RIYADH: Saudi Arabia's mining sector is entering an era of change. The kingdom is determined to become a global leader in the industry. But have you ever wondered what treasures lie hidden in its soil?
Saudi Arabia is rich in minerals that are crucial to various global industries. The kingdom is emerging as a leading exporter of various types of energy, moving away from its traditional role as an oil producer.
It has great potential for the production of minerals essential for the energy transition, such as aluminium, copper and rare earths, 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. The value of the Kingdom's mineral resources is estimated at SR9.4 trillion ($2.4 trillion).
Open for business
According to the World Risk Report 2023 by British research and consulting firm MineHutte, Saudi Arabia is considered to have the fastest-growing regulatory and investment environment in the world due to its reforms in the mining sector over the past five years.
The report also states that the Kingdom was ranked as the second best country in terms of its licensing environment.
This comes after Saudi Arabia saw a 138 percent increase in the number of mining licenses issued since the implementation of the new Mining Investment Law in 2021.
According to Gaute Andreassen, a partner in Bain & Co.'s Advanced Manufacturing and Services and Energy and Natural Resources businesses, while some resources are already being mined, a significant portion remains untapped.
“The mining sector in Saudi Arabia has for many years focused mainly on phosphate for fertilizers and bauxite, which is used in aluminum production. These two raw materials will continue to form an important part of the sector's activities in the future,” Andreassen told Arab News.
He added: “There are indications that there will be more deposits in the future, for example of rare earths and also copper, which can be mined. The question is whether these resources are commercially viable.”
Rabih Nassar, a resource and industrial consulting partner at PwC Middle East, believes that there are other important minerals besides phosphate and bauxite that are considered particularly promising for the development of the Saudi Arabian mining sector.
“The FMF (Future Minerals Forum) 2024 highlighted that Saudi Arabia is rich in minerals such as phosphates, gold, copper, zinc, lithium and rare earths. Each of these minerals serves different global markets and industries,” Nassar explained.
According to Nassar, gold remains in high demand, not only for jewelry and investments, but also for technological 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 stressed the importance of zinc, which is mainly used for galvanizing to protect steel from corrosion and is therefore indispensable in the construction and automotive industries. This metal is also crucial in the production of batteries and alloy materials.
Lithium plays a central role in the battery industry, especially for electric vehicles and renewable energy storage systems.
In addition, rare earth elements are crucial for the production of permanent magnets used in wind turbines, electric vehicle motors and various other electronic devices such as smartphones and computers.
Attract investments
During the FMF 2024, held in Riyadh in January, Saudi Arabia outlined its strategy to attract investment in the mining sector through regulatory reforms, competitive tax systems 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 and enable investors to make informed decisions.
He stressed that this work is of great importance and that the regulatory framework must continue to be improved in order to create an enabling environment for investment.
“These efforts will be complemented by strong government support and streamlined processes for mining licensing and operations,” he said, adding: “These initiatives will provide enhanced expertise and capital, as well as promote knowledge transfer and capacity building, ensuring the sustainable development of the mining industry.”
Chris Braun, partner in retail and energy and natural resources at Bain & 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 mining resources.
“The Kingdom is already working on establishing several industries that will extract significant quantities of these minerals. This is a very good start. In addition, Saudi companies have demonstrated their ability to work well with international partners in pursuing mining opportunities,” Braun said.
He added: “A major prerequisite for future success is the confirmation of the country’s mineral resources and investment in exploration.”
Braun also stressed the importance of developing infrastructure to support mining, which is often located in remote areas, including modern transportation, housing, reliable utilities and digital access.
“Finally, Saudi Arabia must ensure it has sufficient access to critical capacity and skilled labor. Both unskilled and skilled labor are critical, and ensuring the Kingdom trains enough mining engineers should be a top priority,” he explained.
Promoting private and foreign investment
When it comes to foreign investment in Saudi Arabia, the Kingdom is an attractive destination for those interested in long-term returns and strategic partnerships.
According to PwC, the Kingdom is expected to offer a number of new opportunities and incentives to both the private sector and foreign investors.
“The government has revised its mining laws to make them more investor-friendly,” Nassar said.
These include simplifying the application and approval processes for mining licenses, ensuring transparency and reducing regulatory restrictions.
The establishment of a separate Ministry of Mining underlines the importance of the sector and provides a direct contact point for investors.
Investors in the mining sector can also benefit from tax incentives, such as reduced tax rates and exemptions from import duties on mining equipment.
“The Saudi 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 state-of-the-art mining infrastructure can generate significant investments, such as the construction of rail networks, ports and roads to support the extraction and transportation of minerals.
These developments aim to reduce the logistical challenges and operating costs of mining activities.
Saudi Arabia is investing heavily in geological surveys and has made great strides in making geological data more accessible to investors.
“This initiative, known as the Saudi Geological Survey, provides detailed and reliable data, thereby reducing the exploration risks and costs associated with mining projects,” said PwC’s Middle East consulting partner.
In addition, the Kingdom promotes joint ventures between local and international companies as a central strategy.
These partnerships facilitate technology transfer, share expertise and pool 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 to projects that prioritize environmental protection, use renewable energy and implement environmentally friendly 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 prime location for mining investment and provide comprehensive opportunities and support to both domestic and foreign investors,” Nassar said.
Saudi Arabia is not waiting idly 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 Kingdom's considerable growth potential.
Alkhorayef is currently on a South American tour scheduled to last from July 22 to 30 and has already attended an industry association roundtable conference in Sao Paulo, where he urged Brazilian companies to invest in Saudi Arabia's emerging mining sector.
What's next?
When asked about his future prospects for Saudi Arabia's mining sector, Andreassen said the Kingdom has a good chance of success due to its significant reserves of critical minerals that are important both regionally and globally.
“Saudi Arabia has many levers in its hands that are likely to lead to success in mining. It has access to many minerals that are critical for the region and globally in the coming years through a major local player in the mining sector in the Kingdom. If it maintains its growth trajectory, it has the potential to become a global champion,” he said.
Andreassen continued: “The fact that minerals and mining feature so prominently in Vision 2030 gives us confidence that the Saudi government will continue to support the sector and ensure that it has the right conditions to grow profitably and boost the economy.”
This 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.
Another positive aspect is PwC's positive forecast for Saudi Arabia's mining sector. The company expects it to experience significant growth thanks to government reforms and investments.
“The greatest opportunities lie in expanding into new minerals and integrating cutting-edge technologies for exploration and processing,” Nassar explained.
He added: “By exploiting the potential of our rich mineral resources and implementing strategic initiatives, the mining sector will become a major driver of economic diversification and sustainable development.”
Mining plays a central role in Riyadh's efforts to break free from oil dependence, with a focus on developing significant reserves of phosphate, gold, copper and bauxite.
