were as follows:

Public Investment Fund (“PIF”) 4,000,001,250
   
Islamic and commercial banks  
Banque Saudi Fransi – as agent for the procurement facility participants 4,269,892,500
Mizuho Corporate Bank Limited – as agent for the commercial facility participants 1,491,562,500
Al-Rajhi Bank 2,343,750,000
The Export Import Bank of Korea 1,500,000,000
Korea Export Insurance corporation 750,000,000
Sub-total 10,355,205,000
   
Saudi Industrial Development Fund (“SIDF”) 600,000,000
Total facilities granted 14,955,206,250

27.2 Facilities utilized under the different CTAs

  December 31, December 31,  
  2016 2015  
Public Investment Fund 2,668,800,835 3,001,600,938  
Less: Repaid during the year 2,668,800,835 332,800,103  
Sub-total (Note 42.2) 2,668,800,835  
  The rate of commission on the principal amount of the loan drawdown and outstanding for each commission period was LIBOR plus 0.5% per annum.

 

Loan repayment started on June 30, 2012, on a six monthly basis, in equal principal repayments of SAR 166.4 million over the term of the loan (Note 27.7).

 

   
  Islamic and commercial banks    
  Saudi Riyal procurement 3,458,612,925 3,693,457,013
  Al-Rajhi Bank 1,898,437,500 2,027,343,750
  The Export Import Bank of Korea 1,096,500,000 1,230,000,000
  Commercial 904,415,625 965,826,563
  Korea Export Insurance Corporation 548,250,000 615,000,000
  Sub-total 7,906,216,050 8,531,627,326
  Less: Repaid during the year 7,906,216,050 625,411,276
  Sub-total 7,906,216,050
   

The rate of commission on the principal amount of the loan drawdown and outstanding for each commission period was LIBOR plus 0.5% to 1.15% per annum.

 

The repayment of this loan started on June 30, 2012, on a six monthly basis, starting at SAR 255.1 million and increasing over the term of the loan (Note 27.7).

 

   
  Saudi Industrial Development Fund 370,000,000 460,000,000
  Less: Repaid during the year 370,000,000 90,000,000
  Sub-total 370,000,000
       
  The project follow-up cost paid during the drawdown amounted to SAR 6.3 million.

 

Repayment of this loan started on February 26, 2013, on a six monthly basis, starting at SAR 40 million and increasing over the term of the loan. (Note 27.7).

   
       
  Total MPC borrowings (Note 27.6) 10,945,016,885

 

MAC Facility

  December 31, December 31,
  2016 2015
Public Investment Fund 4,575,187,500 4,775,062,500
Less: Repaid during the year 199,875,000 199,875,000
Sub-total (Note 42.2) 4,375,312,500 4,575,187,500
     
The rate of commission on the principal amount of the loan drawdown and outstanding for each commission period is LIBOR plus 1.5%.

 

The repayment of the loan started on December 31, 2014, on a six monthly basis, starting at SAR 99.9 million and increasing over the term of the loan with the final repayment of SAR 1,218 million on June 30, 2026 (Note 27.7).

 

   
Islamic and commercial banks    
Dollar procurement 872,805,000 910,935,000
Saudi Riyal procurement 3,864,273,750 4,033,091,250
Commercial 844,650,000 881,550,000
Wakala 739,068,750 771,356,250
Sub-total 6,320,797,500 6,596,932,500
Less: Repaid during the year 276,135,000 276,135,000
Sub-total 6,044,662,500 6,320,797,500
     
The rate of commission on the principal amount (lease base amount in case of Wakala facilities) of the loan drawn for each commission period on all the US Dollar facilities is LIBOR plus a margin (mark-up in case of Wakala facilities) that varies over the term of the loan. The rate of commission on the principal amount (lease base amount in case of Wakala facilities) of the loan drawn for each commission period on all the Saudi Riyal facilities is Saudi Interbank Offered Rate (“SIBOR”) plus a margin (mark-up in case of Wakala facilities) that varies over the term of the loan. The margin/mark-up on the principal amount of the loan drawn for each commission period is in the range of 1.65% to 2.75% per annum.

 

The repayment of the loans started from December 31, 2014, starting at SAR 138 million and increasing over the term of the loan with the final repayment of SAR 1,684 million on June 30, 2026 (Note 27.7).

