Arabian American Development Co. (NASDAQ:ARSD) today provided an update on activities at the Al Masane Al Kobra (AMAK) mine in Saudi Arabia, of which it is a 41% equity owner, as well as progress on the completion of its Isomerization unit that is being built at its South Hampton Resources facility. AMAK Status Update:
-- AMAK has received an initial tranche of $35 million from a total
bridge loan in the amount of $85 million. AMAK has completed financing
arrangements to fund the $85 million with a Saudi French bank while
pre-closing conditions for the SIDF (Saudi Industrial Development
Fund) permanent loan are being met. The second amount, $46 million,
can be drawn after AMAK receives clearance for the first payment from
the SIDF. The SIDF loan is signed and documentation is being completed
which satisfies the bridge lender that negotiations for the permanent
financing are close to completion.
-- AMAK signed a five-year contract for the underground development and
production work at the mine, valued at $125 million over the five-year
period. CMG, the contractor on the construction of the surface
facilities, won the bid and will begin mobilization at the end of
September of 2010.
-- Mobilization will be completed and construction of the ventilation air
raises will begin by the end of 2010. Construction will take
approximately 90 days. Ore will then be produced starting at low
levels as development of the shafts and stopes is undertaken.
-- The contract calls for full capacity production at the 700,000 ton
annual rate by the fourth quarter of 2011. (Underground mining
projects typically have more waste material to move in the early
stages of development which declines as the shafts reach the main
production levels.)
-- The mill is approximately 90% complete and test runs of ore will take
place in the second quarter of 2011 as underground construction
activities move forward.
-- Separately, AMAK has issued purchase orders for U.S. manufactured
Caterpillar scoops and articulated trucks for the underground work, in
addition to Caterpillar generator equipment for powering the
activities. Due to the remote location of the mine, Caterpillar's
reliability and service was judged to be superior to that available
from other vendors competing for this business. These capital
equipment purchase orders are not included in the $125 million
contract.
Isomerization Unit Update:
-- Construction of the Company's South Hampton Resources facility
isomerization unit, which will be used to convert Normal Pentane into
Isopentane, is near completion and will give the Company more
flexibility in managing its product line. South Hampton has initiated
start up procedures with normal operations expected to be achieved
within a week. The Company will conduct trial runs and testing for a
short period of time with monetization beginning after trials and
testing are complete. The isomerization expansion will allow South
Hampton to convert up to 600,000 gallons per month of Normal Pentane
into Isopentane.
-- South Hampton is also adding an additional Hexane treater to finalize
expansion of C6 products and expects this to be operational in six
weeks. The additional train will increase C6 capacity by 50% and will
cost approximately $1.0 million.
-- The units being added were planned as part of the 2008 major expansion
but were delayed until the volume of sales demanded capacity in these
areas.
Nick Carter, President and Chief Executive Officer of Arabian American Development, commented, "We are pleased that we have secured the bridge loan from the Saudi French bank as we await the finalization of the SIDF permanent financing. We continue to see progress towards the goal of monetizing this asset and with full funding now identified, we believe that progress will be made and time tables can be met with a greater degree of certainty than we have seen in the past. Having money in the bank solves a lot of the issues which have slowed the project over the last couple of years. Our Saudi partners have shown a lot of perseverance in taking the project to the point where operations are finally within sight."
Mr. Carter continued, "The completion of the isomerization unit is on schedule and will give us another tool to use in the management of our product slate to keep our margins more consistently within our target range. The additional train for the C6 production will also add flexibility in a market that we have seen grow stronger over the first half of 2010. The initial plan upon completion of this unit, will be to shut in the older C6 unit and spend a little time updating and remodeling to ensure it performs at modern standards for safety and efficiency."
Mr. Carter concluded, "These two additions were not done in the original 2008 expansion as they were not needed until the volume process reached a specific level which we are now approaching. ARSD is currently running at 4,500 barrels/day up from approximately 3,500 barrels/day earlier in the year. Both the Isomerization and C6 expansions are being funded through operating cash flow and the Pipe arrangement previously contemplated will not be needed."
