Saudi Arabian Mining Company (Maaden) (1211) Earnings Call Transcript & Summary

Good day, and welcome to the full year earnings presentation call. Today's conference is being recorded. At this time, I would like to turn the conference over to Frederik Michaelsen. Please go ahead, sir.

Welcome to the Fourth Quarter and Full Year 2020 Earnings Call. Just a quick disclaimer, the presentation contains forward-looking statements, which involve inherent risks and uncertainties. Therefore, please do not place undue reliance on these statements. The full disclaimer is on Page 3. I'm here with our acting CFO, Yaser; and our CEO, Mosaed. I hand over now. Thank you for joining.

Good afternoon, good morning, and good afternoon to everybody. Again, I am really pleased to have a chance to engage with you in this quarterly and, for the same time, year-end full year 2020. We always value these engagement sessions. It's a time for us to talk with you about the stuff that we are doing, the accomplishments that we are doing as well as the challenges that we are facing and, hopefully, get out of it with building confidence -- confident relationship between us. We value the function that you guys do for the stakeholders, the investors, the societies we operate with and this whole respect of the stakeholders. And so we've added this engagement, and we always look for opportunities to improve it. Our first slide is regarding 2025 strategy. This is basically the -- in the -- I mean, starting page that we always start with it. And it summarizes in -- I mean, in a way, what is it that Ma'aden does? So first, yes, we want to run projects with operational excellence, with capital excellence and commercial excellence. So our projects must be run successfully and create financial details. It creates, of course, a benefit to the investors, creates benefits for our employees, create benefits for our societies, et cetera. So that's our first pillar, is value creation. The second thing is we are -- I mean, we take confidence in the fact that we are operating in Saudi Arabia. Our government has invested heavily in Ma'aden, and our -- one of our major objectives is to create value within the Saudi Arabian context. And so we look at our GDP, Saudi Arabia GDP contribution and diversification of income. We look at our job -- ability to create jobs, direct and indirect jobs. We look at our ability to drive local content in our supply chain. So local content from where we purchase services and materials and local content where we actually provide material to provide the products and services in the downstream. This positioning of ourselves as a national mining champion has really done -- helped us quite a bit because to the extent that we are fulfilling this role successfully and we have been fulfilling this successfully, we continue to enjoy the government's support. The other thing is in the global presence. So one, our routes in Saudi Arabia, so far, in Saudi Arabia, but of course, our reach goes globally. We market our products in all the continents and a huge number of countries. And we would like to strengthen our presence in the global theater. And normally, we don't look at ourselves as just seller of projects. We do this, but in addition to it, we also provide solutions to the sectors as we said. So in the food security, we support the agricultural piece of it. And we try to functionalize our projects so as to provide targeted solution to our customers. And to a lesser extent, we do the same thing in aluminum and gold. And last but not least, we recognize that we are operating in an environment that needs to be protected, Mother Earth need to be protected, and so we need to make sure that we are, I mean, very responsible with our safety performance, mission performance, energy performance, resource utilization, recycle, protection of the marine life and all these things that creates sustainable life on earth. So these are the areas where we play. It's profitable projects and business, creating value within the Saudi context, operate in a global theater and being environmentally and socially responsible. Next slide is our growth history. When we went into the IPO, the initial public offering, in 2028 (sic) [ 2008 ] until now, our growth has been 36%. Really, really tremendous and very admirable. And we would like to continue with our growth trajectory. And 36% annual growth is a tough thing to do, and it is inherent in man that has the corporate capabilities that allow us to manage this as we go forward. Next is we're always focused on the value we create to our investors. And the value is traditionally expressed in 2 ways: dividends and capital appreciation of the stock. We haven't been doing a dividend distribution for a very, very good reason. And that is to basically fuel our growth. You know that we are heavily leveraged, and so in order to support the 36% growth, we have gone into quite a bit of borrowings, which comes, of course, with the financial burdens, plus our growth. And so we have not made dividends, but our capital appreciation has really done fantastic. And the combination of the 2, we calculated as the annualized return since the IPO, we offered 9.2%. You look at Saudi Index of 2.4% and the other mining giants and pure players, we've done really well in this space. Next is our fundamentals. We look definitely at our safety performance. We take our safety performance very seriously. And what you saw here is the total recordable incident rate. And what we have is our own history, we look at our own direct people and we look at our contractors. And we are very proud of keeping our injury rates in such a low level. Compared to the benchmark on the right, you can see where Ma'aden is doing. We don't lose cognizance of the fact that at the beginning of 2020, we did have a couple of fatalities, which is extremely serious. And really, that has been, I would say, a turning point in our safety performance. And we have taken tremendous effort to ensure that we understand where the 2 fatalities happened and how to prevent that from happening. And at the end of the day, it revolves in 3 things: organizational effectiveness, maturity of management systems and leadership effectiveness. And we're working on all of these and pleased on the results we are achieving. Second slide is to give you a flavor of our environmental and sustainability focus. So we look at 4 KPIs. We look at water consumption intensity and water conservation. That said -- we're trying -- we're building history. You look at 2019 versus 2020, that reflects certain operational events in our gold business, especially on the heap leach structures that has caused an increase in water consumption. That's something is in our focus. And as we move forward, we would like to have programs and investments that keep our water consumption intensity in check. Energy intensity is also very important. And over there, we are going in the right direction between '19 and '20. And CO2 emission is very, very important. In addition, we also have a recycle resource -- conservation and recycle. That is also going to be added in our talk. Well, of course, the talk now is COVID-19. It's very, very challenging for everybody. Business communities and governments, everybody. And we look at here at our overall infection rate, we keep it very low in-check. You look at November, it was a peak that happened in a couple of our camps in remote areas in our minds. This opportunity, this -- or I mean, breakouts, always learning opportunity for us in strengthening our control on carbon containment. I mentioned in the past, our containment strategy is based on 3 pillars. It's to protect. And so that's protecting our people and contractors. And we use a number of things to help us with protection. The mask -- the infection is so -- the physical distancing, what is called social distancing because, socially, we are not distancing ourselves, but it is physical distancing. Checking terminal channel, people coming into our territories and our workplace, et cetera. And so that is first pillar. It's protection. And the second thing is detection, making sure that we have a good scanning program for everybody that comes in our place. And