   
     
Saudi Industrial Development Fund 550,000,000 570,000,000
Less: Repaid during the year 100,000,000 50,000,200
Sub-total 450,000,000 519,999,800
     
Repayment of the SIDF facility started from February 4, 2015. The repayments are starting at SAR 25 million and increasing over the term of the loan with the final repayment of SAR 62.5 million on June 7, 2020 (Note 27.7).    
     
Riyal Murabaha facility 375,000,000 375,000,000
 

During the quarter ended March 31, 2016, the rate of profit on the purchase price i.e. principal amount of the loan drawn for each commission period is revised to SIBOR plus 1.25% from SIBOR plus 1.75%.

 

The repayment of the Murabaha facility is due on March 31, 2018 (Note 27.7).

   
     
Total MAC borrowings (Note 27.6) 11,244,975,000 11,790,984,800

 

MRC facility

  December 31, December 31,
  2016 2015
 

Public Investment Fund (Note 42.2)

3,078,750,000 3,078,750,000
Less: Repaid during the year 30,787,500
Sub-total (Note 42.2) 3,047,962,500 3,078,750,000
     
The rate of commission on the principal amount of the loan drawn for each commission period is London Interbank Offered Rate (“LIBOR”) plus 1.5%.

 

The repayment of the loan started on December 31, 2016, on a six monthly basis, starting at SAR 30.8 million and increasing over the term of the loan with the final repayment of SAR 153.9 million on June 30, 2026 (Note 27.7).

 

   
Islamic and commercial banks    
Riyal procurement 1,041,000,000 1,041,000,000
Less: Repaid during the year 10,410,000
Sub-total 1,030,590,000 1,041,000,000
     
The rate of commission on the principal amount of the loan drawn for each commission period on all the Saudi Riyal facilities is Saudi Interbank Offered Rate (“SIBOR”) plus a margin that varies over the term of the loan. The margin/mark-up on the principal amount of the loan drawn for each commission period is in the range of 1.65% to 2.45% per annum.

 

Repayment of the SIDF facility started from January 25, 2016, starting at SAR 25 million and increasing over the term of the loan with the final repayment of SAR 62.5 million on July 19, 2021 (Note 27.7).

   
     
Saudi Industrial Development Fund 600,000,000 570,000,000
Less: Repaid during the year 50,000,000
Sub-total 550,000,000 570,000,000
     
Repayment of the SIDF facility started from January 25, 2016. The repayments are starting at SAR 25 million and increasing over the term of the loan with the final repayment of SAR 62.5 million on July 19, 2021 (Note 27.7).    
     
Riyal Murabaha facility 375,000,000 375,000,000
     
The rate of profit on the purchase price i.e. principal amount of the loan drawn for each commission period is Saudi Interbank Offered Rate (“SIBOR”) plus 0.95%.

 

The repayment of Murabaha facility is due on August 31, 2017 (Note 27.7).

   
     
Total MRC borrowings (Note 27.6) 5,003,552,500 5,064,750,000

 

MBAC facility

  December 31, December 31,
  2016 2015
Public Investment Fund (Note 42.2) 3,750,000,000 3,750,000,000
     
The rate of commission on the principal amount of the loan drawn for each commission period is London Interbank Offered Rate (“LIBOR”) plus 1.5%.

 

The repayment of the principal amount of PIF facility will be in 21 installments on a six monthly basis starting from June 30, 2017. The repayments are starting at SAR 75 million and increasing over the term of the loan with the final repayment of SAR 435 million on June 30, 2027 (Note 27.7).

 

   
Islamic and commercial banks    
Dollar procurement 799,500,000 799,500,000
Riyal procurement 1,891,212,844 1,891,212,844
Commercial 258,750,000 258,750,000
Wakala 768,750,000 768,750,000
Sub-total 3,718,212,844 3,718,212,844
     
The rate of commission on the principal amount (lease base amount in case of wakala facilities) of the loan drawn for each commission period on the all the dollar facilities is LIBOR plus a margin (mark-up in case of wakala facilities) that varies over the term of the loan. The rate of commission on the principal amount (lease base amount in case of wakala facilities) of the loan drawn for each commission period on all the Saudi Riyal facilities is Saudi Interbank Offered Rate (“SIBOR”) plus a margin (mark-up in case of wakala facilities) that varies over the term of the loan. The margin/mark-up on the principal amount of the loan drawn for each commission period is in the range of 1.45% to 2.4% per annum.

