Quarterly report pursuant to sections 13 or 15(d)

INVESTMENT IN AL MASANE AL KOBRA MINING COMPANY (AMAK)

INVESTMENT IN AL MASANE AL KOBRA MINING COMPANY (AMAK)

9 Months Ended

Sep. 30, 2013

INVESTMENT IN AL MASANE AL KOBRA MINING COMPANY ("AMAK") [Abstract]

INVESTMENT IN AL MASANE AL KOBRA MINING COMPANY ("AMAK")

14. INVESTMENT IN AL MASANE AL KOBRA MINING COMPANY (“AMAK”)

In December 2012 the Board of Directors of AMAK authorized the issuance of additional shares of AMAK in an amount equal to ten percent of the then outstanding shares to raise funds for working capital requirements and retirement of construction debt. In January 2013 we entered into an agreement with AMAK to purchase an additional 937,500 shares of AMAK at 30 Saudi Riyals (USD $8.00) per share, for a total of USD $7.5 million. Due to the continued improvement in the operations of AMAK and a desire to prevent a substantial dilution of its investment, we elected to purchase these additional shares. As a result of this purchase and upon completion of the raise on May 27, 2013, our ownership percentage in AMAK became approximately 35%. All existing AMAK shareholders had the opportunity to buy into the issue and all shares were placed within that group. As a result of the equity raise in 2013, the Company’s share of the net assets of AMAK increased approximately $4.0 million which the Company recognized as a gain (with a corresponding increase in its investment) in accordance with ASC 323-10-40-1.

As of September 30, 2013, and December 31, 2012, the Company had a non-controlling equity interest of approximately $54.4 million and $37.9 million, respectively. This investment is accounted for under the equity method. There were no events or changes in circumstances that may have an adverse effect on the fair value of our investment in AMAK at September 30, 2013.

AMAK’s financial statements were prepared in the functional currency of AMAK which is the Saudi Riyal (SR). In June 1986 the SR was officially pegged to the U. S. Dollar (USD) at a fixed exchange rate of 1 USD to 3.75 SR.

The summarized results of operation and financial position for AMAK are as follows:

Results of Operations

	Three Months Ended September 30,					Nine Months Ended September 30,
	2013		2012			2013		2012
	(Thousands of Dollars)
Sales	$	17,815	$	-		$	64,310	$	-
Gross Profit		6,994		-			25,028		-
General, administrative and other expenses		4,256		1,929			14,071		3,325
Net Income (loss)	$	2,738	$	(1,929	)	$	10,957	$	(3,325	)

Financial Position

	September 30,		December 31,
	2013		2012
	(Thousands of Dollars)
Current assets	$	43,132	$	32,827
Noncurrent assets		263,400		261,620
Total assets	$	306,532	$	294,447

Current liabilities	$	99,262	$	135,111
Long term liabilities		6,237		9,260
Shareholders' equity		201,033		150,076
	$	306,532	$	294,447

AMAK was not in technical compliance with the current ratio covenant calculation on its loan from the Saudi Industrial Development Fund (“SIDF”) at September 30, 2013. While AMAK received a waiver for the year ended December 31, 2012, no additional waivers have been requested or received for any subsequent events of non-compliance. Therefore, the outstanding balance owed to SIDF is shown as a current liability as of September 30, 2013, and December 31, 2012. During the second quarter of 2013AMAK used a portion of their capital raise to repay a portion of their outstanding debt obligations. We anticipate that AMAK will satisfy their ongoing operating needs through profitable operations, renegotiation of payment terms, and additional financing from SIDF.

The equity in the income or loss of AMAK reflected on the consolidated statement of income for the three and nine months ended September 30, 2013, and 2012, is comprised of the following:

	Three months ended September 30,					Nine months ended September 30,
	2013		2012			2013		2012
			(restated)					(restated)
	(Thousands of Dollars)
Company’s share of income (loss) reported by AMAK	$	965	$	(712	)	$	3,991	$	(1,227	)
Amortization of difference between Company’s investment in AMAK and Company’s share of net assets of AMAK		337		184			1,010		184
Gain from additional equity issuance by AMAK		-		-			3,997		-
Equity in income (loss) of AMAK	$	1,302	$	(528	)	$	8,998	$	(1,043	)

During the year ended December 31, 2012, we advanced approximately $2.0 million to AMAK for interim funding on a short term basis. The amount was repaid in May 2013. A balance of approximately $500,000 remained outstanding at September 30, 2013, due to AMAK expenses being paid by the Company with reimbursement to follow.

See the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2012, for additional information.

- Definition

The entire disclosure for investments accounted for under the cost-method. The carrying amount of such investments may be adjusted, for example, distributions in excess of cost (return of capital) or for other-than-temporary impairments. The cost method and lower-of-cost or market, an adaptation of the cost method, is generally followed for most investments in noncontrolled corporations, in some corporate joint ventures, and to a lesser extent in unconsolidated subsidiaries in which the entity does not have the ability to exercise significant influence.

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