RIYADH: Saudi Arabia's mining sector is on the verge of a transformational period, with the kingdom determined to become a global leader in the industry. But have you ever wondered what treasures lie beneath its grounds?
Saudi Arabia is rich in essential minerals for various global industries. The kingdom is becoming a leading exporter of a variety of energy sources, moving away from its traditional role as an oil producer.
It has a strong potential to produce essential minerals for energy transmission such as aluminum, copper and rare earth elements, as well as minerals needed for global agriculture.
A strategic focus on economic diversification has placed the mining sector at the forefront of national development plans, with the Kingdom's mineral wealth estimated at SR 9.4 trillion ($2.4 trillion).
It is open for business
According to the Global Risk Report 2023 published by UK-based research and consultancy firm MineHutte, Saudi Arabia's mining sector reforms have seen the country become the fastest growing regulatory and capital environment globally over the past five years. .
The report also states that the Kingdom is the second best country for the licensing environment.
Meanwhile, since the implementation of the new mineral investment law in 2021, Saudi Arabia has seen a 138% increase in the number of mining licenses issued.
According to Gaute Andreassen, a partner in Bain and Co.'s Advanced Manufacturing and Services and Energy and Natural Resources, while some resources are already being mined, there is still a significant amount that remains untapped.
The mining sector in Saudi Arabia has for years focused mainly on phosphates for fertilizers and bauxite, which is used in aluminum production. Andreessen told Arab News: These two will form a key part of the sector's activities in the future.
“Furthermore, there is evidence of additional endowment, for example rare earth elements as well as mineable copper,” he added. The question is whether these sources are commercially viable.
Rabi Nassar, resource and industrial consulting partner at PwC Middle East, believes that in addition to phosphate and bauxite, there are other key minerals that are particularly promising for development in Saudi Arabia's mining sector.
At FMF (Future Minerals Forum) 2024, it was emphasized that Saudi Arabia is rich in minerals such as phosphate, gold, copper, zinc, lithium and rare earth elements. Nassar clarified: Each of these minerals serves distinct global markets and industries.
According to Nassar, gold continues to be in high demand not only for jewelry and investment, but also for technology applications in the electronics and aerospace industries due to its excellent conductivity and corrosion resistance.
Copper is essential in electrical engineering, electronics, construction and new green technologies such as electric vehicles and renewable energy systems.
He also emphasized the importance of zinc, which is mainly used for galvanizing to protect steel from corrosion and is essential in the construction and automotive industries. This metal is also very important in the production of batteries and alloy materials.
Lithium plays a fundamental role in the battery industry, especially for electric vehicles and renewable energy storage systems.
In addition, rare earth elements are critical to the production of permanent magnets used in wind turbines, electric vehicle motors, and other electronic devices such as smartphones and computers.
Investment attraction
During FMF 2024 held in January in Riyadh, Saudi Arabia outlined its strategy to attract investment in the mining sector through regulatory reforms, competitive tax frameworks and increased transparency.
Nassar told Arab News that the kingdom is improving geological databases and conducting extensive surveys to better map its mineral resources, thereby facilitating informed decision-making for investors.
He aligned the importance of this work with the continued improvement of regulatory frameworks in order to provide a favorable environment for investment.
“These efforts are complemented by strong government support and streamlined processes for mining permits and operations,” he said, adding, “These initiatives provide extensive expertise and capital, as well as promote knowledge transfer and capacity building, ensuring sustainable development.” mining industry.
Chris Brown, a retail and energy and natural resources partner at Bain and Co, also shed light on what the Kingdom will do to attract domestic and international investment to support the exploration and development of Saudi Arabia's mineral resources.
“The Kingdom is currently working on creating several industries that will remove a significant portion of these minerals. This is a very good start. Beyond that, Saudi companies will demonstrate their ability to work with international partners in pursuing opportunities based on They have shown a mine.
He added: The prerequisite for success in the future is to validate the country's mineral endowment and invest in exploration.
Brown also emphasized the importance of developing infrastructure to support mining operations that are often located in remote areas. This includes modern transportation, housing, reliable water and electricity, and digital access.