 

The repayment of the principal amounts of Islamic and commercial total approved facilities will start from June 30, 2017. The repayments are starting at SAR 74 million and increasing over the term of the loan with the final repayment of SAR 431 million on June 30, 2027 (Note 27.7).

 

   
     
Saudi Industrial Development Fund 841,071,390 743,035,677
     
SIDF has withheld loan processing and evaluation fee of SAR 75 million.

 

Repayment of the SIDF facility will start from July 2017. The repayments are starting at SAR 40 million and increasing over the term of the loan with the final repayment of SAR 80 million in April 2024 (Note 27.7).

   
 

SIDF has withheld loan processing and evaluation fee of SAR 75 million. The fee will be amortized over the term of the loan and the unamortized fee is SAR 59 million as of December 31, 2016.

 

   
Total MBAC borrowings (Note 27.6) 8,309,284,234 8,211,248,521

 

MWSPC facility

  December 31, December 31,
  2016 2015
 

Public Investment Fund

6,839,278,174 3,954,229,920
Less: Transaction cost balance as of the year 64,842,843 71,307,385
Sub-total (Note 42.2) 6,774,435,331 3,882,922,535
     
The rate of commission on the principal amount of the loan drawdown and outstanding for each commission period, is  LIBOR plus 1.5% per annum.

 

The repayment of the principal amount of loan will be in 24 installments on a six monthly basis starting from June 30, 2019. The repayments are starting at SAR 112.5 million and increasing over the term of the loan with the final repayment of SAR 606 million on December 31, 2030 (Note 27.7).

 

Transaction cost incurred and is amortized over the term of the loan amounted to SAR 6,464,542 (December 31, 2015: SAR 2,171,240) (Note 14).

 

   
Islamic and commercial banks    
Dollar procurement facility 304,392,518 174,565,346
Saudi Riyal procurement facility 2,620,254,420 1,502,683,523
Wakala 1,488,141,198 853,430,583
Commercial facility 5,061,772,152 2,847,314,693
Sub-total 9,474,560,288 5,377,994,145
Less: Transaction cost balance as of the year 78,983,617 109,070,785
Sub-total 9,395,576,671 5,268,923,360
     
The rate of commission on the principal amount of the loan drawdown and outstanding for each commission period is LIBOR plus 1.25% to 2.10% per annum.

The repayment of the principal amounts of loans will start from June 30, 2019. The repayments are starting at SAR 171 million and increasing over the term of the loan with the final repayment of SAR 809 million on December 31, 2030 (Note 27.7).

Transaction cost incurred and is amortized over the term of the loan amounted to SAR 30,087,168 (December 31, 2015: SAR 13,557,950) (Note 14).

   
Total MWSPC borrowings (Note 27.6) 16,170,012,002 9,151,845,895

27.3 Facility utilized under the Syndicated Revolving Credit facility

  December 31, December 31,
  2016 2015
Syndicated Revolving Credit Facility (Note 27.6)

 

The rate of commission on the principal amount of the borrowing drawdown is SIBOR plus 0.85% per annum.

27.4 MGBM facilities

  December 31, December 31,
  2016 2015
As Suq mine    
Saudi Industrial Development Fund 179,000,000 143,200,000
Less: Transaction cost balance as of the year 9,258,917 12,008,103
Sub-total 169,741,083 131,191,897
Less: Repaid during the year 8,000,000 12,008,103
Sub-total 161,741,083 131,191,897
 

 

The repayment of this loan started on July 20, 2016, on a six monthly basis, starting at SAR 8 million and increasing over the term of the loan with the final repayment of SAR 18 million on November 9, 2022 (Note 27.7).

 

Transaction incurred and is amortized over the term of the loan amounted to SAR 2,749,186 (December 31, 2015: SAR 1,391,897) (Note 39).

