Maaden to benefit from sanctions on Rusal: report

SICO Investment Bank said Saudi Arabian Mining Company (Maaden) is set to get a 'big boost' in earnings, as the company is likely to sell 350kt of excess alumina, following market deficit and sanctions on Russia's Rusal.

The Russian aluminum giant, Rusal, was included into a sanctions blacklist as of early April. The sanctions have largely cut the company off global markets, scared off suppliers and customers, and impacted on metals prices.

"For Maaden, as an integrated producer, any increase in aluminium and alumina price flows directly into earnings. Every $100/ton increase in price adds over SAR 230 million to Maaden’s EBITDA," the bank said in a report today.

“Recycling business is likely to benefit from a rise in spreads,” it added.

Additionally, Maaden Rolling Co.’s (MRC) could see more business traction from end users seeking cost stability and supply assurance. MRC gains from its single location, low-cost capacity over its peers.

This should potentially mark an end to asset impairments at MRC, SICO noted.

Other commodities in Maaden’s portfolio are also firing with the Q2 2018 phosphoric acid contract settling at $760/ton, the highest price since Dec. 2015 as per SICO's estimate.

The mining firm also benefits from an increase in copper prices and favorable investment in gold, given the expected inflation and geopolitical issues.

Meanwhile, SICO revised its short-term rating to “positive” from “neutral” but maintained the stock’s fair value at SAR 42.