RIYADH: Saudi Arabia’s mining sector is on the brink of a transformational era, with the Kingdom determined to become a global leader in mining, but have you ever wondered what treasures lie beneath the soil?
Saudi Arabia is rich in mineral resources that are essential to many global industries, and the Kingdom is transforming from its traditional role as an oil producer to becoming a major exporter of diversified energy sources.
It has great potential to produce minerals essential for the energy transition, such as aluminium, copper and rare earth elements, as well as minerals needed for global agriculture.
A strategic focus on diversifying the economy has placed the mining sector at the forefront of national development plans, with the Kingdom’s mineral resources estimated to be worth 9.4 trillion Saudi riyals ($2.4 trillion).
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Saudi Arabia’s mining sector reforms have seen the country recognized as the world’s fastest growing regulatory and investment-friendly environment over the past five years, according to the World Risk Report 2023, published by Minehat, a UK-based research and consulting firm.
The report also stated that the Kingdom was ranked as the second best country for its licensing environment.
This comes after Saudi Arabia saw a 138 percent increase in the number of mining licenses issued since it implemented a new mining investment law in 2021.
While some resources have already been extracted, there is a lot that remains untapped, according to Gaute Andreasen, a partner in Bain & Company’s advanced manufacturing and services and energy and natural resources practices.
“Saudi Arabia’s mining sector has long been focused on bauxite, which is used to produce phosphate for fertilizer and aluminium, and these will remain important parts of the sector’s activity in the future,” Andreasen told Arab News.
He added: “There is evidence that there are further resources that can be extracted in the future, such as rare earth elements and copper. The question is whether these can be made commercially viable.”
Ravi Nasser, resources and industry consulting partner at PwC Middle East, believes that beyond phosphate and bauxite, there are other important minerals that he believes are particularly promising for development in Saudi Arabia’s mining sector.
“FMF (Future Minerals Forum) 2024 highlighted that Saudi Arabia is rich in minerals such as phosphates, gold, copper, zinc, lithium and rare earth elements, each of which contributes to different global markets and industries,” Nasser said.
According to Nasser, gold’s excellent electrical conductivity and corrosion resistance mean that it will continue to be in high demand for jewellery and investments, as well as for technical applications in electronics and aerospace.
Copper is essential in electrical engineering, electronics, construction and in new green technologies such as electric vehicles and renewable energy systems.
He also highlighted the importance of zinc, which is mainly used in plating to protect steel from corrosion and is essential in the construction and automotive industries. The metal is also essential in the production of batteries and alloy materials.
Lithium plays a vital role in the battery industry, especially in electric vehicles and renewable energy storage systems.
Additionally, rare earth elements are essential in the manufacture of permanent magnets used in wind turbines, electric vehicle motors and a variety of electronic devices such as smartphones and computers.
Investment Attraction
At FMF 2024 in Riyadh in January, Saudi Arabia outlined a strategy to attract investment into the mining sector through regulatory reform, competitive tax systems and increased transparency.
Nasser told Arab News that Saudi Arabia is carrying out extensive surveys to improve its geological database and more accurately map its mineral resources, allowing investors to make informed decisions.
He aligned the importance of this initiative with the continued strengthening of the regulatory framework to provide an investment-friendly environment.
“These efforts are complemented by strong government support and streamlined processes for mining licensing and operations,” he said, adding that “these efforts will expand expertise and capital, promote knowledge transfer and capacity building, and ensure the sustainable development of the mining industry.”
Chris Brown, partner in Bain & Company’s retail and energy and natural resources practice, also revealed what the Kingdom will do to attract local and foreign investment to support the exploration and development of Saudi Arabia’s mineral resources.
“The Kingdom is already working on setting up several industries that will take up most of these minerals, which is a very good start. Moreover, Saudi companies have demonstrated an ability to work well with international partners in pursuing mining-based opportunities,” Brown said.
“Going forward, a major requirement for success will be to validate the country’s mineral endowments and invest in exploration,” he added.
