Financial Advisor and Sole Bookrunner

Transcription

1 jkj PROSPECTUS Offering of 462,500,000 Shares representing 50% of the total issued share capital of Saudi Arabian Mining Company (Ma'aden) through an Initial Public Offering at an Offer Price of SR20 per Share (representing a nominal value of SR10 per share and a premium of SR 10 per share) SAUDI ARABIAN MINING COMPANY (MA'ADEN) A Saudi Joint Stock Company established pursuant to Royal Decree M/17 dated 14/11/1417H (corresponding to 23/03/1997G) with Commercial Registration Number dated 10/11/1421H (corresponding to 04/02/2001G). Subscription Period from Saturday 02/07/1429H (corresponding to 05/07/2008G To Monday 11/07/1429H (corresponding to 14/07/2008G) Saudi Arabian Mining Company (Ma'aden) (hereinafter referred to as the Company or Ma aden ) was formed as a joint stock company pursuant to Royal Decree No. M/17 dated 14/11/1417H (corresponding to 23/3/1997G) and Council of Ministers Resolution No. 179 dated 8/11/1417H (corresponding to 17/03/1997G), with Commercial Registration Number dated 10/11/1421H (corresponding to 4/2/2001G) and with a share capital of SR4,000,000,000, comprising 400,000,000 shares with a nominal value of SR10 each (the "Shares") wholly owned by Government of the Kingdom of Saudi Arabia represented by the Public Investment Fund ( PIF ). Pursuant to Council of Ministers Resolution No. 49 dated 25/02/1429H (corresponding to 04/03/2008G) the capital of the Company was increased to SR 9,250,000,000 comprising 925,000,000 Shares with a nominal value of SR10 each through the subscription by the Government of the Kingdom of Saudi Arabia represented by the PIF of a total of 62,500,000 shares and the offer of 462,500,000 Shares to the public. This initial public offering (the "Offering ) of 462,500,000 Shares (collectively "Offer Shares and each an Offer Share ), representing in total 50% of the issued capital of the Company. The price of each Offer Share shall be SR 20 (comprising a nominal value of SR10 and a premium of SR10 per Share). The Council of Ministers Resolution No. 72 dated 3/4/1427H provided that the price of the Offer Shares should be determined by the mutual agreement of the Minister of Petroleum and Mineral Resources and the Minister of Finance (Chairman of the Board of the Public Investment Fund), having regard to the financial position of Maaden as at the date of the Offering. On 16/11/1428H, the Minister of Petroleum and Mineral Resources and the Minister of Finance, chairman of the Board of the Public Investment Fund agreed that the price of the Ma'aden Shares to be offered to the public will be SR 20, comprising a nominal value of SR10 and a premium of SR10. Subscriptions under the Offering will be restricted to the following tranches: Tranche (A) the General Organization for Social Insurance ( GOSI ) and the Public Pension Agency ( PPA ). At least 46,250,000 Offer Shares representing 10% of the Offer Shares will be allocated to GOSI and the PPA, each subscripting to 5%. Tranche (B) Institutional Investors ("Institutional Tranche"). This Tranche comprises a number of institutional investors (collectively referred to as Institutional Investors ). The Institutional Investors shall be selected from among the institutions approached by the Sole Bookrunner after consultation with the Company in accordance with standards previously specified by the CMA. 124,875,000 Offer Shares representing 27% of the Offer Shares will be allocated to Institutional Investors. This allocation may be decreased down to 23,125,000 Offer Shares (representing 5% of the Offer Shares), in the event that the number of Offer Shares allocated to Individual Subscribers is increased as described below. Tranche (C) Individual Subscribers ("Retail Tranche"): includes Saudi individuals and Saudi women divorced or widowed having minor children from a non-saudi husband who shall have the right to subscribe in their names for her own benefit (referred to individually as Individual Subscriber and collectively as "Individual Subscribers ). 291,375,000 Shares will be allocated to Individual Subscribers representing 63% of the Offer Shares. This allocation may be increased to 393,125,000 Shares (representing 85% of the Offer Shares). Pursuant to the Offering, the Company shall issue 462,500,000 new Shares, representing 50% of the issued capital of the Company following completion of the Offering. The Government of the Kingdom of Saudi Arabia (represented by the Public Investment Fund) shall hold the remaining 50% of the issued capital of the Company. The Company shall receive the subscription proceeds which shall be used, after the deduction of the subscription costs, to finance the Company s expansion projects (see Use of Proceeds section and Financing and Costs of Projects section). This Offering has been fully underwritten (see Underwriting section). The subscription period will commence on Saturday 02/07/1429H (corresponding to 05/07/2008G) and will remain open for a period of 10 days up to and including Monday 11/07/1429H (corresponding to 14/07/2008G) (the Subscription Period ) during which time subscription applications can be made through branches of any of the Receiving Banks identified on page 9. Each Individual Subscriber must apply for a minimum of 25 Offer Shares and not more than the maximum of 5,000,000. Institutional Investors may subscribe for Offer Shares through the Sole Bookrunner pursuant to a book building exercise to be conducted prior to the Retail Offering (see "Key Dates for Investors" section). Each Institutional Investor must apply for a minimum of 500,000 Offer Shares. No maximum limit is applicable to Institutional Investors. The Offer Shares comprised in the Retail Tranche shall be allocated in two stages. During the first stage at least 25 Shares shall be allocated to each Individual Subscriber. In the event that there is additional demand from Individual Subscribers, during the second stage each Subscriber for 2,000 shares or less shall receive full allocation of his subscription provided that the total allocated shares shall not exceed the total of the shares allocated to the Retail Tranche (291,375,000 shares). The remaining Offer Shares (if any) shall be allocated on a pro-rata basis to the number of Offer Shares applied for by the Subscriber. In the event that there is additional demand from Individual Subscribers, the number of Offer Shares allocated to Individual Subscribers may be increased by an amount of up to 101,750,000 shares resulting in a total allocation to the Retail Tranche of 393,125,000 shares representing 85% of the total Offer Shares. Excess subscription monies (if any) will be refunded to all Applicants (including Individual Subscribers and Institutional Investors) without any charge or withholding by the Receiving Banks. Notification of the final allotment and refund of subscription monies (if any) will be made no later than on Sunday 17/07/1429H (corresponding to 20/07/2008G) (see Subscription Terms and Conditions Allocation and Refund Policy section). The Company has one class of shares. Each Share entitles the holder to one vote and each shareholder has the right to attend and vote at the shareholders' general assembly meeting (the "General Assembly"). The Offer Shares will be entitled to receive dividends declared by the Company for the financial year ending 31 December 2008 (see "Dividend Policy" section). Prior to the Offering, there has been no public market for the Shares in Saudi Arabia or elsewhere. An application has been made to the CMA for the admission of the Shares to the Official List and all relevant approvals pertaining to this Prospectus and all other supporting documents requested by the CMA in addition to all relevant regulatory approvals required to conduct the Offering have been granted. Trading in the Shares is expected to commence on the Saudi Arabian Stock Exchange (the "Exchange") soon after the final allocation of the Shares (See "Key Dates for Investors"section). Subsequent to the commencement of trading of the Shares, Saudi nationals, GCC nationals, foreign individuals resident in Saudi Arabia, as well as majority Saudi or GCC owned companies, banks and Saudi and GCC investment funds will be permitted to trade in the Shares. The "Important Notice" and "Risk Factors" sections in this Prospectus should be considered carefully prior to making an investment decision in the Offer Shares pursuant to this Prospectus. Financial Advisor and Sole Bookrunner Lead Underwriter and Lead Manager Co-Underwriters Receiving Banks This Prospectus includes information given in compliance with the Listing Rules of the Capital Market Authority of Saudi Arabia (the "CMA"). The Directors, whose names appear on page 4i, jointly and severally, accept full responsibility for the accuracy of the information contained in this Prospectus and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts the omission of which would make any statement herein misleading. The Authority and the Exchange take no responsibility for the contents of this document, make no representations as to its accuracy or completeness, and expressly disclaim any liability whatsoever for any loss arising from, or incurred in reliance upon, any part of this document. English Translation of the Official Arabic Prospectus This Prospectus is dated 20/6/1429H (corresponding to 24/6/2008G)

2 Important Notice This Prospectus provides full details of information relating to the Company and the Offer Shares. When applying for Offer Shares, investors will be treated as applying on the basis of the information contained in the Prospectus, copies of which are available for collection from the Receiving Banks or by visiting the Company's website, or the Authority's website, JPMorgan Chase Bank N.A. - Riyadh Branch ("JPMorgan") has been appointed by the Company to act as Financial Advisor and Sole Bookrunner in relation to the Offering described herein. This Prospectus includes details given in compliance with the Listing Rules of the Authority. The Directors, whose names appear on page 4, jointly and individually, accept full responsibility for the accuracy of the information contained in this Prospectus and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts the omission of which would make any statement herein misleading. The CMA and the Exchange take no responsibility for the contents of this document, give no assurances as to its accuracy or completeness, and expressly disclaim any liability whatsoever for any loss arising from, or incurred in reliance upon, any part of this document. Whilst the Company has made all reasonable enquiries as to the accuracy of the information contained in this Prospectus as at the date hereof, substantial portions of the market and industry information herein are derived from external sources. Whilst none of the Company, its financial advisor or any other advisors have any reason to believe that the market and industry information is materially inaccurate, such information has not been independently verified by the Company and no representation is made with respect to the accuracy or completeness of any of this information. However, the Company does take responsibility for the accuracy of its own market and industry estimates. The information contained in this Prospectus as at the date hereof is subject to change, particularly because the actual financial state of the Company and the value of the Shares may be adversely affected by future developments in inflation, interest rates, taxation, or other economic, political and other factors including those described herein under "Risk Factors" that may negatively affect the Company or any of its investments over which the Company may have no control. Neither the delivery of this Prospectus nor any oral or written interaction in relation to the Offer Shares is intended to be, or should be construed as or relied upon in any way as, a promise or representation as to future earnings, results or events. This Prospectus is not to be regarded as a recommendation on the part of the Company, the Directors or any of their respective advisors to participate in the Offering. Moreover, information provided in this Prospectus is of a general nature and has been prepared without taking into account any potential investor's investment objectives, financial situation or particular investment needs. Prior to making an investment decision, each recipient of this Prospectus is responsible for obtaining independent professional advice in relation to the Offering and for considering the appropriateness of the information herein, with regard to his financial objectives, situations and needs. This Offering is directed at: (1) GOSI and the PPA, (2) Institutional Investors approached by the Sole Bookrunner, and (3) Saudi individuals and Saudi women divorced or widowed having minor children from a non-saudi husband who shall have the right to subscribe in their names for her own benefit. The distribution of this Prospectus and the sale of the Offer Shares to any other persons or in any other jurisdiction are expressly prohibited. The Company and the 1

3 Financial Advisor ask the recipients of this Prospectus to identify these regulatory restrictions and to abide by them. Industry, Market and Valuation Data The institutions that supplied information about the different sectors or provided specific reports or studies are: SRK Consulting (UK) Limited ( SRK ) is an international independent institution for consulting that operates through 31 offices distributed across 6 continents. SRK is an associate company of the international holding company, formed in 1974, SRK Global Limited which offers mining project related services ranging from exploration through feasibility, mine planning, and production to mine closure. The source for all market data contained in Gold MER is SRK, which is the entity that prepared the report. Neither SRK Consulting nor any of its affiliates, shareholders, directors or their relatives, hold any shareholding or interest of any kind in the Company. SRK Consulting has given its written consent for the use of the Gold MER in the manner and format set out in the Prospectus. Such consent has not been withdrawn. Behre Dolbear & Company Inc. ( Behre Dolbear ), founded in 1911, specializes in performing studies and consulting for a wide range of businesses with interests in the minerals industry. Behre Dolbear prepared the Phosphate MER and Aluminium MER which has performed assignments around the world in relation to a broad range of commodities including base and precious metals, coal and lignite, ferrous metals, uranium, industrial minerals and gemstones. Neither Behre Dolbear nor any of its affiliates, shareholders, directors or their relatives, hold any shareholding or interest of any kind in the Company. Behre Dolbear has given its written consent for the use of the Phosphate MER and Aluminium MER in the manner and format set out in the Prospectus. Such consent has not been withdrawn. CRU Strategies Limited ( CRU ), founded in the late 1960s, is an independent business analysis and consultancy group focused on the mining, metals, power, cables, fertilizer and chemical sectors. The source for all of the market data contained in The Phosphate Industry and the The Aluminium Industry is CRU which employs more than 200 experts in London, Beijing, Santiago, Sydney and key centers within the United States. Neither CRU nor any of its affiliates, shareholders, directors or their relatives, hold any shareholding or interest of any kind in the Company. CRU has given its written consent for the use of its market data and research in the manner and format set out in the Prospectus. Such consent has not been withdrawn. Brook Hunt & Associated Ltd ( Brook Hunt ), since 1975, has operated as a specialized company analyzing mine, smelter and refinery production costs within the base and precious metal industries. The source for all of the market data contained in The Gold Industry is Brook Hunt. The information used in the The Gold Industry section has been derived from a Brook Hunt report (gold industry in Saudi Arabia). Neither Brook Hunt nor any of its affiliates, shareholders, directors or their relatives, hold any shareholding or interest of any kind in the Company. Brook Hunt has given its written consent for the use of its market data and research in the manner and format set out in the Prospectus Financial Information. Such consent has not been withdrawn. The general overviews of the Gold Industry, the Phosphate Industry and the Aluminium Industry (set out in the "Industry Overview" section) were prepared in October 2007 and as such address prevailing market conditions at that time and do not take account of any changes in market conditions which may have occurred since. The overviews do not contain any statistical information for 2007 and have not been updated prior to the date of this Prospectus. 2

4 Each of the Gold MER, Phosphate MER and Aluminium MER (set out in the "Mineral Expert Reports" section) were prepared in or prior to November 2007 and as such address the matters stated therein at that time or at the times otherwise specified and do not take account of any changes or developments which may have occurred since. These reports have not been updated prior to the date of this Prospectus. Financial Information The consolidated financial statements of the Company for the years ended 31 December 2007, 2006 and 2005 which have been audited by Deloitte & Touche Bakr Abulkhair & Co., and in each case the notes thereto, which are incorporated elsewhere in this Prospectus, have been prepared in conformity with the Saudi Organisation for Certified Public Accountants ("SOCPA") Generally Accepted Accounting Principles. The Company reports its financial statements in Saudi Arabian Riyals ( SR ). Forecasts and Forward Looking Statements Forecasts set forth in this Prospectus have been prepared on the basis of certain stated assumptions. Future operating conditions may differ from the assumptions used and consequently no representation or warranty is made with respect to the accuracy or completeness of any of these forecasts. Certain statements in this Prospectus constitute "forward-looking-statements". Such statements can generally be identified by their use of forward-looking words such as "plans", "intends", "estimates", "believes", "anticipates", "may", "will", "should", "expected", "would be", "sees" or the negative or other variation of such terms or comparable terminology. These forward-looking statements reflect the current views of the Company with respect to future events, and are not a guarantee of future performance. Many factors could cause the actual results, performance or achievements of the Company to be significantly different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements. Some of the risks and factors that could have such an effect are described in more detail in other sections of this Prospectus (See "Risk Factors" section). Should any one or more of the risks or uncertainties materialise or any underlying assumptions relied on prove to be inaccurate or incorrect, actual results may vary materially from those described in this Prospectus as anticipated, believed, estimated, planned or expected. Subject to the requirements of the Listing Rules, the Company must submit a supplementary prospectus to the Authority if at any time after the Prospectus has been approved by the Authority and before admission of its shares to the Official List, the Company becomes aware that: (a) there has been a significant change in essential matters contained in the Prospectus or any document required by the Listing Rules, or (b) additional significant matters have become known which would have been required to be included in the Prospectus. Except in the two aforementioned circumstances, the Company does not intend to update or otherwise revise any industry or market information or forward-looking statements in this Prospectus, whether as a result of new information, future events or otherwise. As a result of these and other risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Prospectus might not occur in the way the Company expects, or at all. Prospective investors should consider all forward-looking statements in light of these explanations and should not essentially rely on the forward-looking statements. 3

5 Corporate Directory Appointed Board of Directors Name Position Nationality Age H.E. Ali Ibrahim AI-Naimi Non-executive Chairman Saudi 72 H.R.H. Prince Faisal Bin Turki Bin Abdulaziz Non-executive Director Saudi 42 Dr. Mohammad Suliman AlJasr Non-executive Director Saudi 52 Dr. Abdulrahman A. Al-Jafary Non-executive Director Saudi 67 Dr. Ziad Al-Sudairy Non-executive Director Saudi 53 Dr. Abdulaziz, S. Al-Jarbou Non-executive Director Saudi 60 Mr. Abdullah A. AI-Zaid Non-executive Director Saudi 65 Dr. Zuhir AbdulHafiz Elnawab Non-executive Director Saudi 64 Dr. Abdallah E. Dabbagh Director and CEO Saudi 62 Source: Ma aden * Pursuant to the Royal Decree No. 32/A dated 13/02/1418H the currently appointed Board of Directors shall remain until the first meeting of the general assembly to take place after the Offering (please review section Corporate Structure Board of Directors section). Shareholders Name The Government (represented by The Public Investment Fund) General Organization for Social Insurance Number of Shares Pre-Offering % Value in SR Number of Shares Post-Offering % Value in SR 400,000, % 4,000,000, ,500,000 50% 4,625,000, ,125, % 231,250,000 Public Pension Agency ,125, % 231,250,000 Public* ,250,000 45% 4,162,500,000 Total 400,000, % 4,000,000, ,000, ,250,000,000 * including the Individual Subscribers and Institutional Investors Registered Office The business address of the Company is: Saudi Arabian Mining Company (Ma aden) P.O. Box Riyadh Building of the Ministry of Petroleum and Precious Metals Al-Ma ather Street 4

6 Kingdom of Saudi Arabia Telephone: Fax: Authorised Representative The Company s Representative is Mr. Abdullah Al-Fallaj (Vice President Financial Matters) Board of Directors Secretary Dr. Bakri Magzoub Mudathir P.O. Box Riyadh, Kingdom of Saudi Arabia Telephone: Fax: Share Registrar Tadawul Abraj Attuwenya 700 King Fahad Road PO Box Riyadh Kingdom of Saudi Arabia Ph: Fax: Advisors Financial Advisor and Sole Bookrunner JPMorgan Chase Bank N.A. Riyadh Branch Al Faisaliah Office Tower 8 th Floor P.O. Box Riyadh, Kingdom of Saudi Arabia Telephone: Fax: Legal Advisors to the Transaction 5

7 Legal Advisors Torki A. Al Shubaiki in association with Baker & McKenzie Limited P.O. Box 4288 Riyadh Kingdom of Saudi Arabia Telephone: Fax: Baker & McKenzie LLP 100 New Bridge Street London EC4V 6JA United Kingdom Telephone: Fax: Registered Auditors and Reporting Accountants Deloitte & Touche Bakr Abulkhair & Co. P.O. Box 213 Riyadh Kingdom of Saudi Arabia Tel: Fax: Transaction Accounting Advisors KPMG Al Fozan & Al Sadhan Building No Al Ahsa Street, Malaz P.O. Box 92876, Riyadh Kingdom of Saudi Arabia Telephone: Fax: Market Studies Advisors And Mineral Experts BEHRE DOLBEAR Behre Dolbear Company ( Behre Dolbear) Winchester House Street Old Marylebone Road London, United Kingdom 6

8 Telephone: Fax: SRK Consulting Engineers and Scientists SRK Consulting (UK) Limited ( SRK ) 5 th floor, Churchill House 17 Churchill Way City and County of Cardiff CF10 2HH, Wales United Kingdom Telephone: Fax: CRU Strategies Limited ( CRU ) 31 Mount Pleasant London, United Kingdom Telephone: Fax: Brook Hunt & Associates Ltd 45 High Street, Addlestone Surrey KT15 1TU United Kingdom Telephone: Fax: NOTE: As of the date of this Prospectus, the foregoing advisors and mineral experts have given and not withdrawn their written consent to the use of their name and the publication of their reports or overviews in this Prospectus. Moreover, the foregoing advisors do not themselves, nor do any of their affiliates, employees or their relatives, hold any shareholding or interest of any kind in the Company. Lead Underwriter and Lead Manager Samba For Asset and Investment Management (Samba Capital) Kingdom Centre P.O. Box , Riyadh, Telephone: Fax:

9 Legal Advisors to the Underwriters Allen & Overy, LLC Suite No. 101/202, second floor, Bawaba Village, Building No. 8 Dubai International Financial Centre P.O. Box , Dubai United Arab Emirates Tel: Fax: Principal Bankers of the Company Saudi British Bank P.O. Box 9084, Riyadh 11413, Kingdom of Saudi Arabia Telephone: Fax: Samba Financial Group P.O. Box 833, Riyadh 11421, Kingdom of Saudi Arabia Telephone: Fax: The Saudi Investment Bank P.O. Box 3533, Riyadh 11481, Kingdom of Saudi Arabia Telephone: Fax:

10 Receiving Banks Riyad Bank Principal Office, P.O. Box 22622, Riyadh 11416, Kingdom of Saudi Arabia Telephone: ; Fax: Arab National Bank Principal Office, P.O. Box 9802, Riyadh 11423, Kingdom of Saudi Arabia Telephone: ; Fax: Banque Saudi Fransi Principal Office, P.O. Box 56006, Riyadh 11554, Kingdom of Saudi Arabia Telephone : ; Fax: The Saudi British Bank (SABB) Principal Office, P.O. Box 9084, Riyadh 11413, Kingdom of Saudi Arabia Telephone: ; Fax: The Saudi Investment Bank Principal Office, P.O. Box 3533, Riyadh 11481, Kingdom of Saudi Arabia Telephone: ; Fax: The National Commercial Bank Principal Office, P.O. Box 3555, Jeddah 21481, Kingdom of Saudi Arabia Telephone: ; Fax: Bank Al Bilad Principal Office, P.O. Box 140, Riyadh 11411, Kingdom of Saudi Arabia Telephone: ; Fax: Bank Al Jazira Principal Office, P.O. Box 6277, Jeddah 21442, Kingdom of Saudi Arabia Telephone: ; Fax: Saudi Hollandi Bank Principal Office, P.O. Box 1467, Riyadh 11431, Kingdom of Saudi Arabia Telephone: ; Fax: Al Rajhi Bank Principal Office, P.O. Box 28, Riyadh 11411, Kingdom of Saudi Arabia Telephone: ; Fax:

11 Samba Financial Group Principal Office, P.O. Box 833, Riyadh 11421, Kingdom of Saudi Arabia Telephone: ; Fax:

12 Summary of The Offering Company Capital Total number of issued Shares pre- Offering Total number of issued Shares post- Offering The Offering Saudi Arabian Mining Company (Ma'aden) SR9,250,000, ,500,000 shares 925,000,000 shares This initial public offering (the "Offering ) will comprise an offer of 462,500,000 shares ("Offer Shares ) representing 50% of the Company's issued capital following completion of the Offering. The price per share is SR20 (comprising a nominal value of SR10 and a premium of SR10). Subscriptions under the Offering will be restricted to the following tranches: Tranche (A) the General Organization for Social Insurance ( GOSI ) and the Public Pension Agency ( PPA ). At least 46,250,000 Offer Shares representing 10% the Offer Shares will be allocated to GOSI and the PPA, each subscribing to 5%.. Tranche (B) Institutional Investors ("Institutional Tranche"). This Tranche comprises a number of institutional investors (collectively referred to as Institutional Investors ). The Institutional Investors shall be selected from among the institutions approached by the Sole Bookrunner after consultation with the Company in accordance with standards previously specified by the CMA. 124,875,000 Offer Shares representing 27% of the Offer Shares will be allocated to Institutional Investors. This allocation may be decreased down to 23,125,000 Offer Shares (representing 5% of the Offer Shares), which would result in an increase in the number of Offer Shares allocated to Individual Subscribers. Tranche (C) Individual Subscribers ("Retail Tranche"): includes Saudi individuals and Saudi women divorced or widowed having minor children from a non-saudi husband who shall have the right to subscribe in their names for her own benefit (referred to individually as an Individual Subscriber and collectively as "Individual Subscribers ). 291,375,000 Shares will be allocated to Individual Subscribers representing 63% of the Offer Shares. This allocation may be increased to 393,125,000 Shares (representing 85% of the Offer Shares). Offer price SR20 per Share 11

13 Par value per Share Number of Offer Shares Percentage of issued Shares Total value of Offer Shares Total number of Shares for which each of GOSI and PPA are committed to subscribe Total number of Underwritten Offer Shares Minimum subscription for Institutional Investors Minimum subscription amount for Institutional Investors Maximum number of Offer Shares to be applied for by Institutional Investors Minimum subscription for Individual Subscribers Minimum subscription amount for Individual Subscribers Maximum number of Offer Shares to be applied for by Individual Subscribers Maximum subscription amount for Individual Subscribers Allocation of Offer Shares in the Retail Tranche SR10 462,500,000 Shares The Offer Shares will represent 50% of the issued capital of the Company following finalization of the Offering SR9,250,000,000 Each of GOSI and the PPA have committed to participate in the Offering for an amount equal to the percent of Offer Shares allocated to them being 46,250,000 shares, representing 10% of the Offer Shares. 416,250,000 Shares, representing 90% of the Offer Shares 500,000 Offer Shares SR 10,000,000 No maximum 25 Offer Shares SR500 5,000,000 Shares SR100,000,000 The Offer Shares comprised in the Retail Tranche shall be allocated in two stages. During the first stage at least 25 Shares shall be allocated to each Individual Subscriber. In the event that there is additional demand from Individual Subscribers, during the second stage each Subscriber for 2000 shares or less shall receive full allocation of his subscription provided that the total allocated shares shall not exceed the total number of Shares allocated to the Retail Tranche ( 291,375,000 shares). The remaining Offer Shares (if any) shall be allocated on a basis pro-rata to the number of Offer Shares applied for by the Subscriber. In the event that there is additional demand from Individual Subscribers the number of Offer Shares allocated to Individual Subscribers may be increased by an amount of up to 101,750,000 Shares resulting in a total allocation to the Retail Tranche of 393,125,000 12

14 Use of the net Subscription Proceeds Dividends Voting Rights Share Restrictions Listing and Trading of the Shares Risk Factors Costs Shares representing 85% of the total Offer Shares. Net subscription proceeds (after deduction of the estimated expenses of the Offering) of SR 9,175,000,000 will be paid to the Company and used for its expansion projects. The Government represented by the Public Investment Fund shall not receive any portion from the subscription proceeds (see Use of Proceeds section). The Offer Shares will be entitled to receive dividends for the year 2008 if declared by the Company following the Subscription Period and for subsequent fiscal years. (see Dividend Record and Policy section). The Company has only one class of Shares and no Shareholder has any preferential voting rights. Each Share entitles the holder to one vote and each Shareholder has the right to attend and vote at the General Assembly Meeting (see Voting Rights section). The Government, represented by the Public Investment Fund, will not be permitted to dispose of any of its Shares during the period of six months from the date on which trading of the Offer Shares commences on the Exchange (the "Restriction Period"). After the Restriction Period has elapsed, the Government, represented by the Public Investment Fund, may dispose of its Shares with the prior approval of the CMA. Prior to this Offering, there has been no public market for the Shares in Saudi Arabia or elsewhere. An application has been made by the Company to the CMA for the admission of the Shares to the Official List and all relevant approvals pertaining to this Prospectus and all other supporting documents requested by the CMA in addition to all relevant regulatory approvals required to conduct the Offering have been granted. Trading is expected to commence on the Exchange soon after the final allocation of the Shares. (See Key Dates for Investors section.) There are certain risks relating to an investment in this Offering. These risks are described in the Risk Factors section of this Prospectus, and should be considered carefully prior to making a decision to invest in the Offer Shares. The Company will be responsible for all expenses and costs associated with the Offer, which are estimated at SR75,000,000. This figure includes the fees of the Financial Advisor, Legal Adviser to the Company and Reporting Accountants, in addition to Receiving Banks, Manager and Underwriter expenses, marketing expenses, printing and distribution expenses and other related expenses. 13

15 Offering Timetable Key Dates for Investors Date Subscription Period...The Subscription will commence on Saturday 02/07/1429H (corresponding to 05/07/2008G), and it will remain open for a period of 10 days up to and including the last day of closing the subscription on Monday 11/07/1429H (corresponding to 14/07/2008G). Start of Subscription Period.Saturday 02/07/1429H (corresponding 05/07/2008G) Last date for submission of application form and subscription monies...monday 11/07/14/29H (corresponding to 14/07/2008G) Allocation and Refund Date Allocation of the Offer Shares is expected no later than Sunday 17/07/1429H (corresponding to 20/07/2008G). Excess Subscription monies......excess subscription monies will be refunded to Applicants without any charges or withholdings by the Receiving Banks on Sunday 17/07/1429H (corresponding to 20/07/2008G). (See Subscription Terms and Conditions Allocation and Refunds" section). Start date of trading of Offer Shares...Upon completion of all relevant procedures, to Note: The above timetable and dates therein are indicative. Actual dates will be communicated through national press announcements in Saudi Arabia and on the CMA s and Tadawul s websites. 14

16 How to Subscribe Institutional Tranche Subscription in the Institutional Tranche concerning the Offered Shares is limited to the institutions approached by the Sole Bookrunner after consultation with the Company in accordance with standards previously specified by the Authority. Subscription forms will be available from the Sole Bookrunner. Retail Tranche The Retail Tranche is directed at and may be accepted by individuals having Saudi Arabian nationality only. A Saudi woman who is divorced or widowed and who has minor children from a non-saudi husband may subscribe for Offer Shares in the name(s) of her children (they will be referred to as "Individual Subscriber" and, collectively, as "Individual Subscribers"). Subscription Application Forms will be made available during the Subscription Period at the branches of the Receiving Banks and on the websites of the Receiving Banks. Subscription can be also effected through the internet, phone banking, or automated teller machines through the Receiving Banks that offer one or all of those facilities to those Applicants who have previously subscribed to recent offerings, subject to the following conditions: (1) The Applicant has an account at such Receiving Bank providing such services, and (2) There are no changes to the Applicant's information or details since the Applicant's subscription in a recent offering. The Subscription Application Forms must be completed in accordance with the instructions described in the "Subscription Terms and Conditions" section of this Prospectus. Each Applicant must agree to all relevant sections of the Subscription Application Form. The Company reserves the right to reject any Subscription Application Form, in whole or in part, in the event any of the subscription terms and conditions are not met. Amendments to and withdrawal of that Subscription Application Form shall not be permitted once the Subscription Application Form has been submitted. Furthermore, the Subscription Application Form shall, upon submission, represent a binding agreement between the Applicant and the Company (See "Subscription Terms and Conditions" section). 15

17 Summary of Key Information This summary of key information aims to give an overview of the information contained in this Prospectus. As it is a summary, it does not contain all of the information that may be important to interested investors. Recipients of this Prospectus should read the whole Prospectus (including Risk Factors ) before making a decision as to whether or not to invest in the Company. Capitalized and abbreviated terms have the meanings ascribed to such terms in the Definitions and Abbreviations section, the Glossary of Terms, and elsewhere in this Prospectus. Overview Ma'aden was formed as a Saudi joint stock company, pursuant to Royal Decree No. M/17 dated 14/11/1417H (corresponding to 23/3/1997G) and Council of Ministers Resolution No. 179 dated 8/11/1417H (corresponding to 17/03/1997G), with Commercial Registration Number dated 10/11/1421H (corresponding to 4/2/2001G) for the purpose of facilitating the exploration and development of Saudi Arabia s mineral resources. Ma'aden's objective is to explore and develop Saudi Arabia's mineral resources and become a world class international mineral resource company. Ma aden s Vision Ma aden s vision is to build a world class international mining company. Ma aden s Mission Ma aden s mission is to become a publicly owned world class international mining company that generates profits while at the same time protecting matters relating to human resources, health, safety, as well as environmental and social matters. The Company s Current Activities - Gold To date, Ma'aden's focus has been its gold business. Ma'aden's gold assets include five operating mines, the last of which commenced production in January Ma'aden is also currently carrying out a significant exploration and appraisal programme. The Company's total gold reserves as at 1 July 2007 were 21.66Mt grading at 1.9g/t of gold according to SRK in its MER (see "Gold Mineral Expert's Report") and gold production from its four mines operating throughout 2006 was approximately 167,000 ounces and decreased to approximately 142,763 ounces for the period ended 31 December Ma'aden also produced small saleable quantities of copper and zinc concentrate as by-products of its gold mining operations. In November 2007 the Company settled all its forward gold sale contracts which comprised forward contracts for an amount of 256,514 ounces due for settlement in 2012 ((for further information see "Current Company Business (gold operations) - Settlement of Hedge Contracts")). The Company was granted an exploration licence for the Ad Duwayhi prospect in 1998 and extensive exploration activities were carried out under the licence which resulted in the delineation of a significant gold resource at Ad Duwayhi by the end of During the previous years, Ma aden was able, through exploration programmes, to delineate six advanced exploration projects, including: Ad Duwayhi, Zalim, As Suk, Ar Rjum, Mansourah and Masarrah. Preliminary resource estimates completed to date indicate approximately 7.93 million ounces of gold resource in the region. Ma'aden intends to devote significant capital expenditure and other resources in the next few years to undertake the 16

18 necessary technical and feasibility studies and other actions required to assess the economic and technical feasibility of exploiting the CAGR resources and to achieve its strategic objective of significantly increasing its gold production. The Company also expects to be able to achieve further significant growth in its gold business. In addition, successful development of the Phosphate and Aluminium Projects will transform the Company from a gold producer into a world class, international mineral resource company. The Company s Future Projects Ma'aden has taken significant steps towards achieving its vision and mission by launching the development of a phosphate mine and fertiliser production facility for the production of Diammonium Phosphate ("DAP") and excess saleable quantities of ammonia and phosphoric acid (the "Phosphate Project") and a bauxite mine, alumina refinery and aluminium smelter for the production of aluminium ingot (the "Aluminium Project"). All of the Company s activities occur within the Kingdom of Saudi Arabia. Except for the new projects highlighted in this Prospectus, the Company does not intend to materially change the nature of its operations. The Phosphate Project The Phosphate Project aims to exploit an extensive phosphate deposit at AI Jalamid in northern Saudi Arabia and utilise local natural gas and sulphur to manufacture DAP, which is the most widely used phosphate based fertiliser in the world. DAP produced by the Phosphate Project will be sold primarily into international markets after the demand in the local market has been satisfied. It is anticipated that the Phosphate Project will also produce excess ammonia and phosphoric acid not required in the production process which will also be sold domestically or exported. The Phosphate Project involves the development, design, construction and subsequent operation of two integrated sites: The mining facilities at Al Jalamid in northern Saudi Arabia which will comprise a phosphate mine and a beneficiation plant; and The fertiliser complex facilities at Ras Az Zawr on the eastern coast of the Arabian Gulf approximately 90km north of Jubail with a fertiliser production facility comprising DAP, ammonia, sulphuric acid and phosphoric acid processing plants; with each site supported by appropriate industrial and social infrastructure. The mining and beneficiation facilities at Al Jalamid will produce an estimated 5.02 Mtpy of phosphate concentrate, supported by phosphate reserves sufficient to sustain the project beyond 20 years (for more information please refer to the MER). It is estimated that the project will produce approximately 2.92 Mtpy of granular DAP with first production targeted to commence in the second half of On 15 September 2007, Ma'aden entered into a joint venture agreement with SABIC pursuant to which SABIC acquired a 30 % interest in PhosCo, the joint venture company established to operate the Phosphate Project. Pursuant to the terms of the Phosphate JVA, Ma'aden and SABIC will enter into various agreements with PhosCo for the marketing by SABIC of the majority of the DAP and excess ammonia produced by PhosCo to certain key markets including India, Pakistan, Taiwan and South Korea, after the demand in the local market has been satisfied. It is anticipated that SABIC will take all excess phosphoric acid produced by the Phosphate Project for use in its Saudi Arabian operations in the earlier years. 17

19 The total cost of the Phosphate Project is estimated at SR20.85 billion (US$5.56 billion ) taking account of projected annual inflation and estimated financing costs and based on projected capital costs of SR17.03 billion (US$4.54 billion ). Over 70% of total capital costs have been or will be contracted at a fixed rate under signed Lump Sum Turn-Key ( LSTK ) contracts for the engineering, procurement and construction ("EPC") of a beneficiation plant, DAP, ammonia, sulphuric acid and phosphoric acid processing plants and certain supporting infrastructure. Thirty percent of total project costs of the Phosphate Project will be funded by equity contributions from Ma'aden and SABIC in proportion to their interests in the project. The remaining 70% project costs will be funded by limited recourse debt financing. A mandate letter appointing arrangers and underwriters for the required debt financing for the Phosphate Project was executed in December 2007 and formal finance documentation was executed in June The Aluminium Project The Aluminium Project envisages the exploitation of Ma'aden's bauxite resources at Az Zabirah in the north central region of Saudi Arabia to produce aluminium for domestic consumption as well as export. The Aluminium Project involves the development, design, construction and subsequent operation of two integrated sites: Mining facilities at Az Zabirah, consisting of a bauxite mine and ore handling facilities; and Aluminium complex facilities at Ras Az Zawr, consisting of an alumina refinery, an aluminium smelter and a dedicated power plant; with each site supported by appropriate industrial and social infrastructure. Capacities reviewed in historical independent technical studies and by Behre Dolbear in its Aluminium MER previously indicated that upon completion of the Aluminium Project approximately 3.5 Mtpy of bauxite would be mined from the Az Zabirah Deposit to produce approximately 1.4 Mtpy of alumina from the refinery and approximately 0.65 Mtpy of aluminium from the smelter. Further feasibility studies focusing on the aluminium smelter and alumina refinery ("FEL 2 Studies") completed earlier this year confirmed the economic feasibility of increasing these capacities to approximately 4.0 Mtpy of bauxite, 1.8 Mtpy of alumina and 0.74 Mtpy of aluminium and the Company intends to proceed with the development of the Aluminium Project on this basis. Excess alumina produced by the refinery that is not used to expand the smelter's aluminium production is anticipated to be sold to international markets, after the demand in the local market has been satisfied, through Ma'aden's proposed marketing arrangements with Rio Tinto Alcan. In April 2007, Ma'aden entered into a HoA with Rio Tinto Alcan to conclude a joint venture agreement pursuant to which Rio Tinto Alcan will acquire a 49 % interest in AlumCo the joint venture company which will operate the Aluminium Project. Commercial production of aluminium is planned to commence by the end of The Heads of Agreement envisages that each of Ma'aden and Rio Tinto Alcan will enter into offtake agreements with AlumCo to purchase the aluminium produced in proportion to their respective interests in, the project. The Company anticipates entering into a formal joint venture agreement with Rio Tinto Alcan in the third quarter of Following completion of the FEL 2 Studies and the revision of the estimated production capacities for the refinery and smelter to approximately 1.8 Mtpy of alumina and 0.74 Mtpy of aluminium respectively and to the power plant to approximately 2100MW, cost estimates have been adjusted upwards. It is now estimated that the total cost of the Aluminium Project is SR39.56 billion (US$10.55 billion) taking into account working capital and contingency 18

20 costs but not projected annual inflation or estimated financing costs during the construction phase. This estimate is based on projected capital costs of approximately SR35.04 billion (US$9.34billion). The increase in cost estimate is attributable to several factors including the increased capacities of each of the mine, refinery, smelter and power plant, the more advanced stage of development of the project, increased construction costs due to inflationary pressures in the region, increased import costs resulting from exchange rate changes and human capital costs because of skilled labour shortages. The Smelter Opex estimate, based on an annual production rate of 740,000 tonnes of metal, is estimated at $1,281 per tonne (vs. $1,056 per tonne based on the previous plan of 650,000 tonnes in Q prices). It is currently expected that 30% to 40 % of the total costs will be funded through equity contributions from Ma'aden and Rio Tinto Alcan with the balance to be funded through limited recourse debt. It is possible that Ma'aden and Rio Tinto Alcan may provide this contribution by way of a subordinated shareholder loan. Ma aden may also resort to other sources of financing. Common Infrastructure The successful development and operation of the Phosphate and Aluminium Projects will be supported by a railway and port facility, as follows: The 1,486km railway will connect the phosphate and bauxite mine sites, located at Al Jalamid and Az Zabirah respectively, to Ras Az Zawr and Jubail. Ma'aden understands that the Railway will be constructed by the Public Investment Fund ("PIF"). A deep water port facility capable of landing ships with up to 70,000 DWT of carrying capacity will be developed at Ras Az Zawr by the Saudi Port Authority. The port will primarily be used for the import of raw materials and the export shipment of DAP, excess ammonia and aluminium produced from the facilities at Ras Az Zawr. It is envisaged that the port and railway will be completed by the end of 2009 and the end of 2010 respectively to service the Phosphate and Aluminium Projects once completed. The Phosphate and Aluminium Projects will be supported by certain key common infrastructure to be developed by InfraCo, a company currently under formation which will be a wholly owned subsidiary of Ma'aden, including serviced land, roads, drainage, lighting and a power grid connection as well as accommodation. The total cost of the key common infrastructure is estimated at SR862.5 million (US$230 million). Other Projects Ma'aden plans to produce caustic soda in joint venture with Sahara Petrochemical Company with a production capacity of 0.25 Mtpy of caustic soda and 0.30 Mtpy of ethylene di-chloride. It is anticipated that the caustic soda production will be supplied to the Aluminium refinery owned by Ma aden pursuant to a marketing agreement between Ma aden and Sahara Petrochemical Company. Ma aden has signed a Memorandum of Understanding with Sahara Petrochemical Company dated 10 September 2006 in relation to the construction of the plant and it is anticipated that a joint venture agreement will soon be signed pursuant to which a company will be formed and owned 50% by Ma aden and 50% by Sahara Petrochemical Company. It is proposed that the joint venture will last for 25 years. It is anticipated that commercial production of caustic soda together with ethylene di-chloride will commence in

21 Ma'aden also anticipates commencing commercial production of kaolin and low grade bauxite by the end of the year and high value magnesium oxide products in The total cost of these three projects is estimated at SR1.75 billion (US$0.47 billion) taking account of projected annual inflation and estimated financing costs where relevant. Location of Ma aden s Mines The list below summarises Ma'aden's proposed phosphate and bauxite mines, downstream facilities at Ras Az Zawr and licences for its gold mines and exploration properties: 1) The Phosphate Project a) Al Jalamid Location b) Ras Az Zawr Location 2) The Aluminium Project a) Az Zabirah Location b) Ras Az Zawr Location 3) The Gold Operation a) Mining Licences Mahd Ad Dahab Sukhaybarat Bulghah Al Hagar Al Amar b) Central Arabian Gold Region (CAGR) Exploration Licences Ad Duwayhi (Ad Duwayhi licence) Manasourah (Al Uruq licence) Massarah (Ash Shakhtaliyah licence) Ar Rjum (Ash Shakhtaliyah licence) As Suk (Ash Shakhtaliyah licence) Zalim Al Hajar (located in the south west of the Kingdom) c) Northern Shield Region (Sukhaybarat - Bulghah Area) Exploration Licences Humaymah (Miskah Licence) 20

22 Shabah Al Jardawiyah An Najadi / Hablah South / Hablah North, Nugrah Licence and Mawan Tawan Strengths As Siham Ma aden's key strengths may be described as follows: Strong growth opportunities Ma aden has begun the implementation of major scale projects for the production of phosphate fertilisers and for aluminium in Saudi Arabia. Upon completion of the Phosphate and Aluminium Projects Ma aden will become a major supplier of phosphate fertilizers and primary aluminium ingot in global markets. Ma aden also has valuable opportunities to expand its gold producing projects, as described in the Gold MER. Favourable markets for core products It is anticipated that demand for Ma'aden's core products (gold, DAP/MAP and aluminium) will continue to grow driven by increases in population growth and rising standards of living as well as rapid industrialisation in the growing economies of India and China. Ma aden believes that such increases in demand will allow new producers, including Ma aden, to enter the market on a competitive basis. Diversified business Ma aden will be operating a diversified minerals business encompassing gold, phosphate fertilizers, primary aluminium, and industrial minerals. The markets for these products have individual price cycles and this will help mitigate the effects of commodity price fluctuations impacting prices of Ma'aden's core products and movements in the prices of key raw materials on which it depends. Long life phosphate and bauxite resources Ma'aden's future growth is further underpinned by its known reserves and resources of phosphate and bauxite in Saudi Arabia. In its Phosphate MER, Behre Dolbear measured the phosphate resources at Al Jalamid are estimated to be 534 Mt in accordance with the Gruk System (see Expert Report Section). It is proposed to mine 223 Mt for the Phosphate Project over its initial planned life of operations, leaving the balance available to extend the project life or to enable increases in production capacity during the current project life. Ma'aden's bauxite ore resources in the south zone of the Az Zabirah deposit are estimated to be 240 Mt at 50% available alumina and 8% sulphur dioxide and are expected to be sufficient to supply AlumCo's proposed alumina refinery for a period in excess of 30 years based on initial design capacity. Low cost minerals producer Ma'aden's gold business is, and its phosphate and aluminium businesses will be, fully vertically integrated from mineral ore to production of primary metal (in the case of aluminium and gold) and from mined ore to final consumer products (in the case of phosphate fertilisers). 21

23 The vertical integration of Ma'aden's businesses offers substantial economies of scale enabling it to minimise the involvement of third parties and thereby more effectively control costs. Modern cost effective technology Both the Phosphate Project and the Aluminium Project will benefit from modern processing and mining facilities and techniques employing tried and tested methodologies under the guidance of Ma'aden's joint venture partners, SABIC and Rio Tinto Alcan. Ma aden's technical plans seek to take advantage of vertical integration and scale economies to reduce cost and create synergies such as the use of steam generated in the production of sulphuric acid to fire the phosphate power plant to be located. Significant Government support Ma aden projects enjoy special Government support and backing that includes the provision of key support infrastructure such as the Railway and Port, the industrial and residential land at the Ras Az Zawr site, the allocation of fuel for the power station and natural gas for the ammonia plant and a significant subsidy for the connection of the power supply at Ras as Zawr to the public electricity network. Ma aden s Strong partners The participation of SABIC in the Phosphate Project and Rio Tinto Alcan or any other strategic partner in the Aluminium Project significantly diminishes Ma'aden's project execution and operating risk. Synergies between divisions The shared location of processing facilities for the Phosphate and Aluminium Projects at Ras Az Zawr and the use of the Railway, Port and other shared infrastructure at this site create significant synergies between Ma'aden's business divisions. Experienced management team Ma aden's management is experienced in developing, executing and operating natural resource projects within Saudi Arabia. Ma aden has recruited experienced senior executives and technical experts to drive the projects forward and to train its future project workforces and has engaged international consultants to assist it in planning for its future strategic growth. Strategy Ma aden's objective is to become a world class diversified mining and minerals group, and to enhance overall value for its shareholders. Ma aden's main strategic driver is to successfully exploit the large phosphate and bauxite deposits over which it has mining rights through the production of DAP and primary aluminium ingot. It also plans to achieve significant growth in its gold mining business by exploiting known gold resources and developing new prospects primarily within the Central Arabian Gold Region over which it has secured mining or exploration rights. Ma aden intends to pursue this strategy by: Maintaining the momentum it has already achieved with respect to the implementation of the Phosphate and Aluminium Projects and ensuring the completion of the construction of Ma'aden's mining and production facilities and the 22

24 associated infrastructure for the Phosphate and Aluminium Projects within existing budgeted costings and in accordance with project deadlines. Using its strong balance sheet following the initial public offering to raise project finance for the Phosphate and Aluminium Projects. Co-operating closely with its major shareholder, the Government, represented by the Public Investment Fund, to ensure the timely completion of the Railway and the Port as the key supporting infrastructure for the successful realisation of the Phosphate and Aluminium Projects. Successfully developing its proposed Chlor Alkali Project to produce caustic soda as an essential feedstock to be used by the Aluminium Project's alumina refinery to refine bauxite to produce alumina (see "The Company's Business - Other Projects"). Developing its gold resources in the Central Arabian Gold Region and in the Arabian Shield Region. Developing its industrial minerals resources including magnesium oxide products. Taking advantage of its ability to increase production capacity in its future phosphate and aluminium operations at a relatively small incremental cost. Increasing appropriate know-how and technical expertise with respect to its project management, operations, processing facilities and marketing. Maximising the benefits achieved through the economies of scale available to the Company as a result of the availability of key raw material inputs such as energy, sulphur, natural gas, and caustic soda. Continuing to build up Ma'aden's human resources at all levels so as to meet the needs of running a rapidly expanding diversified mining business. Opportunistically considering strategic acquisitions and concluding joint ventures that will enhance Ma'aden's growth prospects and shareholder value. Implementing strong corporate governance as a company listed on Tadawul in order to safeguard the interests of all its shareholders. Maintaining its emphasis on corporate social responsibility by implementing detailed policies dealing with health and safety and environmental issues. 23

25 Summary Financial Information The selected financial information presented below should be read together with the audited results as at and for the years ended 31 December 2007, 2006 and 2005, including in each case, the notes thereto, each of which are included elsewhere in this Prospectus. Table 1: Summary of Financial Information Year Ended December 31 SR ' Consolidated income statement Sales 244, , ,964 Cost of sales (167,407) (187,733) (150,764) Gross Margin 76, , ,200 General and administrative expenses (96,304) (58,359) (47,167) Severance fee (4,281) (23,101) (17,005) Exploration expenses (25,500) (31,187) (28,039) Technical services expenses (4,879) (5,020) (3,843) Other income/ (expense)- net 27, ,258 Profit/ (Loss) before investment income (26,546) 44,388 34,404 Investment income 225, , ,263 Net income prior to unusual provisions 199, , ,667 Unusual provisions (446,293) - - Net income (247,203) 317, ,667 Consolidated cash flow statement Profit before investment income (26,546) 44,388 34,404 Adjustments for non-cash items 52,258 62,016 51,597 Unusual provisions (446,293) - - Net change in working capital (224,334) 55,934 68,302 End of service indemnities paid (2,121) (3,305) (2,089) Cash flow from operating activities (647,035) 159, ,149 Long-term investments - 65, ,000 Interest income received 292, , ,615 Long-term receivable 2,452 (16,337) (35,874) Additions to pre-operating expenses and deferred charges (173,726) (298,882) (195,105) Additions to property, plant and equipments (142,317) (95,887) (94,806) Proceeds from investment in company under formation (1,383,663) - - Cash flow from/used in investing activities (1,404,681) (94,465) 275,830 Net increase/ (decrease) in cash, cash equivalents and short term investments (2,051,716) 64, ,044 Cash, cash equivalents and short term investments at the beginning of the year/period Cash, cash equivalents and short term investments at end of the year/period 4,746,653 4,682,086 4,254,042 2,694,937 4,746,653 4,682,086 Consolidated balance sheet Current assets 3,155,902 4,990,300 4,915,697 Non-current assets 2,692,491 1,047, ,748 24

26 Total assets 5,848,393 6,037,649 5,659,445 Current liabilities 252, , ,596 Non-current liabilities 111, ,686 97,480 Shareholders' equity 5,484,144 5,731,348 5,413,369 Total liabilities and equity 5,848,393 6,037,649 5,659,445 25

27 Contents Summary of The Offering Key Dates for Investors How to Subscribe Summary of Key Information Summary Financial Information Industry Overview The Company's Business Aluminium Project Mining and Environmental Regulatory Framework Corporate Structure Related Party Transactions Accountants' Report Management's Discussion & Analysis of Financial Condition & Results of Operations134 Dividend Policy Use of Proceeds Underwriting Description of Shares Summary of Bylaws Subscription Terms and Conditions Legal Information Summary of Material Agreements Documents Available for Inspection Mineral Experts Reports Gold Mineral Expert's Report Phosphate Mineral Expert's Report Aluminium Mineral Expert's Report Glossary of Technical Terms Annexes Annex A Audited consolidated financial statements for the years ended 31 December 2006, 2005 and

28 Definitions and Abbreviations Term Rio Tinto Alcan AlumCo Aluminium MER Aluminium Project Applicant Auditors Authority Az Zabirah Deposit Bylaws Board of Directors (The Board) CAGR Prospects Common Infrastructure Company or Ma aden Companies Regulations Director Exchange Financial Advisor and Sole Bookrunner Financial Statements Definition Rio Tinto Alcan, Inc., a subsidiary of the Rio Tinto group formally Alcan, Inc, The joint venture company to be established for the purpose of operating the Aluminium Project The report entitled Mineral Independent Experts Report for the Aluminium Project prepared by Behre Dolbear and included in this Prospectus The Aluminium Project to be undertaken by AlumCo as further described in this Prospectus An Individual Subscriber or an Institutional Investor Deloitte & Touche Bakr Abulkhair & Co The Capital Market Authority The Bauxite deposit located at Az Zabirah as further described in this Prospectus The bylaws of the Company The Board of Directors of the Company The Ad Duwayhi, Zalim, As Suk, Ar Rjum, Mansourah and Masarrah exploration prospects located in the Central Arabian Gold Region (CAGR) Infrastructure common to the Phosphate and Aluminium Projects as further described in this Prospectus Saudi Arabian Mining Company (Ma'aden) The Regulations for Companies, issued under Royal Decree No. M/6, dated 22/3/1385H (corresponding to 21/7/1965G), as amended A director of Ma'aden The Saudi Arabian Stock Exchange (Tadawul) JP Morgan Saudi Arabia Limited The consolidated audited financial statements of the Company for years ended 31 December 2007, 2006 and 2005, and in each case the notes thereto 27

29 Term Gold MER Government Individual Subscribers InfraCo Institutional Investors Institutional Tranche Listing Rules Management Offer Price Offering Offer Shares Official Gazette Official List Definition The report entitled An Independent Mineral Experts Report on the Gold Mining and Exploration Assets of Saudi Arabian Mining Company (Ma aden)" prepared by SRK Consulting and included in this Prospectus Government of the Kingdom of Saudi Arabia Includes Saudi individuals and Saudi women divorced or widowed having minor children from a non-saudi husband who shall have the right to subscribe in their names for her own benefit. 291,375,000 Shares will be allocated to Individual Subscribers representing 63% of the Offer Shares, subject to an increase up to 393,125,000 Shares representing 85% of the Offer Shares. Ma aden Infrastructure Company, a company currently under formation which is to be a wholly owned subsidiary of the Company Includes institutions approached by the Sole Bookrunner after consultation with the Company in accordance with standards previously specified by the CMA. 124,875,000 Offer Shares representing 27% of the Offer Shares will be allocated to Institutional Investors, subject to a decrease of down to 23,125,000 Offer Shares representing 5% of the Offer Shares following an increase in the number of Offer Shares to the Individual Subscribers. The tranche of Offer Shares described as Tranche (B) in "The Summary of Offering Section". The Listing Rules issued by the Authority pursuant to Article 6 of the Capital Market Regulations promulgated under Royal Decree No. M/30 dated 2/6/1424H (corresponding to 31/7/2003G) The current management of Ma'aden SR 20 per share The initial public offering of 462,500,000 Shares representing 50% of the share capital of the Company 462,500,000 Shares the subject of the Offering Um Al Qura, the official Gazette of the Government of Saudi Arabia The list of securities maintained by the Authority in accordance with the Listing Rules Petromin The state petroleum company established in 1962 and owned by the Government of Saudi Arabia 28

30 Term PhosCo Phosphate Project Phosphate MER Port Prospectus Definition The joint venture company established for the purpose of operating the Phosphate Project. The Phosphate Project to be undertaken by PhosCo as further described in this Prospectus The report entitled Mineral Independent Experts Report for the Al Jalamid Project prepared by Behre Dolbear and included in this Prospectus The port relating to Ras Az Zawr location as described in this Prospectus This document prepared by the Company in relation to the Offering Railway The north-south Railway proposed to be established in the Kingdom of Saudi Arabia as described in this Prospectus Receiving Banks Saudi British Bank (SABB), The National Commercial Bank, Bank Al Bilad, Bank Al Jazira, Riyad Bank, Banque Saudi Fransi, The Saudi Investment Bank, Arab National Bank, Saudi Hollandi Bank, Al Rajhi Bank and Samba Financial Group Retail Tranche SAR SR Saudi Arabia SABIC SABIC Group SCPM Shares Subscription Application Form The tranche of Offer Shares described as Tranche (C) in "The Summary of Offering Section". Saudi Railway Company Saudi Arabian Riyal Kingdom of Saudi Arabia Saudi Basic Industries Corp. SABIC together with its affiliates and subsidiaries Saudi Company for Precious Metals (which has since been renamed Ma aden Gold Company) Shares of the Company with a nominal value of SR 10 each Application form to subscribe for the Offer Shares Subscription Period The period from Saturday 02/07/1429H (corresponding to 05/07/2008G), up to and including Monday 11/07/1429H (corresponding to 14/07/2008G). Underwriters Samba Capital, Saudi Hollandi Capital, ANB Invest, Aljazira Capital, Riyad Capital, Calyon Saudi 29

31 Term Definition Fransi, AlBilad Investment Co., Al Rajhi Financial Services Co., Alistithmar Capital, NCB Capital and HSBC Saudi Arabia Limited. Underwriting Agreement The Underwriting Agreement between the Company and the Underwriters, pursuant to which: 1. The Company undertakes to each Underwriter that it will issue and allot the Offer Shares to successful Applicants and/or issue and allot to the Underwriters any Offer Shares that are not purchased pursuant to the Offering (save for the portion of the Offer Shares being allocated to GOSI and PPA); and 2. Each Underwriter undertakes to the Company that it will purchase the Offer Shares that are not subscribed for by successful Applicants (save for the portion of the Offer Shares being allocated to GOSI and PPA). Voting Rights The Company has only one class of shares. No shareholders has any preferential voting rights; each share grants its holder one vote and each holder has the right to attend the ordinary general assembly and to vote therein (for more information please see Voting Rights section) 30

32 Risk Factors An investment in the Shares involves risk. Investors should carefully consider the following information about these risks, together with the information contained in this Prospectus, before deciding to purchase Shares. If any of the following risks actually occur, Ma'aden's business, results of operations and financial condition could be adversely affected. In that case, the trading price of the Shares could decline and purchasers of the Offer Shares could lose all or part of their investment. An investment in the Shares is only suitable for investors who are capable of evaluating the risks and merits of such investment and who have sufficient resources to bear any loss which might result from such investment. A potential investor who is in any doubt about the action he or it should take should consult a professional advisor who specialises in advising on the acquisition of shares and other securities. The risks and uncertainties that Management believes are material are described below. However, these risks and uncertainties may not be the only ones faced by Ma'aden and are not intended to be presented in any assumed order of priority. Additional risks and uncertainties, including those currently unknown, or deemed immaterial, could have the effects set forth above. 1 Risks relating to the development of Ma'aden's projects 1.1 Construction and Project Development Risks Ma aden is subject to risks generally associated with specific companies engaged in construction and development projects and to certain other risks specifically related to its Phosphate and Aluminium Projects and its stated objective of expanding its gold mining operations and exploration activities. These include the following: a. Ma'aden may incur construction and other costs for the Phosphate or Aluminium Projects or other future development projects such as the development of the CAGR Prospects which significantly exceed its current cost estimates due to increased material, labour or other costs or other additional unanticipated costs being incurred, which could make completion or operation of Ma'aden's projects uneconomical. In particular, the cost estimates for the Aluminium Project are based on the recently increased production capacities for the refinery and smelter of approximately 1.8 Mtpy of alumina and 0.74 Mtpy of aluminium respectively. If production capacities were increased further then cost estimates will increase further. Any such further increase in capacity would only occur if Ma'aden determines that it will be economically beneficial to do so. Irrespective of any further possible capacity increases, it is expected that the Aluminium Project costs will undergo revisions in any event as: (1) project optimisation and capital reduction initiatives are undertaken by Ma'aden and Rio Tinto Alcan; (2) the financing plan and its associated costs and stand-by equity support requirements are defined; (3) advance engineering and construction contracts are awarded; and (4) other elements are identified for adjustment (upward or downward) by Ma aden or its joint venture party Rio Tinto Alcan. b. Notwithstanding the Government's support of the Phosphate and Aluminium Projects to date, principally through its undertaking to finance and provide supporting infrastructure, it is possible, due to changes in permitting regulations and policies or other reasons not currently known to Ma'aden, that Ma'aden may be unable to obtain or renew, or face delays in obtaining or renewing, required mining, exploration, industrial, land use, building, occupancy, and other Governmental permits, authorisations or permits. This could result in increased costs or delays and could require Ma'aden to abandon its activities entirely with respect to one or 31

33 both of these Projects or other projects, including Ma'aden's proposed development of the CAGR Prospects. c. Ma'aden may experience delays in completing, or be unable to complete, the construction of mining or processing facilities or certain key infrastructure for either or both of the Phosphate or Aluminium Projects or other projects including Ma'aden's proposed development of the CAGR Prospects as a result of technology failures, contractor or sub-contractor default or poor performance, accidents, force majeure type events and other factors beyond the control of Ma'aden. In the case of the Phosphate and Aluminium Projects, such a delay or failure to complete one of the elements of these Projects could threaten the successful development or operation of such Project (see risk factor, "Project Interdependencies") and result in a failure to achieve the milestones set for each Project by management (see, "The Company's Business" - "Phosphate: Project Status and Key Milestones" and "Aluminium: Project Status and Key Milestones"). Such a failure or delay may also result in increased debt service expense and increased construction, repair or renovation costs which could in turn result in the termination of its joint venture arrangements with SABIC (in the case of the Phosphate Project) or Rio Tinto Alcan (in the case of the Aluminium Project) or of its future financing and supply agreements, resulting in claims by third parties for damages for breach of sales and supply contracts or the termination of such contracts. This risk is considered greater in the case of the Aluminium Project given its earlier stage of development. d. There are currently shortages of mining equipment (such as trucks used to transport ore), experienced engineering, procurement and construction contracting firms, skilled operating personnel, plant and equipment and building materials such as steel affecting the Saudi market and the Middle East generally, due to the level of current and planned projects in Saudi Arabia and the region generally. Such shortages have affected the performance, timing and pricing of project contracts and could adversely impact either or both Projects and/or the development of the CAGR Prospects. e. Ma'aden's future profitability will depend, in part, on the actual economic returns derived from the Phosphate and Aluminium Projects, which may differ significantly from Ma'aden's current estimates. Ma aden's decision to develop the Phosphate and Aluminium Projects was substantially based on the results of feasibility studies carried out in relation to the Projects which included estimates of anticipated returns for the projects. These estimates are based on assumptions about future sales prices, anticipated tonnage, grades and metallurgical characteristics of ore to be mined and processed, anticipated recovery rates of phosphate or bauxite from the relevant ores, anticipated capital expenditure and cash operating costs, and the anticipated return on investment. In the event that actual cash operating costs and economic returns differ significantly from those anticipated by the studies and estimates Ma'aden's future development activities may be less profitable than currently anticipated or may not be profitable at all. f. The processing facilities for the Phosphate and Aluminium Projects at Ras Az Zawr will rely on specialised technology for their operation. Whilst this technology is being supplied by experienced providers and has been the subject of various technical and feasibility studies by independent consultants, there is a risk that the technology may not initially produce at its design capacity or achieve the desired product quality. For example, alumina refinery design is specific to the grade and quality of the bauxite at Az Zabirah and is therefore unique. In the event that the technology used in the processing facilities does not produce the desired quantities or quality of products Ma'aden may incur significant costs in rectifying any defects in the operation of the technology. 32

34 g. Although a mandate letter appointing arrangers and underwriters for Phosphate Project debt financing has been executed in December 2007 and formal documentation for the Phosphate financing is expected to be executed in the third quarter of 2008, Ma'aden has not as yet concluded any third party financing arrangements to provide the funding required to develop the Phosphate or Aluminium Projects or associated infrastructure. Working capital reserves combined with equity funding resulting from this Offering and contributions from joint venture partners will not be sufficient to cover all funding requirements for these projects. Accordingly, Ma'aden will be reliant on obtaining funding from either affiliated or unaffiliated sources. There is no assurance that sufficient financing will be available for the successful development of these projects or, if available, will be available on reasonable terms. Adverse changes in the credit markets may affect the cost or availability of debt finance which may have the effect of increasing the costs associated with either Project. h. The Company has not yet entered into a Railway Transportation Agreement with Saudi Railway Company ( SAR ) and/or the railway operator with respect to the operation of the proposed Railway that will link the phosphate mines at Al Jalamid and the bauxite mine at Az Zabirah to Ras Az Zawr and Jubail. As a result, at this point the railway tariffs for the Company's use of the Railway have not been finalised (although discussions have been held concerning such tariffs). Whilst the Company contemplates that tariffs will be set within a particular range that will make both Projects economically feasible there can be no guarantee that such terms will be reflected in the final Railway Transportation Agreement or any other arrangement between the Company and SAR and/or the railway operator. It is anticipated that the tariffs charged for Ma'aden's use of the Railway will form a material element of the Company's operating costs. Accordingly, unless the tariffs are fixed at an appropriate level and period there may be a material adverse effect on Ma aden s business, prospects, operating results, financial condition, and its Share price. i. Ma'aden has been granted an industrial licence for the production of alumina and aluminium at Ras Az Zawr which will permit Ma aden to sell 0.20 Mtpy of alumina per year with the surplus to be used in the production of 0.74 Mtpy of aluminium per year. Currently estimated production capacities of up to 1.8 Mtpy for alumina and up to 0.74 Mtpy of aluminium are likely to result in approximately 0.23 Mtpy of alumina being available for sale. The terms of the licence require Ma aden to inform the Ministry of Petroleum and Precious Metals (the Ministry ) of any changes to the production capacities of the Aluminium Project as the project design is further developed. There can be no guarantee that the Ministry would be prepared to amend the scope of such licence to reflect the increased capacities or that were it to do so that it would not impose conditions unfavourable to Ma aden. Nor can there be any assurance that further revisions to the scope of the Aluminium Project requiring further amendments to the scope of the industrial licence will not be made or that if they are, the Ministry would be prepared to amend the scope of licence appropriately or that were it to do so that it would not impose conditions unfavourable to Ma aden. Further, whilst Ma aden has been granted a 30 year mining licence with respect to the mining of the Az Zabirah Deposit, Ma aden, requires a significant number of other licences to develop and operate the Aluminium Project (see, Legal Information - Mining and Exploration Licences and Other Permits and Authorisations section) including a certificate of environmental approval which, under the terms of the industrial licence, must be obtained before production is permitted to commence. This has been issued based on the previous capacities and will need to be re-issued to reflect the revised capacities of the refinery and the smelter. Other outstanding licences which are required to be obtained relate to the construction of facilities and infrastructure at Ras Az Zawr and include a licence to construct and operate the power, desalination and steam plant. Whilst the Company is confident that it can obtain such further licences 33

35 and on terms that will enable it to develop and operate the Aluminium Project as currently envisaged, there can be no guarantee that such licences will be granted and if granted that they will contain appropriate terms. The occurrence of any of the circumstances described above could have a material adverse effect on Ma'aden's business, prospects, results of operations and financial condition and/or its Share price. 1.2 Project Interdependencies The Phosphate and Aluminium Projects are complex, large scale projects which comprise a number of different elements relating to the mining of minerals, mine site processing, transportation and the downstream processing of mineral ores and raw materials. The operation of many of these project elements is interdependent with other elements meaning that the successful completion of the various integrated elements of a particular project in accordance with the project schedule becomes critical to the success of that project as a whole. In the case of the Phosphate Project all five processing plants, two power stations, the Railway and the Ras Az Zawr infrastructure, including the Port and support facilities, are required to be completed for the project to achieve operational readiness. For example, should the sulphuric acid, phosphoric or ammonia plants not be operational on time for any reason, including delays or performance failure associated with LSTK EPC contracts for the plant, the phosphoric acid or ammonia needed to produce DAP will not be available and production of DAP could be delayed. Similarly, a significant delay in completion of the construction of the Railway or the Port at Ras Az Zawr or the existence of operational problems with respect to either the Railway or the Port would be likely to significantly prejudice the successful outcome of both projects and in any event severely disrupt Ma'aden's ability to transport mineral extracts and raw materials and to export its key products. Ma aden has contingency plans to deal with circumstances where one of the project elements is not completed in a timely manner, including transportation of phosphate or bauxite by road if the Railway is not completed on time and the importation of intermediate feedstock. Nonetheless, the occurrence of such delay or operational problems may have an impact on the timing of completion of another element of the project and thus ultimately Ma'aden's ability to begin production of DAP and/or aluminium, which may have a material adverse effect on Ma'aden's business, prospects, results of operations and financial condition and/or its Share price. 1.3 Dependence on Key Third Parties including the Government of Saudi Arabia, Joint Venture Partners, Contractors and Financiers During the execution and operational phases of the Phosphate and Aluminium Projects Ma'aden will be dependent on the support and contributions of a number of key third parties as described below: a. Joint Venture Partners Ma aden will be dependent on SABIC and Rio Tinto Alcan (or any other strategic partner) for the provision of technical support services, know-how, management and technical expertise, and marketing services. If, for whatever reason, such technical and other services were not available to Ma'aden it could suffer increased costs and liabilities and disruption to the execution or operation of its projects. On 15 November 2007 Rio Tinto completed the acquisition of 100% of the issued capital of Rio Tinto Alcan pursuant to a takeover offer. Accordingly, Rio Tinto has assumed 34

36 control of Rio Tinto Alcan and has the ability to control or influence Rio Tinto Alcan's activities including the development of proposed projects such as the Aluminium Project. Whilst Ma'aden has no reason to believe that the development of the Aluminium Project will not proceed as contemplated in the Aluminium HoA, it is possible that the Aluminium Project may not proceed in this manner or at all resulting in a material adverse effect on Ma'aden. On 8 November BHP Billiton confirmed that it had approached Rio Tinto with a proposed offer to acquire the Rio Tinto group (including Rio Tinto Alcan but excluding debt) for approximately SR523 billion (US$141 billion). Rio Tinto rejected the proposal on the basis that its board believed the offer to undervalue Rio Tinto and its prospects. On 6 February 2008 BHP Billiton made a revised offered to acquire the group offering 3.4 BHP Billiton shares for every Rio Tinto share valuing the Rio Tinto group at approximately SR (US$147.4) as of 4 February Rio Tinto s board has rejected the revised offer on the basis that it believes that the offer significantly undervalues Rio Tinto. Should however this or a further offer be successful BHP Billiton will assume control of Rio Tinto Alcan (as a subsidiary of Rio Tinto) and the development of the Aluminium Project will be subject to the same risks described in the foregoing paragraph. b. Government of Saudi Arabia The Company will continue to depend on the Government with respect to its development of the Port and the Railway as key supporting infrastructure for the operation of the Phosphate and Aluminium Projects. In addition, sourcing low cost and secure energy supplies through Saudi ARAMCO will be critical to the success of these projects. Whilst the Company has no reason to believe that the Government will withdraw its support, any failure to develop or any delay in developing this key supporting infrastructure could have a material adverse effect on the Phosphate and Aluminium Projects. c. Contractors Ma aden will also be heavily dependent on third-party contractors and consultants in order to carry out its development of the Phosphate and Aluminium Projects as well as current gold mining operations, the proposed development of the CAGR Prospects, and to carry out future operations generally. Such services may include the provision of project management, engineering, construction, process design and planning. Some of the services required for Ma'aden s operations and project developments may only be available on commercially reasonable terms from one or a limited number of appropriately skilled providers. These operations and project developments may be interrupted or otherwise adversely affected by a failure to supply, or delays in the supply of these services by third party providers, by any material change to the terms on which these services are made available by third party providers, and/or by the failure of third party providers to provide services that meet Ma'aden s quality requirements. If Ma'aden is forced to change a provider of such services, this may result in Ma'aden experiencing additional costs, interruptions to current operations or to the development of projects, including in particular the Phosphate and Aluminium Projects, or some other adverse effect on its business. There is also no guarantee that Ma'aden will be able to find adequate replacement services on a timely basis or at all. d. Financiers The development of Ma'aden's projects including, in particular its Phosphate and Aluminium Projects and the expansion of Ma'aden's gold mining and exploration business will require significant capital expenditures and, in addition to debt finance, Ma'aden will be relying on third-party sources of capital for this purpose. This will include SABIC in the case of the Phosphate Project and Rio Tinto Alcan, in the case of the Aluminium Project, each of whom will have funding commitments pursuant to their respective joint venture arrangements, subject to formal documentation being signed. Should Rio Tinto Alcan not 35

