Saudi gold miner shines for investors

What's Up: Saudi Arabian Mining Co, also known as Ma'aden, is seen as a proxy to the increase in gold price, a fund manager said.

Saudi Arabian Mining Company is catching the eye of investors looking to benefit from the recent gold rally.

The metals producer, also known as Ma'aden, earns 95 per cent of its revenues from gold with 9.2 million ounces of potential reserves, two recent mine discoveries and plans to triple its gold production by 2015. Ma'aden sells gold on the spot market at the London Metal Exchange.

Ma'aden's shares, listed on the Saudi Tadawul exchange, have surged 15 per cent since the start of this year, tracking gains in the spot gold market. "For retail investors, buying Ma'aden's stock is as good as buying gold," said Hisham Tuffaha, the head of asset management at the Bakheet Investment Group, based in Riyadh.

"This is the story of Ma'aden."

Gold has risen 16 per cent since January, underpinned by persistent doubts about the economic and financial health of the US and Europe and the measures governments and central banks might have to take to put things right.

The increase in the gold price has boosted Ma'aden's revenues, which reached a record high of 246 million Saudi riyals in the second quarter. Gold for immediate delivery traded 1 per cent higher yesterday at US$1,654.47 an ounce.

Ma'aden has an exploration licence for the Arabian Shield located in the northern region of Saudi Arabia.

The company last year identified two probable gold mines, Ad Duwayhi and As Suq. A 500km pipeline will be constructed to provide sufficient water for the mines.

The cost of the pipeline has not been disclosed by Ma'aden. Apart from those two mines, it has identified three more possible sites.

The company has been investing heavily in mine exploration - it has spent about $73m on gold exploration over the past decade.

The company has also diversified into other areas such as the production of diammonium phosphate fertiliser and aluminium.

Ma'aden's stock, listed on the Saudi Tadawul exchange, closed down 0.4 per cent at 25 riyals yesterday.