LONDON: Saudi mining company Ma’aden cheerked the market on Thursday with first quarter figures significantly ahead of analyst expectations, sending the Tadawul-listed stock 2 percent higher.
Gold was the standout feature as production rocketed to 118,000 ounces, up 70 percent year-on-year — a quarterly record.
It has been a good time to lift production of the yellow metal, seen as a hedge against global geopolitical uncertainty.
Group net profit surged over 120 percent in the first three months of 2018 against the same period in 2017, and sales were up 32 percent.
“By continuing to generate greater production from our assets whilst maintaining pressure on costs, we were able to capitalize on the generally positive commodity price environment,” said CEO Khalid Al-Mudaifer.
Ma’aden, which mines gold, copper, aluminum and phosphates — all at sites in Saudi Arabia — is ramping up production across many of its operations. Investors have piled into the shares, which trade on 25 times forward earnings making them highly-rated, but relatively expensive.
The company’s portfolio includes a joint venture with Barrick Gold of Canada.
In an interview with Arab News, Youssef Husseini, mining analyst at broker EFG Hermes in Cairo, said: “These results are exceptional with the cost profile impressive after a cost-cutting program — the margin came in 400 basis points up from where we thought.”
Al-Mudaifer pointed to a 36 percent increase in earnings before interest, tax, depreciation and amortization (Ebitda), a key market measure.
Ma’aden’s new phosphate operation at Wa’ad Al-Shamal was said to be progressing well as was the next phase of growth at its largest ever gold mine, the “Mansourah Massarah project”. An investment decision on further expansion was expected in the second quarter.
Commodity price volatility was forecast to be a feature of 2018 “but as the first quarter results show, we are well placed to deliver strong profitability built on the basis of strong underlying trends in our core commodities,” said Al-Mudaifer.
The only potential fly in the ointment, said Husseini, was the possibility of higher energy costs if Saudi Electricity upped its charges before the year is out. “We shall have to wait and see,” he said.
Al-Mudaifer said the first quarter saw a drop in the price of aluminum but the price trend remained favorable compared to 2016 and 2017 and “we continue to believe in the long-term fundamentals for this metal.”
He added: “Phosphate prices remained robust as did gold and copper although the latter dropped slightly in the quarter after a year of solid gains in 2017.”
Cash generated from operations was SR543 million ($144.7 million); a decrease of 28 percent compared to the first quarter of 2017, primarily due to increased working capital requirements, said the company.
Ma’aden’s liquidity position remained strong with cash and equivalents topping SR6 billion.