37 enter into formal joint venture documentation or SABIC or Rio Tinto Alcan fail to meet their respective funding commitments, then Ma'aden will have to seek alternative sources of capital which may or may not be available on terms satisfactory to Ma aden or at all. In addition, Ma'aden may require third party capital for the development of other future projects. Ma aden s access to third-party sources of capital to fund any project depends on a number of factors, including the market's perception of Ma'aden s growth potential and Ma'aden s current and potential future earnings. If Ma'aden is not able to obtain thirdparty sources of capital on favourable terms, Ma'aden s planned development and hence its business, financial condition and results of operations could be adversely affected, which could result in a decline in the market value of its securities. Moreover, additional equity offerings may result in dilution of Ma'aden's shareholders' interests, and additional debt financing may substantially increase Ma'aden s leverage. Whilst Ma'aden is currently negotiating with the key third parties described above, there can be no assurance that such negotiations will be concluded on terms satisfactory to Ma'aden and in a timescale that will enable Ma'aden to meet its project implementation deadlines. Delay in the provision of or failure by any of the above key third parties to provide services, funding or other support on which Ma'aden is dependent may disrupt or prevent the successful development of Ma'aden's Projects and therefore have a material adverse effect on Ma'aden's business, prospects, results of operations and financial condition and/or its Share price. 1.4 The Company's rights to use the land at Ras Az Zawr have not been formalised The land at Ras Az Zawr on which the Phosphate and Aluminium production facilities will be constructed is owned by the Government. The land was subject to a "right of use" granted in favour of Saudi ARAMCO which was subsequently released so as to make the land available for Ma'aden's Phosphate and Aluminium Projects. It is intended that ownership of the land will remain with the Government, represented by the Property Department of the State. Steps are currently under way to register the land in the name of the Property Department of the State for use by Ma aden At that stage, the allocation of the land to Ma'aden will be formalised and the terms and conditions of occupation of the land by Ma aden will be agreed with the relevant Government Agencies (including the period of the allocation, and whether a rent or some other fee will be payable by the Company in connection with its occupation of such land or Ma aden s right to sublease or licence portions of the land to PhosCo and AlumCo). If the land allocation is not formalised or is not formalised on terms satisfactory to Ma aden, then there is likely to be a material adverse effect on Ma'aden's business, prospects, results of operations and financial condition and/or its Share price. 2 Risks relating to the operation of Ma'aden's projects 2.1 Ma aden's future operations will be energy-intensive and, as a result, its profitability may decline if energy costs were to rise, or if energy supplies were interrupted In the event of the successful completion of Ma'aden s Aluminium and Phosphate Projects, Ma'aden will consume substantial amounts of electrical energy in its operations and interruptions in energy supply could materially adversely affect Ma'aden. In addition, aluminium smelters generally require an uninterrupted supply of intense electrical energy, and any interruption for more than a very short duration, whatever the cause, may result in the solidification of aluminium in the pots, with widespread damage to the pot-line and resulting capital costs and interruptions to business resulting from the need to replace significant items of equipment. The availability of electricity is influenced by a number of factors many of which are beyond Ma'aden's control, including, but not limited to, supply interruptions, price fluctuations and natural disasters. Operating expenses at Ma'aden's proposed phosphate and bauxite mining locations are sensitive to changes in electricity and fuel prices which may fluctuate significantly, including 36

38 diesel fuel, which Ma'aden will be using for its equipment and as a source of its electricity. If energy costs were to rise, or if energy supplies or supply arrangements were to be interrupted, the profitability of future DAP, aluminium or gold production activities may decline causing a material adverse effect on Ma'aden's business, prospects, results of operations and financial condition and/or its Share price. 2.2 Ma aden's profitability could be adversely affected by increases in production costs including the cost of raw materials and by disruptions to the supply of raw materials Ma aden's costs of production may increase significantly. Aside from energy costs, Ma'aden's most significant cash costs, include (i) the cost of raw materials used in the production process; (ii) labour costs; (iii) repair and maintenance costs; (iv) freight costs and (v) royalty payments to the Government relating to gold, phosphate and aluminium production. The raw materials that Ma'aden intends to use in manufacturing DAP and aluminium include sulphur, natural gas, lime, calcined petroleum coke and resin. The prices of many of these raw materials depend on supply and demand relationships at a global level, and are subject to continuous volatility. Supply of these raw materials may also be subject to interruptions or delays should failures occur in suppliers plants or in transport infrastructure. Prices for the raw materials required by Ma'aden may increase from time to time and, if they do, it may not be able to pass on the entire cost of the increases to Ma'aden's customers or offset fully the effects of higher raw material costs through productivity improvements. In addition, there may be a potential time lag between changes in prices under supply contracts and the point when Ma'aden can implement a corresponding change under its sales contracts with customers. As a result, Ma'aden may be exposed to fluctuations in raw material prices since, during the time lag period, it may have to temporarily bear the additional cost of the change under its purchase contracts, which could have a negative impact on Ma'aden's profitability. In the event that there are interruptions in or delays to the supply of raw materials Ma'aden may need to find alternate supplies. In these circumstances there can be no assurance that Ma'aden will be able to find a suitable alternate supplier capable of or willing to supply the raw materials in the quantities required or at a price which is acceptable to Ma'aden. Any delay in finding a suitable alternative supplier may result in an interruption of Ma'aden's operations. Increases in production costs including, in particular, the cost of raw material and delays in the supply of raw materials could have a material adverse effect on Ma'aden's business, prospects, results of operations and financial condition and/or on its Share price. 2.3 Ma aden s business is subject to a number of operational hazards and events of force majeure, including the significant risk of disruption or damage to persons and property and operational risks including failure of key plant or equipment Upon completion of the Phosphate and Aluminium Projects, Ma'aden will be operating large scale complex mining operations and processing and refining facilities that are subject to significant operational risks generally associated with mineral companies including industrial accidents, unusual or unexpected geological conditions and environmental hazards. Hazards associated with open-pit mining include accidents involving the operation of open-pit mining that is subject to collapses due to the blasting relating to mining activities and natural flooding. Hazards associated with processing at Ma'aden's mines include the risk of accidents associated with operating crushing and concentrating plant and equipment. Ma aden and its operations may also suffer as a result of other general force majeure type events. Such hazards or events could cause significant damage to Ma'aden's facilities or harm to its workforce, major disruption to production processes and Ma'aden's ability to deliver its products and/or result in significant losses or liabilities being incurred by Ma'aden, any of 37

39 which may have a material adverse effect on Ma'aden's business, prospects, results of operations and financial condition and/or its Share price. The unplanned failure of a key item of plant or equipment, such as power or gas distribution equipment, a mill in the alumina refinery or the sea water cooling system which supplies water to the ammonia and sulphuric acid plants' heat exchangers, or unplanned maintenance and repair work could interrupt Ma'aden's mining or production process. Maintaining production capacity is and will be significant to Ma'aden's business and any interruptions could have a material adverse effect on Ma'aden's business, prospects, results of operations and financial condition and/or its Share price. 2.4 To the extent that Ma'aden increases its indebtedness in the future it will be subject to risks associated with a higher level of indebtedness and to greater constraints on its operational flexibility Although Ma'aden currently benefits from a net cash position, significant increases in indebtedness incurred to fund the development of the Phosphate and Aluminium Projects will expose Ma aden to certain risks. These risks include the possible inability to repay indebtedness, which may result in foreclosure of assets or may require Ma'aden to dispose of assets on disadvantageous terms. Ma aden would be subject to increased interest expense and such indebtedness may increase Ma'aden's exposure to additional costs associated with interest rate fluctuations. The credit facilities Ma'aden proposes to put in place with respect to the new projects are likely to contain customary restrictions and limitations on Ma'aden s ability to incur further debt and impose strict financial covenants requiring certain financial ratios to be met. These covenants are likely to place restrictions on the way in which Ma'aden may finance its operations. If Ma'aden were to breach certain debt covenants in the future, its lenders could require Ma'aden to repay the debt immediately, and, if the debt is secured, may take possession of the property or asset securing the loan. In addition, if any lender declared its loan due and payable as a result of a default, Ma'aden's other lenders would be likely to have the ability to require that those debts owed to them be paid immediately. In these circumstances there could be no assurance that Ma'aden would be able to access sufficient alternative funding to meet such repayments. Any of these risks could have a material adverse effect on Ma'aden's business, prospects, results of operations and financial condition and/or its Share price. 2.5 Failure to obtain approval for or to successfully construct a pipeline for the supply of water to Ma'aden's CAGR Prospects which is suitable for use in the production of gold, could have a material adverse effect on Ma'aden's gold business Development of the CAGR Prospects is critical to the growth and ongoing viability of Ma'aden's gold business, with a number of new mines in this area proposed to be brought into production. However, a means of providing water to the region is required in order to achieve this and management is currently preparing an integrated development plan for the provision of water (and other infrastructure) to facilitate the economic development of the gold resources within the CAGR Prospects. Should the construction of operation of the pipeline prove uneconomic, or should the required approvals and permits for the construction and use of the pipeline not be obtained or be the subject of significant delay, then Ma'aden will not be able to proceed with the development of the CAGR Prospects. This could significantly hinder the growth of the gold business or even render it unviable and could therefore have a material adverse effect on Ma'aden's business, prospects, results of operations and financial condition and/or on its Share price. 38

40 2.6 Ma aden's profitability could be adversely affected by changes in law or regulations in Saudi Arabia Ma aden's business and operations are subject to detailed mining, environmental and health and safety laws and regulations. New or amended laws or regulations may result in significant additional compliance requirements on Ma aden which Ma aden may not be able to comply with either at all or without incurring significant additional costs. Furthermore, any such new or amended laws and regulations could lead to delay in the development of the Phosphate and or Aluminium Projects and or the exploitation of the Company's gold reserves and resources and therefore have a material adverse effect on Ma'aden's business, prospects, results of operations and financial condition and/or its Share price. 3 Risks specifically relating to exploration, mining and production activities and the mining industry generally 3.1 Title to Ma'aden s exploration and mining properties All of the exploration or mining licences which Ma'aden has, or may acquire an interest in, are or will be subject to applications for renewal or issue (as the case may be). Failure to have a licence renewed or issued may have a material negative impact on Ma'aden through loss of the opportunity to discover or develop any mineral resources within the licence area. While Management has no reason to believe that any third parties have claims over the licensed properties, title to such properties may still be subject to potential litigation by third parties claiming an interest in them. The failure to comply with all applicable laws and regulation, including failures to pay royalties or severance payments, meet minimum expenditure requirements, or carry out and report assessment work, may invalidate the licences. Ma aden might not be able to retain its licence interests when they come up for renewal. 3.2 The volume and grade of Ma'aden s Ore Reserves and its rate of production may not conform to current expectations No assurance can be given that the estimated quantities or grades of phosphate, bauxite or gold described in this Prospectus will be available for extraction, that any particular level of recovery of phosphate, bauxite or gold will in fact be realised or that budgeted or expected levels of production of phosphate, aluminium or gold will be achieved. Resource exploration is speculative in nature and there is uncertainty in any mineral resource or reserve estimate. Therefore, the actual deposits and the grade of mineralization actually encountered may differ materially from the estimates disclosed in this document. Moreover, the level of exploration expenditure actually required to delineate a resource or prove up a reserve may be significantly more than initially estimated. There can be no guarantee that an identified reserve or resource will continue to qualify as a commercially mineable deposit that can be legally and economically exploited over the medium to long term. In the case of bauxite reserves it is possible that the grade of bauxite feed may vary substantially from the grade estimated through sampling tests. The alumina refinery has been designed to be optimised for a specific grade of bauxite feed based on the estimated grade of the bauxite reserve. Whilst some allowance has been made for variations in grade, substantial variations could impact the production rate, cost and quality of alumina produced by the refinery. Mining of phosphate, bauxite or gold resources can also be affected by other factors such as permitting regulations and requirements, weather, community or environmental factors which may restrict access to reserves, unforeseen technical difficulties, unusual or unexpected geological formations and work interruptions. The estimated resources and reserves described in this Prospectus should not be interpreted as an assurance of the commercial viability, potential or profitability of any future operations. Additionally, the production of minerals fluctuates materially from year to year. The annual production of gold mineral reached a peak of 239,731 ounces during 2005 and has been 39

41 decreasing since reaching 142,763 ounces for the period ended 31 December 2007, representing a drop of 47% during the intervening period. This decrease was a result of a drop in the reserves at certain mines as well as a drop in the grade of the raw material as well as the level of extractions. 3.3 The profitability of Ma'aden's operations, and the cash flows generated by these operations, will be significantly affected by changes in the market prices for gold, phosphate and aluminium The market price for gold products, DAP and aluminium can fluctuate significantly. These fluctuations are caused by numerous factors beyond Ma'aden's control, including, in the case of gold: speculative positions taken by investors or traders in gold; changes in the demand for gold use in jewellery, for industrial uses and for investment; changes in the supply of gold for production, disinvestment, scrap and hedging; financial market expectations regarding the rate of inflation; the strength of the US dollar (the currency in which gold trades are affected internationally) relative to other currencies; changes in interest rates; actual or expected gold sales by central banks; gold sales by gold producers in forward transactions; global or regional political or economic events; and costs of gold production in major gold-producing nations, such as South Africa, the United States, Australia and Uzbekistan. Factors affecting the market prices for phosphate and aluminium include, in the case of DAP, the cost of the primary raw materials used to make DAP (such as phosphate rock, sulphur and ammonia in the case of DAP and natural gas in the case of ammonia), plant outages, uneven buying patterns, seasonality of planting seasons, vessel delivery patterns, variable weather conditions and, in the longer-term, the expansion or contraction of production capacity of phosphate products worldwide and, in the case of aluminium, the level of demand in end user-markets, such as the automotive, building and construction sectors, which tend to be cyclical and on the supply side the availability of carbon used for the lining of the reduction cells (also known as pots) in aluminium smelters. Indeed, both Aluminium and DAP prices have shown a long run falling trend in real terms (refer to "Industry Overview" - "Phosphate Industry Overview" and "Aluminium Industry Overview"). If revenue from gold sales falls below the costs of production for an extended period in the short term prior to the successful completion of the Phosphate and Aluminium Projects, Ma'aden may experience losses and be forced to curtail or suspend some or all of its current projects and/or operations. 3.4 Ma aden could incur significant liabilities under environmental laws There are certain risks inherent in the activities of mining Groups that could subject Ma'aden to extensive liability under environmental laws. Ma aden's production facilities at Ras Az Zawr will generate hazardous and toxic substances, chemicals, pollutants and other waste which, if not properly managed, are capable of causing damage to human and animal life or to the environment. These include waste products such as "red mud" (a waste material which results from the Bayer process used to produce alumina) in the case of the Aluminium Project and phosphor-gypsum, sulphur dioxide and hydrofluoric gas in the case of the Phosphate Project. A similar risk exists at Ma'aden's production facilities at its various gold mine sites. The discharge, storage and disposal of such waste are subject to environmental regulations, some of which require the clean up of prior contamination and reclamation of mined out areas. Pollution risks and related clean-up costs are often difficult to assess unless long term environmental audits have been performed and the extent of liability under environmental laws is clearly determinable. Ma aden accrues the estimated future environmental costs over the operating life of a mine; however, estimates of ultimate rehabilitation and restoration costs are subject to revision as a result of future changes in regulations, technology and cost estimates. In the future it is also possible that Ma'aden may be exposed to environmental liabilities resulting from the activities of third parties operating downstream facilities at Ras Az Zawr. 40

42 Other activities undertaken by Ma'aden as part of the mining process could lead to environmental problems such as the escape of dust and other pollutants and therefore to environmental claims against the Company. This could result in additional costs being incurred by the Company and potential disruption to Ma'aden's mining operations. Whilst Ma'aden has developed and is developing environmental controls and management systems for its current and future operations in accordance with best practice domestic and international standards, environmental laws and regulations are continually changing and are likely to become more restrictive over time, particularly in the extractive and heavy industries such as aluminium, gold and fertiliser production. If Ma'aden's environmental compliance obligations were to change as a result of changes in the laws and regulations or in certain assumptions it makes to estimate liabilities, or if unanticipated conditions were to arise in its operations, Ma'aden's expenses and provisions would increase to reflect these changes. If material, these expenses and provisions could adversely affect its business, operating results and financial position. Moreover, any changes may have an impact on Ma'aden's ability to access finance for the development of its projects as the provision of funding by financial institutions is likely to be subject to compliance with the Equator Principles, a financial industry benchmark for determining, assessing and managing social and environmental risk in project financing. 3.5 Risk related to Renewal of Mining Licences The Minister of Petroleum and Precious Minerals has the discretion to renew the mining licences for a period or periods not to exceed 30 years, provided that all the conditions and requisite procedures have been complied with and observed without violating the rules which are in place at the time of such renewal. The ability of Ma aden to renew its licences depends on the rules and procedures provided in the Mining Law and its implementing regulations as well as the rules provided in the licence which is the subject of renewal. 4 General Risks Relating to Ma'aden's Business 4.1 Ma aden may not be able to effectively manage its future growth Assuming the successful completion of the proposed Aluminium and Phosphate Projects and development of the CAGR Prospects, Ma'aden will experience significant growth in the next few years. As a result, the operating complexity of Ma'aden's businesses and the responsibilities of its Management will increase significantly. Following the Offering, Management will assume additional responsibilities associated with the operation of a publicly listed company. There can be no assurance that Ma'aden will be able to attract further managers of the quality and experience it desires or successfully manage its future growth. Any inability of Ma aden to successfully manage its growth could have a material adverse effect on Ma'aden's business, prospects, results of operations and financial condition and/or its Share price. 4.2 Ma aden is dependent on its key personnel and maintaining a highly qualified and skilled workforce. Ma aden's future success will depend on its continued ability to attract, retain and motivate highly qualified and suitably skilled personnel at each of Ma'aden's mining facilities, processing facilities and administrative offices. The competition in Saudi Arabia for personnel with relevant expertise is intense due to the current high demand for qualified individuals. Furthermore, the remote locations and severe climatic conditions associated with Ma'aden's mining facilities make it difficult for Ma'aden to attract suitably qualified personnel. Ma'aden lacks experience in developing projects of the proposed scale of the Phosphate and Aluminium Projects and in operating, commissioning and maintaining the processes and 41

43 technology associated with such projects and marketing the resultant products. Accordingly, to some extent, it will be reliant on acquiring technical know-how and expertise from its joint venture parties and other third party providers. While Ma'aden attempts to structure compensation packages in a manner consistent with the evolving standards of the Saudi Arabian market, there can be no assurance that Ma'aden will be able to retain its personnel without affecting Ma'aden's profitability. In particular, Ma'aden may be unable to retain qualified personnel or may be unable to control the costs associated with retaining and motivating highly qualified employees. Failure to successfully manage Ma'aden's personnel needs could materially adversely affect Ma'aden's operations and growth strategy. 4.3 Currency fluctuations may have a material adverse effect on Ma'aden's business, financial condition and results of operations Currently most of Ma'aden's revenues are received in US dollars and it is anticipated that this will continue to be the case following the development of its Phosphate and Aluminium Projects. Fluctuations between the US dollar and other currencies in which it will incur and pay certain project costs could increase project costs and adversely affect Ma'aden's operating margins. 4.4 Ma'aden s insurance coverage may be inadequate and the occurrence of significant uninsured events could materially and adversely affect the business, financial condition and results of operations of Ma'aden Ma aden may become subject to liabilities, including liabilities for pollution or other hazards, against which Ma'aden is not insured adequately or at all or cannot insure. Ma aden's existing insurance policies contain, and future policies are likely to contain, exclusions and limitations on coverage. In addition, Ma'aden's existing insurance policies may not continue to be available and future insurance policies may not be available at economically acceptable premiums. As a result, in the future, Ma'aden's insurance coverage may not cover the extent of claims against Ma'aden for environmental or industrial accidents or pollution. There is a risk that losses and liabilities arising from such events could significantly increase Ma'aden's costs and have a material adverse effect on Ma'aden's business, prospects results of operations and financial condition and/or its Share Price. 5 Risks Related to the Offering 5.1 Shareholders may not receive cash dividends on the Shares Future dividends will depend on, amongst other things, the future profit, financial position, capital requirements, distributable reserves and available credit of the Company and general economic conditions and other factors that the Directors of the Company deem significant from time to time. Also, Ma'aden's ability to declare and pay cash dividends on the Shares may be restricted by, among other things, covenants in credit facilities, the recovery of accumulated losses, compliance with shareholder agreements in each case in relation to Ma'aden's subsidiaries and by provisions of Saudi Arabian law. Accordingly, there can be no assurance as to the distribution of dividends to Shareholders. 5.2 Effective control by the Founding Shareholder The Government, represented by the Public Investment Fund, as founding shareholder will remain in a position to vote in relation to all matters requiring shareholder approval, including the election of the Board and significant corporate transactions. 42

44 Following completion of the Offering, the Government, represented by the Public Investment Fund, will own 50 % of the Shares in issue. Therefore, the Government, represented by the Public Investment Fund, will be able to influence all matters requiring Shareholder approval since it will be able to pass ordinary resolutions without the need for other Shareholders to vote in favour and, similarly, prevent other Shareholders from passing ordinary and special resolutions by voting against them. It may exercise these rights in a manner that could have a material adverse effect on Ma'aden's business, prospects, results of operations and financial condition and/or its Share price. 5.3 Absence of prior trading market and potential volatility of the price of Offer Shares There has been no prior market for the Offer Shares and there can be no assurance that, following admission to the Official List, an active trading market for the Offer Shares will develop. If an active trading market is developed, there is no assurance that this will continue after admission to the Official List or for how long. Various factors, including variations in actual or anticipated operating results, changes in, or failure to meet, earnings estimates or forecasts, market conditions in the industry, regulatory actions, general economic conditions or other factors beyond Ma'aden's control could cause significant fluctuations in the price and liquidity of the Offer Shares. 5.4 Future Share sales Sales of substantial amounts of the Shares in the public market following the completion of the Offering, or the perception that these sales will occur, could adversely affect the market price of the Shares. Upon the successful completion of the Offering, the Government, represented by the Public Investment Fund, may not dispose of any Shares during the period of six months from the date on which trading on the Offer Shares commences on the Exchange pursuant to the Listing Rules. Moreover, Ma'aden does not currently intend to issue additional Shares immediately following the Offering. Nevertheless, the issuance by Ma'aden or sale by the Government, represented by the Public Investment Fund, following the share-restriction period of a substantial number of Shares could have an adverse effect on the market for the Shares and result in a lower market price of the Shares. 43

45 Industry Overview The overviews of the gold, phosphate and aluminium industries provided below have been prepared by CRU (for the phosphate and aluminium industries) and by Brook Hunt (for the gold industry) and have been reviewed by the Company. The overviews contain market and other industry data from external sources, including third party or industry or general publications. The Company has not independently verified such data, and there can be no assurance as to the accuracy and completeness of, and the Company takes no responsibility for, such data. In addition, when considering the industry and market data included in this Prospectus, Subscribers should note that this information may be subject to uncertainty due to differing definitions of the relevant markets and market segments described. The general overviews of the Gold Industry, the Phosphate Industry and the Aluminium Industry set out below were prepared in October 2007 and as such address prevailing market conditions at that time and do not take account of any changes in market conditions which may have occurred since. The overviews do not contain any statistical information for 2007 and have not been updated prior to the date of this Prospectus. Gold Industry Overview Background As a result of its relative rarity, unique lustre, malleability, resistance to corrosion and other unique physical properties, gold has been used in coinage, in jewellery, as a store of value and in various practical applications for thousands of years. Global demand for gold in 2006 is estimated at 3,530 tonnes. Jewellery is the largest component of demand, accounting for around 64 % of the total. Dentistry, electronic and other industrial applications, collectively referred to as non-jewellery fabrication demand, accounted for a further 18 %. Bar hoarding, that is purchases of physical gold for the purposes of investment by private individuals, accounted for seven % of demand. In 2006 the remaining 11 % of demand for physical gold came from gold miners closing out hedge positions; this component of demand is a short-term phenomenon occurring as a result of rising gold prices. Gold is supplied to the market from mine production, recycling or mobilisation of aboveground stocks. Global above-ground gold stocks are estimated at around 158,000 tonnes, of which around 28,500 tonnes is held by central banks (the official sector ). Gold in the form of jewellery accounts for just over 50 % of above-ground stocks. Gold Supply In 2006 global gold supply fell by 4.9 % relative to the prior year, to 3,914 tonnes. Mine production accounts for 63 %, or 2,471 tonnes of this total, with the balance made up by net official sector supply (central bank sales) of 328 tonnes and scrap supplies of 1,115 tonnes. Around 85 % of mine production is from primary gold mines, that is, mines which derive most of their revenue from gold, rather than other co-product metals. The remaining 15 % is mainly from mines for which copper or silver are the main products. Primary gold mines typically produce gold in the form of a doré, which is an alloy of gold and silver plus impurities. A variety of mining methods are used, both underground and open cut. Ore mined underground typically grades between 4 and 15g/t; ore mined from open cuts varies in grade from around 1g/t upwards. A wide range of ore processing techniques are 44

46 employed, depending on the scale of operation, grade and nature of the ore. Where gold occurs in ore as large discrete grains, simple gravity concentration methods may be used; otherwise gold is often extracted by cyanide leaching and adsorption onto activated carbon, followed by elution, electrowinning and smelting to produce doré. Gold mines vary greatly in scale. In many developing countries gold is mined on a small scale by informal sector artisan miners, using rudimentary methods and equipment. At the other extreme, the largest formal sector mining operations extract and process tens of millions of tonnes of ore per year using the largest available mining equipment and advanced processing technologies. Doré is shipped to third party refineries, where it is refined to London Bullion Market Association Good Delivery standard, i.e. cast into bars of prescribed weight and dimensions, containing no less than 99.5 % gold. South Africa is the largest producer of gold, accounting for 12 % of global mine supply, followed closely by the United States, China and Australia, each with a 10 % share of the total. The five largest gold mining companies collectively account for 34 % of global mine production. Brook Hunt expects global gold mine production to increase to 2,566 tonnes in 2007 and 2,794 tonnes in 2010, with significant production increases from the former Soviet states, China, Africa and Asia. Of the other sources of supply, the official sector is comprised of central banks and the IMF. The former have been significant contributors to gold supply since the early 1990s, selling gold at an average rate of 438 tonnes per annum from 1992 to The significant official sector sales that have occurred over the last twelve years have been part of a process of reserve rebalancing which many of the larger central banks have embarked upon in the belief that their reserves were overweight in gold. This process culminated in the signing of the Washington Agreement (WA1) in September Under WA1 fifteen European central banks agreed to limit their sales and lending activities to 2,000 tonnes over the five years to The agreement was renewed in September 2004 (WA2), allowing the signatories to sell up to 2,500 tonnes over the following five years. In 2006 central bank sales amounted to 328 tonnes, as many of the banks who are parties to WA2 elected not to take up their sales quotas for the period, while other banks outside the agreement entered the market as purchasers. Brook Hunt s forecasts of official sector supply assume that the signatory banks take advantage of their full WA2 sales entitlements, and that over the longer term, net official sector sales continue at a rate of tonnes per annum. Scrap is a fairly constant, but low, proportion of total supply, on average over the last ten years accounting for around 830 tonnes of supply annually. In the West, gold jewellery recycling rates are very low, although in Asia jewellery held primarily as an investment may be sold during times of hardship or to realise profit when the gold price is high. Consequently, Brook Hunt's estimate of scrap supply is partly price sensitive, rising and falling in line with gold prices. Gold Demand In 2006 global gold demand is estimated to have fallen by 2.9 % relative to 2005, to 3,530 tonnes, due to a sharp fall in the demand for jewellery. Also in 2006 Gold use in jewellery fabrication fell by 16 % to 2,280 tonnes, as a result of consumers sensitivity to higher gold prices. 45

47 Year-to-year variations in the consumption of gold in jewellery fabrication are driven by numerous factors, but most importantly by the prevailing economic climate and the price of gold. Over the longer term such factors as changing consumer tastes also play a large part. India is by far the largest single jewellery fabricating country, accounting for around 21 % of global demand. Besides adornment, in India gold jewellery is also an important means of storing personal wealth, and has special cultural significance in many other regards. Indian gold demand has declined from 720 tonnes in 1998 to 464 tonnes in 2006, in part due to price sensitivity, but also as a result of consumers growing financial sophistication. Demand recovered somewhat in 2005, reaching 539 tonnes, before resuming its decline in As a luxury consumer item, gold jewellery demand in Western countries is dictated by economic conditions, changing broadly in line with GDP growth. Brook Hunt s forecasts for global jewellery fabrication demand anticipate average annual growth of 1.9 % over the next ten years. Other fabrication demand includes use of gold in electronics, which accounts for around 304 tonnes per annum, followed by dentistry, which requires around 61 tonnes per annum. Coins and medals, plus other miscellaneous industrial and decorative uses account for the balance. With regard to gold demand for investment, bar hoarding is essentially an Asian phenomenon, whereby investors buy gold bars as an investment and store of value. Hoarding demand tends to be negatively correlated with the gold price, although significant swings in annual demand are common and difficult to confidently quantify or attribute to a particular cause. The other main source of investment demand which has arisen in recent years is Exchange Traded Funds (ETFs), which provide investors with a means of investing directly in gold without the costs of purchasing physical metal. Early closure of hedge book commitments by gold miners has been a source of net gold demand since 2000, as this requires that gold is purchased in the marketplace for delivery against the forward sales contracts. Gold demand for net de-hedging in 2006 is estimated at 375 tonnes, having averaged 245 tonnes per annum since As of Q gold miners outstanding hedge books amounted to 1,241 tonnes of gold. Net de-hedging is forecast to continue for the next few years, although at a slower rate, as the outstanding hedges dwindle. Costs Brook Hunt estimates that global average cash cost for gold mine production was US$297/oz in Of this cash cost, costs incurred at mine sites, i.e. mining and processing ore, site general and administrative costs averaged US$287/oz. Smelting and refining costs accounted for costs of US$18/oz, offset by by-product credits, mainly for silver and copper, of US$8/oz. Pricing Most refined gold is traded globally in Over the Counter (OTC) transactions directly between buyer and seller, rather than through exchanges. As well as spot transactions, the OTC market encompasses forwards, options and complex derivative contracts. The main centres for OTC trading are London, New York and Zurich. In addition to the OTC market, gold is traded on futures exchanges such as NYMEX and TOCOM. The most widely-quoted reference price for gold is set each afternoon at the London Gold Bullion Market Association price fixing, usually referred to as the London p.m. fix. Market Outlook The gold price fell to a low of US$253/oz in 1999, its lowest level in nominal terms since 1979, and its lowest in real terms since the 1960s, due to perceived over-supply of gold from mines 46

48 and central bank sales, plus a strong US dollar. Besides fundamental supply and demand parameters, the gold price is strongly influenced by a range of other factors, such as the value of the US dollar relative to other currencies, and perceived geopolitical and economic risks. Since 1999 prices have increased substantially, with the London p.m. fix averaging US$604/oz in Prices have increased in response to falling mine production; the Washington Agreements, which have constrained official sector sales; a weaker US dollar and an increase in perceived geopolitical and economic risks due to terrorism, rising oil prices and concern over instability in financial markets. Brook Hunt expects gold prices to remain firm in 2007 and 2008, with annual averages of US$675/oz and US$690/oz respectively, indicating that investment demand, including ETFs, remains strong. Brook Hunt expects these supportive economic and political factors to continue for some time allowing gold prices to remain at levels in excess of US$500/oz into Phosphate Industry Overview Introduction There is no substitute for phosphorus: it is essential for all plant and animal life. Phosphorus (P) is required for cell division, photosynthesis, flowering, fruiting and rapid root development, and along with nitrogen (N) and potash (K), it is considered one of the three primary plant nutrients. Plants absorb phosphorous from the soil and convert it to forms that can be absorbed by people and animals. On agricultural soils, harvesting and grazing removes plants containing phosphorus, so replacement of the phosphorus in the soil is necessary to improve future crop production. The growth in global population along with improved nutrition will guarantee that demand for food will grow in the future, requiring additional quantities of phosphate fertilizers. Phosphorus is a relatively scarce mineral. Commercially viable phosphorus is found in ore bodies (typically with associated carbonates and silicates), referred to collectively as phosphate rock. Most phosphate fertilizers are manufactured from phosphate rock. While phosphate rock reserves are widespread throughout the world, high-grade deposits with low impurities are becoming more difficult to find and more costly to develop. Diammonium phosphate (DAP) and monammonium phosphate (MAP) (a close alternative) are the primary phosphate fertilizers used in the world today. DAP is the world s most popular and widely traded source of phosphate fertilizer with world consumption estimated by British Sulphur Consultants (BSC) at million tonnes, accounting for 31 % of global phosphate fertilizer consumption whereas world consumption for MAP in 2006 was estimated at million tonnes 1 in 2006, accounting for 20 % of global phosphate fertilizer consumption. DAP has 64 total nutrient units 2 (18 units of nitrogen and 46 units of phosphate). MAP has a similar composition but requires less nitrogen and more phosphorous to produce. The DAP production process has three main steps; mining of phosphate rock, conversion into intermediary phosphoric acid, typically by reacting it with sulphuric acid, and lastly transformation of the phosphoric acid (by the addition of ammonia) to DAP. The total value of DAP produced in 2006 (based on average plant net-back price, deducting freight costs) was an estimated US$8 billion. 1 For the purpose of this analysis, all volumes, costs and prices are on a product tonne basis, rather than P 2O 5 content. 2 A fertilizer's grade refers to the total nutrients (N, P & K) contained in the fertilizer, by weight. 47

49 DAP and MAP only became commercially viable and available in the early 1970s. These two fertilizers played a vital role in boosting agricultural production across the globe. While DAP faces some competition from other types of phosphate fertilizers (in recent years MAP has taken some market share from DAP due to the formers superiority in certain soils and for certain crops), there is no substitute for these phosphate fertilizers as a means of meeting the phosphate nutrient requirements of current global crop production. It is also important to remember that most DAP producers can adjust their product mix of DAP and MAP (using the same granulation equipment and simply adjusting the levels of phosphoric acid and ammonia inputs) based on market conditions for each product, and that Ma aden capacity will have this flexibility as well. There is no substitute for phosphorous rock ore as the phosphorus raw material source for phosphate fertilizers. Phosphorous rock ore is found across the globe, mainly in old marine sediments. Commercially viable deposits are widespread, as the relatively high cost of transporting the ore, in relation to the market price, provides opportunities for smaller producers to exist to supply local markets. The majority of high quality reserves are located in Morocco (and to a lesser extent across the rest of North Africa) and China. The US remains a major producer, but the main production centre in Florida is faced with declining reserves and reserve quality, as well as increased opposition to mining. The industry there is likely to be much less significant relative to the rest of the world within the next 20 years. Mining is a relatively simple operation, though upgrading the raw ore referred to as beneficiation to a grade sufficient to allow conversion to phosphoric acid can be problematic with some deposits. Depending on the characteristics of the deposit and distance to the downstream phosphoric acid/dap complex, the cost of the beneficiated phosphate rock accounts for a little less than one-third of the cash cost of producing DAP. Supply and Demand DAP consumption grew from 5.67 million tonnes in 1975 to million tonnes in 2006 at an annual average growth rate of 5.3 %, though significant year-on-year variation has remained persistent over time. Rapid growth to 1990 was followed by a brief period of low or negative growth during the political and economic restructuring in the countries of Eastern Europe and the former Soviet Union, which were significant suppliers of phosphates up to that point (the economic turmoil led to lower export availability and higher phosphate rock raw material costs to DAP producers dependant on Russian supplies). Growth accelerated again from the early 1990s, propelled principally by the rapid growth of consumption in China and India. Worldwide historical trends in DAP consumption are shown in the table below. Table 2: DAP Consumption Historical Trends A ( 000 tones) Share of World Consumption (%) West Europe 1, % 2.1% 6.6% 5.8% Central Europe % 5.8% 0.7% 0.9% Former Soviet Union % 0.0% 0.0% 0.3% Africa % 3.0% 2.6% 3.0% North America 3, % 28.9% 18.0% 12.2% Central America % 3.5% 1.5% 2.1% South America 1, % 4.4% 3.7% 5.1% Middle East 1, % 12.4% 8.5% 5.0% South Asia 9, % 24.5% 20.7% 33.0% SE Asia 1, % 0.4% 3.2% 4.9% East Asia 6, % 11.8% 30.2% 24.8% Oceania % 3.2% 4.1% 3.0% World Total 27, % 100.0% 100.0% 100.0% Data: IFA, British Sulphur Consultants 48

50 China s use of DAP began in the late 1970s. DAP consumption grew by an average 11.8 % per annum between 1980 and 2006, and currently accounts for 22.9 % of global consumption. Furthermore, China s combined DAP and MAP demand accounts for 28 % of global consumption. China was once the world s largest importer, accounting for over one-third of trade in the mid to late 1990s. By 2005 China's DAP/MAP exports equalled its DAP/MAP imports, following rapid development of their domestic phosphates capacity. India s DAP consumption grew by an average 10.6 % per annum between 1975 and 2006 (9.4 % per annum from ), and currently accounts for 27.9 % of global consumption. Going forward, CRU expects DAP and MAP consumption growth to exceed overall phosphate fertiliser demand growth, with DAP/MAP consumption rising at about 2.7 % per annum to 2025, while phosphate fertilisers in total are expected to rise by 1.8 % per annum. This is a continuation of the current trend whereby high analysis products replace lower analysis products due to superior performance characteristics and lower transport costs per tonne of nutrients. The bulk of new demand is expected to continue to come from Asia (DAP and to a lesser extent MAP) and South America (primarily MAP). Broadly speaking on a global basis, the growth in DAP production has matched the growth in demand. Year to year imbalances between consumption and production are reflected in changes in industry inventories. Changes in the geographical location of production are reflected in the following table. Table 3: DAP Production - Share of World Production (%) ( 000 t) West Europe % 1.3% 1.3% 1.1% Central Europe % 5.2% 1.5% 1.1% FSU 2, % 0.0% 4.3% 8.1% Africa 2, % 4.2% 9.9% 8.1% North America 8, % 67.3% 60.0% 31.8% Central America 0 2.0% 0.6% 2.4% 0.0% South America % 1.3% 0.3% 0.1% Middle East 1, % 6.1% 5.7% 5.1% South Asia 5, % 6.2% 11.0% 19.3% SE Asia % 1.1% 0.6% 0.4% East Asia 6, % 6.0% 3.0% 22.7% Oceania % 0.7% 0.0% 2.1% World Total 27, % 100.0% 100.0% 100.0% Source: IFA, British Sulphur Consultants The US was the first nation to construct and operate large-scale DAP production plants, largely to satisfy their own consumption, and subsequently for export. As the technology became more widely known and accepted, other nations, particularly those that were already producing phosphate rock and other downstream products for export became DAP producers as well. Also, in a few instances, productive capacity was built largely on the basis of serving a large domestic market (by importing the raw materials). This process began slowly in the 1970s, but rapidly accelerated through the end of the 1990s. Currently, the trend continues to push new production towards areas not only with lower-cost phosphate rock resources, but ready access to cheaper sulphur/sulphuric acid and ammonia. The biggest changes since 1975 have been the decline in the relative importance of the US as a global supplier, in the face of rapid production growth in China and India, though the latter is largely dependant on imported raw materials. China is now the second largest producing country in the world, following the US, but is expected to become the global leader within 3-4 years. In general, China does not have particularly low cash costs, but it has been able to grow production to feed its rapidly growing domestic market due to low capital and 49

51 labour costs (capital costs are kept low primarily by incorporating lower-cost domestic engineering, fabrication and construction services). Costs In 2006, British Sulphur Consultants estimates the average cash operating cost (which does not include delivery to market) for all DAP producers as US$221 per tonne 3. The table below shows the major components of costs, which are spread fairly broadly across the three main raw material components and the costs of conversion (these are the costs associated with converting the various raw materials into intermediates and subsequently into the final product). Table 4: Cash Operating Costs by Major Cost Component (2006) (nominal US$/tonne) US$/tonne % of total Phosphate Rock % Sulphuric Acid % Ammonia % Conversion % Total % Note: Conversion costs include all other cash costs Data: British Sulphur Consultants The average cost conceals a large variation in costs between the high and low end of the cost curve, from a minimum of US$156 per tonne to a maximum of US$277 per tonne. In addition, transportation costs to end-user markets can be very significant (for example, the plant with US$156 per tonne cash costs also faces around US$40 per tonne in transport costs just to reach an export port). Because of the sometimes very significant logistical costs, planned new DAP plants will consider the costs of delivering the product along with the cash cost curve, and result in situations where plants with a large local market may be built despite being relatively high on the industry cash cost curve. Because of the cyclical nature of the purchased raw materials (i.e.; ammonia, sulphur and phosphate rock), there can be a great degree in variability in costs at a particular plant from one year to the next. Most new and planned DAP plants are being built with captive phosphate rock and phosphoric acid capacities resulting in relatively low cash operating costs typically around US$ per tonne. Prices DAP, as well as other phosphate fertilizers, its raw materials or intermediates phosphate rock, sulphur/sulphuric acid, phosphoric acid, ammonia are not exchange-traded commodities (with some very minor exceptions). DAP prices 4 are typically determined via public tenders, some negotiated contracts for specified quantities over a period of time i.e. six months or a year (with a formula to adjust for changes in the market price over time) and as spot sales. As such, DAP market prices are quite transparent, with several fertilizer trade publications quoting them on a weekly basis. 3 DAP prices are expressed in US$ per metric tonne of DAP product (46% P 2O 5). 4 DAP prices represent sales between suppliers and buyers. These buyers typically resell these products to other resellers or end users (the farmer). Ma'aden and SABIC will likely sell its products through importers in the host country (both private and public) or through international fertilizer brokers. It is unlikely that Ma'aden will sell any of its products directly to the farmer. 50

52 Typical supply/demand issues move the market price. In recent years the escalation in the cost of phosphate rock/phosphoric acid raw materials (whether as a direct production cost for an integrated producer or, most significantly, as purchased by non-integrated producers) have played an increased role in moving prices to their current highs, by shifting the equilibrium price higher. This has led to a greater disparity between the margins received by integrated producers and those that rely on purchased raw materials/intermediates, with the former enjoying record margins. High ammonia prices have played a similar, though smaller, role in moving prices higher. The history of prices shows a long run falling trend in real prices, using the US GDP deflator to bring prices to 2006 equivalents, though the rate of decline has slowed over the past decade. For a commodity like phosphate, the decline in real prices is typical, as manufacturers have built larger, more technically efficient plants to reduce costs and stay competitive. In addition, a degree of oversupply characterised the market in many of the past 15 years, primarily the result of limited producer discipline for example, state-controlled companies would often bring new capacity on stream with little regard to the industry supply/demand balance, instead they have been more concerned about growing their domestic industrial base and to provide employment. The average rate of decline in real prices from has been 0.9 % a year. Apart from the long run trend, another important aspect of prices is cyclical behaviour, as illustrated by the table below. These cycles result because the growth in demand and the additions to capacity are not in synch, which is brought about by a myriad of factors including farm product pricing (influenced by weather, government intervention) and developments in the upstream phosphate rock and phosphoric acid markets. The Tampa price has historically served as the benchmark for international DAP sales since the US is the world s largest exporter currently representing 46 % of international DAP trade. Freight costs are important to determine delivered cost to the customer s port-of-entry and the competition will adjust free on board ( fob ) values from the suppliers port-of-export to be competitive. Table 5: DAP Benchmark Price, fob Tampa ($ per tonne) Year Price Year Price Year Price Source: CRU Strategies Outlook The maintenance of the healthy growth rates of DAP consumption depends heavily on the continued growth of the world economy and particularly the economies of the developing world, as increased incomes there have a more significant impact on food demand. Growth of over four % a year in the global economy looks probable over the next 10 years, barring a major economic recession. Recessions can slow the growth in DAP demand by reducing incomes and thus reduce food demand. 51

53 The increase in supply to meet this demand is likely to come mostly from China, the Middle East and North Africa. China has a large and growing DAP market, with low capital and labour costs. We expect that, going forward, China will meet the vast majority of this demand with domestic production, though still likely importing volumes into the north due to logistical constraints within China. CRU do not believe that China will become a major exporter, as China's government has made it clear that phosphate is considered a strategic natural resource and has enacted a less favourable tax treatment and tariffs on phosphate rock and DAP exports. The Middle East and North Africa hold advantages to varying degrees pertaining to lower raw material costs by integration into those raw materials or simply capturing savings due to proximity to existing suppliers. Conversely, some older, non-integrated capacity in the US, Europe and possibly India can be expected to close down, especially those plants that purchase high cost phosphate rock. This is expected to occur following a period where they are expected to operate in a negative cash flow scenario, preventing them from servicing existing debt (which in some cases is considerable). This will be brought about by a combination of new capacity additions exceeding demand growth and continued high phosphate rock pricing. CRU Strategies believes that its forecasts of announced and probable projects suggest a period of falling phosphate fertilizer prices to around 2011 to 2012, which is likely to trigger a capacity rationalisation that will bring about the next cyclical upturn. In addition, sustaining current levels of DAP prices depends on continued producer discipline, specifically those that sell phosphate rock and/or phosphoric acid. By exercising caution in expanding capacity, they may be able to prevent, or at least prolong, the current relative market tightness. With concentration in the phosphate rock and phosphoric acid export markets at 95 % (from nine companies and China) and 90 % (from seven companies and China) respectively, continuation of producer discipline also appears probable. Producers appear to have gravitated towards concentrating on margin over the past few years, rather than tending to target volume, as they did in the past. DAP prices are likely to continue to be cyclical, driven by the cyclical nature of the raw material inputs costs (phosphate rock, ammonia and sulphur), economic growth fluctuations and the uneven additions of new capacity. However, the trend in prices will be dictated by costs of production in the long run, and it is our belief that there has been a structural shift upwards in these costs, due to higher capital costs and producer discipline among the sellers of phosphate rock and phosphoric acid. Aluminium Industry Overview Introduction The aluminium industry is the world s second largest metals industry, after steel. The world consumption of primary aluminium in 2006 was estimated by CRU at million tonnes. Primary aluminium is aluminium made from alumina (which is made from bauxite). In addition, there is consumption of secondary aluminium (made from scrap), estimated at 14 million tonnes in The total value of primary aluminium produced in 2006 was US$88 billion. Primary and secondary aluminium is further transformed into various semi-fabricated products rolled sheet, coil and plate, extruded bars and sections, wire-rod, castings and forgings, before final use in manufacturing. Aluminium has a relatively short history as an industrial metal. Its widespread use only became viable in the last decades of the nineteenth century, with the discovery of the Hall- Heroult process for the electrolytic smelting of aluminium, and the Bayer process for the production of alumina. Prior to these discoveries, aluminium was a semi-precious metal. The twin processes are still in use today as the main (indeed almost exclusive) processes for producing aluminium. 52

54 The applications of aluminium took off very rapidly in the Second World War, due to military uses. Non-military applications then grew rapidly between 1945 and 1970, by which time the uses of aluminium were very broadly based. The main uses include transport (in road vehicles, aircraft, railcars and marine uses), in packaging (drinks cans, aluminium foil), construction (windows, doors, cladding, facades), electrical (cable and wire), consumer durables, and in fabrication. The key properties of aluminium that lead to this wide array of applications are its light weight, high strength to weight ratio, good electrical conductivity and machinability. Aluminium faces competition from a variety of materials, depending on the application. Its main substitutes are steel (in transport, construction, packaging and engineering), plastics (in packaging and construction) and copper (in electrical applications and heat exchangers). Aluminium is a very abundant element in nature, but its main commercial ore is bauxite. Bauxite is largely found in tropical areas of the world, with the main global reserves located in Australia, Brazil, Guinea, India and Jamaica. Mining is a relatively simple operation, and the cost of mining bauxite forms only a small proportion of the total cost of producing primary aluminium. Aluminium is produced from bauxite in two stages. First, bauxite is processed in an alumina refinery to produce alumina (Al 2 O 3 ) an oxide of aluminium. Secondly, alumina is processed into aluminium in an electrolytic smelter. The main costs of converting bauxite into alumina are energy (in the form of process steam for digestion and fuel for calcination), labour and caustic soda. The main costs of converting alumina into aluminium are power, labour and carbon products (coke and pitch). Relative costs of production and freight tend to favour the processing of alumina close to the source of bauxite, and the processing of aluminium close to a source of low cost power. Supply and Demand The consumption of primary aluminium grew from 4.1 million tonnes in 1960 to million tonnes in 2006, an annual average growth rate of 4.66 %. As the table below shows, the demand growth rate has varied over time. Rapid growth to 1974 was followed by a period of slower growth in the following two decades. Growth accelerated again from the early 1990s, propelled principally by the rapid growth of consumption in China, as well as the resumption of economic growth in the countries of Eastern Europe and countries of the former Soviet Union. Table 6: Primary Aluminium Consumption ( ) (million tonnes) '06 '05-06 EU/EEA Other Europe CIS North America Latin America Middle East/Africa India China Japan South & East Asia Oceania Total Source: CRU The table also shows the relative importance of different geographical regions in primary aluminium consumption. Until the late 1980s consumption was dominated by North America, Western Europe, Japan and the Soviet Union. Since 1990 the main features have been the 53

55 rapid growth in China and the rest of South East Asia, and the rapid decline and then recovery of former Eastern Bloc economies. China s primary aluminium consumption grew by an average 13.9 % a year between 1989 and 2006, by which year it accounted for 25.6 % of global consumption surpassing the shares of North America and Western Europe. Between 2000 and 2006, China contributed 59 % of the total global growth in primary aluminium consumption. The largest end use is transport which accounted for 30 % of aluminium consumption (primary and secondary) in 2006, and grew by 6.2 % per year from 1994 to The second biggest market, construction, is more mature. It accounted for 19 % of consumption in 2006, having grown at an average 3 % a year over the previous 12 years. Packaging (10 % of consumption) is the slowest growing market (1.5 %). The other main markets electrical (11 %), machinery and equipment (9 %) and others (21 %), have all grown at over 4% a year between 1994 and The supply of primary aluminium has generally matched the growth in demand. Year to year imbalances between consumption and production are reflected in changes in industry inventories. Changes in the geographical location of production are reflected in the following table. Table 7: Primary Aluminium Production ('000 tonnes) % of total North America 5,472 5,585 6,041 5, % Western Europe ,707 4,066 4, % Eastern Europe % CIS 700 2,100 3,433 3,615 4, % China ,423 9, % Middle East 2, ,247 1, % Other Asia 160 1, , % Africa ,178 1, % Australasia ,501 2,094 2, % Latin America ,698 2,167 2, % World 4,546 13,954 18,886 24,059 33, % Source: CRU Until the 1973 oil crisis, aluminium production took place mostly in the main aluminium consuming countries of Western Europe, USA, Japan and the countries that now comprise the CIS. Between 1974 and 1989 the importance of these areas declined as new smelters were built in countries with low cost power in Latin America, Australia, the Middle East and Canada. Between 1989 and the present day these trends continued, but the Middle East and Southern Africa supplanted Australia and Latin America as the largest producers. The biggest change since 1989 has been the rapid growth of China as a producer. China is now the largest single producing country of primary aluminium in the world by some margin. In general, China does not have low power costs, but it has been able to grow production to feed its rapidly growing domestic market due to low capital and labour costs. Costs CRU Strategies estimates that in 2006 the average corporate cost for all companies was US$1,636 per tonne. The table below shows the major components of costs. The average cost conceals a large variation in costs between different companies, from a minimum of US$911 per tonne to a maximum of US$2,425 per tonne. The 10 th to 90 th percentile range was US$1,342 per tonne to US$2,086 per tonne. 54

56 Table 8: Aluminium Corporate Costs by Major Component (2006) Component US$/Tonne % of total Alumina % Carbon 155 9% Labour % Power % Other costs % Total (world average) 1, % Source:CRU Prices Since 1978, primary aluminium contracts have been traded on the London Metal Exchange (LME) and by the mid-1980s the LME aluminium price became the main reference price for aluminium, with most primary aluminium being traded at a price related to the LME price. Before the LME contract, aluminium prices were published by producers as list prices, and periodically adjusted in line with market forces. They were not transparent (producers adjusted prices by means of payment terms and discounts), were adjusted infrequently and failed to represent the market accurately. Primary aluminium is currently used as the reference price for aluminium. Prices for alumina and semi fabricated products are closely linked to the primary aluminium price. The history of prices shows a long run falling trend in real prices, using the US GDP deflator to bring prices to 2006 equivalents as is shown in the table below. The rate of decline over 46 years has been 0.8 % a year. Table 9: Primary Aluminium Prices, in real 2006$ ( ) LME 3m price (real 2006$) , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,816 Apart from the long run trend, the other important aspect of prices is cyclical behaviour. The table illustrates that the average annual real aluminium price is subject to pronounced price cycles. Over the period the nominal 3-month LME prices averaged US$1,468 per tonne. But annual average nominal prices varied from a low of US$1,032 per tonne in 1982 to a high of US$2,319 per tonne in In the 1990s the cycle was less marked, but prices hit a low of US$1,161 per tonne in 1993 and a high of US$1,832 per tonne in Between 1996 and 2004, annual average prices were contained in a relatively narrow band by historical standards of US$1,364-1,721 per tonne. 2005, 2006 and 2007 to date have seen the biggest breakout from this band since the late 1980s, with the annual average price in 55

57 2007 expected to be US$2,705 per tonne. In terms of real 2006 prices, this is still below the peaks in 1980 and 1988, when prices exceeded US$3,500 per tonne. Outlook The maintenance of the healthy growth rates of aluminium consumption depends heavily on the continued growth of aluminium in transport applications, the continued rapid growth of the Chinese economy, and the growth of consumption in other emerging economies, notably India. Whilst CRU Strategies expects growth rates to slow from last year s 7.8 % and 10.1 % in 2007 (propelled by Chinese demand), it expects to see average annual growth of 5.8 % to 2015, barring a major economic recession. CRU Strategies believes that the increase in supply to meet this demand is likely to come mostly from China, the Middle East, Russia, Africa and Iceland. On the other hand some older smelters in the US, Europe and China can be expected to close down. Expansion of alumina capacity can be expected to occur mostly in China, Australia, Brazil, Guinea and India. Aluminium prices are likely to continue to be cyclical, mainly driven by economic growth fluctuations, though the timing of troughs and peaks is unpredictable. 56

58 The Company's Business Overview Ma'aden was formed as a Saudi joint stock company, pursuant to Royal Decree No. M/17 dated 14/11/1417H (corresponding to 23/3/1997G) for the purpose of facilitating the exploration and development of Saudi Arabia s mineral resources. In that year Petromin transferred all of its interest in the Saudi Mining Company for Precious Metals ( SCPM ), amounting to 50% of the share capital of SCPM to Ma'aden. Ma aden acquired the remaining 50% balance of the shares in SCPM in November 1999 from, Boliden Mineral S.P., a Swedish mining company for an amount of SR26,000,000. Subsequent to the transfer of these assets, Ma'aden's active gold business has expanded to include the operation of five gold mines in the Kingdom: Mahd Ad Dahab (located in central western Saudi Arabia), Al Hajar (located in south western Saudi Arabia), Sukhaybarat (located in central Saudi Arabia), Bulghah (located in central Saudi Arabia) and Al Amar (located in central Saudi Arabia) which commenced production in early As of 31 December 2007, the main customers of Ma aden were JPMorgan, Barclays Bank and Umicore, amounting to 93.6% of Ma aden s cumulative gold sales. Ma'aden's objective is to explore and develop Saudi Arabia's mineral resources and become a world class international mineral resource company. Ma'aden has taken significant steps towards achieving this objective by launching the development of a phosphate mine and fertiliser production facility for the production of Diammonium Phosphate ("DAP") and excess quantities of ammonia and phosphoric acid (the "Phosphate Project") and a bauxite mine, alumina refinery and aluminium smelter for the production of aluminium ingot (the "Aluminium Project").To date, Ma'aden's focus has been its gold and base metals business. Since its formation, Ma'aden (through the Ministry of Petroleum) has collaborated with the Government, represented by the Public Investment Fund, and local legislators to develop a regulatory framework for the governance of the mining industry in Saudi Arabia. In addition, Ma'aden secured the commitment of the Public Investment Fund to design and construct the Railway, Port and other infrastructure to underpin its planned Phosphate and Aluminium Projects. Ma aden s Mission Ma aden s mission is to become a publicly owned world class international mining company that generates profits while at the same time protecting matters relating to human resources, health, safety, as well as environmental and social matters. Shareholding Structure Pre and Post Offering Pre-Offering Post-Offering Name Number of Shares % Value in SR Number of Shares % Value in SR Government of the Kingdom of Saudi Arabia represented by Public Investment Fund General Organization for Social Insurance 400,000, % 4,000,000, ,500,000 50% 4,625,000, ,125, % 231,250,000 57

59 Public Pension Agency ,125, % 231,250,000 Public ,250,000 45% 4,162,500,000 Total 400,000, % 4,000,000, ,000, % 9,250,000,000 *including Institutional Investors and Individual Subscribers Ma'aden Organisational Structure and Overview Ma'aden's business units will be organised under separate subsidiaries to facilitate joint ventures with strategic partners such as Rio Tinto Alcan and SABIC. It is envisaged that Ma'aden will retain a majority interest in these companies, each of which will have its own Board and management. The proposed group structure for Ma aden is shown below. Proposed Ma aden Group Structure Ma'aden SABIC 30% Alcan 49% Sahara 50% 100% 70% 51% 50% 50% 100% Ma'aden Gold Company 1 Ma'aden Phosphate Company ("PhosCo") Ma'aden Aluminium Company ("AlumCo") (Under Formation) Chlor Alkali JVCo (Under Formation) 2 Ma'aden Infrastructure Company ("InfraCo") (Under Formation) 3 Gold Mining Exploration Projects Phosphate Project Aluminium Project EDC Project Infrastructure Please note that the formation process of InfraCo, Chlor Alkali and AlumCo has not yet been finalized as of the date of this Prospectus. 1 Saudi Mining Company for Precious Metals was renamed Ma aden Gold Company. 2 The company will be 50% owned by Ma aden and 50% by Sahara Petrochemical Company for the purpose of establishing Chlor Alkali. 3 The company will be wholly-owned by Ma aden and will be established for the purpose of building and maintaining the required infrastructure for the Ras Az Zawr. 58

60 Ma aden s Major Accomplishments Dates Event 1997 The Al Amar licence was issued covering an area of 5km² with a duration of 30 Hijri years. The Al-Amar mine is located 210 km west of Riyadh in central Saudi Arabia, 900m above sea levels. This licence covers essential and precious minerals with an annual surface rent of SR50, Ma'aden commenced exploration for phosphate in the Umm Wu'al area The Al Hajar licence was issued covering an area of 6Km² with a duration of 30 Hijri years. This licence covers precious and base metals with an annual surface rent of SR60,000. Mining operations ceased in 2006 following depletion of the open cut Ore Reserves and operations are now limited to the reclaiming of gold stacked at the heap leach facility Ma'aden was granted an exploration licence for the Ad Duwayhi prospect. In 2004, the Ad Duwayhi licence was renewed for a period of four additional Hijri years. A further renewal of this licence is currently pending Ma aden won the right to explore and investigate the feasibility of the bauxite deposits at Az Zabirah in a competitive tender Ma'aden was granted an exploration licence for Al Jalamid (the Turayf licence). In 2004, the Al Jalamid licence was extended for a period of 4 additional Hijri years and is now subject to a renewal application for a reduced licence area. 1999/2003 Ma aden carried out a staged resource definition diamond core drilling programme with total drilling advance of m in 574 holes The Bulghah licence was issued covering an area of 39Km² with a duration of 30 years. The licence covers the mining lower grade ore (less than 1.0g/t of gold) for processing at the Bulghah heap leach processing facility (which has a design capacity of 4.0Mtpy) and higher grade ore (greater than 1.0g/t of gold) for processing at the Sukhaybarat processing facility. The licence is for gold with an annual surface rent of SR390, The Al Hajar mining and processing operation was commissioned Ma'aden commenced exploration for phosphate in the Al Jalamid area The Mansourah deposit was discovered by Ma aden. The Mansourah deposit is located some 460km northeast of Jeddah. A total diamond core drilling advance of 65,107 m in 317 holes and 26 reverse circulation holes have been completed to date Bulghah mining and processing operation was commissioned Development of the Railway was authorised. Construction of the Railway was approved by the Supreme Economic Council and the Council of Ministers and its development will be monitored by SAR, a company wholly owned by PIF Ma'aden was granted the Al Uruq licence. 59

61 2004 Snowden determined a JORC Code compliant Mineral Resource of 2.1Moz of gold contained within 17.1Mt grading at 3.9g/t of gold for Ad Duwayhi The Masarrah deposit was discovered. The Masarrah deposit is located approximately 6.5km north-west of Mansourah. A total of 34,115m of diamond core drilling was completed Bechtel's Feasibility Study Report for the Aluminium Project was completed Ma aden was granted a mining licence for the Al Jalamid site by the Ministry of Petroleum & Minerals. The licence covers an area of 49.55km 2 and encompasses the Al Jalamid Deposit and the four other prospective deposit areas identified in the immediate area around the Al Jalamid Deposit. The term of licence is 30 Hijri years from the date of issue and the annual surface rent for the licence is SR 500, Ma aden signed a Memorandum of Understanding with Sahara Petrochemical Company in relation to the construction of a caustic soda plant and it is anticipated that a joint venture agreement will soon be signed pursuant to which a company will be formed and owned 50% by Ma aden and 50% by Sahara Petrochemical Company Ma'aden entered into a project management consultant agreement with Worley Arabia Limited for the provision of certain project management services relating to all contracted works and services to be carried out in connection with the development of the Phosphate Project and the Common Infrastructure 2006 Ma'aden was granted a mining licence which covers an area of 37.82km 2 and encompasses the Al Khabra deposit site and three other prospective deposit targets identified in the Umm Wu al area. The Al Khabra mining licence was granted for a period of 30 Hijri years. The annual surface rent for the licence is SR380, Ma'aden was granted three mining leases by the Ministry of Petroleum and Mineral Resources for the south zone of the Az Zabirah deposit. Ma'aden has also applied for two contiguous exploration licences which will cover the central zone of the Az Zabirah Deposit with a total area of 164km Ma'aden entered into a joint venture agreement with SABIC pursuant to which PhosCo, the joint venture company to be established to operate the Phosphate Project, will be owned 30% by SABIC and 70% by Ma aden A contract of the operation and maintenance of the phosphate mine at the Al Jalamid site mine was awarded to Saudi Comedat Company Ltd Ma'aden entered into LSTK EPC contracts for the construction of each of the sulphuric acid, phosphoric acid, ammonia, DAP and beneficiation plants to be constructed at the Ras Az Zawr site Ma'aden entered into heads of agreement with Rio Tinto Alcan to conclude a joint venture agreement pursuant to which Rio Tinto Alcan will acquire a 49% interest in AlumCo, the joint venture company which will operate the Aluminium Project Construction of sulphuric acid, phosphoric acid, ammonia and DAP plants 60

62 commenced at Ras Az Zawr 2007 The construction of the Al Amar mine was finalized Ma aden and SABIC obtained, for the benefit of PhosCo, a commitment letter pursuant to which AlRajhi Bank, Riyad Bank, Samba Financial Group, Saudi Fransi Bank, Standard Chartered Bank, Caylon Bank and Mizoho Corporate Bank agreed to secure and arrange for loans for the financing of the Phosphate Project A mandate letter appointing arrangers and underwriters for the required debt financing for the Phosphate Project was executed The FEL 2 Studies were completed and the estimated production capacities for the refinery and smelter were revised to approximately 1.8 Mtpy of alumina and 0.74 Mtpy of aluminium respectively The Al Amar mine was commissioned First production delivery from the kaolin and low grade bauxite project. 61

63 Strengths Ma aden's key strengths may be described as follows: Strong growth opportunities Ma aden benefits from an existing gold business that generates strong cash flows from five operating gold mines and has a number of advanced exploration projects ready for development. Ma aden has begun the implementation of major scale projects for the production of phosphate fertilisers and for aluminium in Saudi Arabia. Upon completion of the Phosphate and Aluminium projects Ma aden will become a major supplier of phosphate fertilizers and primary aluminium ingot in global markets with its business and financial growth prospects transformed. Ma aden has also valuable opportunities to expand its gold producing projects, as described in the Gold MER. Favourable markets for core products It is anticipated that demand for Ma'aden's core products will continue to grow driven by increases in population growth and rising standards of living as well as rapid industrialisation in the growing economies of India and China. Ma aden believes that such increases in demand will allow new producers, including Ma aden, to enter the market on a competitive basis. In 2006 global gold supply declined to a greater extent than the reduction in global demand for gold. This has resulted in an attractive pricing environment for gold which experts expect to continue in the medium term. At present, there is no alternative to DAP or monammonium phosphate ( MAP ) as a fertiliser which can deliver significant increases in food production and the product is not recyclable. For the period from 2000 to 2006 the average growth rate for the consumption of primary aluminium was 5.4 % per annum, which has been fuelled by the rapid economic growth in China and the world. Diversified business Ma aden will be operating a diversified minerals business encompassing gold, phosphate fertilizers, primary aluminium, and industrial minerals. The markets for these products have individual price cycles and this will help mitigate the effects of commodity price fluctuations impacting prices of Ma'aden's core products and movements in the prices of key raw materials on which it depends. Long life phosphate and bauxite resources Ma'aden's future growth is further underpinned by its known reserves and resources of phosphate and bauxite in Saudi Arabia. Ma aden's measured phosphate resources at Al Jalamid are estimated to be 534 Mt. It is proposed to mine 223 Mt for the Phosphate Project over its initial planned life of operations, leaving the balance available to extend the project life or to enable increases in production capacity during the current project life. Ma'aden's bauxite ore resources in the south zone of the Az Zabirah deposit are estimated to be 240 Mt at 50 % available alumina and eight % sulphur dioxide ( SiO 2 )and are expected to be sufficient to supply AlumCo's proposed alumina refinery for a period in excess of 30 years based on initial design capacity. Additional bauxite resources have been delineated in the central and north zones and exploration is continuing for higher grade bauxite deposits which 62

64 may be mined more economically with a view to improving overall returns from the Aluminium Project. Low cost minerals producer Ma'aden's gold business is, and its phosphate and aluminium businesses will be, fully vertically integrated from mineral ore to production of primary metal (in the case of aluminium and gold) and from mined ore to final consumer products (in the case of phosphate fertilisers). The vertical integration of Ma'aden's businesses offers substantial economies of scale (particularly in terms of transport and storage of raw materials) enabling it to minimise the involvement of third parties and thereby more effectively control costs. In addition, Ma'aden will benefit from raw material supplies sourced within Saudi Arabia including, in particular, sulphur, natural gas and an economical source of heavy crude oil. As a result Ma'aden expects to hold a significant cost advantage over its nearest competitors in producing and delivering DAP to its target markets. In addition, lower freight rates to Ma aden s key markets in Asia due to its closer proximity to those markets are expected to enable Ma aden to compete on more favourable terms than alternate suppliers in North Africa and the United States. Modern cost effective technology Both the Phosphate Project and the Aluminium Project will benefit from modern processing and mining facilities and techniques employing tried and tested methodologies under the guidance of Ma'aden's joint venture partners, SABIC and Rio Tinto Alcan. Ma aden's technical plans seek to take advantage of vertical integration and scale economies to reduce cost and create synergies such as the use of steam generated in the production of sulphuric acid to fire the phosphate power plant to be located. Significant Government support Ma aden is the vehicle through which the Government intends to realise its strategic goal of creating a world class diversified mineral business operating from Saudi Arabia. The Phosphate and Aluminium Projects, in particular, have received strong Government backing the provision of key support infrastructure such as the Railway and Port. The Government has also allocated the industrial and residential land at the Ras Az Zawr site for the establishment of the processing facilities and supporting social and industrial infrastructure required for the Company s projects. In addition, the Government has provided an allocation of fuel for the power station and natural gas for the ammonia plant (in each case through Saudi ARAMCO). The Government will also grant the Company a significant subsidy for the connection of the power supply at Ras as Zawr to the public electricity network on condition that the SEC remain responsible for the maintenance and operation of the transmission network grid. Ma'aden's strong partners The participation of SABIC, currently one of the world s largest petrochemical companies in the world, in the Phosphate Project and Rio Tinto Alcan, currently the world s second largest aluminium company, or any other strategic partner in the Aluminium Project significantly diminishes Ma'aden's project execution and operating risk. Through joint venture arrangements SABIC and Rio Tinto Alcan will each provide the benefit of their world class technical, and operational experience to provide input and know-how in the engineering design of the projects and during the project execution and operational phases of the projects. Ma aden's joint venture partners will also provide expertise with respect to the sale and marketing of Ma'aden's products to be reflected in agreements and flexible marketing arrangements that enable Ma'aden to develop its own marketing resources over time. 63

65 Synergies between divisions The shared location of processing facilities for the Phosphate and Aluminium Projects at Ras Az Zawr and the use of the Railway, Port and other shared infrastructure at this site create significant synergies between Ma'aden's business divisions. By way of example, the ability to combine acidic waste streams from the fertilizer plants with the alkaline waste streams from the alumina refinery provides an opportunity to neutralise waste streams at a cost lower than that likely to be incurred by Ma aden s competitors. Experienced management team Ma aden's management is experienced in developing, executing and operating natural resource projects within Saudi Arabia having profitably operated four gold mines, brought two mines into economic production and commenced a number of advanced exploration projects where it has carried out JORC compliant resource estimates and pre-feasibility studies. Ma aden has recruited experienced senior executives and technical experts to drive the projects forward and to train its future project workforces and has engaged international consultants to assist it in planning for its future strategic growth. Management's experience is supplemented by key expertise and specialised personnel provided by joint venture partners. Strategy Ma aden's objective is to become a world class diversified mining and minerals group, and to enhance overall value for its shareholders. Ma aden's main strategic driver is to successfully exploit the large phosphate and bauxite deposits over which it has mining rights through the production of DAP and primary aluminium ingot. It also plans to achieve significant growth in its gold mining business by exploiting known gold resources and developing new prospects primarily within the Central Arabian Gold Region over which it has secured mining or exploration rights. Ma aden intends to pursue this strategy by: Maintaining the momentum it has already achieved with respect to the implementation of the Phosphate and Aluminium Projects and ensuring the completion of the construction of Ma'aden's mining and production facilities and the associated infrastructure for the Phosphate and Aluminium Projects within existing budgeted costings and in accordance with project deadlines. Using its strong balance sheet following the initial public offering to raise project finance for the Phosphate and Aluminium Projects. Co-operating closely with its major shareholder, the Government, represented by the Public Investment Fund, to ensure the timely completion of the Railway and the Port as the key supporting infrastructure for the successful realisation of the Phosphate and Aluminium Projects. Successfully developing its proposed Chlor Alkali Project to produce caustic soda as an essential feedstock to be used by the Aluminium Project's alumina refinery to refine bauxite to produce alumina (see "The Company's Business - Other Projects"). Developing its gold resources in the Central Arabian Gold Region and in the Arabian Shield Region. Taking advantage of its ability to increase production capacity in its future phosphate and aluminium operations at a relatively small incremental cost. 64

66 Increasing appropriate know-how and technical expertise with respect to its project management, operations, processing facilities and marketing. Maximising the benefits achieved through the economies of scale available to the Company as a result of the availability of key raw material inputs such as energy, sulphur, natural gas, and caustic soda. Continuing to build up Ma'aden's human resources at all levels so as to meet the needs of running a rapidly expanding diversified mining business. Opportunistically considering strategic acquisitions and concluding joint ventures that will enhance Ma'aden's growth prospects and shareholder value. Implementing strong corporate governance as a company listed on Tadawul in order to safeguard the interests of all its shareholders. Maintaining its emphasis on corporate social responsibility by implementing detailed policies dealing with health and safety and environmental issues. Research and Development The Company does not carry out any research and development activities. 65

67 Background of Gold Operations Current Company Business (Gold Operations) The history of gold mining in the Arabian Peninsula dates back to ancient times. Numerous ancient workings dating back over 4,000 years have been documented by government agencies. These sites formed the focus for subsequent exploration work in modern times which has been carried out largely by government agencies since This work resulted in extensive documentation of old workings, regional-scale geologic mapping at a scale of 1:250,000 and localised trenching and drilling programmes. Exploration carried out by Ma aden through its gold division since 1997 has focused largely on the follow-up of old workings, but has also succeeded in discovering new gold occurrences and deposits. Ma aden and its wholly owned subsidiary, SCPM currently hold between them mining leases covering approximately 110km 2 and will hold, following renewal of current applications, exploration licences covering approximately 48,492.42km 2 of the prospective geological area known as the Arabian Shield. Estimates of the Company's gold and other mineral reserves and resources appearing in this section are based on the figures set out in the Gold MER which are stated as at 1 July The Directors are not aware of any facts or circumstances that have occurred since that date which would lead to any significant reduction in the reserves or resources as stated in the Gold MER. Gold Mines Licences Ma'aden's gold assets include five operating mines, the last of which commenced production in January Ma'aden currently holds the following licences in relation to each of the operating mines in Al Amar, Mahd Ad Dahab, Sukhaybarat, Bulghah and Al Hajar. The table below provides the historical sequence for securing such licences and their duration, size of the mines and their yearly rental values. Table 10: Gold Mines Licences Date Licence/location Duration* Size Yearly Rent 1988 Mahd Ad Dahab¹ 30 years 10.3 Km² SR110, Sukhaybarat² 30 years 50 Km² SR500, Al Amar² 30 years 5 Km² SR50, Al Hajar² 30 years 6 Km² SR60, Bulghah² 30 years 39 Km² SR390,000 Source: Ma aden * refers to Hijri years ¹ Ma aden has the right to extend or renew the licence for Mahd Ad Dahab upon the expiry of its original term for periods which do not cumulatively exceed 20 years subject to not violating the operative rules and regulations at the time of renewal, provided that Ma aden would have met all its obligations listed in the licence, the Mining Law and its implementing regulations. ² The Minister of Petroleum and Mineral Resources has the right to renew the licences for these mines upon the finalization of all necessary procedures in this regard for periods which do not cumulatively exceed 30 years subject to not violating the operative rules and regulations at the time of renewal, provided that Ma aden would have met all its obligations listed in the licence, the Mining Law and its implementing regulations. 66

