
14.	Oman Investment

In June of 2012, we entered into a strategic partnership with the Zawawi Group in Oman to establish a mining operation by acquiring 55% of Zawawi Gypsum LLC, which holds the mining rights to a gypsum quarry in Salalah, Oman, for $16 million, including transaction costs. Zawawi Gypsum LLC will develop infrastructure and operate the quarry. Quarry mining operations are targeted for startup in the third quarter of 2013.

The second phase of the partnership is a 50/50 manufacturing venture, USG-Zawawi Drywall LLC, with Zawawi Minerals LLC to build and operate a low cost wallboard plant in Oman. The plant site is in close proximity to the gypsum quarry and port facilities, facilitating access into markets in India and the Middle East. The target for commencement of wallboard production operations is the first half of 2014.

We have accounted for the acquisition of the mining rights as an asset acquisition and have measured our interest in the mining rights at our cost. The mining rights will be depleted based upon tonnage mined relative to the total probable capacity in the quarry, and are presented within total property, plant and equipment in our consolidated balance sheet.

We determined that both entities are variable interest entities (VIEs). We believe that we direct the activities that most significantly impact the VIEs through our appointment of the general manager, who oversees both ventures and whose responsibilities include developing infrastructure, operating the quarry and directing the entity's product development and pricing strategies. As such, we consolidate the VIEs and, in June 2012, in conjunction with the acquisition of the mining rights, we established a 45% noncontrolling interest of $13 million within stockholders' equity based upon the fair value of the mining rights, with a corresponding increase to the mining rights. There was no gain or loss recognized upon the initial consolidation of the mining VIE.

In January of 2013, under our strategic partnership agreement, we paid an additional $17 million to obtain additional mining rights. Concurrently, our venture partner who holds the noncontrolling interest contributed its share of the mining rights. Based upon the fair value of the mining rights, the noncontrolling interest within stockholders' equity increased by $13 million and the mining rights, reflected within property, plant and equipment, increased by $30 million.

During the first quarter of 2013, in conjunction with the second phase of this partnership, our venture partner Zawawi Group provided a loan of approximately $2 million to USG-Zawawi Drywall LLC, which is included in other liabilities in our accompanying consolidated balance sheet as of March 31, 2013. Other liabilities includes, in the aggregate, loans payable to our venture partner of $6 million and $4 million as of March 31, 2013 and December 31, 2012, respectively.

During the first quarter of 2013, we provided a loan of approximately $2 million to USG-Zawawi Drywall LLC. Including this loan, we have provided $4 million of loans to USG-Zawawi Drywall LLC and $2 million of loans to Zawawi Gypsum LLC. Loans we make to these ventures are not reflected on our accompanying consolidated balance sheets because they are eliminated in consolidation.