 

   
Ad-Duwayhi mine and water pipeline    
Saudi Industrial Development Fund 804,507,000 120,000,000
Less: Transaction cost balance as of the year 65,197,022 16,000,000
Sub-total 739,309,978 104,000,000
 

The repayment of this loan will start on July 9, 2017, on a six monthly basis, starting at SAR 60 million and increasing over the term of the loan with the final repayment of SAR 100 million on October 30, 2022 (Note 27.7).

 

Transaction incurred and is amortized over the term of the loan amounted to SAR 14,802,978 (December 31, 2015: Nil) (Note 39).

 

 

   
Total MGBM borrowings (Note 27.6) 901,051,061 235,191,897

27.5 Facilities utilized under the different MFAs

MIC facility

  December 31, December 31,
  2016 2015
HSBC Saudi Arabia Limited – as agent for the Murabaha  facility participants 1,000,000,000
Less: Transaction cost balance at the year end 9,000,000
Sub-total 991,000,000
Less: Repaid during the year 39,000,000  
Total MIC borrowings (Note 27.6) 952,000,000  
 

The rate of commission on the principal amount of the loan drawdown and outstanding for each commission period, is in the range of SIBOR plus 1 % per annum.

The repayment of the principal amount of the loan will commence on December 30, 2016, in equal principal repayments of SAR 39 million, on a semi-annual over a 10 year period with the final principal repayment of SAR 298 million on December 30, 2025 (Note 27.7).

Transaction cost incurred and is amortized over the term of the loan amounted to SAR 1,185,000 (December 31, 2015: Nil) (Note 39).

   

 

MPC facility

  December 31, December 31,
  2016 2015
Riyad Bank – as agent for the Murabaha  facility participants 11,493,750,000
Less: Transaction cost balance as of the year 98,953,754
Total MPC borrowings (Note 27.6) 11,394,796,246
 

The rate of commission on the principal amount of the loan drawdown and outstanding for each commission period, is in the range of LIBOR plus 1% per annum for SAR Murabaha facility and LIBOR plus 1.1% per annum for US Dollar Murabaha facility.

 

 

The repayment of this loan will start from February 25, 2017, starting at SAR 575 million and increasing over the term of the loan with the final repayment of SAR 3,448 million on February 25, 2023.

 

Transaction cost incurred and is amortized over the term of the loan amounted to SAR 15,983,746 (December 31, 2015: Nil) (Note 39).

 

 

 

 

 

27.6 Total borrowings

  December 31, December 31,
  2016 2015
     
Facilities utilized under:    
CTAs (Note 27.2):    
MPC 10,945,016,885
MAC 11,244,975,000 11,790,984,800
MRC 5,003,552,500 5,064,750,000
MBAC 8,309,284,234 8,211,248,521
MWSPC 16,170,012,002 9,151,845,895
Syndicated Revolving Credit facility (Note 27.3):    
Ma’aden
MGBM facilities (Note 27.4) 901,051,061 235,191,897
MFAs (Note 27.5):    
MIC 952,000,000
MPC 11,394,796,246
Sub-total 53,975,671,043 45,399,037,998
Less: Current portion of borrowings shown under current liabilities    
MPC 1,149,375,000 1,089,112,404
MAC 576,010,000 951,010,000
MRC 532,395,000 91,197,500
MBAC 338,728,517
MGBM 78,000,000
MIC 78,000,000
Sub-total 2,752,508,517 2,131,319,904
Long-term portion of borrowings 51,223,162,526 43,267,718,094

27.7 Maturity profile of long-term borrowings

  December 31, December 31,
  2016 2015
     
2016 2,131,319,904
2017 2,752,508,518 2,562,245,922
2018 3,111,859,645 3,185,503,199
2019 3,634,171,943 3,347,766,713
2020 3,893,420,400 3,473,132,097
2021 4,621,562,506 3,945,767,134
2022 6,003,649,012 4,291,783,358
2023 through 2030 29,958,499,019 22,461,519,671
Total                                                                                                      53,975,671,043 45,399,037,998

 

As of December 31, 2015, current portion of MPC’s long-term borrowings of SAR 1,089,112,404 is included in the maturity profile due in the next 12 months. Out of this amount, SAR 544,556,202 was restricted in the debt service reserve account for the next schedule repayment, six months prior to the due date, as per the facility agreement (Note 7).

