Delays in the completion of its phosphate plant is generating the decline in Ma'aden's share price.
Ma'aden shares fall amid delays
Ma'aden shares fell the most in six months after the company delayed production from its phosphate plant to the second quarter of next year from the end of this year.
In a sharp reversal of fortune for the company, Ma'aden shares fell almost 10 per cent in intraday trading yesterday, ending an upward momentum that stretched back five months.
The state-run producer, also known as Saudi Arabian Mining Company, said it would put back the start of production at its Ras al Zour phosphate plant to the second quarter of next year from the fourth quarter of this year.
Ma'aden went public in 2008, raising 10.5 billion Saudi riyals to start two projects: a phosphate joint venture with Saudi Basic Industries Corporation (SABIC), the world's largest petrochemicals maker; and an aluminium joint venture with Alcoa.
It is attempting to enter the broad minerals farming sector and diversify beyond its current success as a gold miner, where it earns 95 per cent of its revenues.
But the stock closed 4.5 per cent down at 21.20 riyals yesterday.
While commercial production will start in the third quarter of next year, the delay will not incur additional costs, the company said in a statement to the Saudi exchange yesterday as it remained upbeat about the venture. Analysts, however, are not convinced by Ma'aden's strategy.
"The market is overexcited with the stock and this explains the negative reaction on the exchange," said Ahmed al Qahtani, an analyst at NCB Capital in Riyadh.
He said the company's current price was overvalued. He has an "underweight" rating on the stock and a target price of 16.80 riyals.
"It's very difficult with these large companies to meet deadlines. We assumed the plant would be operational in the third quarter of 2011 but there's obviously been a delay," he said.
Saudi Kayan, another unit of SABIC, has also announced delays in the construction of its 1.5 million tonnes per year capacity Al Jubail petrochemical complex until late next year.