68 Ma aden is currently also developing a prospect (Ad Duwayhi) for mining. In addition, the Company has five advanced exploration projects and 33 other projects. The Exploration Project section contains more information with respect to these projects. In addition to mining and processing of gold, Ma aden also produces zinc and copper concentrates. Operating Mines Ma'aden's current operating mines are: Mahd Ad Dahab Mahd Ad Dahab is situated in the western region of the country known as the Hejaz in the Al Medinah Province of Saudi Arabia. Ma aden began commercial production at the mine in Originally, the mine had a planned life of seven years, which has since been extended to 2011 by underground diamond drilling. Mining is carried out by underground methods with a total tunnel development in excess of 60km and a metallurgical plant. In its MER, SRK states that as at 1 July 2007, Mahd Ad Dahab had Ore Reserves of 347,000oz of gold (360,000oz of gold equivalent) contained within 1.2Mt grading at 8.7g/t of gold (9.0g/t of gold equivalent). This ore reserve includes a total of 232kt of surface sources grading at 0.8g/t of gold (0.9g/t gold equivalent) containing 6koz of gold (7,000oz of gold equivalent). Total Mineral Resources comprise 643koz of gold (665koz of gold equivalent) contained within 1.2Mt grading at 16.1g/t of gold (16.6g/t of gold equivalent). In 2007 Mahd Ad Dahab mined and processed approximately 183,425 tonnes of ore at a grade of around 11.1 g/t of gold from underground operations, resulting in gold production of approximately 58,256 ounces for 2007 compared to 58,400 ounces and 56,108 ounces in 2005 and 2006 respectively. In addition, the mine also processes reclaimed tailings and produces copper and zinc concentrates for third party toll smelting. There is the potential to upgrade current Inferred Mineral Resources at the mine to the Indicated Mineral Resources category and potentially extend the life of the mine by one year to Any further potential for the mine beyond this is largely dependent on further exploration in the immediate underground mining areas. The net cash cost per ounce of gold produced at Mahd Ad Dahab for the year ended 31 December 2007 was US$153 (SR ) compared to a net cash cost of US$87 (SR326.25) per ounce for the previous year. The significant increase in net cash cost per ounce in 2007 was due to a decrease in by-product credits and increased production cash costs. Sukhaybarat The Sukhaybarat site is situated in Al Qaseem Province about 250km east of Mahd Ad Dahab. Sukhaybarat now comprises a carbon-in-leach (CIL) processing plant only. It processes ore transported form Bulghah mine, which is located 65km to the south west of Sukhaybarat. Its open cut mining operation and heap leach operations ended in The Sukhaybarat plant has a rated capacity of 600ktpa and is planned to continue operations until The current LoMp is solely dependent on processing ore from the Bulghah mine and, specifically, the planned future processing of lower grade ore from that mine. In its Gold MER, SRK states that as at 1 July 2007, Sukhaybarat has Ore Reserves of 2koz of gold contained within 0.2Mt grading at 0.4g/t of gold. Total Mineral Resources comprise 2koz of gold contained within 0.2Mt grading at 0.4g/t of gold. Its Ore Reserves are limited to the surface stock pile of ore transported from Bulghah. Process output at the Sukhaybarat plant has increased since 2005 to reach a current annualised output of 624ktpa. However, the head grade has reduced significantly since 2005 from 2.9g/t of gold to 1.4g/t of gold. This, in conjunction with other factors, has resulted in an 67

69 approximate 50% reduction in annualised gold production since Gold production at Sukhaybarat in 2007 was approximately 25,079 ounces. Given the increasing contribution of fresh and lower grade ore planned for delivery to the heap leach facility from Bulghah, Ma aden s intention is that the Sukhaybarat mine will focus on maximising metallurgical recoveries. Ore Reserves are expected to be fully depleted by The net cash cost per ounce of gold for the years ended 31 December 2005, 2006 and 2007 was approximately SR637.5 (US$170), SR (US$263), and SR1,275 (US$340) per ounce respectively. The increase in cash costs during the period is primarily due to declining ore grades. Bulghah Bulghah is situated in Al Madinah Province about 65km south of the Sukhaybarat processing plant. It comprises an open-pit mine which mines lower grade ore (less than 1.0g/t of gold) for processing at the Bulghah heap leach processing facility (which has a design capacity of 4.0Mtpy) and higher grade ore (greater than 1.0g/t of gold) for processing at the Sukhaybarat processing facility. Bulghah was commissioned in October It is currently in a transitional phase as its high grade (oxidised) ore is depleted and future production will be increasingly dominated by lower grade transitional and sulphide ores which have lower metallurgical recoveries than those achieved historically from ores previously mined at this site. In its MER, SRK states that as at 1 July 2007, Bulghah has Ore Reserves of 428,000oz of gold contained within 16.8Mt grading at 0.8g/t of gold. Process throughput at the Bulghah processing facility has been reduced from in excess of 4.0 Mtpy to an annualised production of 2.9Mtpy based on processing figures for the year Furthermore, the grades of stacked gold (ore ready for heap leaching) have also reduced (currently 0.7g/t of gold), which when combined with the reduction in the quantity processed, has resulted in an approximate 31% reduction in annualised gold production since Gold production at Bulghah in 2007 was approximately 43,299 ounces. Given the increasing contribution of fresh and lower grade ore planned for delivery to the heap leech facility, Ma aden intends to focus on maximising metallurgical recoveries at the mine. It expects Ore Reserves to be fully depleted by The net cash cost per ounce of gold at the mine for the last three years ended 31 December 2005, 2006 and 2007 was SR (US$123), SR832.5 (US$222) and SR1, (US$307) per ounce respectively. Al Hajar Al Hajar is located in southern Saudi Arabia 710km southeast of Riyadh. It comprises an open cut mine and the Al Hajar heap leach facility which is currently re-processing previously stacked and leached material. Mining operations ceased in 2006 following depletion of the open cut Ore Reserves and operations are now limited to the reclaiming of gold stacked at the heap leach facility. The heap leach facility was commissioned in 2001 and has a rated capacity of 750ktpa. A secondary crusher was installed in October 2005 to improve crushing methods and increase gold recoveries. Subsequent metallurgical testing of the stacked and leached ore at the mine indicated that the material leached has residual gold grades of 1.3g/t of gold. The current LoMp assumes that material stacked prior to October 2005 can be economically reclaimed, re-crushed (to less than 20mm) and re-stacked on a new Heap Leach Pad with metallurgical recovery of 51.9% for gold. 68

70 In 2005, Ma aden commenced mining at Jadmah, a satellite deposit situated some 4km west of Al Hajar which is now depleted. In 2006, Ma aden completed a technical study investigating the potential for re-crushing existing stacked and leached material. In the third quarter of 2006, the re-crushing programme commenced, and in September resulted in the reprocessing of 0.3Mt of material grading at 1.5g/t of gold up to 1 July In its Gold MER, SRK states that as at 1 July 2007, Al Hajar has Ore Reserves of 87,000oz of gold contained within 2.1Mt and grading 1.3g/t. Total Mineral Resources comprise 87,000oz of gold contained within 2.1Mt and grading 1.3g/t of gold. Process throughput at the heap leach facility increased from 666ktpa to 756ktpa between 2004 and Performance for the year period ended 2007 is expected to be 31% below budget. The head grade has also reduced significantly since 2004, from 3.5g/t of gold to the current 1.3g/t of gold. Accordingly, this has resulted to a 39% reduction in gold production from 2006 and a 40% decrease in cash operating costs during 2007 against 2006 figures. Ma'aden is largely focused on attaining the forecast production rates and unit operating expenditures as provided in the latest LoMp. However, there are six regional exploration prospects situated within the Al Hajar Exploration Licence area, namely, Hajeej, Sheers, Jadmah, Gossan-14, Waqba and Sha abat Al Hamra. Al Amar Al Amar is located in the Ar Riyadh Province approximately 195km southwest of Riyadh. It comprises an underground mine which is planned to process a gold rich polymetalic ore at a rate of 200ktpa to produce gold in doré and copper and zinc concentrates which are sold to third parties for toll smelting. Construction was completed during the half year period ended 30 June 2007 and the facility is currently undergoing commissioning and production build up with full production planned for In its MER, SRK states that as at 1 July 2007, Al Amar has Ore Reserves of 429,000oz of gold (441,000oz gold equivalent) contained within 1.4Mt grading at 9.9g/t of gold (10.2g/t of gold equivalent). Total Mineral Resources comprise 722koz of gold (742koz gold equivalent) contained within 2.0Mt grading at 11.2g/t of gold (11.5g/t gold equivalent). The LoMp assumes underground mining at a rate of 200ktpa and underground mining of the Ore Reserve is planned to continue at the projected rate of 200ktpa until depletion in The Al Amar processing facility will process ore mined from the underground operation and has a rated design capacity of 200ktpa. The mine is expected to produce approximately 385,000 ounces of gold, 635,000 ounces of silver, 45,500kt of zinc and 7800kt of copper over the planned life of the mine. Processing will involve crushing, grinding, copper flotation, and recovery of gold from the copper flotation tailings by CIL technology and zinc flotation. Its products will be copper concentrate, doré and zinc concentrate, which will all be sent abroad for refining. Al Almar commenced production in January this year. The capital expenditure spend by Ma aden in building the Al-Amar mine was approximately US$63.24 million (SR million). No substantial production is forecasted for the current year, but under the LoMp mill tonnage for 2008 is assumed at 203ktpa at a gold grade of 9 g/t of gold. Ma aden s objective is to achieve the projected production build up schedule for Al Amar. There is also the prospect of upgrading the currently delineated Inferred Mineral Resource at the south vain zone. The bulk in-situ institute mineral resource is estimated at 4.5 million tonnes at 3.5 grams per tonne Au (at a cut-off 2 grams per tonne). This includes 1.7 million tonnes of oxide materials. These resource figures will be tested along the strike and depth for extensions of the currently delineated ore bodies through underground and surface drilling. 69

71 Exploration Projects The Company was granted an exploration licence for the Ad Duwayhi prospect in 1998 and extensive exploration activities were carried out under the licence which resulted in the delineation of a significant gold resource at Ad Duwayhi by the end of During the previous years, Ma aden was able, through subsequent exploration programmes to delineate six advanced exploration projects, including: Ad Duwayhi, Zalim, As Suk, Ar Rjum, Mansourah and Masarrah. Preliminary resource estimates completed to date indicate approximately 7.93 million ounces of gold resource in the region. Ma'aden intends to devote significant capital expenditure and other resources in the next few years to undertake the necessary technical and feasibility studies and other actions required to assess the economic and technical feasibility of exploiting the CAGR resources and to achieve its strategic objective of significantly increasing its gold production. Ma'aden's exploration projects are located within the prospective Arabian Shield area and are grouped into two regions, namely the CAGR and the Northern Shield Region sometimes referred as the Sukhaybarat-Bulghah area. CAGR Prospects Since the grant of the exploration licence for the Ad Duwayhi prospect in 1998, Ma'aden has conducted an extensive exploration programme throughout targeted areas which has resulted in the delineation of six advanced exploration projects: Ad Duwayhi, Zalim, As Suk, Ar Rjum, Mansourah and Masarrah. Last year Ma aden set budgeted capital expenditure at US$33.5 million (SR million) for the period extending from the second half of 2007 to 2010 to undertake more exploration activities in the licensed regions and further studies including the necessary feasibility studies (second half of 2008) for the Ad Duwayhi prospect and the prefeasibility studies (the fourth quarter of 2008) for the Mansourah, Ar Rjum, Masarrah, As Suk and Zalim properties. Budgeted capital expenditure has since been revised to approximately US$41.62 million (SR million). Development of the CAGR prospects, including the more advanced Ad Duwayhi prospect where a pre-feasibility study has been completed, is dependent on the supply of sufficient quantities water for processing. Due to shortages of water in the region it will be necessary to construct a long distance (approximately 500km) pipeline to provide water to the prospects. Management is currently preparing an integrated development plan to provide water and other infrastructure to allow the CAGR gold resources to be economically developed as on the basis of the Company s current projections it is likely that none of the prospects, including Ad Duwayhi, can operate on a stand alone basis due to of the costs of supplying water for processing. Two alternative water pipeline conceptual project cost assessments have been completed: the first for a scheme involving piping salt water from the Red Sea and the second involving piping treated sewage water from Taif. A consultant has been engaged to prepare a detailed scope of work for the design and detailed engineering for the purposes of awarding a contract for the design and construction of the water pipeline, should the Company determine that the economic exploitation of the CAGR prospects is possible. Management is also in discussions with the relevant Government authorities to determine the land access and permit requirements necessary to award the contract for the construction of the pipeline. The CAGR prospects have a total preliminary resource estimate of approximately 7.93 million ounces of gold in place. The deposits are open at depth and are considered by management to have good potential to develop resources amenable to underground mining methods, once open cut operations have ceased. The table below gives the detailed Mineral Resource statements for the development of the Ad Duwayhi deposit and the advanced exploration properties of Mansourah, Ar Rjum, Masarrah, As Suk and Zalim. In combination, these assets have a total Mineral Resource of 7.9Moz of gold contained within 103.2Mt grading at 2.4g/t of gold. Ad Duwahyi, the most advanced of these properties has a total Mineral 70

72 Resource of 2.1Moz of gold contained within 17.1Mt grading at 3.9g/t of gold representing some 25% of the total gold content of the Mineral Resources reported in the table below. Table 11: Mineral Resource Statement Tonnage Grade Content Measured (kt) (g/t Au) (g/t Au Eq) (koz Au) (koz Au Eq) Ad Duwayhi 7, Subtotal 7, Indicated Ad Duwayhi 6, ,169 1,169 Mansourah 18, ,388 1,388 Masarrah 13, Subtotal 37, ,538 3,538 Measured + Indicated Ad Duwayhi 13, ,817 1,817 Mansourah 18, ,388 1,388 Masarrah 13, Total Measured + Indicated 45, ,186 4,186 Inferred Ad Duwayhi 3, Mansourah 3, Ar Rjum 35, ,225 2,225 Masarrah 2, As Suk 1, Zalim 10, Subtotal 58, ,747 3,747 Mineral Resources Ad Duwayhi 17, ,116 2,116 Mansourah 21, ,616 1,616 Ar Rjum 35, ,225 2,225 Masarrah 16, ,157 1,157 As Suk 1, Zalim 10, Total Mineral Resources 103, ,933 7,933 Source: SRK Should the results of pre-feasibility, feasibility and other studies show satisfactory results, it is proposed that new mines will be brought into production at Ad Duwayhi, Mansourah, Massarah and Ar Rjum. Resource modelling and metallurgical test work is being carried out while an economic development plan for each of these projects is being formulated. In addition to the advanced exploration projects in the CAGR, Ma'aden will continue to explore the Jabal Ghadara, Bir Tawilah, Masarrah North, Mansourah South, Umm Selam, and Amana prospects where exploration and drilling to date have intersected several mineralised intercepts. Ad Duwayhi (Ad Duwayhi licence) Between 1999 and 2003, Ma aden carried out a staged resource definition diamond core drilling programme with total drilling advance of 60,031m in 574 holes. As the result of the Ma aden drilling programs a significant high grade vein mineralisation was outlined. In February 2004, Snowden determined a JORC Code compliant Mineral Resource of 2.1Moz of gold contained within 17.1Mt grading at 3.9g/t of gold. In February 2007 SRK completed a pre-feasibility study which assumes the construction of an open cut mining operation processing through a CIL plant with a rated processing capacity of 1Mtpy at a capital cost of 71

73 US$92 million (SR345 million). The pre-feasibility study was multi-disciplinary in scope and demonstrated the technical feasibility of the project as well as its economic viability given certain assumptions. Development of the project is, however, dependent upon the establishment of regional infrastructure including a water pipeline, the total capital expenditure requirement for which is estimated at approximately US$90 million (SR337.5 million). Accordingly, off takers (Ad Duwayhi) would then be charged for water supply alone. The pricing for this supply assumes recovery of the capital costs over a 20 year period, in addition to the annual unit operating costs which also assume that other off takers (including some of the advanced exploration properties) have been developed. The capital cost of regional infrastructure for the project is intended to be financed by either internal or external sources of funds or a mixture of both. The project assumes a LoMp inventory of 10.2Mt mined at a grade of 3.5g/t gold, metallurgical recoveries of 93%, a processing rate of 1Mtpy and LoMp weighted cash cost of production of US$224/oz. Diamond core drilling to obtain bulk samples has been completed and metallurgical test work is being carried out. It is expected that testing will be completed by the end of July 2008 and that the feasibility study will commence before the end of Mansourah Prospect (Al Uruq Exploration licence) The Mansourah deposit is located some 460km northeast of Jeddah and 50km south east of the town of Zalim and 35km south of the Jeddah-Riyadh expressway. The Mansourah deposit was discovered by Ma'aden in September A total diamond core drilling advance of 65,107 m in 317 holes and 26 reverse circulation ( RC ) holes have been completed to date. In its MER, SRK states that as at 1 July 2007, the Mansourah prospect had Mineral Resources of 1,616koz of gold contained within 21.69Mt grading at 2.3 g/t of gold. Metallurgical test work and environmental baseline studies will be undertaken in preparation for a pre-feasibility study for the project. Follow up diamond core drilling programmes will be carried out to test the economic potential of certain Mansourah satellite prospects. Masarrah Gold Prospect (Ash Shakhtaliyah licence) The Masarrah deposit is located approximately 6.5km north-west of Mansourah and was discovered by Ma'aden in A total of 34,115m of diamond core drilling has been completed. In its MER, SRK states that as at 1 July 2007, the Masarrah prospect had Mineral Resources of 1,157koz of gold contained within 16.10Mt grading at 2.2 g/t of gold. Further drilling is being conducted to further define the resource to the north. The Mansourah and Masarrah projects are located within 6.5km of each other and Ma aden envisages that ore from each site will be trucked to a centrally located plant and the deposits will be developed as one project. Both deposits are open at depth and management considers that in each case there is potential to locate more resource amenable to underground mining methods. Ar Rjum Project (Ash Shakhtaliyah licence) The Ar Rjum project situated inside the Mahazat Assaid Conservation area is located approximately 300km from Jeddah and 25km south of the town of Al Muwayh on the Jeddah Riyadh expressway. Ma aden was issued the licence in April The project location comprises several prospects, including Wasema, Um-Naam, Gazal, Al Maha, and Ar Rjum Zinc. Between 2004 and end of June 2007 a total of 395 resource definition diamond core holes with total length of 56,800m were drilled on the two main Ar Rjum prospects of Wasema and Um-Naam. In its MER, SRK states that as at 1 July 2007, the Ar Rjum prospects had Mineral Resources of 2,225koz of gold contained within 35.89Mt grading at 1.9 g/t of gold. 72

74 Resource definition and infill drilling is in progress to bring the Ar Rjum prospects of Wasema South extension and Um-Naam to the pre-feasibility stage. During 2008, management anticipates that a JORC-compliant audited resource estimate of the two prospects will be completed. As Suk (Ash Shakhtaliyah licence) The As Suk gold prospect is located within the area covered by the Ash Shakhtaliyah licence. A feasibility study was completed in respect of the As Suk prospect in 1997 by international consultants and the Company is currently reviewing and updating the data contained in this study. Metallurgical tests carried out using the gravity process have shown improved recovery rates over those achieved using the heap leach process which was recommended by the feasibility study. Feasibility studies for the process plant and for the geology and mining aspects of the project are expected to commence shortly. It is envisaged that the As Suk prospect will be developed together with the other CAGR properties, although no exploration work is currently being carried out in relation to this prospect. In its Gold MER, SRK states that as at 1 July 2007, the As Suk had Mineral Resources of 228,000oz of gold contained within 1.73Mt grading at 4.1 g/t of gold. Zalim The Zalim gold prospect is a relatively small prospect with an area of km 2 which is subject to a separate licence positioned within the area covered by the Ash Shakhtaliyah licence. It is located approximately 460km east of Jeddah, about half way along the Jeddah- Riyadh expressway. Recently, an application to renew the licence for another five years has been submitted to the DMMR. It is envisaged that ore from the Zalim prospect will be trucked to the As Suk site for processing once the project is developed. In its MER, SRK states that as at 1 July 2007, that the Zalim prospect had Mineral Resources of 590,000oz of gold contained within 10.75Mt grading at 1.7 g/t of gold. Northern Arabian Shield Prospects Ma'aden holds a licence area of 23,149.59km 2 which, in the view of the Company, represents the most prospective ground around the Company s existing mines and known prospects in the Northern Arabian Shield area. Ma'aden's most advanced exploration projects in the region are the Bulghah North and Humaymah prospects. Other exploration licences include the Shabah Licence, the Al Jardawiyah Licence, the An Najadi/Hablah South/Hablah North and Nuqrah Licence, the Tawan Licence, and the As Siham Licence. Bulghah North (Mawan licence) A study of previous exploration, regional geological and structural interpretation work was undertaken to rank and prioritise the most promising areas of Ma'aden's exploration licences around Sukhaybarat and Bulghah mines. These areas were covered by large grid soil / rock geochemical reconnaissance surveys that indicated a significant gold anomaly 3km north of the Bulghah mine. Following a series of drilling programmes, the discovery of a significant gold mineralisation at Bulghah North was confirmed. Drilling results have confirmed that the Bulghah North mineralised zone is similar to the Bulghah mine style of mineralisation. As at 1 July 2007, 483 RC holes with a total length of 38,240m and 35 diamond core holes with total length of 5100 m had been completed. Following an additional infill and definition drilling programme, Ma aden envisages completing in-house resource estimate in the Inferred and Indicated Mineral Resource categories by the end of the second quarter of Subject to the successful completion of its ongoing evaluation programme Ma'aden proposes to bring the Bulghah North deposit into production as an expansion to the current operation at 73

75 Bulghah. The Bulghah North prospect is located within the Bulghah mining lease and no further government permit or licence will be required to develop the deposit. Humaymah (Miskah licence) The Humaymah gold prospect is located 35km southeast of the Bulghah mine and is the second grassroots gold prospect discovered in the Northern Arabian Shield area by Ma'aden. Access to the property is via a 30km paved two lane road that connects the towns of Bulghah and Al Hassu in the south. The property is situated 5km east of the paved road. To date 76 RC holes with a total length of 3,119m and 27 diamond core holes with a total length of 4,115m have been completed. Resource definition drilling is currently being undertaken on this prospect. Overview of Gold Operations The annual production of Ma aden s gold division peaked at 265,819 gold ounces for the period ended 31 December 2004 and has since declined to 142,763 gold ounces for the period ended 31 December 2007 due to depleting reserves in some of the mines and lower grades and recovery rates. This represents a 46% decrease over the intervening period. However, high gold, copper, silver and lead prices have enabled the gold business to maintain profitable operations and a positive cash flow in The Company's total gold reserves as at 1 July 2007 were 21.66Mt grading at 1.9g/t of gold according to SRK in its MER (see "Gold Mineral Expert's Report"). Ma'aden also produced saleable quantities of silver, copper and zinc as concentrate by-products of its gold mining operations. On the basis of Ma'aden's existing gold resources and exploration activities, the Company expects to be able to achieve further significant growth in its gold business. In addition, successful development of the Phosphate and Aluminium Projects will transform the Company from a gold producer into a world class, international mineral resource company. Ma'aden's operating statistics for the years ended 31 December 2005, 2006 and 2007 are summarised in the table below: Table 12: Operating Statistics Processing Units Tonnage (kt) 5,813 5,449 4,218 Grade (g/t Au) Production Gold (koz Au) Silver (koz Au) Zinc (t Zn) Copper (t Cu) Lead (t Pb) Gold Equivalent (koz Au Eq) Expenditures Cash Cost (1) - on mine (US$/t) Cash Cost (2) - Co-product (US$/oz) Cash Cost (3) - By-product (US$/oz) Capital Expenditure (US$m) Source: SRK (1) On mine cash costs excluding concentrate and bullion related treatment, refining and realisation charges (2) Co-product cash cost based on cash cost excluding by-product credits divided by gold equivalent production (payable) (3) By-product cash cost based on cash costs net of by-product credits divided by gold production (payable) 74

76 Ma aden s consolidated revenue (derived exclusively from its gold business and excluding investment income) was SR349.7 million for the year ended 31 December 2006, an increase of 26 %, compared to the year ended 31 December In its Gold MER, which is set out in full in this Prospectus, see Gold Mineral Expert s Report, SRK states that the Ore Reserves for the Company s five operating mines and Ad Duwayhi (classified by Ma aden as a development project) as at 1 July 2007 were 21.66Mt grading at 1.9g/t of gold, with contained gold of 1.29Moz (1.32Moz of gold equivalent). Total Mineral Resources in respect of the operating mines, Ad Duwayhi and the Company s five advanced exploration projects in Measured, Indicated and Inferred categories were Mt grading at 2.3 g/t of gold, with contained gold of 10.04Moz. Set out below is a table showing Ma aden s total Mineral Resources and Ore Reserves on an asset by asset basis as at 1 July It includes the five operating mines, Ad Duwayhi and the five advanced exploration projects referred to in Exploration Projects below. In the following table and throughout this and other sections of the Prospectus, Mineral Resources and Reserves relating to Ma'aden's gold business have been stated in accordance with standards as defined by the terms and conditions given in the JORC Code. The JORC Code is an internationally recognised Mineral Resource and Reserve Mining Code. Table 13: Total Mineral Resources and Ore Reserves (as at 1 July 2007) Tonnage Grade Content Ore Reserves Proved (kt) (g/t Au) (g/t Au Eq) (koz Au) (koz Au Eq) Mahd Ad'Dahab Subtotal Probable Mahd Ad'Dahab Al Amar 1, Bulghah 16, Sukhaybarat Al Hajar 2, Subtotal 21, ,140 1,172 Ore Reserves Mahd Ad'Dahab 1, Al Amar 1, Bulghah 16, Sukhaybarat Al Hajar 2, Total Ore Reserves 21, ,293 1,329 Mineral Resources Measured Mahd Ad'Dahab Ad Duwayhi 7, Subtotal 7, Indicated Mahd Ad'Dahab Al Amar 1, Bulghah 21, Sukhaybarat Mineral Resources Tonnage Grade Content (kt) (g/t Au) (g/t Au Eq) (koz Au) (koz Au Eq) Al Hajar 2,

77 Ore Reserves Proved Tonnage Grade Content (kt) (g/t Au) (g/t Au Eq) (koz Au) (koz Au Eq) Ad Duwayhi 6, ,169 1,169 Advanced Exploration Projects 31, ,369 2,369 Subtotal 64, ,181 5,211 Measured + Indicated Mahd Ad'Dahab 1, Al Amar 1, Bulghah 21, Sukhaybarat Al Hajar 2, Ad Duwayhi 13, ,817 1,817 Advanced Exploration Projects 31, ,369 2,369 Total Measured + Indicated 71, ,064 6,102 Inferred Mahd Ad'Dahab Al Amar Bulghah 2, Ad Duwayhi 3, Advanced Exploration Projects 54, ,448 3,448 Subtotal 60, ,939 3,944 Mineral Resources Mahd Ad'Dahab 1, Al Amar 2, Bulghah 23, Sukhaybarat Al Hajar 2, Ad Duwayhi 17, ,116 2,116 Advanced Exploration Projects 86, ,817 5,817 Total Mineral Resources 132, ,004 10,046 Source: SRK Ma aden anticipates that the Ore Reserves at its operating mines including the Al Amar mine will be depleted by Accordingly, in its LoMp s Ma aden has made provisions totalling US$14.62 million (SR54.82 million) in the aggregate in respect of environmental liabilities and other closure costs. However, Ma'aden s strategic objective with respect to its gold business is to increase its Ore Reserves in existing mines, extending the life of certain mines where possible, and following completion of appropriate technical feasibility and economic viability studies, to develop other prospective deposits into producing mines if technically and financially feasible. To this end Ma'aden is currently conducting an extensive exploration programme focusing on targets in the proximity of existing mines as well prospective areas within the CAGR where it has identified Measured, Indicated and Inferred total gold resources of 7.93 million ounces. The exploration projects are at an early stage with the exception of Ad Duwayhi, where a prefeasibility study has been prepared. However, Ma aden intends to undertake further exploration activities over the next three years in order to undertake the necessary studies and other actions required to assess the economic and technical feasibility of exploiting the CAGR resources and to achieve its strategic objective of significantly increasing its gold production. 76

78 Settlement of Hedge Contracts With the privatization of Ma aden and the increase in the price of gold during the past two years to unprecedented levels, the Board of Directors decided, pursuant to its decision No. 2 dated 22/10/1428H (corresponding to 03/11/2007G) to liquidate all of the gold forward contracts to enable Ma aden to proceed without any obligations arising under such contracts, in addition to allowing the Company to benefit from the increase in gold prices. In 2001 the prices of gold were relatively low with the average purchase price of gold set at SR (US$ ) per ounce. As part of its risk management strategy, the Board of Directors made the following decisions pursuant to the authorities vested in it by the Company s bylaws to authorize management to enter into hedging contracts for the purpose of the deferred selling of quantities of gold in order to secure a minimum return on its investment. Decision No. 1. dated 21/09/1421H (corresponding to 17/12/2000G) in relation to the approval of the Bulghah mine project; and Decision No. 2 in its 8 th meeting dated 24/10/1423H (corresponding to 28/12/2002G) in relation to the approval of the Al Amar mine project. Given the foregoing, Ma'aden entered into hedging contracts with each of SAMBA Financial Group (previously known as The Saudi American Bank-Riyadh ) and JP Morgan Bank (previously known as Chase Manhattan Bank ) for the forward sale of 244,956 ounces of gold from the Al Amar mine with an average price per ounce of SR1,400 (US$ 373.6). During the same year (2001), Ma'aden entered into a call option contract with Barclays Bank plc which was converted into a forward sales contract in December of 2006 for the purpose of selling 11,558 ounces of gold from the Sukhaybarat and Bulghah mines with an average price per ounce of SR1,047 (US$279.2). Forward contracts are contracts pursuant to which the Company agrees to sell a certain amount of gold at a fixed price at a settlement date in the future. No payments are made upon the signature on such contracts. At the settlement date, the Company delivers the gold at the agreed-upon price. On 21 November 2007 the Company settled all its forward gold sale contracts which comprised forward contracts for an amount of 256,514 ounces due for settlement in At the settlement of the contracts, the price of gold was approximately SR3,000 (US$800) per ounce. This resulted in the sale price of the gold being considerably less than market price at the time of sale. Table 14: Gold Prices Saudi Riyals Year ended December Average Market Price 2,606 2,272 1,616 Average Sale Price by Ma aden 1,668 1,721 1,365 Source: unverified Management Estimates Ma aden was required to pay a cash sum of SR446 million (US$ 119 million) from its cash reserves to settle these contracts. The following table details such settlements on a per mine basis. Table 15: Settlement of Forward Contracts Per Mine Amount (ounces) Cost of Contract Settlement (US$ million) Al Amar Mine 244, Sukhaybarat and Bulghah Mines 11,558 6 Total 256, Source: Management Estimates 77

79 The resulting loss was expensed in the income statement for the year ending 31 December 2007 at the time of the settlement of the contracts. As these forward sales contracts have now been settled no further provision or reserve will be required to be made in respect of them. 78

80 Phosphate Project Ma aden Expansion Projects Phosphate Project General Overview The Phosphate Project aims to exploit an extensive phosphate deposit at AI Jalamid in northern Saudi Arabia and utilise local natural gas and sulphur to manufacture DAP, which is the most widely used phosphate based fertiliser in the world. DAP produced by the Phosphate Project will be sold primarily into international markets, after the demand in the local market has been satisfied. It is anticipated that the Phosphate Project will also produce excess ammonia and phosphoric acid not required in the production process which will also be sold domestically or exported. The Phosphate Project involves the development, design, construction and subsequent operation of two integrated sites: The upstream Al Jalamid site in northern Saudi Arabia which will comprise a phosphate mine and a beneficiation plant; and The downstream Ras Az Zawr site on the coast of the Arabian Gulf approximately 90km north of Jubail with a fertiliser production facility comprising DAP, ammonia, sulphuric acid and phosphoric acid processing plants; with each site supported by appropriate industrial and social infrastructure. It is expected that the mining and beneficiation facilities at Al Jalamid will produce an estimated 5.02 Mtpy of phosphate concentrate, supported by phosphate reserves sufficient to sustain the Phosphate Project beyond the estimated 20 year life of the project. It is estimated that the Phosphate Project will produce approximately 2.92 Mtpy of granular DAP. It is also anticipated that the Phosphate Project will generate approximately 0.44 Mtpy of excess ammonia for sale and 0.16 Mtpy of excess phosphoric acid for sales to the domestic market in Saudi Arabia. The phosphate concentrate will be transported by train from Al Jalamid to the fertiliser production facility at Ras Az Zawr for processing. The Railway is to be constructed by PIF (see, Common Infrastructure Railway ). In addition, the Phosphate Project (like the Aluminium Project) will be supported by a port facility and certain key common infrastructure further described in the "Common Infrastructure" section below. The phosphate concentrate will be processed at the Ras Az Zawr site to produce DAP in a fertiliser production facility consisting of a phosphoric acid plant, a sulphuric acid plant, an ammonia plant, a DAP granulation plant, a cogeneration and desalination plant, and other site infrastructure. Sulphur and natural gas, the additional key raw material inputs, will be sourced from Saudi ARAMCO. Power supply at Al Jalamid will be provided by a newly constructed captive plant consisting of three diesel-fired turbines and power at Ras Az Zawr will be generated by a captive cogeneration plant using steam produced by the sulphuric acid and ammonia plants. Much of the infrastructure at Ras Az Zawr will be common to the Phosphate and Aluminium Projects, including worker accommodations and will be provided by InfraCo, which is under formation and will be a subsidiary of Ma'aden. 79

81 On 15 September 2007, Ma'aden entered into a joint venture agreement with SABIC pursuant to which SABIC subscribed for a 30 % interest in PhosCo, the joint venture company to be established to operate the Phosphate Project. Pursuant to the terms of the Phosphate JVA, Ma'aden and SABIC will enter into various agreements with PhosCo for the marketing by SABIC of the majority of the DAP and excess ammonia produced by PhosCo to certain key markets in Asia and the Indian sub-continent, after the demand in the local market has been satisfied. It is anticipated that SABIC will take all excess phosphoric acid produced by the Phosphate Project for use in its Saudi Arabian operations in the earlier years. The total cost of the Phosphate Project is estimated at US$5.56 billion (SR20.85 billion) taking account of projected annual inflation and estimated financing costs and based on projected capital costs of US$4.54 billion (SR17.03 billion). Over 70% of total capital costs has been contracted at a fixed rate under signed Lump Sum Turn-Key ( LSTK ) contracts for the engineering, procurement and construction ("EPC") of a beneficiation plant, DAP, ammonia, sulphuric acid and phosphoric acid processing plants and certain supporting infrastructure. Thirty percent of total project costs of the Phosphate Project will be funded by equity contributions from Ma'aden and SABIC in proportion to their interests in the project. The remaining project costs (70%) will be funded by limited recourse debt financing. A mandate letter appointing arrangers and underwriters for the required debt financing for the Phosphate Project was executed in December 2007 and formal finance documentation was executed in June Project Status and Key Milestones The preliminary design of the phosphate mine and beneficiation plant at the upstream Al Jalamid site has been completed. A contract for the operation and maintenance of the mine was awarded to Saudi Comedat Company Ltd, a company owned by a syndicate of experienced mining contractors comprising CMCI, Jordan Comedat and Kier Group, on 1 October An LSTK EPC contract for the construction of the beneficiation plant was entered into on 17 December Ma'aden has entered into LSTK EPC contracts for the construction of each of the sulphuric acid, phosphoric acid, ammonia and DAP plants to be constructed at the Ras Az Zawr site and construction of these facilities has already commenced. The value of these contracts together with those for the beneficiation plant and certain other infrastructure represents over 70% of the total capital costs of the Phosphate Project. In addition, recruitment efforts have commenced and local technical institutions have been requested to commence preparation of appropriate training programs. Further key milestones in the development of the Phosphate Project are: (1) the commencement of commercial operations of the beneficiation plant (expected in the first half of 2010); (2) the commencement of commercial operations of the DAP plant (expected by end of 2010); (3) the operation of the phosphate facilities at full capacity, being 2.92 Mtpy of DAP (expected by end of 2012). The milestones for commercial operations of the sulphuric acid, phosphoric acid, ammonia and DAP plants are based on certain completion dates set out in the recently signed LSTK EPC contracts for the relevant plants (see "Summary of Material Agreements"). Each of the LSTK EPC contractors for the production plants was selected by Ma'aden based on their respective experience and track record in executing similar projects. Whilst Ma'aden currently anticipates completing the milestones as described above, the dates mentioned are indicative only and may change due to factors beyond Ma'aden's control. Background, Geology and Resources The Al Jalamid Deposit is located within the Sirhan Turayf region, a northern province of Saudi Arabia that extends into Jordan, southern Iraq, and Syria. It encompasses an area of 32.7km 2 in the northern province of Saudi Arabia, approximately 27km to the north-west of 80

82 the village of Al Jalamid, and 120km south-east of the town of Turayf, and is part of a total area of approximately 4016km 2 where Ma aden controls the mineral estate. This area is currently subject to an application for licence renewal (see the Mining and Exploration Licences and Other Permits and Authorisations section). The Al Jalamid Deposit is relatively flat and shallow, making it accessible for mining operations. Ma'aden commenced exploration for phosphate in the Umm Wu'al area in 1997 and in the Al Jalamid area in Ma aden s exploration programs and geological database in these areas have outlined nine prospective deposit areas (five at Al Jalamid and four in the Umm Wu al area). On the basis of these results, Ma aden adopted a long-term strategy for the development and exploitation of the phosphate resources in the northern region of Saudi Arabia. In 2002 Ma aden commissioned the Saudi Arabian Phosphate Consortium (SAPC) to complete a Bankable Feasibility Study ("BFS") for the Al Jalamid resource. Geotechnical analysis performed by SAPC confirmed that drill hole spacing used in the exploration programs provided sufficient certainty to upgrade the classification of a significant portion of the resource at Al Jalamid to the "measured" resource category in accordance with the JORC Code. In its Phosphate MER (see, Mineral Experts Report ), Behre Dolbear confirmed an estimate of the total Measured Resources within the Al Jalamid deposit (pursuant to Ma aden s mining licence) at 534 Mt according to the JORC Code classification with a 97.5 % probability that the tonnage exceeds 505 Mt. However, not all of the Measured Resources will be economically mineable and so defined as Proven Reserves. Behre Dolbear classifies 223Mt as Proven Reserves within the JORC classification and confirms that this level of Proven Reserves is more than sufficient to support the 20 year mining plan developed for Al Jalamid. Furthermore, developments since these estimates were made including an increase in assumed product prices and improved beneficiation recoveries might enable new mine planning studies to lead to a modest increase in the Behre Dolbear's estimates. Ownership Structure and Management Ownership The Phosphate Project will be developed in a joint venture with SABIC, through a limited liability company ("PhosCo"), incorporated in Saudi Arabia, which will own and operate the project and be 70 % owned by Ma'aden and 30 % owned by SABIC. PhosCo is managed by a board of managers comprised of six managers, four of which are appointed by Ma aden two of which are appointed by SABIC. The first board of managers of PhosCo has been elected for a term of three years and is comprised of the following members: Dr. Abdullah Essa AlDabagh (Chairman) (representing Ma aden) Mr. Khalid Saleh AlMudaifer (representing Ma aden) Dr. Mansour Othman Nazer (representing Ma aden) Mr. Khalid Salem AlRuais (representing Ma aden) Mr. Abdullah Ali Al Bakr (Chief Financial Officer) (representing SABIC) Mr. Hussain Ali Abu Halikeh (representing SABIC) The current president of PhosCo is Mr. Abdullaziz AlHarbi and the vice-president is Mr. Dahash Al Rasheedi. 81

83 PhosCo. s board is currently working on recruiting prospective PhosCo employees from the best qualified personnel available whilst ensuring that it recruits and trains a sufficient number of Saudi employees. Recruitment efforts have commenced and local technical institutions have been requested to commence preparation of appropriate training programmes. A joint venture agreement ("Phosphate JVA") was concluded on 15 September 2007 by Ma'aden and SABIC. The term of the Phosphate JVA is 25 years which will renew automatically for a subsequent five year period, subject to either party giving two year's notice of their intention not to renew. A summary of the material terms and conditions of the Phosphate JVA is set out in Summary of Material Agreements. Each joint venture partner will contribute equity in proportion to its project interest. Ma'aden's contribution to the joint venture on a best endeavours basis will include assigning the land and mining leases for the Ras Az Zawr and Al Jalamid sites to PhosCo, procuring a contractual commitment from Saudi ARAMCO for the supply of sulphur and gas and procuring the provision of certain project infrastructure and services. SABIC have undertaken to provide PhosCo with research, technical and marketing services on commercial terms and with technical, operational, project management and construction support and certain other services on favourable terms equivalent to those offered to SABIC affiliates, subject in all cases to the negotiation of appropriate services agreements with PhosCo. Overview of SABIC SABIC is a joint stock company formed in 1976 and owned 70 % by the Government of Saudi Arabia and 30 % by public shareholders. SABIC is a holding company for a group of companies that together constitute the Middle East s largest non-oil industrial company and the sixth largest international petrochemical company in the world based on revenues (source: Fortune 500). The principal business of SABIC is the manufacture and sale of basic chemicals, intermediates (including industrial gases), polymers (including polyolefins, PVC and polyester), fertilisers and metals. It has 22 manufacturing affiliates (16 in Saudi Arabia, three in the Kingdom of Bahrain, one in the Netherlands, one in Germany, and one in the United Kingdom). SABIC's fertiliser business unit consists of two divisions: urea and ammonia/phosphates. Its product range includes urea, ammonia, DAP, compound and liquid fertilisers. The combined fertiliser production capacity of SABIC and its affiliates is approximately 8 Mtpy at present including a production capacity of 0.3 Mtpy of DAP. With the start-up of the SAFCO IV plant in 2006, a SABIC owned fertiliser production facility in Jubail, SABIC now ranks as the world s largest producer of urea fertiliser, and the single largest producer of granular urea. It is also the largest granular urea exporter in the world. Currently, Saudi Arabia s entire urea and ammonia demand is met by SABIC, while it meets 90 % of the Kingdom s total requirements for phosphate fertiliser. For the year ended 31 December 2007, the SABIC Group had gross revenues of SR126.7 billion and gross profits of SR27 billion. Its total assets as at 31 December 2007 were SR256 billion. Technical Support PhosCo will receive technical and operational support from SABIC (through its subsidiary SAFCO) and the various technology providers and LSTK contractors for the various plants at the fertiliser production facility at Ras Az Zawr. 82

84 It is proposed that PhosCo will enter into a technical support agreement with SABIC pursuant to which SABIC (through its subsidiary SAFCO) will provide support to PhosCo as well as other agreements for the training of PhosCo. s technical personnel. These are currently being negotiated. SABIC has experience with similar plants, operating and maintaining SAFCO IV, a similar fertiliser production facility through SAFCO. The proposed agreement with SABIC is also expected to cover project management, training support, maintenance support and operational support. Additional technical, operational and maintenance support and training for each of the sulphuric acid, ammonia and DAP plants will be provided by: - Outotec (LSTK contractor for the sulphuric acid plant); - Samsung and Uhde (LSTK contractor and technology provider for the ammonia plant); and - Dragados and Incro (LSTK contractor and technology provider for the DAP plant). PhosCo will be provided with training and technical support in respect of its phosphoric acid plant by Yara France (Yara) as technology provider, under the terms of its technology transfer, agreement and by Litwin as LSTK contractor, under the terms of its contract. Al Jalamid Operations and Facilities The development at Al-Jalamid comprises a phosphate mine, beneficiation plant and supporting infrastructure. Mining Ma aden has developed a 20-year mine plan for an open cut mine for proven reserves of million tonnes measured in accordance with JORC standards. All mined ore will be crushed and conveyed to the beneficiation plant feed stockpile. In its Phosphate MER (see Mineral Experts Reports ), Behre Dolbear have confirmed that there is potential to further expand the Phosphate Project by developing a substantial portion of an additional 194 million tonnes of measured resources on an economic basis. Additional test work has commenced to fully evaluate this potential. Mine production is expected to average approximately 11 Mtpy of ore. Behre Dolbear has confirmed in its Phosphate MER that estimated phosphate reserves will be sufficient to sustain production at this level beyond the mine's estimated 20-year life. The mining and beneficiation facilities at Al Jalamid will be scheduled to produce an estimated 5.02 Mtpy of phosphate concentrate on a dry basis. The mining activities at the Al Jalamid site will be conducted by Saudi Comedat Company Ltd, a company owned by a syndicate of experienced mining contractors comprising CMCI, Jordan Comedat and Kier Group pursuant to a mining services contract signed on 1 October The initial contract period will be for eight years after which the contract is intended to be re-tendered. The mine contractor will provide all equipment, personnel and consumables for the operation of the mine during the contract period. PhosCo will, however, retain control of the mining resource, long term mine planning and ore quality. Beneficiation Beneficiation involves processes which increase the percentage of phosphate content in the ore whilst lowering the content of other deleterious minerals. 83

85 The Al Jalamid beneficiation plant will utilise grinding, washing, de-sliming, flotation and drying processes to remove calcium and magnesium carbonates from the ore and produce a phosphate concentrate suitable for use in the manufacture of wet process phosphoric acid. The plant design capacity is 11.6 Mtpy of ore (dry basis) to ensure production of 5.02 Mtpy (on a dry basis) of flotation concentrate. The basic design of the beneficiation plant was completed by WorleyParsons in November 2006, and was based on process flowsheets developed by SNC Lavalin/Jacobs and then optimized by Litwin. This basic design constituted the basis of the invitation to bid to provide a lump sum (or fixed amount) bid for the LSTK EPC contract for the beneficiation plant, which was signed at the end of Mobilisation at the site and site preparation for construction of the plant has commenced. Infrastructure and Water Supply A substantial amount of industrial infrastructure will need to be developed at the Al Jalamid site to support mining and beneficiation operations. This includes a power plant, potable water production, treatment and distribution, roads and telecommunications. Raw water supplies are a critical input requirement for a beneficiation plant and will be drawn from the reserves of the Tawil aquifer which is part of the eastern Arabian aquifer system. The quantity of ground water that is estimated to be withdrawn from the reserve over the lifetime of the project (212 million m 3 ) represents a negligible portion of the estimated reserve in the Tawil Aquifer (40,000 million m 3 ). Ras Az Zawr Site Facilities The phosphate concentrate will be transported by rail from the Al Jalamid beneficiation plant to Ras Az Zawr for processing. The phosphate concentrate will be processed in a fertiliser production facility consisting of a phosphoric acid plant, a sulphuric acid plant, an ammonia plant, a DAP granulation plant, a co-generation plant and desalination plant, and other infrastructure. Ma aden's phosphate processing facilities will be constructed so as to minimise the risk of interruptions to production and processing. Ma'aden will operate three separate trains for the production of phosphoric acid and sulphuric acid. Each train will be capable of operating independently and as a result, if one of the trains becomes inoperable for whatever reason, supplies of these key raw materials needed for the production of DAP will continue to be available. There will be four separate trains for the DAP granulation plant, two of which will be capable of producing both DAP and MAP with the other two dedicated for DAP production. In addition, even though there will be only one ammonia plant, ammonia can be purchased locally from SABIC or imported, if required. Plans have been put in place to minimise disruptions in mine production by including suitable ore and plant feed stockpiles at the mine, railheads, and Ras Az Zawr site. Adequate storage has also been included for key raw materials and intermediate products at the Ras Az Zawr site. Additional storage can be added later, if required. The proximity of Ras Az Zawr to the Eastern Province s oil and gas production and shipment facilities (Ras Tanura is the world s largest oil export port) means that there is an extensive network of supply pipelines and storage facilities to draw upon should the need arise. Sulphuric Acid Plant Sulphuric acid will be manufactured in the sulphuric acid plant using sulphur procured from Saudi ARAMCO. The sulphuric acid plant will supply sulphuric acid to the phosphoric acid plant for the production of phosphoric acid. The sulphuric acid plant will also produce high- 84

86 pressure, super-heated steam which will be fed into the cogeneration plant to produce power for the fertiliser production facility. The plant consists of three acid production trains and will produce a total of approximately 4.66 Mtpy and consume approximately 1.52 Mtpy of molten sulphur in the process. Four days of molten sulphur storage will be provided to ensure that the plants can continue to operate in case of an interruption in supply. Sulphuric acid storage will be designed to allow the sulphuric acid plant to continue in full operation while one phosphoric acid plant is undergoing an annual overhaul. Molten sulphur, the key raw material input for the production of sulphuric acid, will be supplied by Saudi ARAMCO pursuant to the terms of a sulphur supply contract. Saudi ARAMCO has already provided sulphur supply letters to Ma'aden that outline the pricing mechanism for the supply of the required quantity of sulphur for sulphuric acid production. it is anticipated that a formal supply contract will be signed approximately 6 months prior to completion of the plant, as is customary in Saudi Arabia. The sulphuric acid facility is based on process technology from Outotek and in June 2007 Ma'aden signed LSTK contracts with Outotek GmbH and GAMA Industry Austria Ltd for the design, procurement and construction ( EPC ) of the sulphuric acid plant. Construction of the sulphuric acid plant commenced in December The EPC cost of the sulphuric acid plant under the LSTK contracts is approximately US$495 million (SR1.87 billion). Phosphoric Acid Plant Phosphoric acid is one of the main inputs for the production of DAP. Three separate phosphoric acid production trains are proposed to be constructed to meet annual DAP production requirements. Sulphuric acid will be mixed with the phosphate concentrate in the phosphoric acid plants to produce phosphoric acid, which will then be used for supply to the DAP plants. In aggregate the three phosphoric acid trains will have a combined annual production capacity of approximately 1.52 Mt and consume approximately 5.02 Mt of phosphate concentrate each year. There will also be on-site storage facilities for approximately 200,000 tonnes of concentrate which will support fourteen days production of phosphoric acid. The phosphoric acid will be supplied to the DAP trains, with surplus phosphoric acid to be transported via road tankers for local sale to SABIC. The phosphoric acid facility is based on process technology from Yara, in respect of which Ma'aden has obtained a licence. In June 2007 Ma'aden signed LSTK contracts with Litwin Middle East and certain other parties for the design and construction of the phosphoric acid plants. Construction of the phosphoric acid plant commenced in December last year. The EPC cost of the phosphoric acid plant under the LSTK contract is approximately US$523 million (SR2 billion). Ammonia Plant The ammonia plant will be designed for production of approximately 1.09 Mtpy of ammonia, approximately 0.66 Mtpy of which will be used by the DAP plant, with the surplus to be exported, after the demand in the local market has been satisfied. Surplus ammonia will be available for future expansions of DAP production. The estimated output is expected to be sufficient to supply the ammonia required for DAP production of 2.92 Mtpy. 85

87 Surplus ammonia will be stored onsite in two 30,000 tonne capacity refrigerated ammonia storage tanks. The storage capacity of the tanks is expected to be sufficient to ensure an adequate ammonia supply to the DAP plants, in the event that the ammonia plant is undergoing a planned shutdown for maintenance. To the extent that ammonia production exceeds required input for DAP production and storage requirements, it is expected that ammonia will be exported to international markets, after the demand in the local market has been satisfied. It is anticipated that approximately 0.44 Mt of surplus ammonia will be available for sale each year through Ma'aden's marketing arrangements with SABIC. Natural gas, the key raw material input for the production of ammonia, will be supplied by Saudi ARAMCO and used as feedstock for the production of ammonia at Ras Az Zawr. Saudi ARAMCO will be responsible for supplying natural gas to the Ras Az Zawr site. It has dedicated gas for supply to PhosCo at Ras Az Zawr via a gas allocation letter in quantities sufficient to meet the ammonia plant's daily requirements. It is anticipated that a formal supply contract will be signed approximately six months prior to completion of the plant as is customary in Saudi Arabia. In July 2007 Ma'aden signed LSTK contracts with Samsung Engineering Co., Ltd and Samsung Saudi Arabia Ltd. for the EPC of the ammonia plant pursuant to which Uhde will be subcontracted to provide technology and design and other services. Construction work on the ammonia plant commenced in December last year. The EPC cost of the ammonia plant under the LSTK contracts is approximately SR3.57 billion (US$951 million). Diammonium Phosphate (DAP) Plant The DAP plant has been designed to produce approximately 2.92 Mtpy of DAP in two independently operating plants (each comprising two trains). The overall plant comprises four DAP production trains, two of which will also have the capability to produce MAP, should production of MAP be considered more economically viable. 100,000 tonnes of DAP storage at the fertiliser production facilities will be allocated to each of the two plants, providing a total storage capacity of 200,000 tonnes. The total storage capacity corresponds to 22 days of production, and is intended to allow the plant to operate through shipping interruptions and short term fluctuation in product demand. The DAP plant will be based on process technology from Incro SA in respect of which Ma'aden obtained a licence. In June 2007 Ma'aden signed LSTK contracts with Dragodos Gulf Construction, Intecsa Ingenieria Industrial S.A. and Initec Energia S.A. Union Temporal de Empresas for the EPC of the DAP plant. Construction of the DAP plant complex commenced in December last year. The EPC cost of the DAP plant under the LSTK contracts is approximately SR1.83 billion (US$486 million). PhosCo Infrastructure PhosCo's operations at Ras Az Zawr will require the support of substantial infrastructure. In addition to the port facility which will be used to export DAP and ammonia, PhosCo's operations will rely on certain infrastructure dedicated for the sole use of PhosCo at Ras Az Zawr ("PhosCo Infrastructure") and is located inside PhosCo's fence line and certain infrastructure which is to be shared with the Aluminium Project ("Common Infrastructure") and is located outside PhosCo's fence line (a discussion of the Common Infrastructure and the Port is set out in The Company s Business - Common Infrastructure ). 86

88 The PhosCo Infrastructure includes the following: A power generation and water desalination plant capable of generating approximately 135MW of electricity and 40,000 m3 of desalinated water per day. The plant will make use of the excess steam generated by the sulphuric acid and ammonia plants and any surplus power produced will be sold to the SEC's national electricity distribution grid. In addition, the connection to the grid will provide an alternative source of power should this be required. Bids have been received for the LSTK EPC contract for the plant from contractors and this contract was awarded and signed in December Construction of the plant commenced recently. A seawater cooling system to provide cooling water to the ammonia and sulphuric acid plants, and supply water to the desalination plant. PhosCo is responsible for the infrastructure required to bring the water to the process plant. Gas distribution facilities to various plants and facilities for the gas supplied to the Ras Az Zawr site. Other infrastructure includes facilities for process and potable water, storm water, effluent and waste water treatment, plant air, feedstock distribution, phosphate concentrate handling, integrated control systems, communications and security, acid loading, liquid sulphur receiving, roadways, lighting, security and administrative offices. The total cost of the PhosCo Infrastructure is estimated at approximately US$755 million (SR2.83 billion). Project Development, Management and Commissioning Worley Arabia Limited ("WorleyParsons") has been appointed as the Project Management Consultant ( PMC ) for the Phosphate Project and to assist PhosCo, Ma'aden and SABIC to manage the overall implementation and execution of the Phosphate Project. WorleyParsons has assigned a team to each LSTK contractor working with them to ensure that contract conditions are met and will carry out certain design, procurement, and construction management services as necessary to assist in meeting scheduled production. During construction and initial operations of certain construction projects, PhosCo s teams will be supported by external providers including the EPC and LSTK contractors and technology providers. Commissioning of the facilities is planned to occur in a sequential manner as follows: The mine and beneficiation plants at Al Jalamid will be commissioned to provide a build-up of rock concentrate at Ras Az Zawr for processing. Ras Az Zawr Phosphate Project site infrastructure such as major roadways, control rooms, maintenance buildings, office buildings, laboratories will be progressively constructed, fitted out and completed. Power supply to the site and associated infrastructure together with cooling seawater supply and outfall, utilities boiler, desalination plant and associated storage and distribution systems will be constructed. The ammonia plant has the longest lead time for construction and must be operational before DAP can be produced. A sulphuric acid plant is scheduled to be the first plant to commence operation at Ras Az Zawr. As soon as quantities of sulphuric acid have been produced and 87

89 subject to the various plants being completed on time and in sequence, the first phosphoric acid plant will then commence operation. Similarly, as soon as quantities of phosphoric acid have been produced, a DAP granulation plant will commence operation using ammonia produced by the ammonia plant. For each of the plants, commissioning will include producing initial quantities of the product; reaching a stable level of production and handing the plant to the operations team. Environmental Impact An Environmental Impact Assessment (EIA) study for each of the Al Jalamid and Ras Az Zawr sites was prepared in conjunction with the BFS. The study was prepared in accordance with Presidency of Meteorology & Environment of Saudi Arabia ("PME") standards, Islamic principles for the conservation of the natural environmental, Ma aden's corporate policy, and applicable international standards. The EIA study concluded that construction and operation of the mine and beneficiation plant at Al Jalamid, and the fertiliser production facilities at Ras Az Zawr are not anticipated to generate any major negative environmental impact at the sites, although several mitigation measures to minimise any potential negative impact proposed by the EIA are planned to be implemented. The findings of the study have been confirmed by subsequent studies carried out in relation to the sites for the Phosphate Project including a Supplemental Environmental Impact Report (SEIA) prepared by GHD, a leading international engineering and environmental consultant, to assess the potential for additional environmental impacts generated by changes to the design of these facilities and amendments made to the Equator Principles since the completion of the EIA and various other studies. A Community Impact Study (CIS) also undertaken to comply with the requirements of the Equator Principles established by the World Bank classified the Phosphate Project as a Category B Project, meaning that potential limited adverse social or environmental impacts are few in number, generally site-specific, largely reversible and readily addressed through mitigation measures. Ma'aden proposes to manage the potential environmental impact of the Phosphate Project by implementing a specific environment management plan for the Al Jalamid site. The environmental impact of all activities at Ras Az Zawr (including those relating to the Aluminium Project, Port and other infrastructure) is to be managed through the implementation of an "environmental monitoring programme" which will enable Ma'aden to assess its compliance with applicable environmental standards and regulations, establish the effectiveness of pollution prevention and control strategies and support management decisions, by identifying priorities for action. Marketing and Agency Arrangements Pursuant to the terms of the Phosphate JVA, Ma'aden and SABIC have entered into various agreements with PhosCo and each other concerning the marketing of DAP and excess ammonia produced by PhosCo, providing for the following: SABIC and Ma'aden will each be responsible for marketing a pro-rata amount of the total DAP and excess ammonia production equivalent to their interests in PhosCo of 30 % and 70 % respectively (as amended from time to time) for the Phosphate JVA's initial term of 25 years and any subsequent renewal periods. In consideration of the marketing of their respective shares of the DAP and ammonia production, each of SABIC and Ma aden will be paid a marketing fee by PhosCo. 88

90 The assignment by Ma'aden of its marketing obligation in respect to 47 % of the total DAP production to SABIC such that 77 % of the total DAP production will be marketed by SABIC for a period of 15 years commencing on the first date of production by the Phosphate Project. As a result Ma'aden will be responsible for marketing 23 % of the total DAP production. The assignment by Ma'aden of its marketing obligation in respect of all of the excess ammonia production to SABIC such that all excess ammonia production will be marketed by SABIC for a period of 15 years commencing on the first date of production by the Phosphate Project. That Ma'aden will have the right to call back all or part of its pro rata share of the total DAP and excess ammonia from SABIC at any time after the expiry of a period of 5 years from the effective date of the marketing agreements between Ma aden and PhosCo and SABIC and PhosCo. Pursuant to the proposed marketing arrangements with SABIC it is anticipated that during the first five years of production SABIC will market DAP to international markets, after the demand in the local market has been satisfied, with a particular focus on the Indian subcontinent and excess ammonia produced to international markets east of Suez with a particular focus on Asia and the Indian sub-continent, after the demand in the local market has been satisfied. PhosCo has agreed to sell to SABIC all of the surplus volume of phosphoric acid produced by PhosCo at Ras Az Zawr. A final sale and supply agreement between PhosCo and SABIC in relation to the surplus phosphoric acid is currently under negotiation. Phosphate Project Costs and Funding The total cost of the Phosphate Project is estimated at US$5.56 billion (SR20.85 billion) taking account of projected annual inflation and estimated financing costs and based on projected capital costs of US$4.54 billion (SR17.03 billion). Over 70% of total capital costs have been contracted at a fixed rate under signed LSTK contracts for the engineering, procurement and construction ("EPC") of a beneficiation plant, DAP, ammonia, sulphuric acid and phosphoric acid processing plants and certain supporting infrastructure. For further details regarding costs see table 13.1 in the Phosphate MER prepared by Behre Dolbear. The principal items of Phosphate Project costs include the cost of construction of the mine at Al Jalamid and associated facilities and infrastructure ($0.58 billion (SR2.18 billion)) and the cost of construction of the processing facilities at Ras Az Zawr and associated infrastructure ($3.33 billion (SR12.49 billion)). Other miscellaneous costs will include finance costs, inflation, interest payments and other debt related fees. Provisions for contingency costs account for the balance of the project costs. It is expect that 30 % of total project costs of the Phosphate Project will be funded by way of equity contributions from Ma'aden and SABIC in proportion to their interests in the project. The remaining project costs will be funded by limited recourse debt financing. The debt financing is currently being sourced from a mix of Islamic, other local, regional and international commercial banks and financial institutions and export credit agencies. Debt funding is also expected to be made available by the PIF and the Saudi Industrial Development Fund. Debt financing will be made available on a limited recourse basis with security limited to PhosCo's assets. Ma'aden and SABIC will provide completion support in proportion to their respective shareholdings in PhosCo. Ma'aden and SABIC will also be expected to enter into equity retention and subordination arrangements with the financiers. A mandate letter appointing arrangers and underwriters for the required debt financing for the Phosphate Project was executed in December of 2007 and formal finance documentation was executed in June of

91 Aluminium Project Aluminium Project Overview Ma'aden's objective is to exploit Saudi Arabia's bauxite resources to produce aluminium for domestic and export markets. The Aluminium Project involves the development, design, construction and subsequent operation of two integrated sites: The mining facilities at Az Zabirah, consisting of a bauxite mine and ore handling facilities; and The aluminium complex at Ras Az Zawr, consisting of an alumina refinery, an aluminium smelter and a dedicated power plant at Ras Az Zawr; with each site supported by appropriate industrial and social infrastructure. Capacities reviewed in historical independent technical studies and by Behre Dolbear in its Aluminium MER previously indicated that upon completion of the Aluminium Project approximately 3.5 Mtpy of bauxite would be extracted from the Az Zabirah Deposit to produce approximately 1.4 Mtpy of alumina from the refinery and approximately 0.65 Mtpy of aluminium from the smelter. Further feasibility studies focusing on the aluminium smelter and alumina refinery ("FEL 2 Studies") completed earlier this year confirmed the economic feasibility of increasing these capacities to approximately 4.0 Mtpy of bauxite, 1.8 Mtpy of alumina and 0.74 Mtpy of aluminium and the Company intends to proceed with the development of the Aluminium Project on this basis. Excess alumina produced by the refinery that is not used to expand the smelter's aluminium production is anticipated to be sold to international markets, after the demand in the local market has been satisfied, through Ma'aden's proposed marketing arrangements with Rio Tinto Alcan. In April 2007, Ma'aden entered into a HoA with Rio Tinto Alcan to conclude a joint venture agreement pursuant to which Rio Tinto Alcan will acquire a 49 % interest in AlumCo the joint venture company which will operate the Aluminium Project. Commercial production of aluminium is planned to commence by the end of The Heads of Agreement envisages that each of Ma'aden and Rio Tinto Alcan will enter into offtake agreements with AlumCo to purchase the aluminium produced in proportion to their respective interests in, the project. The Company anticipates entering into a formal joint venture agreement with Rio Tinto Alcan in the third quarter of Following completion of the FEL 2 Studies and the revision of the estimated production capacities for the refinery and smelter to approximately 1.8 Mtpy of alumina and 0.74 Mtpy of aluminium respectively and for the power plant to approximately 2100MW, cost estimates have been adjusted upwards. It is now estimated that the total cost of the Aluminium Project is SR39.56 billion (US$10.55 billion) taking into account working capital and contingency costs but not projected annual inflation or estimated financing costs during the construction phase. This estimate is based on projected capital costs of approximately SR35.04 billion (US$9.34billion). The increase in cost estimate is attributable to several factors including the increased capacities of each of the mine, refinery, smelter and power plant, the more advanced stage of development of the project, increased construction costs due to inflationary pressures in the region, increased import costs resulting from exchange rate changes and human capital costs because of skilled labour shortages. The FEL 2 Studies also confirmed an increased production cost per tonne of $1,281 based on an annual production rate of 0.74 Mtpy of aluminium. This was previously estimated as $1,056 per tonne by Behre Dolbear in the Aluminium MER based on the previous capacity of 0.65Mtpy of aluminium. 90

92 The successful development and operation of the Phosphate and Aluminium Projects will be supported by a railway and port facility and certain key common infrastructure further described in the "Common Infrastructure" section below. The bauxite ore will be mined using trucks and shovels and will be transported from the Az Zabirah mine site to the processing facilities at Ras Az Zawr by train, on the Railway. The alumina refinery will process the bauxite using the Bayer process. The alumina produced will be used primarily as feedstock for the project's aluminium smelter, with surplus production to be sold into international markets, after the demand in the local market has been satisfied. Power, steam and desalinated water will be supplied to the smelter and refinery by a projectdedicated oil-fired power plant rated at approximately 2,100 MW net capacity to be developed as part of the Aluminium Project. It is expected that the heavy crude oil to fuel the power plant will be supplied by Saudi ARAMCO at a fixed cost. Certain of the other associated utilities including cooling water facilities and worker accommodations to be located at Ras Az Zawr will be developed by InfraCo, which is currently under formation and will be a subsidiary of Ma'aden. It has been agreed that any excess power not required for the refining and smelting operations will be sold to SEC. Project Status and Key Milestones The Aluminium Project is at an earlier stage of development than the Phosphate Project. The FEL 2 Studies for the aluminium smelter and the alumina refinery which confirmed the current capacities of the refinery and smelter were completed in the first quarter of this year. Further, detailed engineering studies ("FEL 3 Studies") for the smelter and refinery will need to be completed before execution of EPCM contracts for the construction of these facilities and as a pre-condition to financing. The Company is currently in discussions with EPCM contractors for the mine and refinery and the smelter who will be appointed during the FEL 3 Studies phase to assist with the completion of the studies. It is expected that the FEL 3 Studies will be completed by the third quarter of On 30 April 2007, Ma'aden entered into a Heads of Agreement ("HoA") with Rio Tinto Alcan for the development of the Aluminium Project after the evaluation and selection of a group of international companies, with which Ma aden has strong ties, that specializes in this field. It is anticipated that a formal joint venture agreement to replace Ma'aden's current Heads of Agreement with Rio Tinto Alcan will be signed in the third quarter of Further key milestones in the development of the Aluminium Project are: (1) the availability of first reliable power (expected by the end of the first half of 2012); (2) first alumina production (expected by end of the second half of 2012); (3) first aluminium production (expected by end of the second half of 2012); (4) operation of the aluminium facilities at full capacity (1.8 Mtpy of alumina and 0.74 Mtpy of aluminium) expected by end of the first half of 2013). It is expected that the alumina refinery will become operational after the aluminium smelter and under the terms of the HoA, Rio Tinto Alcan will be required to use its reasonable best efforts to supply alumina to the smelter during that period. Whilst Ma'aden currently anticipates completing the milestones as set out above, the dates specified are indicative only and may change due to factors beyond Ma'aden's control. Background, Geology and Resources A significant bauxite deposit was discovered at Az Zabirah in 1979 by Riofinex Limited, a subsidiary of Rio Tinto. Exploration work carried out by Riofinex between 1979 and 1984 further defined the deposit which is located discontinuously along a strike length of approximately 105km, with an average width of approximately 2.5km ("Az Zabirah Deposit"). The Az Zabirah Deposit comprises three main zones: the north, central and south zone, with each being approximately 30km in length. 91

93 Subsequently, between 1987 and 1993, Bureau de Recherché Géologiques et Minières ( BRGM ), in conjunction with the Directorate General for Mineral Resources ("DGMR"), conducted a pre-feasibility study of the deposit. Ma aden won the right to explore and investigate the feasibility of the bauxite deposits at Az Zabirah in a competitive tender in In December 2001, Ma aden commissioned Hatch Associates Pty. Ltd. ("Hatch") to review geological data collected from exploration programs conducted by Riofinex and BRGM. Hatch prepared resource estimates for the south zone and the central zone of the deposit based on the Riofinex and BRGM programs and a drilling programme undertaken by Ma'aden. The total resource (including measured, indicated and inferred resources) for the south and central zones of the deposit at Az Zabirah was estimated by Hatch in 2004 at 377 Mt with an estimated total available alumina content of 50.4 % and an estimated silica content of 8.3 %. Hatch was also engaged to prepare a mine plan ( Mine Plan") in November 2003 based on a specified limited period of production, exclusively within the south zone and estimated the Az Zabirah ore proved and probable reserves in the south zone to be Mt in accordance with the then applicable standards. Further work is currently being undertaken to upgrade this estimate to comply with JORC Code standards. This is expected to be completed early next year. In April 2003, Ma aden also commissioned Saudi Arabian Bechtel Company ( Bechtel ) to prepare a Feasibility Study Report ( FSR ) for the Aluminium Project which was completed in 2005 (with additional work performed by Snowden and Runge). This was subsequently revised in 2005, and confirmed Hatch's reserve and resource estimates, estimating a mine life of 12 years. The FSR recommended that further work be done to upgrade a portion of the inferred resource in the south zone to an indicated resource, and the mine plan was revised to increase reserves and hence the mine life. In February 2007, Ma'aden was granted three mining leases by the Ministry of Petroleum and Mineral Resources for the south zone of the bauxite deposit. Ma'aden has also applied for two contiguous exploration licences which will cover the central zone of the Az Zabirah Deposit with a total area of 164km 2. In July 2007, Hatch Engineering commenced a further review of the resource and reserve estimates as part of the FEL 2 engineering design package for the mine and refinery. In its Aluminium MER (see, Mineral Experts Reports ), Behre Dolbear assesses the total potential resource for the South Zone of the Az Zabirah deposit to be 240 Mt at 50% available alumina and 8% SiO 2. Even if only half of this assessed resource is converted to reserves, in Behre Dolbear's view, a reasonable assumption, it would allow for a mine life of well over 30 years at the initially proposed alumina production rate of 1.4 Mtpy from a bauxite supply rate of 3.5 Mtpy. They further state that additional resources may be available from the Central Zone of the deposit which has drilled out resource potential (partly measured but mostly inferred classification) of over 100 Mt at 50 % total available alumina and 8 % SiO 2. However, Behre Dolbear did not support the reserve estimates contained in the Hatch report which is part of the FSR nor the update prepared by SMGC in 2005 as being in compliance with the JORC Code. It has reservations as to the geological modelling and resource estimates procedures from data validation to conversion of resources to reserves followed by Hatch and in the update studies carried out by Ma'aden and SMGC in In its Report it recommends that the differences in the levels of resources supported by those studies and those supported by the Project Feasibility Study carried out by Hatch in 2003 be resolved. To this effect Behre Dolbear recommended that new resource modelling should be undertaken on the basis of new procedures endorsed by it in the Aluminium MER. The work commenced by Hatch in July 2007 was to be used as the basis for the preparation of a further technical report to prepare a revised resource model for the South zone of the Az Zabirah bauxite deposit which would, amongst other things, address the issues raised by 92

94 Behre Dolbear. In late 2007 the Company engaged international technical consultants to prepare a technical report in compliance with the requirements of Canadian National Instrument (the Canadian equivalent standard of the JORC Code). The technical consultants considered the planning, estimation and design work reviewed to be comprehensive and of prefeasibility study standard. The technical consultants determined that the work was of sufficient quality to support a Mineral Resource estimate in accordance with the CIM Definition Standards (CIM 2005) and best practice guidelines (CIM 2003) and to convert the Mineral Resource estimate to Mineral Reserves. In its report issued in May 2008 the technical consultants estimated the total Mineral Resource at the South Zone of the Az Zabirah deposit to be Mt at 49.4% available alumina and 8.9% SiO and the total Mineral Reserves at 203Mt at 47.5% available alumina and 9.5% silica. These classifications were prepared in accordance with the Canadian standards described above. The mine plan has since been updated to take into account the revised Mineral Resource and Mineral Reserve estimates as well as the revised estimated capacities of the refinery and smelter reviewed in FEL 2 Studies. The revised mine plan envisages production at an annual mining rate of 4.0 Mtpy of bauxite to meet the annual alumina supply target of 1.8 Mtpy and aluminium production of 0.74 Mtpy for a period in excess of 30 years. Ownership Structure and Management Ownership The Aluminium Project will be owned and operated in joint venture with Rio Tinto Alcan through a limited liability company ("AlumCo") to be incorporated in Saudi Arabia. A Heads of Agreement ("HoA") was concluded on 30 April 2007 between Ma'aden and Rio Tinto Alcan. AlumCo will be owned 51 % by Ma'aden and 49 % by Rio Tinto Alcan. The conclusion of the formal joint venture agreement is anticipated in the third quarter of 2008 after the completion of the negotiations. Under the HoA each joint venture partner will contribute equity in proportion to its project interest. The HoA also outlines each partner's responsibilities towards the Aluminium Project with Ma'aden being responsible on a reasonable endeavours basis for, amongst other things, procuring the provision of certain infrastructure and services, licences for the production of power, steam and desalinated water, property and mining leases for the Az Zabirah and Ras Az Zawr sites, caustic soda and fuel supply contracts. Rio Tinto Alcan is obliged to provide AlumCo with certain management support services including the provision of skilled personnel from other Rio Tinto Alcan plants, training, human resources management, developing and updating of certain operational policies and procurement services. The term of the Aluminium joint venture agreement, as contemplated under the HoA, is intended to be 30 years and subject to renewal for an additional term of 20 years unless the parties agree otherwise. A summary of the material terms and conditions of the HoA is set out in Summary of Material Agreements. Overview of Rio Tinto Alcan On 15 November 2007 Rio Tinto completed the acquisition of 100% of Alcan's issued share capital pursuant to a takeover offer for an all cash consideration of approximately SR billion (US$38.1 billion). Rio Tinto Alcan is a multinational company regarded as a global leader in aluminium production and packaging with operations in primary aluminium and fabricated aluminium as well as flexible and specialty packaging, aerospace applications, bauxite mining and alumina processing. In 2006 Rio Tinto Alcan generated revenues of SR88.5 billion (US$23.6 billion) and achieved net income of approximately SR 6.75 billion (US$1.8 billion). Rio Tinto Alcan 93

