Maaden’s profit margin guarantees sufficient cash flows: CEO

Despite the losses realized by Saudi Arabian Mining Co. (Maaden), a 27% profit margin guarantees sufficient cash flows to fulfill the company's obligations for the existing projects or suppliers, CNBC Arabia reported citing chief executive, Mosaed Al Ohali. 

He said that the company’s results were hit by the global economic conditions driven by the coronavirus outbreak and weak demand, affecting phosphate and aluminum prices that are still at the bottom of the cycle. 

Commenting on the rise in gold prices, Al Ohali said that cash flows from gold help the company continue investing in the sector and expand its production base. 

Maaden intends to inject SAR 100 million in explorations during the current year, he indicated, attributing higher operating expenses to the company's increased exploration activities – the driver for boosting production of gold, copper, zinc and other minerals. 

“Prices are subject to market conditions and the economic cycle, while the factor that could be controlled by the company is costs. We are in a good position in terms of costs compared to competitors.” the CEO stated. 

Maaden is able to control costs through its raw materials mine, inputs, and proximity to consumption areas, in addition to the company's ability to operate assets at full capacity. 

Maaden focuses on cutting or rationalizing fixed costs, Al Ohali said, indicating that the company is working on a mega project to establish a joint services unit and update the information system that will help raise employees’ productivity. 

The project will cut operational costs  and improve the company's performance in procurement and project management. The project’s impact on cost will be realized starting from H2 2021 after completion. 

He added that the company is witnessing an improvement in aluminum prices recently. Fertilizer prices also have improved but not at the same level of aluminum, Al Ohali noted, expecting the second half of this year to be better than the first. 

According to the data compiled by Argaam, Maaden widened losses to SAR 787.4 million at the end of the first half of 2020, compared to a loss of SAR 370.9 million during the same period in 2019.