RIYADH: Saudi Arabia’s mining sector is entering an era of transformation, and the kingdom is determined to become a global leader in the industry. But have you ever wondered what treasures lie beneath the surface?
Saudi Arabia is rich in minerals essential to a variety of 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 to produce minerals essential for 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 the country's development plans, with the kingdom's mineral resources estimated at around SR9.4 trillion ($2.4 trillion).
We are open for business
According to the 2023 Global Risk Report by MineHutte, a UK-based research and consulting firm, Saudi Arabia’s mining sector reforms have been recognized as the world’s fastest-growing regulatory and investment-friendly environment over the past five years.
The report also said Cambodia was rated as the second best country in terms of licensing environment.
Saudi Arabia has seen a 138% increase in mining licenses issued since the country implemented a new mining investment law in 2021.
Some resources have already been mined, but many remain untapped, according to Gaute Andreasen, a partner in Bain & Company's Advanced Manufacturing & Services and Energy & Natural Resources practices.
“Saudi Arabia’s mining sector has for many years been focused primarily on phosphates for fertilizers and bauxite, which is used in the production of aluminium. These two will continue to represent a key part of the sector’s activities in the future,” Andreassen told Arab News.
He added: “Going forward, there is evidence that there are additional resources, such as rare earth elements and extractable copper. The question is whether these resources are commercially viable.”
Rabi Nassar, resources and industrial consulting partner at PwC Middle East, believes that apart from phosphate and bauxite, there are other key minerals that are seen as particularly promising for Saudi Arabia’s mining sector development.
“At the Future Minerals Forum (FMF) 2024, it was highlighted that Saudi Arabia is rich in minerals such as phosphate, gold, copper, zinc, lithium and rare earth elements, each of which has its own unique global market and industry,” Nassar said.
According to Nasar, gold remains in high demand not only as a jewelry or investment, but also for technical applications in the electronics and aerospace industries due to its excellent conductivity and corrosion resistance.
Copper is essential to new green technologies such as electrical engineering, electronics, construction, electric vehicles and renewable energy systems.
He also highlighted the importance of zinc, which is mainly used in galvanizing 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, particularly in electric vehicles and renewable energy storage systems.
Additionally, rare earth elements are essential for producing permanent magnets used in a variety of electronic products, including wind turbines, electric car motors, smartphones, and computers.
Attracting investment
Saudi Arabia outlined its strategy to attract investment in the mining sector through regulatory reforms, a competitive tax framework and greater transparency at the FMF 2024 in Riyadh in January.
Nassar told Arab News that Saudi Arabia is improving its geological database and conducting extensive surveys to more accurately map its mineral resources, helping investors make informed decisions.
He argued that the importance of this work lies in continuously strengthening the regulatory framework to provide a conducive environment for investment.
“These efforts are complemented by strong government support and streamlined processes for mining licensing and operations,” he said. “These initiatives provide expanded expertise and capital, and facilitate knowledge transfer and capacity building to ensure sustainable development of the mining industry.”
Chris Brown, a partner in Bain & Company’s Retail, Energy and Natural Resources practice, also outlined what steps Saudi Arabia will take to attract domestic and foreign investment to support the exploration and development of the kingdom’s mineral resources.
“The Kingdom of Saudi Arabia is already working to establish several industries that will capitalize on a significant portion of these minerals. That’s a very good start. In addition, Saudi companies have shown a strong ability to work well with international partners in pursuing mining-based opportunities,” Braun said.
“A big requirement for success moving forward is investing in the verification and exploration of the country’s mineral resources,” he added.
Brown further emphasized the importance of developing infrastructure to support mining operations, often located in remote areas, including modern transportation, housing, reliable utilities and digital access.
“Finally, Saudi Arabia must ensure sufficient access to a workforce with critical skills and qualifications – both unskilled and skilled – and ensuring the Kingdom is training enough mining engineers must be a key priority,” he said.
Encouraging private sector and foreign investment
When it comes to foreign investment in Saudi Arabia, the Kingdom offers an attractive destination for those seeking long-term returns and strategic partnerships.
According to PwC, the kingdom is expected to expand a range of new opportunities and incentives for both the private sector and foreign investors.
“The government has changed the mining laws to make it more investor-friendly,” Nassar said.
This includes streamlining the mining permit application and approval process, ensuring transparency, and reducing regulatory restrictions.
The establishment of a dedicated Mining Department is meant to highlight the importance of the sector and provide direct access to investors.
Investors in the mining sector can also benefit from tax incentives such as reduced tax rates on mining equipment and exemption from import duties.
“The Saudi Industrial Development Fund also provides financial support, such as loans at competitive interest rates, to encourage investment in mining-related technologies and infrastructure,” Nassar said.
Developing state-of-the-art mining infrastructure can attract significant investment, such as the construction of railway networks, ports, and roads designed to support the mining and transportation of minerals.
These developments aim to reduce the logistical challenges and operating costs of mining activities.
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 to reduce exploration risks and costs associated with mining operations,” said a PwC Middle East consulting partner.
Moreover, Saudi Arabia encourages joint ventures between domestic and international companies as a central 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 prioritizing environmental protection, using renewable energy, and providing incentives for projects that adopt 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 a prime location for mining investment, providing extensive opportunities and support for domestic and international investors,” Nassar said.
Saudi Arabia will not just sit back and wait for this industry to come to the country.
Minister of Industry and Mineral Resources Bandar Alkorayev is active on the world stage, visiting countries that he believes can benefit from the Kingdom’s enormous growth potential.
Alkorayev is currently on a tour of South America from July 22 to 30, and has already attended a roundtable hosted by the Confederation of Industries in Sao Paulo inviting Brazilian companies to invest in Saudi Arabia's booming mining sector.
What are your future plans?
Asked about the future direction of Saudi Arabia’s mining sector, Andreasen explained that the kingdom is well positioned for success, with significant reserves of essential minerals of regional and global importance.
“Saudi Arabia sits on many levers that could make it successful in mining. Saudi Arabia has access to many minerals that are important in the region and globally in the coming years, through the Kingdom’s leading local players in the mining sector. Saudi Arabia has the potential to become a global champion if it continues its growth trajectory,” he said.
Andreassen continued: “The fact that minerals and mining occupy such a central place in Vision 2030 gives us confidence that the Saudi government will continue to support the sector and deliver the right results to grow profitably and boost the economy.”
The support is expected to help revitalize the economy through job creation and revenue from the sale of minerals and mineral-derived products, such as metals, fertilizers, batteries and automobiles.
Another positive aspect is that PwC has a bright outlook for Saudi Arabia's mining sector, which is expected to see significant growth driven by government reforms and investments.
“Key opportunities include expansion into new minerals and integration of cutting-edge technologies for exploration and processing,” Nassar 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.
Riyadh is focusing on mining to reduce its dependence on oil, focusing on exploiting the country's significant reserves of phosphate, gold, copper and bauxite.
