RIYADH: Saudi Arabia's mining sector is going through a period of transformation as the kingdom strives to become a global industry leader. But have you ever wondered what treasures lie hidden beneath the surface?
Rich in minerals essential for industries around the world, Saudi Arabia is transforming itself into a leading energy exporter, abandoning its traditional role as an oil producer.
It has strong potential to produce minerals essential for the energy transition, such as aluminium, copper and rare earths, as well as minerals essential for agriculture worldwide.
A strategic focus on economic diversification has placed the mining sector at the forefront of national development plans, with the kingdom's mineral wealth valued at around 9.4 trillion Saudi riyals ($2.4 trillion).
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Saudi Arabia’s mining sector reforms have been recognised as the fastest-growing regulatory and investment-friendly environment in the world over the past five years, according to the 2023 Global Risk Report published by UK-based research and consultancy firm MineHutte.
The report also said Saudi Arabia was ranked as the country with the second best licensing environment.
Saudi Arabia has seen a 138 percent increase in the number of mining licenses issued since the introduction of a new mining investment law in 2021.
As Gaute Andreassen, a partner in Bain and Co.’s Advanced Manufacturing and Services and Energy and Natural Resources, puts it, “Even though some resources have been extracted, there are still many that are untapped.”
“The mining sector in Saudi Arabia has been focused mainly on the production of phosphates for fertilizers and bauxite for aluminium production for many years. These two will be the main parts of the sector’s activities in the future,” Andreassen told Arab News.
“In the future, there will be more evidence that other resources such as rare earths and copper can be extracted. The question is, are these resources commercially viable?” he added.
Rabih Nassar, Partner, Resources and Industry Consulting at PwC Middle East, believes that apart from phosphates and bauxite, there are other important minerals that are particularly promising for the development of Saudi Arabia’s mining sector.
“At the FMF (Future Minerals Forum) 2024, it was highlighted that Saudi Arabia is rich in minerals such as phosphates, gold, copper, zinc, lithium and rare earths. Each of these minerals has different uses in different global markets and industries,” Nassar said.
According to Nassar, gold remains in high demand, not just for jewelry and investment purposes, but also for technological applications in the electronics and aerospace industries, due to its excellent electrical conductivity and resistance to corrosion.
Copper is essential for 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 in galvanizing to protect steel from corrosion, making it essential in the construction and automotive industries. The metal is also crucial in the production of batteries and alloys.
Lithium plays a key role in the battery industry, particularly for electric vehicles and renewable energy storage systems.
Rare earths are also important for the production of permanent magnets used in wind turbines, electric vehicle motors, and other electronic devices such as smartphones and computers.
Attracting Investment
At the FMF 2024 conference held in January in Riyadh, Saudi Arabia outlined a strategy to attract investment in the mining sector through regulatory reforms, a competitive tax framework and increased transparency.
Nassar told Arab News that Saudi Arabia is improving its geological database and conducting extensive surveys to create better mineral resource maps that will help investors make more informed decisions.
He stressed the importance of this work in line with the ongoing improvement of the regulatory framework to create a conducive environment for investment.
“These efforts are complemented by strong government support and streamlined processes for mining licenses and operations,” he said, adding that “these initiatives will help generate more expertise and funding, as well as promote knowledge transfer and capacity building, which will ensure the sustainable development of the mining industry.”
Chris Brown, a partner in Bain and Co.’s retail, energy and natural resources practice, also spoke about what Saudi Arabia will do to attract domestic and foreign investment to support the exploration and development of Saudi Arabia’s mining resources.
“Saudi Arabia is working to establish several industries that will be large buyers of these minerals, which is a very good start. Saudi companies have also demonstrated their ability to work with international partners to explore mining opportunities,” Braun said.
“Moving forward, a key requirement for success is to examine the country’s mineral resources and invest in exploration,” he added.
Braun also emphasized the importance of developing infrastructure to support mining operations, which are often located in remote areas, including modern transportation, housing, reliable utilities and digital access.
“Ultimately, Saudi Arabia needs to ensure that it has sufficient significant capacity and a qualified workforce, both unskilled and skilled, and ensuring that Saudi Arabia provides adequate education for mining engineers should be a top priority,” he said.
Promoting private and foreign investment
When it comes to foreign investment in Saudi Arabia, the Kingdom is an attractive destination for those seeking long-term returns and strategic partnerships.
As PwC predicts, the Kingdom will offer a host of new opportunities and incentives to both the private sector and foreign investors.
“The government has revised mining laws to make them more investor-friendly,” Nassar said.
This includes streamlining the mining licence application and approval process, providing more transparency and reducing regulatory restrictions.
The establishment of a dedicated Ministry of Mines highlights the importance of the sector and serves as a direct point of contact 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 at competitive interest rates, to stimulate investment in mining-related technologies and infrastructure,” Nassar said.
Developing modern mining infrastructure can generate significant investments, such as the construction of a network of railways, ports and roads designed to support mining and mineral transport.
These developments aim to reduce transportation challenges and operating costs for mining activities.
Saudi Arabia has invested heavily in geological exploration and has made significant progress in making geological information more accessible to investors.
“This project, called the Saudi Geological Survey, will provide detailed and reliable data that will help reduce exploration risks and costs associated with mining,” said PwC Middle East consulting partner.
In addition, the Kingdom promotes joint ventures between domestic and foreign companies as a key strategy.
These collaborations facilitate technology transfer, share expertise, and pool resources for exploration and development projects, making investment more attractive and feasible for foreign companies.
The country also promotes sustainable mining practices by providing incentives for projects that prioritize environmental conservation, use renewable energy and incorporate green technologies into their operations.
“The projects comply with global environmental standards and attract environmentally conscious investors. These projects establish Saudi Arabia as a prime location for mining investment, offering both domestic and international investors a wealth of opportunities and support,” Nassar said.
Saudi Arabia is not sitting idly by and waiting for industry to enter the kingdom.
Minister of Industry and Mineral Resources Bandar Al-Khorayev has been active on the world stage, visiting countries he believes could benefit from the significant growth potential the Kingdom has to offer.
Alkhorayef is currently on a trip to South America, scheduled for July 22 to 30, and has already attended a roundtable organized by the industry federation in Sao Paulo, where he invited Brazilian companies to invest in Saudi Arabia's growing mining sector.
What next?
When asked to imagine the future of Saudi Arabia’s mining sector, Andreassen explained that the kingdom is well-positioned to succeed, given its vast reserves of critical minerals that are both regionally and globally significant.
“Saudi Arabia has a lot of potential to help it succeed in mining. It has a variety of minerals that are important to the region and the world in the coming years. Through key local players in the Saudi mining sector, Saudi Arabia has the potential to become a global champion if it continues to grow,” he said.
Andreassen continued: “The fact that minerals and mining have a prominent place in Vision 2030 gives us great confidence that the Saudi government will continue to support the sector and ensure that it makes the right contribution to profitable growth and economic growth.”
This support is expected to boost the economy through job creation and revenue from the sale of minerals and mineral products such as metals, fertilizers, batteries and automobiles.
On the other hand, PwC is bullish on Saudi Arabia’s mining sector, saying it is likely to grow significantly, supported by government reforms and investment.
“Key opportunities include expansion into new minerals and integration of advanced technologies for exploration and processing,” Nassar said.
“By tapping into the vast mineral resources and implementing strategic initiatives, the mining sector is poised to become a key driver of economic diversification and sustainable development,” he added.
Mining is at the core of Riyadh's efforts to move away from oil, with a focus on tapping its vast reserves of phosphates, gold, copper and bauxite.