with that, it is in our workplace or in the camps, residential camps. As I said, one is, of course, quarantine, isolation if someone is exposed or has met with someone who is exposed. You can see from the history that has helped us quite a bit in maintaining low infection rate. I'm very proud to say that we -- I mean, people working in our facilities, working home. We have not had the need to ask people to work for from home, except if someone goes on vacation and then he or she wouldn't be able to come because of travel restriction, so we ask people to [indiscernible]. Going into the financial results and operating results. I'm really very pleased with the results we have accomplished in '20 in the fourth quarter last year. It shows the inherent strength of Ma'aden model. I have always mentioned to you that the key to our success is we're sweating the assets as hard as we can. And at the same time, taking close as much as possible without compromising our fundamentals, without compromising our people, health, safety, security and environment. And the last quarter was a good demonstration of this where we, our production and our volume was in check. Our cost was in check. And we benefited from the uptake on the prices. And that has really helped us quite a bit. And while I talk about asset, sweating the asset, and maybe we will talk about, more about it in the next few slides that we also remain cognizant that we have an open switch in Ma'aden management. And it's something we're not operating at capacity, but something we have a full project to work on the deficiencies there and the gaps, so we can achieve the full capacity in the target TAM. So if you look at our financial performance, sales was SAR 5.5 billion in the fourth quarter, up 19% from the previous quarter. Some of it is due to the prices except gold, but a good piece of it also is coming from [indiscernible]. And that's what we want to do is look at the thing that we control, that is the sales volume. This is what I call sweating the asset and benefiting from the prices when they swing up. The EBITDA was SAR 2 billion, 36% from previous quarter. Net profit is SAR 617 million in reporting quarter, compared to a net loss of SAR 100 million in the previous quarter and SAR 430 million loss in fourth quarter '19. Tremendous capacity to generate cash, 2.1% -- sorry, SAR 2.1 billion. And working capital stood at SAR 4.1 billion, which is down 16% quarter-to-quarter. I think we will also have more room to go on our working capital. The interesting thing is, in the next slide, is -- I mean, it's interesting for us but, also, I think interesting in the investment community because we became way better than what the market was expecting. So we have Aljazira, we have Arqaam, we have Bank of America, Citi, EFG, Falcom and others. And you can see that we really have done better than the expectation, which I think says to me is that we need more -- the investment community need to be more -- I mean, familiar with Ma'aden and Ma'aden business model and with our business, in general. And so I have inspected our investor relationship departments to work harder in further engagement with the investment community, so that you have a good or at least a reasonable view on what we are doing and the benefit, the value we create in the businesses we are doing. In terms of production, phosphate reduction was 6% year-on-year. And in the fourth quarter was about 5% down. Ammonia production was down 3% year-on-year, mainly due to operational issues, and it has to do with overall maintenance of the plant. Alumina production was low, again, because of the operational issues, mainly with our steam systems in the refinery. Alumina production. Flat rolled products. The flat-rolled products is the area of focus for us because we are operating at lower than capacity. We move -- flat rolled products goes into can sheets, can covers and auto sheet. We need to strengthen our focus on how much of our flat rolled products goes into the high end of the products, that is the can covers and the auto sheets. We are working very good the progress. We have made the qualification with 2 OEMs, major brands, current OEMS, and that's going to help us go into achieving full capacity. Gold was 90, and the reduction is only stripping. And the amount of stripping that we are doing now, which is a catch-up from the previous years that we didn't do as much certainly as we should have. Full year performance. Our sales, SAR 18.6 billion, 5% versus 2019, mainly due to higher volumes sold except for alumina. Alumina is a side product. It's not one of our refinery products. EBITDA is SAR 5.6 billion, 1% above 2019. Net loss is SAR 0.85 billion compared to a net loss of SAR 1.5 billion, a tremendous improvement in our net profit performance. And cash is SAR 4 billion, 20% above 2019. And working capital more or less is still the same. And I mean so these are summarized as far as analyst forecast, we've done better than the general market expected us to do. Production update. I mean it's the same more or less on the year-end. So we have production is, on the first, ammonium phosphate is more or less the same. By the way, this 5.1 million tonne of phosphate for the MPC, it is above the design capacity. And as I mentioned for Waad Al Shamal, it's below the design. Ammonia 4% up. Aluminum production 5% up. Alumina production is more or less stayed the same, 1.7 million. Flat rolled products is 3%, above 2019. This product has been more impacted by COVID than the other products. And so 303, we could have done better if it wasn't for COVID. Now we are learning more how to deal with the COVID situation, number one; and number two, driving into more applications with regard to the can covers and the auto sheets. Gold production was essentially on the same as we've done in '19, and same, copper production is 14%. With the copper production, we are leveraging the performance of our MPCC so it's Ma'aden-Barrick phosphate metal company, it's our joint venture with Barrick, and we see a production increase here. Prices, mostly unfavorable. So we look at phosphate and ammonia, did 10% since the middle of last year, and we are seeing prices strengthening, and we expect them to continue to strengthen. Also where they are now, you look at ammonia as at the level of $240 and you look at the ammonium phosphate, it's -- this level is is just shy of $300. We are seeing now better prices in the market and significantly better prices in the market. And we hope that this recovery would be sustained unless the COVID-19 pandemic comes -- I mean, turn it around. But with the help of the vaccine and with the Biden U.S. Presidency, I think we're seeing -- we're going to see a little bit of stabilizing, I mean, geopolitical stability that will help the market recovery together with the vaccines, more vaccines available and with the track record in the vaccines. So we're seeing, at least in one case, second-generation vaccine coming. So that should help. Alumina and aluminum go in the right direction, definitely with the aluminum reaching new highs, north of $2,000 per tonne, mainly driven by the -- again, the geopolitical stability, the expectation for China as well as the weakening of the dollar. Alumina is, as I said, for us, it's a side product. And prices should grow -- should increase in alumina. And then last but not least is gold. Gold is seen as a safe-haven, and I'm not an expert in all of these stimulus packages and the market equity and debt market and the technologies. But I think there is enough credit risk in the economy, global economy, that the investors will continue to look at gold as a safe-haven for some time to come. And so we expect it to stay in this $1,800 per ounce for some time and, hopefully, possibly 2021, helping us with our financials. And copper goes -- copper actually is looked at as a leading indicator on the global market recoveries. And so what we see here is the prices coming from $5,000 in the middle of last year, and now it is almost touching $8,000 is a good indicator that there is a more sustainable global market recovery. That's what I want to say, and then I'll turn it to our acting CFO to cover more specifics.

