RIYADH: Saudi Arabia's mining sector is on the cusp of a transformational era and the kingdom is determined to become a global leader in the industry. But have you wondered what treasures lie beneath its lands?
Saudi Arabia is rich in mineral resources necessary for various global industries. The kingdom is transforming itself into a leading exporter of various types of energy, moving away from its traditional role as an oil producer.
It has strong potential to produce minerals essential to the energy transition, such as aluminum, copper and rare earth elements, as well as minerals needed for global agriculture.
A strategic focus on economic diversification has put the mining sector at the forefront of national development plans, with the kingdom's mineral wealth estimated at SR9.4 trillion ($2.4 trillion).
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According to the World Risk Report 2023, published by British research and consultancy firm MineHutte, Saudi Arabia's mining sector reforms over the past five years have made it the fastest-growing regulatory and investment-friendly environment globally.
The report also said the kingdom was ranked as the second best country for its licensing environment.
It comes as Saudi Arabia has seen a 138 percent increase in the number of mining licenses issued since the implementation of a new mining investment law in 2021.
According to Gaute Andreassen, a partner at 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 has yet to be tapped.
“For many years, the mining sector in Saudi Arabia has primarily focused on phosphates for fertilizers and bauxite, which is used in aluminum production. These two will also represent a key part of the activities in the sector in the future,” Andreassen told Arab News.
He added: “For the future there is evidence of retrofitting such as rare earth elements as well as copper that can be mined. The question is whether these resources are commercially viable.”
Rabih Nassar, resource and industry consulting partner at PwC Middle East, believes that in addition to phosphate and bauxite, there are other key minerals that are considered particularly promising for development in the Saudi mining sector.
“At FMF (Future Minerals Forum) 2024, it was highlighted that Saudi Arabia is rich in minerals such as phosphates, gold, copper, zinc, lithium and rare earth elements. Each of these minerals serves distinct global markets and industries,” said Nassar.
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 resistance to corrosion.
Copper is essential in electrical engineering, electronics, construction and new environmental technologies such as electric vehicles and renewable energy systems.
He also highlighted the importance of zinc, which is mainly used for electroplating to protect steel from corrosion, making it essential in the construction and automotive industries. This metal is also crucial in the production of batteries and alloy materials.
Lithium plays a key role in the battery industry, especially for electric vehicles and renewable energy storage systems.
In addition, rare earth elements are key to making permanent magnets used in wind turbines, electric vehicle motors, and various other electronics such as smartphones and computers.
Attracting investment
During FMF 2024 held in Riyadh in January, 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 its geological databases and conducting extensive surveys to better map its mineral resources, making it easier for investors to make informed decisions.
He linked the importance of this work with the further 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 licenses and operations,” he said, adding: “These initiatives will provide enhanced expertise and capital, as well as promote knowledge transfer and capacity building, ensuring sustainable mining development. mining industry.”
Chris Braun, a partner at Bain and Co.'s Retail and Energy and Natural Resources, 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 mining resources.
“The kingdom is already working to establish several industries that will consume a significant portion of these minerals. That's a very good start. In addition, Saudi firms have demonstrated their ability to work well with international partners to exploit mining-based opportunities,” said Braun.
He added: “Going forward, confirming the country's mineral wealth and investing in exploration is a big requirement for success.”
Braun further emphasized the importance of developing infrastructure to support mining operations, which are often located in remote areas. This includes modern transport, housing, reliable services and digital access.
“Saudi Arabia must finally ensure sufficient access to critical capabilities and a skilled workforce. Both unskilled and skilled labor are critical and ensuring that the Kingdom produces enough mining engineers should be a key priority,” he said.
Support for the private sector and foreign investment
When it comes to foreign investment in Saudi Arabia, the Kingdom represents an attractive destination for those seeking long-term returns and strategic partnerships.
According to PwC, a number of new opportunities and incentives can be expected that the kingdom will extend to both the private sector and foreign investors.
“The government has overhauled its mining laws to make them more investor-friendly,” Nassar said.
This includes streamlining mining license application and approval processes, ensuring transparency and reducing regulatory constraints.
The establishment of a dedicated mining ministry underlines the importance of the 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.
“The Saudi Industrial Development Fund also offers financial support, such as loans with competitive interest rates, to encourage investment in mining-related technology and infrastructure,” Nassar said.
The development of state-of-the-art mining infrastructure can generate significant investment, such as the construction of rail networks, ports and roads designed to support the mining and transportation of minerals.
The aim of this development is to reduce the logistical problems and operational costs of mining activities.
Saudi Arabia is investing heavily in geological exploration and has made significant strides in making geological data available to investors.
“Known as the Saudi Geological Survey, this initiative provides detailed and reliable data, reducing exploration risks and costs associated with mining ventures,” said PwC's Middle East partner.
In addition, the kingdom promotes joint ventures between local and international firms as a central strategy.
These partnerships facilitate technology transfer, share expertise and combine resources for exploration and development projects, making investment more attractive and feasible for foreign companies.
In addition, the country promotes sustainable mining practices by offering incentives for projects that prioritize environmental protection, use renewable energy sources, and implement green technologies in their operations.
“This is in line with global environmental standards and appeals to environmentally conscious investors. These initiatives position Saudi Arabia as a premier location for mining investment, offering extensive opportunities and support for both domestic and foreign investors,” Nassar said.
Saudi Arabia is not sitting back and waiting for industry to come to the kingdom.
Minister of Industry and Mineral Resources Bandar Alkhorayef is proactive on the world stage, visiting countries he believes can benefit from the substantial growth potential the kingdom offers.
Alkhorayef is currently on a trip to South America from July 22 to 30 and has already attended a round table meeting organized by the Federation of Industries in Sao Paulo where he invited Brazilian companies to invest in Saudi Arabia's emerging mining sector.
What will be next?
When asked to envision the future trajectory of Saudi Arabia's mining sector, Andreassen explained that the kingdom is well-positioned for success due to its significant reserves of critical minerals that are important both regionally and globally.
“Saudi Arabia is sitting on many levers that are likely to bring success in mining. It has access to many minerals that are vital to the region and globally in the coming years. Through a local major player in the mining sector in the kingdom. It has the potential to become a global champion if it continues its growth trajectory,” he said.
Andreassen went on to say: “The fact that minerals and mining have been given such a prominent position in Vision 2030 gives us great comfort that the Saudi government will continue to support the sector and ensure that it has the right implications for profitable growth and growth. drive the economy.”
The support is expected to boost the economy by creating jobs 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 for Saudi Arabia's mining sector, saying it is poised for significant growth supported by government reforms and investment.
“Major opportunities include expansion into new minerals and integration of cutting-edge technologies for exploration and processing,” said Nassar.
He added: “By harnessing the potential of its rich mineral resources and implementing strategic initiatives, the mining sector will become a key driver of economic diversification and sustainable development.
Mining is key to Riyadh's bid to avoid dependence on oil, and is aimed at tapping significant reserves of phosphate, gold, copper and bauxite.
