Quarterly report pursuant to Section 13 or 15(d)

INVESTMENT IN AMAK

INVESTMENT IN AMAK

3 Months Ended

Mar. 31, 2017

16. INVESTMENT IN AMAK

In July 2016 AMAK issued four million shares to provide additional funds for ongoing exploration work and mine start-up activities. Arab Mining Co. (“Armico”) purchased 3.75 million shares at 20 Saudi Riyals per share (USD$5.33 per share)

and the remaining 250,000 shares are for future use as employee incentives. We did not participate in the offering, thereby reducing our ownership percentage in AMAK to 33.44% from 35.25%.

As of March 31, 2017, and December 31, 2016, the Company had a non-controlling equity interest of 33.44% in AMAK of approximately $48.2 million and $49.4 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 March 31, 2017.

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 March 31,
	2017			2016
	( thousands of dollars)
Sales	$	2,256		$	8,992
Gross profit (loss)		(1,307	)		191
General, administrative and other expenses		2,589			2,147
Loss from operations	$	(3,896	)	$	(1,956	)
Gain on settlement with former operator		-			16,225
Net income (loss)	$	(3,896	)	$	14,269

Gain on settlement with former operator of approximately $16.2 million during the three months ended March 31, 2016, relates to a settlement with the former operator of the mine resulting in a reduction of previously accrued operating expenses.

Depreciation and amortization was $0.5 million and $2.7 million for the three months ended March 31, 2017, and 2016, respectively. Therefore, net income (loss) before depreciation and amortization was as follows:

	Three Months Ended March 31,
	2017			2016
	( thousands of dollars)
Net income (loss) before depreciation and amortization	$	(3,369	)	$	16,978

Financial Position

	March 31,		December 31,
	2017		2016
	(Thousands of Dollars)
Current assets	$	17,333	$	22,860
Noncurrent assets		257,715		251,741
Total assets	$	275,048	$	274,601

Current liabilities	$	10,326	$	8,005
Long term liabilities		84,567		82,546
Shareholders' equity		180,155		184,050
	$	275,048	$	274,601

The equity in the income or loss of AMAK reflected on the consolidated statements of income for the three months ended March 31, 2017, and 2016, is comprised of the following:

	Three months ended March 31,
	2017			2016
AMAK Net income (loss)	$	(3,896	)	$	14,269

Company’s share of income (loss) reported by AMAK	$	(1,303	)	$	5,030
Amortization of difference between Company’s investment in AMAK and Company’s share of net assets of AMAK		337			337
Equity in earnings (loss) of AMAK	$	(966	)	$	5,367

See our Annual Report on Form 10-K for the year ended December 31, 2016, for additional information.