95 has over 60,000 employees, including its joint ventures, and has operating facilities in 61 countries and regions. Immediately prior to the Rio Tinto take-over, Rio Tinto Alcan was a public company whose shares traded on the Toronto, New York, London, Paris and Swiss stock exchanges with a market capitalisation of approximately SR143 billion (US$38 billion). For further information refer to Rio Tinto Alcan's website: On 8 November BHP Billiton confirmed that it had approached Rio Tinto with a proposed offer to acquire the Rio Tinto group (including Rio Tinto Alcan but excluding debt) for approximately SR523 billion (US$141 billion). Rio Tinto rejected the proposal on the basis that its board believed the offer to undervalue Rio Tinto and its prospects. On 6 February 2008 BHP Billiton made a revised offer to acquire the group offering 3.4 BHP Billiton shares for every Rio Tinto share valuing Rio Tinto Group at approximately SR billion (US$147.4 billion) as of 4 February Rio Tinto s board has rejected the revised offer again on the basis that it believes that the offer significantly undervalues Rio Tinto. Management Upon incorporation of AlumCo, following the execution of the joint venture agreement, it is proposed that the Board of Managers of AlumCo will comprise three managers appointed by Ma'aden (including the chairman) and three managers appointed by Rio Tinto Alcan (including the vice chairman). The senior management team to be appointed by the Board will include a chief executive officer recruited by Ma'aden, a chief operating officer recruited by Rio Tinto Alcan and a chief financial and chief human resources officer jointly recruited by Ma'aden and Rio Tinto Alcan. Project Management Management of the Aluminium Project will require the successful co-ordination of the construction and commissioning of the alumina refinery, aluminium smelter and power plant at Ras Az Zawr. It is anticipated that construction of the refinery and smelter will proceed under EPCM contracts which are currently being negotiated and that construction of the power plant will proceed under an EPC contract. It is the current intention to appoint one of the contractors awarded the construction of the refinery or smelter to be responsible for coordinating the development of these three projects. Az Zabirah Operations and Facilities The site for the Az Zabirah bauxite mine is located in the Qassim province in the northeastern region of Saudi Arabia, approximately 150km north of Buraydah and 440km northwest of Riyadh. The mine plan has since been updated to take into account the revised Mineral Resource and Mineral Reserve estimates as well as the revised estimated capacities of the refinery and smelter reviewed in FEL 2 Studies. The revised mine plan envisages production at an annual mining rate of 4.0 Mtpy of bauxite to meet the annual alumina supply target of 1.8 Mtpy and aluminium production of 0.74 Mtpy for a period in excess of 30 years. Bauxite initially be mined from the south zone resource area with conventional open cut mining techniques and delivered to the mine processing facilities at Az Zabirah, with excavated waste material being placed in previously mined areas. It is proposed that mining operations will be undertaken by a third party contractor on the basis that a contracted mining operation has been assessed to be more cost-effective than a mining operation to be undertaken by AlumCo itself which is a common practice in the mining industry. This will be reviewed further during the FEL 3 Studies phase with assistance from Rio Tinto Alcan with the benefit of their experience in mining operations. The mine processing facilities will comprise a two-stage crushing plant which will accept runof-mine (ROM) ore and will crush the ore into a size suitable for delivery to and processing 94

96 through the grinding mills in the alumina refinery. The mine facilities will include also a loading station to deliver crushed ore to the top of train wagons. The mine processing facilities have been designed to process 4.0 Mtpy of dry bauxite and will be located at the mine site. The mine infrastructure will include site access roads, drainage, bore field and water supply pipeline, integrated communications systems, sewerage systems, electrical systems, reticulation of utilities and worker accommodation. Ras Az Zawr Facilities Bauxite ore transported by rail to Ras Az Zawr will be refined to produce aluminium oxide commonly known as alumina which will in turn be processed in the aluminium smelter (also located at Ras Az Zawr) to produce aluminium. Alumina Refinery The project s alumina refinery will use the Bayer process. The Bayer process is considered the most cost-effective commercial method for producing alumina and involves four steps - digestion, clarification, precipitation and calcination. The resulting product is alumina, which may then be processed into aluminium metal through the smelting process. It is intended that the refinery will operate continuously, with a first phase capacity of 1.8 Mtpy smelter grade alumina based on current estimated capacities. It is envisaged that a second 1.8 Mtpy stream for the production of alumina may be added following successful operation of the first phase in conjunction with a commensurate expansion of the smelter. Aluminium Smelter The smelter will use the Pechiney smelting process technology to extract aluminium metal from alumina through electrolytic reduction. This process is to be licensed to AlumCo by AP Aluminium Pechiney and is currently regarded as the most modern, commercially available and proven smelting technology. The smelting process converts alumina into its two elemental components, aluminium and oxygen. The separation of aluminium from oxygen is accomplished by high-temperature electrolysis in individual electrolytic cells or "pots". The smelter will comprise two modern pre-bake high amperage technology potlines, each with reduction cells with an overall facility capacity of 0.74 Mtpy of aluminium metal. The smelter will also include a carbon plant for anode production, a cast house for ingot production, material handling, and support facilities. AlumCo Infrastructure Power, Steam & Desalinated Water Facility As with PhosCo's processing facilities at Ras Az Zawr, AlumCo's operations at Ras Az Zawr will rely on certain infrastructure dedicated for the sole use of AlumCo ("AlumCo Infrastructure") as well as Common Infrastructure. A discussion of the Common Infrastructure and the port facility are set out in the Common Infrastructure section. Power, steam and desalinated water will be supplied to the smelter and refinery by a projectdedicated oil-fired power plant rated at approximately 2,100 MW net capacity to be developed as a key item of AlumCo Infrastructure. The power plant will be located on the coastline at Ras Az Zawr adjacent to the refinery and smelter and will be designed to meet all electricity, water and steam requirements of the two facilities. It is proposed that pursuant to a power interconnection agreement with Saudi Electricity Company ("SEC") the plant will have access to approximately 600 MW of back-up power supply and also have the ability to sell surplus capacity back into the grid. See "Power 95

97 Interconnection Agreement with Saudi Electricity Company in the "Summary of Material Agreements" section. Construction of the power, water and steam station will be undertaken by an EPC contractor. The bid process for the award of the power EPC has commenced and award of the contract is currently expected to occur by the end of the year. Project Development and Commissioning It is intended that the project facilities will be executed as individual, interrelated design and construction packages with internationally recognised EPCM and EPC contractors with extensive project execution experience in Saudi Arabia. It is envisaged that the EPCM/EPC contractor teams will work closely with AlumCo s project personnel to ensure the successful completion of the facilities. Ma aden and Rio Tinto Alcan have established teams to oversee all necessary studies for the completion of the alumina refinery and aluminium smelter. In anticipation of the completion of these studies and the execution of the Aluminium JVA Ma'aden and Rio Tinto Alcan are also establishing a dedicated team of specialists to oversee the overall execution of the Aluminium Project. Environmental Impact In conjunction with the FSR Ma aden engaged Bechtel to conduct an Environmental Impact Assessment (EIA) for each of the Az Zabirah mine site and refinery and smelter at Ras Az Zawr. A further study was conducted in relation to the Port and power, steam and desalination water facility. The EIA study concluded that construction and operation of the mine at Az Zabirah, and the alumina refinery and aluminium smelter at Ras Az Zawr are not anticipated to generate any major negative environmental impact at the sites, although several mitigation measures to minimise any potential negative impact proposed by the EIA are planned to be implemented. A certificate of environmental approval with respect to the proposed operations of the Aluminium Project at Ras Az Zawr has been issued based on the previous capacities of 1.4 Mtpy of alumina 0.65 Mtpy of aluminium from the smelter. The Company proposes to prepare a revised EIA study which reflects the revised capacities of approximately 1.8 Mtpy of alumina and 0.74 Mtpy of aluminium and apply for an updated certificate on this basis. It is proposed that a specific environment management plan be formulated for the Az Zabirah site. However, the environmental impact of all activities at Ras Az Zawr (including those relating to the Phosphate Project, Port and other infrastructure) are to be managed through the implementation of an "environmental monitoring programme" which will enable Ma'aden to assess its compliance with applicable environmental standards and regulations, establish the effectiveness of pollution prevention and control strategies and support management decisions, by identifying priorities for action. Offtake and Agency Arrangements Under the terms of the HoA Ma'aden and Rio Tinto Alcan have each agreed to enter into an offtake agreement with AlumCo to purchase their pro rata share (according to their respective project interests of 51 % and 49 %) of aluminium produced by the Aluminium Project at a price based on LME prevailing prices. These are currently being prepared and negotiated. Primary aluminium is one of the most commonly traded commodities on the LME with a daily average traded volume of 191,163 tonnes for the year to date (30 April The Aluminium spot and future markets will provide a liquid market into which Ma'aden can sell its aluminium production. 96

98 Nonetheless, the HoA contemplates that Rio Tinto Alcan and Ma'aden will enter into a sales agency agreement pursuant to which Rio Tinto Alcan will act as Ma'aden's sales agent for the sale of a portion of Ma'aden's share of smelter aluminium outside Saudi Arabia in consideration for the payment of an agency fee. It is anticipated that the term of the agreement will be 15 years from the first date of full commercial production from first line of the smelter. It is also proposed that Rio Tinto Alcan shall have the right to terminate the sales agency agreement at any time after the fifth year of the term by providing to Ma'aden 12 months' prior written notice. The portion of Ma'aden's share of aluminium production to be subject to the agreement and the agency fee payable to Rio Tinto Alcan is yet to be agreed in principle. It is proposed that each year after the fifth year of the term of the sales agency agreement, Ma'aden will be entitled to reduce the amount of aluminium which Rio Tinto Alcan may sell on its behalf in increments of up to 25 % of Ma'aden's pro rata share of aluminium provided it has first given Rio Tinto Alcan 12 months notice. The gross proceeds of sale (before deduction of the commission payable to Rio Tinto Alcan) remitted to Ma'aden upon sale of smelter aluminium by Rio Tinto Alcan on behalf of Ma'aden will be determined with reference to the average price achieved by Rio Tinto Alcan on sales of smelter aluminium in arm's length transactions with third parties. Rio Tinto Alcan and Ma'aden also propose entering into an exclusive sales agency agreement for Saudi Arabia for the sale by Ma'aden on behalf of Rio Tinto Alcan of that portion of Rio Tinto Alcan's share of the smelter aluminium that Rio Tinto Alcan determines may be sold to purchasers within Saudi Arabia. Ma'aden will have the right to terminate the sales agency agreement at any time after the fifth year of the term on 12 months prior written notice to Rio Tinto Alcan. The agreement is anticipated to otherwise be substantially on the same terms as the sales agency agreement for markets outside of Saudi Arabia. Project Costs and Funding Following completion of the FEL 2 Studies and the revision of the estimated production capacities for the refinery and smelter to approximately 1.8 Mtpy of alumina and 0.74 Mtpy of aluminium respectively, and for the power plant to approximately 2100MW, cost estimates have been adjusted upwards. It is now estimated that the total cost of the Aluminium Project is SR39.56 billion (US$10.55 billion) taking into account working capital and contingency costs but not projected annual inflation or estimated financing costs during the construction phase. This estimate is based on projected capital costs of approximately SR35.04 billion (US$9.34billion). The increase in cost estimate is attributable to several factors including the increased capacities of each of the mine, refinery, smelter and power plant, the more advanced stage of development of the project, increased construction costs due to inflationary pressures in the region, increased import costs resulting from exchange rate changes and human capital costs because of skilled labour shortages. Key Aluminium Project costs include the cost of the mine at Az Zabirah ((SR0.83 billion) (US$0.22 billion)) and construction of the facilities at Ras Az Zawr being the refinery ((SR8.19 billion) (US$2.18 billion)), the smelter ((SR13,66 billion) (US$3.64 billion)) and the power plant ((SR12.37 billion) (US$3,30 billion). It is currently expected that 30% to 40 % of the total costs will be funded through equity contributions from Ma'aden and Rio Tinto Alcan with the balance to be funded through limited recourse debt. It is possible that Ma'aden and Rio Tinto Alcan may provide this contribution by way of a subordinated shareholder loan. Ma aden may also resort to other sources of financing. Common Infrastructure Both the Phosphate and Aluminium Projects rely on the successful development and operation of several substantial infrastructure projects. These are: 97

99 The port for exporting DAP and ammonia in the case of the Phosphate Project and for the import of raw materials, and export of alumina and aluminium in the case of the Aluminium Project; The Railway project to transport the phosphate and bauxite ore from Al Jalamid and Az Zabirah (respectively) to Ras Az Zawr; and Certain common infrastructure facilities including land, accommodation and telecommunications at Ras Az Zawr to service both the Phosphate and Aluminium Projects. Port A new Port will be constructed, operated and maintained by the Saudi Port Authority. It will service industrial and mining operations located at Ras Az Zawr including the import and export requirements associated with the Aluminium and Phosphate Projects. The new Port will be located at Ras Az Zawr, approximately 90km northeast of Al Jubail. It is proposed that the port facility will comprise a 24km long, 175m wide navigation channel and a 2.4km by 1.4km port basin. The port has been designed to receive visiting vessels of up to 70,000 DWT to ensure that there is sufficient capacity to accommodate the largest vessels involved in the DAP and ammonia trades, and to meet the export needs of the Aluminium Project. Phase 1 development of the Port will involve the construction of three main berths, one for dry bulk cargo (such as DAP), one for general cargo and one for liquid bulk cargo. Provision has been made in the port basin design for additional berths if required for future expansion and for the extension of the proposed Railway line to the future berth front. In February 2008 it was reported that the Saudi Port Authority entered into an agreement with China Harbour Engineering Company (a joint venture between China's Harbour Contracting and Engineering Company local company Rafid Group) for the construction of the Port. The total cost for construction and development of the Port is estimated under the contract at approximately SR2.2 billion (US$590 million). The Company will not be responsible for any of the costs associated with the development of the Port. Railway Development of the Railway has been authorised under the Royal Decree No. 56, dated 4/3/1424 H (corresponding to 6/5/2003G). Construction of the Railway has been approved by the Supreme Economic Council and the Council of Ministers and its development is being monitored by SAR, a company wholly owned by PIF. The PIF is undertaking the development of a new north-south railway line from Riyadh to Haditha with spurs to Al Jalamid and Basayta and a linkage from the Az Zabirah to Ras Az Zawr and Jubail. Ma'aden understands that the Railway will be constructed by SAR and fully funded by the PIF and is expected to cost approximately SR16.9 billion (US$4.5 billion). The Company will not be responsible for any of the costs associated with the development of the Railway. The total length of the Railway will be approximately 2,400km and will transport minerals as well as passengers and general freight. The mineral line will be approximately 1,486km long linking the phosphate mine at Al Jalamid and bauxite mine at Az Zabirah to the processing facilities at Ras Az Zawr. Ma'aden understands that the Railway will be critical to the 98

100 production of DAP, alumina and aluminium at Ras Az Zawr and therefore the successful operation of the Aluminium and Phosphate Projects. Accordingly, it is important that the construction schedule for the Railway is synchronised with the Phosphate Project schedule which will be completed prior to the Aluminium. Ma aden s Phosphate and Aluminium Project teams are working closely with the PIF to ensure timely completion of all the milestones related to the construction of the Railway. Ma aden has representatives on the board of directors of SAR, the entity responsible for the construction and operation of the Railway project. Detailed design of the mineral line of the Railway was completed in March 2006 and in May 2006 the Council of Ministers approved the establishment of a new company, Saudi Railway Company which is owned by the PIF, in order to monitor the establishment, operate and manage the Railway project. Design and development of the Railway project is being co-ordinated by two separate consortiums. The consortium responsible for the design comprises CANARAIL of Canada, SYSTRA of France and Khatib & Al-Alami of Saudi Arabia and the development consortium comprises the same entities together with Louis Berger Group. The Railway works are to be divided into a number of contracts: civil and track works; procurement of rolling stock (wagons & locomotives); procurement of railway transport operator; facilities including workshops; and signalling and telecommunications. Contracts valued at over SR9.0 billion have already been awarded. In July 2006, the PIF awarded Al Khodary and Al Omaeir Contractors with the contract (valued at approximately SR1.8 billion) to undertake An Nafud s earthwork between Hail and Jawf (280km). Mobilisation and ordering of equipment is complete, and earthwork is in progress. In April 2007, the PIF signed contracts (valued at approximately SR7.2 billion) with three Railway and civil works contractor consortiums lead by the Saudi Bin laden Group, Al Swaikat Group, the China Railway no.18, and Al Rashed Company in association with Barclay Mowlem to undertake the civil and track works, which cover the construction of roadbed, concrete bridges, concrete culverts, concrete sleepers, rails, crushed rock ballast, and mainline track structure. Ma aden is currently negotiating a Railway Cooperation Agreement ( RCA ) with PIF which will be entered into between PIF, SAR, Ma aden and PhosCo. It is contemplated that the RCA will address matters including target dates for construction of the Railway and the beneficiation plant, information sharing, and certain operational requirements for the Railway. It is anticipated that the RCA will be entered into during Ma'aden also intends to enter into a Railway Transportation Agreement ( RTA ) with SAR and/or the Railway operator prior to completion of the Railway which will address minimum requirements and performance levels as to capacity, frequency, scheduling and turn around times in relation to PhosCo and AlumCo. The RTA will also provide for the tariffs that are payable in connection with the use of the Railway by PhosCo and AlumCo. It is anticipated that the RTA will be executed following execution of the RCA and once PIF has appointed an operator for the Railway. The tariffs payable by PhosCo and AlumCo for use of the Railway have not yet formally been agreed. Ma'aden anticipates that tariffs will be set within a particular range that will make both the Phosphate and Aluminium Projects economically feasible. Completion of the line from Al Jalamid to Ras Az Zawr is scheduled for the end of 2010, prior to the commissioning of the Phosphate Project processing facilities at Ras Az Zawr. In the 99

101 event that construction of the Railway is delayed, Ma aden may be required for a limited period of time to truck phosphate concentrate from Al Jalamid to Ras Az Zawr. Common Infrastructure at Ras Az Zawr Each of the Phosphate and Aluminium Projects have been configured such that Common Infrastructure (infrastructure that cannot be identified as solely for the use of PhosCo or AlumCo) at Ras Az Zawr will be provided by InfraCo, which is currently under formation and will be a subsidiary of Ma'aden. InfraCo s scope includes the following items: primary services, roads, sanitation facilities, electric power, and national electric power connections Power distribution and transmission Worker accommodation at Ras Az Zawr housing for bachelor workers Residential land at Al-Jubail housing for family workers These services, including their initial capital costs, are neither PhosCo s nor AlumCo's responsibility and are therefore not included in the Phosphate or Aluminium Project's costs. Capital costs for the Common Infrastructure will be funded by Ma aden. However, each of PhosCo and AlumCo will be required to pay a charge for their use to InfraCo, with the intention that InfraCo will recover its capital investment in the Common Infrastructure. This charge will also apply to any other entities which may occupy sites and operate downstream industries within the Ras Az Zawr site. Ma'aden is currently in discussions with the Royal Commission to determine the most efficient means of managing the current and future development of the new mining industrial zone at Ras Az Zawr. The Common Infrastructure schedule has been developed to ensure that components that are critical for the operations of PhosCo and AlumCo are completed on time. The total cost of the Common Infrastructure is estimated at approximately SR862.5 million (US$230 million). Other Projects Ma aden is constantly exploring for and evaluating new industrial Mineral Resources in Saudi Arabia for supply to local and international markets. The Company is actively evaluating the potential to enrich its mineral portfolio from identified deposits of industrial minerals including refractory clay and low-grade bauxite, sillimanite type minerals, graphite, bentonite and attapulgite, diatomite, silica, garnets, wollastonite, and brine type minerals. Summaries of Ma'aden's other projects are set out below. Chlor Alkali Project Caustic soda is an essential feedstock needed for the refining of bauxite to alumina. It is produced from the electrolysis of brine, along with chlorine which is later used in the manufacture of ethylene di-chloride ( EDC ). The Company proposes to construct a facility in a 50/50 joint venture with Sahara Petrochemical Company with the capacity to produce up to 0.25 Mtpy of caustic soda and 0.30 Mtpy of EDC. The plant will be located at Jubail Industrial City to allow ethylene to be delivered by pipeline from the Tasnee Ethane Cracker. The ethylene required for production 100

102 is to be provided by Saudi ARAMCO. Brine is readily available and will be sourced locally from one or more of the many suppliers in the region. Power will be supplied by the electrical grid of SEC. It is proposed that caustic soda produced will be supplied to Ma aden s alumina refinery under a marketing agreement between Ma aden and Sahara. A separate marketing agreement will be entered into with a third party for any surplus caustic soda produced. EDC is a widely traded commodity and will be sold into international markets with a portion being taken by another joint venture company in which Sahara Petrochemical Company has an interest. Jacob's Engineering was awarded the Project Manager Contract and is currently completing the design of the chlor alkali plant and the EDC plant. A technology agreement for the plants has been concluded with Uhde. Award of the EPC contract is expected to occur by the end of the year. Production is expected to commence in Ma'aden and Sahara have signed a Memorandum of Understanding dated 10 September 2006 in respect of the construction of the plant, with a joint venture agreement expected to be signed shortly, pursuant to which a joint venture company, to be owned 50 % by Ma aden and 50 % by Sahara, will be incorporated for the purpose of owning and operating the project. The proposed term of the joint venture is 25 years. The total cost of the project is estimated at SR1,500 million (US$400 million) (within a margin of +/- 30%) and it is anticipated that it will be financed with 30% equity and 70% debt. Industrial Minerals Projects Magnesite Zarghat is a high-grade magnesite resource which will provide top quality feedstock for a range of high-value magnesia products. The development of the Zarghat magnesite deposit in the north-central part of Saudi Arabia is planned as part of Ma aden s strategy to develop and diversify the minerals base of Saudi Arabia. The project is expected to become operational mid Ma aden s mining licence covers 3km 2 that includes all the magnesite in this area. The proven reserve at Zarghat is approximately 2.7 million tonnes and comprises four separate bowlshaped ore bodies that outcrop within 300 m of each other. It is proposed that the mine will be developed as an open cast mine and run of mine material will be crushed and screened on site and delivered to Ma aden s processing plant at Al Madinah Al Munawarah. Processing will occur at a state-of-the-art calcining and sintering plant that will be built at Al Madinah Al Munawarah industrial city, with calcined and sintered magnesia products shipped regionally within Saudi Arabia and to selected international destinations. The chemical and physical characteristics of Zarghat magnesite make it suitable for a range of high grade magnesia applications in a variety of market sectors, including refractories, environmental, agricultural, construction and other value added applications. Ma aden also holds exploration licences in the Jabal Al Rokham and Jabal Abt areas which are also prospective for magnesite. Initial exploration work concluded that the magnesite grade in these areas is lower than at Zarghat but that these areas have the potential for larger tonnages. The expected capital cost of the project is estimated at SR million (US$63 million). Kaolin and Low grade Bauxite Ma'aden is planning to develop kaolin and low grade bauxite resources to supply the cement industry in Saudi Arabia with high alumina feedstock. The kaolin and bauxite resources considered for exploitation are located in the central zone of the Az Zabirah lease area some 101

103 30km to the north of the south zone which contains the Az Zabirah Deposit. Suitability for other applications, such as refractory clays, is currently under investigation. Production from the project is estimated at 50,000 tonnes of kaolin per annum and 250,000 tonnes of cement grade bauxite feedstock. The project is situated near Al Baithah town and development of the mine and construction of the plant has been completed. First production delivery occurred in the first quarter of this year The expected capital cost of the project is estimated at SR13.5 million (US$3.6 million). 102

104 Dates and Expected Future Events Dates Events 2 nd Quarter of 2008 Execution of financing documents for the Phosphate Project. 3 rd Quarter of 2008 Ma'aden anticipates entering into a joint venture agreement for the Aluminium Project with Rio Tinto Alcan Ma aden anticipates entering into a Railway Cooperation Agreement with PIF Commencement of a feasibility study at Ad Duwayhi is scheduled 2008 The completion of a JORC-compliant audited resource estimate of the Ar Rjum prospects of Wasema and Um-Naam is expected 2008 Tender for the low grade bauxite and Kaolin project near Al Buathia is expected. (Construction of the mine and the infrastructure has already commenced.) 2009 The development of the Gold deposits at Ad Duwayhi is planned 2009 The operation of the magnesite project which is the subject of Ma aden s mining licence, covering 3 Km² at Zarghat is expected to commence 2009 Full production at the Al Amar mine Mid 2009 End of 2009 Industrial Minerals Project is expected to become operational Completion of the port to service the Phosphate and Aluminium Projects is anticipated The contract with Saudi Comedat for the mining and production of necessary ore for the Phosphate Project is expected to commence in the Al Jalamid region. Saudi Comedat is required to mine 92.4 million tonnes of material during the contract term, of which 40.1 million tonnes is to be phosphate ore. 1 st Half of 2010 Commencement of commercial operations of the initial sorting laboratory for the Phosphate Project is expected. 2ndHalf of 2010 End of 2010 End of 2010 Commencement of commercial operations of the beneficiation plant for the Phosphate Project is expected. Commencement of commercial operations of the DAP plant is expected The completion of the railway to service the Phosphate and Aluminium Projects is expected 2011 Gold deposits at Mansourah-Masarrah anticipated to be developed It is anticipated that commercial production of caustic soda together with ethylene di-chloride will commence. 103

105 Dates Events 1 st Half of 2012 The availability of the electric energy for the Aluminium Project 2 nd Half of 2012 First production of alumina is expected. 2 nd Half of 2012 First production of aluminium is expected. End of 2012 The facilities for the production of phosphate are expected to be fully operational with an estimated production of approximately 2.92 Mtpy of DAP. 1 st half of 2013 The facilities for the production of aluminium are expected to be fully operational with an estimated production of 1.8 Mtpy of alumina and approximately 0.74 Mtpy of aluminium Gold deposits at Ar Rjum are anticipated to be developed 104

106 Mining and Environmental Regulatory Framework Mining Investment Laws and Regulations The Mining Investment Law Mining operations in Saudi Arabia are governed by the Mining Investment Law (the "Mining Law") enacted by Royal Decree M/47 dated 20/8/1425H (corresponding to 5/10/2004G) and its Executive Regulations (the "Regulations") which were enacted by Royal Decree G/173 dated 30/11/1425H (corresponding to 11/1/2005G). Regulatory bodies The Mining Law provides that the Ministry of Petroleum and Mineral Resources ("MPMR") shall be responsible for supervising the implementation of the Mining Law. The specific responsibilities of the MPMR include, amongst other things: formulating the necessary regulations for the implementation of the Mining Law and proposing any amendments; designating the land and sea areas over which rights may be granted under the Mining Law and determining the conditions upon which those rights may be granted pursuant to the Mining Law; coordinating the activities of government agencies responsible for the provision of infrastructure facilities required for mining areas (including roads, railways, ports, power plants, and power supply lines); supervising the financial and technical activities of the licensees under the Mining Law in accordance with the Regulations; establishing the procedures for public bidding for exploration and mining licences; and setting controls for the protection and restoration of land upon which mining operations are conducted. The Mining Law also provides that the Saudi state has a priority right to purchase from any licensee any minerals that it requires on prevailing conditions and at prevailing prices, unless the licensee has a prior commitment to sell its production to a third party. Licences Under the Mining Law all natural mineral deposits are the exclusive property of the Kingdom of Saudi Arabia. Title to minerals in the Kingdom transfers to a licensee under the Mining Law upon extraction of the minerals from the licensed area in accordance with the terms of the relevant licence. A person may only undertake reconnaissance, exploration, exploitation or material collection activities in accordance with a licence granted for the purpose of authorising the relevant activity. Applications for licences must be in the prescribed form and include the information specified by the Regulations. Applications must also be accompanied by proof that the applicant has the necessary technical expertise and capability to conduct the activities permitted by the licence and that the applicant has sufficient financial resources to fund the activities in accordance with the requirements of the Regulations. In the case of mining licences, applications must be accompanied by detailed work plans and project expenditures. Licences are issued on conditions established by the MPMR, as governed by the Regulations. Such conditions may not be amended during the term of the licence. As is discussed further below, when issuing licences the MPMR must also ensure that an applicant complies with any applicable environmental laws and regulations. Particulars of applications for licences and licences granted are maintained by the MPMR in the Register of Applications and "Register of Licences respectively. Only interested 105

107 investors and licensed entities may access the Register of Applications in respect of their own application for a licence. Licences pre-dating the Mining Law continue in effect in accordance with its terms. Exploration or Exploitation Licences may be transferred to parties with the experience, technical expertise and financial resources to fulfil the obligations of the licence, and who would otherwise be qualified to obtain a similar licence in accordance with the provisions of the Mining Law. Licensees may not otherwise transfer or mortgage licences granted under the Mining Law without obtaining written approval from the MPMR. The MPMR may terminate a licence granted under the Mining Law in the following circumstances: In the case of a licensee under a building materials quarry licence or materials collection licence, delaying payment of amounts due by 90 days; In the case of a licensee under an exploration licence or exploitation licence, delaying payment of amounts due by 150 days; Provision by the licensee of incorrect information to the MPMR; Failure by the licensee to carry out (within 60 days of receipt of a written notice from MPMR) its obligations prescribed by the Mining Law, Regulations or the licence; Failure to rectify (within 60 days of receipt of a written notice from MPMR) any practice that exposes the health and safety of a licensee's own employees or other personnel to hazards or threatens to cause damage to mineral formations; and Failure to take the necessary action (within 60 days of receipt of a written notice from MPMR), to protect the environment, habitats, archaeological sites or tourist areas. In the event that a licence is terminated, the MPMR has a broad discretionary power to prevent the licensee from removing assets that are required for the public welfare from the lands subject to the licence, including but not limited to permanent constructions, power supply plants, water and sewage stations, and raw materials processing, separation and processing units. In addition, the Mining Law grants the Minister of the MPMR a broad right to suspend any activity under a licence in accordance with the Regulations, such as in the case of material adverse effects on any property. The Mining Law provides for an appeal process in respect of such orders. Types of Licences Under the Mining Law rights may be granted under a reconnaissance licence, exploration licence, materials collection licence or exploitation licence. An exploitation licence may be granted in the form of a mining licence, raw materials quarry licence, small mine licence or building materials quarry licence. Each of these licence types are described below. Reconnaissance Licence A reconnaissance licence entitles its holder to survey and investigate the licence area for a designated period of time not exceeding two years. The holder has the non-exclusive right to examine the licence area for minerals, examine ore bodies and collect samples and use geophysical, geochemical and other scientific methods for the preliminary examination of lands with potential mining deposits. The licensee is not permitted to undertake any type of excavation, construct any permanent installations or produce minerals for use or sale from the 106

108 sample area. The reconnaissance licence does not confer any right to the issuance of an exploration licence or any other licence under the Mining Law. A reconnaissance licence is renewable for an additional two years at the discretion of the MPMR. Specific obligations imposed under a reconnaissance licence include to notify to the MPMR of the locations of the licensee's field team during reconnaissance activities, to submit of an annual report on the progress and results of work undertaken and to submit a final report upon the expiry of the licence. Exploration Licence An exploration licence grants the licensee the exclusive right for a period of up to five years to engage in any detailed scientific and technical activity leading to the discovery of natural deposits of metallic or non-metallic ores and to explore the licence area, establish camps and various facilities, and, subject to proving the discovery of an exploitable mineral, obtain an exploitation licence within the licence area. The area subject to an exploration licence may not exceed 100km 2 and the term of the licence is renewable for a further period of up to five years. Specific obligations imposed under an exploration licence include undertaking necessary precautions with respect to any hazards which may be caused by exploration activities, notifying the MPMR of the location of field teams undertaking exploration activities, submitting half-yearly reports on the progress of work and a comprehensive report upon the expiry of the licence. In addition, exploration licences are subject to minimum annual expenditure requirements as set out in the following table. Table 16: Minimum Annual Expenditure Requirements for Exploration Licences Year of Licence Minimum Annual Expenditure per km or Slot (in Saudi Riyals) First Year 750 Second Year 750 Third Year 3,000 Fourth Year 3,000 Fifth Year 4,500 Sixth Year 4,500 Seventh Year 5,600 Eighth Year 5,600 Ninth Year 7,500 Tenth Year 7,500 Exploitation Licence The holder of an exploitation licence is permitted to invest and extract raw ores and minerals (by mining or quarrying) from the land. An exploitation licence confers exclusive rights to produce and exploit the minerals specified in the terms of the licence, to transport and export those minerals, and to construct mines and supporting infrastructure in the licence area. In particular, the holder of an exploitation licence is granted the right to produce and exploit the minerals specified in the licence by mining, concentrating, smelting and refining the minerals on the licensed area; the right to transport, export and sell the minerals in their original or refined forms; the right to construct and maintain mines, buildings, plants, pipelines refineries and waste dumps within the licensed area; and the right to construct the required railways, highways, communications systems, power plants and other facilities in the licensed area after obtaining written authorization of the MPMR. 107

109 The holder has no right of possession over any part of the land. The terms of the licence may be extended to cover any deposits of minerals not already covered by the licence. Before the licensee commences any development or mining activities on the licence area, an economic feasibility study and an environmental study must be submitted to the MPMR. If the exploitation licence covers more than one mineral and the licence fails to exploit one of the minerals, the MPMR may terminate the licensee's rights with respect to that mineral and grant an exploitation licence in respect of that mineral to another person. Exploitation licences may be renewed for a further term which may not exceed the original term of the licence. All holders of exploitation licences are required by the Regulations to undertake all operations using modern technology, to avoid damage to and the waste of natural resources, to develop pre-production operations as rapidly as possible as justified by the size of the mineral deposit and by market conditions, to keep the prescribed records and to provide the same to the MPMR, and to comply with Saudi-ization requirements. In addition, compliance with the applicable environmental laws and regulations is a condition of all licences. There are four types of exploitation licences which may be issued, the most important of which in the case of Ma aden are the mining licence and the raw materials quarry licence. Mining Licence A mining licence entitles the holder to practice mining activities within the licence area and to exploit the minerals defined as "Class 3" minerals in the Regulations. These include, amongst others, precious metals (such as gold and silver), base metals (such as copper, lead and zinc) and minerals which require advance processing and concentration operations (such as bauxite and phosphate). Applicants for a mining licence must specify a work programme and provide particulars of the capital investment required to implement the proposed mining plan and ongoing investment during operations. A mining licence may be granted for a period not exceeding 30 years, over an area not exceeding 50km 2. Raw Materials Quarry Licence A raw materials quarry licence entitles the holder to exploit minerals within the licence area defined as "Class 1 and 2" minerals under the Regulations. These include, amongst others, sand, soil materials, stones used for producing concrete and bricks, ornamental rocks and stones (such as granite, marble and limestone) and industrial minerals and raw materials such as garnet, low density iron ore, kaolin, magnesium, titanium and coal. Applicants for a raw materials quarry licence must specify a work programme and provide particulars of the capital investment required to implement the proposed mining plan and ongoing investment during operations. As with a mining licence, a raw materials quarry licence may be granted for a period not exceeding 30 years, over an area not exceeding 50km 2. In addition, the Mining Law and Regulations also provide for Small Mine Licences and Materials Collections Licences. 108

110 Environmental Protection under the Mining Law The Mining Law and the Regulations establish certain environmental protection requirements in addition to the requirements of the applicable environmental laws. Every mining licence holder must prepare an environmental study as a condition of being granted a licence, must rehabilitate the licensed land in accordance with the regulations, and must preserve any archaeological sites or items on the site. All licensees are required by the Regulations to abide by all environmental laws applicable in Saudi Arabia, to ensure the efficacy of the environmental protections required as a result of the mining operations, and to take precautionary measures capable of preventing or reducing any adverse effects on the environment by using the best available technologies, so far as possible. Environmental Laws, Regulations and Compliance In 1992 Saudi Arabia adopted the Basic Law (commonly referred to as the constitution of Saudi Arabia) setting out the system of government for the country and the Government's obligations to the people of Saudi Arabia. Article 32 (Environment, Nature) of the Basic Law states that, "The state works for the preservation, protection, and improvement of the environment, and for the prevention of pollution". In addition, over the years Saudi Arabia has become a signatory to a significant number of international environmental treaties and conventions. The Environmental Law Environmental protection in Saudi Arabia is regulated under the Public Environmental Law (the "Environmental Law"), enacted by Royal Decree No. M/34 dated 28/7/1422H (corresponding to 16/10/2001G). The Implementing Regulations in respect of the Environmental Law were issued by the Minister of Defence and Aviation Resolution No. 1/1/4/5/1/924 dated 03/08/1424H (corresponding to 30/09/2003G) and amended by Minister of Defence and Aviation Resolution No. 1/1/4/2391 dated 08/05/1426H (corresponding to 15/06/2005) published in the Official Gazette on 22/07/05 (the " Regulations"). The Environmental Law operates as a general regulatory framework for the development and enforcement of domestic environmental rules and regulations. The stated objects of the Environmental Law are as follows: Preserving, protecting and developing the environment and preventing its pollution; Protecting public health from the hazards of activities and actions that are harmful to the environment; Preserving, developing and rationalizing the usage of natural resources; Making environmental planning an integral part of comprehensive development planning in all areas of industrial, agricultural, urban and other industries; and Promoting awareness of environmental issues, individual and collective responsibility for protecting and improving the environment and national voluntary efforts in this regard. Regulatory bodies The Presidency of Meteorology and Environmental Protection (the "PME") is the agency responsible for the application and administration of the Environmental Law. Its specific responsibilities include: Conducting environmental studies; 109

111 Documenting and publishing the results of any environmental studies; Preparing, issuing and reviewing relevant environmental standards; Ensuring compliance with relevant environmental standards; Working in conjunction with other responsible and/or public agencies, in establishing plans to deal with environmental catastrophes; Promoting general awareness for protecting the environment; and Working in conjunction with other government agencies, in dealing with violations of applicable environmental standards. The Environmental Law anticipates that the PME will co-ordinate with other government agencies regarding the development and enforcement of environmental standards, and that the PME, together with any other relevant government agency, will have the power to impose penalties for violations of any applicable environmental standards, where there are no such penalties already in place. In particular, other licensing bodies must ascertain that any projects that may cause negative impacts on the environment has been subject to an evaluation project at the feasibility stage, and that such a study has been performed in accordance with the Environmental Law and Regulations. Accordingly, the environmental protections required under the Environmental Law may in practice be enforced by other bodies, including the MPMR. In addition, any application to another competent agency must enclose a certificate stating that the PME has evaluated the existing or new facility and has ascertained that the facility is in compliance with the standards required by the Environmental Law and Regulations. Environmental regulations The Environmental Law imposes a number of broad obligations on those responsible for executing projects that may have a negative impact on the environment ("Impact Projects") including the use of techniques and materials which are likely to minimise any such possible impact, rationalising the use of natural resources in order to develop the use of renewable resources and more efficiently use non-renewable resources, recycling resources and designing and operating projects in such a way to limit the possible negative effects on the environment. Those undertaking Impact Projects are required to undertake environmental studies in accordance with applicable regulations. The Environmental Law also generally reinforces the application of laws which set standards for pollutants from polluting sources or pollutant concentrations in the environment. The Environmental Law also places an obligation on those "lending funds" to consider compliance with applicable environmental standards as a condition precedent to the disbursement of funds under any loan, although the types of entities which would be considered entities "lending funds" are not defined. The Regulations include detailed standards governing the scheduled release of pollutants. Other obligations imposed by the Environmental Law and Regulations include: Certain facility owners or operators must prepare contingency plans to prevent and address adverse environmental impacts; Major facilities shall incorporate the best available technology for the control of pollutant discharges and the disposal of waste; and Waste generators shall be held responsible for ensuring that the waste they generate are stored, treated and disposed of in an environmentally sound manner. 110

112 The PME is granted a broad discretionary power for issuing or withholding its consent for projects so as to ensure compliance with the Environmental Law and the Regulations. Environmental Impact Assessments Under the Regulations, any authority responsible for issuing a licence to Impact Projects must ensure that an environmental impact assessment ("EIA") is prepared by the applicant during the feasibility study of any Impact Project. Impact Projects are distinguished into three classes by the Regulations, which annex detailed lists of the types of projects falling into each class together with various environmental protection standards which apply to specific types of projects. In addition to an initial environmental assessment application which is required for each class of project: A "Class I" project must prepare a simple report describing the project; A "Class II" project must prepare a brief environmental technical report of the project; and A "Class III" project must prepare a comprehensive EIA. Class III Projects include metal extraction industries, major transportation systems, thermal power stations, port expansions, waste water treatment systems, and toxic and hazardous waste storage, treatment and disposal facilities. Following its review of the application and the documentation provided, the PME may reject the applicant's application for PME consent, grant unconditional PME consent or grant PME consent subject to such conditions as it considers necessary to address its concerns. Where conditional PME consent is granted, the applicant must undertake to fulfil the conditions as a prerequisite to the grant of the licence by the relevant licensing authority. Compliance Measures and Penalties under the Environmental Law and Regulations The PME and other relevant regulators are given a broad power to ensure that the standards under the Environmental Law and Regulations are maintained, and in particular, may require a violator to eliminate or rectify any damage, or to desist from the relevant activity until the damage ceases. In certain circumstances the PME may also shut down violating facilities for a period not to exceed 90 days. Penalties for violations are also set out in the Environmental Law. Polluting the sea and land of Saudi Arabia with "toxic, nuclear or other similar dangerous materials" may be punished by one or more of the following: imprisonment for a period of up to five years, a fine of up to SR500,000, closure of business activities or seizure and confiscation of any vessel responsible for the pollution for a period of up to 90 days. A violater may also be required to pay of compensation for damage caused by the pollution, and/or to rectify any damage caused and to clean up. For repeat offences the maximum term of imprisonment and fine are increased to 10 years and SR1,000,000 respectively and closure of business or seizure and confiscation of the vessel may be indefinite. Other acts of pollution or violations of the Law and Regulations may be punished by a maximum fine of SR10,000 and/or rectification of any damage and cleaning up. For repeat offences the range of punishments are the same, except that the maximum fine is SR20,000 and business may be closed for a period not greater than 90 days. 111

113 Corporate Structure Shareholders Table 17: The Company s Shareholders Pre-Offer Post-Offer Name Number of Shares % Value in SR Number of Shares % Value in SR Government of the Kingdom of Saudi Arabia represented by Public Investment Fund General Organization for Social Insurance 400,000, % 4,000,000, ,500,000 50% 4,625,000, ,125, % 231,250,000 Public Pension Agency ,125, % 231,250,000 Public* ,250,000 45% 4,162,500,000 Total 400,000, % 4,000,000, ,000, ,250,000,000 * comprising the individual subscribers and institutional investors Appointed Board of Directors The Board of Directors is responsible for the overall strategy and direction of the Company's business. The basic functions of the Board include the following: a) Approving the Company s strategic trends and key objectives and supervising the pursuit and achievement of them; b) Setting internal audit controls and rules and supervising the same; c) Putting in place a corporate governance code; d) Setting clear policies and procedures for the selection of Directors, and causing the same to be implemented after having them approved by the General Assembly; e) Setting a written policy governing the relationship with the stakeholders in order to protect them and preserve their rights; f) Establishment of policies and procedures that ensure compliance with applicable laws and regulations and the disclosure by the Company of all material information to shareholders, creditors and other stakeholders. The Board of Directors responsibilities also include approving internal, financial, administrative and technical regulations of the Company, and policies and procedures related to the staff, forming the committees and granting them appropriate powers, approving the establishment of subsidiaries, branches, offices and agencies, entering into loans and credit facilities, and approving the Company's business plan, operating plan and annual budget. The Board of Directors consists of nine Directors to be appointed by the Ordinary General Assembly for a term of three years including the President of the Company and four members representing the Government (represented by the Public Investment Fund), so long as the Government holds at least 50 % of the shares in the Company. As an exception to the 112

114 foregoing, the Board of Directors appointed by the Royal Decree No 32/A dated 13/2/1418H (corresponding to 20/6/1997G) will remain until the first General Assembly meeting, which is expected to take place as soon as possible following the Offering. The Directors confirm their compliance with the requirements of Articles 69 and 70 of the Companies Regulations. These Articles prohibit a director from having any interest, whether directly or indirectly, in the business or contracts of the Company or to participate in any competing business or engage in any commercial activities carried out by the Company without prior authorization from the Ordinary General Assembly. The Directors confirm that they shall abide fully by the Corporate Governance Regulations issued by the CMA. New committees shall be formed and their tasks shall be set by the Board after the new Board is elected by General Assembly in accordance with the Corporate Governance Regulations issued by the CMA. Information about the Company's Directors is set forth in the table below. Table 18: The Company s Appointed Directors Name Position Nationality Age H.E. Ali Ibrahim AI-Naimi Non-executive Chairman Saudi 72 H.R.H. Prince Faisal Bin Turki Bin Abdulaziz Non-executive Director Saudi 42 Dr. Mohammad S. Al-Jasser Non-executive Director Saudi 52 Dr. Abdulrahman A. Al-Jafary Non-executive Director Saudi 67 Dr. Ziad Al-Sudairy Non-executive Director Saudi 53 Dr. Abdulaziz, S. Al-Jarbou Non-executive Director Saudi 60 Mr. Abdullah A. AI-Zaid Non-executive Director Saudi 65 Dr. Zuhair Abdulhafiz AlNawab Non-executive Director Saudi 64 Dr. Abdallah E. Dabbagh Director and CEO Saudi 62 The experience and qualifications of each of the Directors are set forth below. H.E. Ali Ibrahim AI-Naimi Chairman His Excellency, Engineer Ali Ibrahim Al-Naimi is the Minister of Petroleum and Mineral Resources in Saudi Arabia, a position he was appointed to in His Excellency obtained his Masters degree in Hydrology from Stanford University in Prior to being appointed Minister, Engineer Naimi had an extensive career at Saudi ARAMCO (from 1974 to 1995) where he held his first position in the Human Resources department in Dhahran. His career progressed at Saudi ARAMCO where he became the President of Saudi ARAMCO. As President of Saudi ARAMCO, Engineer Naimi worked on and supervised a number of recent expansion and development projects in Saudi Arabia. Among his other positions at Saudi ARAMCO prior to being elected as its president on 1 January 1984, Engineer Naimi served as Deputy Executive to the President of the Lubricant and Gas Business in 1982, then he became the Head of the Executive Officers in His Excellency also has been a director of Ma aden since 1997 and the chairman of the board of Ma aden since H.R.H. Prince Faisal Bin Turki Bin Abdulaziz Director HRH Prince Faisal Bin Turki Bin Abdulaziz is Advisor to the Ministry of Petroleum & Mineral Resources in Saudi Arabia since 20/03/1416H. In 1986 he obtained a Bachelor of Science degree in Industrial Management from the King Fahad University of Petroleum & Minerals in Dhahran, Saudi Arabia. 113

115 He has occupied various key roles at the Ministry of Petroleum & Mineral Resources since 1987 including roles concerning the restructuring of Saudi Arabia's refining and distribution industry, the restructuring of Saudi Arabia's mining industry, and the development of Saudi Arabia's Gas Strategy. Dr. Mohammad S. Al-Jasser Director Dr. Al-Jasser obtained a PhD in Economics from California State University in 1986, after previously completing Masters (1981) and Bachelors (1979) degrees from the University of California. Dr. Al-Jasser represented Saudi Arabia as an Economic Consultant at the International Monetary Fund from 1988 to After 1989, Dr. Al-Jasser served as Vice Executive Manager for the International Monetary Fund. As a result, Dr. Al-Jasser has a broad background in monetary management and affairs. Dr. Al-Jasser also served in various capacities at the Saudi Arabian Monetary Fund, most importantly, as Deputy Governor from 1996 to date. Dr. Al-Jasser also has experience within the Saudi market where he was appointed Deputy Governor of the Saudi Monetary Agency and the Chairman of the Arabian Investment Company in As a member of the negotiations team and President of the Service Team in 1996, Al-Jasser was involved in the negotiation process of Saudi Arabia s entry into the World Trade Organization. Dr. Al-Jasser has been a member of the board of directors of Ma aden since He is also a board member at Arabian Investment Company since 1997 and was the chairman of the board of Saudi Telecommunication Company as well as the chairman of its executive committee from 1998 to He has been also a board member at Saudi Airlines Company since Dr. Abdulrahman A. Al-Jafary Director Dr. Al-Jafary was awarded a PhD in Business Administration from the University of Oklahoma in 1979, a Masters of Science in Educational Administration from East Texas State University, and Bachelors degree in Geology from the University of Washington, Seattle in Dr. Al- Jafary is currently a member of the board of directors at Ma aden. Prior to joining Ma aden as a member of the Board, Dr. Al-Jafary worked as a Professor at King Fahad University from 1979 to He then served as the Dean of the College of Industrial Management. Dr. Al-Jafary was then appointed as Secretary General for Gulf Organizations for Industrial Consulting between 1989 and Dr. Al-Jafary was also selected as a Shura Council member in 1993 where he then served for three consecutive terms. During his time on the Shura Council, Dr. Al-Jafary was the Chairman of Finance Committee for four years and has been the Governor of the Saudi Commission for Communication and Information Technology since Dr Al-Jafary has also been a board member of Arabian Mining Company since 1997 and of AlDurais Company since He was also the chairman of the constitutive board of Sabb Takaful Insurance Company. 114

116 Dr. Ziad Al-Sudairy Director Dr. Al-Sudairy holds a J.D. from the University of Virginia (1980) and a Bachelors degree in Political Science from the University of Arizona (1976). He is currently the senior principal of Ziad bin Abdul Rahman Al-Sudairy Consulting Law Firm, which was established in In addition to establishing his own law firm, Dr. Al-Sudairy has worked with the government and the private sector on a number of occasions including acting as a legal consultant to the office of the Minister of Interior from 1980 to 1983 and serving as a Shura Council member in the Saudi government from 1993 to Dr. Al-Sudairy was also a partner in Al-Sudairy and Fahad Legal Consultation Firm from 1985 to Dr. Al-Sudairy also serves as a board member of United Gulf Company for the Processing of Iron and Steel and Badran Projects Company Limited, in addition to being a member on Ma aden s board since Dr. Abdulaziz S. Al-Jarbou Director Dr. Al-Jarbou graduated from the Colorado School of Mines in 1976 with a PhD in Chemical and Petroleum Refining Engineering and a minor in Economics. He joined SABIC from its inception. At SABIC he held a number of positions including representing SABIC in Houston and culminating in seven years as Director General of Projects Implementation from 1980 to From 1988 and until the end of 1996, he was the President and Managing Director of Saudi Amiantit Group, a leading manufacturer in the Middle East, of various pipes, tanks, fibreglass insulation and rubber products. From 1997, Dr. Al-Jarbou worked independently in business although he maintained his board position at Amiantit until today. Dr. Al-Jarbou was appointed to the first board of Saudi ARAMCO for a period of six years from 1989 to Also, between 1997 and 2000, he was a board member of the Riyadh Chamber of Commerce and Industry. In addition to this he was a board member of the Royal Commission for Jubail and Yanbu from 1995 to 2002 and has been a board member of Riyad Bank since In 1999, by a Royal Decree, Dr. Al-Jarbou was appointed as a member of the Consultative Committee of the Saudi Supreme Economic Council. In May 2003, he was appointed as the Chairman of the Board of the Industrialization and Energy Services Company (TAQA) in which the Government holds a 40% interest. He still maintain his membership with TAQA today. Mr. Abdullah A. AI-Zaid Director Mr. Al-Zaid holds a Masters in Business Administration from Pennsylvania State University (1979) and a Bachelor in Economics and Political Science from King Saud University (1973). In addition, Mr. Al-Zaid completed a number of training courses in Saudi Arabia and overseas in accounting and business administration. Mr. Al Zaid has more than 30 years experience in the oil, refinery and mining industry. His experience includes acting as Governor and board member at Petromin from 1988 to Mr. Al-Zaid was also the Chairman of the Executive Committee for the Riyadh refinery and Petromin and Chairman of the board of the Jeddah and Rabigh refinery from 1986 until Mr. Al-Zaid served as a board member of the executive committee of Mahd Ad Dahab mine 115

117 between 1987 to He was also a member of the board of the General Institute for Petroleum and Minerals (Petromin) from 1409H until 1423H. He also served on the Mining Affairs Association (headed by His Excellency the Minister of Petroleum) until Ma aden was established whereupon he become a member of its board. Mr. Al Zaid also acted as the chairman of the board of directors of Jeddah Refinery Company from 1407H to 1409H as well as the chairman at the Arabian Company for Petroleum Consulting (Abicorp) from 1997 until the present. Dr. Zuhair Abdulhafiz AlNawab Director Dr. AlNawab obtained his Ph.D in Geology in Canada in 1976G. He has been the President of the Saudi Geological Assessment Agency since Prior to his current position, Dr. AlNawab worked as the counsel to the Minister of Petroleum and Precious Metals from 2003 to 2006, and also held the position of Undersecretary of the Ministry of Petroleum and Precious Metals from 2000 to Currently, Dr. AlNawab is a member of a number of agencies, committees, and companies operating in the petroleum and metals field, and he is also a member of the International Who s Who Historical Society in the United States as well as AGID, Petromien and Ma aden. Dr. Abdullah E. Dabbagh President and Chief Executive Officer Dr. Dabbagh was awarded a Ph.D. in Geology from the University of North Carolina at Chapel Hill in He has been the President and Chief Executive Officer of Ma aden since its inception in Dr. Dabbagh has been a leader in the field of management, education, research and technological advancement in the Kingdom of Saudi Arabia for over 20 years. His career prior to joining Ma aden was highlighted by his work in the establishment of the Research Institute a leading contract research organization at King Fahd University of Petroleum and Minerals and by significant achievements in the transfer, application and adoption of modern technology. He has been the recipient of many national achievement awards. After his appointment as an executive officer at Ma aden at its inception in 1997, Dr. Dabbah worked on developing a team for the management of the Company which expanded its business in the gold mining field and developed large projects in the phosphate, fertilizers, bauxite and aluminium fields, in addition to other projects in the mineral industry. Dr. Dabbagh has served on the board of many companies, including the board of directors of Saudi ARAMCO from 1989 to He is a Member of the Riyadh Chamber of Commerce and Industry Board since 2004 and a member of the Executive Committee of the Arab Business Council and is seen as a leader in the Saudi Arabian business community. Proposed Board of Directors At a meeting held on 3/6/1429H (corresponding to 7/6/2008G), the Board of Directors resolved in accordance with Article 17 of the Company s Bylaws to nominate the persons set out below as members of the Board of Directors and to approve the recommendation of the Nomination and Remuneration Committee to nominate the other persons set out below. The resolution was made giving consideration to the fact that the current Board of Directors shall remain in place until the first General Assembly of the Company, the importance for investors 116

118 to know the names of the nominated members of the next Board of Directors, the nomination made by H.E. the Minister of Petroleum and Mineral Resources in coordination with H.E. the Minister of Finance-Chairman of the Board of Directors of the PIF for the Government representatives, and the recommendation of the Nomination and Compensation Committee for the members representing the private sector: The persons nominated by the Board of Directors to become members of the Board of Directors as Government representatives are: - Mr. Mansour Bin Saleh Al-Mayman - Mr. Sultan Bin Jamal Chawili - Mr. Abdullah Bin Seif Al-Seif - Mr. Khaled Bin Hamad Al-Sanani In addition to Dr. Abdullah Dabbagh, the Chief Executive Officer of the Company, in accordance with the Company s By-laws. The persons recommended by the Nomination and Remuneration Committee for appointment to the Board of Directors to represent the private sector (as independent Directors) on the next Board of Directors are: - Dr. Ziad Bin Abdulrahman Al-Sudairy - Dr. Abdulaziz Bin Saleh Al-Jarbou - Mr. Suliman Bin Saad Al-Hameed - Mr. Mohammed Bin Abdullah Al-Khorashi The resolution was passed without prejudice to the right of any shareholder to nominate himself for election as a member of the Board of Directors at a specified time prior to the next General Assembly. The experience and qualifications of each of the nominated directors, other than the current directors, are set forth below. Mansur Bin Saleh Al Mayman Director Mr. Mansur Bin Saleh Al Mayman holds a Masters degree in Business Administration from the University of Dallas, Texas-USA (1980) and a Bachelor's degree in Accounting and Business Administration from King Saud University in 1973G. Mr. Mansur Bin Saleh Al Mayman has occupied the position of General Secretary of the Public Investment Fund since 1998G. Prior to his current appointment Mr. Mansur Bin Saleh Al Mayman worked as Assistant Deputy Minister for budgeting and organization at the Ministry Finance and Economy (1993G to 1998G) and prior to that in the Secretariat for Public Investment Fund (1973G to 1993G). He has been a board member of the Saudi Telecommunications Company since 1998 and a board member of the Arab Authority for Agricultural Investment and Development since 2000G. He has also held positions on the board of several companies and institutions including Saudi Bangladesh Company for Investment (1984G to 1990G), Saudi Credit Bank (1988G to 1991G), Saudi Cairo Bank (1988G to 1994G), Saudi Egyptian Company for Industrial Investments (1989 to 1997), Addar Al Saudiah for Investment Services (1993G to 1997G), the General organization for Social Insurance (1994G to 1997G), the General Organization for Petroleum and Minerals (Petromin) (1994G to 1997G), Qassim Cement Company (1990G to 1998G), Saudi Egyptian Company for Construction (1997G to 2000G), 117

119 Eastern Region Electricity Company (SCICO) (1997G to 2000G) and The Saudi Company for Public Transportion (1998G to in 2001G). Sultan Bin Jamal Shawli Director Mr. Sultan Bin Jamal Shawli holds a Masters degree in petrology and environmental studies of the sedimentation of phosphate rocks in the Kingdom. He currently occupies the position of Deputy Minister of Petroleum and Mineral Resources. Mr. Sultan Bin Jamal Shawli worked as a minerals geologist in the Ministry of Petroleum and Mineral Resources in 1976 and was then promoted to several positions including assistant director of Planning s Department (1991G), general director of permits and licences (1998G) and deputy of the Ministry of Petroleum and Mineral Resources (2002G). Mr. Sultan Bin Jamal Shawli holds positions on the board of Saudi Railways Organization, Arab Mining Company in Jordan and Fluor Chemical Manufacturing Company in Tunisia as a representative of Arab Mining Company. Abdullah bin Saif Al Saif Director Eng. Abdullah Al Saif holds a Bachelor of Science in Petroleum Engineering from the University of Oklahoma (1970G). Engineer Abdullah Al Saif has worked for Saudi ARAMCO since 1960G and completed his university education in 1970G. He initially worked as a petroleum engineer and, thereafter, headed several administrative positions in the field of petroleum engineering and production operations. In 1982G he was appointed as Saudi ARAMCO s vice president of production. He then occupied several positions including the positions of vice president of manufacturing, vice president of corporate planning and vice president of crude oil marketing and sales. In 1992G, Eng. Abdullah Al Saif was appointed as the senior vice president of exploration and production. Mr. Al-Saif was a member in Saudi ARAMCO s board of directors from 1998G until 2007G. He retired from Saudi ARAMCO on 31 December 2007G. Khalid Al Senani Director Eng. Khalid Al Senani holds a Masters degree in construction management from the University of Colorado (1991G), and a Bachelor of Science degree in civil engineering from the College of Saint Martins (1984G). Since 2003G, Eng. Khalid Al Senani occupied the position of senior project engineer in the Central Area Projects division of the West and Central Region Projects Department of Saudi ARAMCO. Eng. Khalid Al Senani worked as senior project engineer for Saudi ARAMCO in the Fujian Project Development in Hong Kong from 2001G to 2003G, and as lead project engineer in Shaybah Development Projects in its Abqaiq plants. Eng. Khalid Al Senani also worked as a project engineer with the National Guard in the Department of Engineering and the Research Division in the Department of Operations and Maintenance from 1988 to Dr. Abdullah E. Dabbagh Please review the summary provided above. 118

120 Dr. Abdulaziz S. Al-Jarbou Please review the summary provided above. Dr. Ziad Al-Sudairy Please review the summary provided above. Suleiman bin Saad Al Hamid Director Mr. Suleiman Al Hamid holds a Masters in Business Administration, with a major in financing, obtained from the University of Northern Colorado in 1973G and a Bachelors degree in business administration, with a major in financing, obtained from the University of Northern Colorado in 1972G. Mr. Sulaiman Al Hamid has been working in the General Organization for Social Insurance since his graduation in 1973G. He was promoted to several positions in the organisation and currently holds the position of Governor of the General Organization for Social Insurance. He is also the General Organisation for Social Insurance s representative in the National Company for Cooperative Insurance as a chairman of the Board of Directors. In addition, Mr. Sulaiman Al Hamid holds a position on the board of United Company for Insurance, Saudi Company for Almaikulaih Center and Saudi Research and Marketing Group. Mr. Sulaiman Al Hamid also headed the Kingdom of Saudi Arabia s delegation to several conferences of the International Organization for Social Insurance, and served as a board member of the International Social Security Organization. He has also appointed as the chairman of the financial resources committee in the organization. He is also the General Organisation for Social Insurance s representative in the National Company for Cooperative Insurance as a chairman of the Board of Directors. In addition, Mr. Sulaiman Al Hamid holds a position on the board of United Company for Insurance, Saudi Company for Almaikulaih Center and Saudi Research and Marketing Group. Mohammed bin Abdullah Al Kherashi Director Mr. Mohammed bin Abdullah Al Kherashi holds a Masters degree in accounting from the University of Oklahoma City (1980G). He currently occupies the position of Governor of the General Organization for Retirement. Mr. Mohammed bin Abdullah Al Kherashi has worked in several positions in the organisation including as assistant of the director of the Department of Treasury, general director of the Department of Treasury, and general director of financial affairs. He was appointed in his current position in 2000G. Mr. Mohammed bin Abdullah Al Kherashi was also the representative of the Kingdom of Saudi Arabia in the OPEC Fund for international development (1991G to 2006G). Mr. Mohammed bin Abdullah Al Kherashi is a member of several boards of directors. He is a board member of the Saudi Telecom Company, a board member of the National Company for Cooperative Insurance, a board member of the Saudi Research and Marketing Group, and a board member of the Saudi industrial investment Group. The experience and qualifications of the Chief General Counsel and Board Secretary is set forth below. 119

121 Dr. Bakry Magzoub Mudather Chief General Counsel and Board Secretary Dr. Mudather passed his bar exam in the State of New York in He obtained his Ph.D in Law in 1984 and his masters in law in 1982 from McGill University, Montreal and his bachelor degree in 1979 from the University of Khartoum. Dr. Mudather worked as the manager of the legal department and vice president of a Zenal Group company from 1985G to 1998G. He also acted as the manager of the legal department of a Ali Reza Group company from 1998G to 2001G. He also was a board member and general counsel of Mirage Company and headed the legal department of a number of companies including ARAMCO Gulf Business, Arabian Oil Company in 2002, and Al Salam Holding Company from 2002 to Dr. Mudather joined Ma aden in 2006 and is currently the Lead Counsel and Board Secretary of the Company. Dr. Mudather has a wide range experience in the legal field and has provided many successful companies with legal services. Senior Management Ma aden is currently undertaking an extensive review of its management structure and has engaged MacKinsey Consulting to assist with this process. Ma'aden's management is comprised of qualified and experienced senior officers with the necessary knowledge and expertise to run the Company s business. The Company is successful in retaining its senior management team and in developing qualified employees and promoting them to senior positions in the Company. The following individuals hold key senior management positions within the Company: Table 19: The Company s Senior Management Name Position Nationality Age Dr. Abdallah E. Dabbagh President and CEO Saudi 62 Engineer Abdullah S. Busfar Vice President (Corporate Projects) Saudi 50 Dr. Mohammed H. Al- Dabbagh Vice President (Precious and Base Metals Operations) Saudi 55 Abdullah I. Al-Fallaj Vice President (Finance) Saudi 50 Mr. Khalid S. Al-Mudaifer Vice President (Industrial Affairs) Saudi 46 Dr. Mansour O. Nazer Vice President (Planning and Business Development) Saudi 60 Engr. Nabil Abdulaziz Al Fraih Executive Director, Human Resources and Health, Safety & Security Saudi 49 Engr. Abdullah Abdulgader Executive Director, Projects Saudi

122 Company s Organizational Structure CEO Abdullah Dabbagh Vice President (Planning and Business Development) Mansour Naser Vice President (Finance) Abdullah AlFallaj Vice President (Industrial Affairs) Khaled Mudaifer Vice President (Projects) Abdullah S. Busfar Vice President (Precious & Base Metals Operations)/ President Gold Mohammed Hani Dabbagh Executive Director (Services) Nabil Al Fraih Executive Director (Projects) Abdullah Abdulgader The experience and qualifications of each of the members of senior management is set forth below. Dr. Abdallah E. Al-Dabbagh President and CEO Refer to summary above. Engineer Abdullah S. Busfar Vice President (Corporate Projects) Abdullah Busfar graduated with honors from the University of Colorado with a degree in Electrical Engineering in Besides participating in many national and international conferences and delegations, Mr. Busfar has completed Columbia University s Senior Executive Programme and other leadership programmes in reputed institutions such as Harvard University, Stanford University and the Creative Leadership Center, USA. Abdullah S. Busfar has been Vice President, Corporate Projects, of Ma'aden since 2004 and is responsible for a wide range of projects, including the Aluminium Project, the Phosphate Project, Common Infrastructure and Ma'aden's involvement in the Railway. Prior to his current role, Mr Busfar held the position of Vice President, Industrial Affairs, for 5 years from Whilst in this role, Mr. Busfar successfully managed the human resources, administration, contract and procurement, government relations and public relations components of the department. He is a member of the management committee and chairman of several other committees. 121

123 Mr. Busfar has a total of 26 years of private sector management experience, both in Saudi Arabia and abroad. He worked in the Saudi Navy Forces as a vice president of the operation and maintenance department in Jeddah from 1981 to 1983, and in Kima (one of SABIC s projects) as a chief engineer from 1983 to He was also the representative of Amiantit in Buntamson Company for the establishment of the Dakteel Pipes project in France during He also worked as the general manager and was one of the founders of Saudi Arabian Company for Takteel Pipes Limited from 1989 to 1997 and in the Shumrani Industrial Group as a vice chairman of the executive board from 1997 to 1999 where he was responsible for six companies and for the development of new industrial projects. During this time, he has worked in many areas, including engineering, project development, marketing, and industrial executive management. He has also served on numerous boards for community service and been a member of each of the following organisations: Chamber of Commerce Industrial Committee (Dammam Industrial City, from 1994 to 1997), the National Industrial Committee (Riyadh, from 1998 to 2002), the Prince Sultan Colleges Executive Committee (from 2002 to 2005), the SASO Committee (from 1995 to 1999), the board of the Industrial City in Dammam in 1995 and the head of Mineral Committee in Dr. M Hany K Al-Dabbagh Vice President (Precious & Base Metals Operations)/ President GOLD Dr. Hany Al Dabbagh holds a PhD Mining Engineering from Leeds University in the United Kingdom (2001) and an MSc in Industrial Engineering from King Abdulaziz University, Saudi Arabia in 1993 as well as a BSc in Civil Engineering from Cairo University, Egypt in Dr. Hany Al Dabbagh is responsible for all of Ma aden s precious and base metals mining operations, including five gold mines and various exploration activities, in addition to all geological explorations of the Company. Dr. Hany Al Dabbagh has worked in the Saudi Arabian Company for Minerals (an affiliate of Ma aden) from 1989to date, first in the capacity as a managing director from 1989 to 1998, then as a vice chairman of the board and managing director from 1998to date. He also worked in the Company from 2002 until the date hereof first as the vice president of operations, then as the vice president for the elements and mineral division and the president of the gold division. Prior to joining Ma aden he had an active career in the oil industry and private industry in civil and industrial engineering. More specifically, he worked in the Oil Pipeline Project (Petrolin) and the Petromin Project as well as in other private construction companies from 1975 to Dr. Hany Al Dabbagh is a member of the consultation board at the King Abdullaziz University Jeddah. Abdullah I. Al-Fallaj Vice President (Finance) Mr. Al-Fallaj joined Ma aden in September, 2000 as Vice President, Finance. Mr. Al-Fallaj began his career in Saudi Arabia as head of the Accounting Department at King Faisal University where he also lectured in Accounting from 1984 to Subsequently, he moved to the Eastern Petrochemical Company (SHARQ), a SABIC affiliate, where he worked for more than thirteen years in various positions from 1987 to 2000, becoming the Director of the Finance Division. Mr. Al-Fallaj has a BSc (Honours) in Business, with a Major in Accounting, from King Saud University, Saudi Arabia (1979) and an MSc in Accountancy from Arkansas State University, USA in

124 Engineer Khaled Saleh Al-Mudaifer Vice President (Industrial Affairs) Engineer Al-Mudaifer joined Ma aden in March 2006 as Vice President, Industrial Affairs. Prior to joining Ma aden, he held a number of positions, particularly in the Qassim Region, where he was the General Manager and Board Secretary of Qassim Cement Company from 1993 to 2006 and where he oversaw a period of growth and efficiency gains. He spent the early years of his career (from 1987 to 1993) with Eastern Petrochemical Company (SHARQ) where he held a number of roles culminating in his appointment as Vice President, Finance. He continues to hold a number of public and board positions in Qassim Cement Company and Saudi Airlines Company. Engineer Al-Mudaifer holds a BSc in Civil Engineering (Honours) attained in 1984, and an MBA (Honours) from King Fahad University of Petroleum and Minerals, Saudi Arabia, attained in Dr. Mansour O. Nazer Vice President (Planning and Business Development) Dr. Nazer is responsible for overseeing the formulation of the strategic plans and business development of the company. Dr. Nazer joined Ma aden in 1998 as Director, Corporate Planning and assumed his current responsibilities in Prior to joining Ma aden Dr. Nazer had an active career starting from 1987 to 1998 in both the private sector, where he worked as a vice president at Saudi Cable Company and academia at King Fahd University for Petroleum and Minerals. He joined Ma aden from the Saudi Cable Company where he held a number of executive positions including Vice President of the Power Cable Plant and Acting President from 1990 to Prior to his career in the private sector, Dr. Mansour Nazer held a number of senior positions at King Fahd University of Petroleum and Minerals, Saudi Arabia, his most recent position being Secretary General of the University in Dr. Nazer holds a PhD in Mechanical Engineering from Colorado State University, USA, (1987), an MSc in Mechanical Engineering from the University of Michigan, USA, in 1978 and a BSc in General Engineering from King Fahd University of Petroleum and Minerals, Saudi Arabia, (1971). Engineer Nabil Al Fraih Executive Director, Corporate Services Engineer Nabil Abdulaziz M. Al Fraih has been the Executive Director, Corporate Services in Ma aden since 17 December He is responsible for a number of functions, including Corporate HR and Administration, Corporate Communications, Public Relations and Health, Safety and Industrial Security. Engineer Nabil obtained his Bachelor of Science in Civil Engineering from King Saud University in Saudi Arabia in He has also attended several management and technical programmes in the US, Japan and Europe including a one year industrial training programme with Stone & Webster Engineering Corporation, NY (USA). His 21 years of experience in key positions with leading private and government organizations in the Kingdom equips him to lead the Corporate Services function at Ma aden. Prior to joining Ma aden, Engineer Nabil worked as the General Manager of Al Watania for Container Manufacturing from 1993 to Prior to this, he held a position with Saudi Industrial Export Company as its Regional Marketing Manager from 1990 to He also worked at the Saudi Industrial Fund from 1984 to 1990 as a technical analyst. 123

