Maaden charts its path

19 July 2002

Saudi Arabian Mining Company (Maaden)is pursuing some of the largest projects now being undertaken in the kingdom and is a prime part of the government's privatisation programme. In a 17 July response to MEED questions, Maaden president and chief executive officer Abdallah Dabbagh revealed in more detail the extent of progress on its headline projects and the possible future paths for privatisation (Saudi Arabia, MEED Special Report, 21:6:02, pages 39-40).

Q How far advanced are your plans for privatisation and what is the earliest possible date?

APrivatisation will occur at the appropriate time, in accordance with the laws of the kingdom, and when such action is commercially and strategically correct. Obviously, privatisation would be most appropriate after we have operated our properties successfully and at a profit. We are considering a number of models for privatisation but predicting a date is not something that is appropriate at this time.

Q What requirements must be satisfied first?

AIn order to privatise, a company must be commercially successful - that is profitable - for a continuous period of five years. As well, although we have ongoing profitable businesses, they are relatively small in comparison to our capital. However, there are a number of alternatives. For example, one possible alternative would be to separate base and precious metal activities and privatise them as separate businesses. This alternative, however, would be directly influenced by the new mining law, which is still being considered by the government. Full privatisation may well await development of the company's mega-projects in bauxite and phosphate.

Q Will you privatise through an initial public offering, or in a different way?

A The form of privatisation will be determined by a number of factors such as the objectives of the company at the time, the strategic needs of the kingdom and its people, the commercial dictates of the company, any partners it might have at that time, and also the financial needs of the company.

Q Will the statement of Communications Minister Nasser al-Saloum that a railway will be developed as part of the Al-Jalamid phosphate project help push the scheme forward?

A The communications minister was positive in his statement, and as such the statement was welcome. Such publicity will help to acquaint the Saudi public with the advantages and benefits of such a development.

Q How close are you to finalising the joint venture agreement with Saudi Oger to develop the Al-Jalamid project?

AWe are in routine and regular contact with Saudi Oger on this matter and the joint venture agreement is being worked on by a joint team. It is moving forward at a good pace.

Q How much is the Al-Jalamid project expected to be worth?

AWe are currently projecting expenditure of some $1,200 million, exclusive of railroad development.

Q How much phosphate do you expect to produce and export?

AAl-Jalamid, when fully operational, will see 4.5 million tonnes a year processed into phosphoric acid and diammonium phosphate.

Q What is the current status of Maaden's plans to exploit bauxite from Al-Zabirah?

AThe Al-Zabirah bauxite project has received board approval and the company is proceeding with a formal full pre-feasibility study, which will be completed in September 2002. The study will address the size and location of an alumina refinery in the kingdom, together with the economics of smelting to produce aluminium.

Q Which other mining sites are earmarked for development in the next five years?

AWhat Maaden develops and brings into production in the next five years will depend on a number of factors such as discoveries, prices and the world economy. In October of this year, we will start production at Bulgah, our new gold property. We also have another promising gold property that is very exciting. We fully expect to move this forward and for it to be in production within three years.

Q When do you expect the new mining code to be issued, and what impact do you think it will have on mining in the kingdom?

AThe new mining code will be issued when it receives formal approval and goes through the due process of law. I cannot predict when that will be. However, there is no doubt that the new code will be beneficial to the mining industry of the kingdom. We look forward eagerly to its enactment.

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