Saudi Arabian Mining Company (Maaden) said its third-quarter net profit climbed 4.6 per cent as cost reductions helped the regions top mining firm to report the first rise in profitability in six quarters.
Maaden reported a net profit of SR83.6m ($22.3m) for the three-month period ending 30 September this year, up from SR79.9m for the same period in 2015. The profit however is still 36.9 per cent lower than what the company had announced for second quarter of 2016 when its income more than halved to SR132m, the company said in a statement to Saudi Stock Exchange (Tadawul) where its shares are traded.
Maaden said a 10 per cent drop in cost of sales as a result of lower raw material prices and companys continuing efforts to improve efficiency, have helped the quarterly profit. A 20 per cent increase in the average gold price also soften the impact.
The ongoing initiatives to reduce operating costs led to a reduction of 66 per cent in exploration and technical services expenses, a 24 per cent drop in general and administrative expenses and 18 per cent decline in selling, marketing and logistic expenses, Maaden said in the statement.
The companys nine-month profit for 2016, however, has declined to SR385m, down from SR610.8m for the same period last year. Sales have dropped 9 per cent year-on-year, dragged down by lower commodities prices in phosphate and aluminium segments.
The government-controlled Maaden, which operates in gold, aluminium and phosphates, is at the heart of the Saudi Arabias plans to diversify its economy away from oil and cut its dependence on sale of hydrocarbons for revenues. Unlike the kingdoms smaller GCC neighbours, Saudi Arabia has a large wealth of mineral resources that it is integrating into downstream industries such as aluminium and fertiliser production.
The company has benefited from lower cost of production years and has withstood the global commodities slowdown better than some of its international peers. However, with restructuring of energy subsidies and adjustments in gas feedstock prices by Riyadh to save cost in the wake of lower oil prices mean the company is now losing its advantage.
Maaden in October said that one of its subsidiaries, Maaden Bauxite and Alumina Company, has started commercial production at a new bauxite mine and alumina refinery. The unit, which is 74.9 per cent owned by Maaden and 25.1 per cent by US Alcoa, could begin selling its surplus output into regional and international markets by early 2017.
The alumina refinery has achieved stable operations and will ramp up until reaching its designed production capacity of 1.8 million tonnes a year (t/y) of alumina by early 2017, Maaden said in bourse filing at the time, adding that the revenues impact of the venture will be reflected in its fourth-quarter earnings statement of this year.
In July, it announced that Maaden Barrick Copper Company (MBCC) had started commercial production at the Jabal Sayid copper mine in Saudi Arabia. The operation is expected to produce an average of 45,000 t/y of copper concentrate.
MBCC is a 50:50 joint venture of Maaden and US-based Barrick Gold Corporation. Maaden, which bought into the company in July 2014 for $210m, announced in April that the start-up of the operation had been pushed back from the first quarter of 2016.