125 Engr. Abdullah Abdulgader Executive Manager, Projects Abdullah is a graduate of KFUMT with a degree in Chemical Engineering, attained in He has a total of 27 years of operational and engineering experience in petrochemical plants. He held managerial positions within the operational, engineering and project management division of SABIC from 1977 to 2007 where he worked as the manager of the operation of the caustic soda and ethylene di-chloride plants, of the engineering department, of the technology department and of the ethylene di-chloride department, as well as a general manager of projects. Currently he is an Executive Director of Project Management and Engineering at Ma aden as of Corporate Governance The Company adheres to the Corporate Governance Regulations issued by the CMA. Defining the Company s mission, goals and strategic objectives, providing guidelines and assuring the efficiency and effectiveness of the overall planning system are the key roles of the Company s Board of Directors. Currently, Ma'aden has two corporate governance committees: the Internal Audit Committee and the Compensation Committee in place to review the Company s operations within their particular areas of expertise and present their reports on their findings and suggestions to the Board of Directors. Upon the election of the new Board of Directors by the General Assembly, new committees will be formed and their functions will be approved by the Board of Directors in accordance with the Corporate Governance Regulations. Internal Audit Committee The Internal Audit Committee reviews the financial risk, controls and audit procedures of the Company and it shall report to the Board of Directors. The duties and responsibilities of the Internal Audit Committee also include the following: Recommending the Independent External Auditor to the Board of Directors; Determining the compensation, the term of the assignment and the scope of work of the Independent External Auditor; Receiving the annual report from the Independent External Auditor on its professional engagements with others and evaluating them to determine the effect of such engagements on the Company; Liaising between the Independent External Auditor and the internal audit functions, and between the Independent External Auditor and the Board of Directors; Reviewing the external and internal audit operations of the Company; Reviewing the current conditions of the Company and the results of the procedures adopted by the Independent External Auditor with respect to the financial management of the Company before the declaration of the profits; 124

126 Drafting a report clarifying whether or not the Company has discussed and reviewed the financial statements, the nature of the accounting principles and the major changes that affect those statements with the management of the Company and the Independent External Auditor;. Reviewing the texts that are related to the professional ethics of the Company and the strategies adopted by the management inside the Company and their consistency with applicable legal norms and ethics; Reviewing the investment management of the Company and its performance and results; Reviewing the procedures and strategies related to the risks undertaken by the Company. The existing Internal Audit Committee is comprised of the following directors: Table 20: Internal Audit Committee Chairman Member Member Member Committee Position Name Dr. Abdulrahman Al-Jafari Dr. Ziad Al-Sudairy Dr Abdulaziz Al-Jarbou Mr. Abdullah Al-Zaid* * specializes in accounting Nomination and Compensation Committee The Nomination and Compensation Committee ensures that the Company s compensation policies and practices are in accordance with regulatory requirements and relevant market conditions. The Committee also reviews the Company s executive development programs, its succession plans relating to executives and performance goals and thresholds to be achieved under specified incentive plans. The Compensation Committee comprises four members of the Board. The duties of the Compensation Committee include the following: Recommend to the Board of Directors the nomination to membership of the Board of Directors, provided that no person who has previously been convicted of any offences affecting honour or honesty is nominated of such membership. Reviewing and making recommendations to the Board of Directors regarding: o o Compensation policies and practices applicable to executives The establishment of short and long term benefit plans for all employees Reviewing and approving the following: o o Compensation policies and practices applicable to all employees other than the President and CEO and other executives The total compensation (cash, benefits and equity) for all executives other than the President and CEO 125

127 o o Human resources policy and procedures The Company s executive development programs, executive succession plans and performance goals to be achieved under specific incentive plans. The existing Nomination and Remuneration Committee is comprised of the following Directors: Table 21: Nomination and Remuneration Committee Committee Position Member Member Member Name Dr. Zuhair Abdulhafiz AlNawab Mr. Abdullah A Al-Zaid Dr. Abdulrahman A. Al-Jafary Services Contracts The members of the Board of Directors are appointed by the General Assembly. The Board members responsibilities are governed by the Bylaws and the Board of Directors' charter. The following is a summary of the duties and responsibilities of the Board members and the President and CEO. Directors Duties and Responsibilities The Board is responsible for the overall strategy and direction of the Company's business. The basic functions of the Board include the following: a) Approving the Company s strategic trends and key objectives and supervising the pursuit and achievement of them; b) Setting internal audit controls and rules and supervising the same; c) Putting in place a corporate governance code; d) Setting clear policies and procedures for the selection of Directors, and causing the same to be implemented after having them approved by the General Assembly; e) Setting a written policy governing the relationship with the stakeholders in order to protect them and preserve their rights; f) Establishment of policies and procedures that ensure compliance with applicable laws and regulations and the disclosure by the Company of all material information to shareholders, creditors and other stakeholders. The Board of Directors responsibilities also include approving internal, financial, administrative and technical regulations of the Company, and policies and procedures related to the staff, forming the committees and granting them appropriate powers, approving the establishment of subsidiaries, branches, offices and agencies, entering into loans and credit facilities, and approving the Company's business plan, operating plan and annual budget. Compensation and Allowances Each member of the Board currently receives an annual remuneration of SR40,000 and SR1,500 per board meeting attended. 126

128 The cumulative amount of remuneration and board meeting attendance fees have been paid to the members of the Board for the years ending 31/12/2005, 2006 and 2007, SR 436,500, 439,500 and 426,000 respectively. Duration The Directors duration of service is determined in accordance with the Bylaws. The Board of Directors, and each director, has a term of three years. As an exception to the foregoing, the Board of Directors appointed by the Royal Decree No 32/A dated 13/2/1418H (corresponding to 20/6/1997G) will remain until the first General Assembly meeting, which is expected to be held during the second half of President and CEO Duties and Responsibilities The President of the Company shall execute the decisions of the Board of Directors and in particular shall: a) Prepare for the meetings of the Board of Directors; b) Prepare the Company s general budget, profits and losses account and annual budgets; c) Supervise the Company s management and personnel; and d) Approve expenditures in accordance with the approved annual budgets; Service Contracts The CEO of the Company was appointed pursuant to Royal Decree No. A/32 dated 13/02/1418H. His services in the Company are governed by the Saudi Labour Law, GoSI Regulations and other related laws and regulations. Except for the CEO, there are currently no service contracts in place for any member of the Board. Declaration in Respect of Directors and Key Officers The Directors, the President and CEO and the Chief Finance Officer declare that they: Have not at any time been declared bankrupt or been subject to bankruptcy proceedings. Except as disclosed in the service contracts section above, do not themselves, nor do any of their respective relatives or affiliates, have any material interest in any written or verbal contract, transaction or arrangement made for the account of the Company in effect or contemplated at the time of the Prospectus. Do not participate in any business competitive with that of the Company, or engage in any of the commercial activities carried on by the Company. The Board of Directors declares that no commissions, discounts, brokerages or other noncash compensation in relation to the offer or sale of the Company s shares were granted by the Company to any member of the Board or its CEO, or any developer or expert in the two years immediately preceding the date of the share listing application. 127

129 Remuneration of Directors and Senior Management Total paid compensation to the Board of Directors for the years ending 31 December 2005, 2006 and 2007 amounted to 436,500, 439,500, and 459,000, respectively. Total remuneration of the Company s Executive Officers for the years ending 31 December 2005 and 2006 amounted to 7,674,483 and 10,490,833 respectively. The remuneration includes basic salaries, bonuses and other overheads. No member of the Board or the CEO has any authority to vote on the remuneration paid to them, and there is no authority granted to any member of the Board or a senior executive which would allow him to borrow from the Company. Moreover, no member of the Board or the CEO has any authority to vote on a contract or a proposal in which they have a material interest. The Company has also approved a loan programme for its executive employees to enable them to purchase houses for accommodation purposes. Through this programme, the Company provide loans to the employees through a local bank or national financial institution. The Company bears all banking related service fees in relation to the loan. The employee is obliged to repay the loan during a period not exceeding 10 years in the amount of 10% annually. The repayment is made through withholding such amounts from the employee's monthly salary subject to such withholding not exceeding 25% of the employee s basic salary. Employees The Company has documented and detailed recruitment policies to ensure the recruitment and retention of qualified personnel. Ma'aden employed a total of 1037 staff as of 31 December The staff profile of each of Ma'aden's operating divisions/units is as follows: Gold Division Table 22: Staff Profile of Operating Divisions/Units (December 2007) Trainees and Laborers Contractors Division/Unit Saudi Non-Saudi Saudi Non-Saudi Corporate Finance Industrial relations Industrial security and safety Human resource and admin Purchasing and contracts Projects and technical services Exploration Operations Mahad Gold Mine AlHajar Gold Mine Sukhaybarat Gold Mine Bulghah Gold Mine AlAmar Gold Mine Total Cumulative Total 767 Source: Company Table 23: Staff Profile of Operating Divisions/Units (December 2006) Trainees and Laborers Contractors Division/Unit Saudi Non-Saudi Saudi Non-Saudi Corporate

130 Trainees and Laborers Contractors Division/Unit Saudi Non-Saudi Saudi Non-Saudi Finance Industrial relations Industrial security and safety Human resource and admin Purchasing and contracts Projects and technical services Exploration Operations Mahad Gold Mine AlHajar Gold Mine Sukhaybarat Gold Mine Bulghah Gold Mine AlAmar Gold Mine Total Cumulative Total 692 Source: Company Table 24: Main Companies and Projects (December 2007) Trainees and Laborers Division/Unit Saudi Non-Saudi Contractors Corporate Management Office Finance Industrial Affairs Industrial Security and safety Human Resource and Admin Contracts and Procurement Exploration Planning and Development Zarghat Magnesite Project Kaolin Project Projects Infrastructure Project Aluminium Project Phosphate Project Total Cumulative Total 270* Source: Ma aden * this figure includes the 1037 employees referred to above. Table 25: Main Companies and Projects (December 2006) Trainees and Laborers Division/Unit Saudi Non-Saudi Contractors Corporate Management Office Finance Industrial Affairs Industrial Security and safety Human Resource and Admin

131 Contracts and Procurement Exploration Planning and Development Zarghat Magnesite Project Kaolin Project Projects Infrastructure Project Aluminium Project Phosphate Project Total Cumulative Total 197 Source: Ma aden Saudi Nationals currently represent more than 50 % of the staff of Ma'aden. Ma'aden continues to actively pursue the recruitment of Saudi nationals under its Saudi-ization policy and management has taken key steps towards expanding its Saudi workforce through implementation of recruitment and training programmes through which new recruits will receive on-the-job training and class room training and development. 130

132 Related Party Transactions No Group Company has entered into any contracts or arrangements with the Directors, the Secretary of the Board, the Chief Executive Officer or Chief Financial Officer or any relative of theirs in relation to Ma'aden's business. 131

133 Accountants' Report Financial Statements The audited financial statements as at and for each of the three years ended 31 December 2007, 2006 and 2005 and the notes thereto included in Annex A have been prepared and audited by Deloitte & Touche Baker Abulkhair & Co., a firm of Saudi Accountants. Deloitte & Touche Baker Abulkhair & Co., a firm of Saudi Accountants do not themselves, nor do any of their relatives or affiliates have any shareholding or interest of any kind in the Company. In addition, Deloitte & Touche Baker Abulkhair & Co. has given and not withdrawn their written consent to the publication in this Prospectus of the Accountants' Report. Director s declaration for financial information The Directors declare that: a) The financial information presented in the Prospectus is extracted without material change from the audited consolidated financial statements for the years ended 31 December 2007, 2006, and 2005 and the notes thereto; b) The audited consolidated financial statements have been prepared in accordance with accounting standards generally accepted in Saudi Arabia; and c) There has been no material adverse change in the financial position of the Company since the issuance of the last audited consolidated financial statements. Table 26: Audited Consolidated Financial Statement Year Ended December 31 SR ' Consolidated income statement Sales 244, , ,964 Cost of sales (167,407) (187,733) (150,764) Gross Margin 76, , ,200 General and administrative expenses (96,304) (58,359) (47,167) Severance fee (4,281) (23,101) (17,005) Exploration expenses (25,500) (31,187) (28,039) Technical services expenses (4,879) (5,020) (3,843) Other income/ (expense)- net 27, ,258 Profit/ (Loss) before investment income (26,546) 44,388 34,404 Investment income 225, , ,263 Net income prior to unusual provisions 199, , ,667 Unusual provisions (446,293) - - Net income (247,203) 317, ,667 Consolidated cash flow statement Profit before investment income (26,546) 44,388 34,404 Adjustments for non-cash items 52,258 62,016 51,597 Unusual provisions (446,293) - - Net change in working capital (224,334) 55,934 68,302 End of service indemnities paid (2,121) (3,305) (2,089) 132

134 Cash flow from operating activities (647,035) 159, ,149 Long-term investments - 65, ,000 Interest income received 292, , ,615 Long-term receivable 2,452 (16,337) (35,874) Additions to pre-operating expenses and deferred charges (173,726) (298,882) (195,105) Additions to property, plant and equipments (142,317) (95,887) (94,806) Proceeds from investment in company under formation (1,383,663) - - Cash flow from/used in investing activities (1,404,681) (94,465) 275,830 Net increase/ (decrease) in cash, cash equivalents and short term investments (2,051,716) 64, ,044 Cash, cash equivalents and short term investments at the beginning of the year/period Cash, cash equivalents and short term investments at end of the year/period 4,746,653 4,682,086 4,254,042 2,694,937 4,746,653 4,682,086 Consolidated balance sheet Current assets 3,155,902 4,990,300 4,915,697 Non-current assets 2,692,491 1,047, ,748 Total assets 5,848,393 6,037,649 5,659,445 Current liabilities 252, , ,596 Non-current liabilities 111, ,686 97,480 Shareholders' equity 5,484,144 5,731,348 5,413,369 Total liabilities and equity 5,848,393 6,037,649 5,659,

135 Management's Discussion & Analysis of Financial Condition & Results of Operations The following discussion and analysis of the Company s financial position and results of its operations is based upon, and should be read in conjunction with the Company s audited consolidated financial statements as at and for the years ended 31 December 2005, 2006 and 2007, and the notes thereto, as audited by the Deloitte & Touché, Baker Abulkhair & Co., a firm of Saudi Accountants, and included elsewhere in this Prospectus. This Management s Discussion and Analysis of Financial Condition and Results of Operations section is primarily concerned with the Company's current financial position and past performance based on its existing gold business. The Company's activities will change significantly as a result of the proposed development of the Phosphate, Aluminium and other Projects. Consequently the following discussion and analysis of the Company s financial position and results of its operations should not be relied upon as a reliable indication of the Company's likely future performance. The Management s Discussion and Analysis of Financial Condition and Results of Operations section is being included in this Prospectus for the purposes of complying with the requirements of the CMA and it contains forward-looking statements that involve risk and uncertainties. Actual results of the Company could differ materially from those contemplated by these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Prospectus, particularly in the Risk Factors section. Declaration by the Board of Directors on the Accuracy of the Financial Information The Members of the Board of Directors declare that the financial information presented in this Prospectus is extracted without material changes from the Company s audited consolidated financial statements for the years ended 31 December 2005, 2006 and 2007 and that these statements are prepared in accordance with accounting standards issued by the Saudi Organization for Certified Public Accountants (SOCPA). The Members of the Board of Directors declare that except as set forth in this Prospectus, there has been no material adverse change in the financial or trading position of the Company during the last three years 2005, 2006 and 2007 or during the period from 1 January 2008 up to and including the date of this Prospectus. The Members of the Board of Directors further declare that there was no discontinuation of the Company s activities during the last 12 months, which has or could have had significant effect on the Company s financial position, and the Company will have sufficient funds to meet the working capital requirements for 12 months after the Initial Public Offering. Accounting policies The Company s audited financial statements have been prepared on the accrual basis under the historical cost convention and in compliance with the accounting standards issued by the SOCPA. 134

136 The preparation of the Company s audited financial statements requires management to make estimates and judgments. The Company s principal accounting policies are set out as follows: Accounting convention The consolidated financial statements, expressed in Saudi Arabian Riyals, are prepared under the historical cost convention. Principle of consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary - Ma aden Company for Gold and Base Metals (formerly called Saudi Company for Precious Metals). All material inter-company balances and transactions are eliminated in the consolidated financial statements. Use of estimates The preparation of consolidated financial statements in conformity with generally accepted accounting standards requires management to make estimates and assumptions that affect amounts reported in the consolidated financial statements and accompanying notes. Significant areas requiring the use of management estimates relate to the determination of mineral reserves, reclamation and environmental obligations, impairment of assets and useful lives of assets used to compute depreciation, depletion and amortization. Actual results could differ from those estimates. Foreign currency translation Foreign currency transactions are translated into Saudi Riyals at the rates of exchange prevailing at the time of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the exchange rates prevailing at that date. Gains and losses from settlement and translation of foreign currency transactions are included in the consolidated statement of income. Cash and cash equivalents Cash and cash equivalents contain cash on hand, in banks and time deposits with original maturities of 90 days or less. Short term investments Short term investments represent time deposits with original maturities of more than 90 days. Inventories Inventories are stated at the lower of cost or net realisable value. Cost is determined, for finished goods, on a weighted average cost basis and includes cost of materials, labour and an appropriate proportion of direct overheads. All other inventories are valued on a moving average cost basis. A provision is also established for items deemed to be slow moving or obsolete. Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation. Expenditure on maintenance and repairs is expensed, while expenditure for betterment is capitalized. Depreciation is provided over the shorter of estimated useful lives of the applicable assets or 135

137 the estimated life of the mine using the straight-line method. The estimated useful lives of the principal classes of assets are as follows: Table 27: Estimated Useful Lives of the Principal Classes of Assets Category Years Motor vehicles 4 Heavy equipment 5 13 Fixed plant and heap leach facilities 4 6 Buildings 9 20 Civil works 4 Other equipment 4 Office equipment 4 10 Furniture and fixtures 4 10 Source: Audited Financial Statements Pre-operating expenses and deferred charges Acquisition, exploration, evaluation, development and pre-operating expenses are expensed in the period incurred until a mine/ project is identified as having economical development potential. Once a mine/ project has been determined to have economical development potential the subsequent development and pre-operating expenses incurred on the mine/ project are deferred net of proceeds from the sale of any production during the development period and then amortized over the shorter of the expected life of the mine/ project or a period of seven years. If a mine/ project is no longer considered economical, the accumulated project costs are charged to income in the year in which the determination is made. The Company also defers waste mining cost and has estimated the average of the waste-toore ratio for the quantities contained within the final pit design of the mine. This average is used to calculate the annual waste mining cost to be expensed as follows: Average ratio of waste to ore mined X Quantity of ore mined X Average cost of total tons mined In periods when the actual costs of waste are higher than the costs expensed according to this formula, the difference is deferred to be amortized in a future period when the actual costs are less than the amount to be expensed. Assets impairment At each balance sheet date, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If this has occurred the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. The recoverable amount of the assets/ cash-generating unit is the greater of its fair market value or present value of future cash flows projected from the asset/ cash-generating unit. The Company estimates the recoverable amounts of its mines/ projects considering all tangible and intangible assets attributable to each mine/ project as components to the cash-generating unit represented by each mining/ project. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. Impairment losses are recognised as an expense immediately. Where an impairment loss is subsequently reversed, the carrying amount of the asset (cashgenerating unit) is increased to the revised estimate of its recoverable amount in a manner 136

138 such that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cashgenerating unit) in prior years. A reversal of an impairment loss is recognised as income immediately. Savings plan programme In accordance with clause (137) of the Labour Regulations, and in furtherance to clause (76) of the Company s Internal Work Regulation approved by Resolution No. 424 dated 6/4/1420H issued by the Minister of Labour and Social Affairs, a Savings Plan Programme was introduced to encourage Saudi employees of the Company to save and invest their savings in areas more beneficial to them, to secure their future and as an incentive for them to continue working with the Company. Participation in the Savings Plan Programme is restricted to Saudi Nationals and is optional with employees required to contribute a monthly minimum instalment of 1% to a maximum of 15% of their basic salary subject to a minimum of SR300. The Company will contribute an amount equal to 30% of the monthly savings of each employee, which will in turn be credited to the savings accounts of the member. The Company s portion will only be paid upon termination or resignation of the employee. Mine closure and reclamation During the start up of a mine, a provision is made for the total estimated costs of future closure and reclamation of the mining properties. The full estimated costs are deferred and then amortized to expense over the expected life of the mine on a straight line basis. Estimates of the ultimate site reclamation costs are based on current laws and regulations and expected costs to be incurred, all of which are subject to possible changes, thereby impacting current determinations. End-of-service indemnities End-of-service indemnities, required by Saudi Arabian Labour Law, are provided in the financial statements based on the employees length of service. Revenue recognition Revenue is recognised when the following conditions are met: The quality and quantity of the product is determined with reasonable accuracy; Physical control over the product has been relinquished; The selling price is determined; The product is suitable for delivery, and no further processing is required by or on behalf of the Company, and The Company no longer has insurable interest in its full sales value. Investment income consists of earnings on bank deposits and is recognised on the accrual basis. 137

139 Expenses General and administrative expenses include direct and indirect costs not specifically part of production costs as required under generally accepted accounting standards. Allocations between general and administrative expenses and cost of sales, when required, are made on a consistent basis. Severance fee Effective from 2005 onwards, as per the mining code issued based on the Royal Decree No. 47/M dated 20 Sha aban 1425 H (corresponding to 4 October 2004G), the Company is required to pay to the Government of Saudi Arabia severance fee representing 25% of annual net income or the equivalent amount of income tax, whichever is lower. Forward sales and option contracts In order to protect against the impact of potential gold price declines, the Company and its subsidiary Ma aden Company for Gold and Base Metals (formerly called Saudi Company for Precious Metals) utilise forward sales to provide a minimum price for a portion of its future production. Premiums received on the forward sales contracts (if any) are deferred and recognised upon the settlement of the related option contract. Overview Saudi Arabian Mining Company was formed as a joint stock company pursuant to Royal Decree No.M/17 dated 14/11/1417H (corresponding to 23/3/1997G) and Council of Ministers Resolution No.179 dated 18/11/1417H (corresponding to 17/3/1997G), with Commercial Registration (CR) No dated 10/11/1421H (corresponding to 4/2/2001G). The Company was established with a share capital of SR4,000 million divided into 40 million ordinary shares of nominal value of SR100 each. The entire shareholding of the Company is vested with Government of the Kingdom of Saudi Arabia(represented by the Public Investment Fund).. The Management subsequently further analysed its financial position and concluded that it needed to raise further capital which would required an increase of its share capital. During FY2006 and pursuant to the Council of Ministers resolution number 72, dated 2/4/1427H (corresponding to 30/4/2006G) the capital of the Company was increased from SR4,000 million to SR8,000 million. This resolution was amended pursuant to the Council of Ministers resolution number 49, dated 25/2/1428H (corresponding to 3/3/2008G) the capital of the Company will be increased to SR9,250 million. The proceeds from IPO will be utilised to primarily finance the Phosphate and Aluminium Projects. These large scale projects are part of Management vision to position the Company as a leading and diversified mineral resource company from Saudi Arabia. Existing Business (Gold Mining Projects) The Company presently operates the following mines: Mahd Ad Dahab gold mine - located in central western Saudi Arabia Al-Hajar gold mine - located in south western Saudi Arabia Bulghah gold mine - located in central Saudi Arabia 138

140 Sukhaybarat gold mine - located in central Saudi Arabia Al-Amar gold mine - located in Central Saudi Arabia. Ma'aden's gold production for the years ended 2005, 2006 and 2007 were 239,731 ounces, 166,602 ounces, and 142,783 ounces respectively. For additional details regarding the Company's gold mining projects see "The Company's Business - Gold Operations" section. Exploration Projects The Company was granted an exploration licence for the Ad Duwayhi prospect in 1998 and extensive exploration activities were carried out on the licence, which resulted in the delineation of a significant gold resource at Ad Duwayhi by the end of Subsequent exploration programs undertaken on the Central Arabian Gold region has resulted in outlining a total of six advanced exploration projects, including: Ad Duwayhi, Zalim, As Suk, Ar Rjum, Mansourah and Masarrah. Preliminary resource estimates completed to date indicate approximately 7.9 million ounces of gold resource in the region. The deposits will be developed in sequence starting with Ad Duwayhi in 2009, Mansourah-Masarrah in 2011 and Ar Rjum Gold management envisages developing the Mansourah and Masarrah deposits as one project because of their proximity to each (6.5km). Currently, a plan is being prepared by the Management to provide water, treated water piping and other infrastructure support to develop these mines on an economic basis. Discussions with relevant Government authorities in respect of land access and permit requirements to award the construction contract for pipeline are underway. For additional details regarding the exploration projects, see The Company s Business Gold Operations. Future Projects Ma aden s objective is to explore and develop Saudi Arabia s mineral resources and become a world class international mineral resource company. Ma aden has taken significant steps towards achieving this objective by launching the development of a phosphate mine and integrated fertilizer production facility for the production of DAP and excess quantities of ammonia and phosphoric acid (the "Phosphate Project") and a bauxite mine, alumina refinery and aluminium smelter for the production of aluminium ingot (the "Aluminium Project"). In addition, the Company is developing certain common infrastructure to support those projects and certain other projects. For additional details regarding the Phosphate Project, the Aluminium Project and the supporting common infrastructure, see The Phosphate Project, The Aluminium Project and Common Infrastructure respectively. Results of Operations The results of the operations of the Company for the period under discussion solely represent the Gold business and pre-operating and capital expenses relating to the Phosphate, Aluminium and other Projects, and supporting common infrastructure. The Management believes that upon successful completion of the Phosphate and Aluminium Projects, these projects will represent the core business operations and key drivers of the Company s sales and profitability. 139

141 The following table provides details of the consolidated income statement of the Company and its subsidiary for the three years 2005, 2006 and 2007: Table 28: Consolidated Income Statement Year ended 31 December SR ' Sales 244, , ,964 Cost of sales (167,407) (187,733) (150,764) Gross profit 76, , ,200 General and administrative expenses (96,304) (58,359) (47,167) Severance fee (4,281) (23,101) (17,005) Exploration expenses (25,500) (31,187) (28,039) Technical services expenses (4,879) (5,020) (3,843) Other income, net 27, ,258 Profit/ (loss) before investment income (26,546) 44,388 34,404 Investment income 225, , ,263 Profit before extraordinary item 199, , ,667 Extraordinary item (446,293) - - Net income/ (loss) (247,203) 317, ,667 Source: Audited Financial Statements Production, Sales, Volumes and Prices Table 29: Production, Sales and Prices of Gold for the Period FY Year ended 31 December Production (ounce) 142, , ,731 Sales (ounce) 146, , ,655 Average Realised Price US$ Source: Audited Financial Statements In FY2007, the consolidated sales of the Company decreased by 30.2%, due to a decrease in sales volume of 56,775 ounces and a decrease in realised average gold price per ounce by US$14 per ounce in FY2007 as compared to FY2006. The decrease in sales volume is due to the decrease in gold production and gold recovery rate from the various mines. Gold production decreased by an annual compound rate of 22.8% during the period 2005 to 2007 to 142,763 ounces for the period ended 31 December The following table represents the breakdown of gold production per mine during the period from 2005 to Table 30: Mines production (Ounce) for the Period FY Years ended in 31 December Mine Mahd Ad Dahab Al Hajar Al Sukhaybarat Bulghah Total Source: unaudited accounts The decreases in production volumes for the Al Hajar, Al Sukhaybarat and Bulghah mines during the period from 2005 to 2007 were due to the decrease in the gold concentration rate 140

142 during the period. (for more information about working mines see the Company Activities, Current Activities Working Mines section.) Furthermore, gold sales volumes decreased by an annual compound rate of 15.2% during the period from 2005 to 2007 with gold sale volumes reaching 146,283 ounces year The following table represent sales volume per mine during the period from 2005 to Table 31: Consolidated sales of the company per mine (ounce) Years ended in 31 December Ounce Mahd Ad Dahab Al Hajar Al Sukhaybarat Bulghah Total sales Source: unaudited accounts Total gold sales represent sales to customers at prevailing market prices prevailed and at prices set in forward contracts. The following table represents the breakdown of consolidated sales of the Company. Table 32: Breakdown of consolidated sales Years ended in 31 December SR Mahd Al Dahab Al Hajar Al Sukhaybarat Bulghah Total Sales volume against forward contracts (ounce) Sales volumes and market price (ounce) Sales volume (ounce) Ounce average selling price (SR) 1,668 1,721 1,365 Source: unaudited accounts Due to prices set under forward sales contracts the average gold sales price per ounce for Ma aden was less than the average prevailing price in international markets during the period from 2005 to 2007 which contributed to the board of directors' decision to settle the Company's forward sales contracts. For more information see settlement of forward contracts section. Table 33: Gold prices Years ended in 31 December SR Average market prices Ma aden average selling price Agreed upon forward prices * : Source: unaudited accounts * All forward prices were settled in November

143 Cost of Sales During 2007, the consolidated cost of sales of the Company decreased by 10.8%, reaching SR million. The decrease was mainly due to lower sales volume despite higher average unit cost of sales. The following table highlights mine-wise break-up of consolidated cost of sales. Table 34: Mine-wise break-up of consolidated cost of sales Years ended in 31 December SR Mahd Ad Dahab 40,163 45,247 23,325 Al Hajar 23,155 41,431 28,306 Al Sukhaybarat 39,506 32,356 28,817 Bulghah 64,583 69,167 70,784 Accompanying Materials - (468) (468) Total 167, , ,764 Sales volume (ounce) 146, , ,655 Ounce average cost (SR) 1, Source: unaudited accounts Gold sales volume decreased by an annual compound rate of 15.2% during the period from 2005 to However, consolidated cost of sales increased at an annual compound rate of 5.4% during the period of The increasing cost of sales was mainly due to the increase in mine operation costs and the decreasing recovery rate of gold. Cost of sales exhibited for each of the mines are set out below: - Mahd Al Dahab: In 2006, the cost of sales increased as a result an increase 180.3% increase in sales volume. By comparison in year 2007, the cost of sales decreased as a result of a decrease of 29.3% in sales volume. - Al Hajar: In 2006, the cost of sales increased despite a decrease of sales volume by 13.1% due to the low recovery rate of 57.4%. In 2007, a decrease in sales volume of 48.9% resulted in a lower cost of sales. - Al Sukhaybarat: In 2006, the cost of sales increased despite a decrease in sales volumes due to lower ore milled tonnage, lower gold grade and lower gold recovery. In 2007, sales volume increased by 2.8% resulting in a 22.1% increase in cost of sales. This increase in cost of sales was also due to increased ore milled tonnage and improved gold grade as compared to year Bulghah: In 2006, the cost of sales decreased by 2.3% as a result of a 37.8% decrease in sales volumes. In 2007, the cost of sales decreased by 6.6%, while sales volumes decreased by 28.3% due to lower stocked ore, lower gold grade and lower gold recovery rate. The increase in consolidated cost of sales was primarily due to an adjustment made to correct an understatement of the cost of sales in previous years resulting from an over estimation of the book value of gold inventory contained in the Company s Heap-in-Leach stocks. A general increase in site operation costs also contributed to the increase in consolidated cost of sales. The technical consultants were brought in by the Company to review the gold inventory and the appropriate adjustment was made pursuant to the advice of such technical consultants. 142

144 General and Administrative Expenses Table 35: Breakdown of Consolidated General and Administrative Expenses Year ended 31 December SR ' CAGR %/ (CADR)% Personnel 61,209 43,108 34, % Board of Directors' remuneration (0.9%) Contracted services 24,512 5,783 3, % Consumables 1,405 1,334 1, % Overheads 6,343 5,126 5, % Depreciation and amortization 2,376 2,568 2,405 (0.6%) Total general and administrative expenses 96,304 58,359 47, % Source: Audited Financial Statements Consolidated general and administration expenses remained steady at around 17% of the Company s sales during FY , while it was 39% in Personnel costs which included staff salaries and related expenses was the principal cost item. Contracted services costs relate to consultancy and professional services costs and vary from period to period based on studies conducted. In absolute terms, general and administrative expenses in 2006 were SR58.4 million representing an increase of SR11.2 million compared with This increase was primarily due to increased personnel costs, which in turn, resulted from recruitment of new employees mainly in the second half of 2006 to meet the growing manpower requirements of the Company with respect to the Phosphate, Aluminium and other Projects. In FY2007, general and administrative expenses increased by 65.0%. This was mainly due to increase in personnel cost (due to higher number of employees, increment in staff salaries and changes in the compensation programs) and increase in contracted services expenses (due to costs of initial public offering and privatization consultancy costs). Severance fee Effective from year 2005 onwards, the Company is required to pay to the Government of Saudi Arabia a severance fee representing 25% of its annual net income or the equivalent amount of income tax, whichever is lower. During 2005 and 2006, the Company incurred fees in the amount of SR17.0 million and SR23.1 million respectively, based on the Company s net sales. Severance fees represented 6.1% and 6.6% of the Company s overall revenues for the years 2005 and 2006, respectively. During FY2007, the Company incurred a net loss and as a result the severance fee decreased by SR18.8 million compared to 2006 due to offsetting and reversal of over accrual for FY by SR12.0 million. Exploration expenses In FY2007, exploration expenses decreased by 18.2% mainly due to lower overhead costs resulting from reversal of accrued exploration licence cost from prior years, and due to a reduction in drilling and assaying services and activities, particularly in the Ash-Shaktaliyah, Mawaq and Al-Oruq areas. Exploration expenses grew at 11.2% during FY2006 to reach SR31.2 million from SR28.0 million in FY2005. The increase in exploration expenses was mainly due to expanding exploration activities during the year particularly in the Mawan area. 143

145 Technical services expenses In FY2007, technical expenses remained close to the FY2006 level. Technical services expenses increased in FY2006 by SR1.2 million due to an increase in expenditures made in relation to feasibility/ technical studies. Other income The significant other income for the year ended 31 December 2007 mainly includes a premium received on account of development efforts carried out by the Company for the Aluminium Project which were received from Rio Tinto Alcan (SR18.4 million) and a premium received as consideration for gold sale option (SR13.5 million), offset by a SR6.0 million write off of Phosphate expenditure from the Wadi Sirhan licence. Investment income Investment income comprises interest earned on bank deposits. Investment income earned by the Company decreased by 17.5% during FY2007 and reached SR225.6 million due to less surplus funds being placed on term deposits compared to FY2006. Funds were utilised during FY2007 to meet increased capital expenditure requirements of mega projects, such as Phosphate, Aluminium and Infrastructure Projects. Annual compound rate of 11.5% achieved during Investment income in 2006 was SR273.6 million representing an increase of SR92.3 million on investment income of SR181.3 million for FY2005. This increase was mainly attributable to a higher average interest rate of 5.5%. Extraordinary item As at 21 November 2007, the Company and its subsidiary had forward sales contracts outstanding for 256,513 ounces of gold. These were entered into in 2001 and 2003 and related to the Bulghah and Al Amar mines and were contracted to be settled at a forward price of US$373.5 per ounce. However, the increase in market demand in succeeding years led to an increase in the market price of gold from US$335.4 per ounce in March 2003 to US$783 per ounce in 31 October In view of the above and in line with the privatization of Ma'aden, the Board of Directors in their meeting dated 3 November 2007 decided to unwind all the forward hedge positions. This was decided to enable Ma'aden to proceed with IPO without any commitments with respect to forward contracts and to allow public shareholders to take advantage of increasing gold prices. Accordingly, an amount of US$119.3 million equivalent to SR446.3 million was paid to JP Morgan Chase Bank N.A. on 28 November 2007 to unwind all forward hedge positions as of 21 November Net income In FY2007, the Company incurred loss of SR247.2 million. The decrease in net income as compared to FY2006, was due to lower sale volumes, increase in cost of sales per ounce and lower gold price per ounce realised by the Company, coupled with the impact of the extraordinary item described above. The Company s consolidated net income in FY2006 increased by SR102.3 million or 47.4% compared to its consolidated net income of SR215.7 million in FY2005. The increase in net income in FY2006 was mainly attributable to an increase of SR92.4 million in investment income. 144

146 Earnings before Bank Charges, Zakat, Depreciation and Amortization (EBCZDA) The following table shows the consolidated earnings of the Company and its subsidiary before bank charges, Zakat, depreciation and amortization (EBCZDA) for the three years 2005, 2006 and 2007: Table 36: Income Statement Showing EBCZDA Year ended 31 December SR ' Sales 244, , ,964 Cost of sales- net of depreciation (129,073) (136,560) (110,604) General and administrative expenses- net of depreciation and amortization (93,928) (55,791) (44,762) Severance fee (4,281) (23,101) (17,005) Exploration expenses (25,500) (31,187) (28,039) Technical services expenses (4,879) (5,020) (3,843) EBCZDA (13,531) 98,086 73,711 Depreciation charge (33,445) (45,507) (36,519) Amortization charge (7,265) (8,234) (6,046) Investment income 225, , ,263 Other income, net 27, ,258 Extraordinary item (446,293) - - Net income/ (loss) (247,203) 317, ,667 Source: Audited Financial Statements and Management Information Balance sheet The following table provides details of the assets, liabilities and shareholders equity of the Company and its subsidiary as at 31 December 2005, 2006 and 2007: Table 37: Consolidated Balance Sheet As at 31 December SR ' Current assets 3,155,902 4,990,300 4,980,697 Non-current assets 2,692,491 1,047, ,748 Total assets 5,848,393 6,037,649 5,659,445 Current liabilities 252, , ,596 Non-current liabilities 111, ,686 97,480 Shareholders' equity 5,484,144 5,731,348 5,413,369 Total liabilities and equity 5,848,393 6,037,649 5,659,445 Source: Audited Financial Statements Note: Time deposits maturing after one year where classified as long term investments in the financial statements for FY2005. These were reclassified in FY2006 as short term investments as the Company always had the right to withdraw the time deposits before maturity. Accordingly, such time deposits have been reclassified in the above table for FY2005 (SR65 million) for to be consistent with the presentation adopted in the FY2006 financial statements The Company s consolidated assets as at 31 December 2006 increased by SR378.2 million (or 6.7%) to SR6,037.6 million compared to SR5,659.4 million as at 31 December The growth in assets was mainly due to the capital costs of Aluminium and Phosphate Projects. As at 31 December 2007, total assets decreased by SR189.3 million mainly due to a decrease in shareholders equity, consequent to net loss for FY2007. The decrease in current assets and increase in non-current assets as at 31 December 2007 compared to 31 December 2006 was due to utilisation of short-term investments to finance the Phosphate and Aluminium Projects. 145

147 Current assets Table 38: Breakdown of Current Assets As at 31 December SR ' Cash and cash equivalents 595, ,903 2,625,586 Short-term investments 2,099,000 4,563,750 2,121,500 Investment income receivable 60, , ,449 Accounts receivable 207,511 10,622 11,607 Inventories, net 110,584 98, ,929 Prepaid expenses and other assets 82,407 6,738 6,626 Total current assets 3,155,902 4,990,300 4,980,697 Source: Audited Financial Statements (after reclassification as per note below Table Consolidated balance sheet ) Cash and cash equivalents comprise cash on hand, bank balance and time deposits with original maturity of 90 days or less. Short-term investments include time deposits of the Company, with original maturity over 90 days. Cash and cash equivalents and short term investments together constitute on average 91.9% of total current assets of the Company as at the relevant balance sheet dates. The primary reason for the movement between cash and cash equivalents and short term investments between the relevant balance sheet dates is due to higher or lower time deposits placed with banks with maturity over 90 days. As noted above, the decrease in the current assets as at 31 December 2007 compared to 31 December 2006 was due to utilisation of short-term investments to finance the Phosphate and Aluminium Projects. As of 31 December 2007, Ma'aden had paid an amount of SR168.3 million in excess of its 70% pro rata contribution. Ma aden will be reimbursed this amount after an evaluation KPMG Al Fozan and Al Sudhan, which were appointed by SABIC. The amount is classified under accounts receivable. Inventories on the average constitute 2.6% of current assets and mainly comprise of gold inventory, spare parts and consumables and work-in-process. Prepaid expenses increased by SR75.8 million over FY solely due to increase in advances to vendors relating to the future projects. Non-current assets Table 39: Breakdown of Non-Current Assets As at 31 December SR ' Long-term receivables 61,046 63,498 47,161 Advances against investments in company under formation 1,815, Property, plant and equipment, net 341, , ,853 Pre-operating expenses and deferred charges, net 474, , ,734 Total non-current assets 2,692,491 1,047, ,748 Source: Audited Financial Statements (after reclassification as per note below Table Consolidated balance sheet ) Long-term receivables represent payments made by the Company in connection with studies for North South Railway ( NSR ) plan. Under the plan, the Saudi Railway Company will construct 1,486km railway track, linking Bauxite and Phosphate mines located in Az Zabirah and Al Jalamid respectively with Ras Az Zawr and Al Jubail areas. Pursuant to the Council of Ministers resolution No. 72 dated 30 April 2006, the Company s commitment to contribute US$500 million towards NSR plan was waived by the Government, and the amount paid by the Company will be returned to the Company in

148 During FY2007, the Company entered into an agreement with SABIC to exploit the Al Jalamid phosphate deposit in the Kingdom of Saudi Arabia and utilisation of national resources of natural gas and sulphur to manufacture DAP, MAP and ammonia fertilizer products. The capital cost of the project is estimated at US$ 5.6 billion to be contributed by the Company and SABIC at an agreed proportion of 70% and 30% respectively. The implementation of the Project will be through the Ma'aden Phosphate Company, which was incorporated on 1 January As of 31 December 2007 Ma'aden contribution towards its share in the total cost of project was SR1.82 billion, which is shown as advances against investment in Ma'aden Phosphate Company - under formation. Property, plant and equipment mainly comprise of capital work in progress, civil works and fixed plant and heap leach facilities. The increase in property, plant and equipment in FY2006 and FY2007 was mainly due to increasing civil work at Al-Amar mine and commencement of construction of the Phosphate and Aluminium Projects. Pre-operating expenses and deferred charges incurred for developing new projects and mainly include cost of infrastructure i.e. management consultancy cost incurred for site preparation for Phosphate, Aluminium and other Projects. Current liabilities Table 40: Breakdown of Current Liabilities As at 31 December SR ' Accounts payable 146,653 82,951 50,994 Accrued expenses 105, ,664 97,602 Total current liabilities 252, , ,596 Source: Audited Financial Statements Current liabilities represent accounts payable and accruals made in the ordinary course of business. Accounts payable increased by SR95.7 million during FY , mainly as a result of the payables recorded towards the close of FY2007 on account of various studies conducted by the Company in relation to its projects which are currently in the development stage. The Company records accrued expenses at year end in ordinary course of business. Accrued expenses increased by SR8.3 million during FY Non-current liabilities: Table 41: Breakdown of Non-Current Liabilities As at 31 December SR ' Deferred revenue - 13,500 13,500 Provision for mine closure 54,853 54,853 43,617 End-of-service indemnities 56,859 45,333 40,363 Total non-current liabilities 111, ,686 97,480 Source: Audited Financial Statements Non-current liabilities have remained relatively stable during FY Deferred revenue represents premium received as consideration for gold sale option, recognised in FY2007 income statement, on settlement of contract. Shareholders equity 147

149 Table 42: Components of Shareholders Equity As at 31 December SR ' Share capital 4,000,000 4,000,000 4,000,000 Statutory reserve 183, , ,382 Retained earnings 1,300,964 1,548,168 1,261,987 Total shareholders' equity 5,484,144 5,731,348 5,413,369 Source: Audited Financial Statements The Company has share capital of SR4,000 million divided into 40 million shares of nominal value of SR100 each as at 31 December Total shareholders' equity decreased from 2006 to 2007 as a result of the settlement of the Company's gold forward sales contracts. A statutory reserve is maintained in accordance with applicable regulations in the Kingdom and 10% of the annual net income of the Company is credited to a statutory reserve until such reserve equals 50% of the share capital of the Company. Since the Company incurred loss in FY2007, statutory reserve was not made in that year. The Company s Financial Condition and Liquidity Table 43: Consolidated Cash flow Statement Year ended 31 December SR ' Profit / (loss) before investment income and extra ordinary item (26,546) 44,388 34,404 Adjustments for non-cash items 52,258 62,016 51,597 Extraordinary items (446,293) - - Net change in working capital (224,333) 55,934 68,302 End of service indemnities paid (2,121) (3,305) (2,089) Cash flow from/ (used in) operating activities (647,035) 159, ,214 Interest income received 292, , ,615 Long-term receivable 2,452 (16,337) (35,874) Additions to pre-operating expenses and deferred charges (173,726) (298,882) (195,105) Additions to property, plant and equipments (142,317) (95,887) (94,806) Advance against investment in company under formation (1,383,663) - - Cash used in investing activities (1,404,681) (159,466) (184,170) Net decrease in cash, cash equivalents and short term investments Cash, cash equivalents and short term investments at the beginning of the year Cash, cash equivalents and short term investments at end of the year (2,051,716) (433) (31,956) 4,746,653 4,747,086 4,779,042 2,694,937 4,746,653 4,747,086 Source: Audited Financial Statements (after reclassification as per note below Table Consolidated balance sheet ) For the purposes of this cash flow statement, cash and cash equivalents comprises cash and cash equivalents as stated in the balance sheet and short term investments. Operating activities Net cash flow from operating activities remained positive during the financial years ended 31 December 2005 and 2006, while negative in 2007, mainly due to increase in receivable from SABIC (in relation to the Ma'aden Phosphate Company as discussed above) and loss on settlement of forward contracts. 148

150 Table 44: Cash cycle Year ended 31 December Days Accounts receivable number of days Inventory number of days Accounts payable number of days (314) (159) (122) Cash cycle (14) Source: Management information Cash cycle for the Company has fluctuated during 2005, 2006 and In 2005, cash cycle in days totalled 159 days mainly due to high inventory days. In 2006, cash cycle in days totalled 44 days because of the decrease in inventory days and increase in accounts payable days which decreased the total cash cycle. In 2007, cash cycle in days totalled negative 14 days because of the increase in inventory days and accounts payable days, which decreased the total cash cycle. Investing activities The Company recorded net cash used in FY2006 and FY2007 in respect of investing activities during the period under discussion. Significant investment has been made by the Company in its existing and future projects. The surplus funds which were placed by the Company in bank term deposits and income earned thereon were the main sources of funding for investment in the projects. Financing activities The Company is 100% equity financed and hence there are no debt financing activities during the period under discussion. Commitments and contingent liabilities Forwards Contracts As described above, the Company and its subsidiary unwound all forward sales hedge contracts outstanding as at 21 November 2007, and accordingly there were no outstanding forward sale contracts as at 31 December 2007 (31 December 2006: forward sale contracts were outstanding in respect of 356,611 ounces). As a result of the development of the Phosphate and Aluminium Projects, it is expected that major important changes will occur to the Company s operations. Accordingly, the discussions and analysis of company s balance sheet and results of its operations must not be taken as indication to future performance of the Company. Except as already mentioned, there are currently no expected obligations of the Company. Capital commitments As at 31 December 2007, the Company had total capital commitments amounting to SR10.3 billion (31 December 2006: SR607.8 million). Commitments have been made in connection with the development of the future projects. Letters of Guarantee As at 31 December 2007, the Company has a contingent liability of SR40,000 in respect of the guarantee issued by a bank on behalf of the Company, in favour of a contractor. 149

151 Business risks Credit risk Credit risk is the risk that one party will fail to discharge an obligation and cause the other party to incur a financial loss. The Company has no significant concentration of credit risk. Cash is substantially placed with national banks with sound credit ratings. Accounts receivable are carried net of provision for doubtful debts, if needed. Commission rate risk Commission rate risk is the exposure to various risks associated with the effect of fluctuations in the prevailing commission rates on the Company s financial position and cash flows. The Company monitors the fluctuations in commission rates and believes that the effect of the commission rate risk is not significant. Currency risk Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Company s transactions are principally in Saudi riyals and US dollars. Management monitors the fluctuations in currency exchange rates and believes that the currency risk is not significant. Fair value Fair value is the amount for which an asset could be exchanged, or a liability settled between knowledgeable willing parties in an arm s length transaction. As the Company s financial instruments are compiled under the historical cost convention, differences can arise between the book values and fair value estimates. Management believes that the fair values of the Company s financial assets and liabilities are not materially different from their carrying values. Liquidity risk Liquidity risk is the risk that the Company will encounter difficulty in raising funds to meet commitments associated with financial instruments. Liquidity risk may result from an inability to sell a financial asset quickly at an amount close to its fair value. Liquidity risk is managed by monitoring on a regular basis that sufficient funds are available to meet any future commitments. Current Trading and Prospects Consolidated income statement for the year ended 31 December 2007 has resulted to a net loss of SR247.2 million as compared to net income of SR318.0 million for FY2006, mainly due to higher average cost of sales per ounce, lower realised gold price per ounce, decreased investment income, loss on settlement of forward contracts and increase in general and administrative expenses. During FY2007, the Company entered into heads of agreement with Rio Tinto Alcan Inc., for the development, ownership and operation of an integrated mine, refinery, smelter and power project for aluminium in the Kingdom of Saudi Arabia, after undertaking an evaluation and selection process of a group of international companies, with which Ma aden has close ties, that specializes in this field The total cost of the project is estimated at approximately US$10.55 billion. Current financial position and past performance of the company is related to its current activities in gold. Major changes are expected in the company activities due to the 150

152 development of Phosphate and Aluminium Projects, accordingly the discussions and analysis of company s financial position and results of its operations must not be taken as indication to its future performance. The management considers that successful completion of Phosphate and Aluminium Projects will be mainly the source of company future sales and profits. Statement of Management s Responsibility for Financial Information The Management s Discussion and Analysis of Financial Condition and Results of Operations ( MD&A ) has been drafted by the Management of the Company and approved by the Board of Directors. Except as set forth in this Prospectus, the Management believes that there has been no material adverse change in the financial position or prospects of the Company as of the date of this Prospectus and accepts full responsibility for the authenticity and accuracy of the information and analysis of financial results and confirm, after making all reasonable inquiries, that full and fair disclosure has been made and there are no other information or documents the omission of which make any information or statements therein misleading. Save as disclosed therein, the Management declares that there are no mortgages, rights, and charges against assets of the Company as of the date of this Prospectus. 151

153 Dividend Policy Dividends may be distributed by the Company from its annual net profit after deducting general costs and other costs. However, prior to the payment of dividends, the Company is required to deduct 10 % of the net profit after deducting general costs and other costs and allocate such amount to statutory reserves. The Ordinary General Assembly may discontinue this deduction when the statutory reserves amount to half of the Company s paid-up capital. Any declaration of dividends will be dependent upon the Company s earnings, its financial condition, the condition of the markets, the general economic climate, and other factors, including analysis of investment opportunities and reinvestment needs, cash and capital requirements, as well as other legal and regulatory considerations. Although it is Ma'aden s intention to pay annual dividends to its shareholders, it is unlikely that the Company will be in a position to make annual dividend payments to its shareholders during the development phases of the Phosphate and Aluminium Projects and does not make any assurance that any dividend will actually be paid thereafter, nor any assurance as to the amount, which will be paid in any given year. The distribution of dividends is subject to certain limitations contained in the Bylaws (please refer to the paragraphs under the heading "Distribution of Annual Profits" in the "Summary of Bylaws" section). 152

154 Use of Proceeds The total proceeds from the Offering are estimated to be SR9,175,000,000. This will be paid to the Company and will be primarily used to assist in funding (the costs of) the Phosphate and Aluminium Projects as well as the other projects noted below. The Government, as represented by the Public Investment Fund, will not receive any part of the proceeds from the Offering. The Company shall bear all the costs and expenses associated with the Offering and amounting to SR75,000,000. This will include the fees of each of the Financial Advisers, reporting accountants and the legal advisers to the Company plus the Underwriters, Receiving Bank and Lead Managers' expenses, marketing expenses, printing and distribution expenses and other Offer related expenses. The following is an elaboration of the cost of the projects and the financing thereof. Overview The total cost of the projects is estimated at SR billion including the costs of design, supply, construction, services and material contracts (including emergency costs) as well as the cost of development, financing during construction, preliminary working capital, emergency costs and loan service reserves. It is expected that the costs will be financed through shareholder contributions and commercial loans divided as 37:63 split respectively. Costs of Projects Table 45: Projects Cost Project Total Cost (million Saudi Riyals) Percentage of Total Cost Phosphate 20, % Aluminium % Chlor Alkali 1,500 3% Infrastructure 863 3% Magnesite % Low Grade Bauxite and Kaolin % Other % Total 65, % Source: Ma aden The cumulative cost of the Aluminium Project does not take account of projected annual inflation and estimated financing costs Phosphate Project The total cost of the Phosphate Project is estimated at US$5.56 billion (SR20.85 billion) taking account of projected annual inflation and estimated financing costs and based on projected capital costs of US$4.54 billion (SR17.03 billion). Over 70% of the total capital costs have been contracted at a fixed rate under signed LSTK contracts for the engineering, procurement and construction ("EPC") of a beneficiation plant, DAP, ammonia, sulphuric acid and phosphoric acid processing plants and certain supporting infrastructure. The total cost also includes the costs of preparing the mine and the facilities and infrastructure at Al Jalamid, and the preparation of the Ras Az Zawr location and its infrastructure, storage facilities for Phosphate concrete as well as the energy and water distillation plants. For further details please review the Company Business Phosphate Project section. 153

155 Aluminium Project The total cost of the Aluminium Project is estimated at SR39.56 billion (US$10.55 billion) taking into working capital and contingency costs but not projected annual inflation or estimated financing costs during construction phase. This estimate is based on projected capital costs of approximately SR35.04 billion (US$9.34billion). It is currently expected that 30% to 40 % of the total costs will be funded through equity contributions from Ma'aden and Rio Tinto Alcan with the balance to be funded through limited recourse debt. It is possible that Ma'aden and Rio Tinto Alcan may provide this contribution by way of a subordinated shareholder loan. Ma aden may also resort to other sources of financing. The costs comprise the development, design, construction and operation of the following locations: The mining facilities at Az Zabirah, consisting of a bauxite mine and ore handling facilities; and The aluminium complex facilities at Ras Az Zawr, consisting of an alumina refinery, an aluminium smelter and a dedicated power plant. For more information please review Company Business Aluminium Project section. Chlor Alkali Project The total cost of the Chlor Alkali Project is approximately SR1,500 million (US$ 400 million) (within a margin of +/- 30%) comprising the engineering, supply and construction contract for the caustic soda and ethylene di-chloride plant. For more information please review the Company Business Other Projects Chlor Alkali Project section. Infrastructure The cumulative cost of the infrastructure projects is estimated at SR862.5 million (US$230 million), consisting of the following: Primary services, roads, sanitation facilities, electric power, and national electric power connections; Power distribution and transmission; Worker accommodation at Ras Az Zawr housing for bachelor workers; and Residential land at Al-Jubail housing for family workers. For more information please review the Company Business Infrastructure section. Magnesite The total cost of the Magnesite project is expected to be SR236 million (US$63 million) comprising the costs of the development of the Zarghat mine, which is located in the middle zone of northern Saudi Arabia as well as the amounts needed for the construction of a processing plant at Al Madinah Al Munawarah. For more information please review the Company Business Other Projects Magnesite section. Bauxite and Kaolin 154

156 The total cost of the kaolin and low grade bauxite project is estimated to be SR12 million (US$3million) comprising the cost of developing the mine which is located in the middle zone of Az Zabirah for the purpose of mining the appropriate bauxite for the production of cement and kaolin. For more information please review the Company Business Other Projects Low Grade Bauxite and Kaolin section. Other Projects The total cost of other projects is estimated at SR3,104 million (US$824million) including the cost of developing and constructing projects for Ma aden Industries, the development of the Central Arabian Gold Region and the expenses related to the Company s principal office, fulfilment guarantees, emergency costs, fees and expenses related to this Offering. Project Financing Table 46: Projects financing Capital Financing Million Saudi Riyals Percentage of Total Cost Ma aden 15, % Other Joint Venture Partners 8, % Loan 41,360 63% Total 54, % Source: Ma aden Notice: It is anticipated that the financing for the Aluminium Project shall be divided 65% to 35% debt to capital ratio. Capital financing In accordance with the Council of Minister Resolution dated No. 49 dated 25/02/1429H (corresponding to 04/03/2008G) which increased the capital of Ma aden to SR 9,250 million: The Saudi Government, represented by the Public Investment Fund has subscribed for 62,500,000 shares in the Company for SR1,250 million; The Company is offering 50% in the shares of the Company for public subscription, pursuant to the Offering and the expected proceeds are estimated at SR9,175 million. Ma aden will finance the remaining portions of the Phosphate, Aluminium and other Projects list above from available cash accounts and cash flows expected during the construction periods of those projects. The joint venture partners in the joint projects shall participate in the financing based on their expected shareholding in such projects as follows: Table 47: Projects financing Project Partner Percentage ownership in Project Share Capital (million Saudi Riyals) Phosphate SABIC 30% 1,877 Aluminium Rio Tinto Alcan 49% 5,535 Chlor Alkali Sahara 50% 225 Source: Ma aden Loans Total loans shall amount to 63% of the total cost of the projects. 155

157 Phosphate Project PhosCo has signed financing agreement in June of 2008 pursuant to which a number of banks (subject to the satisfaction of certain conditions) agreed to loan US$2,760 million (SR10,354 million)3 for the financing of the Phosphate Project through long-term banking facilities, commercial facilities for the financing of working capital as well as two Islamic Ijara facilities ( Commercial Banking Facilities ). In addition to the Commercial Banking Facilities, PhosCo received a conditions of loan letter dated 20 January 2008 from PIF under which the PIF has indicated its willingness (subject to satisfaction of certain conditions) to provide debt funding to PhosCo for the Phosphate Project in an amount of up to US$ 1,067 million. PhosCo is currently in negotiations with the Export-Import Bank of Korea and the Korea Export Insurance Corporation in relation to additional funding facilities in an amount of up to US$ 600 million. Any funding facilities provided by the two Korean export credit agencies will reduce the amount of the Commercial Banking Facilities by the amount so provided. PhosCo is also in negotiations with the Saudi Industrial Development Fund ("SIDF") in relation to additional funding in an amount of up to US$ 135 million. If, for any reason, the SIDF does not participate in funding the Phosphate Project, the shareholders of PhosCo (in their respective shareholder proportions) will fund the SIDF portion themselves or procure substitute funding. Other Projects In accordance with the usual financing terms and conditions of the projects, it is expected that the financing documentation will include, among other things, certain provisions relating to the successful completion of the Offering, as well as other acknowledgments, undertakings, conditions, representations (including a condition not to distribute any dividends to the shareholders in the event certain financial covenants to be agreed upon - are not met) and other default situations that are usually included in limited recourse financing arrangements. It is expected that the Islamic, local, regional and international banks in addition to governmental and semi-governmental entities will participate in the financing of the projects, with the share of Islamic banks in the financing activities being increased. Sufficiency of Working Capital The proposed members of the Board of Directors believe that the Company will have sufficient working capital for the next 12 months following the date of this Prospectus upon the Company s receipt of the Offering s proceeds. 3 including guarantees for commercial loans and import guarantees institutions. 156

158 Underwriting Shares Committed for Subscription and Shares Committed for Underwriting The cumulative Offer Shares total 462,500,000 offered at an offering price of SR 20 per shares. Ma aden has secured commitment letters issued by GOSI and PPA confirming their commitment to participate in the Offering. GOSI has committed to subscribe to 23,125,000 shares representing 5% of the Offer Shares and PPA has committed to subscribe to 23,125,000 representing 5% of the Offer Shares, resulting in their combined committed to subscribe to 46,250,000 shares, representing 10% of the Offer Shares. As such, the total number of shares committed to be underwritten is 416,250,000, representing 90% of the Offer Shares. Underwriters The Company and the Underwriters have entered into an underwriting agreement to underwrite 416,250,000 shares, representing 90% of the Offer Shares. The agreed principal terms of the Underwriting Agreement are set out below. Sale and Underwriting of the Offer Shares Under the terms of the Underwriting Agreement: 1. The Company undertakes to each Underwriter that, on the first Business Day after the Authority approves the allocation of the Offer Shares following the end of the Subscription Period (the Allocation Date ), it will: Issue and allot the Offer Shares to all Individual Subscribers, Institutional Investors, the General Organization for Social Insurance and the Public Pension Agency, whose application for Offer Shares has been accepted by a Receiving Bank; and/or Issue and allot to the Underwriters any Offer Shares that are not purchased pursuant to the Offering by Individual Subscribers and Institutional Investors. 2. Each Underwriter also undertakes to the Company that it will purchase the Offer Shares that are not subscribed for by successful Applicants in the proportions stated below: Underwriter Number of Offer Shares Samba Capital 1,350 Saudi Hollandi Capital 300 ANB Invest 800 Aljazira Capital 600 Riyad Capital 1,225 NCB Capital 300 Calyon Saudi Fransi 500 AlBilad Investment Co. 400 Alistithmar Capital

159 Al Rajhi Financial Services Co. 1,350 HSBC Saudi Arabia Limited 1,000 The Company undertakes to the Underwriters that it will abide by all provisions of the Underwriting Agreement. Fees and expenses The Company has agreed to pay the Underwriters a fee based on the number of Offer Shares each Underwriter has agreed to underwrite. 158

160 Description of Shares Summary of Share Terms Share Capital The share capital of the Company is SR9,250,000,000 divided into 925,000,000 nominal indivisable shares, each with a nominal value of SR10. Once it is ascertained to be economically feasible and after obtaining the approval of the competent authorities, the General Assembly may, in an Extraordinary Meeting, adopt a resolution to increase the Company s capital once or several times, provided that the original capital shall have been paid in full, with due consideration to the requirements of the Companies Regulations. The said resolution shall specify the mode of increasing the capital and the Shareholders shall have pre-emptive rights to subscribe for the new shares where these shares are issued for consideration. The Shareholders must notify their desire to exercise such rights within 15 days of their receipt of the aforementioned notice. The said shares shall be allotted to the original Shareholders who have expressed their desire to subscribe thereto, in proportion to the original shares owned by them, provided that the number of shares allotted to them shall not exceed the number of new shares they have applied for. The remaining new shares shall be allotted to the original Shareholders who have asked for more than their proportionate share, in proportion to the original shares they own, provided that that their total allotment does not exceed the number of new shares they have asked for. Any remaining new shares shall be offered for public subscription. The Company may, based on certain justifiable causes, reduce its capital if it proves to be in excess of the Company s needs or if the Company sustains losses. This decision must be made through a resolution adopted by the General Assembly in an Extraordinary Meeting, and requires approval of the Minister of Commerce and Industry and CMA. Such resolution shall be issued only after reading the auditor s report on the reasons calling for such reduction, the obligations to be fulfilled by the Company and the effect of the reduction on such obligations, with due consideration to the provisions of the Companies Regulations. The resolution shall provide for the manner in which the reduction shall be made. If the reduction of the capital is due to it being in excess of the Company s needs, then the Company s creditors must be invited to express their objection thereto within sixty (60) days from the date of publication of the reduction resolution in a daily newspaper published in the city where the Company s head office is located. Should any creditor object and present to the Company evidentiary documents of such debt within the time limit set above, then the Company shall pay such debt, if already due, or present an adequate guarantee of payment if the debt is due on a later date. Shares The shares shall be nominal shares and may not be issued at less than their nominal value. However, the shares may be issued at a value higher than their nominal value, in which case, the difference in value shall be added to the legal reserve, even if the reserve has reached its maximum limit. A share shall be indivisible. If a share is held by several persons, they shall designate one person to act on their behalf in exercising the rights connected with the share. In such a case, they shall be jointly responsible for the obligations resulting from the share ownership. 159

161 Transfer of Shares Transfers of shares shall be subject to the rules and regulations governing listed companies on the Saudi Exchange (Tadawul). Voting Rights Each Shareholder shall have the right to attend the General Assemblies, and each Shareholder may authorise another Shareholder, other than the members of the Board of Directors, to attend the General Assembly on their behalf. Votes at the meetings of Ordinary and Extraordinary General Assemblies shall be computed on the basis of one vote for each share represented at the meeting. Resolutions of the Ordinary General Assembly shall be adopted by an absolute majority of the shares represented thereat. Resolutions of the Extraordinary General Assembly shall be adopted by a majority vote of two thirds of the shares represented at the meeting. However, if the resolution to be adopted is related to increasing or reducing the capital, extending the Company s period, dissolving the Company prior to the expiry of the period specified under the Bylaws or merging the Company with another company or establishment, then such resolution shall be valid only if adopted by a majority of three-quarters of the shares represented at the meeting. Each Shareholder shall have the right to discuss the items listed in the General Assembly s agenda and to direct questions to the members of the Board of Directors and the Auditor in this respect. The Board of Directors or the Auditor shall answer the Shareholders questions to the extent that this does not jeopardise the interest of the Company. Should a Shareholder consider the reply unsatisfactory, he can resort to the General Assembly whose resolution is to be considered as final. Shareholders Rights Each share shall give its holder equal rights in the Company s assets and dividends as well as the right to attend and vote at meetings of the General Assembly. Ordinary General Assembly A General Assembly duly convened shall be deemed to represent all the Shareholders, and shall be held in the city where the Company s head office is located. Except for matters reserved for the Extraordinary General Assembly, the Ordinary General Assembly shall be in charge of all matters concerning the Company. The Ordinary General Assembly shall be convened at least once a year, within six months following the end of the Company's fiscal year. Additional Ordinary General Assembly meetings may be convened whenever needed. The Extraordinary General Assembly shall have the power to amend the Bylaws. Furthermore, the Extraordinary General Assembly may pass resolutions on matters falling within the competence of the Ordinary General Assembly under the same conditions applicable to the latter. A notice of the date and agenda of the General Assembly shall be published in the Official Gazette and in a daily newspaper circulated in the city where the Company's head office is located at least 25 days prior to the time set for such meeting. The Board of Directors shall convene a meeting of the Ordinary General Assembly if requested to do so by the Auditors or by a number of Shareholders representing at least five % of the Company s capital. 160

162 The meeting of the Ordinary General Assembly shall not be quorate unless attended by Shareholders representing at least 50 % of the Company s capital. If such quorum cannot be attained at the first meeting, a second meeting shall be convened within the following 30 days. Such notice shall be published in the same manner described above. The second meeting shall be deemed valid irrespective of the number of shares represented. To have a quorum, the meeting of the Extraordinary General Assembly should be attended by Shareholders representing at least 50 % of the Company s capital. If such requirement is not met in the first meeting, a second meeting shall be convened within the following 30 days. The second meeting shall be considered as having the quorum if attended by a number of Shareholders representing at least one-quarter of the Company s capital. The General Assembly shall be presided over by the Chairman of the Board of Directors or, in his absence, the person designated by him. The Chairman shall appoint a secretary for the meeting and a canvasser. Minutes shall be prepared for the meeting showing the names of Shareholders present in person or represented by proxy, the number of the shares held by each, the number of votes attached to such shares, the resolutions adopted at the meeting, the number of votes assenting or dissenting to such resolutions and a comprehensive summary of the discussions that took place at the meeting. Such minutes shall be regularly recorded after each meeting in a special register to be signed by the Chairman of the Assembly, the secretary and the canvasser. Duration of the Company The duration of the Company shall be 50 years commencing on the date of issuance of the Royal Decree authorising the incorporation of the Company. The Company s period of duration may always be extended for similar or shorter periods. Dissolution and Winding-up of the Company Upon the expiry of the Company s period of duration, or if it is dissolved prior to the time set for the expiry thereof, the Extraordinary General Assembly shall, based on a proposal by the Board of Directors, decide the method of liquidation, appoint one or more liquidators and specify their powers and fees. The powers of the Board of Directors shall cease upon the Company s expiry. However, the Board of Directors shall remain responsible for the management of the Company until the liquidators are specified. The Company s administrative departments shall maintain their powers to the extent that they do not interfere with the powers of the liquidators. 161

163 Summary of Bylaws Objectives of the Company The purpose of the Company is to practice various sorts of mining activities in relation to all the stages of the mining industry including the development and the improvement of the mineral industry, its products and derivatives and all the related industries. Oil and natural gas are not included in the Company s objects except to the extent related to the improvement of the mineral products and preparations. Duration of the Company The duration of the Company shall be 50 years commencing on the date of issuance of the Royal Decree authorising the incorporation of the Company. The Company s period may always be extended for similar or shorter periods. Share Capital The share capital of the Company is SR9,250,000,000 divided into 925,000,000 shares. Bonds The Company may issue negotiable and indivisible bonds and Sukuk, and offer them to the public or otherwise, within Saudi Arabia or outside Saudi Arabia, in accordance with applicable regulations and instructions. Tradability of Shares The Company's shares are tradable according to the rules and regulations of the Authority. Increase of Share Capital Once it is ascertained to be economically feasible and after obtaining the approval of the competent authorities, the General Assembly may, in an Extraordinary Meeting, adopt a resolution to increase the Company's capital once or several times by issuing new Shares provided that the original capital shall have been paid in full, with due consideration to the requirements of the Regulations for Companies. The said resolution shall specify the method of increasing the capital, and the Shareholders shall have pre-emptive rights to subscribe for the new Shares where these shares are issued for cash consideration. Each shareholder must express his intent to use his pre-emptive right within 15 days of publication of the decision to increase the share capital in a daily newspaper. The said Shares shall be allotted to the original shareholders in proportion to the original Shares owned by them, provided that the number of Shares allotted to them shall not exceed the number of new Shares they have applied for. The remaining new Shares shall be allotted to the original Shareholders who have asked for more than their proportionate share, in proportion to the original Shares they own, provided that that their total allotment does not exceed the number of new Shares they have asked for. Any remaining new Shares shall be offered for public subscription. Decrease of Share Capital The Company may, based on certain justifiable causes, reduce its capital if it proves to be in excess of the Company's needs or if the Company sustains losses. This decision must be made through a resolution adopted by the General Assembly in an Extraordinary Meeting, and requires the approval of the Minister of Commerce and Industry. Such resolution shall be 162

164 issued only after reading the auditor's report on the reasons calling for such reduction, the liabilities of the Company and the effect of the reduction on such liabilities, with due consideration to the provision of the Regulations for Companies. The resolution shall provide for the manner in which the reduction shall be made. If the reduction of the capital is due to it being in excess of the Company's needs, then the Company s creditors must be invited to express their objection thereto within 60 days from the date of publication of the reduction resolution in a daily newspaper published in the city where the Company's head office is located. Should any creditor object and present to the Company evidentiary documents of such debt within the time limit set above, then the Company shall pay such debt, if already due, or present an adequate guarantee of payment if the debt is due on a later date. Constitution of the Board of Directors The Company shall be managed by a Board of Directors composed of nine members to be appointed by the Ordinary General Assembly for a term of three years including the President of the Company and four members representing the Government, represented by Public Investment Fund, so long as the Government holds at least 50 % of the shares in the Company. As an exception to the foregoing, the Board of Directors appointed by the Royal Decree No 32/A dated 13/2/1418H will remain until the first General Assembly meeting. Qualification Shares Each member of the Board of Directors shall be a holder of a number of the Company s shares having a nominal value of not less than SR10,000. Such shares shall be deposited in a bank designated by the Minister of Commerce and Industry within 30 days from the date of the appointment of the relevant director. Vacancies Membership of the Board shall be terminated upon the expiration of the appointment period, or resignation of the Director, or death of the Director. If the post of a Board member becomes vacant, then the Board of Directors may temporarily appoint a member to such vacant office, provided that such appointment is presented for approval at the first Ordinary General Assembly following such appointment. The new member of the Board shall complete his predecessor's term of office. In the case that the number of the members of the Board of Directors falls below the quorum required for the proper convening of Board meetings, then the General Assembly shall be called for an Ordinary Meeting held as soon as possible in order to appoint the necessary number of Board members. Authority of the Board of Directors The Board of Directors shall be vested with full powers to manage the business of the Company and supervise its affairs. The Board of Directors responsibilities also include approving internal, financial, administrative and technical regulations of the Company, and policies and procedures related to the staff, forming the committees and granting them appropriate powers, approving the establishment of subsidiaries, branches, offices and agencies, entering into loans and credit facilities, and approving the Company's business plan, operating plan and annual budget. Chairman of the Board The Board of Directors shall appoint a Chairman from among its members. The Chairman shall have the powers to convene the Board to meet and preside over its meetings. 163

165 The Chairman shall be authorised to represent the Company in its relationship with others and before judicial bodies, Government departments, notaries public, courts of law, commissions for settlements of disputes, the power to sell, purchase or vacate real property. The Chairman shall also have the power to sign articles of association and amendments thereto relating to the companies which the Company founds and may delegate any Board member, or other, to carry out certain activity or activities. President of the Company The Board of Directors shall appoint a President for the Company. The President of the Company shall execute the decisions of the Board of Directors and in particular shall: a) Prepare for the meetings of the Board of Directors; b) Prepare the Company s general budget, profits and losses account and annual budgets; c) Supervise the Company s management and personnel; d) Approve expenditures in accordance with the approved annual budgets; and e) Delegate to other executives management responsibilities as appropriate. Board Meetings The Board of Directors shall meet upon invitation of the Chairman at least twice a year. The Chairman of the Board of Directors shall call for a meeting if so requested by any two Board members. Quorum and Representation A Board of Directors meeting shall be valid only if a majority of the Board members including the Chairman or his representative are present. Minutes of Meetings Decisions of the Board of Directors shall be issued with the approval of the majority of the votes present at the meeting and, in the event of a tie, the Chairman s vote shall carry. Deliberations and resolutions shall be recorded in minutes to be signed by the Chairman and the Secretary. Such minutes shall be recorded in a special register to be signed by the Board Chairman and the Secretary. Conflicts of Interest Members of the Board cannot have any personal interest, whether direct or indirect, in any proposal, transaction or contract made for the account of the Company. General Meeting of Shareholders A General Assembly duly convened shall be deemed representing all the Shareholders, and shall be held in the city where the Company's head office is located. 164