27.8 Facilities’ currency denomination

Essentially all of the Group’s facilities have been contracted in United States Dollar (US$) and Saudi Riyals (SAR) and the drawdown balances in US$ are shown below:

  December 31, December 31,
  2016 2015
  (US$)  (US$)
     
Public Investment Fund 4,786,056,088 4,788,176,231
     
Islamic and commercial banks    
Procurement 2,453,712,992 3,122,118,824
Al-Rajhi Bank 506,250,000
The Export Import Bank of Korea 292,400,000
Korea Export Insurance Corporation 146,200,000
Commercial 1,628,007,077 1,286,141,272
US Dollar procurement 515,833,718 490,955,406
Wakala 786,190,750 623,974,433
Sub-total 5,383,744,537 6,468,039,935
     
Saudi Industrial Development Fund 731,232,654 650,193,966
Murabaha facility 3,292,478,999
Riyal Murabaha facility (a working capital facility) 200,000,000 200,000,000
Syndicated Revolving Credit facility
Total 14,393,512,278 12,106,410,132

 

27.9 Security

The following assets were pledged as security for these long-term borrowings in accordance with the applicable CTAs and MGBM facility:

December 31, December 31,
Notes 2016 2015
Property, plant and equipment 13 33,283,863,678 35,706,647,560
December 31, December 31,
Notes 2016 2015
Property, plant and equipment 13 33,283,863,678 35,706,647,560
Capital work-in-progress 14 31,183,895,066 37,197,115,376
Intangible assets 17 103,105,996 85,374,130
Total                                                                                                      64,570,864,740 72,989,137,066

28. Due to joint venture partner

    December 31, December 31,
  Note 2016 2015
       
Due to Alcoa Corporation 42.2 306,790,113 300,703,363

 

Due to Alcoa Corporation represents their share of 25.1% in the joint venture project cost to extend the product mix of the aluminium complex, currently under construction at Ras Al-Khair, to include:

• automotive heat treated and non-heat treated sheet,
• building and construction sheet and
• foil stock sheet (Note 1).

29. Share capital

    December 31, December 31,
    2016 2015
Authorized, issued and fully paid    
       
1,168,478,261 Ordinary shares with a nominal value of SAR 10 per share
(Note 1 and 41)
11,684,782,610 11,684,782,610

30. Share premium

    December 31, December 31,
    2016 2015
525,000,000 Ordinary shares with a nominal  value of SAR 10 per share, issued at a premium of SAR 10 per share 5,250,000,000 5,250,000,000
243,478,261 Ordinary shares with a nominal value of SAR 10 per share, issued at a premium of SAR 13 per share, net after transaction cost 3,141,351,697 3,141,351,697
768,478,261 Total 8,391,351,697 8,391,351,697

31. Transfer of net income

  2016 2015
     
January 1 757,911,634 697,394,239
Transfer of 10% of net income for the year 40,063,908 60,517,395
December 31 797,975,542 757,911,634

 

In accordance with Regulations for Companies in Saudi Arabia, the Company has established a statutory reserve by the appropriation of 10% of net income until such reserve equals 50% of the share capital. Such transfer is made on an annual basis and the reserve is not available for dividend distribution.

32. Non controlling Interest

33. Sales

  Year ended Year ended
  December 31, December 31,
  2016 2015
     
Phosphate segment    
Phosphate fertilizer 3,241,417,836 4,542,770,526
Ammonia 814,908,407 761,572,269
Low grade bauxite 70,497,397 96,837,110
Caustic calcined magnesia 38,224,871 48,532,148
Kaolin 40,386,328 38,388,067
Sub-total 4,205,434,839 5,488,100,120
     
Aluminium segment    
Primary aluminium 4,252,077,395 4,762,750,070
     
Gold and base metals segment    
Gold 1,048,707,732 705,215,748
     
Infrastructure    
Infrastructure revenue 21,250 60,000
Total 9,506,241,216 10,956,125,938
     
Gold sales analysis    
Quantity of gold ounces (Oz) sold 224,576 164,938
Average realized price per ounce (Oz) in:    
US$ 1,245 1,140
Saudi Riyals (equivalent) 4,670 4,276

34. Cost of sales

34.1 Sale of by-products comprise of the following commodities:

35. Selling, marketing and logistic expenses

36. General and administrative expenses

37. Exploration and technical services expenses

38. Income from short-term investments

39. Finance charges 

39.1 Summary of finance charges

40. Other income, net

41. Earnings per ordinary share

Basic earnings per ordinary share is calculated by dividing the net income attributable to the shareholders of the parent company by the weighted average number of ordinary shares in issue during the year.