Thank you, Engineer Mosaed. Good morning, ladies and gentlemen. I will shed some lights on the key financial results. I will start with the Q4 first, then I will compare year-on-year. So on our Q4 consolidated key financial results, let me start. It's good to start saying, it's a record service for Ma'aden for this quarter. The record sales is actually due to 2 reasons. The CEO just mentioned the higher sales that we definitely enjoyed in the Q4, the sales -- the prices rebound started on September. So Q3, we can see the improvement started. But in Q4, the full 3 months benefited from this improving prices. He also -- the CEO also mentioned that in Q1, we are seeing better prices. So we hope that, inshallah, this will continue. In Q4, we see around 15% increase in prices from previous quarter. That's a major increase. And that shows how sensitive Ma'aden is also to prices. We have worked on the volume also. So the volume increase also have contributed to these record sales. The EBITDA also, as a result of the increase in sales, we also have record EBITDA for the quarter, over SAR 2 billion, 36% over previous quarter. From the EBITDA to the operating profit, as you know that we, Ma'aden, have built huge assets, around SAR 80 billion of assets we have. So we have a high depreciation amount, SAR 1.2 billion for the quarter, that brings our EBITDA to an operating profit of SAR 844 million. If we also consider the finance costs of over SAR 200 million for the quarter, although it is a major decrease due to the SIBOR and LIBOR decrease, we have SAR 217 million compared to a finance cost of SAR 540 million in Q4 '19. So that's definitely a major contributor to our profitability in this quarter. The finance cost brings us to a net profit of SAR 617 million, but attributable to Ma'aden shareholders is SAR 572 million, which is 0.46 -- or SAR 0.46 for the earnings per share. On the second -- on the second slide, the net profit bridge comparing Q4 with Q3, SAR 617 million to a loss of SAR 99 million in Q3 '20. It shows the both contributor, which is the price effect and the sales volume effect. So maybe there was a drop in prices, but margin continuing to work on sweating the assets, as mentioned by Engineer Mosaed and this is -- shows now on our net profits. What's good to mention also in this slide that even the minority here has turned to a positive this quarter, which always are a good sign that all our assets now is contributing to the profitability. If we compare the Q4 '20 to Q4 '19 in this bridge, the major contributor here is the price. We can see over SAR 550 million coming from prices. Sales also contributed and also finance costs. On the EBITDA by segment and the consolidation, right, this record consolidated EBITDA in this quarter is actually from better EBITDA in the phosphate business and aluminum business. Prices improved. Volume also improved, but unfortunately, we see some lower gold EBITDA here due to prices decrease on a quarter-on-quarter and also some volume decrease, as mentioned earlier, for the stripping of waste that will be, inshallah, benefiting the Ma'aden in the near future. In this slide, we see the EBITDA and EBITDA margins per quarter. If you allow me to go to 2018, where we have seen 55% of EBITDA margin, this is something not able to update. The margin that we see now is actually with all our assets in operation level. In 2018, 2 major of our assets was in actually project phase. So that's why we have enjoyed the margin of the ammonia without really having the cost of sales of that. So when we talk about the 36% and the 32%, we see the real improvement in our EBITDA margin. Finally, I would like to talk on the cash flow quarter -- compared to -- or for Q4. The cash flow for this quarter was actually very healthy. We have generated SAR 2.1 billion from operating activities. And we were able really to cover the investing and financing activities for the quarter and, also, around SAR 600 million added to our ending balance. Moving to compare 2020 full year with 2019 and starting with the sales. And it's also a pleasure to say it's a record sales also for the full year. And this is definitely coming from the volume. The increase in volume really was contributed to this record sales because from price point of view, 2020 as an average, right -- we said Q4 has increased but, as an average, still lower than the average of 2019 price. EBITDA, again, slightly improved. Full depreciation of SAR 4.8 billion brings us to operating profit of SAR 811 million. Now our operating profit is actually only 8% lower from last year. But the lower finance cost actually helped us in reducing our net losses. What's attributable to Ma'aden shareholders is SAR 209 million losses. SAR 0.17 earnings per share, negative. On the next slide, we compare the net losses of 2019 to the net losses of 2020. We can see the -- how the sales volume contributed to a reduction of our net losses although we have a price effect of around SAR 550 million negative. Finance costs also, as mentioned earlier, is a major contributor here. On the consolidated EBITDA, only 5% compared to last year, as I mentioned earlier, coming from the volume, the -- in the phosphate side, we see sales has improved, but the EBITDA is still lower than previous year. On the aluminum side, higher volume, but lower prices. On gold, higher prices and volume, which resulted in an increased EBITDA. On the annual year-on-year cash flow, it's healthy operating activities, cash generation, SAR 4 billion, which all was used in the investing and financing activities, and we have -- we have to use also around SAR 1 billion to cover for these activities. On the financial ratios, on the profitability ratios, they remain at a maybe similar level as both year have a very close effect, except the ROE improved due to improved losses. The efficiency ratios have improved from improved sales, except for the accounts receivable turnover, which is due to higher receivables. The debt coverage ratios improved due to lower SIBOR, LIBOR, causing lower interest rate and also from higher EBITDA. Liquidity ratios reduced due to higher current liability from higher trade payables and accrued expenses. Okay. In this set of slides, we talked about the production and sales per quarter. Actually, the CEO also covered the differences, but this is also to show the improvement in the volume side and deficiency. If we have any deficiencies, mainly if I start with the phosphate, we see that we have improved compared to last year quarter, the MWSPC level of production is improving. We're moving towards the capacity. But in the meantime, we still see some gaps there that the CEO will discuss and clarify in the next slides. Ammonia remains in the same level. Aluminum, also, quarter-on-quarter, shows an excellent improvement. We are improving the -- and increasing the production. And that shows obvious in the aluminum chart. Flat rolled products also improved, although it's continuing the same level up as Q4 2019. As we mentioned earlier and due to higher stripping of waste, we see that there is a reduction on the level of production of gold. And thus, inshallah will be recovered in the next years. The next slide is comparing production and sales year-on-year, and we see slightly decrease in phosphate due to plant reliability in MWSPC. And this is something we've been repeating. But hopefully, inshallah, the CEO will be explaining, right now, what's the plan to close these gaps. In the aluminum production and sales, it's -- obviously, we are reaching above SAR 1 million in production and sales. And that's really from -- a lot of efforts was done in this system. The full year goal is still higher than 2019. We're seeing the reduction started in Q3, Q4. But as the full year, we're still higher in regards to production and sales. With this, I turn it back to Engineer Mosaed to continue this presentation.