166 Except for matters reserved for the Extraordinary General Assembly, the Ordinary General Assembly shall be in charge of all matters concerning the Company. The Ordinary General Assembly shall be convened at least once a year, within six months following the end of the Company's fiscal year. Additional Ordinary General Assembly meetings may be convened whenever needed. The Extraordinary General Assembly shall have the power to amend the Company's Bylaws. Furthermore, the Extraordinary General Assembly may pass resolutions on matters falling within the competence of the Ordinary General Assembly under the same conditions applicable to the latter. General Assemblies shall be held upon the invitation of the Board. The Board must convene a meeting of the Ordinary General Assembly if requested to do so by the Auditors or by a number of Shareholders representing at least 5% of the Company's capital. The notice of the date and agenda of the General Assembly shall be published in the Official Gazette and in a daily newspaper circulated in the city where the Company's head office is located at least 25 days prior to the time set for such meeting. The meeting of the Ordinary General Assembly shall be valid only if attended by Shareholders representing at least 50 % of the Company's capital. If such quorum is not met at the first meeting, a second meeting shall be convened within the following 30 days. The second meeting shall be considered valid regardless of the number of shares represented in the meeting The meeting of the Extraordinary General Assembly shall be valid only if attended by Shareholders representing at least 50 % of the Company's capital. If such quorum is not met at the first meeting, a second meeting shall be convened within the following 30 days. The second meeting shall be considered valid only if attended by a number of Shareholders representing at least one quarter of the Company s capital. The General Assembly shall be presided over by the Chairman of the Board or, in his absence, the representative designated by him. The Chairman shall appoint a secretary for the meeting and a canvasser. Minutes shall be prepared for the meeting showing the names of Shareholders present in person or represented by proxy, the number of the Shares held by each, the number of votes attached to such Shares, the resolutions adopted at the meeting, the number of votes assenting or dissenting to such resolutions and a comprehensive summary of the discussions that took place at the meeting. Such minutes shall be regularly recorded after each meeting in a special register to be signed by the Chairman of the Assembly, the Secretary and the canvasser. Voting Rights Each Shareholder shall have the right to attend the General Assemblies, and each Shareholder may authorise another Shareholder, other than the members of the Board, to attend the General Assembly on their behalf. Votes at the meetings of Ordinary and Extraordinary General Assemblies shall be computed on the basis of one vote for each share represented at the meeting. Resolutions of the Ordinary General Assembly shall be adopted by an absolute majority of the Shares represented thereat. Resolutions of the Extraordinary General Assembly shall be adopted by a majority vote of two thirds of the Shares represented at the meeting. However, if the resolution to be adopted is related to increasing or reducing the capital, extending the Company's period, dissolving the Company prior to the expiry of the period specified under the Company's Bylaws or merging the Company with another company or establishment, then such resolution shall be valid only if adopted by a majority of three quarters of the Shares represented at the meeting. 165

167 Each Shareholder shall have the right to discuss the items listed in the General Assembly's agenda and to direct questions to the members of the Board of Directors or the auditor in this respect. The Board or the Auditor shall answer the Shareholders' questions to the extent that does not jeopardise the interest of the Company. Should a Shareholder consider the reply unsatisfactory, he can resort to the General Assembly whose resolution is to be considered as final. Appointment of Auditor The Company shall have one auditor or more to be selected from among the certified public auditors licensed to work in Saudi Arabia. The auditor shall be appointed and its remuneration fixed by the Board of Directors. The Board of Directors may reappoint the same Auditor. Access to Records The auditor shall have access at all times to the Company s books, records and any other documents, and may request information and clarification as it deems necessary. It may further check the Company s assets and liabilities. Auditor s Report The auditor shall review the annual budget and final accounts, including the balance sheet and profit and loss statement, and prepare a report about the business, activities and financial status of the Company and its opinion as to whether the Company's accounts conform to the facts and whether it has discovered any violations of the articles of association. Financial Year The Company s fiscal year shall commence as on 1 January and expire at the end of December of each year. Annual Accounts The Board of Directors shall prepare 40 days prior to the end of each fiscal year an inventory of the Company s assets and liabilities on such date, the Company s balance sheet and profit and loss account, a report on the Company s activities and its financial position for the preceding year and its proposals as to the distribution of the net profits. The Board of Directors shall put such documents at the auditor s disposal at least 55 days prior to the time set for convening the General Assembly. The Chairman of the Board of Directors shall cause the Company s balance sheet, profit and loss account, a comprehensive summary of the Board of Directors report and the full text of the auditor s report to be published in a newspaper circulated in the city where the Company s head office is located, and shall send copies of such documents to the Companies Department at the Ministry of Commerce and Industry and to the Capital Market Authority at least 25 days prior to the date set for the General Assembly. Distribution of Annual Profits The annual net profit of the Company shall be distributed after deducting general costs and other costs, as follows: a) 10 % of the net profit shall be deducted and allocate such amount to statutory reserves and the Ordinary General Meeting Assembly shall discontinue said 166

168 deductions when the statutory reserve amounts to half of the Company s share capital; b) There shall be paid to the holders of preferred shares the specified percentage pertaining to such shares; c) The Ordinary General Assembly may, if proposed by the Board proposal, set aside a percentage from the net profit to form a reserve for certain purposes, as may be determined by the Ordinary General Assembly; d) Using the remaining amount, a first dividend payment of 5% shall be allocated to the shareholders out of the paid-in capital; e) The Board compensation shall be allocated from the rest; and f) The rest shall be distributed to the shareholders as an additional share of the profits. The Company may distribute semi-annual and quarterly dividends after complying with the applicable requirements established by the competent authorities. The Capital Market Authority shall be notified of any resolution to distribute dividends or any recommendation to do so. Dividends scheduled to be distributed among shareholders shall be paid at the place and time determined by the Board of Directors. If the Company does not distribute dividends at any financial year, the dividends of the following year shall be distributed after the preference shares shareholders are paid their dividends in accordance with the Company's Bylaws. Company Losses If the Company s losses total three-quarters of its capital, then the members of the Board shall call the Extraordinary General Assembly for a meeting to consider whether the Company shall continue to exist or be dissolved prior to the expiry of the period specified in the Company s Bylaws. In all cases the Assembly s resolution shall be published in the Official Gazette. Directors Indemnity The Company shall compensate, within reasonable limits, the members of the Board of Directors and the managers of the Company for all the expenses and amounts incurred or paid by them in relation to any judicial cases or procedures filed against them for their behaviour or services as Board of Directors or managers of the Company. However this compensation shall not extend to matters in which the member of the Board of Directors or the manager of the Company shall be judged responsible for the consequences because of his negligence or misconduct while performing his duties. 167

169 Subscription Terms and Conditions All Applicants must carefully read the Subscription Terms and Conditions prior to completing the Subscription Application Form, since signing the Subscription Application Form constitutes acceptance and agreement to the Subscription Terms and Conditions. This initial public offering (the "Offering ) of 462,500,000 Shares ("Offer Shares ) with a nominal value of SR10 per Share, represents 50 % of the Company's issued capital. The price per share shall be SR20 (SR 10 representing the nominal value of the shares and SR 10 represents the premium paid). Subscriptions under the Offering will be restricted to the following tranches: Tranche (A) the General Organization for Social Insurance ( GOSI ) and the Public Pension Agency ( PPA ). At least 46,250,000 Offer Shares representing 10% the Offer Shares will be allocated to GOSI and the PPA, each subscripting to 5%. Tranche (B) Institutional Investors ("Institutional Tranche"). This Tranche comprises a number of institutional investors (collectively referred to as Institutional Investors ). The Institutional Investors shall be selected from among the institutions approached by the Sole Bookrunner after consultation with the Company in accordance with standards previously specified by the CMA. 124,875,000 Offer Shares representing 27% of the Offer Shares will be allocated to Institutional Investors. This allocation may be decreased to 23,125,000 Shares (representing 5% of the Offer Shares), in the event that the number of Offer Shares allocated to Individual Subscribers is increased as described below. Tranche (C) Individual Subscribers ("Retail Tranche"): includes Saudi individuals and Saudi women divorced or widowed having minor children from a non-saudi husband who shall have the right to subscribe in their names for her own benefit (referred to individually as Individual Subscriber and collectively as "Individual Subscribers ). 291,375,000 Shares will be allocated to Individual Subscribers representing 63% of the Offer Shares. This allocation may be increased to 393,125,000 Shares (representing 85% of the Offer Shares) The Offer Shares comprised in the Retail Tranche shall be allocated in two stages. During the first stage at least 25 Shares shall be allocated to each Individual Subscriber. In the event that there is additional demand from Individual Subscribers, during the second stage each Subscriber for 2000 shares or less shall receive full allocation of his subscription provided that the total allocated shares shall not exceed the total of the shares allocated to the Retail Tranche (291,375,000 shares). The remaining Offer Shares (if any) shall be allocated on a basis pro-rata to the number of Offer Shares applied for by the Subscriber. In the event that there is additional demand from Individual Subscribers, the number of Offer Shares allocated to Individual Subscribers may be increased by an amount of up to 101,750,000 shares resulting in a total allocation to the Retail Tranche of 393,125,000 shares representing 85% of the total Offer Shares. Subscription application forms shall be available for Subscribers during the subscription period at the branches of the Receiving Banks. Subscription can be done through the internet, phone banking service, or automated teller machines at the Receiving Banks that provide one or all of such services for the subscribers who previously subscribed for any subscription recently offered provided that: a) The subscriber has a bank account with the Receiving Bank which provides such services; and 168

170 b) No changes have taken place to the subscriber s information or data since his/her last subscription to a recently offered subscription. Subscription The signature of the Subscriber on the Subscription Application and its submission to the Receiving Banks shall represent a legally binding agreement between the Company and the Subscriber. The Subscribers who have submitted their subscription applications may obtain the Prospectus, the mini-prospectus and the Subscription Application Forms from the following Receiving Banks: Samba Financial Group Principle Office, P.O. Box 833, Riyadh 11421, Kingdom of Saudi Arabia Telephone: ; Fax: Riyad Bank Principle Office, P.O. Box 22622, Riyadh 11416, Kingdom of Saudi Arabia Telephone: ; Fax: Arab National Bank Principle Office, P.O. Box 9802, Riyadh 11423, Kingdom of Saudi Arabia Telephone: ; Fax: Banque Saudi Fransi Principle Office, P.O. Box 56006, Riyadh 11554, Kingdom of Saudi Arabia Telephone : ; Fax: The Saudi British Bank (SABB) Principle Office, P.O. Box 9084, Riyadh 11413, Kingdom of Saudi Arabia Telephone: ; Fax: The Saudi Investment Bank Principle Office, P.O. Box 3533, Riyadh 11481, Kingdom of Saudi Arabia Telephone: ; Fax: The National Commercial Bank Principle Office, P.O. Box 3555, Jeddah 21481, Kingdom of Saudi Arabia Telephone: ; Fax: Bank Al Bilad Principle Office, P.O. Box 140, Riyadh 11411, Kingdom of Saudi Arabia Telephone: ; Fax:

171 Bank Al Jazira Principle Office, P.O. Box 6277, Jeddah 21442, Kingdom of Saudi Arabia Telephone: ; Fax: Saudi Hollandi Bank Principle Office, P.O. Box 1467, Riyadh 11431, Kingdom of Saudi Arabia Telephone: ; Fax: Al Rajhi Bank Principle Office, P.O. Box 28, Riyadh 11411, Kingdom of Saudi Arabia Telephone: ; Fax: The Subscription period shall commence on 02/07/1429H (corresponding to 05/07/2008G, and shall last for ten (10) days including the last closing day on 11/07/1429H (corresponding to 14/07/2008G). During this period the Subscription Applications of the Subscribers for their allocated shares shall be received at the aforementioned Receiving Banks branches throughout the Kingdom. The Company has the right to consider the Application of the Applicant, who does not abide by all the instructions and requirements stated in the Subscription Application Forms or if any of the following conditions is not fulfilled, as partially or completely void. Hence, the applicant does not have the right to demand any compensation for any damage that has resulted from this cancellation. The conditions are listed below: a) The Form must be filled in completely and accurately along with an acknowledgement made by each subscriber declaring that he/she agrees to subscribe for the Offer Shares and purchase the number of Shares in the Subscription Application Form submitted by him/her. b) The total value of the Shares must be paid for; the subscriber submits to subscribe for the Shares in full. This value shall represent the number of Shares, he or she submitted to purchase multiplied by the price of SR20 per Share. This sum shall be paid to any of the Receiving Banks' branches through the subscriber s own account, and if the subscriber does not have an account at the Receiving Bank, he or she must open an account to be able to register his or her subscription, in accordance with the instructions issued by the Saudi Arabian Monetary Agency. c) The Application must be stamped by the Receiving Bank. d) The minimum subscription is 25 Shares. Any increase in the number of shares must be in multiples of 25. The maximum subscription amount for Subscribers is 5,000,000 Shares. e) The original and a copy of the Identification Card or the family identification card must be attached to the Subscription Application Form. The official clerk in the Bank will return these documents to the Subscriber after comparing the copies with the original. In the event that the Application is submitted by the Subscriber on behalf of the children and parents only, the following must be adhered to: a) The proxy must write his or her name and must sign the Subscription Application Form. 170

172 b) The proxy must attach the original and a copy of an effective power of attorney or the constitutive document. The official clerk in the bank will return the original documents to the Subscriber after comparing and verifying the copies. c) The power of attorney must be issued by the (Public Notary) for those who are residents in Saudi Arabia, or through the Saudi Embassies and Consulates located in the place of residence of those who live outside the Kingdom of Saudi Arabia. One Subscription Application Form should be completed for each head of family applying for himself and members appearing on his family identification card if dependent Applicants apply for the same number of Offer Shares as the primary Applicant. In this case: a) All Offer Shares allocated to the primary Applicant and dependent Applicants will be registered in the primary Applicant s name; b) The primary Applicant will receive any refund in respect of amounts not allocated and paid for by himself and dependent Applicants; and c) The primary Applicant will receive all dividends distributed in respect of the Offer Shares allocated to himself and dependent Applicants. Separate Subscription Application Forms must be used if: a) The Shares that will be allocated are to be registered in a name other than the name of the primary Applicant; or b) Dependent Applicants wish to apply for a different quantity of Offer Shares than the primary Applicant. A wife must complete a separate Subscription Application Form as a primary subscriber if she wishes to subscribe in her name and to add allocated Shares to her account. If the husband makes a subscription on her behalf, her Subscription Application shall be recognised, the allocated shares shall be added to her account, and the Subscription Application made by her husband shall be cancelled. Each Applicant shall be considered the owner of the number of Offer Shares that were approved pursuant to his Application upon: a) Delivery by the Applicant of the Subscription Application Form to any of the Receiving Banks; b) Payment in full by the Applicant to the Receiving Bank of the total value of Offer Shares subscribed for; and c) Delivery to the Applicant by the Receiving Bank of the allotment notice specifying the number of Offer Shares allotted to him. Allocation and Refunds Policy The Offer Shares in the Retail Tranche shall be allocated as follows: - the minimum allocation amount is 25 Shares to each Subscriber; - the remaining Shares shall be allocated to each Subscriber within the limits of 2,000 Shares or less; 171

173 - the remaining Offer Shares (if any) shall be allocated on a pro-rata basis based on the number of shares applied for by each Subscriber to the cumulative number of requested shares for subscription. In the event that demand is increased by Individual Subscribers, the number of Offer Shares allocated to the Individual Subscribers shall be increased by an amount of 101,750,000 shares so that the total allocated to the Retail Tranche would increase to 393,125,000 representing 85% of the total Offer Shares. Excess of subscription monies, if any, will be refunded to all Applicants (Subscribers and Institutional Investors) without any charge or withholding by the relevant bank. Notification of the final allotment and refund of subscription monies, if any, will be made no later than on Sunday 17/07/1429H (corresponding to 20/07/2008G). The Receiving Banks shall send notification letters to their Applicants informing them of the final allocated number of Offer Shares together with the amounts, if any, to be refunded without any fee or deduction. Applicants should contact the branch of the Receiving Banks where they submitted their Subscription Application Form for any further information. Acknowledgements By completing and delivering the Subscription Application Form, the Applicant: Accepts to subscribe in the Company for the number of Shares specified in the Subscription Application Form; Warrants that he has carefully read the Prospectus and understood all its contents; Accepts the Bylaws of the Company and all the terms mentioned in the Prospectus, and accordingly, applied to subscribe for the mentioned Shares; Reserves his/her/its right to sue the Company for damages caused by material, incorrect or incomplete information contained in the Prospectus, or by ignoring substantial information that should have been part of the Prospectus which could affect the Applicant s decision to purchase the Shares; Declares that neither he nor any of his family members included in the Subscription Application Form has previously subscribed for the Shares, and the Company has the right to reject all applications; Accepts the number of Shares allocated to him and all other subscription instructions and terms mentioned in the Prospectus, and the Subscription Application Form; and Warrants not to cancel or amend the Subscription Application Form after submitting it to the Receiving Banks. Miscellaneous The Subscription Application Form and all related terms, conditions and covenants hereof shall be binding upon and inure to the benefit of the parties to the subscription and their respective successors, permitted assigns, executors, administrators and heirs; provided that, except as specifically contemplated herein, neither the Subscription Application Form nor any 172

174 of the rights, interests or obligations arising pursuant thereto shall be assigned or delegated by any of the parties to the subscription without the prior written consent of the other party. The Prospectus has been released in both Arabic and English Languages. In the event of a discrepancy between the English and Arabic text, the Arabic text of the Prospectus will prevail. The Saudi Arabian Stock Exchange (Tadawul) Tadawul was founded in 2001 as the successor to the Electronic Securities Information System. In 1990, full electronic trading in Saudi Arabia equities was introduced. The market capitalisation was SR 843billion at the end of 07/06/1429H (corresponding to 11/06/2008G). As of that date, 119 companies were listed on the Exchange. Trading on the Exchange occurs through a fully integrated trading system covering the entire process from trade order to settlement. Trading occurs each business day between 11:00 am to 3:30 pm during which time orders can be entered. Other than during this time, orders can be entered, amended or deleted from 10:00 am to 11:00 am and from 3:30pm to 4:30pm. From 10:00 am new entries and inquiries can be made. For the opening phase (starting at 11:00 am), the system starts opening procedures, it establishes the opening prices and determines orders to be executed according to the matching rules. Transactions take place through the automatic matching of orders. Each valid order is accepted and generated according to the price level. In general, market orders (orders placed at best price) are executed first, followed by limit orders (orders placed at a price limit), provided that if several orders are generated at the same price, they are executed according to the time of entry. The Exchange distributes a comprehensive range of information through various channels, including in particular the Exchange's website and the Exchange's Information Link. The Exchange's Information Link supplies trading data in real time to information providers such as Reuters. Exchange transactions are settled on a T+0 basis, meaning that ownership transfer takes place immediately after the trade is executed. Issuers are required to report all material announcements via the Exchange for onward dissemination to the public. Surveillance and monitoring is the responsibility of the Exchange as the operator of the market. The aim of supervision is to ensure fair trading and an orderly market. Trading on the Exchange It is expected that dealing in the Shares will commence on the Exchange upon finalisation of the allocation process. The Exchange will announce the start date of trading once this is determined. Dates and times included in this Prospectus are indicative and may be changed or extended subject to the approval of the Authority. Furthermore, Shares can only be traded after allocated Shares have been credited to Applicants accounts at the Exchange, the Company has been registered in the Official List and its Shares listed on the Saudi Stock Exchange. Pre-trading is strictly prohibited and Applicants entering into any pre-trading activities will be acting at their own risk. The Company shall have no legal responsibility in such an event. 173

175 Legal Information Establishment of the Company Saudi Arabian Mining Company (Ma'aden) (hereinafter referred to as the Company ) was formed as a joint stock company pursuant to Royal Decree No. M/17 dated 14/11/1417H (corresponding to 23/3/1997G) and Council of Ministers Resolution No. 179 dated 8/11/1417H (corresponding to 17/03/1997G), with Commercial Registration Number dated 10/11/1421H (corresponding to 4/2/2001G) and with a share capital of SR4,000,000,000, comprising 400,000,000 shares with a nominal value of SR10 each (the "Shares"). Pursuant to Council of Ministers Resolution No. 49 dated 25/02/1429H (corresponding to 04/03/2007G) the capital of the Company will be increased to SR 9,250,000,000 comprising 925,000,000 Shares with a nominal value of SR10 each. PhosCo was established as a Saudi limited liability company with commercial registration certificate no issued in Jubail and dated 22/12/1428H (corresponding to 01/01/2008G). The share capital of PhosCo is SR5,961,500,000 divided into 596,150 shares each with a nominal value of SR10,000 of which SR637,500,000 (divided into 63,750 each with a nominal value) has been paid up. The Saudi Mining Company for Precious Metals (which has been renamed Ma aden Gold and Essential Mineral Company (SCPM) was established as a Saudi limited liability company with commercial registration certificate no issued in Jeddah and dated Jeddah on 8/1/1410H (corresponding to 11/8/1989G). The share capital of SCPM is set at SR103,000,000 divided into 103,000,000 each with a nominal value of SR1. SCPM s capital was increased to SR 300,000,000 divided into 30,000,000 shares, each with a nominal value of SR10. The Articles of Association of SCPM were notarized by the Public Notary on 20/12/1428H (29/01/2008G). The Company confirms that its share capital and the share capital of its affiliated companies are not subject to any options. Capital Increase and Share Price Determination Council of Minister Decision No. 72 Dated 03/04/1427H On 03/04/1427H the Council of Minister Decision No. 72 was issued providing that the setting out the price of the Company s shares for public subscription shall be carried out in agreement with the Minister of Petroleum and Precious Minerals and the Minister of Finance(also the Chairman of the Board of the Public Investment Fund) taking into account the Company s financial position at the time of the Offering. Minutes Dated 16/11/1428H Pursuant to the Council of Minister Decision No. 72 dated 03/04/1427H, the Minister of Petroleum, the Minister of Financing and the Chairman of the Board of the Public Investment Fund have agreed that the price for each of the Company s shares offered for public subscription shall be SR20 which includes SR10 reflecting the nominal value of the shares and SR10 reflecting the subscription premium. 174

176 Council of Minister Decision No. 49 Dated 25/02/1429H On 25/02/1429H the Council of Minister Decision No. 49 was issued requiring the following: increasing the capital of the Company to SR 9,250,000,000; Amending Article 8 of the Company s Bylaws to read the Capital of the Company shall be SR9,250,000,000 divided into 925,000,000 shares, each with a nominal value of SR10. The Government, represented by the Public Investment Fund, has subscribed to 462,500,000 shares, with the remaining shares of 462,000,000 being offered for public subscription. Mining and Exploration Licences and Other Permits and Authorisations Phosphate Project Al Jalamid Site The mining licence for the Al Jalamid site covers an area of 49.55km 2. This area encompasses the Al Jalamid Deposit and the four other prospective deposit areas identified in the immediate area around the Al Jalamid Deposit. The Al Jalamid Deposit is located within in the Sirhan Turayf region of northern Saudi Arabia, and is the subject of a mining licence M/43 issued on 01/07/1427H (corresponding to 27/07/2006G) by the Ministry of Petroleum & Mineral Resources ("MPMR"). The term of licence is 30 Hijri years from the date of issue and the annual surface rent for the licence is SR 500,000. Ma'aden has also been granted a separate mining licence which covers an area of 37.82km 2 and encompasses the Al Khabra deposit site and three other prospective deposit targets identified in the Umm Wu al area. The Al Khabra mining licence was granted by way of licence M/42 issued on 01/07/1427 (corresponding to 27/07/2006G) and is also for a period of 30 Hijri years. The annual surface rent for the licence is also SR 380,000. The Al Jalamid mining licence is located within a greater area of approximately 9,883.25km 2 that was the subject of an exploration licence (the Turayf licence) granted to Ma'aden. This licence was initially issued as licence G/25 on 4/4/1420H (corresponding to 18/07/1999G) and was renewed as licence G/77 on 13/9/1425H (corresponding to 27/10/2004G) for a term of 4 Hijri years ending on 13/9/1429H (corresponding to 14/9/2009G). In view of the introduction of the limitation of the size of licences to 100km 2 and imposition of minimum expenditure requirements to replace agreed expenditure programmes such as that which applies to this exploration licence, Ma aden has now relinquished the Turayf licence and apply for several smaller licences of 100km 2 covering a total area of approximately 2000 km 2 which represents those portions of the former licence area which it considers hold the best prospects for successful exploration. The application is under consideration by the MPMR and the Company is not aware of any reason why it should not be granted. Key infrastructure at the Al Jalamid site will include a power plant. Initial authorisation for planning the construction of this plant was granted to Ma'aden pursuant to Decision 16/A dated 29/03/1428H (corresponding to 17/04/2007G) issued by the Electricity & Co-Generation Regulatory Authority (Licensing & Legal Affairs Department). A further licence permitting the construction and operation of the power station has also been issued for the Al Jalamid site pursuant to licence issued by the Electricity and Co-Generation Regulatory Authority (Licensing and Legal Affairs Department) on 19/09/1428H (corresponding to 01/10/2007G). Several water wells will need to be drilled for the purpose of drawing water at the Al Jalamid site for the operation of the beneficiation plant. On 12/05/1428H (corresponding to 175

177 29/05/2007G) Ma'aden was granted a licence by the Acting Deputy Minister for Water Affairs of the Ministry of Water and Electricity to permit the drilling and use of seven producer wells and four observation wells. Ras Az Zawr Site The Ras Az Zawr site comprises a plot of land covering an area of 78km 2 north of Jubail on the coast of the Arabian gulf. Approximately 3km 2 of the site is proposed to be used for the construction of the fertilizer facility and related infrastructure for the Phosphate Project and approximately 21.6km 2 is proposed to be used for the construction of the alumina refinery and aluminum smelter and related infrastructure for the Aluminium Project. The remainder of the land has been designated for expansions of operations and accommodating third party downstream industry premises. The land plot for the Ras Az Zawr site is owned by the Government and was subject to a "right of use" granted in favour of Saudi ARAMCO which was subsequently released so as to make the land available for Ma'aden's Phosphate and Aluminium Projects. It is intended that ownership of the land will remain with the Government as represented by the Property Department of the State. Steps are currently under way to register the land in the name of the State for use by Ma aden At that stage the allocation of the land to Ma'aden will be formalised and the terms and conditions of occupation of the by Ma aden and following the Offering will be agreed with the relevant Government Agencies (including the period of the allocation, and whether a rent or some other fee will be payable by the Company in connection with its occupation of such land or Ma aden s right to sublease or licence portions of the land to PhosCo and AlumCo). Ma'aden has also obtained an industrial licence for the production of 2.9 Mtpy of DAP at its proposed fertiliser production facilities at Ras Az Zawr. The licence was granted by the Decision no. 1814/SAD dated 27/10/1426H (corresponding to 29/11/2005G) issued by the Ministry of Commerce & Industry. The licence may be cancelled by the Ministry if Ma'aden violates any of the stipulated conditions. On 29/03/1428H (corresponding to 17/04/2007G) Ma'aden obtained an initial authorisation for planning the construction of an electricity and co-generation station at the Ras Az Zawr site for the Phosphate Project issued by the Electricity & Co-Generation Regulatory Authority (Licensing & Legal Affairs Department). A further licence permitting the construction and operation of a power station has also been issued for the Ras Az Zawr site pursuant to licence issued by the Electricity and Co-Generation Regulatory Authority (Licensing and Legal Affairs Department) on 19/09/1428H (corresponding to 01/10/2007G). On 12/04/1428H (corresponding to 30/04/2007G) Ma'aden was granted a certificate of environmental approval with respect to the proposed operations at its fertiliser production facilities at Ras Az Zawr site by the PME. Should Ma'aden propose to change the nature, volume or production at the facilities, the certificate shall be deemed revoked unless Ma'aden obtains a supplementary approval based on the new capacities notified to the PME. Any such supplementary approval granted by the PME may be subject to further conditions. Aluminium Project Az Zabirah Site The south zone of the Az Zabirah Deposit in the north central region Saudi Arabia, is the subject of three mining licences issued by the MPMR (licences M/6, M/7, and M/8) issued on 25/1/1428H (corresponding to 13/2/2007G). The terms of each licence is 30 Hijri years from the date of issue and the licences cover a total area of km. The annual surface rent for each licence is SR1,480,

178 Ma'aden has also applied for two contiguous exploration licences which will cover the central zone of the Az Zabirah Deposit with a total area of 164km 2 ; the applications were submitted on 15/4/1427H (corresponding to 13/05/2006G). The term of these licences, if granted, will be 5 Hijri years each. Ma aden is currently not aware of any reason why these licences would not be granted. Ras Az Zawr Site In addition to those to be issued or granted for the purpose of the Phosphate Project, several other licences, permits and authorisations are required for the facilities and infrastructure to be constructed at Ras Az Zawr for the Aluminium Project including an industrial licence which was granted to Ma aden on 26/02/1427H (corresponding to 27/03/2006G) by the Ministry of Commerce & Industry. The permitted production capacities specified on the licence are 0.20 Mtpy of surplus alumina available for sale (that portion not to be used by the smelter for the production of aluminium) and 0.63 Mtpy of aluminium. Currently alternative production capacities of up to 1.6 Mtpy for alumina and up to 0.72 Mtpy of aluminium are being considered. The terms of the licence require Ma aden to inform the Ministry of any changes to the production capacities of the Aluminium Project as the project design is further developed. Accordingly, Ma aden will need to notify the Ministry of an amendment to the terms of its licence. The industrial licence stipulates that production at the refinery or smelter at Ras Az Zawr may not commence until such time as a certificate of environmental approval has been obtained from the PME. Ma aden has made application to the PME for this certificate and approval is pending. Ma'aden has obtained a separate co-generation licence for the development of a power, desalination and steam plant pursuant to the licence dated 21/5/1427 (corresponding to 18/06/2006G) issued by the Electricity & Co-Generation Regulatory Authority (Licensing & Legal Affairs Department). This licence is required to be updated for the construction and operation of the proposed plant. Ma'aden will also require a generation licence in connection with the operation of the power, desalination and steam plant. Ma'aden has made application for these licences and anticipates that these will be granted on completion of the SEC agreements. Gold Operations Mining licences Ma'aden currently holds the following mining licences for each of its operating mines at Al Amar, Mahd Ad Dahab, Sukhaybarat, Bulghah, and Al Hajar. Mahd Ad Dahab The Mahd Ad Dahab licence issued by Royal Decree M/9 covers an area of 10.3km 2 and was issued on 04/04/1409H (corresponding to 14/11/1988G) for a period of 30 Hijri years. The licence is for precious and base metals and the annual surface rent is SR 110,000. Sukhaybarat The Sukhaybarat licence issued by Royal Decree M/10 covers an area of 50km 2 and was issued on 04/04/1409H (corresponding to 14/11/1988G) for a period of 30 Hijri years. The Sukhaybarat open-pit gold mine is located 250km north of Mahd Ad Dahab. The licence is for gold and the annual surface rent is SR 60,

179 Bulghah The Bulghah licence issued by Royal Decree M/41 covers an area of 39km 2 and was issued on 18/08/1422H (corresponding to 05/11/2001G) for a period of 30 Hijri years. The Bulghah gold mine operates as a satellite open cut mine to the Sukhaybarat mine. The licence is for gold and the annual surface rent is SR 390,000. Al Hajar The Al Hajar licence issued by Royal Decree M/3 covers an area of 6km 2 and was issued on 24/01/1419 (corresponding to 21/05/1998G) for a period of 30 Hijri years. The licence is for precious and base metals and the annual surface rent is SR 60,000. Al Amar The Al Amar licence issued by Royal Decree M/17 covers an area of 5km 2 and was issued on 10/05/1418H (corresponding to 13/9/1997G) for a period of 30 Hijri years. The Al-Amar gold mine is located 210km west of Riyadh, in central Saudi Arabia 900m above sea level. The licence is for precious and base metals and the annual rent is SR 50,000. Exploration Licences For administrative purposes Ma'aden's exploration licences are grouped into two regions: the Central Arabian Gold Region and the Northern Shield Region (also referred to as the Sukhaybarat - Bulghah Area). With the introduction of the new Mining Law in 2004 and its Regulations in 2005, holding large areas of exploration licences became expensive due to new minimum expenditure requirements calculated at a rate per km 2 which increased with each year of the licence term. When Ma aden's exploration licences were initially granted, the Saudi Arabian mining laws allowed for a single licence to be up to 10,000km 2 in size. Exploration expenditures were not fixed and depended upon the work programme proposed by the company holding the licence. Under the new Mining Law the maximum size of newly granted licence has been reduced to 100km 2 and an annual minimum exploration expenditure ranging from SR 750 per km 2 in the first year and second year to SR7,500 per km 2 in the ninth and tenth years has been imposed. The areas of licences granted prior to the introduction of the new Mining Law are not required to be reduced to 100m 2 although holders of these licences are required to comply with the new minimum expenditure requirements. Ma aden was granted a grace period by the DPMR until January 2007 to comply with new minimum expenditure requirements. To reduce the financial burden associated with complying with the new minimum expenditure requirements, Ma'aden proposes to reduce the extent of its licence area by relinquishing areas considered to have low potential for hosting economic deposits. Ma'aden has submitted requests for the renewal of all of its gold exploration licences and is currently preparing an application for the renewal of the exploration licence for the Al Hajar area which expires in 21/11/1428H (corresponding to 1/12/2007G). Upon grant of Ma'aden's renewal applications Ma'aden's total gold exploration licence area will be reduced from 71,044km 2 to 48,492.42km 2 representing a decrease of 22,551.58km 2 or 31.7% The majority of Ma'aden's applications for renewal are still pending approval. Applications for renewal often take up to a year to grant. By the end of 2007 Ma aden plans to relinquish up to a further 50 % of the remaining exploration area or identify and enter into joint venture agreements to finance further exploration work and earn an interest in the Ma'aden exploration properties. Central Arabian Gold Region (CAGR) Exploration Licences 178

180 Ad Duwayhi (Ad Duwayhi licence) The Ad Duwayhi site is covered by the Ad Duwayhi exploration licence, issued by Ministerial Decision G/31, and covering an area of 646km 2. This licence was initially granted to Ma aden on 13/06/1419H (corresponding to 05/10/1998G) for a period of five Hijri years and was renewed by Minister Decision G/83 on 20/09/1424H (corresponding to 15/11/2003G) for a further four Hijri years. The DPMR has since requested that Ma aden divide the current licence area of 646km 2 into seven new licences to comply with the 100km 2 area limit imposed by the new Mining Law. This has been agreed with Ma aden on the basis that the new licences will be for five Hijri years and for minimum expenditure requirement purposes the licences will start at Year 6. The new licence applications were submitted on 10/07/1428H (corresponding to 25/07/2007G) and are currently pending approval. Mansourah (Al Uruq licence) The Mansourah deposit is located some 460km northeast of Jeddah and 77km south east of the town of Zalim. This falls within the scope of the Al Uruq licence issued by Ministerial Decision G/53, which covers an area of 6,758km 2 and was issued on 19/07/1424H (corresponding to 609/2003G) for a term of 5 Hijri years. Although the licence will be in effect until 21/07/2008G, Ma aden s request to reduce the current licence area to km 2 has been approved by the DMMR. Ma aden has submitted an application to renew the licence for four years on 20/05/1429H (corresponding to 25/05/2008G). Massarah (Ash Shakhtaliyah licence) The Masarrah prospect falls within the scope of the Ash Shakhtaliyah licence issued by Ministerial Decision G/6, which covers an area of 9,953km 2 and was issued on 18/01/1423H (corresponding to 01/04/2002G) for 5 Hijri years. The licence expired on 09/01/1428H (corresponding to 28/01/2007G) and has been renewed for a term of 4 Hijri years until 237/01/1432 (corresponding to 23/12/2010). Ma'aden s request to reduce the licence area to 6,333 km 2 has been approved by Ministerial decision No. G/20. The licence is contiguous with the Al Uruq licence. Ar Rjum (Ash Shakhtaliyah licence) The Ar Rjum project falls within the area of the Ash Shakhtaliyah licence, described above. As Suk (Ash Shakhtaliyah licence) The As Suk project falls within the area of the Ash Shakhtaliyah licence, described above. Zalim The Zalim licence issued by Ministerial Decisions G/37 covers an area of 288.5km 2 and was issued on 09/06/1420H (corresponding to 20/09/1999G) for a period of 9 Hijri years. The licence was renewed on 18/09/1425H (corresponding to 01/11/2004G) by Minister Decision G/87 for a term of 4 Hijri years ending on 18/09/1429. The DMMR has requested to split the current licence area of in to three licences to comply with the 100km 2 area restriction imposed by the new Mining Law. This has been agreed with Ma aden on the basis that the new licences will be for 5 Hijri years and for minimum expenditure requirement purposes the licence will start at year 6. The licence renewal application has been submitted on 28/05/1429H (corresponding to 02/06/2008G). Northern Shield Region (Sukhaybarat - Bulghah Area) Exploration Licences Humaymah (Miskah Licence) 179

181 The Miskah licence issued by Ministerial Decision G/60 covers an area of 9,774km 2 and was issued on 15/08/1423H (corresponding to 22/10/2002G) for a period of 5 Hijri years. A renewal application submitted to reduce the licence area to 7,063km 2 and to renew the licence for four years term until 14/08/1432 (corresponding to 16/07/2011G) has been granted on 26/02/1429H (corresponding to 05/03/2008G) by Ministerial Decision No. G/17. The Humaymah gold prospect located 35km southeast of the Bulghah mine is the second grassroots gold prospect discovered as a result of systematic exploration activities by Ma aden exploration teams. An exploration licence reduction application has been submitted to the DMMR to reduce the licence area to 7,013km 2. Shabah The Shabah licence issued by Ministerial Decision G/68 covers an area of 9,621km 2 and was issued on 06/09/1422H (corresponding to 22/11/2001G) for a period of 5 Hijri years. A renewal application was submitted on 21/04/1428H (corresponding to 09/05/2007G) has been granted and the licence has been renewed for four years until 05//09/1431 (corresponding to 16/08/2011) by Ministerial Decision No. G/15. Ma aden s request to reduce the total licence area to 6,944km 2 has also been granted. Al Jardawiyah The Al Jardawiyah licence issued by Ministerial Decision G/55, which originally covered an area of 9,961km 2 was issued 07/08/1422H (corresponding to 25/10/2001G) for a period of 5 Hijri years. A renewal application was submitted on 20/04/1428H (corresponding to 08/05/2007G) has been approved and the licence has been renewed for four years until 06/08/1431H (corresponding to 18/07/20010) by Ministerial Decision No. G/18. Further reduction of the licence area is imminent. The Sukhaybarat mine area is located within the scope of this licence. An Najadi / Hablah South / Hablah North, Nugrah Licence and Mawan The licence covering An Najadi, Hablah South, Hablah North, Nugrah Licence and Mawan was issued by Ministerial Decisions G/51 on 07/08/1422H (corresponding to 25/10/2001G) for a period of 5 Hijri years and was subsequently renewed by Minister Decision G/102 on 26/12/1430H (corresponding to 14/12/2009G)). The licence had originally covered an area of 3,919km 2, but this has been reduced to 1,846.1km 2. Further reduction of this licence is expected to be minimal. Tawan The licence covering Tawan was issued by Ministerial Decision G/89 on 26/10/1423H (corresponding to 31/12/2002G) for a period of 4 Hijri years. A renewal application was submitted on 03/06/1428H (corresponding to 19/06/2007G) and is currently pending. Ma aden s request to reduce the total licence area from 1508km 2 to km 2 is pending approval. Minimal further reduction of this licence is expected. As Siham The As Siham licence originally covered an area of 9,970km 2, but now only covers an area of 5,504.4km 2, was issued on (05/06/1423H (corresponding to 14/08/2002G) for a period of 5 Hijri years. A further major reduction of this licence is imminent. An application for renewal of this licence was made on 25/05/1428H (corresponding to 11/06/2007G) was granted for four years by Ministerial decision No. G/19. The licence is now valid until 04/06/1432H (corresponding to 08/05/2011G). Other Exploration Licences Wurshah 180

182 The Wurshah licence issued by Ministerial Decision G/66 originally covered an area of 7,146km 2 and has since been reduced to 5,764km 2. The licence was issued on 03/09/1422H (corresponding to 19/11/2001G) for a period of 5 Hijri years. A renewal application was submitted on 21/04/1426H (corresponding to 30/05/2007G) and has been granted on 26/02/1429H (corresponding to 05/03/2008G) by Ministerial Decision No. G/16 and the licence is valid until 02/09/1431H (corresponding to 13/08/2010G). The land that falls within this licence is considered by Ma aden to have a favourable geological setting and regional reconnaissance sampling is on-going. Ma'aden is currently considering further reducing the size of this licence area or entering into a joint venture arrangement with respect to the licence area. Licences for Other Projects In addition to the licences referred to above, Ma'aden holds a number of mining, quarrying and exploration licences for the exploitation of various industrial minerals. In addition, other exploration licences are pending. Details of these licences and applications are set out below. Zarghat Ma aden holds a mining licence for magnesite, issued by Royal Decree M/8 on 27/02/1421H (corresponding to 01/06/2000G) and running for a period of 30 Hijri years. This licence covers 2.69km 2. Annual rent is SR 30,000. Az Zabirah Ma aden holds a raw materials quarry licence for kaolin and low grade bauxite, issued by Royal Decree M/5 on 25/01/1428 (corresponding to 13/02/2007G) and running for a period of 30 Hijri years. This licence covers 27.9km 2. Annual rent is SR 280,000. Ma aden is required to establish certain water wells for water-related purposes at the Bauxite mine. In 22/05/1426H (corresponding to 29/06/2005G), Ma aden secured licence no from the Conservation Department at the Ministry of Water and Electricity for the drilling of two production wells and four monitoring wells. The licence expires in 21/08/1429H (corresponding to 22/08/2008G) Zarghat, Jabal AL Rokham and Jabal Abt Ma aden holds an exploration licence for the exploration of magnesite, initially issued on 27/12/1422H (corresponding to 12/03/2002G) for a term of 5 Hijri years and covering 3,163km 2. This licence was renewed by Ministerial Decision G/82 dated 16/10/1425H (corresponding to 29/11/2004G) for a period of 4 additional Hijri years. Jabal Sawda Ma aden has received an exploration licence for the exploration of nepheline syenite and other related minerals and related metals in Jabal Sawda pursuant to Ministerial Decision No. G/61 dated 04/07/1428H (corresponding to 18/07/2007G). Jabal Kirsh Ma aden has submitted an application for an exploration licence in respect of kaynite and associated metals, on 03/06/1428H (corresponding to 19/06/2007G) covering an area of 50.04km 2. If granted this licence would run for a period of 5 Hijri years. General 181

183 Ma'aden has been granted a reconnaissance licence for all locations in Saudi Arabia except certain areas excluded under Mining Investment Law. The licence was granted by Ministerial Decision W/1030 for a period of two years commencing on 06/04/1427H (corresponding with 05/05/2006G) and permits Ma'aden to conduct preliminary geological surveys prior to conducting detailed exploration surveys. The licence covers all industrial minerals, base metals and precious metals in Saudi Arabia. The duration may be extended for a period of 2 years. Zakat On 15/03/1429H (corresponding to 24/03/2008G), an agreement between the Company s Board of the Directors, headed by the Minister of Petroleum and Precious Minerals and the Minister of Finance, was reached, indicating that Ma aden does not have any obligations to the DZIT as of the date of the Offering. The Company shall, however, be subject to Zakat payment after the Offering. 182

184 Summary of Material Agreements Phosphate Project Project Management Consultant Agreement On 22 February 2006, Ma'aden entered into a project management consultant agreement ("PMCA") with Worley Arabia Limited ("WorleyParsons") for provision of certain project management services relating to all contracted works and services to be carried out in connection with the development of the Phosphate Project and the Common Infrastructure. Services to be provided by WorleyParsons include project management, design and engineering, project scheduling and execution, project cost controls, procurement, contract and construction management, commissioning and operational readiness support, training support and operations, maintenance and technical support. In addition WorleyParsons undertakes to co-ordinate its activities with the development of the Aluminium Project (having regard to commonalities or interdependencies between the two projects), construction of the Railway, SABIC and Saudi ARAMCO and other suppliers of raw materials and the government of Saudi Arabia. WorleyParsons is to be paid on the basis of hourly rates, overheads and profit, and reimbursable expenses. The estimated total fee payable by Ma'aden to WorleyParsons for performance of the Phosphate Project services under the contract is US$95.1 million (SR million) (subject to adjustment for certain bonuses and penalties) plus reimbursement of costs. However, as is customary in an agreement of this nature this is not a fixed price. WorleyParsons covenants to perform the services in a timely, efficient and economical manner so as to enable the achievement of project milestones within the prescribed times. WorleyParsons warrants that it possesses the requisite level of expertise and experience to provide the services for a project of the size, nature and complexity of the Phosphate Project. The agreement contains certain other warranties, covenants and indemnities provided by WorleyParsons which are usually provided by a contractor in an agreement of this nature. WorleyParsons' total liability under the agreement is capped as is customary for an agreement of this nature other than in respect of liability arising out of (a) fraud or wilful or reckless misconduct; (b) death or personal injury caused by negligence; (c) third party claims caused by negligence; (d) third party claims not caused by negligence; (e) insurable losses up to the level of the minimum insurance cover WorleyParsons is required to obtain. The contract also contains certain other provisions which are usual for an agreement of this nature including provisions concerning a monthly 10 % retention amount deducted from fees payable by Ma'aden to WorleyParsons to be released annually subject to confirmation of satisfactory performance, mutual indemnities for certain losses arising out of negligent acts or omissions, failure to pay tax or breaches of duty imposed by law, insurance to be maintained by WorleyParsons and the vesting in Ma'aden of intellectual property rights in design documents produced by WorleyParsons. Ma'aden may terminate the agreement at any time without cause giving notice to WorleyParsons and paying the appropriate portion of fees for services rendered up until the time of termination. 183

185 Contract for Mining Phosphate Ore and Waste On 1 October 2007, Ma'aden entered into a mining services contract ("Mining Contract") with Saudi Comedat Company Ltd ("Saudi Comedat"), for the provision of mining services and related activities at the Al Jalamid mine. Saudi Comedat is required to extract phosphate ore from the Al Jalamid mine and deliver it to Ma'aden's crusher, or into stockpiles designated by Ma'aden. Pre-stripping operations (to uncover the ore) are required to commence on 1 June 2009, with ore production required to commence on 1 December The term of the Mining Contract is scheduled to run until 30 November 2017, unless target production levels are achieved earlier and Ma'aden chooses to terminate at that stage. Saudi Comedat is required to mine 92.4 million tonnes of material during the contract term, of which 40.1 million tonnes is to be phosphate ore. Ma'aden can require adjustments to these production quantities within specified ranges. The contract price for achieving the target production levels is SR945 million (equivalent to US$252 million), subject to adjustment for (i) periodic changes in certain variable costs of production (plant, consumables, labour); (ii) any variation to the scope of services instructed by Ma'aden; and (iii) the levels of production actually achieved. Saudi Comedat is also entitled to reimbursement of specific costs, including the cost of maintaining insurance in accordance with the Mining Contract. Saudi Comedat warrants that it will perform the services in a competent, proper and workmanlike manner and in accordance with good industry practice. Saudi Comedat also warrants that it has the necessary expertise, experience and capability to perform the services and to operate the mine in accordance with the Mining Contract. Saudi Comedat's total liability under the agreement is capped as is customary for a contract of this nature, except in respect of liability arising out of (a) fraud, illegality or wilful misconduct; (b) death, personal injury or property damage caused by negligence or breach of the Mining Contract; or (c) losses that should have been insured against by Ma'aden. Ma'aden may terminate the Mining Contract at any time without cause, on three months' notice to Saudi Comedat. Either Ma'aden or Saudi Comedat may also terminate the Mining Contract in certain other circumstances, including insolvency of the other party, material breach of the Mining Contract by the other party or prolonged force majeure. In case of termination by Ma'aden without cause or termination by Saudi Comedat for Ma'aden's default, Saudi Comedat may require Ma'aden to purchase the mining equipment, at market value. In case of termination on other grounds, Ma'aden can require Saudi Comedat to make the equipment available for its continued use until Ma'aden has had a reasonable time to arrange replacement equipment. LSTK Contracts LSTK EPC Contracts for Construction of the Sulphuric Acid Plant On 25 June 2007 Ma'aden (the "Employer") entered into the following contracts relating to the construction of the sulphuric acid plant at Ras Az Zawr: a) A construction contract (the "SAP Onshore Contract") with Gama Industry Arabia Ltd (the "SAP Onshore Contractor") for the construction of facilities and provision of performance guarantees. The value of the contract is SR506, 250,000 (US$ 135,000,000); b) An engineering and procurement contract (the "SAP Offshore Contract") with Outotec GmbH (the "SAP Offshore Contractor") for certain services, plant and 184

186 materials to be provided outside Saudi Arabia. The value of the contract is SR1,350,000,000 (US$ 360,000,000); and c) A co-ordination agreement with the SAP Onshore Contractor and SAP Offshore Contractor to assist the co-ordination of the activities of the SAP Onshore Contractor under the SAP Onshore Contract and the SAP Offshore Contractor under the SAP Offshore Contract; (the above contracts collectively being referred to as the "SAP LSTK Contracts" and the SAP Onshore and SAP Offshore Contractors collectively being referred to as the "SAP Contractors"). Under the SAP LSTK Contracts, the SAP Contractors will be responsible for the fieldengineering, field-procurement, construction, testing, commissioning and completion of a sulphuric acid plant at Ras Az Zawr and certain related works ("Works") on a turn-key basis including the supply of all equipment and materials necessary for the construction of the plant. The SAP Contractors will also be responsible for ensuring that the completed Works are fit for the intended purpose and for remedying any defects in the Works. In addition the SAP Contractors are responsible for providing proprietary process technology for the production of sulphuric acid. The total contract price of US$495 million (SR1, million) under the SAP LSTK Contracts is fixed, subject to adjustments for changes in SAP Contractors' costs which result from variations in the scope of the Works made by the Employer, or changes in related legislations. The SAP Contractors are required to complete all Works by 1 August The Employer will be entitled to damages for delay if the SAP Contractors fail to complete the Works on time. Such damages will be calculated at agreed daily rates, subject to a cap. The SAP Contractors' total liability under the SAP LSTK Contracts (excluding liabilities in respect of certain matters such as the provision of additional plant remedy; re-testing; IP infringement claims and specified indemnities) is capped as is customary for agreements of this nature. The SAP Contractors are required to provide to the Employer a performance security in the amount of 10 % of the contract price. The SAP Contractors may reduce the value of the performance security to five % of the contract price when the Works are taken over by the Employer. The SAP Contractors are also required to provide to the Employer a retention guarantee which is to be adjusted on an ongoing basis such that the amount is equal to 10 % of the total amounts invoiced at any time. The Employer is required to return the retention guarantee to the SAP Contractors once it has taken over the whole of the Works. The SAP LSTK Contracts contain various warranties, covenants and indemnities of the kind usually found in agreements of this nature, including covenants by the SAP Contractors to execute the Works properly in accordance with recognised good practice to carry out all tests of the plant required by law and good practice and to repair or remedy any defects in the Works. The SAP Contractors' total liability under the SAP LSTK Contracts (excluding certain liabilities in respect of certain matters such as environmental pollution, failure to meet certain minimum performance standards, IP infringement claims, specified indemnities and amounts received from insurances) is capped as is customary for agreements of this nature. The Employer shall be entitled to terminate the SAP LSTK Contracts in certain circumstances, including if the SAP Contractors fail to provide the performance security, abandons the Works, commits a material breach of the contract or applicable laws, becomes liable to pay damages for delay or failure to meet performance guarantees, or fails to complete any section of the Works within 60 days of the prescribed time for completion. The Employer may also terminate the contract, at any time without cause by giving notice in which 185

187 case the SAP Contractors will be entitled to payment for work carried out and various costs incurred. LSTK EPC Contracts for the Phosphoric Acid Plant On 25 June 2007 Ma'aden (the "Employer") entered into the following contracts relating to the construction of the phosphoric acid plant at Ras Az Zawr: a) A construction contract (the "PAP Onshore Contract") with a consortium of Litwin Saudi Arabia and Tefken Construction & Installation Co. Inc. Saudi Arabia Branch (together, the "PAP Onshore Contractor") for the construction of facilities and provision of performance guarantees. The contract value is SR 900,000,000; b) An engineering and procurement contract (the "PAP Offshore Contract") with Litwin Europe Middle East and Africa B.V. (the "PAP Offshore Contractor") for certain services, plant and materials to be provided outside Saudi Arabia. The contract value is SR1,060,627,000; and c) A co-ordination agreement with the PAP Onshore Contractor and PAP Offshore Contractor to assist the co-ordination of the activities of the PAP Onshore Contractor under the PAP Onshore Contract and the PAP Offshore Contractor under the PAP Offshore Contract; (the above contracts collectively being referred to as the "PAP LSTK Contracts" and the PAP Onshore and PAP Offshore Contractors collectively being referred to as the "PAP Contractors"). Under the PAP LSTK Contracts the PAP Contractors will be responsible for the fieldengineering, field-procurement, construction, testing, commissioning and completion of a phosphoric acid plant at Ras Az Zawr and certain related works ("Works") on a turn-key basis including the supply of all equipment and materials necessary for the construction of the plant. The PAP Contractors will also be responsible for ensuring that the completed Works are fit for the intended purpose and for remedying any defects in the Works. The total contract price under the PAP LSTK Contracts is fixed at US$522,833,922 (SR1,960,627,207.5), subject to adjustments for changes in the PAP Contractors' costs which result from variations in the scope of Works made by the Employer or changes in related legislations. The PAP Contractors are required to complete all Works by 30 April The time for completion may be extended where completion is likely to be delayed due to a variation in the scope of Works, any other cause attributable to the Employer or certain other circumstances. The Employer will be entitled to damages for delay if the PAP Contractors fail to complete the Works on time. Such damages will be calculated at agreed daily rates and are capped as is customary for agreements of this nature. The Employer shall also be entitled to damages in the event that the plant fails to achieve certain agreed performance guarantees. Other than as described above, the terms of the PAP LSTK Contracts are materially the same as those of the SAP LSTK Contracts. LSTK EPC Contracts for the Ammonia Plant On 8 July 2007 Ma'aden (the "Employer") entered into the following contracts relating to the construction of the ammonia plant at Ras Az Zawr: 186

188 a) A construction contract (the "Ammonia Onshore Contract") with Samsung Saudi Arabia Ltd (the "Ammonia Onshore Contractor") for the construction of facilities and provision of performance guarantees. The value of the contract is SR956,250,000; b) An engineering and procurement contract (the "Ammonia Offshore Contract") with Samsung Engineering Co., Ltd (the "Ammonia Offshore Contractor") for certain services, plant and materials to be provided outside Saudi Arabia. The value of the contract is SR2,608,340,000; and c) A co-ordination agreement with the Ammonia Onshore Contractor and Ammonia Offshore Contractor to assist the co-ordination of the activities of the Ammonia Onshore Contractor under the Ammonia Onshore Contract and the Ammonia Offshore Contractor under the Ammonia Offshore Contract; (the above contracts collectively being referred to as the "Ammonia LSTK Contracts" and the Ammonia Onshore and Ammonia Offshore Contractors collectively being referred to as the "Ammonia Contractors"). Under the Ammonia LSTK Contracts, the Ammonia Contractors will be responsible for the field-engineering, field-procurement, construction, testing, commissioning and completion of an ammonia plant at Ras Az Zawr and certain related works ("Works") on a turnkey basis including the supply of all equipment and materials necessary for the construction of the plant. The Ammonia Contractors will be responsible for ensuring that the completed Works are fit for the intended purpose and for remedying any defects in the Works. In addition, the Ammonia Contractors are responsible for providing proprietary process technology for production of ammonia. The total contract price of US$950,557,220 (SR3,564,589,575) under the Ammonia LSTK Contracts is fixed, subject to adjustments for changes in Ammonia Contractors' costs which result from variations in the scope of the Works made by the Employer, or changes in related legislations. The Ammonia Contractors are required to complete all Works by 27 December The Employer will be entitled to damages for delay if the Ammonia Contractors fail to complete the Works on time. Such damages will be calculated at agreed daily rates, subject to a cap. The Ammonia Contractors' total liability under the Ammonia LSTK Contracts (excluding liabilities in respect of certain matters such as environmental pollution, failure to meet certain minimum performance standards, IP infringement claims, specified indemnities and amounts received from insurances) is capped as is customary for agreements of this nature. Other than as described above, the terms of the Ammonia LSTK Contracts are materially the same as those of the SAP LSTK Contracts. LSTK EPC Contracts for the DAP Plant On 25 June 2007 Ma'aden (the "Employer") entered into the following contracts relating to the construction of the sulphuric acid plant at Ras Az Zawr: a) A construction contract (the "DAP Onshore Contract") with Dragados Gulf Construction (the "DAP Onshore Contractor") for the construction of facilities and provision of performance guarantees. The value of this contract is SR757,500,000; b) An engineering and procurement contract (the "DAP Offshore Contract") with Intecsa Ingenieria Industrial S.A. and Initec Energia S.A. Union Temporal de Empresas (collectively the "DAP Offshore Contractor") for certain services, plant and materials 187

189 to be provided outside Saudi Arabia. The value of this contact is SR1,065,046,000; and c) A co-ordination agreement with the DAP Onshore Contractor and DAP Offshore Contractor to assist the co-ordination of the activities of the DAP Onshore Contractor under the DAP Onshore Contract and the DAP Offshore Contractor under the DAP Offshore Contract; (the above contracts collectively being referred to as the "DAP LSTK Contracts" and the DAP Onshore and DAP Offshore Contractors collectively being referred to as the "DAP Contractors"). Under the DAP LSTK Contracts, the DAP Contractors will be responsible for the fieldengineering, field-procurement, construction, testing, commissioning and completion of a DAP plant at Ras Az Zawr and certain related works ("Works") on a turn-key basis including the supply of all equipment and materials necessary for the construction of the plant. The DAP Contractors will be responsible for ensuring that the completed Works are fit for the intended purpose and for remedying any defects in the Works. The total contract price of US$486,012,307 (SR1,822,546,151.25) under the DAP LSTK Contracts is fixed, subject to adjustments for changes in the DAP Contractors' costs which result from variations in the scope of the Works made by the Employer or changes in related legislations. The DAP Contractors are required to complete all Works by 6 January The Employer will be entitled to damages for delay if the DAP Contractors fail to complete on the Works on time. Such damages will be calculated at agreed daily rates, subject to a cap. The DAP Contractors' total liability under the DAP LSTK Contracts (excluding liabilities in respect of certain matters such as environmental pollution, failure to meet certain minimum performance standards, IP infringement claims, specified indemnities and amounts received from insurances) is capped as is customary for agreements of this nature. Other than as described above, the terms of the DAP LSTK Contracts are materially the same as those of the SAP LSTK Contracts. LSTK EPC Contracts for the for the Energy and Water Distillation Plant On 17 December 2007 Ma'aden (the "Employer") entered into the following contracts relating to the construction of the Energy and Water Distillation Plant at Ras Az Zawr: a) A construction contract (the "Energy and Water Onshore Contract") with Hanou Saudi Contracting (the " Energy and Water Onshore Contractor") for the construction of facilities and provision of performance guarantees. The value of this contract is SR344,795,620 (corresponding to US$ 91,945,499); b) An engineering and procurement contract (the "Energy and Water Offshore Contract") with Hanou Engineering and Construction Company (the "Energy and Water Offshore Contractor") for certain services, plant and materials to be provided outside Saudi Arabia. The value of this contact is SR705,204,379 (US$ 188,054,501); and c) A co-ordination agreement with the Energy and Water Onshore Contractor and Energy and Water Offshore Contractor to assist the co-ordination of the activities of the Energy and Water Onshore Contractor under the Energy and Water Onshore Contract and the Energy and Water Offshore Contractor under the Energy and Water Offshore Contract; 188

190 (the above contracts collectively being referred to as the "Energy and Water LSTK Contracts" and the Energy and Water Onshore and Energy and Water Offshore Contractors collectively being referred to as the "Energy and Water Contractors"). Under the Energy and Water LSTK Contracts, the Energy and Water Contractors will be responsible for the field-engineering, field-procurement, construction, testing, commissioning and completion of an Energy and Water plant at Ras Az Zawr and certain related works ("Works") on a turn-key basis including the supply of all equipment and materials necessary for the construction of the plant. The Energy and Water Contractors will be responsible for ensuring that the completed Works are fit for the intended purpose and for remedying any defects in the Works. The total contract price of US$280 million (SR1,050 million) under the Energy and Water LSTK Contracts is fixed, subject to adjustments for changes in the Energy and Water Contractors' costs which result from variations in the scope of the Works made by the Employer or changes in related legislations. The Energy and Water Contractors are required to complete all Works by 30 June The time for completion may be extended where completion is likely to be delayed due to a variation in the scope of Works, any other cause attributable to the Employer or certain other circumstances. The Employer will be entitled to damages for delay if the Energy and Water Contractors fail to complete all the Works on time. Such damages will be calculated at agreed daily rates, subject to a cap. The Energy and Water Contractors' total liability under the Energy and Water LSTK Contracts (excluding liabilities in respect of certain matters such as environmental pollution, failure to meet certain minimum performance standards, IP infringement claims, specified indemnities and amounts received from insurances) is capped as is customary for agreements of this nature. The Energy and Water Contractors are obligated to provide Ma aden with a performance guarantee in the amount of 10% of the value of the contract. They are also obligated to provide Ma aden with a holding agreement, amended continuously so that the amount held at all times equals to 10% of their cumulative in-takes (the billed amounts). Ma aden must return the performance guarantee to the Energy and Water Contractors once Ma aden receives all the works. LSTK EPC Contracts for the Beneficiation Plant On 17 December 2007 Ma'aden (the "Employer") entered into the following contracts relating to the construction of the beneficiation plant at Al Jalamid: a) A construction contract (the "Beneficiation Plant Onshore Contract") with Wengfu Arabia Ltd (the "Beneficiation Plant Onshore Contractor") for the construction of facilities and provision of performance guarantees. The contract value is US$151,506,970 (corresponding to SR568,151,137.50). b) An engineering and procurement contract (the "Beneficiation Plant Offshore Contract") with Guizhou Hongfu Industry And Commerce Development Company (the "Beneficiation Plant Offshore Contractor") for certain services, plant and materials to be provided outside Saudi Arabia. The contract value is US$198,493,030 (corresponding to SR744,348,862.50). c) A co-ordination agreement with the Beneficiation Plant Onshore Contractor and Beneficiation Plant Offshore Contractor to assist the co-ordination of the activities of the Beneficiation Plant Onshore Contractor under the Beneficiation Plant Onshore Contract and the Beneficiation Plant Offshore Contractor under the Beneficiation Plant Offshore Contract. 189

191 (the above contracts collectively being referred to as the " Beneficiation Plant LSTK Contracts" and the Beneficiation Plant Onshore and Beneficiation Plant Offshore Contractors collectively being referred to as the " Beneficiation Plant Contractors"). Under the Beneficiation Plant LSTK Contracts, the Beneficiation Plant Contractors will be responsible for the field-engineering, field-procurement, construction, testing, commissioning and completion of a beneficiation plant at Al Jalamid and certain related works ("Works") on a turn-key basis including the supply of all equipment and materials necessary for the construction of the plant. The Beneficiation Plant Contractors will also be responsible for ensuring that the completed Works are fit for the intended purpose and for remedying any defects in the Works. The total contract price under the Beneficiation Plant LSTK Contracts is fixed at US$350 million (SR1,312.5 million), subject to adjustments for changes in the Beneficiation Plant Contractors' costs which result from variations in the scope of Works made by the Employer or changes in legislation. The Beneficiation Plant Contractors are required to complete all Works by 6 May The time for completion may be extended where completion is likely to be delayed due to a variation in the scope of Works, any other cause attributable to the Employer or certain other circumstances. The Employer will be entitled to damages for delay if the Beneficiation Plant Contractors fail to complete the Works on time. Such damages will be calculated at agreed daily rates, subject to a cap. The Beneficiation Plant Contractors' total liability under the Beneficiation Plant LSTK Contracts (excluding liabilities in respect of certain matters such as environmental pollution, failure to meet certain minimum performance standards, IP infringement claims, specified indemnities and amounts received from insurances) is capped as is customary for agreements of this nature. The Beneficiation Plant Contractors are required to provide to the Employer a performance security in the amount of 10 percent of the contract price. The Beneficiation Plant Contractors are also required to provide to the Employer a retention guarantee which is to be adjusted on an ongoing basis such that the amount is equal to 10 percent of the total amounts invoiced at any time. The Employer is required to return the retention guarantee to the Beneficiation Plant Contractors once it has taken over the whole of the Works. Other than as described above, the terms of the Beneficiation Plant LSTK Contracts are materially the same as those of the SAP LSTK Contracts. Technology Agreements Licence Agreement for Process Technology for the production of Phosphoric Acid On 4 July 2005, Ma'aden entered into a licence agreement with Yara for the provision of technology rights and designs for process technology for the production of Phosphoric Acid. The total fee payable to Ma'aden for the licence, basic design package and associated services to be provided under the agreement is 5,815,000 (SR30,808,808). Yara's liability under the agreement is capped as is customary for an agreement of this nature. Other than as specified above, the agreement is on the same terms as the Licence Agreement for Process Technology for the production of DAP. 190

192 Licence Agreement for Process Technology for the production of DAP On 14 November 2005, Ma'aden entered into a licence agreement with Incro S.A. ("Incro") for the provision of technology rights and designs for process technology for the production of DAP. Under the agreement, Incro grants Ma'aden a perpetual and irrevocable licence to use its proprietary process technology for the production of DAP and MAP to (i) design, construct and operate a production plant; (ii) manufacture, market and sell the products world-wide without restriction; (iii) further develop and modify the licensed technology; and (iv) copy documentation provided by the licensor as necessary to build and operate the relevant plant. The licence is granted on a non-exclusive, royalty-free basis. In addition Incro agrees to provide a basic design package to enable Ma'aden to carry out the detailed engineering for the production plant and certain associated services. The total fee payable to Ma'aden for the licence, basic design package and associated services to be provided under the agreement is 1,350,000 (SR7,152,518). Incro warrants that use of the process technology and information provided in accordance with the licence does not infringe any intellectual technology rights anywhere in the world and indemnifies from losses or damages arising out of any claim regarding such an infringement. Save for liability in the case of fraud, deliberate default or reckless misconduct, Incro's liability under the agreement is capped as is customary for an agreement of this nature. The agreement contains strict confidentiality restrictions which prohibit disclosure of confidential information for a period of 20 years from the date of the agreement. Ma'aden may terminate the agreement on notice and either party may terminate the agreement if the other party becomes bankrupt or insolvent or is in default of an obligation under the agreement which will have a material adverse effect on the other party. Joint Venture Agreement with SABIC Ma'aden entered into the Phosphate Project Shareholders' Agreement on 15 September 2007 ("Phosphate JVA") in respect of the Phosphate Project with SABIC. Under the terms of the JVA the parties agreed to establish Ma'aden Phosphate Company ("PhosCo") as a limited liability company in Saudi Arabia through which the parties will hold their respective interests in the Phosphate Project in Joint Venture. PhosCo will be 70 % owned by Ma'aden and 30 % owned by SABIC. The term of the Phosphate JVA is 25 years, and will be renewed automatically for a further term of five years upon expiration unless either of Ma'aden or SABIC has given their written notice of its intention not to renew three years before the expiry date. Ma'aden's obligations under the Phosphate JVA in respect of the Phosphate Project include the novation and transfer to PhosCo of all its rights and benefits of all permits, licences, permissions or agreements granted or entered into by Ma'aden that are relevant to the Phosphate Project including the Al Jalamid Deposit and procuring certain rights, benefits and services for PhosCo from third parties that are necessary in relation to the Project, which are currently under negotiation. Ma'aden will also provide certain support services including assisting in the obtaining of approvals and consents from governmental and nongovernmental entities in Saudi Arabia, procuring certain other rights and benefits for the Company and providing project management services. Ma'aden's obligations in this respect will be governed by a separate services agreement to be negotiated between Ma'aden and the PhosCo. SABIC's obligations under the Phosphate JVA in respect of the Phosphate Project include providing the Company with research and technology services and marketing services on 191

193 arm's length commercial terms; and technical and operational support, project management and construction support, manpower secondment and training and development services on terms equivalent to the most favourable terms on which SABIC provides similar services to its affiliates. In accordance with the terms of the Phosphate JVA the PhosCo board of managers shall comprise six managers; four appointed by Ma'aden and two appointed by SABIC. The senior management team appointed by the Board will include a president (chief executive officer) nominated by Ma'aden and a chief financial officer nominated by SABIC. The initial capital contributions of Ma'aden and SABIC to acquire their respective interests will be represent 70 % and 30 % of the issued capital of PhosCo respectively. Should additional funding be required for future expansions of the Phosphate Project the shareholders shall be invited to subscribe for additional shares on a pro rata basis. Should a party not subscribe to Shares offered to it, the other Party may subscribe for the Shares, and the first shareholder will be diluted accordingly. Alternatively, the party declining to subscribe for additional shares may require a break-off project to be set up to carry out the expansion. No party shall compete with the marketing of granular DAP or MAP produced by the Phosphate Project, in a material way within Saudi Arabia, whilst it is a shareholder and for a period of five years thereafter, subject to Ma'aden being permitted to participate in any breakoff project set up to implement an increase in the capacity and production of the Phosphate Project and SABIC being permitted to participate in the existing operations and future expansions of the Ibn Al Baytar Project in Al Jubail Industrial City. Subject to transfers to an affiliate and Ma'aden being permitted to sell or transfer any of its shares to any entity in which the Government holds an interest, no party may transfer any shares to another person before the fifth anniversary of the commercial production date and no party may grant any security interest over its shares without the prior written consent of the other party. Any transfer of shares to a third party after the five year lock in period shall require the approval of the other party and be subject to pre-emption rights in favour of the other party. The Phosphate JVA will automatically terminate if PhosCo is dissolved and liquidated for any reason. In the event that the proposed debt financing is not completed within 18 months of the date of the Phosphate JVA either party may request that the Company is dissolved and liquidated, provided that the other party may acquire the requesting party's shares at book value. Under the Phosphate JVA, a party becomes a defaulting party if a petition seeking adjudication of bankruptcy or insolvency is filed by or against a party (or a person controlling that party); proceedings for the dissolution or liquidation of a party (or a person controlling that Party) are commenced; a receiver, administrator or trustee is appointed in respect of a substantial portion of the business or assets of a party (or a person controlling that party); a party is in default of an obligation which causes a material adverse effect (as defined in the Phosphate JVA), to the other party or PhosCo, and fails to remedy such a default within 28 days of receiving written notification from the other party; or it is in default of an obligation to provide funds to PhosCo pursuant to the terms of the Phosphate JVA. If a party becomes a defaulting party the non-defaulting Party may terminate the Phosphate JVA, by electing to purchase all, or any number of, the shares in the Company then held by the defaulting Party and its affiliates at a price equal to 80 % of the per share equity contribution of the defaulting party if the default occurred before the commencement of commercial production, or at a price equal to 80 % of the share price if default occurred after the commencement of commercial production date. Alternatively, if the defaulting party and its affiliates together hold 50 % or more of the shares in PhosCo the non-defaulting party may require the defaulting party to purchase its shares at fair market value (as determined in accordance with the terms of the Phosphate JVA). 192

194 The Phosphate JVA contains such other warranties, covenants and provisions considered usual for an agreement of this type. Aluminium Project Heads of Agreement On 30 April 2007 a Heads of Agreement ("HoA") in relation to the Aluminium Project was concluded by Rio Tinto Alcan and Ma'aden. The HoA envisages that the Aluminium Project will be owned and operated through AlumCo, which is to be incorporated as a limited liability company and owned 51 % by Ma'aden and 49 % by Rio Tinto Alcan. The conclusion of a definitive joint venture agreement ("Aluminium JVA") is subject to further negotiation and to the successful completion of a feasibility study in respect of the refinery. Under the HoA each joint venture partner will contribute an equity contribution in proportion to its project interest. The HoA also outlines each partner's responsibilities towards the project with Ma'aden being responsible on a reasonable endeavours basis for, amongst other things, procuring the provision of certain infrastructure and services, licences for the production of power, steam and desalinated water, property and mining leases for the Az Zabirah and Ras Az Zawr sites, caustic soda and fuel supply contracts. Rio Tinto Alcan is obliged to provide AlumCo with certain management support services including the provision of skilled personnel from other Rio Tinto Alcan plants, training, human resources management, developing and updating of certain operational policies and procurement services. In addition Rio Tinto Alcan is obliged to ensure that certain of its affiliates provide licences for alumina refining and aluminium smelting technologies and that these affiliates also enter into technical support arrangements with AlumCo The HoA contains a number of provisions regarding the governance and management of AlumCo, including the following: All matters to be considered by shareholders shall require a resolution passed with a majority representing 55 % of the voting share capital, save for certain reserved matters such as the amendment of AlumCo's articles, changes in AlumCo's shareholding structure or capital increases or decreases other than as contemplated in the HoA and a material change in business, which shall require a 75 % majority; The board of managers of AlumCo shall comprise six members in total with three being nominated by Ma'aden (including the Chairman) and three being nominated by Rio Tinto Alcan (including the Vice-Chairman); Decisions of the board of managers may be approved by simple majority vote, save for certain reserve matters such as approvals of project expansion proposals, entry by AlumCo into any project, financing or related party agreements and acquisitions and disposals with a value in excess of US$1,000,000 (SR3,750,000,) which shall require approval by a 75 % majority; The appointment of senior officers of AlumCo made by the board of managers and approved by a 75 % majority. The senior management team shall include a chief executive officer recruited by Ma'aden, a chief operating officer recruited by Rio Tinto Alcan and chief financial and chief human resources officers jointly recruited by Ma'aden and Rio Tinto Alcan; Pending execution of the Aluminium JVA, Ma'aden and Rio Tinto Alcan shall form a project development committee ("Development Committee") comprising eight members, four of which are to be appointed by Ma'aden and four of which are to be appointed by Rio Tinto Alcan. The Development Committee shall be responsible for co-ordination of the development of the Aluminium Project and setting budgets for 193

