INVESTMENT IN AL MASANE AL KOBRA MINING COMPANY (AMAK)
|12 Months Ended|
Dec. 31, 2015
|INVESTMENT IN AL MASANE AL KOBRA MINING COMPANY ("AMAK") [Abstract]|
|INVESTMENT IN AL MASANE AL KOBRA MINING COMPANY ("AMAK")||
NOTE 10 - INVESTMENT IN AL MASANE AL KOBRA MINING COMPANY ("AMAK")
We have concluded that we have significant influence over the operating and financial policies of AMAK and, accordingly, should account for our investment in AMAK using the equity method. As of December 31, 2015, and 2014, we had a non-controlling equity interest of approximately $47.7 million and $53.0 million, respectively.
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, 2015, and 2014, and for each of the three years ended December 31, 2015. 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
Depreciation and amortization for the years ended December 31, 2015, 2014, and 2013 was $23.2 million, $23.7 million and $24.4 million, respectively. Therefore, net income before depreciation and amortization was as follows:
The equity in the income or loss of AMAK reflected on the consolidated statements of income for the years ended December 31, 2015, 2014, and 2013, 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.
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.
We assess our investment in AMAK for impairment when events are identified, or there are changes in circumstances that may have an adverse effect on the fair value or recoverability of the investment. We consider recoverable ore reserves and the amount and timing of the cash flows to be generated by the production of those reserves, as well as, recent equity transactions within AMAK. No impairment charges were recorded in 2015, 2014, or 2013.
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://www.xbrl.org/2003/role/presentationRef