Saudi Arabian Mining Company (Ma'aden) grows Q3 production and reduces costs in response to challenging market conditions

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Saudi Arabian Mining Company (Ma'aden) P.O. Box 68861, Riyadh 11537

Kingdom of Saudi Arabia Tel: +966 011 874 8123 Fax: +966 011 874 8134 www.maaden.com.sa

17 October 2016

Saudi Arabian Mining Company (Ma'aden) grows Q3 production and reduces costs in response to challenging market conditions

The Saudi Arabian Mining Company (Ma’aden) today issued its financial and operating results for the third quarter of 2016, which demonstrated good progress for the Company as it works to meet the challenges of current lower prices for its products. The Company reported increased production across all of its business segments and significant progress in its Company-wide cost cutting initiative.

“We continue to position Ma’aden for the future by growing production and ramping up capacity at our aluminium, gold and phosphate segments during the quarter; these additional production capacities will be significant contributors to our performance in the future” said Ma’aden President and CEO Khalid Al Mudaifer. “We are also making good progress towards optimizing costs across all of our production facilities.”

Financial

Ma’aden has been successful in positioning itself globally as one of the lowest cost producers in both aluminium and phosphate commodities. However, in the current low commodity price environment Ma’aden financial performance during the quarter has been impacted, notably by the lower prices for phosphate fertilizers.

Sales fell by 9% in Q3 2016, compared to the same quarter last year. This can be attributed to the decline in prices for ammonium phosphate fertilizers and ammonia by 27% and 24%

respectively. However, average realized prices for aluminium remained flat and gold prices improved significantly by 20%.

The impact on profitability from the decline in sales was partially offset by a 10% reduction in cost of sales due to lower raw material prices coupled with the effects of the group’s ongoing initiative to reduce operating costs. Even though Ma’aden has increased its sales volumes in phosphate and gold, its various cost saving initiatives led to a drop of 18% in selling, marketing and logistic expenses, 24% drop in general and administrative expenses and a 66% drop in exploration and technical services expenses.

Increase in borrowing costs is notably due to the increase in SIBOR/LIBOR interest rates, which has impacted the net income due to finance charges rising by 87% as compared to the same quarter last year.

Overall, despite the weak pricing environment for some of its products, Ma’aden demonstrated its ability to achieve operational excellence through its continued increase in production and reduction in costs. These efforts continue with further initiatives underway focused on achieving a significant improvement in cash flows over the coming quarters.

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Saudi Arabian Mining Company (Ma'aden)

Consolidated interim results for third quarter and nine months ended September 30, 2016 Page 2 of 5

Production highlights

 Ma’aden made progress in increasing its production and optimizing its costs while operating at design capacities across the entire portfolio:

 708 K tonnes of ammonium phosphate fertilizer, up by 3% y-o-y

 312 K tonnes of ammonia, up by 23% y-o-y

 216 K tonnes of primary aluminium, up by 2% y-o-y

 57 K ounces of gold, up 33% y-o-y, Project highlights

 Wa’ad Al Shamal (WAS) construction work continues to progress well and the first plant, for the production of ammonia, has completed construction and commenced trial production on September 6, 2016

 The Al-Ba’itha bauxite mine and the alumina refinery started commercial production on October 1, 2016

 The Rolling mill continues to steadily progress towards achieving commercial production

Operations Phosphate

During Q3 2016, Ma’aden produced 708 K tonnes of ammonium phosphate fertilizer and 312 K tonnes of ammonia, an increase of 3% and 23% respectively as compared to the same quarter last year. In Q3, Ma’aden sold 672K tonnes of ammonium phosphate fertilizer and 151 K tonnes of ammonia (external) sales, an increase of 7% and 14% respectively, as compared to the same quarter last year.

The increase in production and sales volume is largely attributed to the reliable operations base and the continuing optimization of Ma’aden production facilities.

Aluminium

The aluminium smelter continues to operate above its design capacity and is currently regarded as one of the most efficient smelters in the world. During Q3 2016, the Company produced 216 K tonnes of primary aluminium, an increase of 2% and sold 203K tonnes of aluminum with a decrease of 4% due to the increase of production on the last month and transferring it to inventory, as compared to the same quarter last year. The increase is mainly due to increased production efficiency and higher volumes from the recycling facility.

The bauxite mine at Al Ba’itha and alumina refinery at Ras Al Khair achieved a major milestone with the achievement of commercial operations on October 1, 2016, this is an important step in completing Ma’aden Aluminium’s integrated value chain from ‘mine to metal’. The Alumina refinery is operating well and achieved up to 90% of its nameplate production capacity during the third quarter 2016.