42. Related party transactions and balances

42.1 Related party transactions

Transactions with related parties carried out during the year, in the normal course of business, are summarized below:

42.2 Related party balances

Amount due from / (to) related parties arising from transaction with related parties are as follows:

Due to joint venture partners:

43. Operating lease agreements

44.Commitments and contingent liabilities

44.1 Commitments

44.1 Commitments

*Ma’aden guarantees to SIDF and other financial institutions for granting financing facilities to SAMAPCO and MBCC to the extent of its shareholding of 50% in the jointly controlled entities.

44.2 Contingent liabilities

The Group has contingent liabilities from time to time with respect to certain disputed matters, including claims by and against contractors and lawsuits and arbitrations involving a variety of issues. These contingent liabilities arise out of the ordinary course of business. It is not anticipated that any material liabilities will be incurred as a result of these contingent liabilities. There are no material environmental obligations or decommissioning liabilities.

45. Financial risk management

The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value risk, commission rate risk and commodity price risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group’s financial performance.

45.1 Currency risk

Is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Group transactions are principally in Saudi Riyals and US Dollars. Management monitors the fluctuations in currency exchange rates and believes that the currency risk is not significant.

45.2 Fair value risk

Is the amount for which an asset could be exchanged, or a liability settled between knowledgeable willing parties in an arm’s length transaction. As the Group’s financial instruments are compiled under the historical cost convention, differences can arise between the book values and fair value estimates. Management believes that the fair values of the Group’s financial assets and liabilities are not materially different from their carrying values.

45.3 Commission rate risk

Is the exposure to various risks associated with the effect of fluctuations in the prevailing commission rates on the Group’s financial position and cash flows. The Group’s commission rate risks arise mainly from its short-term investments and long term-borrowings, which are at floating rate of commission and are subject to re-pricing on a regular basis. The Group monitors the fluctuations in commission rate.

Based on the Groups net debt outstanding as at December 31, 2016, the effect on its annual net earnings of a 1% movement in the US Dollar LIBOR and SAR SIBOR commission rate would be SAR 459 million (December 31, 2015: SAR 408 million). These effects will not remain consistent throughout 2017 due to drawdown and repayment of long-term borrowing facilities.

45.4 Commodity price risk

Most of the commodities sold by the Group are priced in an active market in which prices respond to daily changes in quantities. The Group’s normal policy is to sell its products at prevailing market prices. The Group does not generally believe commodity price hedging would provide long-term benefit to the shareholders.

45.5 Credit risk

Is the risk that one party will fail to discharge an obligation and cause the other party to incur a financial loss. The Group is exposed to credit risk from its operating activities (pertaining to trade receivables mainly). However, the cash collection is made at time of sales delivery and from its financing activities, including deposits with banks and financial institutions. Credit limits are established for all customers based on internal rating criteria. Outstanding trade receivables are regularly monitored and any credit concerns highlighted to senior management. Cash and short-term investments are substantially placed with commercial banks with sound credit ratings.

The Group currently has three major customers which account for sales of approximately SAR 3,338 million, representing 35% of the Group’s sales for the year ended December 31, 2016 (December 31, 2015: SAR 4,544 million representing 41% of Group’s sales from three major customers). Trade receivables are carried net of allowance for doubtful debts, if needed.

45.6 Liquidity risk

Is the risk that the Group will encounter difficulty in raising funds to meet commitments associated with financial instruments. Liquidity risk may result from an inability to sell a financial asset quickly at an amount close to its fair value. Liquidity risk is managed by monitoring on a regular basis that sufficient funds are available to meet any future commitments.

46. Events after the reporting date

On January 1, 2017, the Company announced the commencement of commercial production of the ammonia plant of its subsidiary MWSPC at Ras Al-Khair. The ammonia plant has achieved stable operations and has a designed production capacity of 1.1 million tonnes of ammonia per year. The financial impact of this event will be reflected from the first quarter of 2017 onwards.

