INVESTMENT IN AMAK AND DISCONTINUED OPERATIONS
|12 Months Ended|
Dec. 31, 2019
|Equity Method Investments and Joint Ventures [Abstract]|
|INVESTMENT IN AMAK AND DISCONTINUED OPERATIONS||
INVESTMENT IN AMAK AND DISCONTINUED OPERATIONS
At December 31, 2019 and 2018, the Company had a non-controlling equity interest of 33.3% and 33.4% in AMAK of approximately $32.9 million and $38.7 million, respectively. This investment is accounted for under the equity method. There are no events or changes in circumstances that may have an adverse effect on the fair value of our investment in AMAK at December 31, 2019 and 2018.
The Company committed to a plan to sell our investment in AMAK during the third quarter of 2019. Management engaged in an active program to market the investment which resulted in an agreement with certain AMAK stockholders in September 2019. Pursuant to a Share Sale and Purchase Agreement (the "Purchase Agreement") that was effective as of October 2, 2019, the Company has agreed to sell its entire 33.3% equity interest in AMAK, to AMAK and certain other existing stockholders of AMAK (collectively, the "Purchasers") for an aggregate gross purchase price (before taxes and transaction expenses) of SAR 264.7 million (or approximately US$70 million), which will be payable in US Dollars. The Purchasers advanced 5% of the purchase price (or approximately $3.5 million) in the form of a non-refundable deposit, which was a condition to the effectiveness of the Purchase Agreement. These advances were recorded as a reduction in our investment in AMAK.
The Purchase Agreement contained various representations, warranties and indemnity obligations of the Company and the Purchasers, including the release of the Company's guarantee as described in Note 14. On January 16, 2020, the Company and the Purchasers entered into a letter agreement (the “Amendment”) providing certain amendments to the Purchase Agreement. Pursuant to the Amendment, the Long Stop Date (as defined in the Purchase Agreement) for completion of the Share Sale has been extended to March 31, 2020 to allow additional time for the parties to obtain certain required governmental approvals. Under the Purchase Agreement, the Company has certain termination rights if closing of the Share Sale does not occur on or before the Long Stop Date. The Amendment also provides that, if closing of the Share Sale does not occur on or before the extended Long Stop Date, and the Company determines in its sole discretion to further extend such date, then an amount equal to 50% of the approximately $3.5 million non-refundable deposit made by the Purchasers under the Purchase Agreement will be forfeited to the Company as liquidated damages and shall not be applied to the purchase price at closing of the Share Sale.
As all the required criteria for held-for-sale classification was met in third quarter of 2019, the investment in AMAK is classified as held-for-sale in the Consolidated Balance Sheets and reflected as discontinued operations in the Consolidated Statements of Operations for all periods presented. The assets held-for-sale are disclosed by the Company in the Corporate segment. The Company expects to have no continuing involvement with the discontinued operations after the closing date. The gain (loss) from discontinued operations, net of tax, include our portion of the equity in earnings (losses) in AMAK as well as other administrative expenses incurred in Saudi Arabia and transaction costs.
Included in discontinued operations are the following for the years ending December 31:
Ordinary and customary closing expenses related to the disposition of AMAK will be incurred and expensed at closing.
We have received and attached to this Form 10-K the financial statements of AMAK prepared in accordance with generally accepted accounting principles in the United States of America as of December 31, 2019 and 2018, and for each of the three years ended December 31, 2019. These financial statements have been 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
The equity in the income or loss of AMAK reflected in discontinued operations for the years ended December 31, 2019, 2018, and 2017, is comprised of the following:
A gain of approximately $16.2 million for the difference between our initial investment in AMAK and our share of AMAK's initial assets recorded at fair value was not recognized in 2008. This basis difference is being amortized over the life of AMAK's mine which is estimated to be twelve years beginning with its commencement of production in July 2012 as an adjustment to our equity in AMAK's income or loss.
Changes in Ownership and Other Transactions
The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef