Sabic mining venture hammered by costs

Saudi Arabian Mining (Maaden) revealed on Sunday that a phosphate venture it is developing with Saudi Basic Industries (Sabic) will cost $5.6 billion, 62% more than the $3.47 billion the companies projected in March.

In a statement explaining the increase, Maaden said: "The increase in the cost of the project... is due to a rise in prices in the international construction market".

Energy projects in the Gulf Arab region face delays and cancellations due to a shortage of engineers and labourers, Anne Keller of Jacobs Consultancy told an energy conference in March.

Sabic, the world's largest chemical company by market value and the Gulf's largest steel producer, owns 30% of the project with the 70% balance of ownership being retained by Maaden.

The new venture will be specialised in producing phosphate fertilisers at the Minerals Industrial City at Ras Az Zawr. Both Maaden and Sabic are majority owned by the Kingdom of Saudi Arabia.

Sabic is listed on the Saudi Stock Exchange and Maaden has plans to list on the bourse. It announced plans to sell 50% of the company through an initial public offering (IPO) by the end of 2006, but held back the offering due to market conditions.

The $5.6 billion phosphate project is Sabic's first in mining and its fourth in fertilisers, and according to Maaden, once "the project enters the complete production phase... it will represent more than 20% of the global trade of phosphate-based fertilisers".

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