Finally, Saudi Arabia must ensure that there is adequate access to critical capabilities and a qualified workforce. Both skilled and unskilled labor are critical and ensuring the Kingdom trains enough mining engineers should be a key priority.
Encouraging the private sector and foreign investment
When it comes to foreign investment in Saudi Arabia, the Kingdom is an attractive destination for those looking for long-term profits and strategic partnerships.
According to PwC, a range of new opportunities and incentives can be anticipated that the Kingdom will extend to the private sector and foreign investors.
“The government has revised its mining laws to make them more investor-friendly,” Nassar said.
This includes streamlining the application and approval processes for mining permits, ensuring transparency and reducing regulatory restrictions.
The creation of a dedicated Ministry of Mines emphasizes the importance of this sector and provides a direct point of contact for investors.
Investors in the mining sector can also benefit from tax incentives such as reduced tax rates and exemption from import duties for mining equipment.
“Saudi Arabia's Industrial Development Fund also provides financial support, such as loans with competitive interest rates, to encourage investment in mining-related technologies and infrastructure,” Nassar said.
The development of advanced mining infrastructure can generate significant investments such as the construction of rail networks, ports and roads designed to support the extraction and transportation of minerals.
These developments aim to reduce logistical challenges and operational costs for mining operations.
Saudi Arabia invests heavily in geological surveys and has taken important steps in making geological data more accessible to investors.
“This initiative, known as the Saudi Geological Survey, provides accurate and reliable data and reduces exploration risks and costs associated with mineral investments,” said the PwC Middle East consulting partner.
In addition, the Kingdom encourages joint ventures between local and international companies as a central strategy.
These partnerships facilitate technology transfer, expertise sharing, and resource pooling for exploration and development projects, making investments more attractive and feasible for foreign companies.
In addition, the country promotes sustainable mining practices by offering incentives for projects that prioritize environmental protection, the use of renewable energy and the implementation of green technologies in their operations.
It complies with global environmental standards and is attractive to environmentally conscious investors. These initiatives will position Saudi Arabia as a prime location for mining investment and provide ample opportunities and support for domestic and foreign investors, Nassar said.
Saudi Arabia does not sit and wait for this industry to enter the kingdom.
The Minister of Industry and Mineral Resources of Bandar al-Kharaif is active on the world stage, visiting countries that he believes can benefit from the significant growth potential that the Kingdom offers.
Al-Khoraif is currently on a trip to South America – scheduled to run from July 22 to 30 – and has already attended a roundtable hosted by the Federation of Industries in Sao Paulo, where he asked Brazilian companies to invest in the emerging sector. Saudi Arabia's mining growth is inviting.
Then what?
When asked to envision the future direction of Saudi Arabia's mining sector, Andreessen explained that the kingdom is well-positioned for success due to its significant reserves of vital minerals that are important both regionally and globally.
“Saudi Arabia has a lot of levers that are likely to be successful in mining. The country has access to many minerals that will be vital for the region and the world in the years to come. through a major local player in the mining sector in the Kingdom. If he continues on his growth path, he has the potential to become a world champion.”
Andreessen continued: “The fact that minerals and mining have such a prominent place in Vision 2030 gives us comfort that the Saudi government will continue to support the sector and ensure that the right outcomes for profitable growth and It will be profitable. It fuels the economy.”
This support is expected to boost the economy through job creation and revenue from the sale of minerals and mineral-derived products such as metals, fertilizers, batteries and automobiles.
On another positive note, PwC has a bright outlook on Saudi Arabia's mining sector, saying it is poised for significant growth with government support for reforms and investments.
“The main opportunities include expanding into new minerals and integrating advanced technologies for exploration and processing,” Nassar clarified.
He added: The mining sector, by taking advantage of the potential of abundant mineral resources and implementing strategic plans, is supposed to become the main driver of economic diversity and sustainable development.
Mining is central to Riyadh's efforts to move away from dependence on oil, focusing on exploiting significant reserves of phosphate, gold, copper and bauxite.