47. Comparative figures

Certain comparative figures of the previous year have been reclassified, wherever necessary, to conform with the current year’s presentation. Such reclassifications did not affect either the net worth or the net income of the Group for the previous or  current year.

48. Contingent assets held and liabilities incurred under fiduciary administration

On January 6, 2013 MIC, a wholly owned subsidiary of Ma’aden, received an amount of USD 140 million (in a fiduciary capacity) from the Ministry of Finance of the Kingdom of Saudi Arabia, in accordance with the Council of Ministers’ Resolution No 87, dated 28 Rabi ul Awal 1433H (corresponding to February 20, 2012), for the purpose of establishing an industrial city in the Northern Borders Province, by the name of “Waad Al-Shamal City for Mining Industries”.

The aggregate amount represents part payment of the following two amounts approved by the Council of Ministers:

  • USD 500 million for the design and construction of the basic infrastructure and required utilities of the industrial city, and
  • USD 200 million for the design and construction of the housing and required social facilities for the proposed industrial city.

In 2014, an additional amount of USD 250 million has also been received and deposited in a separate bank account and does not form part of MIC’s available cash resources and has been accounted for in its own standalone accounting records and has not been integrated with MIC’s accounting records.

In 2016, the remaining balance of USD 310 million was received. These amounts can only be utilized for the designated purpose in accordance with the Council of Ministers Resolution and replenished based on the presentation of supporting documents for the expenditures incurred, in accordance with the applicable Governments Regulations. Total net assets of the project as of December 31, 2016 amounted to SAR 2,625,000,000 (December 31, 2015: SAR 1,462,500,000).

49. Detailed information about the subsidiaries and jointly controlled entities

 

 

 

 

  Issued, paid-up and partly paid-up share capital   Effective group

interest %

  Cost of investment by

parent company

      December 31, December 31,   December 31, December 31,   December 31, December 31,
Subsidiaries Nature of business   2016 2015   2016 2015   2016 2015  
                       
Ma’aden Gold and Base Metals Company (“MGBM”) Gold mining   867,000,000 867,000,000   100 100   867,000,000 867,000,000  
Ma’aden Infrastructure Company (“MIC”) Manage and develop infrastructure projects   500,000 500,000   100 100   500,000 500,000  
Industrial Minerals Company (“IMC”) Kaolin, low grade bauxite and magnesite mining   344,855,200 344,855,200   100 100   344,855,200 344,855,200  
Ma’aden Aluminium Company (“MAC”) Aluminium ingots, T-shape ingots, slabs and billets   6,573,750,000 6,573,750,000   74.9 74.9   4,923,738,750 4,923,738,750  
Ma’aden Rolling Company (“MRC”) Aluminium sheets for can body and lids   2,477,371,807 2,449,008,348   74.9 74.9   1,855,551,484 1,834,307,253  
Ma’aden Bauxite and Alumina Company (“MBAC”) Bauxite mining and refining   4,828,464,412 4,806,784,758   74.9 74.9   3,616,519,845 3,600,281,784  
Ma’aden Phosphate Company (“MPC”) Phosphate mining and fertilizer producer   6,208,480,000 6,208,480,000   70 70   4,345,936,000 4,345,936,000  
Ma’aden Wa’ad Al Shamal Phosphate Company (“MWSPC”) Phosphate mining and fertilizer producer   7,005,001,875 5,505,001,875   60 60   4,203,001,125 3,303,001,125  
Total                 20,157,102,404 19,219,620,112  
                       
Jointly controlled entities                      
Sahara and Ma’aden Petrochemicals Company (“SAMAPCO”) Production of concentrated caustic soda and ethylene dichloride   900,000,000 900,000,000   50 50   450,000,000 450,000,000  
Ma’aden Barrick Copper Company (“MBCC”) Production of copper and associated minerals   404,965,292 404,965,292   50 50   202,482,646 202,482,646  
Total                 652,482,646 652,482,646  
                                 

All the subsidiaries and jointly controlled entities listed above are incorporated in the Kingdom of Saudi Arabia and all their operations are within the Kingdom.