Maaden to decide on Waad Al-Shamal phosphate 3 plant in 2020: CEO

Saudi Arabian Mining Company (Maaden) will take a call on the construction date for the phosphate plant of the third phosphate facility at Waad Al-Shamal next year, Darren Davis told Argaam in an exclusive interview.

"We are still evaluating when we are going to start building phosphate part of phosphate 3. We have said we will have phases over a period of 2025 and that’s still our basic plan. I think during 2020 we will decide on when the first phase of that will start to be constructed," he said on the sidelines of the annual GPCA Forum in Dubai.

However, the ammonia component of phosphate 3 project has been under construction for a year and is on target, schedule and budget, he added.

Currently, the second phase of the Waad Al-Shamal phosphate project is running close to design capacity.

Reducing Debt

Asked how the company was looking at reducing its debt, Davis said they were sticking to their repayment schedule, but the aim was to improve profitability and cash flow in 2020 to reduce its leverage ratio.

"We will just focus on producing more, keeping our cost down and generating more cash that will help us to pay down our debt," he stated.

He further added that the company will generate more cash as the ammonia 3 plant and the under-construction gold processing facility in the Kingdom will come online in late 2021.

While Maaden has taken a very small amount of debt for the above two projects, Davis expects average leverage to come down on both debt-to-equity and net debt-to-EBITDA basis, more rapidly over the next five years.

Seeking investment opportunities

In terms of expansion, the Saudi mining major is actively looking for investment opportunities globally, particularly in Africa, to complement and strengthen its domestic commodities business.

“We will continue to look at opportunities in phosphate such as Meridian Group and have more exposure to copper since it takes time to develop it domestically due to the exploration, development and construction cycle,” he explained.

Commodity prices

Given the global economic uncertainty, Davis said the biggest challenge for Q4 2019 and 2020 was to ensure operations were functioning as efficiently as possible and to maximize production from all its facilities.

Phosphate and aluminium prices were passing through a down cycle, the CEO said, adding that the business segments were still making money.

He, however, ruled out any price recovery in aluminium in the next 12 months, citing oversupply from China, a slowdown in Chinese demand, and growth and general economic uncertainty.

“We are optimistic that we will start seeing some recovery later in 2020 in phosphate prices but we don’t see a big bounce back. So the recovery will be from pretty low levels back to more modest levels not like we saw in 2018,” Davis concluded.