195 project costs. Upon execution of the Aluminium JVA, the Development Committee will be replaced by a project steering committee which will assume the functions of the Development Committee. Neither party may transfer any part of its shareholding in AlumCo during the five year period commencing on the date of commercial operation of the Aluminium Project. After the expiry of the five year lock-in period, each party will have a right of first refusal with respect to any proposed sale of shares by the other party. Ma'aden, however, shall be entitled to transfer its shares to any agency or entity in Saudi Arabia in which the Government of Saudi Arabia holds a controlling interest or conduct an initial public offering provided Public Investment Fund retains a controlling interest in Ma'aden, without Rio Tinto Alcan's consent. Rio Tinto Alcan shall be entitled to transfer its shares to any of its wholly-owned subsidiaries without Ma'aden's consent. Under the terms of the HoA Ma'aden and Rio Tinto Alcan have each agreed to enter into an offtake agreement with AlumCo to purchase their pro rata share (according to their respective project interests of 51 % and 49 %) of aluminium produced by the project at a price based on LME prevailing prices. It is proposed that Rio Tinto Alcan and Ma'aden enter into a sales agency agreement pursuant to which Rio Tinto Alcan will act as Ma'aden's sales agent for the sale of a portion of Ma'aden's share of smelter aluminium outside Saudi Arabia in consideration for the payment of an agency fee. It is anticipated that the term of the agreement will be 15 years from the first date of full commercial production from first line of the smelter. The portion of Ma'aden's share of aluminium production to be subject to the agreement and the agency fee payable to Rio Tinto Alcan is yet to be agreed in principle. It is proposed that each year after the fifth year of the term of the sales agency agreement, Ma'aden will be entitled to reduce the amount of aluminium which Rio Tinto Alcan may sell on its behalf in increments of up to 25 % of Ma'aden's pro rata share of aluminium provided it has first given Rio Tinto Alcan 12 months' notice. The gross proceeds of sale (before deduction of the commission payable to Rio Tinto Alcan) remitted to Ma'aden upon sale of smelter aluminium by Rio Tinto Alcan on behalf of Ma'aden will be determined with reference to the average price achieved by Rio Tinto Alcan on sales of smelter aluminium in arm's length transactions with third parties. It is also proposed that Rio Tinto Alcan shall have the right to terminate the sales agency agreement at any time after the fifth year of the term by providing to Ma'aden 12 months' prior written notice. Pursuant to the HoA, Rio Tinto Alcan and Ma'aden also propose entering into an exclusive sales agency agreement for Saudi Arabia on substantially the same terms for the sale of Rio Tinto Alcan's share of the smelter aluminium that Rio Tinto Alcan determines may be sold to purchasers within Saudi Arabia. Ma'aden will have the right to terminate the sales agency agreement at any time after the fifth year of the term on 12 months' prior written notice to Rio Tinto Alcan. The HoA will terminate in the event of (i) the insolvency of either party, (ii) a material breach by the other party not remedied within 14 days of notice, (iii) the joint venture agreement for the Aluminium Project not being signed on or prior to 16 July 2008, or any extended period thereafter but in any event by 31 December 2008, or (iv) any material delay in the development work programme and timetable as agreed in the HoA. The term of the Aluminium Joint Venture Agreement, as contemplated under the HoA, is intended to be 30 years and subject to renewal for an additional term of 20 years unless the parties agree otherwise. Thereafter, it is contemplated that the joint venture shall be subject to renewal for subsequent 10 year terms by mutual agreement between the parties. 194

196 Common Infrastructure Power Interconnection Agreement with SEC On 19 December 2006 Ma'aden entered into an interconnection agreement with SEC ("Interconnection Agreement") which outlines the basis on which backup power from the SECs power grid may be purchased by Ma'aden and imported to co-generation power plants for each of the Phosphate and Aluminium Projects at Ras Az Zawr and surplus power may be sold by Ma'aden back to the SEC grid. The Interconnection Agreement records Ma'aden and the SECs agreement to proceed with the construction of certain interconnection assets including a 122km long, 380kV double circuit overhead transmission line between SECs 380kV substation at Jubail to a 380kV substation to be constructed by Ma'aden at Ras Az Zawr which will enable the import and purchase of back-up power from SECs 380kV network to support operations at Ras Az Zawr and the export and sale of power to the SEC's 380kV network from Ma'aden's facilities at Ras Az Zawr. The Interconnection Agreement commits SEC and Ma'aden to agreeing certain technical and commercial agreements to achieve the objects of the Interconnection Agreement. Ma'aden will fund and implement the interconnection and, on completion, the transmission lines will be handed over to SEC. Ma'aden will also be responsible for funding and implementing the construction of the 380kV substation to be located at Ras Az Zawr. SEC will provide Ma'aden with technical and operational support for the testing, commissioning and acceptance of the interconnection. SEC also agrees to supply interim power to the facilities at Ras Az Zawr (at the standard industrial tariff) until full operation of the Phosphate cogeneration plant. Ma'aden shall pay to a percentage of the actual cost of material and construction of the transmission line (which is estimated under the agreement to be SR300 million) as reimbursement for SECs costs of providing engineering, technical support, field supervision and services in relation to the interconnection project. The fees will be payable in five instalments. Insurance Policies Ma aden currently maintains an insurance programme which covers a range of classes including property (all risks), business interruption, machinery breakdown, public liability, motor, marine and land transit, life & personal accident and medical expenses. Ma'aden maintains and periodically reviews its policies with the assistance of its insurance consultant. The reviews include an assessment of any new exposures or risks that may have developed since the last review. Ma'aden has appointed Aon, as an insurance advisor and placing broker to Ma aden to manage insurance programmes for existing operations as well as new projects, including the Phosphate and Aluminium Projects. It is intended that PhosCo, on behalf of all parties involved in the Phosphate Project, will effect the appropriate insurance both during the construction and operational phases. "Early works" insurance policies have already been implemented to cover the construction phase of the Phosphate Project. It is envisaged that an insurance programme similar to that to be implemented in relation to the Phosphate Project with respect to the Aluminium Project at the appropriate time. 195

197 Litigation The Directors and Management confirm that the Company and/or any of its affiliated companies are not involved, as of the date of this Prospectus, in any litigation, arbitration or administrative proceedings that would, individually or in aggregate, have a material adverse effect on its financial condition and results of its operations. Moreover, so far as the Directors and Management are aware, there is no expected or threatened litigation, arbitration or administrative proceedings that would, individually or in aggregate, have a material adverse effect on its financial condition and results of operations. 196

198 Documents Available for Inspection The following documents will be available for inspection at the Company s head office located at Al-Ma ather Street, Ministry of Petroleum and Mining, Saudi Arabia, Riyadh between the hours of 8:30 am to 2:00 pm one week prior to and during the Subscription Period: The Bylaws of the Company and the Articles of Association of its affiliated companies; The Commercial Registration Certificates of the Company and its affiliated companies; The CMA s approval of the Offering; Written approval of Baker & McKenzie Limited and Baker & McKenzie LLP for the inclusion of their names in this Prospectus as the Offering s Legal Advisors; The valuation report prepared by the Financial Advisor; Financial Advisor s Letter; Audited Financial Accounts of the Company for the years ending 31 December 2004, 2005, 2006 and 2007, which were prepared by Deloitte & Touché, Baker Abulkhair & Co., a firm of Saudi Accountants; Gold Mineral Expert s Report prepared by SRK; Phosphate Mineral Expert s Report prepared by Behre Dolbear; and Aluminium Mineral Expert s Report prepared by Behre Dolbear. Council of Minister Resolution No. 72 dated 03/04/1427H. Minutes of meeting dated 16/11/1428H between Minister of Petroleum and Precious Minerals and the Minister of Finance(Chairman of the Board of the Public Investment Fund) to determine the Share Offering price. Council of Minister Resolution No. 49 dated 25/02/1429H providing for the increase in Ma aden s capital to SR 9,250,000,

199 Mineral Experts Reports Each of the Gold MER, Phosphate MER and Aluminium MER (set out in the "Mineral Expert Reports" section) were prepared in or prior to November 2007 and as such address the matters stated therein at that time or at the times otherwise specified and do not take account of any changes or developments which may have occurred since. These reports have not been updated prior to the date of this Prospectus. 198

200 Gold Mineral Expert's Report An Independent Mineral Experts Report on the Gold Mining and Exploration Assets of Saudi Arabian Mining Company (Ma aden) 1.0E INTRODUCTION 1.1E Background SRK Consulting (UK) Limited ( SRK ) is an associate company of the international group holding company, SRK Global Limited (the SRK Group ). SRK has been commissioned by the board of directors of Saudi Arabian Mining Company ( Ma aden also referred to as the Company ) to prepare an independent mineral experts report ( MER ) on the gold mining assets (the Mining Assets ) and gold exploration assets (the Exploration Assets ), collectively referred to as the Gold Assets of the Company (Figure 1.1E). This extract (the Extract ) has been prepared in accordance with the Listing Rules as defined by the Capital Market Law (the CMA ) issued by Royal Decree No M/30 dated 1 August 2003, hereinafter referred to as the CMA Listing Rules. The Extract contains a valuation of the Gold Assets. The valuation of the Gold Assets is limited to the valuation of the Ore Reserves and specifically excludes all other assets of the Company s gold division ( Ma aden Gold ). The MER, available in full, electronically on the Company s website, has been prepared by SRK. The Extract is compiled from the MER by SRK and will be included in the prospectus (the Prospectus ) to be published by the Company in connection with the simultaneous offering (the Offer ) of ordinary shares in the Company and the proposed admission (the Admission ) of such shares to trading on the Saudi Stock Exchange. Accordingly the Extract should not be considered a MER within the meaning of Chapter 19 of the United Kingdom Listing Authority s Listing Rules as it existed on 30 June, 2005 (prior to its deletion upon the implementation in the UK on 1 July, 2005 of the Prospectus Directive) as published by the Financial Services Authority from time to time and governed by the United Kingdom Listing Authority. The standard adopted for the reporting of the Mineral Resource and Ore Reserve statements for the Mining Assets is that defined by the terms and definitions given in The 2004 Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code ) as published by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia. The JORC Code is an internationally recognised Mineral Resource and Ore Reserve reporting code. The Extract has been prepared under the direction of the Competent Persons (the CPs, see Section 1.2E) as defined by the JORC Code who assume overall professional responsibility for the Extract. The Extract, however, is published by SRK, the commissioned entity, and accordingly SRK assumes responsibility for the views expressed herein. Consequently with respect to all references to CPs and SRK: all references to SRK mean the CP and vice-versa. The Extract is addressed to the Company and JPMorgan Chase Bank N.A. (the Financial Advisor ). Drafts of the Extract were provided to the Company, but only for the purpose of confirming both the accuracy of factual information and the reasonableness of assumptions relied upon in the Extract. SRK has given and has not withdrawn its written consent to the inclusion of its Extract set out as the Extract from the Gold Mineral Experts Report and references to its report and its name in the form and context in which they are respectively included and has authorised the contents of its report for the purposes of compliance with the Listing Rules. In respect of all matters in relation to limitations, reliance on information, declarations, Consent and Copyright, the reader is referred to Section 1.3E of the Extract. 105

201 The Extract includes technical information, which requires subsequent calculations to derive subtotals, totals and weighted averages. Such calculations may involve a degree of rounding and consequently introduce an error. Where such errors occur, SRK does not consider them to be material. 1.2E Review Process The Extract is dependent upon technical, financial and legal input. The technical information as provided to and taken in good faith by SRK, has not been independently verified by SRK by means of complete re-calculation of the Mineral Resources and Ore Reserves. SRK has, however, conducted a review and assessment of all material technical issues likely to influence the future performance of the Mining Assets which included the following: Inspection visits to the Mining Assets mining and processing facilities, surface structures and associated infrastructure undertaken most recently April 2006; Discussion and enquiry following access, to key project and head office personnel between June 2007 and October 2007; An examination of historical information (2004, 2005, 2006 and 2007H1) and results made available by Ma aden Gold in respect of the Mining Assets; and A review, and where considered appropriate by SRK, modification of Ma aden Gold s production forecasts contained in the relevant Life-of-Mine plans ( LoMp ). SRK has also: Assumed certain macro-economic parameters and commodity prices and relied on these as inputs to undertake a break-even analysis of Ma aden Gold s Ore Reserve estimates (hereinafter referred to as the Ore Reserve economic viability assessment - the Ore Reserve EVA ) and to derive the equity value of Ma aden Gold; and Satisfied itself that such information is both appropriate and valid for the Ore Reserve EVA and derivation of the equity value as reported herein. Where fundamental base data has been provided (LoMp, capital expenditures, operating budgets etc) for the purposes of review, SRK has performed all necessary validation and verification procedures deemed appropriate in order to place an appropriate level of reliance on such information. The forecast of commodity prices in real terms (Table 4.1E) is based on the following: For gold, a combination of the short-term and-long term price profiles as provided by Brook Hunt & Associates Limited ( Brook Hunt ); and For silver, zinc, copper and lead the consensus market forecasts (annual averages of various market analysts forecasts). In undertaking the Ore Reserve EVA a break-even gold price which: Is equivalent to the weighted average LoMp real terms total costs; Reflects the current (2007H1) cash costs reported on a by-product basis; and Is required to return a zero NPV at a real terms discount factor of 10%. The Competent Person with overall responsibility for reporting of Mineral Resources is Mr Martin Pittuck, CEng, MIMMM, MSc who is an employee of SRK. Mr Martin Pittuck is a mining 200

202 geologist with 12 years experience in the mining industry and has been responsible for the reporting of Mineral Resources on various properties internationally during the past five years. The Competent Person with overall responsibility for reporting of Ore Reserves is Mr David Pearce, CEng, A.AusMMM, MSc, MBA, who is an employee of SRK. Mr David Pearce is a mining engineer with 20 years experience in the mining industry and has been involved in the reporting of Ore Reserves on various properties internationally during the past five years. 1.3E Limitations, Reliance on Information, Declaration, Consent and Copyright 1.3.1E Limitations Save for the responsibility arising under paragraph 1(c)(2) of Annex 4 of the Listing Rules issued by the CMA to any person as and to the extent provided therein or under any other law, to the fullest extent permitted by law SRK does not assume any responsibility and will not accept any liability to any other person for any loss suffered by any such other person as a result of, arising out of, or in connection with this Extract or statements contained therein, required by and given solely for the purpose of complying with item paragraph 1(c)(2) of Annex 4 of the Listing Rules issued by the CMA, consenting to its inclusion in the Prospectus. The Company has confirmed in writing to SRK that to its knowledge the information provided by it (when providing) was complete and not incorrect or misleading in any material respect. SRK has no reason to believe that any material facts have been withheld and the Company has confirmed in writing to SRK that it believes it has provided all material information. The achievability of the LoMps are neither warranted nor guaranteed by SRK. The LoMps as presented and discussed herein have been proposed by the Company s management and adjusted where appropriate by SRK, and cannot be assured; they are necessarily based on economic assumptions, many of which are beyond the control of the Company. Future cashflows and profits derived from such forecasts are inherently uncertain and actual results may be significantly more or less favourable E Reliance on Information SRK believes that its opinion included in the Extract must be considered as a whole and that selecting portions of the analysis or factors considered by it, without considering all factors and analysis together, could create a misleading view of the process underlying the opinions presented in the Extract. SRK s equity value for the Company is effective at 1 July 2007 and is based on information provided by the Company throughout the course of SRK s investigations, which in turn reflect various technical-economic conditions prevailing at the date of this report. In particular, the equity value and Ore Reserve EVA are based on expectations regarding the commodity prices and exchange rates prevailing at the date of this report. These and the underlying technicaleconomic parameters ( TEPs ) can change significantly over relatively short periods of time. Should these change materially the Equity Value could be materially, different in these changed circumstances. Further, SRK has no obligation or undertaking to advise any person of any change in circumstances which comes to its attention after the date of the Extract or to review, revise or update the Extract or opinion E Declaration SRK will receive a fee for the preparation of this report in accordance with normal professional consulting practice. This fee is not contingent on the outcome of the Offer and SRK will receive no other benefit for the preparation of this report. SRK does not have any pecuniary or other interests that could reasonably be regarded as capable of affecting its ability to provide an unbiased opinion in relation to the Mineral Resources, the Ore Reserves, the LoMp and the equity value of the Company. 201

203 Neither SRK, the CPs nor any directors of SRK have at the date of this report, nor have had within the previous two years, any shareholding in the Company, the Mining Assets or advisors of the Company. Consequently, SRK, the CPs and the Directors of SRK consider themselves to be independent of the Company. In the Extract, SRK provides assurances to the Board of Directors of the Company that the TEPs, including production profiles, operating expenditures and capital expenditures, of the Mining Assets as provided to SRK by the Company and reviewed and where appropriate modified by SRK, are reasonable, given the information currently available E Consent SRK has given and has not withdrawn its written consent to the inclusion of its Technical Report set out in the Prospectus: the Extract from the Gold Mineral Experts Report and references to its report and its name in the form and context in which they are respectively included and has authorised the contents of its report and context in which they are respectively included and has authorised the contents of its report for the purposes of compliance with the CMA Listing Rules E Copyright Copyright of all text and other matter in this document, including the manner of presentation, is the exclusive property of SRK. It is an offence to publish this document or any part of the document under a different cover, or to reproduce and/or use, without written consent, any technical procedure and/or technique contained in this document. The intellectual property reflected in the contents resides with SRK and shall not be used for any activity that does not involve SRK, without the written consent of SRK E Disclaimers Ore Reserve estimates are based on many factors, including, in this case, data with respect to drilling and sampling. Ore Reserves are derived from estimates of future technical factors, future production costs, future capital expenditure, future product prices and the exchange rate between the SAR and the US$. The Ore Reserve estimates contained in this report should not be interpreted as assurances of the economic life of the Mining Assets or the future profitability of operations. As Ore Reserves are only estimates based on the factors and assumptions described herein, future Ore Reserve estimates may need to be revised. For example, if production costs increase or product prices decrease, a portion of the current Mineral Resources, from which the Ore Reserves are derived, may become uneconomical to recover and would therefore result in lower estimated Ore Reserves. The LoMp, the TEPs and the financial models include forward-looking statements. These forward-looking statements are necessary estimates and involve a number of risks and uncertainties that could cause actual results to differ materially. 202

204 Figure 1.1E Ma aden Gold: operating structure 203

205 2.0E THE GOLD ASSETS Ma aden Gold s principal activities include exploration, development, and operation of gold mines and metallurgical processing facilities which in addition to gold and silver also produce precious metals rich copper and zinc concentrates for third party toll smelting (Mahd Ad Dahab and Al Amar). Ma aden Gold s assets are all located in Saudi Arabia and include: five operations (Mahd Ad Dahab, Al Amar, Bulghah, Sukhaybarat (processing facility only), and Al Hajar); one development property (Ad Duwayhi); five advanced exploration properties (Mansourah, Ar Rjum, Masarrah, As Suk and Zalim collectively the AEPs ) and 33 exploration prospects (Figure 2.1E, Table 2.1E), collectively the EPs. In 2006, Ma aden Gold (Table 2.2E) processed approximately 5.4Mt of ore and produced approximately 167koz of gold (192koz gold equivalent) at a by-product cash cost of US$283/oz. For the six-month period ending 30 June 2007, Ma aden Gold processed approximately 2.1Mt of ore and produced approximately 75koz of gold (86koz gold equivalent) at a by-product cash cost of US$292/oz. Ma aden Gold employs a total of 728 total employees costed ( TEC ), 607 of whom are employed directly at the Mining Assets: Mahd Ad Dahab (234), Al Amar (112), Bulghah (106), Sukhaybarat (94), Al Hajar (61); and a further 121 are employed at Ma aden Gold s head office in Jeddah. Total environmental liabilities comprise bio-physical and social ( Terminal Benefits ) of US$25.2m ( Bio-physical US$17.1m; Terminal Benefits US$8.1m). At 30 June 2007, Ma aden Gold had total Plant Property and Equipment ( PP&E ) valued at US$62.2m. As at 1 July 2007, Ma aden Gold (Table 3.1E) had Ore Reserves of 1.3Moz of gold contained within 21.7Mt and grading 1.9g/t Au and Mineral Resources of 10.0Moz of gold (10.1Moz gold equivalent) contained within 132.8Mt and grading 2.3g/t Au (2.4g/t Au Eq). An analysis of international gold companies based on 2006 calendar statistics indicates that Ma aden Gold is ranked 46 th in respect of production and 18 th in respect of cash costs. Figure 2.2E presents the industry cash cost curve for mining companies based on equity participation and by-product reporting principles. The Company s Health, Safety and Environmental Policy commits to the establishment of a health, safety and environmental management system. Ma aden has designed an environmental management system ( EMS ) and an occupational health and safety system ( OHSS ) manuals and intends to introduce these to the whole Ma aden group in the second half of The Company is not currently ISO compliant and SRK notes that the proposed EMS system and policy statement do not reference compliance with the World Bank, Equator Principles or the principles established by the International Council of Mining and Metals ( ICMM ). Notwithstanding this limitation, the Company has employed external consultants for the generation of certain regulatory documentation: specifically Environmental Impact Assessments ( EIAs ) for some mines and closure plans for some mines. SRK has assessed Ma aden Gold s performance in this area in respect of compliance with World Bank, Equator Principles, ICMM and local regulatory requirements. Details regarding these components are given in the site specific sections of the full MER. The overall safety performance of the Mining Assets during 2007H1 (measured against performance during 2006) is summarised as follows: no fatalities; and an increase in the LTIFR from 9.74 to per million man hours worked. For comparison, the Ontario benchmark target is 0.15 per million man hours for fatality rates and 7.50 per million man hours for LTIFR. Table 2.1E Gold Assets (1) Gold Assets Type (2) Licence Expiry (3) Area (km 2 ) Mining 204

206 Operations Mahd Ad'Dahab u/g Mahd Ad Dahab Dec Al Amar u/g Al Amar Dec Bulghah o/p Bulghah Dec Sukhaybarat s/f Sukhaybarat Dec Al Hajar s/f Al Hajar Jun Development Property Ad Duwayhi o/p Aduwayah Oct Exploration Advanced Exploration Properties 10,923.8 Mansourah o/p Al Uruq Jul ,302.3 Ar Rjum o/p Ash Shakhtaliyah Feb ,333.0 Masarrah o/p Ash Shakhtaliyah Feb ,333.0 As Suk o/p Ash Shakhtaliyah Feb ,333.0 Zalim o/p Zalim Jun Exploration Prospects 36, Prospects n/d Aduwayah Oct Prospects n/d Al Hajar Dec , Prospects n/d Al Jardhawiyah Aug , Prospects n/d Al Uruq Jul , Prospects n/d An Najadi, Nugrah, Mawan, Habla Dec , Prospects n/d As Siham Jun , Prospects n/d Ash Shakhtaliyah Feb , Prospects n/d Miskah Aug , Prospects n/d Tawan Nov Prospects n/d Shabah Sep , Prospects n/d Wurshah Sep ,764.0 (1) (2) (3) The Mining Licences and the Exploitation Licences reflect the anticipated position by the Company for Ma aden Gold following relinquishment of certain areas in accordance with the licence conditions. u/g underground; o/p open pit; s/f surface sources; n/d not determined. For all licences which are expired as of 30 June 2007 or are due to expire in 2007, SRK has been informed that the necessary applications for renewal have been lodged with the regulatory authorities. Table 2.2E Ma aden Gold: salient historical ( H1 inclusive) and forecast (2007H2, 2008) operating statistics Statistics Units H1 (1) 2007H Processing Tonnage (kt) 5,638 5,813 5,449 2,134 2,208 5,100 Grade (g/t Au) Production Gold (koz Au) Silver (koz Ag) Zinc (t Zn) ,150 Copper (t Cu) ,476 Lead (t Pb) Gold Equivalent (koz Au Eq) Expenditures Cash Cost (2) - on mine (US$/t) Cash Cost (3) - Co-product (US$/oz) Cash Cost (4) - By-product (US$/oz) Capital Expenditure (US$m) (1) (2) (3) (4) The reduced cash operating costs for 2007H1 compared with 2007H2 is impacted by the significant (US$5.8m) under spend of corporate overheads (General and Administration, Projects and Technical Services, and Exploration). This under spend equates to a unit cash cost (byproduct) basis of US$70/oz and is not assumed to continue in the current LoMp. On mine cash costs excluding concentrate and bullion related treatment, refining and realisation charges. Co-product cash cost based on cash cost excluding by-product credits divided by gold equivalent production (payable). By-product cash cost based on cash costs net of by-product credits divided by gold production (payable). 205

207 Figure 2.1E Ma aden Gold: location of Gold Assets 206

208 Figure 2.2E Ma aden Gold: company C1 cash cost curve analysis (calendar 2006 results) Ma'aden Gold, US$187/oz Spot Gold Price 1 July 2007, US$779/oz 3 Year Average Daily Price to 30 June 2007, US$529/oz Cash Costs (US$/oz) Q1, US$234/oz Q2, US$304/oz Q3, US$365/oz Cash Costs (US$/oz) Gold Production 2006 (Moz) The above graphs are derived from data provided by Brook Hunt in October 2007 where C1 Cash Cost comprises cash costs incurred from mining through to refined metal. Costs are net of by-product credits for primary gold mines (i.e. those where gold provides more than 65% of net revenues). For by-product gold mines (i.e. those where gold provides less than 65% of net revenues), costs are allocated pro-rata according to gold contribution to net revenue. 3.0E MINERAL RESOURCES AND ORE RESERVES SRK has not re-estimated the Mineral Resource and Ore Reserve statements for the Gold Assets as estimated by Ma aden Gold. SRK has, however, undertaken sufficient check calculations and where appropriate, made necessary adjustments to the estimates as presented herein and incorporated such adjustments into the respective Mineral Resource and Ore Reserve statements and LoMps. Table 3.1E and Table 3.2E summarise SRK s statements of Mineral Resources and Ore Reserves. 207

209 Table 3.1E Ma aden Gold: Mineral Resources and Ore Reserves by asset (1 July 2007) JORC Code Statements Tonnage Grade Content (kt) (g/t Au) (g/t Au Eq) (koz Au) (koz Au Eq) Ore Reserves Proved Mahd Ad'Dahab Subtotal Probable Mahd Ad'Dahab Al Amar 1, Bulghah 16, Sukhaybarat Al Hajar 2, Subtotal 21, ,140 1,172 Ore Reserves Mahd Ad'Dahab 1, Al Amar 1, Bulghah 16, Sukhaybarat Al Hajar 2, Total Ore Reserves 21, ,293 1,329 Mineral Resources Measured Mahd Ad'Dahab Ad Duwayhi 7, Subtotal 7, Indicated Mahd Ad'Dahab Al Amar 1, Bulghah 21, Sukhaybarat Al Hajar 2, Ad Duwayhi 6, ,169 1,169 Advanced Exploration Projects 31, ,369 2,369 Subtotal 64, ,181 5,223 Measured + Indicated Mahd Ad'Dahab 1, Al Amar 1, Bulghah 21, Sukhaybarat Al Hajar 2, Ad Duwayhi 13, ,817 1,817 Advanced Exploration Projects 31, ,369 2,369 Total Measured + Indicated 71, ,064 6,113 Inferred Mahd Ad'Dahab Al Amar Bulghah 2, Ad Duwayhi 3, Advanced Exploration Projects 54, ,448 3,448 Subtotal 60, ,939 3,944 Mineral Resources Mahd Ad'Dahab 1, Al Amar 2, Bulghah 23, Sukhaybarat Al Hajar 2, Ad Duwayhi 17, ,116 2,116 Advanced Exploration Projects 86, ,817 5,817 Total Mineral Resources 132, ,004 10,058 Table 3.2E Ma aden Gold: Total Ore Reserve Sensitivity (1 July 2007) Gold Price Tonnage Grade Content (US$/oz) (kt) (g/t Au) (g/t Au Eq) (koz Au) (koz Eq Au) 350 8, , ,087 1, , ,293 1, , ,293 1, , ,565 1,607 When considering the Mineral Resource and Ore Reserve statements as presented herein, the following applies: Measured and Indicated Mineral Resources are inclusive of those Mineral Resources modified to produce Ore Reserves; Mineral Resources are quoted at an appropriate in-situ economic cut-off grade which satisfies the requirement of potentially economically mineable for open-pit and underground mining assets separately. Furthermore, the commodity prices incorporated into the in-situ cut-off grade calculations are as follows: US$550/oz for gold; US$9.00/oz 208

210 for silver; USc65/lb for zinc; and USc140/lb for copper. The resulting cut-off grades have then in general been discounted by 25% to report Mineral Resources and to accommodate the potentially economically mineable consideration. SRK notes however that where potential exists for both open-pit and underground mining (specifically Ad Duwayhi and the AEPs) the stated Mineral Resources have not been sub-divided into those Mineral Resources which are potentially economically mineable by open-pit methods (typically by using a optimisation shell at higher commodity prices than that used for the Ore Reserves) and underground methods (higher cut-off grades). Accordingly consideration at this stage for Ore Reserve potential within the AEPs is difficult given this limitation; Ore Reserves are due to currency of the LoMps (i.e. Al Amar feasibility study 2001; Bulghah mining study 2005Q4) based on a range of commodity prices which are generally lower than the current three year average as derived from daily closing prices. Notwithstanding this aspect, SRK has confirmed the validity of the statements as presented at the following long term commodity prices: gold at US$550/oz; silver at US$9.00/oz; zinc at USc65/lb; and copper at USc140/lb; Mineral Resources and Ore Reserves were originally prepared by Ma aden Gold based on various LoMps. These statements have not been adjusted by means of re-estimation but have been adjusted by SRK to reflect depletion and any other necessary adjustments deemed necessary to reflect JORC Code compliant statements as at 1 July 2007; Unless otherwise stated all Mineral Resources and Ore Reserves are quoted on an equity attributable basis assuming 100% ownership as at 1 July 2007; All Ore Reserves are quoted in terms of RoM tonnage and grades as delivered to the metallurgical processing plants and are therefore inclusive of all appropriate modifying factors; Ore Reserve statements are derived from LoMps which are based solely on Measured and Indicated Mineral Resources and specifically exclude Inferred Mineral Resources; Ore Reserve sensitivities, where reasonable to estimate, have been derived from application of the relevant in-situ cut-off grades and application of modifying factors at a range of commodity prices for gold, silver, zinc and copper. In respect of the open-pits incremental optimised shells were developed for the range of commodity prices which were then used to constrain the open-pitable Ore Reserves. It should, however, be noted that these are not supported by appropriately detailed LoMps and should therefore be considered as incremental changes to the declarations as reported herein; All references to Mineral Resources and Ore Reserves are stated in accordance with the JORC Code; and Surface sources at the Mining Assets comprise low grade stockpiles which are notoriously difficult to sample, given the range of particle sizes commonly present and the resultant heterogeneity of grade encountered during small-scale sampling operations. Notwithstanding the fact that certain of the stockpiles are an integral part of the mining and processing operations and are in current use, SRK has classified all stockpiles as Indicated Mineral Resources and where planned to be processed economically reported these as Probable Ore Reserves. Table 3.3E presents the results of the Ore Reserve EVA for the Mining Assets whereby the current (2007H1) cash costs (by-product basis) are compared with the LoMp weighted averages and the commodity prices required to return the post-tax pre-finance break-even position at a real terms discount factor of 10%. Table 3.3E Mining Assets: Ore Reserve economic viability assessment 209

211 Mining Asset Cash Costs (by-product basis) +ve NPV 2007H1 LoMp Gold Price (US$/oz) (US$/oz) (US$/oz) Mahd Ad'Dahab Al Amar Bulghah Sukhaybarat Al Hajar Head office n/a Ma aden Gold E VALUATION 4.1E Valuation Methodology The valuation methodology for arriving at the equity value of the Mining Assets is based on the sum of the parts approach comprising the following: The Enterprise Values defined as the sum of the Net Present Values ( NPVs ) of the five Tax Entities; and Various valuation adjustments. The Enterprise Value is also defined as the Net Asset Value ( NAV ) of the Mining Assets. The sum of the NAV and the valuation adjustments are defined as the equity value attributable to Ma aden Gold. SRK has not undertaken a valuation of the Exploration Properties and accordingly the NAV of the Gold Assets is the aggregate NPV of Mahd Ad Dahab, Al Amar, Bulghah, Sukhaybarat, and Al Hajar. The methodology for undertaking the Ore Reserve EVA is based on the commodity price which: Is equivalent to the weighted average LoMp real terms total costs; Reflects the current (2007H1) cash costs reported on a by-product basis; and Is required to return a zero NPV at a real terms discount factor of 10%. 4.2E Enterprise Value: Basis of Valuation The Enterprise Values are based on the application of Discounted Cashflow ( DCF ) techniques to the post-tax pre-finance cashflows represented by the Financial Models as developed for each Tax Entity. The financial Models are based on the various LoMps, including the TEPs. The financial models are based on annual cashflow projections ending 31 December 2007 and TEPs stated in 1 July 2007 money terms. As the Effective Date is 1 July 2007, the cashflow projection for Year 1 includes projections for six months only. In generating the Financial Models and deriving the Enterprise Values, SRK specifically, has: Incorporated the macro-economic forecasts as reflected in Table 4.1E; Incorporated the commodity price forecasts as reflected in Table 4.1E; Applied a real discount factor of 10% which can be compared with the Weighted Average Cost of Capital ( WACC ) of 7.36% real; 210

212 Relied upon Ma aden Gold to the extent that for all accounting inputs as required for the generation of the Financial Models in respect of the Net Movement in Working Capital; Relied upon the Board of Directors of the Company for all accounting inputs as required for the generation of the Financial Models in respect of: the un-depreciated opening balances; a general depreciation rate of 20%; trading loss carried forward indefinitely but limited to 25% of any given year s taxable profit; corporate income tax ( CIT ) of 20%; and Zakat based on 2.5% of the net book value of the assets at the close of each period; Reported Enterprise Values for the Mining Assets as at 1 July 2007 which are based on a DCF valuation of the post-tax pre-finance cashflows resulting from the Financial Models; Performed sensitivity analysis to ascertain the impact of discount factors, commodity prices and total working costs; and Excluded the impact of salvage value on cessation of operations. Table 4.1E Base case commodity price and macro-economic projections (1),(2) Parameter Units 2007H Commodity Prices - Real Gold (US$/oz) Silver (US$/oz) Zinc (USc/lb) Copper (USc/lb) Lead (USc/lb) Commodity Prices - Nominal Gold (US$/oz) Silver (US$/oz) Zinc (USc/lb) Copper (USc/lb) Lead (USc/lb) Macro-Economics US CPI (%) 2.7% 2.7% 2.7% 2.7% 2.7% 2.7% SA CPI (%) 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% Exchange Rate - Real (US$:SAR) Exchange Rate - Nominal (US$:SAR) (1) (2) All commodity prices are quoted at the closing period of 31 December. CPI rates for 2007 are annualised. 4.3E Enterprise Value: post-tax pre-finance cashflows Table 4.2E presents the consolidated cashflows for the Mining Assets as well as the head office expenditures, accordingly this is included for summary presentation purposes only. The first period 2007H1 reports the forecast six-month projections to 31 December 2007, thereafter the projections are annual ending 31 December. 211

213 Table 4.2E Ma aden Gold: financial model in US$ real terms (1 July 2007) Period Units Total/Avg 2007H Production Mining Production - u/g + o/p + s/f Tonnage (kt) 21,195 2,845 6,407 5,795 4, Grade (g/t Au) (g/t Ag) (% Zn) 0.42% 0.05% 0.18% 0.25% 0.28% 3.66% 3.74% 5.62% 4.58% (% Cu) 0.07% 0.02% 0.03% 0.04% 0.05% 0.63% 0.63% 0.99% 0.67% Processing Production - u/g + o/p + s/f Tonnage (kt) 21,665 2,208 5,100 5,147 4,768 2,168 1, Grade (g/t Au) (g/t Ag) (% Zn) 0.43% 0.08% 0.24% 0.29% 0.30% 0.68% 1.45% 1.40% 1.97% (% Cu) 0.07% 0.02% 0.04% 0.04% 0.05% 0.11% 0.23% 0.25% 0.29% Payable Sales Gold (koz Au) 1, Silver (koz Ag) 1, Zinc (t Cu) 52, ,150 8,465 7,940 8,172 8,306 6,910 5,596 Copper (t Zn) 11, ,476 1,559 1,816 1,805 1,790 1, Lead (t Pb) 1, Gold - Equivalent (koz Au) 1, Commodity Price Gold (US$/oz) Silver (US$/oz) Zinc (USc/lb) Copper (USc/lb) Lead (USc/lb) Sales Revenue (US$m) Gold (US$m) Operating Expenditure Summary (US$m) (313.2) (32.1) (57.0) (58.9) (62.3) (40.8) (27.1) (20.5) (14.5) Mining (US$m) (89.1) (5.8) (15.9) (17.1) (17.9) (11.2) (11.1) (7.0) (3.2) Processing (US$m) (149.6) (10.8) (27.9) (29.5) (26.3) (19.5) (17.4) (10.0) (8.0) Overheads (US$m) (71.9) (3.7) (11.9) (11.9) (11.9) (10.7) (10.1) (6.5) (5.2) TC/RC/Realisation/Transportation (US$m) (61.1) (1.7) (10.7) (11.5) (9.7) (8.1) (8.2) (6.4) (4.7) By-product Credits (US$m) Other Corporate (US$m) (106.2) (12.2) (21.3) (21.7) (21.7) (11.4) (7.6) (5.1) (5.3) Environmental (US$m) (17.1) (1.6) (3.4) (3.4) (3.0) (2.3) (2.0) (0.9) (0.5) Terminal Benefits (US$m) (5.2) (0.3) (0.4) (1.8) (0.1) (2.6) Net Change in Working Capital (US$m) 19.3 (2.7) (0.2) Operating Profit (US$m) Tax Liability (US$m) (34.1) (2.6) (9.6) (6.6) (4.5) (4.0) (4.8) (1.4) (0.7) Capital Expenditure (US$m) (62.0) (5.7) (14.7) (11.1) (9.9) (8.5) (7.2) (2.8) (2.1) Final Net Free Cash (US$m) Cash Operating Costs (US$/oz Au) Total Cash Costs (US$/oz Au) Total Working Costs (US$/oz Au) Total Costs (US$/oz Au) E Enterprise Value: Net Present Value and Sensitivities The following section presents the NPVs of the real term cash flows as derived from the Financial Models for individual Mining Assets (see MER). The various NPV tables include the following: NPVs at a range of discount factors; and NPV sensitivity to simultaneous adjustments for sales revenue and total working costs. Table 4.3E Mining Assets (excluding Head office): NPV (US$m) at various discount factors Discount Factor Net Present Value (%) (US$m) 0.00% % % % % % % Table 4.4E Mining Assets (excluding head office): sales revenue and total working cost simultaneous sensitivity at a real discount factor of 10% NPV (US$m) Sales Revenue Sensitivity -30% -20% -10% 0% 10% 20% 30% -15% Total -10% Working Cost -5%

214 Sensitivity 0% % % % Table 4.5E Mining Assets (detail): NPV (US$m) at various discount factors Discount Factor Mahd Ad'Dahab Al Amar Bulghah Sukhaybarat Al Hajar NPV (%) (US$m) (US$m) (US$m) (US$m) (US$m) (US$m) 0.00% (5.2) % (3.8) % (3.0) % (2.2) % (1.4) % (0.8) % (0.3) Table 4.6E Head Office: NPV (US$m) at various discount factors Discount Factor Net Present Value (%) (US$m) 0.00% (127.3) 3.00% (115.8) 5.00% (109.1) 7.50% (101.5) 10.00% (94.8) 12.50% (88.8) 15.00% (83.5) 4.5E Valuation of Advanced Exploration Properties The Mineral Resource statements for the Development Property of Ad Duwayhi and the Advanced Exploration Properties of Mansourah, Ar Rjum, Masarrah, As Suk and Zalim comprise a total Mineral Resource of 7.9Moz of gold contained within 103.2Mt at a grade of 2.4g/t Au. Ad Duwayhi, the most advanced of these has a total Mineral Resource of 2.1Moz of gold contained within 17.1Mt at a grade of 3.9g/t Au representing some 25% of the total gold content of the Mineral Resources reporting as Ad Duwayhi and AEPs. SRK has not valued the Ad Duwayhi or the AEPs (Mansourah, Ar Rjum, Masarrah, As Suk and Zalim). Notwithstanding this limitation, SRK notes the following: Ad Duwayhi: A pre-feasibility study was completed for the Ad Duwayhi development property in February 2007 by SRK. The pre-feasibility study assumes the construction (in 2010) of an open-pit mining operation processing through a carbon-in-leach plant with a rated processing capacity of 1Mtpa at a capital cost of US$92m. The pre-feasibility study was multi-disciplinary in scope, demonstrated the technical feasibility of the project as well as its economic viability given certain assumptions and included a discounted cashflow valuation for the project. Development of the project is however, dependent upon the establishment of regional infrastructure, specifically a water pipeline, the total capital expenditure requirement for which (to be expended in 2010) is some US$90m (at 10% DCF this equates to US$64.4m in 1 July 2007 money terms). The pre-feasibility study assumes that the capital cost for the development of this regional infrastructure is funded by third parties and that offtakers (Ad Duwayhi) are then charged for water supply. The pricing for this supply assumes recovery of the capital costs over a 20 year period in addition to the annual unit operating costs which also assume that other offtakers (including some of the AEPs) have been developed. Accordingly given that Ad Duwayhi on a stand alone basis, does not justify the development of the pipeline, and the conditionality of economic viability on this assumption, no Ore Reserves are declared for the Ad Duwayhi development project. Based on the commodity price forecasts as included herein, SRK has updated its cashflow model and at a discount factor of 10% real, this results in a NPV of US$40m excluding the capital cost for the construction of the regional water pipeline. The project assumes a LoMp inventory of 10.2Mt mined at a grade of 3.5g/t Au, metallurgical recoveries of 93.0%, a processing rate of 1Mtpa and LoMp weighted cash cost of production of US$224/oz; and 213

215 The technical studies completed for the AEPs are generally at the conceptual level and would require the completion of a scoping study followed by a pre-feasibility study to advance these to a similar level of confidence as Ad Duwayhi. Furthermore, their development is also constrained by the availability of a reliable water source. Accordingly Ma aden Gold considers their potential development in combination with Ad Duwayhi (collectively termed the Central Arabian Gold Project ; the CAG Project ). SRK considers that the scope as presented in the Ad Duwayhi pre-feasibility study to be an appropriate proxy for any assessment of the potential development of the CAG Project. 4.6E Valuation Adjustments 4.6.1E Derivative Instruments SRK has been informed that Ma aden Gold has the following derivative instruments as at 1 July 2007: Commodity contracts for gold amounting to 29,615oz at a weighted average strike price of US$279/oz; and Commodity contracts for gold amounting to 190,452oz at a weighted average strike price of US$374/oz. This amounts to a total of 220,067oz of gold with a weighted average strike price of US$361/oz (Table 4.7E). Table 4.7E Commodity (gold) derivatives Item Units Totals/Avg. 2007H Hedge (koz) Strike Price (US$/oz) Based on the spot price as at 1 July 2007 of US$779/oz, the market-to-market value, estimated by the net difference between the spot price and the weighted average strike price multiplied by the hedged ounces, is estimated at a negative US$92.08m E Unallocated Head Office expenditures The NPV at 10% real of the unallocated Head Office expenditures are estimated at negative US$94.8m E Net (Debt)/Cash position As at 30 June 2007, Ma aden Gold had net (debt)/cash position of US$31.9m E Summary of Valuation Adjustments (1) Table 4.8E presents a summary of the valuation adjustments for derivation of the equity value of Ma aden Gold. Table 4.8E Summary of Valuation Adjustments Valuation Adjustment Units Amount Commodity Derivatives - mark-to-market value (1) (US$m) (92.1) Net (Debt)/Cash position (US$m) 31.9 Unallocated Head Office Expenditures (US$m) (94.8) Total (2) (US$m) (155.0) Subsequent Events: Since the preparation of this Extract we have been informed by the Company that it has unwound its gold hedge position represented by the derivative instruments described above at a cost of US$119.25m. As a result the valuation adjustment for the commodity derivative shown in Table 4.8E is no longer appropriate and no such adjustment would be made to any valuation of Ma'aden Gold prepared as at date of this Prospectus. 214

216 (2) Accordingly and given (1) above the Total as presented in Table 4.8E would be adjusted to a negative US$62.9m. 215

217 5.0E RISKS AND OPPORTUNITIES 5.1E Introduction SRK has included its view on the achievement of the LoMp and the appropriateness of the Mineral Resource and Ore Reserve statements when presenting technical and financial data in this Extract. As of the Effective Date (1 July 2007) SRK considers these projections to be achievable. In all likelihood many of the identified risks and/or opportunities will have an impact on the cash flows as presented in Section 5.0E, some positive and some negative. The impact of one or a combination of risks and opportunities occurring cannot be specifically quantified to present a meaningful assessment. SRK has however provided a sensitivity table for simultaneous (twin) parameters. The sensitivity range covers the anticipated range of accuracy in respect of commodity prices, operating expenditures and capital expenditure projections. In this way the general risks are, with the aid of sensitivity tables, adequately covered. 5.2E General Risks and Opportunities The Mining Assets are subject to certain inherent risks and opportunities, which apply to some degree to all participants of the international precious metals mining industry. These include: Commodity Price Fluctuations: These many be influenced, inter alia, by commodity demand-supply balances for gold, silver, zinc, copper and lead. In the case of gold and silver this is also impacted by consumption in industry and jewellery, actual or expected sales by central banks, sales by gold and silver producers in forward transactions and production cost levels for gold and silver in major producing countries. In the three-year period between 1 July 2004 and 30 June 2007 the following apply: gold price ranging between US$387/oz and US$651/oz with a resulting three year average of US$529/oz which can be compared with the long-term price of US$511/oz and the current 1 October 2007 spot price of US$743/oz, silver price ranging between US$5.88/oz and US$14.94/oz with a resulting threeyear average of US$9.64/oz which can be compared with the long-term price of US$9.50/oz and the current 1 October 2007 spot price of US$13.78/oz, zinc price ranging between USc43/lb and USc210/lb with a resulting three-year average of USc104/lb which can be compared with the long-term price of USc65/lb and the current 1 October 2007 spot price of USc138/lb, copper price ranging between USc121/lb and USc398/lb with a resulting three-year average of USc230/lb which can be compared with the long-term price of USc140/lb and the current 1 October 2007 spot price of USc369/lb, lead price ranging between USc37/lb and USc163/lb with a resulting three-year average of USc63/lb which can be compared with the long-term price of USc40/lb and the current 1 October 2007 spot price of USc156/lb; Exchange Rate Fluctuations: Specifically related to the related strength of the US$, the currency in which commodity prices are generally quoted. During the period between 1 July 2004 and 30 June 2007 the US$:SAR exchange rate was pegged at 3.75; Inflation Rate Fluctuations: Specifically related to the macro-economic policies of the individual countries. During the period between 1 July 2004 and 30 June 2007, United States CPI ranged between 1.3% and 4.7% reported on a 12-month basis. During the 216

218 period between 1 July 2004 and 30 June 2007, Saudi CPI ranged between -0.2% and 3.6%; Country Risk: Specifically country risk including: political, economic, legal, tax, operational and security risks; Legislative Risk: Specifically changes to future legislation (tenure, mining activity, labour, occupational health, safety and environmental) within Saudi Arabia; Exploration Risk: Resulting from the elapsed time between discovery of deposits, development of economic feasibility studies to bankable standards and associated uncertainty of outcome; Mining Risk: Specifically Ore Reserve estimate risks, uninsured risks, industrial accidents, labour disputes, unanticipated ground water conditions, human resource management and safety performance; and Development Project Risk: Specifically technical risks associated with green field projects for which technical studies are limited to pre-feasibility studies or less and development and production has not commenced. In addition to those stated above, the Mining Assets are subject to certain specific risks and opportunities, which independently may not be classified to have material impact (that is likely to affect more than 10% of the Tax Entities annual pre-tax profits), but in combination may do so. 5.3E Specific Risks and Opportunities In addition to the specific risks and opportunities identified below, addressing the general deficiencies identified by SRK is important to: unlocking the potential of the Gold Assets; to further assess the impact of lower recoveries at Bulghah and Sukhaybarat; and to maintain and increase production beyond The deficiencies identified are: Mineral Resource and Ore Reserve: The application and documentation of Quality Control and Quality Assurance, The lack of a formal Mineral Resource and Ore Reserve Management system as exemplified by the currency of core data (>2 years), lack of detailed reconciliation, reliance on manual methods, lack of detailed mine design and production scheduling beyond the immediate budget (1 year) reporting period; and Environmental Management, specifically the limitations in respect of: EIAs for Mahd Ad Dahab and Sukhaybarat, Rudimentary social assessments arising from the limited public involvement, Monitoring processes. The additional specific risks and opportunities are: Environmental Risk: The inability of the Mining Assets to fund the environmental liabilities from estimated operating cashflows, should operations cease prior to that projected in the LoMp. This would result in an unfunded liability since the estimated rehabilitation expenditure is not currently funded. As at 1 July 2007, Ma aden Gold s environmental liability is estimated at US$17.1m. SRK notes that certain components of this risk may be mitigated as no assumptions have been made regarding the ability to 217

219 generate revenue through recovery of metals or sale of scrap when reporting this environmental liability. Specific environmental risks at each of the Gold Assets include: At Sukhaybarat, the seepage from the tailings storage facilities ( TSFs ) and the cessation of abstraction of polluted water emanating from the site, Some 2.2Moz of the total 5.8Moz of gold associated with the Exploration Properties is attributed to the Ar Rjum AEP which is located within the Mahazat Assaid Conservation Area which was established in the 1980s as a safe haven for endangered species such as the Arabian Oryx and indigenous Arabian Ostrich. Conversion of the Exploration Licence for Ar Rjum to an Exploitation Licence will require completion of a feasibility study and an Environmental Impact Study. In this respect a risk remains that the completion of such environmental work will not adequately address all environmental issues satisfactorily to ensure the conversion to an Exploitation Licence; Environmental Compliance: All Mining Assets that are operational were granted mining leases (now called Exploitation Licences) when the old Mining Code (promulgated by Royal Decree No. M/21, dated July 1972) was in effect. The general environmental legislation, by means of Article 15 of the Implementing Regulations, allows all projects existing at the time of issue of the regulations a maximum grace period of five years (until September 2008) to ensure their compliance with both the Public Environmental Law and the Implementing Regulations. Accordingly whilst an extension is possible it is crucial that the Company adheres to a process to achieve the intended deadline; Exploration Risk: During 2007 the Company significantly reduced the area of exploration licences under direct management to 47,521.0km 2. Ma aden Gold s current strategy assumes a further reduction to 14,000.0km 2 and total operating expenditures of US$33.5m. The exploration programme in the Northern-Arabian Shield ( NAS ) Region (US$17.4m) includes target generation where no JORC Code compliant Mineral Resources have been defined. Accordingly there remains a risk that the necessity to relinquish further licence area in the near future may not allow sufficient time to advance these properties as planned. This risk is further heightened by the fact that historical activity to date in the NAS region in respect of drilling appears significant by comparison with the Central Arabian Gold Region; Terminal Benefits Liability Risk: The inability of the Mining Assets to fund the terminal benefits liabilities from estimated operating cashflows, should operations cease prior to that projected in the LoMp. This would result in an unfunded liability since the estimated terminal benefits expenditure is not currently funded. As at 1 July 2007, Ma aden Gold s terminal benefits liability is estimated at US$8.1m; The combined operational and economic risk as reflected in the LoMps, specifically: at Al Amar, that projected dilution is greater than that envisaged in the 2001 Feasibility Study given the current development dimensions and the acquisition of larger underground equipment than initially planned. In addition the planned processing expenditures are some 17% lower than currently experienced at Mahd Ad Dahab Plant, despite the similarities in respect of planned production rates and flowsheet arrangements. at Bulghah, specifically in respect of the planned significant increase in the processing of lower grade fresh ore with significantly reduced metallurgical recoveries, at Sukhaybarat, the projected decline in processed grades beyond 2009 resulting in cash operating costs in excess of US$600/oz, 218

220 Al Hajar s re-crushing project given the estimation risks associated with sampling historically stacked heap leach material and ensuring the representivity of metallurgical testwork; Development risks associated with the Development Property and the Advanced Exploration Properties given: that only a pre-feasibility study has been completed for Ad Duwayhi, that only conceptual/scoping studies have been completed for Mansourah, Ar Rjum, Masarrah, As Suk, and Zalim, that all of the above are to some degree dependent upon the establishment of a regional water pipeline at an overall capital cost of US$90m; The opportunity to increase Ore Reserves, through: upgrading of Inferred Mineral Resources at the AEPs through further drilling as well as completion of appropriate technical studies demonstrating the technical feasibility and economic viability of the CAG Project, re-optimisation of open-pits at Bulghah at the long-term commodity prices and consideration of the applicability of the current positive bias between grade-control models and exploration models, upgrading of Inferred Mineral Resources at Mahd Ad Dahab, Al Amar and Bulghah to the Indicated Mineral Resource category through further drilling and completion of the necessary technical studies for modification to Probable Ore Reserves; and The opportunity to increase Mineral Resources through: further drilling, specifically targeting the areas which have not been closed off by drilling at Ad Duwayhi and the AEPs, application of improved geological wireframing at certain of the AEPs specifically Mansourah where the current Mineral Resource could be significantly expanded without the necessity of further drilling, further exploration at the prospects situated within 30km of Sukhaybarat: Hablah South; Red Hill; La prospect; and Al Habla, further exploration at the six prospects situated within 30km of Al Hajar: Hajeej; Sheers; Jadmah; Gossan-14; Waqba and Shabat Al Hamra, implementation of the planned exploration at the Exploration Properties which have not yet reported JORC Code compliant Mineral Resources. SRK has not been informed of the use of proceeds from the Admission and accordingly cannot comment on whether this will be utilised in the further development of Ma aden Gold. 219

221 6.0E COMPANY EQUITY VALUE 6.1E Introduction The following section includes an assessment of the equity value of the Company which is based on the sum of the parts approach combining: the valuation of the Mining Assets as represented by the Enterprise Values and the Valuation Adjustments. 6.2E Equity Value Table 6.1E gives the equity value of Ma aden Gold at a discount factor of 10% real. Table 6.2E gives the equity value at a range of real discount factors and Table 6.3E gives the sensitivity of the equity value to changes in sales revenue and total working costs for the Enterprise Values and the value of unallocated Head Office overheads. 220

222 (1) Table 6.1E Ma aden Gold equity value Valuation Component Units Valuation Enterprise Value (Mining Assets) Mahd Ad'Dahab (US$m) 79.8 Al Amar (US$m) 91.7 Bulghah (US$m) 39.9 Sukhaybarat (US$m) (1.4) Al Hajar (US$m) 7.8 Subtotal (US$m) Exploration Assets (US$m) - Gold Assets (Net Asset Value) (1) (US$m) Valuation Adjustments (US$m) (155.0) Equity Value (US$m) 62.7 Mineral Resources (Gold Assets) (koz Au Eq) 10,058 Ore Reserves (Gold Assets) (koz Au Eq) 1,329 EV per Mineral Resource Unit (1) (US$/oz Au Eq) 6 EV per Ore Reserve Unit (US$/oz Au Eq) 47 Subsequent Events: Since the preparation of this Extract we have been informed by the Company that it has unwound its gold hedge position represented by the derivative instruments described above at a cost of US$119.25m. As a result the valuation adjustment for the commodity derivative shown in Table 6.1E is no longer appropriate and would be reduced to a negative US$62.9m, which would result in a revised Equity Value of US$154.8m. (1) (2) The Equity Value per Mineral Resource unit contained within the Mining Assets (2.1Moz) is estimated at US$30/oz. Table 6.2E Ma aden Gold equity value: discount factor sensitivity analysis Discount Factor Mining Assets Head Office Other Valuation Adjustments Equity Value (%) (US$m) (US$m) (US$m) (US$m) 0.00% (127.3) (60.2) % (115.8) (60.2) % (109.1) (60.2) % (101.5) (60.2) % (94.8) (60.2) % (88.8) (60.2) % (83.5) (60.2) 46.7 Subsequent Events: Since the preparation of this Extract we have been informed by the Company that it has unwound its gold hedge position represented by the derivative instruments described above at a cost of US$119.25m. As a result the valuation adjustment for the commodity derivative shown in Table 6.1E is no longer appropriate and would be reduced to a positive US$31.9m, which would result in a revised Equity Value of US$154.8m. (1) Table 6.3E Ma aden Gold equity value: sales revenue and total working cost simultaneous sensitivity at a real discount factor of 10% NPV (US$m) Sales Revenue Sensitivity -30% -20% -10% 0% 10% 20% 30% -15% (22.1) Total -10% (37.2) Working Cost -5% (52.5) (7.0) Sensitivity 0% (68.0) (21.4) % (83.7) (36.3) % (99.4) (51.6) (6.7) % (115.2) (67.1) (21.1) Subsequent Events: Since the preparation of this Extract we have been informed by the Company that it has unwound its gold hedge position represented by the derivative instruments described above at a cost of US$119.25m. As a result the Equity Value of US$62.7m would be revised to US$154.8m 7.0E CONCLUDING REMARKS Ma aden Gold s Mineral Resource and Ore Reserve statement (Table 3.1E) as included in this Extract are JORC Code compliant and includes a total Mineral Resource of 10.0Moz of gold contained within 132.8Mt grading 2.3g/t Au (2.4g/t Au Eq) and total Ore Reserves of 1.3Moz of gold contained within 21.7Mt grading 1.9g/t Au. In assessing the potential beyond this, the reader is referred to the various Ore Reserve sensitivities in Table 3.2E and SRK s comments regarding the advanced exploration properties and the exploration properties. The sensitivities, however, are not based on detailed LoMp and should only be considered on a relative basis. The equity value of the Company as stated in this Extract at US$62.7m should be considered in conjunction with the accompanying sensitivity analyses as reported in Table 6.3E. SRK has not been informed of the use of proceeds from the Admission and accordingly cannot comment on whether this will be utilised in the further development of Ma aden Gold. 221

223 For and behalf of SRK Consulting (UK) Limited Martin Pittuck, Principal Consultant, SRK Consulting Iestyn Humphreys, Director, SRK Consulting David Pearce, Corporate Consultant, SRK Consulting 222

224 Phosphate Mineral Expert's Report 1. Introduction 1.1 Purpose of Report An Independent Mineral Experts Report on the Phosphate Project This report has been prepared by Behre Dolbear International Limited ( Behre Dolbear ) for inclusion in the Prospectus to be published by the Saudi Arabian Mining Company ( Ma aden ) in connection with an offer of ordinary shares in Ma'aden and proposed admission of ordinary shares to the Official List of the Capital Market Authority and the trading of those shares on the Saudi Arabian Stock Exchange. Behre Dolbear was instructed by the directors of the Company to prepare a Minerals Expert s Report ( MER ) for the Al Jalamid Phosphate Project ( the Phosphate Project ). This report, which summarises the findings of Behre Dolbear s review has been prepared to satisfy the requirements of a Mineral Expert s Report as set out in Chapter 19 of the listing rules of the UKLA and, with respect to resources and reserves, the Australasian Code for Reporting Mineral Resources and Reserves (September 1999) published by the Joint Ore Reserves committee ( JORC ) of the Australasian Institute of Mining and Metallurgy, Australasian Institute of Geoscientists and the Minerals Council of Australia ( the JORC Code ). The JORC Code establishes the nature of evidence required to ensure compliance with the code. The review was conducted with regard to the JORC Code because it is internationally recognised. In this report, all resource and reserve estimates are reported in accordance with the JORC Code and have been substantiated by evidence obtained from Behre Dolbear s site visits and observation. They are supported by details of drilling results, analyses and other evidence and take account of all relevant information supplied by Ma aden management and contractors. 1.2 Capability, Independence and Disclaimer This report was prepared on behalf of Behre Dolbear by the signatories of this report. Details of the qualifications and experience of the consultants who carried out the work are in Annex A to this report. Behre Dolbear operates as an independent technical consultant providing resource evaluation, mining engineering and mine valuation services to clients. Behre Dolbear has received and will receive professional fees for its preparation of this report. None of Behre Dolbear nor any of its directors, staff or sub-consultants who contributed to this report has any financial interest in: Ma aden; the mining assets reviewed; the outcome of the Offer Behre Dolbear has conducted an independent technical review of the Ma aden Phosphate Project including a visit to the project sites by minerals experts. Behre Dolbear has reviewed technical data, reports, and studies produced by other consulting firms as well as information provided by Ma aden and their contractors. The review was conducted on a reasonableness basis and Behre Dolbear has noted herein where such provided information engendered questions. Except for the instances in which we have noted questions, Behre Dolbear has relied upon the information provided as being accurate and suitable for use in this report. Metric units are used throughout this report and all financial estimates are in United States dollars (US$). 223

225 1.3 Scope of Work Behre Dolbear was engaged as Technical Consultant by Ma aden to prepare a Mineral Experts Report to include: the background to the project, an opinion on the phosphate mineral resource and reserves, an assessment of the proposed mining unit, an assessment of the process plants (beneficiation plant at Al Jalamid and chemical plants at Ras Az Zawr), an analysis of the infrastructure and capital projects, human resources analysis, health and safety review, environmental planning and issues, assessment of the implementation plan, valuation of the project assets. 1.4 Sources of Information Documentary information is available dating from identification of the phosphate deposits in the Thaniyat area in Sources include: Reports by Riofinex ( a subsidiary of Rio Tinto plc) and the Directorate General of Mineral Resources from 1976 to 1986; United States Geological Survey ( USGS ) reports from 1987 to 1992; Saudi Arabian Mining Consortium ( SAPC ) with the SNC-Lavalin/Jacobs consortium from The Behre Dolbear project team visited the Al Jalamid site and the project office in May 2006 and subsequent visits to review recent ongoing feasibility study work, including a meeting in September Inherent Mining Risks Mining is carried out in an environment where not all events are predictable. While an effective management team can, firstly, identify the known risks and, secondly, take measures to manage and mitigate these risks, there is still the possibility of unexpected and unpredictable events occurring. It is therefore not possible to remove totally all risks or state with certainty that an event which may have a material impact on a mine will not occur. In the case of the Al Jalamid deposit, the proposed mining method is a regular truck and shovel operation for both overburden and phosphate ore, requiring drilling and blasting activities. This is a standard system for the mining of a bulk mineral in an arid environment. There are no perceived unusual inherent mining risks. 224

226 1.6 Glossary of Terms Words and Expressions used in this report are defined in the Glossary of Terms of the Prospectus. 2. The Project The Ma aden Phosphate Project is the development of the Al Jalamid phosphate deposit to produce about three million tonnes per year of phosphate fertilizer products for a minimum of twenty years from Under an agreement between Ma aden and Saudi Arabian Basic Industries Corporation ( SABIC ) the project will be undertaken by PhosCo, a company which is intended to be jointly owned by Ma aden with a 70% equity interest and SABIC with a 30% equity interest. The location of PhosCo s operations is shown in Figure 2.1. At Al Jalamid, Ma aden has exclusive exploration rights over an area of almost 10,000 km 2 and a mining licence covering a deposit where an open-cut mine is planned, capable of producing 11 Mtpy of run-of-mine ore with more than adequate Ore Reserves to support the operations beyond the designated 20-year life of the project. Behre Dolbear has reviewed the licence issued by the Ministry of Petroleum and Mineral Resources ( MPMR ) for exclusive rights to mine phosphate ore for a period of 30 years. Developments on the Al Jalamid site will include a beneficiation plant, involving crushing and flotation and drying to produce 5.0 Mtpy (dry basis) of phosphate concentrates containing 32% to 33% P 2 O 5, and related facilities including a power generating plant, workshops, and warehouses. The phosphate concentrates are to be processed in a chemical complex with related infrastructure at Ras Az Zawr ( RAZ ), a new port on the Arabian Gulf, 90km north of Al Jubail and 200km south of the Kuwait border. The complex is designed to convert the concentrates to Mt/y Diammonium Phosphate fertilizer ( DAP ), using local sulphur and natural gas. The four chemical process plants are a sulphuric acid plant ( SAP ), a phosphoric acid plant ( PAP ), an ammonia plant ( TAP ) and the DAP plant. Other facilities within PhosCo s battery limits include a desalination plant to supply fresh water, a power generation plant utilising steam generated by the SAP and a seawater cooling facility. Other essential developments are: the North-South Railway ( NSR ) that will connect Al Jalamid and RAZ, to be built and operated by the Saudi Arabia Railway Company ( SAR ); the Ras Az Zawr Port, being constructed by the Saudi Port Authority; and support infrastructure provided to the PhosCo at RAZ by Infraco, a subsidiary of Ma aden. The Phosphate Project plan is to produce DAP fertilizer at an average operating cost over the first 20 years, including the cost of by-products, but not allowing for by-product credits, of $98 per tonne of DAP. Start-up is forecast for fourth quarter of 2010, and the initial capital cost is estimated to be $4.54 billion in Q terms not including financing costs. Sustaining capital is estimated at $252 million over the mine life. 225

227 2.1 Location Map Scale: 1cm to 140km PLANTS AND PORT 2.2 The Technical Consultant Team Visits Behre Dolbear assigned a team of nine professionals to the project, and has conducted three reviews of the project as it has developed. In May 2006, documents were reviewed and copied from the data room at PhosCo s offices in Al Khobar, including the Bankable Feasibility Study ( BFS ) prepared by SNC Lavalin Jacobs ( SAPC Saudi Arabian Phosphate Consortium ) dated February Over the course of several days, presentations were given by the staff of Worley Parsons ( WP ), the project management contractor engaged by Ma aden primarily to cover developments since completion of the BFS. The mine site at Al Jalamid and the chemical and fertilizer plant site at RAZ were visited with PhosCo personnel. The team also attended a briefing on the North-South Railroad. The second review was made in January, 2007, to receive an update on the progress during the preceding six months. Behre Dolbear reviewed a number of revised documents, conducted site visits, and received updated detailed presentations from WP and Ma aden personnel on the PhosCo Project, the infrastructure and port, and by the Saudi Public Investment Fund ( PIF ) on the NSR. The third review by Behre Dolbear was conducted in June 2007 to update the overall progress of the project, the development of the port and the NSR, project schedule, current capital cost 226

228 estimates, and to review construction contracts for the sulphuric acid plant, phosphoric acid plant, ammonia plant and DAP plant. 3. Geology, Resources and Reserves 3.1 Geology The Al Jalamid phosphate deposit occurs within the Thaniyat member of the Jalamid Formation, which straddles the boundary between the Cretaceous and Tertiary periods. The phosphatebearing Thaniyat member is reasonably shallow, flat and easily accessible. It is up to 25m thick in the Al Jalamid resource area, with overburden 8 to 15 m, and encompasses 32.7km 2 (up to 30km long on an NW-SE alignment and of variable width up to 3km). Ma aden controls an area of almost 10,000km 2 in terms of an Exploration Licence and subsequent Ministerial Decisions issued by the Kingdom of Saudi Arabia. 3.2 Resource and Reserve Estimate The phosphate resources estimated within the Al Jalamid resource area are classified as Measured, according to JORC Code guidelines. The criteria for defining the resources are based on the following factors: There have been many periods of geologic exploration, beginning with the regional identification of phosphate rock from water-well drill-hole cuttings in 1965 and culminating in 2004 with an extensive drilling, sampling, and testing programme; The post-1980s work was completed in the presence of a Competent Person as generally defined by JORC and the resource/reserve estimates have been prepared using the JORC guidelines; The drilling, sampling and chemical analysis were of 257 drill-hole samples with the average distance between the drill holes reported at about 350m, Nine manually excavated pits exposed the mineral; and A trial-cut mine has extracted a bulk sample of the mineral. The total phosphate resource within the resource area is estimated at 534 million tonnes ( Mt ) with a probability of 97.5% that the tonnage exceeds 505 Mt. Not all the measured phosphate resource estimate will be economically mineable and so defined as reserves. The proven ore reserve estimate, based on a 20-year mining plan and the economics of the project, is shown, together with the resource estimate in Table 3.1 below. Table 47: Estimates of Al Jalamid Phosphate Mineral Resources and Proven Ore Reserves for the 20-Year Mining Area Mineral Estimate Tonnes Strip Ratio % P 2O 5 % MgO Measured Resources 534,000, Proven Reserves 223,305, : The Ore Reserves shown are limited to the 20-year mining plan, and are a part of the measured resources, not additional. A mining plan for measured resources within the drilled and tested area would enable conversion of more resources to reserves, probably about 200 Mt, but they would have higher stripping ratios. Developments since these estimates were made, including an increase in assumed product prices and improved beneficiation recovery would lead to a modest increase in the estimate. 227

229 Behre Dolbear believes that the Proven Reserve estimate prepared by the Phosphate Project reflects the project phosphate reserves because: The ore sampling programme conformed to industry standards and included several quality control features such as duplicate chemical analyses within the primary laboratory and at independent laboratories; and The information prepared by Ma aden is sufficient for an accurate description of the classical geology and the estimation of the Al Jalamid phosphorite resources within the area; the reserve estimates for the projected 20-year mine life conform to JORC criteria and meet international industry standards for describing the physical, chemical, resource, and reserve characteristics for phosphate rock deposits; and There are more than sufficient phosphate resources to support the 20-year mining plan, including an additional 194 million tonnes of measured resources adjacent to the proposed mine plan area that could be mined. The stripping ratio is indicated to be higher and a mine plan has not been developed to determine if these are economical but it is expected that a significant portion of these resources would support extension of the existing mine plan. Further, the assumptions regarding ore recovery appear to be conservative and could result in additional ore being recovered within the current mine plan area. This observation is further supported by the contract miner s technical proposal indicating that they believe they can improve ore recovery as a result of their proposed mining process. Thus there are more than sufficient reserves to support the 20-year mining plan. Figure 3.1 shows the general layout of the orebody and mine plan. Figure 3.1 Ore Body and Mine General Layout 228

230 4. Exploitation Figure 4.1 shows a chart of the processes involved in exploitation of the phosphate resource. Figure 4.1 Ma aden Phosphate Project Block Flow Diagram BENEFICIATION PLANT Al Jalamid 12M TPY ORE MINE OPERATIONS 18.6M BCM/YR OVERBURDEN Al Jalamid Ras Az Zawr PHOSPHATE CONCENTRATE 5.020M TPY (DRY BASIS) Via Rail to Ras Az Zawr SULPHUR STORAGE 20,000 T MOLTEN SULPHUR 1.520M TPY CONCENTRATE STORAGE 200,000 T (14 days) SULPHURIC ACID PLANT 4.663M TPY (Storage 108,000T) (8 Days) COOLING CLAY (KAOLIN) 0.07 MTPY + SILICA 0.03 MTPY NATURAL GAS MMBTU/yr PHOSPHORIC ACID PLANT 1.521M TPY 1 day 40% Acid Storage 1 day 48% Acid Storage AMMONIA PLANT 1.089M TPY (Storage 60,000 T) (18 days) FSA to Neutralization COOLING SEA WATER 36,850m 3 /hr PHOSPHOGYPSUM STACK 8.3M TPY SALES to SABIC PHOSPHORIC ACID 162,000 TPY DAP/MAP GRANULATION PLANT 2.922M TPY TO PORT FOR EXPORT CONVEYOR 2.922M TPY DAP STORAGE 200,000 T (22 Days) TO PORT FOR EXPORT 437,000 TPY 229

231 4.1 Licences and Permits Behre Dolbear has reviewed the licence issued by the Ministry of Petroleum and Mineral Resources ( MPMR ) for exclusive rights to mine phosphate ore for a period of 30 years. The licence has provisions for termination if PhosCo fails to make mining fee payments and file appropriate reports in a in timely manner. Numerous other permits have been issued or applied for relating to both Phosco s Al Jalamid and RAZ sites including roads, water, waste disposal, explosives, security, safety, medical centers and environmental controls. No reason is seen for these not being granted. 5. Planned Mine and Facilities at Al Jalamid The Al Jalamid project area includes the surface phosphate mine, the beneficiation plant, a railway loadout facility, a railway spur for the delivery of supplies to Al Jalamid, a diesel-powered electrical generation plant, maintenance and warehousing facilities for the beneficiation plant, water supply, employee bachelor quarters, a helipad, and a waste-water treatment facility. 5.1 Al Jalamid Mine The mining plan is based on surface mining of some 11 Mt/y of ore from one of two phosphate beds. Only the upper bed occurs in the area to be mined in the initial years of mining. Both beds will be recovered in the areas where they are mineable. Ma aden plans to engage a contract miner to undertake mining operations for an initial 8-year period. The contractor will use diesel-powered hydraulic shovels, blast-hole drills, haulage trucks, front-end loaders, dozers, graders and other support equipment to remove overburden, and to mine and transport the ore to a crushing and screening plant owned and operated by PhosCo. A mining contractor has been selected after a competitive tendering process in which seven bids were received from nine invitations and Ma aden has signed the mining contract. 5.2 Phosphate Ore Beneficiation Plant Ma aden has selected a process developed by SAPC and then optimized by Litwin for the beneficiation plant after pilot-plant tests were conducted on ore samples from the Al Jalamid test mine showed an improved recovery of phosphate as compared to the earlier tests. The process involves: particle size reduction using crushers and rod mills, desliming, froth flotation to remove carbonates, concentrate dewatering, drying to around 4% moisture and storage, concentrate reclaim and rail loadout, waste disposal, and process water recovery and distribution. The plant design is based on a annual production rate of up to 5 Mt of phosphate rock concentrates containing an average of 33% P2O5 on a dry basis, with a concentrate yield of about 40%. The proposed beneficiation plant engineering, procurement and construction ( EPC ) contract, which will be on a lump-sum turnkey ( LSTK ) basis, covers: the mobile crushing plant located near the mining operations; 230

