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 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, abandoning its traditional role as an oil producer.
It has strong potential to produce minerals that are critical to the energy transition, such as aluminum, copper and rare earth elements, 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 approximately SR9.4 trillion ($2.4 trillion).
Open for business
According to the World Risk Report 2023, published by UK-based research and consultancy firm MineHutte, Saudi Arabia's mining sector reforms have made it recognized as the fastest-growing regulatory and investment-friendly environment globally over the past five years .
The report also stated that the Kingdom was ranked as the second best country for its licensing environment.
This comes as Saudi Arabia has seen a 138% increase in the number of mining licenses issued since the implementation of the new Mining Investment Law in 2021.
According to Gaute Andreassen, partner at Bain and Co. Advanced Manufacturing and Services and Energy and Natural Resources practices, while some resources are already being extracted, there is still a significant amount that has yet to be harnessed.
“Saudi Arabia's mining sector has for many years focused mainly on phosphate for fertilizer and bauxite, used in aluminum production. These two will also represent a key part of the sector's activities in the future,” Andreassen told Arab News.
He added: “Furthermore, there is evidence of additional endowment, for example rare earth elements and also 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 earth elements. Each of these minerals serves distinct global markets and industries,” said Nassar.
According to Nassar, gold continues to be in high demand, not only for jewelry and investment, but also for technology 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 against corrosion, making it essential in the construction and automotive industries. This metal is also crucial in the production of batteries and alloy materials.
Lithium plays an essential role in the battery industry, especially for electric vehicles and renewable energy storage systems.
Furthermore, rare earth elements are crucial for the production of permanent magnets used in wind turbines, electric vehicle motors and various other electronic components 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 extensive surveys to better map its mineral resources, thereby facilitating informed decision-making for investors.
He aligned the importance of this activity with continuing to improve regulatory frameworks to provide an investment-friendly environment.
“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 mining industry”.
Chris Braun, partner in the practice of Bain and Co. Retail and Energy and Natural Resources, 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 mineral resources.
“The kingdom is already working to establish several industries that will receive significant portions of these minerals. This is a very good start. In addition, Saudi firms have demonstrated their ability to work well with international partners in pursuing mining-based opportunities,” Braun said.
He added: “Going forward, a big requirement for success is validating the country's mineral endowment 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 transport, housing, reliable utilities and digital access.
“Finally, Saudi Arabia must ensure that there is sufficient access to critical capabilities and a skilled workforce. Both unskilled and skilled labor is essential and ensuring the Kingdom educates enough mining engineers should be a key priority,” he said.
Encouraging the 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, a number of new opportunities and incentives can be anticipated that the Kingdom will 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 mining ministry 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 import duty exemptions for mining equipment.
“The Saudi Industrial Development Fund also provides financial support, such as loans with competitive interest rates, to encourage investment in mining-related technologies and infrastructure,” Nassar said.
The development of state-of-the-art mining infrastructure can generate significant investment, such as the construction of rail networks, ports and roads designed to support the mining and transportation of minerals.
These developments aim to reduce logistical challenges and operational costs for mining activities.
Saudi Arabia is investing heavily in geological studies and has made significant 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 enterprises,” said PwC Middle East consulting partner.
In addition, the Kingdom encourages partnerships between local and international firms 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.
In addition, the country promotes sustainable mining practices by offering incentives to projects that prioritize environmental conservation, use renewable energy and implement green technologies in their operations.
“This aligns with global environmental standards and attracts environmentally conscious investors. These initiatives position Saudi Arabia as a prime location for mining investment, offering expanded opportunities and support to domestic and foreign investors,” said Nassar.
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 world stage, visiting countries he believes can benefit from the substantial growth potential the Kingdom offers.
Alkhorayef is currently on a trip to South America – scheduled to run from July 22-30 – and has already participated in a round table hosted by the Federation of Industries of Sao Paulo, where he invited Brazilian companies to invest in the sector burgeoning mine of Saudi Arabia.
What's 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 substantial reserves of essential minerals that are important both regionally and globally.
“Saudi Arabia is sitting on a lot of leverage that could be successful in mining. It has access to many minerals that are critical to the region and globally for years to come. Through a major local player in the mining sector in the Kingdom. It has the potential to become 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 ramifications to grow profitably and fuel the economy .”
This support is expected to boost the economy by creating jobs and revenue from the sale of minerals and mineral-derived products such as metals, fertilizers, batteries and machinery.
On another positive note, PwC has a bright outlook for Saudi Arabia's mining sector, saying it is poised for significant growth underpinned by government reforms and investment.
“Key opportunities include expanding into new minerals and integrating cutting-edge technologies for exploration and processing,” said Nassar.
He added: “By harnessing the potential of its abundant mineral resources and implementing strategic initiatives, the mining sector will become a key driver of economic diversification and sustainable development.”
Mining is central to Riyadh's efforts to move away from dependence on oil, focusing on exploiting substantial reserves of phosphate, gold, copper and bauxite.