Well, we didn't have much left, but I just wanted to give you a preview on our projects. So we have Ammonia III, which is 1.1 kilo tonne -- 1.1 million kilo tonne. And so hopefully, it's a $1.1 billion of investment. It's going on target, we had a little bit of a delay because of FY '19, COVID-19, and a project Mansourah coming in and COVID as well. Looking for towards the end of this year and beginning of next year for a start up. Our Mansourah-Massarah gold project is expecting to add a 0.25 million ounce of gold per annum. It's $880 million budget. We had a little bit of a delay because of the COVID-19 impact. Next -- middle of next year, we should start seeing results coming out. Phosphate 3, that's our big projects. Hopefully, we'll add 3 million metric tonnes of phosphatic fertilizers, looking at the budget to about $4.2 billion on completion. I think this completion is very optimistic. I don't think we're going to get into that time frame. So it's basically pushed a couple of years beyond to 2025. And remediation at Waad Al Shamal, this is the -- which will achieve the full capacity of Waad Al Shamal. And looking at -- starting the benefit of this is starting to grow this year and full realization and actually exceeding the design capacity by 2025. So most of the benefit we will get this year and next year. And then it will be around -- towards higher than design capacity. 4.1, financial facility. I think there must be a type of view. This must be a type of view. There is no need for [ 4 ] billion financial facilities. This project is going to be completed on our own cash flows. So this is inaccurate. Okay. I think we're ready for the Q&A now.

Operator?

[Operator Instructions] First question comes from Ebrahim Alshamasi from GIB Capital.

Congratulations on the set of results. I have a couple of questions regarding, first, gas prices. I think you have a grace period in the gas prices on the aluminum segment. When this grace period will end? This is the first question. The second question is regarding DAP pricing. Now we can see any global DAP prices, especially in the U.S. and China reaching $550 per tonne. And if we look at the Moroccan DAP prices, it's at $360. Where Ma'aden stands in terms of DAP prices? Is it close to the U.S. and China price or the Moroccan price? Lastly, on the aluminum segment. I can see that the aluminum segment in Q4 did very well. What is the driver for this scope, yes? Is it the flat rolled product or the primary aluminum? That's it. I think lastly, on Waad Al Shamal. When the issue in Waad Al Shamal will be resolved? Is it this year or should we wait for 2022?