232 the overland ore conveyor system to transfer the ore from the mobile crushing plant to the stockpiling facility at the beneficiation plan; the crushed ore stockpiling facilities at the beneficiation plant; the beneficiation plant; the wet concentrate storage and reclaiming facilities; the concentrate drying plant; the dry concentrate storage and reclaiming facilities; an in-motion railcar loading system for the concentrate loadout the tailings distribution system from the beneficiation plant to the tailings pond, the dam and tailings water reclaim system. Behre Dolbear concurs with the selection of the beneficiation process developed because the phosphate recovery increases, in spite of increased capital and operating cost. However, there are some concerns with the beneficiation process testing and its impact on the operations, including potential MgO contamination. The report on the bench and pilot scale tests qualifies the results indicating that the method of simulating the MgO content may not be representative conditions where the ore has a high inherent MgO content. However, Behre Dolbear understands that Datong has a proprietary reagent to remove MgO that should minimize this concern. Also, the bulk and pit samples used for testing were not from the area to be mined during the first eight years of operations. However, the ore characteristics are generally consistent across the reserve area and Ma aden is requiring the beneficiation contractor to perform beneficiation tests on samples representing the initial 8 years of the mining operations. It is important that beneficiation tests on samples representing the early years of mining should be performed. 5.3 Al Jalamid s Industrial and Social Infrastructure The industrial infrastructure for PhosCo s operations at Al Jalamid includes: a concentrate-loading facility; a well field for water supply; a power plant and power distributions system; maintenance and warehousing complex for the beneficiation plant; administrative offices; and bachelor quarters at the mine site. PhosCo will own and operate the concentrate loading facility, but the North-South Railway will own and operate the rail tracks into the site. The availability of water for industrial and town-site distribution is a critical component of the Al Jalamid mine operation. The regional assessment of the groundwater resources indicates multiple sources of adequate quantity and water quality. The design basis of the water treatment plant is in accordance with WHO standards and the storage capacity appears adequate. The use of a reverse-osmosis plant is appropriate for this application. 231

233 The independent power supply is based on combustion turbine generators using diesel fuel. Various services that require emergency backup are provided with diesel generator sets. The planned power plant should be adequate to meet the power requirements of Al Jalamid. The maintenance facilities will primarily service the beneficiation plant. The mining contractor will be responsible for his own maintenance facilities. Most of PhosCo s employees will live in existing towns near Al Jalamid, and the only social infrastructure will be a bachelor housing for some PhosCo employees. Behre Dolbear concurs with PhosCo s decision not to construct and operate a town site at the mine location. Most mining companies are avoiding the development of employee town sites because they are difficult to manage and costly to operate. 6. PhosCo s Chemical Complex at Ras Az Zawr The chemical complex at RAZ consists of four major processing plants, as detailed below. 6.1 Sulphuric Acid Plant (SAP) Ma aden selected Outotec, a subsidiary of Outokumpu Oy, to design the large-capacity sulphuric acid plants using Outotec/Lurgi technology with the capacity to produce 4.66 million tonnes per year of 98.5% sulphuric acid. Behre Dolbear supports this selection. The design provides for three sulphur-burning acid-production lines with common acid-storage and molten-sulphur receiving area. Each production line will have a design capacity of 4,500 t/d of 98.5% sulphuric acid, will consume 1,505 t/d of sulphur with a conversion efficiency of 99.7% and will produce 230 t/h of high-pressure steam at 482 C and 66kg/cm 2. About 1.5 Mt/y of molten sulphur, supplied by Saudi Aramco in road tankers, will be consumed per year. The sulphuric acid plants employ the double-contact/double-absorption process where acid is produced by burning molten sulphur to produce sulphur dioxide followed by catalytic conversion to sulphur trioxide, and absorption with water to form sulphuric acid. The design of the sulphuric acid plants will be flexible and with debottlenecking they should be able to produce up to 5,000 tonnes per day. The sulphuric acid is utilised in the phosphoric acid plant to produce phosphoric acid from phosphate concentrates. Behre Dolbear concurs with Ma aden s decision on the process and the selection of contractor. One concern is the limited designed capacity to store acid. There is adequate area to add to this storage at a later date with addition to the capital cost if it is proven necessary. 6.2 Phosphoric Acid Plant (PAP) The Yara technology has been selected by Ma aden for the production of phosphoric acid with an annual plant production capacity of 1.52 Mt/y The PAP is based on the hemihydrate process, which is a proven process. Yara, a Norwegian company is the world's leading producer and marketer of mineral fertilizers and in the last 10 years probably half of the world s new PAPs have used Yara technology. The design covers three 1460 t/d phosphoric acid lines for a total capacity of 1.52 Mt/y of 48% P 2 O 5 strong acid. The total consumption will be 5.02 Mt/y of phosphate concentrate and 4.49 Mt/y of sulphuric acid. Weak acid at 40% P 2 O 5 is fed to three acid-concentration evaporators to produce strong acid which is pumped to the DAP plants. The Al Jalamid concentrate has been adequately tested to demonstrate the potential for producing a commercial grade acid. The concentrate storage capacity of 200,000 tonnes, equivalent to 14 days of operation, should be adequate to ensure continued production in event of all normally anticipated problems on the railway or in the beneficiation plant. There is provision for only one day of acid storage, between the PAP and the DAP plant. Behre Dolbear believes that the PAP may not operate efficiently with only one day of acid storage, and this will cause the costs of producing phosphoric acid to be higher than projected due to frequent 232

234 cut-backs in production. There is ample area for expanded storage and additional storage capacity could be installed at minimal cost relative to the overall project should storage capacity prove to be a problem in optimizing operations. However, Behre Dolbear recommends that the acid storage capacity be expanded to at least 3 days during the initial construction to allow the plant to operate more efficiently and reduce production costs. The process produces phosphogypsum as a waste by-product to be stacked in an area south of the PAP with capacity to store over 20 years of phosphogypsum production. There will be a series of stockpiles rising to 50m in height south of the concentrate unloading station and advancing south from there. The plant also produces fluosilicic acid which is neutralized in a neutralization system. Behre Dolbear concurs with PhosCo s decision to award the LSTK contract to construct the PAP to the consortium of Litwin Chemical Technologies and Tekfen Construction. 6.3 Ammonia Plant The technology selected by Ma aden for the ammonia plant is the SAFCO IV design using Uhde s process, a standard design with proven success which should meet annual production projections. Behre Dolbear concurs with this process selection and with the selection of Samsung to construct a plant based on a recently successfully commissioned 3,300tpd SAFCO IV design using Uhde s process. The plant is designed to produce ammonia with a minimum NH3 content of 99.8% at a capacity of 3,300t/d (1.09Mt/y). This will produce more ammonia than required for the DAP production of 2.922Mt/y, but it has been determined that there is a market in the region for additional ammonia, and the excess capacity will be exported until such time as downstream users at Ras Az Zawr require offtake and/or an expansion of the phosphate project occurs. The primary raw material for the plant is natural gas, about 32 billion BTUs a year, which will be supplied by Saudi Aramco by pipeline. The ammonia storage capacity of 60,000 tonnes appears to be adequate considering that SABIC will market the excess ammonia production and has the capacity to store additional ammonia if necessary. 6.4 DAP Fertilizer Plant Behre Dolbear concurs with the selection of the Incro s Mixed Process using a pre-neutralizer and pipe reactor and the contract award to the consortium of Intecsa-Ingenieria Industrial S.A., INITEC Energia S.A. and Dragados Gulf Construction. The DAP plant is designed to produce 2.92Mt/y of DAP fertilizer and the Incro process should meet annual production projections. The plant will have: four DAP units each having 2,250t/d production capacity. It will consume tonnes of phosphoric acid and tonnes of ammonia per tonne of DAP produced, and produce DAP with a content of 18% N, 46% P 2 O 5 ; and MAP content of 11% N, 52% P 2 O 5. It is also capable of producing the same amount of monoammonium phosphate fertilizer (MAP). The designed storage of DAP/MAP is 200,000 tonnes. Behre Dolbear believes that the storage capacity of 200,000 tonnes may not be adequate in view of the seasonal nature of the fertilizer business even when shipping to a two-season market, and if PhosCo decides to produce both MAP and DAP, the fertilizers will need to be kept separate and more storage capacity will be required. PhosCo has indicated that it plans to be ready to add another 100,000 tonnes of storage if it is shown that this is a required, and the storage area is also large enough to increase total storage capacity to 600,000 tonne if this should be necessary. 6.5 PhosCo s Infrastructure at Ras Az Zawr PhosCo s industrial infrastructure includes a power generation plant utilising steam from the sulphuric acid and ammonia plants, a desalination plant, concentrate unloading system and water cooling facility. The power plant is a robust system with reliable and safe operating characteristics. The plant will also be connected to the national grid, both to receive power for 233

235 start-up and in emergencies, and to permit the export and sale of surplus generating capacity. The desalination plant has not been reviewed in detail, but these are generally off-the-shelf facilities and there should be no significant problems with it. An administration building and a training center are located at the extreme south-west of the plot assigned to PhosCo, south of the warehouse and maintenance complexes. The maintenance facilities are concentrated in a central shop to service all four of the process units in the PhosCo complex. The maintenance shops are of adequate size and the work force will be common to all facilities. 7. Other Entities Supporting PhosCo s Operations The following entities are not part of the PhosCo project, or the responsibility of PhosCo, but are being considered as part of the review because of their critical role in the successful development of PhosCo s project. The capital costs of these entities are not charged to PhosCo, but the cost of their services will be part of PhosCo s Opex. 7.1 North-South Railway This project requires the construction of a completely new railway of some 1500km from the mine at Al Jalamid to the chemical complex at Ras Az Zawr. The objective is to ensure timely implementation of operating NSR to carry mineral traffic in an economical fashion from mines at Al Jalamid and Az Zabirah to facilities in RAZ. The system is designed for a mineral freight capacity sufficient for transport of both phosphate concentrates and bauxite, plus general freight and passengers. Behre Dolbear has reviewed the design and progress of the North-South Railway in May 2006, in January 2007 and again in June Significant progress has been made in expediting the construction of the railway during the past year and the construction is on schedule. The projected completion date for the mineral line in the Third Quarter of 2010 should meet the current shipping requirement for the delivery of concentrates from Al Jalamid to RAZ. PhosCo has developed a trucking option in the event the railway is not completed on time, and it appears to be a viable, although more expensive, alternative for up to a nine-month delay in the railway start-up. Behre Dolbear believes that the NSR project will be operational on schedule and should not cause the project startup to be delayed, and welcomes the additional comfort of trucking backup in event the railway is delayed. 7.2 Infraco A subsidiary of Ma aden, Infraco, is to be formed to provide certain supporting common infrastructure to PhosCo s chemical plants at RAZ and to the Aluminium Project. Based on the current schedules, the Infraco supporting infrastructure essential for PhosCo operations will be completed by October 2009, nearly a year before they are required by PhosCo. 7.3 Ras Az Zawr Port WP developed the conceptual design in late 2006, managed the EPC bidding cycle through early The bids have been submitted to the Saudi Port Authority, who will construct and operate the port. The construction schedule indicates that the port will be operational before it is required by PhosCo in the third quarter of Employee Accommodation The two villages for PhosCo employees at RAZ for bachelors and a family village at Al Jubail are well planned communities providing quality housing and services for employees and designed to match comparable accommodation for the range of staff employed in other similar local industrial complexes. They should be a benefit in recruiting and retaining employees at all levels, especially expatriate managers. 234

236 Behre Dolbear concurs with the decision to transfer the employee housing to a BOT contractor because it relieves PhosCo of the responsibility of managing and maintaining employee housing and is consistent with industry practice. Behre Dolbear believes that the villages will be available in time for their required occupation, and if not there are other actions that PhosCo can take to provide temporary housing. 8. PhosCo Work Force Recruiting and Training Ma aden has developed a comprehensive recruiting plan to attract qualified and high-potential employees to its operations, and a comprehensive training programme to attract and develop a highly skilled workforce. It is planned to achieve a Saudization of 45% in Phosco on start-up in 2010, increasing to 50% in 2013 and 80% in Training will focus on the immediate business needs for the period up to start-up and the first year of operation, and on health, safety, and environment (HSE). This training will be targeted to match requirements, and will differ due to the range of staff such as managerial, supervisory, technical, technicians, or others and different area requirements. All training will be competency based. Experienced expatriate personnel with plant-specific production background for the various plants will be recruited in mid-2007 to form a training programme development team. Behre Dolbear believes that the comprehensive recruiting and training programme PhosCo has developed will attract qualified and high potential employees to its operations, which should result in an efficient organization and operations. 9. Environmental Impact Statements Separate Environmental Impact Assessments ( EIAs ) and supplementary EIAs have been prepared for the Al Jalamid and RAZ. The highest standards were required and compliance with: Islamic Principles for Conservation of the Environment; the applicable KSA regulations; the corporate environmental policy for Phosco; the Equator Principles; The World Bank Group standards; and WHO guidelines. A Community Impact Study has been completed to identify the potential social impact that the project may bring to the communities. It is anticipated that there will be no material impacts on the project. Any minor impacts identified will be accommodated by suitable amendments to the respective licences if necessary. Behre Dolbear has found that the EIAs have been prepared to generally accepted standards. The construction and operation of the RAZ chemical complex is not anticipated to generate any major negative impacts on the natural and human environment. Concentrations of cadmium and uranium in the ore, which are usually associated with phosphate deposits, are low. Threats to human health and the environment are considered insignificant. 10. Evaluation of the Construction Contracts Ma aden has received four LSTK bids for EPC contracts for the plants and field camps at Al Jalamid and RAZ. EPC contracts have been awarded as of July 2007 for the SAP, PAP, ammonia plant, and DAP plant. A summary of all awarded contracts is given in table 10.1 Table 48: Summary of the Awarded Contracts and Contract Bids as of July 2007 Type of Projected Facility Contract or Bid Cost ($Millions) Contractor/Comments Award Date Sulphuric Acid Plant LSTK $495.0 Outotec GmbH and Gama Industry Arabia EPC June 2007 Phosphoric Acid Plant LSTK $522.8 Ammonia Plant LSTK $950.6 DAP Plant LSTK $486.0 Litwin and Tekfen Construction EPC, YARA technology contractor Samsung EPC contractor Uhde as technology subcontractor Intecsa-Ingenieria Industrial S.A. and INITEC Energia S.A. and Dragados Gulf Construction EPC, INCRO technology contractor June 2007 July 2007 June

237 PAP Phosphogypsum Stockpiling System LSTK $110.0 Beneficiation Plant LSTK $353.0 Based on bid received from Litwin, but engineering is being re-evaluated Contract negotiations in progress TBA TBA Ras Az Zawr Cogeneration and Desalination Plants LSTK $249.2 Bids being evaluated but have not been awarded Total $ Total represents 70% of Base Capital Estimate TBA Two types of LSTK contracts have been developed: an In-Kingdom contract ( I-K ) deals with the construction of facilities and performance guarantees; an Out of Kingdom ( OOK ) contract deals with the procurement, engineering, and fabrication. Both contracts ultimately affect plant performance and compliance with performance standards. The contracts are usually tied to coordination agreement which forms an administrative agreement between the parties. The contracts developed to date are detailed and rigorous and the penalties are significantly onerous to encourage good planning and execution of the project by the EPC contractors. The protection afforded Ma aden under the contracts is exceptionally good, but the contracts allow for flexibility depending on changing conditions from deliveries, scope of work and other unforeseen circumstances. All of the contractors are highly experienced in their fields and have accepted the performance criteria and apparently sufficiently confident to accept the terms. 11. Construction Schedule The successful completion of the Phosphate Project, with start-up in the fourth quarter of 2010 and a ramp-up to full production rate in 2012, is dependent not only on the completion of PhosCo s own projects, but also on the completion of the North-South Railway, the Ras Az Zawr port and the Infraco projects that support the phosphate facilities at RAZ. A schedule has been developed by WP based on the project contracts that have been agreed to and time estimates for the completion of each segment of the project that is not currently under contract. WP s current projected status of the individual projects is summarized as follows: The mining contract bids have been received, the contractor has been selected and the contract is scheduled to be awarded in October With this schedule, the pre-mine development work can be completed well in advance of the schedule for delivery of ore to the beneficiation plant. Pre-mine stripping and construction of the tailings dams are scheduled to begin in June Delivery of ore from the mine to the beneficiation plant is scheduled for December 2009 although this date will be adjusted to meet final Beneficiation Plant start date. The seawater cooling facilities are scheduled for completion in November 2009, well in advance of the startup of the chemical plants. The power generating plant EPC contract bids have been received and it is scheduled to be operational by July 2010, 3 months before the startup of the ammonia plant. The beneficiation plant is scheduled to be in commercial operation no later than the end of June 2010, based on firm bids from two bidders, well in advance of the startup of the ammonia plant. This schedule is firm because it is based on an LSTK bid. The sulphuric acid plant EPC contract has been awarded and the plant is scheduled for commercial operation in September 2010, one month in advance of the ammonia plant startup. This schedule is firm because it is based on a negotiated LSTK contract. 236

238 The phosphoric acid plant EPC contract has been awarded and is scheduled for commercial operation in September 2010, firm because it is based on a negotiated LSTK contract. It is scheduled to be completed more than 1 month before the ammonia plant. The ammonia plant is on the critical path for the completion of the entire project. The EPC contract for the plant has been awarded, and it is scheduled to be operational by end of October 2010 and in full production December This is firm because it is based on a negotiated LSTK contract. The DAP plant EPC contract has been awarded and is scheduled for commercial operation in October This schedule is firm because it is based on a negotiated LSTK contract. The facilities outside the battery limits of the Phosphate Project include the North-South Railway, the Ras Az Zawr port, the accommodation at RAZ and Jubail, the cooling water intake, utilities, roads and communications systems. The current status of these facilities is as follows: The port schedule for completion of construction and the beginning of full operations in December 2009 is based on bids that have been tendered. The North-South Railway has been a prime concern due to the difficulties that were anticipated in the construction of the Railway across a desert. Major progress has been made in accelerating the construction of the Railway during the past year, and the railway between Al Jalamid and Ras Az Zawr is scheduled to be operational by July 2010, to meet the required date for the delivery of concentrate to the chemical complex. If this schedule is not met, PhosCo has a viable backup plan for truck haulage of concentrates. The power transmission line to the Ras Az Zawr site is scheduled for completion in October The Ras Az Zawr village bachelor quarters for employees at the chemical plant site is scheduled for completion of the PhosCo units by Q The Jubail Village family housing for the employees is scheduled for occupancy beginning in the October 2010, but this should not be critical to the project startup. The Phosphate Project has progressed to the point where the schedules of the critical facilities are becoming firm due to LSTK contracts, the reception of firm bids, or detailed engineering. The only facility on the critical path of the project is the ammonia plant, and the design of this facility is based on an existing plant that was constructed by the same contractor as that selected for PhosCo s ammonia plant. The other aspects of the project appear to have more than adequate lead times on their completion to provide assurance that they will be completed before the ammonia plant. In a large complex project like this where the startup and the achievement of full production of all of the facilities are dependent upon each other there are many opportunities for slippage in the schedule to occur. The schedules are not only dependent on the performance of the construction contractors, but on the delivery of individual pieces of equipment from a large number of manufacturers located throughout the world. The completion dates are also based on the ability of the contractors to achieve the performance and completion tests, which may be difficult to do in the scheduled time frames. While this may not impact the project reaching full production, which is scheduled for October 2012, it could delay the ramp-up schedule and the shipping schedule of products. Behre Dolbear believes that: the scheduled date for full production, October 2012, will be achieved; but there is a fair probability that the ramp-up schedule could slip by as much as 3 to 4 months, which could impact shipping schedules. 237

239 Since most of the capital costs are tied to LSTK contracts these most likely will not be impacted, but a delay in startup will impact PhosCo s need for working capital. Due to the project s size and complexity it will need to be monitored regularly to ensure that the milestones are being met in a timely manner. 12. Project Risk Analysis Behre Dolbear has developed a risk analysis for the Phosphate Project which is summarized below. Ore Reserves Low Risk The Ore Reserves have been adequately explored for a 20-year mine life, have a high level of confidence, and meet the JORC criteria. There is potential to expand the reserves with additional exploration. Mining Operations Low Risk The 20-year mine plan has been sufficiently defined to initiate mining, but will require continual updating. The current plan is to utilise a contract miner to operate the mine. Bids have been received for the mining and a contractor is being considered to operate who has experience in mining phosphate in Jordan, and the contract is expected to be awarded by the end of There are opportunities to reduce the projected mining costs after the mine is in operation. Beneficiation Plant Low Risk PhosCo has completed extensive testing of the ore for beneficiation and has selected the process developed by SAPC and optimised by Litwin to produce concentrate to feed the phosphoric acid plant. The plant design conforms to industry standards, the plant should achieve the production projections, and the projected operating costs are consistent with industry norms. Al Jalamid Infrastructure Low Risk Engineering is still in progress, but the well field design for water supply is finalized and the power plant is basically an off-the-shelf item and should not delay the project startup. The town site only consists of bachelor quarters and should not delay the project startup either. Sulphuric Acid Plant Low Risk The engineering for the plant is complete, and a LSTK construction contract has been awarded to a well qualified contractor. The projected capital costs are based on the awarded contract, plus nominal contingencies. The plant design conforms to industry standards, the plant should achieve the production projections, and the projected operating costs are consistent with industry norms. Ammonia Plant Medium Risk The engineering for the plant is complete, and a LSTK construction contract has been awarded to a well qualified contractor. The projected capital costs are based on the awarded contract, plus nominal contingencies. The plant design conforms to industry standards, the plant should achieve the production projections, and the projected operating costs are consistent with industry norms. However, the plant schedule for completion is on the critical path for the entire PhosCo project and any delay in the plant startup could delay the startup of the entire project Phosphoric Acid Plant Low Risk 238

240 A different process has been selected from the process tested in the BFS, but the selected process is being utilised through the industry and the engineering is in the advanced stages so the capital and production cost estimates are fairly well defined. DAP Plant Low Risk The engineering for the plant is complete, and a LSTK construction contract has been awarded to a well qualified contractor. The plant design conforms to industry standards and there should be few start-up and operating problems. It is of adequate size to meet the requirements of the project and the projected operating costs are consistent with industry norms. Ras Az Zawr Infrastructure Low Risk Detailed engineering is complete and it appears that the facilities will be operational before required to meet the production schedule. Environmental Impact Statements Low Risk These have been conducted to conform to highest world standards and there are few potential environmental problems. Workforce and Organization Low Risk PhosCo has developed a comprehensive recruiting and training programme that should ensure that well qualified managers and workers will be attracted to the operations and will be properly trained for their responsibilities initially. PhosCo also plans to have an ongoing retraining programme to continually upgrade the employees skills. North-South Railway Low Risk The mine and the chemical plants are connected by a railway that will be constructed and operated by Saudi Railway Company. Construction has begun and is on schedule. The scheduled completion date is two months before the required delivery of concentrate and PhosCo has developed a back-up plan to deliver concentrates if they are required before the railway is operational. Infraco Infrastructure Low Risk The roads are under construction, and the remaining detailed engineering has been completed on most of the other facilities. It appears that the facilities will be operation before required to meet the production schedule. Ras Az Zawr Port Low Risk The detailed engineering has been completed, construction bids have been received and evaluated, and the EPC contract will be awarded by the end of The port is scheduled to be operational in Q4 2009, over a year before PhosCo will be shipping chemical products. Production Costs Medium Risk Behre Dolbear has reviewed the production costs generally and they appear reasonable based on various studies, including the BFS, WP and standards of work which have been updated to reflect the current scope. Actual costs experienced once in operations will be dependent on many factors arising over the life of the project that cannot be accurately predicted now, and may vary from those indicated, including escalation factors. 239

241 Capital Cost Projections Medium Risk Although 70% of the Base Capital cost estimates are based on LSTK contracts, 30% are based on engineering estimates with varying degree of accuracy. This suggests that the capital costs could exceed the current 5% contingency provision. Completion Schedule Medium Risk In a large complex project like this, where the startup and the achievement of full production of all of the facilities are dependent upon each other, there are many opportunities for slippage in the schedule to occur. The Mechanical Completion schedules are not only dependent on the performance of the construction contractors, but on the delivery of individual pieces of equipment from a large number of manufactures located throughout the world. The Financial Completion dates are based on the ability of the contractors to achieve the performance and completion tests, which may be difficult to do in the scheduled time frames. While this may not impact the project reaching full production, which is scheduled for October 2012, it could delay the ramp-up schedule and the shipping schedule of products Conclusions on Risk The conclusion is that the Phosphate Project has a relatively low risk at this time for reasons including: the engineering and design is in the advanced stage and proven process technologies have been selected for the beneficiation and chemical plants; the contractors selected to construct the facilities are reputable and highly experienced; and the high percentage of the capital that is committed to LSTK construction contracts 13. Capital Cost Estimates The current base capital cost estimate, as of the first quarter of 2007, is $4.54 billion, excluding any financing costs. The estimate is based on LSTK awards or bids or on WP s engineering estimates. Details are given in Table Mining PhosCo s initial mining Capex is projected to be $3.35M to cover the contractor s pre-production construction of tailings dams, etc. The projected capital expenditures should be reviewed to ensure that the mine capital costs projections include all of the current and future capital requirements. Beneficiation Plant The Base Capital Estimate for the beneficiation plant is $351.0 million. This cost is based on preliminary LSTK construction contract bids. A firm LSTK EPC contract is currently being negotiated with the preferred bidder. Al Jalamid Infrastructure The Base Capital Cost estimate is $229.1 million for the water supply, temporary construction facilities and industrial and social infrastructure is based on detailed engineering that is subject to continued engineering. 240

242 Sulphuric Acid Plant The Base Capital Estimate for the SAP is $501.2 million and is based on preliminary LSTK bids. A LSTK EPC contract has been awarded to the consortium of Outotech GmbH and Gama Industry Arabia, LTD on June 25, Phosphoric Acid Plant The Base Capital Estimate for the phosphoric acid plant is $642.8 million (including $110.0M for the phosphogypsum stacking system) or 14.1% of the Total Base Capital Estimate. The capital cost estimate includes liners for the first 4 years of the phosphogypsum stacking area, and the cost for future liners has been included in the sustaining capital estimate. The estimates are based on a preliminary LSTK contract from Litwin of $532.8 million for the phosphoric acid plant itself and on a LSTK bid of $110.0M received from Litwin (but not awarded ) for the phosphogypsum stacking system. The latter contract is pending further engineering review. Ammonia Plant The Base Capital Estimate of $948.9 million is based on preliminary LSTK EPC contracts. A firm LSTK EPC contract was awarded to Samsung on July 4, 2007, which includes a 5% increase in production guarantee over the 3,300 t/d design. DAP Plant The Base Capital Estimate of $483.0 million is based on a preliminary LSTK EPC contract. A firm LSTK EPC contract was awarded to the consortium of Intecsa-Ingenieria Industrial S.A., INITEC Energia S.A., and Dragados Gulf Construction on June 25, RAZ Infrastructure The Base Capital cost for the infrastructure inside PhosCo s battery limits at RAZ is estimated to be $754.8M. Table 49: Ma aden Phosphate Project Base Capital Cost Summary ITEM ESTIMATES Q At Al Jalamid US$ Millions Mine % Beneficiation Plant LSTK % Infrastructure and Indirects % Percentage Sub-total Al Jalamid % At Ras Az Zawr Sulphuric Acid Plant LSTK % Phosphoric Acid Plant LSTK % Phosphogypsum Stacking LSTK % Ammonia Plant LSTK % DAP Plant LSTK % Power Generation and Desalination LSTK % Infrastructure and Indirects % Sub-total Ras Az Zawr 3, % Owner s Cost % Project Management Contractor % Contingency % Total Base Capital Cost Estimate 4, % 241

243 The Base Capital cost of $4.54 billion is based on a combination of awarded LSTK EPC contracts, bids for LSTK EPC contracts, and WP s engineering estimates with: 70% ($3,176 million) based on preliminary LSTK contracts (four awarded to date) or LSTK bids; 11% ($506 million) based on detailed cost estimates, such as the Ras Az Zawr infrastructure; 5% ($232 million), such as the Al Jalamid infrastructure, requiring further engineering development; 9% ($396 million) being the owner s cost and WP cost; and 5% ($230 million) being the current contingency. Behre Dolbear concurs that the potential for major cost overruns of the LSTK EPC contract prices due to change orders is low due to the high degree of engineering that has been completed on the facilities with LSTK contracts. WP has provided for $230 million in contingency at the current stage of the project, which still includes some facilities that are in various stages if engineering development. However, WP s Monte Carlo simulation method of estimating the contingency required for these facilities appears to be reasonable. Sustaining Capital The financial model also provides $252 million in sustaining capital during the 20-year term of the project. The sustaining capital includes funding for staged construction of synthetic tailings pond liners in the event they are required. The initial cell liner is estimated to cost $6 million with future expenditures planned as required. The liner may not be required as Ma aden is in discussions with environmental regulators to finalize tailings dam design. PhosCo believes that it is probable that a liner will not be required and a much more economical substitute will be used, eg, clay or compacted earth. The first major sustaining capital expenditures are scheduled to occur in 2013 and are scheduled to increase as the facilities age. This represents a typical cash flow scenario associated with sustaining capital where the expenditures occur only after several years of operation. Behre Dolbear believes, based on its experience, that the sustaining capital budget of $252 million during the first 20 years of operation is a reasonable estimate for this project. 14. Operating Costs PhosCo s projected costs of production by function are summarized in Table These costs are the average estimated cash production costs over the first twenty years life of the mine and are in real 2007 terms. The production cost estimates developed for the PhosCo project are, with the exception of the mining costs and raw material costs, generally based on the costs developed in the BFS, which was prepared in 2005 and updated as required. Phosco s total operating cost estimate of about $290 million a year or $98 per tonne of DAP produced is made up approximately of: Costs at Al Jalamid mining, beneficiation and infrastructure: 30% Railway transportation 18% RAZ Chemical Complex 36% Administration, RAZ Infrastructure and Port 16% Behre Dolbear accepts these as being realistic. It is understood that a severance tax or mining fee is also applicable, amounting to just under 10% of the operating cost. Marketing costs of about 4% of sales have been deducted in the financial analysis. 242

244 Ammonia and phosphoric acid are to be sold as by products and, if these were to be treated as credits to the cost of DAP production, the net cost would be about $67/tonne. A low stripping ratio of 1.2 tonnes waste per tonne of ore in the first 8 years will allow a low cost of mining, but the stripping ratio increases to an average of 2.1:1 over the life of mine to give an average real cost of $2.5/t ore equivalent to $13.5/t DAP. Beneficiation operating costs are estimated at $9.1/t concentrates or $14.0/t DAP. Adding infrastructure cost and assuming 3% concentrate loss in handling and transportation, the total Al Jalamid cost of concentrate received at RAZ is estimated at $32.2/t concentrates or $49.3/t DAP. Ma aden understands that PIF will charge $10.00 per tonne of concentrate for the 1,500km distance to Ras Az Zawr during the first 7 years, with an increase after that. This cost is high relative to other producers due to the distance hauled, but the rate per tonne-kilometre is less than half world standards for railway haulage. Average transportation cost estimate for concentrate delivered is $12.1/t concentrate or $18.5/t DAP. The total cost of concentrate delivered to the chemical complex is $32.2/t concentrate or $49.3/t DAP, which is almost half of the total cost of DAP. This cost is high compared with the industry standards due to high transportation costs, lower ore grade and above-average mining costs. The chemical complex will have the advantage of relatively low prices for sulphur and natural gas sold at market rates by Saudi Aramco. The price of sulphur is further discounted from market based on Saudi Aramco cost avoidance and net transportation credits. In summary the data and information available regarding the production costs of PhosCo s competitors indicate that PhosCo s: cost of concentrate delivered to the chemical complex is 40% to 50% higher than PhosCo s competition due to lower ore grade, and cost of transportation; cost of sulphuric acid is significantly lower than PhosCo s competitors; cost of ammonia is about average compared to PhosCo s competitors; and other costs are lower due to the economies of scale arising from the large sizes of the chemical plants. The total cost of producing DAP at $98/t in real terms should be competitive on the international market. Moreover, PhosCo has the advantage in India and the Pacific Rim of having a significantly lower transportation cost than its competition. The phosphoric acid and ammonia sales, treated as credits to the DAP costs, result in a net production cost of about $67 per tonne. Behre Dolbear has reviewed the projected production costs for the mine and chemical complex and believes that they generally reflect the costs of production for PhosCo s operating conditions. The operating cost projections discussed above include productivity improvement assumptions that might be typical over the term of similar projects. True gains from productivity improvements are generally realised as a result of increased production, which has not been presented by Ma aden as Phosco s operating plan. However, Behre Dolbear believes there is the potential to increase production over time, thus leveraging the fixed costs which are estimated to be about 30% of total costs. There is also potential for some improvement in the consumption of raw materials through efficiencies and the economy of scale of these large plants. Behre Dolbear has incorporated this concept in its financial analysis of Phosco with a very preliminary estimate of the impact of expanding ammonia and phosphoric acid production. Ammonia production is increased incrementally up to +5% relying on the side letter commitment from Samsung that the capacity is built into the plant. This increase is assumed to be sold into the market. The increased amount of phosphoric acid is also assumed to be sold into the market. The cost of the increased production is based only on the base variable costs 243

245 associated with each process thus leveraging the fixed costs associated with each process as well as the general administration related costs. A preliminary indication from Ma aden suggests that the plants have this capability once debottlenecking is complete and experience is gained. The increase in ammonia production begins to ramp up during the 2012 and reaches the full 5% increment in The phosphoric acid increase only occurs after year six with incremental gains each year thereafter reaching 15% in the final year. The project should still have some further upside potential to reduce the net cost of DAP through improvements in cost as experience is gained in operating the plants and through a change in mining equipment as the stripping ratio increases. The assumption concerning mining is that a contract miner is utilised at a fixed unit cost for moving overburden and ore. However, in real terms, as the stripping ratio goes up standard practice would call for larger equipment that is more productive, thus decreasing the unit cost of moving overburden. There are many issues influencing this that prevent the benefit from being quantitatively captured at this point but Behre Dolbear believes the potential is real. In summary, Phosco s cash flow has the potential to improve over time more than presented here. Some minor amounts of capital may be required for additional in-process storage of materials to achieve these improvements. 15. Revenue and Valuation 15.1 DCF Calculation PhosCo s principal product will be Diammonium Phosphate, while ammonia and phosphoric acid surplus to the requirements of the DAP plant will be sold as by-products. British Sulphur Consultants ( BSC ), part of the CRU group, undertook market studies for Ma aden and forecast prices for PhosCo sales, which Behre Dolbear accepts. These prices are in real 2007 terms. Behre Dolbear has assumed an incremental increase in ammonia sales and ultimately doubled the external sales of phosphoric acid as a result of capturing the economic benefit associated with the potential operations improvements over time. Behre Dolbear believes the market will support both of the increases as they are small in relation to the market. On the basis of forecast production rates, these prices and the Capex and Opex estimates covered in Sections 13 and 14, a net present value ( NPV ) has been estimated by a standard discounted cash flow ( DCF ) method. A 21-year mine life is assumed and no residual value of the plant or equipment. For this analysis, prices and costs are expressed in constant 2007 Q3 terms and an all-equity basis is assumed. The valuation date is taken as the end of Assumptions Capital Cost The estimated capital cost, as summarized in Table 13.1, is US$4,540 million. For this cash-flow determination, expenditure has been taken as $2,096M by the end of 2008, $2,028M in 2009 and $416M in The sustaining capital provision of $252M over the mine life should also cover rehabilitation costs, if necessary. Product sales The average base annual sales are taken as: DAP: million tonnes at $276/t; Ammonia: 437,000 tonnes at $230/t 244

246 Phosphoric Acid: 162,000 tonnes at $393/t. Operating Costs As covered in Section 14, the total estimated average annual base operating cost at full production is $290M/y on a real basis. Marketing Costs average $40M/y Tax, comprising severance fee and Zakat, estimates have been provided by Ma aden to average $27M/y Net Present Value Calculations The outcome at a range of discount rates from mid-year points to the end of 2007 are as follows. Discount Rate NPV in US$ 9% 231M 8% 651M 7% 1,139M 6% 1,530M 5% 2,150M These are, of course very approximate numbers. They are in real, 2007, terms and show a substantial value for the project. 16. Conclusions Behre Dolbear concludes from this independent technical review on the Ma aden Phosphate Project that: Ma aden s management and consultants have sufficient geological and geotechnical mining knowledge to support short, medium and long term planning of the Al Jalamid phosphate mine project; The mine plans appropriately consider geological and geotechnical factors to minimize mining hazards; Ma aden s management and their PMC contractor, Worley Parsons, have sufficient processing and engineering ability to execute the design, construction and start-up of the chemical and ancillary plant at Ras Az Zawr; The start up of the complex to produce DAP, scheduled for Q is unlikely to be more than four months late; Environmental and community issues are being seriously addressed and are unlikely to affect the development of the project; The capital cost estimate of US$ 4.54 billion (in Q terms) is not likely to be exceeded by more than 4%; The operating cost estimates developed appear to be realistic; The risk factors identified by Behre Dolbear are understood by Ma aden and appropriate action to mitigate them will be taken. On the basis of a rough pre-tax cash flow analysis of projected sales, capital and operating costs, and a discount rate of 7%, Behre Dolbear has estimated a net present value of US$1,139 million. 245

247 Not included in this value is any assessment of the strategic importance of the project or the benefits to the community and country from the multiplier effect of consequential industrial activity and employment. There is further upside value potential, not quantifiable at this time, including: o o o Optimizing the mining operations as stripping ratio increases to reduce unit cost of mining. Increase in market prices of fertilizer products above core inflation, based on CRU market projections, thus improving margins. The sale of phosphate concentrate directly into the market. This would take some additional capital investment in beneficiation and port facilities. The margins should be more than adequate to support the investment and contribute to the overall value of PhosCo and the reserve base would support additional production. Behre Dolbear s greatest concerns are whether: the start-up of the facilities will be accomplished within the projected time frame due to the rigorous performance and completion test terms and conditions in the construction contracts for the chemical plants; the adequacy of the storage for materials in process are sufficient to permit efficient operation of the plants. Behre Dolbear believes that PhosCo has the potential, with continuing good management, to achieve a successful outcome and a valuable contribution to Saudi Arabia s industrial development. 246

248 Annex A Qualifications and Experience of Behre Dolbear Personnel Project Manager, Donald P Bellum, BS Min Eng (UCLA) MS Eng Admin (Utah). Mr Bellum is a Director and Senior Associate of Behre Dolbear & Company, Inc. A mining engineer with over forty years of operations and technical experience in the mining industry including senior management positions with major mining companies. He was Project Manager for Behre Dolbear s 1998 Ma aden Project, and also Project Manager for Behre Dolbear s technical advisory consultancy for the privatization of Jordan Phosphate Mining Company. Project Director/Administrator, Denis Acheson, BSc Chem Eng (Cape Town), MMMSA, Mr Acheson is Chairman of Behre Dolbear International Limited and Director of Behre Dolbear & Company, Inc. He has 50 years experience in the mining industry in metallurgical processing, marketing, general management and consulting. Geologist, Henry J Lamb, BS Geology (NCSU), MS (MTU), CPG Mr. Lamb has over 30 years professional experience in mining and production geology, mine planning, and reserve evaluation of mineral deposits, particularly phosphate rock. As an exploration geologist, Mr. Lamb has evaluated phosphate rock deposits in the United States (Florida, California, Utah, Michigan, North Carolina), South America (Peru, Chile, Brazil), Asia (Kazakistan, The Philippines), Jordan and Uganda. Mining and Evaluation Specialist, James B Dodd, BS Eng (Auburn) MBA (UP), RPE Mr Dodd has over 30 years experience with operations utilising draglines, shovels, trucks, longwall and continuous miners and has held management positions with responsibility for production, maintenance, customer service, human resources, accounting, engineering, safety, environmental and purchasing activities. He has undertaken several assignments including financial analysis and was a Mining Specialist for Behre Dolbear s technical advisory consultancy for the privatization of Jordan Phosphate Mining Company. Processing and Environmental Engineer, Ralph W Crosser, BS (UN) Mr. Crosser has over 40 years of experience in the minerals industry related to the management of operations including mines, mineral beneficiation plants fertilizer plants and chemical plants, and evaluation and development of plant operations, capital projects, and environmental management. Beneficiation Plant Specialist, Edward P Finch Mr. Finch has over 35 years of worldwide experience in the phosphate industry in the operation and design of phosphate beneficiation plants. He assisted JPMC in the start up the flotation plant at Eshidiya and later oversaw the entire beneficiation operation for a period of one year while debottlenecking the plant in order to achieve design operating rates. Chemical and Fertilizer Plant Specialists, James W Cox Mr Cox has over 30 years of international experience in the design, construction and operation of phosphate fertilizer and chemical plants. He was the Chemical/Fertilizer Specialist for Behre Dolbear s recent technical advisory consultancy for the privatization of Jordan Phosphate Mining Company and evaluated the chemical and fertilizer operations in Aqaba, Jordan.

249 Infrastructure Engineer, John S Tait Mr Tait is a Registered Professional Engineer with over 40 years experience of design, construction supervision and management of mining, smelting/refining, civil engineering and multidiscipline industrial projects in the UK, Saudi Arabia, Central Asia, Russia, Africa, Europe and North America. He has also worked on railway construction. His experience covers all relevant aspects of project management, construction management, engineering, administration, programming, quality and cost control. Human Resources, Health and Safety, Robert F Revitte Mr Revitte has more than 40 years experience in senior management at staff and operating level, specializing in Human Resources, Employee and Labour Relations in the international mining industry as well as the automotive and airline industries. He was the Human Resources Specialist for Behre Dolbear s the Ma aden study in 1998 and the technical advisory consultancy for privatisation of Jordan Phosphate Mining Company and for the study of the Nigerian coal Industry. Marketing and Logistics, Arthur J Roth Mr Roth has more than 35 years of management experience in domestic and international nitrogen, phosphate and potash fertilizer marketing, project management and new project development, phosphate and potash mine and chemical plant operation and administration, bulk materials transportation and distribution, asset acquisition and divestiture, structured finance transactions and international trading.

250 Aluminium Mineral Expert's Report An Independent Mineral Experts Report on the Aluminium Project 1. Introduction 1.0 Introduction 1.1 Purpose of report This report has been prepared by Behre Dolbear International Limited ( Behre Dolbear ) for inclusion in the Prospectus to be published by the Saudi Arabian Mining Company ( Ma aden ) in connection with an offer of ordinary shares in Ma'aden and proposed admission of ordinary shares to the Official List of the Capital Market Authority and the trading of those shares on the Saudi Arabian Stock Exchange. Behre Dolbear was instructed by the directors of the Company to prepare a Minerals Expert s Report ( MER ) for the Az Zabirah Aluminium Project ( the Aluminium Project ). This report, which summarises the findings of Behre Dolbear s review, has been prepared in accordance with the Committee of European Securities Regulation and the guidelines of Chapter 19 of the listing rules (as in effect prior to 1 st July 2005) published by the Financial Services Authority ( FSA ) and, with respect to resources and reserves, to satisfy the Australasian Code for Reporting Mineral Resources and Reserves (December 2004) published by the Joint Ore Reserves Committee ( JORC ) of the Australasian Institute of Mining and Metallurgy, Australasian Institute of Geoscientists and the Minerals Council of Australia ( the JORC Code ). The JORC Code establishes the nature of evidence required to ensure compliance with the code. The review was conducted with regard to the JORC Code because it is internationally recognised and embodied in similar codes, guidelines and standards published and adopted by the relevant professional bodies in Australia, Canada, South Africa, USA, UK, Ireland and many other countries in Europe. The definitions in this edition of the JORC Code are either identical to, or not materially different from, those international definitions. In this report, all resource and reserve estimates are reported in accordance with the JORC Code and have been substantiated by evidence obtained from Behre Dolbear s site visits and observation. They are supported by details of drilling results, analyses and other evidence and take account of all relevant information supplied by Ma aden management and contractors. Whilst Behre Dolbear has conducted its review according to the requirements of Chapter 19 of the listing rules of the UKLA and, with respect to resources and reserves, the JORC Code, Behre Dolbear notes that the inclusion of a valuation for the Aluminium Project in Section 15 Report Conclusions does not comply with the principals of Chapter 19 which does not permit the inclusion of a valuation in respect of a deposit which has not been classified as a reserve under the JORC Code. A summary of the further work recommended by Behre Dolbear to convert the resource at Az Zabirah to a reserve is set out in section 4.2 of this report. The location of the South Zone deposit is shown in Fig.1.0, cross section in Fig.3.1 and plan area in Fig Capability, Independence and Disclaimer This report was prepared on behalf of Behre Dolbear by the signatories of this report. Details of the qualifications and experience of the consultants who carried out the work appear in Annex A to this report. Behre Dolbear operates as an independent technical consultant providing resource evaluation, mining engineering and mine valuation services to clients. Behre Dolbear has received and will receive professional fees for its preparation of this report. None of Behre Dolbear nor any of its directors, staff or sub-consultants who contributed to this report has any financial interest in: 249

251 Ma aden; the mining assets reviewed; the outcome of the Offer Behre Dolbear has conducted an independent technical review of the Ma aden Aluminium Project including a visit the project sites by minerals experts. Behre Dolbear has reviewed technical data, reports, and studies produced by other consulting firms as well as information provided by Ma aden and their contractors. The review was conducted on a reasonableness basis and Behre Dolbear has noted herein where such provided information engendered questions. Except for the instances in which we have noted questions, Behre Dolbear has relied upon the information provided as being accurate and suitable for use in this report. Metric units are used throughout this report and all financial estimates are in United States dollars ( US$ ). 1.3 Scope of Work, Behre Dolbear was engaged as Technical Consultant by Ma aden to prepare a Competent Person s Report to include: the background to the project, an opinion on the bauxite mineral resource and reserves, an assessment of the proposed mining unit, an assessment of the proposed refinery, smelter and power plant at Ras Az Zawr, an analysis of the infrastructure, logistics and capital projects, human resources analysis, health and safety planning, environmental planning and issues, assessment of the implementation plan, and valuation of the project assets. 1.4 Sources of Information The sources of information for this MER are, principally: the Hatch Feasibility Study of 2003; the Feasibility Study Report ( FSR ) prepared by Bechtel in January and February 2005 which comprises 2 volumes; a subsequent FSR cost update in September 2006 and updates to the study by Ma aden through June 2006; reviews of several supporting and individual studies commissioned by Ma aden and Bechtel, 250

252 visits to the sites relevant to the Project; and review with Ma aden Project personnel. 1.5 Inherent Mining Risks Mining is carried out in an environment where not all events are predictable. While an effective management team can, firstly, identify the known risks and, secondly, take measures to manage and mitigate these risks, there is still the possibility of unexpected and unpredictable events occurring. It is therefore not possible to remove totally all risks or state with certainty that an event which may have a material impact on a mine will not occur. In the case of the Az Zabirah deposit, the proposed mining method is a regular truck and shovel operation for excavating both overburden and bauxite, requiring drilling and blasting activities. This is a standard system for the mining of bauxite in an arid environment. There are no perceived unusual mining risks. 1.6 Glossary of Terms Words and Expressions used in this report are defined in the Glossary of Terms of the Prospectus 2.0 The Project The Aluminium Project covers the development of a bauxite mine at Az Zabirah in Central Saudi Arabia, and a processing facility at Ras Az Zawr ( RAZ ). The bauxite will be exploited by surface mining and hauled to load onto railroad cars. The processing complex at RAZ is located some 90km north of the Saudi Arabian city of Al Jubail, on the western shore of the Arabian Gulf, 200km south of the Kuwaiti border. It will receive about 3.5 million tonnes per year (Mt/y) of crushed bauxite by rail from the Az Zabirah mine, and will include an alumina refinery, an aluminium smelter, support facilities, power plant and export shipping installations. The project reviewed by Behre Dolbear is estimated to produce and market 650,000 tonnes of aluminium metal per year at a projected operating cost of $1056/t of aluminium. Start-up is projected to occur in 2012 and the initial capital is estimated at $6.7 billion. Any surplus alumina and power produced would also be sold. An up-lift in capacity using more advanced technology to produce 720,000 t/y of aluminium is presently being studied ( the FEL-2 study ) and will be reported on in early It is expected that this change will contribute positively to the economics of the project, but Behre Dolbear has not reviewed the revised plans. Behre Dolbear has had sight of a Heads of Agreement concluded between Alcan, Inc. ( Alcan ) and Ma aden to set up a joint venture in which Ma aden will own 51% of the equity, while Alcan will own 49% and provide technical and management services. The map shows the location of the Az Zabirah mine and the RAZ industrial facilities as well as the crucial North-South Railroad connecting them and other developments. 251

253 Figure 2.1 Map of Saudi Arabia Scale: 1cm to 140km 3.0 Geology and Resources 3.1 Geology Economic bauxite mineralization with an average 3m thickness is within a 10 to 25m thick lateritic profile, in its entirety labelled the Bauxite Zone. The lateritic profile was formed by the weathering of the top of a sandstone sequence of late Triassic to early Jurassic geological age (160 million years). The chemical weathering itself is of early Cretaceous age (100 My). An overburden sequence of late Cretaceous and more recent sediments overlay the lateritic weathering profile. The contact between the lateritic profile and the soft sandstone overburden is unconformable: the contact is usually sharp and well distinguishable. Within the Bauxite Zone three subdivisions are discerned labelled upper clay zone, pisolitic bauxite zone and lower clay zone but the lithological boundaries between them are not sharp and in fact, more often, chemically determined and not visible. The pisolitic bauxite zone is the ore zone. Both Upper and Lower Clay zones may contain high total alumina content values, but also relatively high reactive silica in the form of clay minerals, mostly 252

254 kaolinite and montmorillonite. Reactive silica affects the refining process, reducing the recovery of alumina and increasing costs. 0E 1000E 2000E 3000E 4000E 520RL 520RL 580RL 600RL 580RL 600RL 620RL 620RL 640RL 640RL AZ AZ AZ AZ AZ AZ AZC RL 540RL RL 540RL 0E 1000E 2000E 3000E 4000E Fig.3.1 Typical cross section South Zone. Vertical scale 10 x exaggerated (Source SMGC Geological Report) The Bauxite Zone outcrops along a NW-SE strike length of some 105km either side of Az Zabirah, to the north of Qibah. The deposits are flat and near-horizontal, dipping to the East with a 1 or 2% overall gradient (South Zone deposit). Locally, gradients may be higher. Three main areas of mineralization are distinguished along strike, which have been labelled respectively the North, Central and South Zones. In-fill drilling to prove Ore Reserves for the project has in recent campaigns been restricted to South Zone and it is considered that the South Zone contains sufficient resources for the Project. Behre Dolbear has seen Ma aden s mining licence covering the South Zone permitting mining for 30 years from It is expected that this will not limit the life of the mine. With the thickness of economic bauxitisation averaging only some 3m - varying from a minimum minable thickness of 1m to 8m - the deposits have been drilled to a maximum overburden depth of approximately 30 metres. This depth is considered a practical limit for economical Ore Reserves, involving a stripping ratio of 10:1. The resulting width of drilled-out mineralization is up to about 5km but with an average of 2.5km. A list of studies relevant to the geology and mine planning is provided in 3.6 and 5.1 below. 3.2 Overview of Resources Behre Dolbear considers that there are sufficient mineral resources to support the project, assessing the total resource for the South Zone to be 240 Mt at 50% available alumina and 8% SiO 2. Even if only half of this is converted to reserves, a reasonable assessment, it would allow for a mine life of well over 30 years at the currently proposed alumina production rate of 1.4 Mt/y from a bauxite supply rate of 3.5 Mt/y. Additional resources may be available from Central Zone, which has drilled out resource potential (partly Measured but mostly Inferred classification) of over % available alumina and 8% SiO 2. Behre Dolbear considers that the differences between the resources of the Project Feasibility Study, by Hatch (2003), (refer to Section 3.6), and the more recent updates by Ma aden and SMGC, the latter a geological services company, must be resolved. To this effect, new resource modelling should be undertaken, based on a clear and consistent set of criteria to define the ore zone, without subjective inclusion or exclusion of intercepts modifying the apparent continuity of the mineralization. The transfer of resources to reserves should then take account of ore losses and dilution, based on the trial mine test results and the observed hanging wall and footwall configuration. 253

255 Under the current FEL-2 Study contract with SNC-Lavalin, Hatch has been contracted to perform this work. This study is being given a high priority and is on track to complete by end of It would be prudent to then give this work an independent audit. 3.3 Independent Technical Audit by SRK (2005) A comprehensive audit of the resource base was made upon the completion of infill drilling after the completion of the Bechtel FSR (refer to section 3.6). The infill drilling upgraded the classification of a major quantity of resources from Inferred to Indicated Mineral Resource. The audit included site visits, check assaying and a thorough review of the existing geology, resource, mining and reserve estimation reports. The audit concludes that additional work is necessary to firm up the reserve base for the project and Behre Dolbear supports the findings of this report. Behre Dolbear shares the conclusions of this audit in that additional desk study is required, but we also support SRK s positive comment: However, the calculation of the reserve quantum is not in question as there is abundant availability of economic resources for the project definition. 3.4 JORC Code This review conducted by Behre Dolbear has been carried out using the guidelines and terminology of the JORC Code. The following figure shows the relationship between Mineral Resources to Ore Reserves (Source: JORC, blue edition 2004). Fig 3.2 General Relationship between Exploration Results, Mineral Resources and Ore Reserves 3.5 Exploration The occurrence of outcrops of lateritic clay and bauxite north of Qibah was first recorded on the legend of Miscellaneous Geologic Investigations Map 1-206A (1963), compiled by the US Geological Survey from mapping by Saudi ARAMCO. The ensuing exploration history is comprehensively summarised in SRK s audit report and is in summary: 254

256 Riofinex Limited, a subsidiary of Rio Tinto plc, conducted an exploration programme at Az Zabirah between 1979 and 1984 (Black et al, 1982). The programme comprised a reconnaissance study, which included regional mapping and outcrop and channel sampling, followed by a regional drilling programme, with some additional close spaced drilling to provide data for a geostatistical assessment. Riofinex drilled a total of 358 holes in the South, Central, and North Zones. A second drilling programme was conducted by BRGM and the Directorate General for Mineral Resources ( DGMR, part of the Deputy Ministry) between 1987 and 1993, as part of a prefeasibility study (hereafter referred to as the BRGM study). A total of 430 holes were drilled in the South and Central Zones. Ma aden conducted an infill drilling programme, recommended by the then Hatch Kaiser Engineers (Hatch), over selected areas of the South and Central Zones from May 2002 to February A total of 398 holes were drilled to provide additional data to support a feasibility study. An additional infill drilling programme was carried out by Saudi Arabian Bechtel between August and November This programme comprised 603 drill holes and was aimed at upgrading the classification of the bauxite resources of the area from Inferred to Indicated and Measured categories. The last two drilling programmes, by Ma aden in 2003, were undertaken based on the (2002) Geological Data Review by Hatch, which analysed the Riofinex and BRGM data. Drill grids of 125 x 125m and 250 x 250m were deemed necessary to delineate the required quantities of the Measured and Indicated Resource categories. The Ma aden drilling consisted of two parts: o o Drilling to delineate 12 years of Measured and Indicated Resources for the feasibility study (considering an annual production of 3.5 Mt), covering areas of respectively 2 x 2km (pattern 125 x 125m) and 2 x 3km (250 x 250m). The drill campaign to upgrade the remainder of the South Zone from Inferred to Indicated Resources. In addition, a trial mining operation was conducted during 2003, mining 26,000 tonnes of bauxite, the results of which have been incorporated in the FSR (2005) report together with a number of closer spaced holes for geostatistical purposes. The latter work was executed by SMGC. 3.6 Bauxite Resource Estimates Each of the above exploration programmes was followed up by diligent geological study, data validation, geostatistical analysis and resource/reserve estimates using state-of-the-art orebody modelling systems. All (four) estimates by Riofinex, BRGM, Hatch and Ma aden/smgc are well documented in their individual reports. The Riofinex and BRGM drilling, sampling and assaying work is of excellent quality and a valuable source of geological information on the deposits. The estimates are generally confirmed by the later work and also very useful for the purpose of comparison, even though the drilling is of too large a spacing for feasibility-stage Ore Reserves. The Hatch 2003 geological modelling study and resource estimate was part of the Bechtel FSR and remains the definitive report to-date. The resulting orebody model was used for the mine planning reports (Hatch, Runge) which are also part of the Bechtel FSR. The Ma aden/smgc modelling work and resource estimate were completed in October 2004 with an update in February 2005 to incorporate geostatistical data from the close-spaced drilling and the trial mine. This resource model incorporated both the (Hatch) 125 x 125m and 250 x 250m drilling inside 255

257 the two blocks drilled for the specific purposes of the feasibility study as well as the 250 x 250m drilling in the remainder of South Zone. The different resource-class areas of the Hatch and SMGC estimates are illustrated in Fig E 5000E 0E 5000E 25000N 25000N 25000N 25000N 30000N 30000N 30000N 30000N 35000N 35000N 35000N 35000N 40000N 40000N 40000N 40000N 45000N 45000N 45000N 45000N 0E 5000E 0E 5000E Figure 3.3. Measured, Indicated and Inferred Resources - South Zone only (left) Hatch South Zone Resource Areas (2003). In red: (2 x 2km drilled at 125 x 125 m) Measured Resource and (2 x 3km, drilled at 250 x 250 m) Indicated Resource. In green: Inferred Resource according to Hatch. (right) Maaden/SMGC resource areas (2005). In red: Measured Resource (square 2 x 2km block) and Indicated Resources. In green: Inferred Resource, drilled at 250 x 250 m) Ma aden/smgc, (with Hatch s green Inferred boundary superimposed). 256

258 The South Zone Geological Resource estimates by Hatch and SMGC are tabulated in Table 3.1. A comparison between the two estimates is discussed in our analysis paragraphs below, the comparison focuses on the Measured Resource categories (marked red in the table) which are based on the same geological information. 257

259 Table 50: Geological Resources by Ma aden / SMGC (2005) and Bechtel/Hatch (2003) - Based on dry bulk density measurements on 245 samples from 23 diamond core holes with an average dry density of 2.01 t/m3 Ucz = Upper clay zone, Lcz = Lower clay zone, Bxz = (Pisolitic) Bauxite zone (all three together forming the bauxite zone = lateritic weathering profile on top of the parent rock) 4.0 Conversion of Mineral Resources to Ore Reserve The in-situ geological resource cannot be mined with exact precision. Ore will be lost at the contacts with hanging wall and footwall and at the same time, mined ore will be diluted with off-grade waste material. A loss-and-dilution algorithm must therefore be applied to convert the in-situ geological resource to the as-mined tonnages and grades constituting the Ore Reserves. The transition from the upper clay zone to the pisolitic bauxite (ore) zone more often is chemically determined and does not always follow the lithology where visible. The footwall is a gradational transition, with again a chemically determined boundary. The situation is aggravated by the fact that both hanging and footwall trend higher in reactive silica and thus carry a substantial penalty in caustic soda consumption when taken as dilution and treated at the refinery. Introducing loss-and-dilution into the reserve estimates is a complex process with interrelated steps. The first loss-and-dilution is introduced with the drill sampling process. With down-hole compositing further loss and dilution are introduced into the resource model. When converting resources to reserves the mining method must be taken into account and a loss-and-dilution algorithm must also be applied, taking all previously introduced loss-and-dilution into account. The loss-and-dilution used by Hatch (2003) for the conversion to reserves, with a loss of 0.25m at the hanging wall only with no further losses or dilution is not realistic. Behre Dolbear shares SRK s reservations on the loss-and-dilution applied in later studies. In view of this and the fact that the resource modelling itself needs additional work, we do not consider that sufficient work has been done to produce a reserve estimate in accordance with the requirements of the JORC Code. 258

260 4.1 Analysis of Procedures The complete sequence of tasks from drilling, sampling, assaying and geological interpretation, up to and including resource modelling, resource estimation, the mining study and the conversion of resources to minable Ore Reserves has been conducted with due diligence by the parties involved. Variographic study generally confirms the choice of exploration drill spacing used for resource categorization and we agree that sufficient drill data are available for the feasibility stage of the project. Drilling methods, sample recovery, assaying methods, variographic studies, quality control, density measurements and determination of limit of mineralization, are summarized in the SRK report. Further fieldwork is not required at this stage However, Behre Dolbear has reservations as to the geological modelling and resource estimates procedures followed. In our opinion there are assumptions which need to be corrected before the reserve can be recalculated and endorsed. Behre Dolbear has expressed our concerns to Ma aden personnel during our visit to the Al Khobar Ma aden office and discussed them in some detail. Behre Dolbear s reservations with both the Hatch and Ma aden/smgc s estimates follow a series of questionable points through the procedures from data validation up to the conversion from Mineral Resource to Ore Reserves and focuses on the following steps in the total procedure: Down-hole Compositing of Boreholes: In essence, we consider both hanging-wall and footwall contacts as chemically determined. In our opinion, no further use should be made of the lithology descriptions for compositing purposes as the descriptions have proven to be unreliable. Mining limits will be based on chemical boundaries. In a number of individual boreholes inspected by us, off-grade material has been included as ore with the aim to create continuity in mineralization. Agreed cut-off criteria must be used in a consistent manner without interference. The compositing procedures must be laid down in strict algorithms which are consistently applied throughout. Cut-Off Grade Determination Tables and curves are presented and used to justify cut-off grades, describing grade-tonnage relationships within a pre-determined, fixed envelope of bauxite mineralization. This envelope was based on lithological descriptions which were often erroneous. The latest SMGC study clearly states that some 30% of the holes still need to be re-checked. Cut-off criteria should instead be based on cut-off grade curves rather than on grade-tonnage curves. The difference is that cut-off grade curves represent a series of different envelopes, each from down-hole compositing for different sets of cutoff criteria. From each set of down-hole composite, an ore envelope is to be developed and resource tonnages estimated. Only on the base of such exercise can a realistic cut-off criterion be established. An important consideration in this evaluation is the continuity of the orebody; that is, the question for which set of cut-off grade criteria (SiO2, available alumina and stripping ratio) continuity and minability are within practical and economical limits. Resource Modelling : Comparison of 2-D versus 3-D Both Hatch and SMGC use 3-D block modelling. We share reservations with SRK on the usefulness of 3-D block modelling for the orebody in question. In our opinion it may overcomplicate the essentials, clouding major issues and in particular, considering that the ore will in any way be mined in a single ore lift. Loss-and-Dilution The original Hatch assumption that neither loss nor dilution would occur at the footwall beside minimal losses at the hanging wall does not appear realistic. Later, more generous allowances for loss-and-dilution (Hatch/Runge, SMGC) are in our opinion still insufficient, particularly considering the undulations and other irregularities in the orebody which have been suppressed to an extent by using zonal control and the introduction of zero thickness intersects into the borehole database. In 259

261 this context we note that SMGC has used diamond-drilled holes only to model the ore envelope, using only the assays from the RC holes. 4.2 Conclusion/Recommendations on Resources and Reserves On the basis of the analysis above, Behre Dolbear holds the opinion that neither the Hatch (2003) reserve estimate which is part of the current FSR nor the update by SMGC (revised version February 2005) are ready for endorsement as in compliance with JORC blue edition 2004 requirements or with the requirements of Chapter 19 of the UKLA Listing Rules. We share a number of reservations and recommendations with both Snowden s review of the original Hatch estimates and, in particular, with the SRK technical audit which also covered the later Ma aden/smgc estimate. Behre Dolbear recommends that the following work is undertaken: Rework complete down-hole compositing. Compositing must be based on a clear and consistently applied set of cut-off grade criteria. Manual interference, ie, including or excluding intercepts contrary to stated cut-off criteria aiming to improve the apparent continuity of the orebody, must be avoided. The down-hole composites are to be tested by modelling and the effect on continuity of mineralization is to be thoroughly analysed. If continuity is insufficient with too many dry holes inside the orebody, the cut-off grade must be lowered. The analysis must reflect practical and realistic mining conditions. Cut-off grade determination As stated in the above analysis, a complete cut-off grade exercise should be done based on downhole compositing with different cut-off criteria, generating a series of ore envelopes as a function of the cut-off criteria chosen for each individual run. Final Pit determination We agree with SRK that the economic runs by Hatch and Runge are not suited to provide the basis for mine scheduling. The economics-generated mine plan is overly complicated and not practical. The primary goal of providing feedstock to the refinery of constant and consistent grades is missed. The Lerch-Grossmann algorithm which forms part of the NPV routine is perfectly suited to the purpose but the NPV time value component is not applicable and the programme should be used to establish the final pit limit or outer boundary of economical mineralization only. Intermediate pits should be scheduled with the foremost aim of providing feedstock of constant grades. Review of loss-and-dilution throughout the reserve estimating process Loss and dilution is introduced throughout the whole process from sampling drill holes up to the final conversion of resources to minable reserves. Each of the steps where loss-and-dilution is introduced is inter-related to the others. All steps need to be evaluated in conjunction and the loss and dilution algorithm for conversion from in-situ resources to minable Ore Reserves is to be thoroughly reconsidered. Variability characteristics The variability characteristics of the deposit were apparently not taken into account in previous modelling work and, in particular, in the latest SMGC/Ma aden model. A wealth of information on variability characteristics is available but not fully used. Komlossy s report (referred to below) is effectively a draft which only covers part of the trial mine test work. The SMGC report makes only limited use of the available information. Smoothing the orebody envelope by disregarding RC drilling based elevations (SMGC) creates a false impression of regularity and continuity of the orebody. Local undulations of hanging and footwall whether due to faulting, folding or grade variations must be kept in the model like all other factors of variability. 260

262 Resource Modelling Ore Envelope As stated, we would probably have a slight preference for 2-D modelling as a more appropriate method of modelling resources and ultimately for estimating reserves in this case with a single ore-lift mining operation. It may, or may not, assist in better presentation and understanding of the variability of the deposit. We recommend that a 2-D model is prepared and evaluated against a 3-D model. The work is due to be completed early in This work was discussed with Ma aden and is incorporated in the scope of the FEL-2 study mentioned above 5.0 Bauxite Mining The bauxite mining operation is to supply the feedstock for the bauxite-to-aluminium metal project. A supply of bauxite of consistent quality is to be secured from the South Mine at Az Zabirah, with oregrade variations within narrow limits. The bauxite is to be delivered to the crushing and rail load-out facility at the Az Zabirah railhead, adjacent to the mine. Stockpiling and blending of mined bauxite and ore quality control (grade control) measures are included in this section as these are closely related to the geological features of the ore and the operation of the mine. These activities will be part of a mining contract. The Bechtel FSR ( ) assumes an annual rated capacity of 1.4 million tonnes of alumina requiring 3.5 Mt of bauxite. Plans currently under review suggest that capacities may increase to 1.6 Mt of alumina requiring 4.0 Mt of bauxite, ie, a 15% increase of rated capacity, in order to increase the aluminium production to 720,000 t/y. This increase can be readily accommodated by the mine. 5.1 Mine Planning Background This review is based on the following series of documents Bechtel Mining & Metals ( ). Sections 1-7 of Feasibility Study Report. This still is the definitive feasibility report which is, however, currently under review. The sections on mining are based on the Hatch and Runge reports: HATCH Kaiser Engineers (2003). Az Zabirah Mine Planning Study. This is the original comprehensive mine planning study which is incorporated in the Bechtel feasibility report. RUNGE Pty Ltd (2004). Review of Hatch Mine Feasibility Study. This review provides revised mining schedules based on narrow limits for ore quality variations besides detailed mining cost estimates. SMG Consultants(Pty Ltd (2005). Geology Report and Mining Study. Rev. February The mine planning volume of this report is an update of the Hatch/Runge studies incorporating increased ore resources and a revised ore reserve. Dr G. Komlossy e.a., (February 2004). Report on the Additional Infill Drilling and Trial Mining Programmes, Geo-Kom Geological Exploration Ltd. This report gives an in-depth geological description of the trial mining operation but is a draft version, covering only the first half of the complete trial mining programme. SRK Consulting Engineers and Scientists (August 2005). Ma aden Az Zabirah Bauxite Project, Independent Technical Audit for Geology and Mine Planning. 261

263 This audit reviews the resource modelling and resource estimates in particular. Mine planning and production schedules are also reviewed. Mining methods and equipment selection are generally endorsed. Fig. 5.1 Trial Pit October 2003 with excavator standing on blasted bauxite and trucks on footwall / lower clay zone (pit floor) 5.2 Current Design Engineering As set out in the preceding section on geology and reserve base, the orebody is virtually horizontal with an average eastward dip of 1 to 2%, ie, the crossfall which is usually applied in open-pit mining on level benches to allow for natural surface water drainage. For all practical means and purposes in open-pit mining, this crossfall and, accordingly, the working surfaces in the future mining operation may be considered horizontal. Haul roads for truck transport the largest single cost component for the mining operation - will have gradients to match and may, for productivity calculation purposes, be considered as having zero gradients beside, of course, the rolling resistance inherent to unsealed mine roads. Ambient temperatures at Az Zabirah and tyre ratings are a complicating factor but this aspect of truck selection is well understood and manageable. While truck transport will be the largest single cost component for the mining operation, selectivity of mining is equally important. Proper clean-up of the pit floor is an absolute necessity, recovering payable bauxite with an average thickness of 3m only while at the same time, avoiding dilution with clayey material and reactive silica from both the hanging wall and the footwall to avoid the penalties involved with diluting the bauxite with clay. Considering this, primary loaders for bauxite lifting need to be selected with special care. For overburden, the selection procedure is relatively easy. For the latter, the criterion simply is to load trucks at the lowest possible overall cost and this translates directly into a choice of shovel which can load the chosen truck in 4 passes or 2 minutes loading time for each truck. At an overburden stripping rate of approximately 10 million cubic metres or 20 million tonnes per year this is an obvious choice. As for bauxite ore lifting in the region of four million tonnes per year, the precision of mining is the most important consideration. Any quantity of clayey material from hanging wall or footwall dug up will carry a penalty if mixed with bauxite ore going to the refinery. 5.3 Resource Base Notwithstanding reservations made with regard to the conversion of resource estimates to Ore Reserves, Behre Dolbear is of the opinion that the Hatch and SMGC figures are a reasonable indication of the resource base. We support the following statement by SRK in their Independent Technical Audit (2005) as follows: 262

264 The total potential of mineral resources, including the Inferred category, is of the order of 380 Mt (HATCH estimate of 390 Mt at 50% TAA and 8% SiO2) providing a mine life of over 100 years. Even if only 50% of the Inferred category is converted to reserves, it implies a mine life of well over 50 years. Note that SRK and Hatch include here some 140 Mt in the Central Zone which is not under current mining title. 5.4 Mining Method and Equipment Selection The engineering studies agree that a shovel-and-truck operation is generally appropriate for Az Zabirah. Overburden is to be removed using the same mobile equipment as for ore lifting. Overburden is to be dumped in mined-out areas at close distance, varying from 200 m or less up to 3km haul in the first year while opening up the deposit, with an average just under 1km (Runge). Ore haulage to the crusher is an average 3.8km (Runge). A 100-t rear-dump truck is recommended, to be loaded by a 300-t class mass excavator. A total number of about 10 trucks (Ma aden-smgc revised projection) would be required and this is considered an appropriate match, balancing flexibility with economies of scale. Fig. 5.2 Illustration of Az Zabirah Shovel-and-Truck Mining Operation The major equipment for the 3.5 million t/y operation will therefore comprise standard mining hardware, including a fleet of 100t off-highway trucks teamed with 10m 3 bucket excavators, backed up by mobile loaders, bulldozers, a grader and blast-hole and grade-control drills and sundry smaller mobile units. Such equipment is readily available on the world market as regular production units. The actual equipment spread will now become the responsibility of the selected mining contractor. Grade control is projected to be based on a pre-production drilling on a 10 x 10m ore sampling grid. The most important requirement for bauxite sent to the refinery is that grade variations are kept within narrow limits. For this purpose, the run-of-mine bauxite is envisaged to be dumped onto 100,000 tonnes blending stockpiles from which it is recovered before crushing and shipment in daily 11,000 tonnes train loads. The practice will involve double handling of all run-of-mine ore but is considered worthwhile towards the goal of smoothing refinery feed grade. Ma aden recognise that the stockpile design will need revision to add an insurance cover in the light of the change to contractor mining. Grade variations within each of the blending stockpiles are to be within +/- 0.5% TAA and +/- 0.2% SiO 2. Hatch/Runge demonstrate on the basis of the resource/reserve model that 10 years production can be scheduled in such a way that this can be achieved. Scope Changes have arisen over time, but the series of documents clearly reflects a convergence of opinions between the various engineering groups involved. Major changes since the Runge study are: 263