AMAK CEO forecasts decline in zinc ore prices

Yahya AlShangiti, CEO of Al Masane Al Kobra Mining Co. (AMAK)

Yahya AlShangiti, CEO of Al Masane Al Kobra Mining Co. (AMAK), expects a decline in zinc ore prices, depending on international prices, noting that the copper, zinc, and gold production would increase.

He told Argaam that copper sales fell by 1% year-on-year (YoY) in the second quarter of 2023. Meanwhile, gold sales rose by 6% YoY, as gold prices depend on international prices, which will reflect positively on the company's performance.

Commenting on AMAK's Q2 2023 results, the top executive said the profit decline was due to lower copper and zinc prices, as well as decreased copper and gold sales. This was also attributed to the higher cost of sales due to a surge in amortization and raw material expenses, along with a rise in general and administrative (G&A) expenses as a result of recognizing compensation expenses for the employee stock incentive scheme. This was despite an increase in gold and silver prices, as well as zinc and silver sales.

Further, selling and marketing expenses retreated, while other revenues grew.

Copper and zinc prices fell by 1% and 19%, respectively, which significantly affected AMAK’s second-quarter results, the CEO underlined.

During the second quarter of this year, the company's copper revenues accounted for SAR 86.1 million of the total, marking a 28% drop. Besides, zinc revenues represented SAR 69.1 million of the total, slumping by 21%, while gold and silver revenues constituted SAR 108.2 million of AMAK’s revenues for the quarter, down 4%, he continued.

Touching on the capital increase, AlShangiti said the move is aimed at supporting the company's financial position to achieve its expansion and growth strategy by seizing the investment opportunities in the mining sector. AMAK obtained several exploration licenses during 2022 and 2023 and is still studying them.

AMAK reported a net profit of SAR 43.5 million in the first six months of 2023, a drop of 47% from SAR 82.2 million a year earlier. In Q2 2023, net earnings plunged by 74% YoY to SAR 10.6 million, according to data compiled by Argaam.

Q. How do you see these results?

A. The profit decline in Q2 2023 was due to lower copper and zinc prices, a pullback in copper and gold sales, as well as an increase in the cost of sales due to higher amortization and raw material expenses. This was also attributed to an uptick in G&A expenses due to recording compensation expenses for the employee stock incentive scheme.

This was despite a jump in gold and silver prices, as well as zinc and silver sales. Selling and marketing expenses tumbled, while other revenues edged up.

Q.   How much are the company's revenues from copper, zinc, gold and silver during the second quarter?

A. Copper and zinc revenues reached SAR 86,074 and SAR 69,074, down 28% and 21%, respectively. Meanwhile, gold and silver revenues rose 4% to SAR 108,179.

Q. What about the decline in copper and zinc prices?

A. Copper and zinc prices decreased by 1% and 19%, respectively, which significantly impacted the company’s results. 

Q. What are the sales volumes of copper and gold compared to Q2 2022 and Q1 2023? 

A. Copper sales volumes edged down 1% YoY. It is worth noting that gold sales grew 6% YoY.  

Q. What are forecasts for gold prices, and how gold prices will impact AMAK’s performance? 

A. Gold prices track global markets. This will be in direct proportion with the company’s performance.  

Q. What are the reasons for capital hike, and what are the opportunities eyed by AMAK to enter the mining sector? 

A. The company aims to boost its financial position and deliver its growth and expansion strategy by seizing investment opportunities in the mining sector. We received several exploration licenses in 2022 and 2023 and opportunities are still under study.  

Q. How do you see AMAK’s performance in Q3? 

A. Zinc ore prices may slip depending on global prices. For production volumes, we expect a good output of copper, zinc and gold.