Quarterly report pursuant to Section 13 or 15(d)

INVESTMENT IN AMAK

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INVESTMENT IN AMAK
3 Months Ended
Mar. 31, 2019
Equity Method Investments and Joint Ventures [Abstract]  
INVESTMENT IN AMAK
INVESTMENT IN AMAK

As of March 31, 2019 and December 31, 2018, the Company had a non-controlling equity interest of 33.4% in AMAK of approximately $37.4 million and $38.7 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, 2019.

In first quarter 2018, we completed an exchange of shares with certain stockholders whereby such stockholders traded 65,000 common shares of TREC in exchange for 24,489 shares of our AMAK stock. The 65,000 shares were accounted for as treasury stock. This transaction reduced our ownership percentage from 33.44% to 33.41%.

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,
 
 
2019

 
2018

 
 
(thousands of dollars)
Sales
 
$
20,664

 
$
14,087

Cost of sales
 
18,570

 
12,506

Gross profit
 
2,094

 
1,581

Selling, general, and administrative
 
2,738

 
1,523

Operating income (loss)
 
(644
)
 
58

Other income
 
428

 
20

Finance and interest expense
 
(445
)
 
(397
)
Loss before Zakat and income taxes
 
(661
)
 
(319
)
Zakat and income taxes
 
522

 

Net Loss
 
$
(1,183
)
 
$
(319
)


Financial Position
 
 
March 31,

 
December 31,

 
 
2019

 
2018

 
 
(thousands of dollars)
Current assets
 
$
56,073

 
$
44,093

Noncurrent assets
 
202,640

 
212,291

Total assets
 
$
258,713

 
$
256,384

 
 
 
 
 
Current liabilities
 
$
18,030

 
$
17,160

Long term liabilities
 
80,008

 
77,366

Stockholders' equity
 
160,675

 
161,858

 
 
$
258,713

 
$
256,384


The equity in the earnings (losses) of AMAK reflected on the consolidated statements of income for the three months ended March 31, 2019, and 2018, is comprised of the following:
 
 
Three Months Ended
March 31,
 
 
2019

 
2018

 
 
(thousands of dollars)
AMAK Net Loss
 
$
(1,183
)
 
$
(319
)
Percentage of Ownership
 
33.41
%
 
33.41
%
 
 
 
 
 
Company's share of loss reported by AMAK
 
$
(395
)
 
$
(107
)
Amortization of difference between Company's investment in AMAK and Company's share of net assets of AMAK
 
337

 
337

Equity in earnings (losses) of AMAK
 
$
(59
)
 
$
230



In connection with the 2018 AMAK share repurchase program, we received net proceeds of approximately $0.4 million during the three months ended March 31, 2019. AMAK expects to complete the share repurchase program in 2019, at which point all shares repurchased from AMAK stockholders will be registered as treasury shares. Upon completion of the share repurchase program, the Company does not believe its ownership percentage in AMAK will change from 33.4%.

For additional information, see Note 10, “Investment in Al Masane Al Kobra Mining Company ("AMAK")” to the consolidated financial statements set forth in our Annual Report on Form 10–K for the year ended December 31, 2018.

At March 31, 2019, and December 31, 2018, we had a receivable from AMAK of approximately $54,000 and $67,000, respectively, relating to unreimbursed travel and Board expenses which are included in prepaid and other assets. We did not advance any cash to AMAK during 2019.