Quarterly report pursuant to Section 13 or 15(d)

INVESTMENT IN AMAK

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INVESTMENT IN AMAK
6 Months Ended
Jun. 30, 2017
INVESTMENT IN AMAK [Abstract]  
INVESTMENT IN AMAK
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 June 30, 2017, and December 31, 2016, the Company had a non-controlling equity interest of 33.44% in AMAK of approximately $45.1 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 June 30, 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 June 30,
   
Six Months Ended June 30,
 
   
2017
   
2016
   
2017
   
2016
 
   
(Thousands of Dollars)
 
Sales
 
$
-
   
$
610
   
$
2,256
   
$
9,602
 
Gross loss
   
(8,901
)
   
(3,000
)
   
(10,207
)
   
(2,809
)
General, administrative and other expenses
   
1,971
     
2,361
     
4,559
     
4,509
 
Loss from operations
 
$
(10,872
)
 
$
(5,361
)
 
$
(14,766
)
 
$
(7,318
)
Gain on settlements with former operator
   
-
     
1,200
     
-
     
17,426
 
Net income (loss)
 
$
(10,872
)
 
$
(4,161
)
 
$
(14,766
)
 
$
10,108
 

Gain on settlements with former operator of approximately $1.2 million during the three months ended and $17.4 million during the six months ended June 30, 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 $7.6 million and $2.4 million for the three months and $10.7 million and $5.1 million for the six months ended June 30, 2017, and 2016, respectively.  Therefore, net income before depreciation and amortization was as follows:
 
   
Three Months Ended June 30,
   
Six Months Ended June 30,
 
   
2017
   
2016
   
2017
   
2016
 
   
(Thousands of Dollars)
 
Net income (loss) before depreciation and amortization
 
$
(3,263
)
 
$
(1,772
)
 
$
(4,102
)
 
$
15,206
 

Financial Position

   
June 30,
   
December 31,
 
   
2017
   
2016
 
   
(Thousands of Dollars)
 
Current assets
 
$
16,113
   
$
22,860
 
Noncurrent assets
   
253,233
     
251,741
 
Total assets
 
$
269,346
   
$
274,601
 
                 
Current liabilities
 
$
16,609
   
$
8,005
 
Long term liabilities
   
83,454
     
82,546
 
Shareholders' equity
   
169,283
     
184,050
 
   
$
269,346
   
$
274,601
 

The equity in the income or loss of AMAK reflected on the consolidated statements of income for the three and six months ended June 30, 2017, and 2016, is comprised of the following:

   
Three months ended
June 30,
   
Six months ended
June 30,
 
   
2017
   
2016
   
2017
   
2016
 
   
(Thousands of Dollars)
 
AMAK Net Income (Loss)
 
$
(10,872
)
 
$
(4,161
)
 
$
(14,766
)
 
$
10,108
 
Zakat tax applicable to Saudi Arabian shareholders only
   
-
     
320
     
-
     
320
 
AMAK Net Income (Loss) before Saudi Arabian shareholders' portion of Zakat
 
$
(10,872
)
 
$
(3,841
)
 
$
(14,766
)
 
$
10,428
 
                                 
Company's share of income (loss) reported by AMAK
 
$
(3,635
)
 
$
(1,354
)
 
$
(4,938
)
 
$
3,676
 
Amortization of difference between Company's investment in AMAK and Company's share of net assets of AMAK
   
337
     
337
     
674
     
674
 
Equity in earnings (loss) of AMAK
 
$
(3,298
)
 
$
(1,017
)
 
$
(4,264
)
 
$
4,350
 

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