I will take the gas price, the DAP prices, Wa'ad Al Shamal, and then Yaser will take the Aluminum segment performance, why it didn't do well. And I think for the gas prices -- for Aluminum, I think -- the price is past the rate -- is past -- and we are operating now without the benefit of the reduced prices. It was for a period of 7 years, and that is behind us. The DAP prices, I take it on that in U.S. it is 550. And we sell in the U.S. and we sell in South America, we sell in Africa and we sell in Southeast Asia. And typically, our realization is in the high end of the market, with regard when you frist freight, we leverage our portfolio and we leverage our market share, we leverage our supply chain and market outreach and the functionality of our projects to drive the best retail for our projects. So if you start with USD 550 million and then you discount that with the, I mean the duties, you discount this with the supply chain, the freight, et cetera, then your value arrive at another FOP in Saudi Arabia. And so as you can see from our financial results, we are enjoying -- I mean we are seeing classic quarter, we have not seen it in the first quarter. But our market realization is just what is in the market, minus our freight and the annual duties. Yes, I again want to share that, this is on the project slide, the last slide we have shown, and this is Wa'ad Al Shamal showed. It says remediation at Wa'ad Al Shamal. So this is the project that will give us the full capacity in Wa'ad Al Shamal. We're going to see a benefit of it this year in achieving the 2.8. Next year, we will see a further accomplishment. And then due to all the 2025, we will achieve a capacity clean arriving at 3.1 million. The design capacity of this asset as that ammonium phosphate is SAR 3 million. Of course, the diammonium phosphate, some of it goes as diammonium, some of it goes into monoammonium phosphate, some of it goes into MPK project. So the design capacity in SAR 3 million will not necessarily -- I mean, when we talk about the production number, doesn't lead to SAR 3 million because the SAR 2 million, again, is on the data coherence. Okay. And on the Aluminum segment? Well, briefly, I would say the improvement actually. Again, it's an efficiency, reliability. The capacity create also additional metal production and CRU molten and the remelt. So it's -- all aspects have really contributed to this improvement.

So if you go to Slide 44.

We'll take our next question from Faisal Al Azmeh from Goldman Sachs.

Congratulations on the strong set of numbers. Maybe just a few questions on my end. Maybe starting off with just understanding the last slide that you went through relating to the project. So first off, just to kind of trying to understand the CapEx outflows relating to Phosphate 3. When do you expect to start construction relating to that project? And in terms of the improvement of the design capacity of Phosphate 2, how much CapEx should we expect to be allocated to that? And then maybe my third question also relating to CapEx. When you look at the first 2 projects that you've highlighted, how much CapEx is still remaining relating to the Ammonia and the gold projects?

Okay. So the -- thank you, for the question. Phosphate 3, seems to be what we have in this slide, is a little bit optimistic. And I don't think we would start -- I don't think we will start the completion in the first quarter '25. We may have to push that a little bit further, a couple of years. And so I would say, at this place, scenario is in 2026. So maybe more realistic is 2027. The -- as I mentioned in the past, Phosphate 3 is dependent on -- one of our objectives is to deleverage and bring our leverage to a situation that allow us to comfortably take the additional borrowing that will be required for Phosphate 3. So we would think that maybe a couple of years, maybe 3 years that we will need deleverage to an acceptable level. Last year, we achieved 5% deleveraging, 7.6 -- 7.7 to 7.6, I think. So right around 5% leverage. And as we look forward, hopefully, we will even accelerate the leverage. And so the cash flow is associated with Phosphate 3, is going to be dependent on where we start. But I don't think we will not have any serious spend on it within this year or maybe next year. That is, of course, I mean, the Phosphate 3 is a very good project. So we may just look at maybe innovative way of financing and, I mean, providing the required capital. That may give us an opportunity to accelerate it into May 2023 timeframe. With regard to Phosphate 2 CapEx, as I mentioned to you, that is something that is within our own cash flows within Wa'ad Al Shamal cash flow. And so we are not going for additional financing to support this project. With regard to Ammonia, we're going to $1 million and the Mansourah-Massarah $0.88 million. I would say that the majority of this spend is committed. I'm not sure exactly how much has been spent. But both of these projects are good. I think the Ammonia project is north of 55% completed and Mansourah-Massarah is north of 30% completed.

And maybe if I could just follow up. Look, when we think about CapEx for 2021, would you say it's a reasonable assumption to assume it would be in the levels of 2020?

Yes. I think it is reasonable. Basically, last year and this year, in all these 2 projects, we have them. And so I would expect this more or less would be very close. We are pursuing at our projects, we are looking at our June project, which is a gold mine and Mahd Ad Dahab, which is another gold mine. We are hoping that we will get up over for these projects within the course of 2022. But that's, well -- the real spending of those will be coming in 2023 and beyond.

And maybe if I can sneak one last question. When you say a certain debt level that you would like to reach, is there a metric in mind in terms of net debt-to-EBITDA that you would be comfortable at before you start borrowing again?

It's difficult to say. We are not comfortable with the huge debt. And as you're comfortable to maintain. So I think it is a bit judgmental. I think the market norm is within the 2.1, maybe 2.5 range. That will be a good comfortable level for us without we wait until we achieve that or maybe ahead of time. I think we will have to see the market performance and our performance and what is happening. I think market norm will be within the 2.1, plus or minus.

We'll take our next question from Sashank Lanka from Bank of America.

I have a few questions. The first one to start with, when I look at the last slide, Slide 48, you mentioned the $4.1 billion of financing facility. And I think you mentioned on the previous question as well that you are going to fund it from internal cash flows. Can you just talk us through how this $4.1 billion CapEx split would be? How much would you be spending this year and next year and so on for this? Because it does seem like a pretty big number to start with.

No. I just want to correct. For the remediation project, we are not taking a facility of $4.1 billion. This is not correct. And so we need to correct this slide. Probably what is referred to here is the refinancing of Wa'ad Al Shamal probably or...

