RIYADH: Saudi Arabia’s mining sector is on the cusp of a transformative era, with the Kingdom determined to become a global leader in the industry. But have you ever wondered what treasures lie beneath its lands?
Saudi Arabia is rich in minerals essential to various global industries. The Kingdom is transforming into a leading exporter of various types of energy, moving away from its traditional role as an oil producer.
It has strong potential for the production of minerals essential to the energy transition, such as aluminum, 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, with the Kingdom's mineral wealth estimated at SR9.4 trillion ($2.4 trillion).
Open for business
Over the past five years, reforms in Saudi Arabia’s mining sector have led to the country being recognised as the fastest growing regulatory and investment-friendly environment in the world, according to the World Risk Report 2023 published by UK-based research and consultancy MineHutte.
The report also states that the Kingdom was ranked as the second best country for its licensing system.
This comes as Saudi Arabia has seen a 138 percent increase in the number of mining licenses issued since the new mining investment law came into force in 2021.
According to Gaute Andreassen, partner in the Advanced Manufacturing and Services and Energy and Natural Resources divisions at Bain and Co., while some resources are already being extracted, there is still a significant amount that has not yet been exploited.
“The mining sector in Saudi Arabia has for many years focused mainly on phosphate for fertilizer and bauxite, which is used in the production of aluminum. These two will also be a key part of the sector’s activities in the future,” Andreassen told Arab News.
He added: “Going forward, there is evidence of additional supplies, for example of rare earth elements and also copper that can be mined. The question is whether these resources are commercially viable.”
Rabih Nassar, consulting partner for resources and industry at PwC Middle East, believes that in addition to phosphate and bauxite, there are other key minerals that are seen as particularly promising for development in Saudi Arabia’s mining sector.
“At the FMF (Future Minerals Forum) 2024, it was highlighted that Saudi Arabia is rich in minerals such as phosphate, gold, copper, zinc, lithium and rare earth elements. Each of these minerals serves distinct global markets and sectors,” Nassar said.
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, 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 highlighted the importance of zinc, which is mainly used for galvanizing to protect steel from corrosion, making it essential in the construction and automotive sectors. The metal is also essential in the production of batteries and alloy materials.
Lithium plays a critical role in the battery industry, particularly for electric vehicles and renewable energy storage systems.
Additionally, rare earth elements are essential for the production of permanent magnets used in wind turbines, electric vehicle motors, and various other electronic devices such as smartphones and computers.
Attracting Investment
At 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 frameworks and greater transparency.
Nassar told Arab News that the Kingdom is improving its geological databases and conducting in-depth surveys to better map its mineral resources, thus facilitating informed decision-making by investors.
He linked the importance of this work to the continuous improvement of regulatory frameworks, in order to create an environment conducive to investment.
“These efforts are complemented by strong government support and streamlined processes for mining licensing and operations,” he said, adding: “These initiatives will provide expanded expertise and capital, as well as promote knowledge transfer and capacity building, ensuring the sustainable development of the mining industry.”
Chris Braun, partner in the Retail and Energy and Natural Resources practices at Bain and Co., also shed light on the actions the Kingdom intends to take to attract domestic and international investment to support the exploration and development of Saudi Arabia's mineral resources.
“The Kingdom is already working to establish several industries that will be buyers of significant portions of these minerals. This is a great start. In addition, Saudi companies have demonstrated their ability to work well with international partners in pursuing mining-based opportunities,” Braun said.
He added: “In the future, an important requirement for success will be the validation of the country's mineral endowment and investment in exploration.”
Braun further emphasized the importance of developing infrastructure to support mining operations, which are often located in remote areas. This includes modern transportation, housing, reliable services and digital access.
“Finally, Saudi Arabia must ensure sufficient access to critical capabilities and a skilled workforce. Both unskilled and skilled labor are critical, and ensuring the Kingdom trains enough mining engineers should be a key priority,” he said.
Encourage 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, the Kingdom can be expected to offer a range 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.
This includes simplifying the mining license application and approval processes, ensuring transparency, and reducing regulatory restrictions.
The establishment of a dedicated mining ministry underscores the importance of the sector and provides a direct point of contact for investors.
Mining investors can also benefit from tax incentives, such as reduced tax rates and import duty exemptions 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 technologies and infrastructure,” Nassar said.
The development of cutting-edge 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 the logistical challenges and operating costs of mining operations.
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, reducing exploration risks and costs associated with mining ventures,” said PwC Middle East consulting partner.
Furthermore, the Kingdom encourages joint ventures between local and international companies as a core 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.
Additionally, the country promotes sustainable mining practices by offering incentives for projects that prioritize environmental protection, use renewable energy, and implement green technologies in their operations.
“This is in line with global environmental standards and attracts environmentally conscious investors. These initiatives position Saudi Arabia as a prime location for mining investment, offering ample 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 global stage, visiting countries he believes can benefit from the Kingdom’s significant growth potential.
Alkhorayef is currently on a trip to South America, scheduled for July 22-30, and has already attended a roundtable organized by the Federation of Industries in Sao Paulo, where he called on Brazilian companies to invest in Saudi Arabia's booming mining sector.
What's next?
Asked what the future holds for Saudi Arabia's mining sector, Andreassen explained that the Kingdom is well positioned for success thanks to its large reserves of critical minerals, which are important both regionally and globally.
“Saudi Arabia holds many of the levers that are likely to produce success in mining. It has access to many minerals that are essential to the region and globally in the years to come. Through a major local player in the Kingdom's mining sector. It has the potential to become a global champion if it continues its growth trajectory,” he said.
Andreassen continued: “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 it has the right ramifications to grow profitably and fuel the economy.”
This support is expected to stimulate 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 rosy view of the Saudi mining sector, saying it is poised for significant growth, supported by government reforms and investment.
“Key opportunities include expansion into new minerals and the integration of cutting-edge exploration and processing technologies,” Nassar said.
He added: “By harnessing the potential of its abundant mineral resources and implementing strategic initiatives, the mining sector is set to become a key driver of economic diversification and sustainable development.”
Mining is central to Riyadh's efforts to move away from oil dependence, focusing on exploiting vast reserves of phosphate, gold, copper and bauxite.
