RIYADH: Saudi Arabia's mining sector is at the height 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 soil?
Saudi Arabia is rich in minerals essential for various global industries. The state is shifting away from its traditional role as an oil producer, turning into a major exporter of diverse energy forms.
It has a strong capacity 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 put the mining sector at the forefront of national development plans, with the state's mineral wealth estimated at SR9.4 trillion ($2.4 trillion).
Open for business
Saudi Arabia's mining sector reforms have positioned it as the fastest-growing regulatory and investment-friendly environment globally over the past five years, according to the World Risk Report 2023, released by UK-based research and consulting firm Minehot.
The report also stated that the Kingdom was ranked the second best country for its licensing environment.
This comes after Saudi Arabia saw a 138 percent increase in the number of exploitation licenses issued after the implementation of a new mining investment law in 2021.
According to Gaute Andreasen, a partner in Bain & Co.'s advanced manufacturing and services and energy and natural resources practice, while some resources are already being mined, there are still large amounts untapped.
“Saudi Arabia's mining sector has for many years focused mainly on phosphates for fertilizers and bauxite, used in the production of aluminum. These two will continue to represent a major part of the sector's activities in the future,” Andresen told Arab News.
He added: “Going forward, there is evidence of additional subsidies, for example rare earth elements and copper can also be extracted. The question is whether these resources are commercially viable.
Rabih Nassar, consulting partner for resources and industrials at PwC Middle East, believes that apart from phosphate and bauxite, there are other key minerals that are considered particularly promising for development within 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 different global markets and industries,” said Nassar.
According to Nassar, gold is in high demand not only for jewelry and investment, but also for technical applications in the electronics and aerospace industries due to its excellent conductivity and corrosion resistance.
Copper is essential in electrical engineering, electronics, manufacturing, 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 which is essential in the construction and automotive industries to protect steel from corrosion. This metal is also important in the production of batteries and alloy materials.
Lithium plays an important role in the battery industry, especially for electric vehicles and renewable energy storage systems.
Furthermore, rare earth elements are important for the production of permanent magnets used in wind turbines, electric vehicle motors, and other electronics such as smartphones and computers.
Attracting 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, enabling investors to make informed decisions.
He emphasized the importance of this work while maintaining the regulatory framework to provide a conducive environment for investment.
“These efforts are complemented by strong government support and streamlined processes for mining licenses 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.”
Bain and Co. Chris Brown, a partner in the retail and energy and natural resources practices of Saudi Arabia, also highlighted what the kingdom will do 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 off-takers for significant portions of these minerals. This is a very good start. In addition, Saudi firms have shown their ability to work well with international partners to pursue mining-based opportunities,” Brown said.
He added: “Going forward, a major requirement for success is investing in the validation and exploration of the country's mineral wealth.”
Brown emphasized the importance of infrastructure development to support mining operations, which are often located in remote areas. These include modern transportation, housing, reliable utilities, and digital access.
“Finally, Saudi Arabia needs to ensure that it has sufficient access to critical capacity and qualified labor. Both unskilled and skilled labor is critical and educating enough mining engineers for the kingdom should be a top priority,” he said.
Encouraging private sector and foreign investment
When it comes to foreign investment in Saudi Arabia, the Kingdom presents an attractive destination for those seeking long-term returns and strategic partnerships.
According to PwC, the state can anticipate a range of new opportunities and incentives to extend 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 streamlining the application and approval processes for mining licenses, ensuring transparency, and reducing regulatory limitations.
The establishment of a dedicated Ministry of Mines emphasizes 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 exemptions from import duties on mining equipment.
“The Saudi Industrial Development Fund also provides financial support such as loans at competitive interest rates to encourage investments in mining technology and infrastructure,” Nassar said.
The development of sophisticated 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 logistical challenges and operational costs for mining activities.
Saudi Arabia is investing heavily in geological surveys 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 exploration risks and costs associated with mining ventures,” said the PwC Middle East consulting partner.
Furthermore, the state encourages joint ventures between local and international firms as a central strategy.
These partnerships combine technology transfer, expertise sharing, and resources for exploration and development projects, making investment more attractive and feasible for foreign companies.
In addition, the country promotes sustainable mining practices by providing incentives for projects that prioritize environmental protection, use renewable energy, and implement green technologies in their operations.
“It aligns with global environmental standards and appeals to environmentally conscious investors. These initiatives establish Saudi Arabia as a prime location for mining investment, offering broad opportunities and support to both domestic and foreign investors,” Nassar said.
Saudi Arabia is not sitting back and waiting for industry to come to the kingdom.
Industry and Mineral Resources Minister Bandar Alkhoref is active on the world stage, believing the state can benefit from the substantial growth potential it offers.
Alkhoref is currently on a South American trip – which will last from June 22 to 30 – and has participated in a roundtable meeting organized by the industry federation in Sao Paulo, where he invited Brazilian companies to invest in the growing mining sector of Saudi Arabia.
what now
Asked to envision the future trajectory of Saudi Arabia's mining sector, Andreasen said the kingdom is well-positioned for success due to its substantial reserves of regionally and globally important minerals.
“Saudi Arabia sits on many levers that have the potential to lead to mining success. It has access to many minerals that will be important regionally and globally in the years to come. Through local major players in the mining sector in the kingdom. It has the potential to become a world champion if it continues its growth momentum, He said.
Andresen said: “The fact that minerals and mining have been given such a prominent place in Vision 2030 gives us high comfort that the Saudi government will continue to support the sector and ensure the right impacts to grow profitably. Fuel the economy.”
The cooperation is expected to boost the economy through job creation 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 bright outlook for Saudi Arabia's mining sector, noting that it is poised for significant growth, supported by government reforms and investments.
“Key opportunities include expansion into new minerals and the integration of state-of-the-art technologies for exploration and processing,” Nassar said.
He added: “By harnessing the potential of its abundant mineral resources and implementing strategic initiatives, the mining sector is poised to become a key driver of economic diversification and sustainable development.”
The mine is key to Riyadh's efforts to move away from oil dependence, focusing on tapping its substantial reserves of phosphate, gold, copper and bauxite.
