RIYADH: Saudi Arabia's mining sector is on the cusp of an era of transformation, with the Kingdom fully set to become a global leader in the field. But have you ever wondered what treasures lie beneath its lands?
Saudi Arabia is rich in minerals needed for various industries worldwide. The kingdom is becoming a leading exporter of various types of energy, moving away from its traditional role as an oil producer.
It has great potential to produce minerals needed for 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 placed the mining sector at the forefront of national development plans, with the Kingdom's mineral wealth estimated at SR9.4 trillion ($2.4 trillion).
Open for business
According to the Global Risks Report 2023, published by UK-based research and consultancy MineHutte, Saudi Arabia's mining industry reforms have established it as the fastest-growing regulatory and investment-friendly environment in the world over the past five years.
The report also said that the Kingdom was ranked as the second best country for its licensing environment.
This comes after Saudi Arabia saw a 138 percent increase in the number of mining licenses issued in 2021.
According to Gaut Andreasen, a partner in the practice of Bain and Co. in the fields of prospective manufacturing and services and energy and natural resources, although some resources are already being extracted, there is a significant amount that has not yet been tapped.
“The mining sector in Saudi Arabia has for many years been mainly focused on phosphates for fertilizers and bauxite, which is used in aluminum production. These two will also represent a key part of the sector's activities in the future,” Andreasen told Arab News.
He added: “Looking ahead, there is evidence of additional reserves, such as rare earth elements, as well as mineable copper. The question is how commercially viable these resources are.”
Rabih Nassar, resource and industry advisory partner at PwC Middle East, believes that besides phosphates and bauxite, there are other key minerals that are considered particularly promising for development in Saudi Arabia's 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 different 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 technological applications in the electronics and aerospace industries because of its excellent conductivity and resistance to corrosion.
Copper is important in electrical engineering, electronics, construction and new green technologies such as electric vehicles and renewable energy systems.
He also highlighted the importance of zinc, which is mainly used for galvanizing to protect steel from corrosion, making it important in the construction and automotive industries. This metal is also crucial in the production of batteries and alloys.
Lithium plays a key role in battery production, 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 various other electronics such as smartphones and computers.
Investment attraction
During the FMF 2024 held in January in Riyadh, Saudi Arabia outlined its strategy to attract investment in the mining sector through regulatory reforms, a competitive taxation system and increased transparency.
Nassar told Arab News that the Kingdom is improving its geological databases and conducting extensive research to better map its mineral resources, which facilitates informed decisions for investors.
He linked the importance of this work with the further improvement of the legal and regulatory framework in order to create favorable conditions for investment.
“These efforts are complemented by strong government support and streamlined processes for licensing and mining operations,” he said, adding: “These initiatives will provide enhanced expertise and capital, and will facilitate knowledge transfer and capacity building, ensuring a sustainable mining industry. “.
Chris Brown, partner in retail, energy and natural resources at Bain and Co., also shed light on what the Kingdom will do to attract both domestic and international investment to support exploration and development of Saudi Arabia's mining resources.
“The Kingdom is already working to establish several industries that will receive a significant portion of these minerals. This is a very good start. In addition, Saudi firms have demonstrated their ability to work well with international partners in pursuing mineral-based opportunities,” Brown said.
He added: “Confirmation of the country's mineral resources and investment in exploration is an important requirement for success going forward.”
Brown also stressed the importance of infrastructure development to support mining operations, which are often located in remote areas. This includes modern transport, housing, reliable public services and digital access.
“Finally, Saudi Arabia must ensure sufficient access to critical capabilities and a skilled workforce. Both the unskilled and skilled workforce are critical and making sure the Kingdom trains enough mining engineers must be a key priority,” he stated.
Encouraging the private sector and foreign investment
In terms of foreign investment in Saudi Arabia, the Kingdom is an attractive destination for those seeking long-term returns and strategic partnerships.
According to PwC, we can expect a number of new opportunities and incentives that the Kingdom will extend to both the private sector and foreign investors.
“The government has revised the mining laws to make them more investor-friendly,” Nassar said.
This includes streamlining the application and approval processes for mining licenses, ensuring transparency and reducing regulatory constraints.
The creation of a dedicated mining ministry underlines the importance of the sector and provides direct contact for investors.
Investors in the mining sector can also benefit from tax incentives such as reduced tax rates and exemption from import duties on mining equipment.
“The Saudi Industrial Development Fund also offers financial support, such as loans with competitive interest rates, to encourage investments in technology and infrastructure related to mining,” Nassar said.
The development of modern mining infrastructure can attract significant investment, such as the construction of railway networks, ports and roads designed to support the extraction and transportation of minerals.
These developments are aimed at reducing the logistical problems and operational costs of mining.
Saudi Arabia invests heavily in geological exploration and has made significant progress in making geological data more accessible to investors.
“This initiative, known as the Geological Survey of Saudi Arabia, provides detailed and reliable data, reducing the risks and exploration costs associated with mining ventures,” said PwC's Middle East consulting partner.
In addition, the Kingdom encourages joint ventures between local and international firms as a core strategy.
These partnerships facilitate technology transfer, experience sharing and pooling of 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.
“It meets global environmental standards and is attractive to environmentally conscious investors. These initiatives position Saudi Arabia as a prime location for investment in the mining industry, offering ample opportunities and support to both domestic and foreign investors,” Nassar said.
Saudi Arabia is not sitting back and waiting for the industry to come to the Kingdom.
Minister of Industry and Mineral Resources Bandar Alharaef is active on the world stage, visiting countries that he believes can take advantage of the significant growth potential the Kingdom offers.
Alharaef is currently on a South American trip from July 22 to 30, and has already participated in a round table organized by the Federation of Industry in Sao Paulo, where he invited Brazilian companies to invest in Saudi Arabia's booming mining sector.
What's next?
When asked to outline the future trajectory of Saudi Arabia's mining industry, Andreasen explained that the kingdom is well-positioned for success thanks to its significant reserves of critical minerals that are important both regionally and globally.
“Saudi Arabia is sitting on many levers that can bring success in mining. It has access to many minerals that are critical to the region and the world in the coming years. Through a local major player in the Kingdom's mining sector. He has the potential to become a world champion if he continues his upward trajectory,” he said.
Andreassen continued: “The fact that minerals and mining have been given such an important place in Vision 2030 gives us great comfort that the government of Saudi Arabia will continue to support the sector and ensure that it has the right ramifications for profitable growth and growth. fuel the economy.”
This support is expected to boost the economy through the creation of jobs and revenue from the sale of minerals and mineral-derived products such as metals, fertilizers, batteries and cars.
On another positive note, PwC has a positive outlook for Saudi Arabia's mining sector, saying it is poised for significant growth supported by government reforms and investment.
“Key opportunities include expanding into new minerals and integrating advanced technologies for exploration and processing,” Nassar said.
He added: “Using the potential of its abundant mineral resources and implementing strategic initiatives, the mining sector should become a key driver of economic diversification and sustainable development.”
Minerals production is key to Riyadh's efforts to wean itself off oil, focusing on mining significant reserves of phosphates, gold, copper and bauxite.