This was in an interview. The interview that we signed that, but this is like for Wa'ad Al Shamal.

So this $4.1 billion financing facility to allow follow-up -- financial facility that is a refinancing exercise that we have done, but it is not for the remediation project. We're are spending much less that $4.1 billion on the remediation.

Okay. Okay. The second question is on Phosphate 3. You say that you expect the phase 1 to be complete by Q1 2025. So is that going to be 1 million tonnes? How are you splitting between various phases because the total plant capacity is 3 million tonnes, right?

Well, yes. The way we are -- I mean, one way to do Phosphate 3 is to do it in 2 phases. Phase 1, half of the capacity, 1.5 million. And another phase of 1.5 million. The advantage of this approach is it reduces the chemical requirement and give us more comfortable management of our cash flow. So it is half of it, which is 1.5 million tonnes. However, I would like to go back to the information I gave, is that, we think that first quarter 2025 is very optimistic. I think probably more likely that it is going to come on the -- domestically 2026 and more realistically, on base case of 2027. And so I think the 2025 is an optimistic, I would say, very optimistic target. Chances are, of course, we're not going to be able to do till that time. This is a huge project and if we are going to meet first quarter 2025, we need to be doing something now. We need to do now more than what we are doing. So the best thing to say is that maybe completion is first quarter 2027.

Okay. And then my last question is, obviously, in the U.S., there has been some tariffs, which were initiated by one of the companies there on Moroccan and Russian producers. So is that helping you in terms of your volumes to the U.S.? Have you seen an uptick in volumes in the second part of last year, especially in Q4?

Yes. I mean, U.S. is, I would say, medium-sized market for us. Our biggest market is in South America, Africa and Southeast Asia. But we do have good -- at least number of volume going into U.S. I think these current duties that we have placed in the Moroccans and the Russians. Yes, they did help. They brought the prices in U.S. higher, and so we benefited from those. Al Ba'itha state -- I mean, U.S. is not one of our major markets for first freight.

We'll take our next question from Anoop Fernandes from SICO.

Yes. Congratulations on a great set of numbers. My first question is on your aluminum volumes. You're operating at almost over 1 million tonnes now. And for our understanding, the design capacity of the smelter is around 740,000 tonnes. So could you please help us reconcile the difference there? Where are the volumes, what's been driving the aluminum volume so high? And if you could give us a more accurate assessment of what the volumes are from the smelter? That is question one. The next question is on your CapEx. There seems to be some escalation in the Ammonia to the project cost. I think earlier, for our understanding, it was about SAR 3 billion. It seems to be above SAR 4 billion right now. And secondly, I see a SAR 2.8 billion capital work in progress on the Ammonia 3 project. Has the entire SAR 2.8 billion being spent? Has there been cash outflow there? Or are there some payables sitting on this project? And the last question is on the mining law, the new mining law. There's a lot of buzz around it lately. How do you see this change the landscape for Ma'aden going forward? Do you see increased competition in securing gold mining licenses on -- especially on the areas that you've already explored, given that the law might be more open to more players coming in? And also your thoughts on uranium. There seems to be a lot of push from Saudi on uranium. Have you been involved in the exploration? And is it a commodity that is exciting you or will you just let it pass to somebody else?

Okay. On first 3 -- the SAR 3 billion. I don't know where the number come from. But these projects, the cost is dependent on the definition. And what do you include in the cost? Probably, when -- what about for this SAR 3 billion, it is probably an old number. And it had maybe a scope on the assets themselves, not including other development costs like the infrastructure, like the owner cost, et cetera. And so I don't know where is the SAR 3 billion coming from. The number we have now is SAR 4 billion in the slide. And that, again, also you have to look at the definition of that. Eventually, when we start -- I mean, it will be more than the SAR 4.2 billion in the whole project. With regard to the Ammonia 3, I've always had this $1.1 billion cost. [indiscernible] core we have announced any different cost estimate. The mining law, we look very, very positively in the mining law. It provides clarity on how licensing and mining businesses are going to be managed in Saudi Arabia. How certain services have to be delivered to the investors and the operators in this sector. It is not a number of pillars, but I can summarize it into 3. One, it gives a much better coverage on the environment, safety and environmental aspects of licensing and mining. Because it gives a clear stipulation on what you need to do and how to make sure that the societies and communities are protected. What you're going to have to do to make sure that the underground waters are protected, what you're going to do when you finish with the mine and how are you going to put it back and rehabilitate the area. So it gives a very good view on how the EHSS, the Environment, Health, Safety and Security aspects are going to be managed. Definitely, mining, exploration and mining, and you see it globally. If those things are not managed right, they can do a lot of damage to the people and to the environment. And the -- it is tough that it happens in regions like South America and Africa and other places. Just a reminder on the importance of doing solid EHSS, Environmental, Safety and Security governance on the mining and it's exploration. So that's one first thing that the mining law does. The second thing is it gives clarity on the procedural aspects of the licensing and mining. So as a licensee -- as an investor wanting to take a license, what are the specific procedures? What is the data that is required? Where do we apply? When do I get a response? And how much I have to pay for the service? How do I have to pay for that service? So it gives a very good clarity on the procedural aspects of the mining. And investors, they love this. Investors, they want to do something. They would like to understand -- they have a very predictable procedure and steps that governs their process. And the same thing it is going to do, it will give -- it will lead to a creation of a very robust geological data base. For investors, they could see, well, what's available in Saudi Arabia? What's the accuracy? What's the probability of it? So I think that they will have a much higher level of confidence in deciding what is it that they want to do, where, investment they want to have in Saudi Arabia. And for us, as I said, it has helped us in all of these aspects. And it has one of the things that it has helped us with regard to the cost of holding a license. If the law says, if you take the license, you have to pay a fee for it. And the fee is reasonable in the first year, it goes up in the second year, it goes up in the third year. And it becomes more painful financially to hold the license. And so that has helped us in kind of looking at our license portfolio. And say, well, what are the -- what are the licenses that we want to keep and which ones that we want to retail. Lastly, on the uranium, I think uranium, to be looked at in the ambition of Saudi Arabia and what Saudi Arabia wants to do on that front. We focus on our portfolio. Our portfolio is in base metals, oxide and phosphate. And we try to get as much financial benefit of this as possible. And uranium is, again, is left to the government.