Rolling mill operation continues to ramp up production and is making solid progress in penetrating the market for can sheets in the Middle East region and beyond..

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Gold and copper

Production and sales of gold during the quarter increased by 33% to 57 Koz compared to the same quarter last year. This was mainly due to new volumes from Ad Duwayhi mine which was commercialized on April 1, 2016.

In the coming quarters, Ma’aden expects to increase production at Ad Duwayhi averaging 180,000 ounce per year capacity during the life of mine, while further reducing the cost per ounce.

Production at Jabal Sayid is progressing very well with 6 of the 10 planned copper concentrate shipments for the year having already been completed. Jabal Sayid produced and sold 9.9 K tonnes of copper in Q3 2016 since the commercial operation at copper mine began on July 1, 2016

Wa’ad Al Shamal project

Wa’ad As Shamal isprogressing well towards the completion of its construction and the first plant in the complex, for the production of ammonia, completed its construction ahead of schedule and started trial production on September 6, 2016.

Sales summary

Particulars Q3

2016

Q3 2015

% change y-o-y

Q2 2016

% change

q-o-q

Nine months 2016

Nine months 2015

% change

y-o-y Phosphate business

Ammonium phosphate

fertilizer (‘000 tonnes) 672 627 7% 705 -5% 1,975 1,887 5%

Ammonia (‘000 tonnes) 151 132 14% 154 -2% 511 318 61%

Aluminium business Primary Aluminium (‘000

tonnes) 203 212 -4% 207 -2% 644 612 5%

Precious and base metals business

Gold (‘000 ounces) 57 43 33% 63 58% 160 123 30%

Copper (‘000 tonnes) 9.9 - - - - 9.9 - -

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Consolidated interim statement of income for the quarter ended Sept 30, 2016

SAR (millions)

Sep 30

% change

Jun 30

% change

Nine months

% change 2016 2015 y-o-y 2016 q-o-q 2016 2015 y-o-y

Sales 2,316 2,542 -9% 2,546 -9% 7,135 8,297 -14%

Cost of sales -1,806 -2,018 -10% -2,005 -10% -5,587 -6,391 -13%

Gross profit 510 524 -3% 541 -6% 1,549 1,905 -19%

Selling, marketing and logistics expenses

-96 -118 -18% -114 -15% -298 -354 -16%

General and administrative expenses

-81 -106 -24% -88 -8% -233 -326 -29%

Exploration and technical services expenses

-12 -37 -66% -12 2% -34 -103 -67%

Write-off of plant and equipment

-14 -8 69% -1 - -15 -8 82%

Operating income 307 255 20% 326 -6% 969 1,115 -13%

Share in net loss of jointly controlled entities

-31 -16 98% -15 107% -71 -52 36%

Income from short-term investments

42 7 514% 44 -5% 113 29 291%

Finance charges -208 -111 87% -198 5% -561 -340 65%

Other expenses, net -5 -3 64% 2 -369% 0 42 -99%

Income before zakat 104 132 -21% 159 -35% 450 794 -43%

Zakat expense -8 -10 -20% -17 -54% -27 -24 10%

Net income 96 122 -21% 142 -32% 423 769 -45%

Net income attributable to:

- Shareholders’ of the parent company

84 80 5% 132 -37% 385 611 -37%

- Non-controlling interest 13 42 -70% 10 26% 38 158 -76%

Earnings per share (Saudi Riyals)

0.07 0.07 0.11 0.33 0.52

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For further information, please contact:

Ma’aden Investors Relations

Walid Al- Hakim, Head Investor Relations Tel: +966 11 874 8123

[email protected]

About Ma'aden

Saudi Arabian Mining Company (Ma'aden) was formed by Royal Decree in 1997 to facilitate the development of Saudi Arabia's mineral resources and was originally wholly owned by the Saudi Government before 50% of its shares were floated on the Saudi Stock Exchange (Tadawul) in 2008. Initially Ma'aden's activities focused on expanding its active gold business which now includes five mines and over 15 million ounces gold resources. Ma'aden has also developed its activities beyond gold with the development of Ma'aden Phosphate Company, Ma’aden Aluminium Company and Industrial Minerals. A number of projects are underway to make Ma’aden the third pillar of Saudi Arabia’s economy. For more details visit us at www.maaden.com.sa.

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