RIYADH: Saudi Arabia's mining sector is on the verge of a transformative era, with the kingdom determined to become a global leader in the industry. But have you wondered what treasures lie beneath its land?
Saudi Arabia is rich in minerals that are important to various global industries. The Kingdom is transforming into a leading energy exporter, moving away from its traditional role as an oil producer.
It has strong potential to produce minerals necessary for energy transition, such as aluminium, copper and rare earths, as well as minerals needed for global agriculture.
The 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 an estimated SR 9.4 trillion ($2.4 trillion).
Open for business
According to the World Risk Report 2023 released by British research and consultancy firm MineHutte, Saudi Arabia's mining sector reforms have seen it recognized as the fastest-growing regulatory and investment-friendly environment globally over the past five years.
The report also stated that the Kingdom has been ranked as the second best country for its licensing environment.
This comes as Saudi Arabia saw a 138 percent increase in the number of mining licenses issued since the new mining investment law was implemented in 2021.
According to Gaute Andreassen, a partner in Bain and Co.'s Advanced Manufacturing and Services and Energy and Natural Resources practices, while some resources are already being mined, there is still a significant amount that has yet to be tapped.
– The mining sector in Saudi Arabia has for many years been mainly focused on phosphate for fertilizer and bauxite, which is used in the production of aluminium. These two will also in the future represent an important part of the sector's activities, says Andreassen to Arab News.
He added: “Going forward, there is evidence of further endowment, for example of rare earths and also of mineable copper. The question is whether these resources are commercially viable.”
Rabih Nassar, consulting partner for Resources and Industrial 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 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 earths. Each of these minerals serves distinct global markets and industries,” said Nassar.
According to Nassar, gold remains in demand not only for jewelry and investment, but also for technical 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 green technologies such as electric vehicles and renewable energy systems.
He also emphasized 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 manufacture of batteries and alloy materials.
Lithium plays a critical role in the battery industry, especially for electric vehicles and renewable energy storage systems.
In addition, rare earth metals are essential for the production of permanent magnets used in wind turbines, electric vehicle engines and various other electronics such as smartphones and computers.
Attract investment
During FMF 2024 held in January in Riyadh, 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 comprehensive surveys to better map its mineral resources and thereby facilitate informed decision-making for investors.
He aligned the importance of this work with continuing to improve the regulatory framework to create a favorable environment for investment.
“These efforts are complemented by strong government support and streamlined processes for mining licenses and mining operations,” he said, adding: “These initiatives will provide increased expertise and capital, as well as promote knowledge transfer and capacity building, ensuring the sustainable development of the mining industry.”
Chris Braun, a partner at Bain and Co.'s Retail and Energy and Natural Resources practice, also shed light on what the Kingdom will do to attract both 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 take away significant portions of these minerals. It is a very good start. In addition, Saudi companies have demonstrated their ability to work well with international partners to pursue mining-based opportunities,” said Braun .
He added: “Going forward, a major requirement for success is validating the country's mineral resources and investing 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 utilities and digital access.
“Finally, Saudi Arabia needs to ensure that there is sufficient access to critical skills and a skilled workforce. Both unskilled and skilled labor are critical and ensuring that the Kingdom trains enough mining engineers should be a key priority,” he said.
Encourage 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.
According to PwC, a series of new opportunities and incentives can be expected that the Kingdom will extend to both the private sector and foreign investors.
“The government has reviewed its 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 establishment of a dedicated Ministry of Mines 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.
Development of state-of-the-art mining infrastructure can generate significant investment, such as the construction of railway networks, ports and roads designed to support the mining and transport of minerals.
This development aims to reduce logistical challenges and operational costs for mining operations.
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 Saudi Geological Survey, provides detailed and reliable data, reducing the exploration risks and costs associated with mining ventures,” PwC's Middle East consulting partner said.
Furthermore, the Kingdom encourages joint ventures between local and international companies as a key 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 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 appeals to environmentally conscious investors. These initiatives position Saudi Arabia as an excellent location for mining investment, offering extensive opportunities and support to both domestic and foreign investors,” said Nassar.
Saudi Arabia is not sitting around 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 significant growth potential the Kingdom has to offer.
Alkhorayef is currently on a South American trip – which will run from July 22 to 30 – and has already participated in a roundtable organized by the Federation of Industries in Sao Paulo, where he invited Brazilian companies to invest in Saudi Arabia's growing mining sector.
What comes 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 sits on many of the levers that are likely to bring success in mining. It has access to many minerals that are critical 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 be 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 to grow profitably and drive the economy.”
This support is expected to boost the economy by creating jobs and revenue from the sale of minerals and mineral-based products such as metals, fertilizers, batteries and cars.
On another positive note, PwC has a bright view of Saudi Arabia's mining sector, saying it is poised for significant growth, supported by government reforms and investment.
“Primary opportunities include the 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 crucial in Riyadh's efforts to avoid oil dependence, with a focus on tapping significant reserves of phosphate, gold, copper and bauxite.