We have to move to the next question in the interest of time. We're already over running. So we you could take --

Sami [indiscernible] from GIB Capital.

Congratulations on your results. I just have 2 follow-up questions. The first one is regarding Wa'ad Al Shamal. I would like to know all the technical issues are solved? And my second question is regarding the gas prices. You mentioned that the agreement regarding gas prices discounts is expired. So I would like to know if 2020 prices reflect discounts or not. And should we expect no discounts in 2021?

Yes. The Wa'ad Al Shamal, the technical issues are not in specific one location. We have issues on the funding of the project with the remediation. So this is where we take the ore, we crush it and then move it into the processing plant. We also had issues on the utility side and then issues on sulfuric acid plant. We have made a one -- I mean, a success with the utilities. We have power generation and steam generation facilities that was not operating at the right level. We fixed it. And now it is generating a very substantial megawatts of power. That helped us to reduce our intake from the grid significantly. To the extent that, I mean, we -- our intake from the grid is marginal now. And of course, we take big cost advantage when we generate it. We generate power at a fraction of the price we would have paid if we take it from the grid. The gas price isn't articulated in Saudi Arabia. It is $1.25 per million BTU. I don't -- I mean, there has been a lot of discussion over the past several years on energy reform and what would be the -- I mean, the price -- the energy pricing of Saudi Arabia, that's in the hand of the operators. I think looking forward, there has to be a balance between the support of the industry and giving them a good, I would say, package of incentives to support investments and advised investment. But at the same time, making sure that there is a good income coming from the government of all sales of these commodities. I think looking forward, Saudi Arabia has always maintained this excellent efficient balance between incentivizing investment, but in prudent way that continue to help the total economy, creating jobs, diversifying income, but at the same time doing this on a market compliant basis that ensures healthy fiscal revenue coming to the government.

And we'll take our last question from [indiscernible] from ICAP.

[indiscernible] just 1 question at a time please. [indiscernible] I've seen your questions. So one question at a time please.

My question, of course, just to follow up with some of my colleagues. They asked what is the Aluminum capacity right now, the primary aluminum and also the petrol 2 capacity. Can you please give us the 2 capacity numbers?

I think the -- what we're reporting is 1 billion -- 1 million, sorry. And then this actually is connected with the capacity of the smelter of 740, not considering the gas house production and other production. So it's a combination, right, that lead to the over 1 million reduction. The -- in a maybe later follow-up, we can give exactly the reconciliation of of this number, and we compare it to the capacity of 740,000 tonnes of smelter capacity.

Please proceed. Any other questions from you, [indiscernible].

Yes, I just wanted to get to like production cost different between MPC and Wa'ad Al Shamal. What is the cost difference, if you can give me, in terms of tonnage or in the percentage. So we have seen significant differences between these 2.

You're talking about the unit cost?

Yes, unit cost. If you cannot disclose the number, at least the cost difference in terms of percentage.

Okay. Okay. No, we usually don't really disclose the cost numbers. But definitely, the unit cost on MWSPC is higher currently than the MWSPC. MPC actually operate in full capacity. MWSPC is still, as mentioned earlier, we have gaps to close before we reach capacity. We are at around 60% to 70% capacity. So this is definitely affecting the variable -- the fixed cost of the MWSPC and increasing this over the MPC. Thank you.

My question, actually, just to see, even if it is running the full capacity level, Wa'ad Al Shamal will be slightly higher cost compared to MPC, right?

Yes. MWSPC, because of capacity level, is definitely higher than the MPC, yes.

If I may ask one small question again. This is the last question, please. We have seen a lot of companies are like they are just trying to give a primary offering subsidiaries or their separate unit. Do you have like any strategic thinking of like IPO-ing one of your segment, let's say, either MPC or Aluminum segment? Do you have something in that kind of nature in the strategic discussion?

No. No, we don't -- we're not looking at -- we always look at our portfolio and make sure that we have a uniform portfolio that is consistent with our strategy. I think, I look at our total portfolio, probably the one that is -- I mean, a little bit of our [indiscernible] is the MRC, rolling company. And -- but generally, we have a good portfolio, good business, and we don't have any plans to IPO or sell off any of this, not in the short term. And with regard with the previous question, Wa'ad Al Shamal, it was decided that it will be located in the north tip of Saudi Arabia, very close to the border of Jordan. And so -- and it is meant for the development of this remote area. And so you look at the -- I would say, the cost of this whole construction and the running profit is a little bit higher than in the MPC. And so what we have done, we make sure that we have functionalized the product portfolio of Wa'ad Al Shamal with a bigger percentage of functionalized projects with MPK that ensures that we'll continue to generate the same or even better retails on the total investment.