Brown further stressed the importance of developing infrastructure to support mining activities, which are often located in remote areas, including modern transport, housing, reliable utilities and digital access.
“Finally, Saudi Arabia needs to ensure sufficient access to critical capacity and a talented workforce. Both unskilled and skilled labor are important, and ensuring the Kingdom educates enough mining engineers should be a key priority,” he said.
Promoting the Private Sector and Foreign Investment
When it comes to foreign investment in Saudi Arabia, the Kingdom remains an attractive destination for those looking for long-term benefits and strategic partnerships.
According to PwC, Saudi Arabia is expected to offer a range of new opportunities and incentives to both the private sector and foreign investors.
“The government has completely overhauled the mining law to make it more investor-friendly,” Nasser said.
This includes streamlining the mining licence application and approval process, ensuring transparency and reducing regulatory restrictions.
The establishment of a dedicated ministry for mining highlights the importance of the mining sector and provides a direct window 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 is also providing financial support, such as loans at competitive interest rates, to promote investment in mining-related technology and infrastructure,” Nasser said.
Developing state-of-the-art mining infrastructure can generate significant investment, including the construction of rail networks, ports and roads designed to support the extraction and transportation of minerals.
These developments are aimed at reducing logistical challenges and operational costs in mining operations.
Saudi Arabia is investing heavily in geological exploration and has made great strides in making geological data more accessible to investors.
“The initiative, known as the Saudi Geological Survey, will provide detailed and reliable data to reduce exploration risks and costs associated with mining operations,” PwC Middle East consulting partners said.
Additionally, the Kingdom has a central strategy of encouraging joint ventures between local and international companies.
These partnerships facilitate technology transfer, sharing of expertise and pooling of resources for exploration and development projects, making investments more attractive and feasible for foreign companies.
Additionally, the country promotes sustainable mining practices by prioritizing environmental conservation, using renewable energy, and providing incentives to projects that implement green technologies in their operations.
“This is in line with global environmental standards and will attract environmentally conscious investors. These initiatives will position Saudi Arabia as a leading hub for mining investment, offering a wide range of opportunities and support to local and international investors,” Nasser said.
Saudi Arabia is not sitting back and waiting for this industry to come to the Kingdom.
Minister of Industry and Mineral Resources Bandar Alkhorayef has been active on the global stage, visiting countries he believes can benefit from the significant growth potential the Kingdom offers.
Alkorayef is currently on a South American tour from July 22-30 and has already taken part in a roundtable hosted by the industry federation in São Paulo to urge Brazilian companies to invest in Saudi Arabia’s burgeoning mining sector.
What’s next?
Asked to predict the future trajectory of Saudi Arabia’s mining sector, Andreasen explained that the Kingdom is well positioned for success with its extensive reserves of critical minerals of regional and global importance.
“Saudi Arabia has many levers at its disposal that could make it successful in mining, with access to many minerals of regional and global importance in the coming years through leading local companies in the Kingdom’s mining sector. If it maintains its growth trajectory, it has the potential to become a global champion,” he said.
Andreasen added: “The fact that minerals and mining figure prominently in Vision 2030 gives us confidence that the Saudi Arabian government will continue to support the sector, ensuring that it has the right impact on profitable growth and rejuvenation of the economy.”
The support is expected to boost the economy through job creation and revenue from the sale of minerals and mineral-derived products, including metals, fertilizers, batteries and vehicles.
On another bright side, PwC is optimistic about Saudi Arabia’s mining sector, which it says is expected to experience strong growth, supported by government reforms and investment.
“Key opportunities include expanding into new minerals and integrating cutting-edge technologies for exploration and processing,” Nasser said.
“By harnessing the potential of our abundant mineral resources and implementing strategic initiatives, the mining sector will become a key driver of economic diversification and sustainable development,” he added.
Mining is crucial in Riyadh’s efforts to wean itself off oil reliance, and it is focused on tapping its abundant reserves of phosphate, gold, copper and bauxite.