And we have another question from Faisal Al Azmeh from Goldman Sachs.

Yes, maybe a follow-up. Just can you provide us with the breakdown in terms of production in 2020 between MPC and Wa'ad Al Shamal?

Well, if we're talking about production, if you -- I'll download to follow up. Can we go to next question, and I will prepare for this question.

Faisal let us think of the information. Do you have any other questions, but we'll definitely answer. Faisal any other questions from your side? Okay. We'll take the next question and then answer the question you had.

Okay. Well, generally, on this question, I mean, our capacity in Wa'ad Al Shamal -- in MPC is 3 million. And so we are operating at capacity, slightly better than capacity. So you look at total production, you subtract MPC capacity and it is Wa'ad Al Shamal.

But actually...

I did answer. I said, you look at the total production, take out the MPC capacity, which is 3 million.

So you're operating -- so MPC is operating at 100%, and you're saying we take this whole production, subtract what you operate at full capacity of MPC and we'll get Wa'ad Al Shamal. Correct?

I think you'll get a very close number, yes.

Thank you. So that's it for formal question. We have a number of written questions. Do you want to take the next questions? Or shall...

Yes, read them.

Okay. So we have a question from [indiscernible] [ Rana Hamudi ] could you kindly shed some more light on our Wa'ad Al Shamal operating rate? And yes, that's a question from Aria.

Yes. Operating rates, we are -- I think, I mentioned that in the past. I mean, we are in the 70%, 71% range of the capacity.

Okay. Then a follow-up question on the same topic from Nick Paton, who recently reinitiated coverage from HSBC. What's the additional CapEx to get Wa'ad Al Shamal fully operational?

As I mentioned, I mean, we're doing this from our own cash generation. And so we are not making a capital allocation for it.

Okay. Then we have a question from [ Waha Capital, [indiscernible]. What percentage of our debt outstanding is Islamic debt at the moment? And whether we see any rights issue on the horizon for the CapEx that we are planning.

How much Islamic? Yes.

We don't have actually now the percentage, right, but we can provide this later.

And then do we see any rights issue on the horizon?

No. No, we are going to take a little bit of small financing, mainly from beside the year on -- to you, I mean, support our project spend. When we take it, how much we take is very much dependent on our cash flow forecast. But this is an opportunity, it is something we can do if we still like to do. I don't think we are contemplating any right issues. Of course, Phosphate 3 is a big project. And it does give us an opportunity to consider many, many financing options. I mean, we talked about it in the past. We said we will look into the debt market and the bond market as an opportunity for us to support our financials. Debt market can give us the -- especially on turnaround, better than what we are having now from the commercial loans. The -- an IPO is another opportunity that we may consider. So looking forward, we want to keep all our options open.

Okay. We have a couple of questions from Adnan Farooq from Jadwa Investment. What is the expected gold production going forward? Will it remain in line with the fourth quarter during 2021?

Of course, gold production is very much dependent on many factors. One of them is the reserve modeling. And reserve modeling is an area where you could spend a lot of money and making sure that you're getting your reserve in major to a very accurate level. And so I mean, considering things as we project them, we plan to keep more or less the same production level as we have in the past couple of years. That is, of course, I mentioned the burden and the stripping ratio. We may have most stripping to do next year than -- I mean, next year, meaning the 2021, than we have done in 2020. And if we do more stripping than we have done, that will, of course, impact our gold production. But generally, we're talking about small valuations, and we should be able to keep more or less the same gold production as we have done in 2020.

A couple of more questions from Jadwa Investment. What is the expected CapEx for 2021? Can you disclose that?

Well, as the CEO actually mentioned earlier, we are expecting similar CapEx compared to this year. We still have the same projects that we are working on, Mansourah-Massarah and Ammonia 3. Those are where the project that we're concentrating on. So the CapEx will continue to be in the same level of 2020, just a bit less than $1 billion.

Okay. And then another question from Jadwa. Is the company expecting any scheduled shutdowns at any of the facilities?

We have a planned shutdown on the Ammonia plant. It's a tactical shutdown. It's not a, I mean, a long term shutdown. But for the rest, I mean, we -- one of the things that we have designed is that when you look at our units, they have more than 1 line. So we have our sulfuric plant has 3 lines. So as we do, we take 1 line at a time for any planned maintenance still around. And so we don't -- we have our own turnaround taken during the normal operation. But if there is -- if the question is, are we going to see a major interruption of our supply, question is no. There will be just a normal variation from 1 month to the other. But those are all will be managed within our inventory variations.

Okay. And 2 questions from Alinma Investment, Ebrahim [indiscernible], on our electricity prices. What is the increase in electricity prices at the end of the grace period for the Aluminum project? Can we disclose that? We historically haven't.

No, for the aluminum project, we have our own gas allocation. So we take gas from Aramco and we use -- send it to the power and water plant in [indiscernible] that is running -- that is run by SWDC, the Saudi Water Desalination Corporation. And we take the power at cost. And so for us, in terms of our Aluminum business, it's not that our electricity prices, it is gas prices. And we made a comment on the gas prices and our expectation of what will happen to it. They are now at 1.25, and we are optimistic that we will continue for the [indiscernible] future at this level.

Thank you very much. I'm afraid we have to go through the call here. We're now half an hour overrunning. Thank you for your interest. A record number of questions. A couple of written questions were answered. I will follow-up individually and get back to you on all other questions. Thank you very much for your interest, and have a nice day.

Thank you all. Thank you very much.

Thank you.

This concludes today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.