Unearthing the transformative potential of Saudi Arabia’s mining sector

the establishment of a dedicated mining ministry underscores the sector’s importance and provides a direct point of contact for investors. (Shutterstock)
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Updated 28 July 2024
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Unearthing the transformative potential of Saudi Arabia’s mining sector

  • Focus on economic diversification places mining sector at the forefront of national development plans

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 for various global industries. The Kingdom is transforming into a leading exporter of diverse energy types, shifting away from its traditional role as an oil producer.

It has strong potential to produce minerals that are essential for 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 an estimated SR9.4 trillion ($2.4 trillion).

Open for business

According to the World Risk Report 2023 released by UK-based 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 the second-best country for its licensing environment.

This comes as Saudi Arabia saw a 138 percent increase in the number of exploitation licenses issued since implementing the new Mining Investment Law in 2021.

According to Gaute Andreassen, a partner at 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 not yet been tapped into.

“The mining sector in Saudi Arabia has for many years been primarily focused on phosphate for fertilizers and bauxite, used in the production of aluminum. These two will also in the future represent a key portion of the sector activities,” Andreassen told Arab News.

He added: “Going forward, there is evidence of additional endowment, e.g. of rare earth elements and also of copper that can be extracted. The question is whether these resources are commercially viable.”

Rabih Nassar, consulting partner for Resources and Industrial at PwC Middle East, believes that besides 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 like phosphates, gold, copper, zinc, lithium, and rare earth elements. Each of these minerals serves distinct global markets and industries,” Nassar stated.

According to Nassar, gold continues to be in high demand, not just for jewelry and investment, but also for technological applications in 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 highlighted the importance of zinc, which is mainly used for galvanizing to protect steel from 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 a pivotal role in the battery industry, especially for electric vehicles and renewable energy storage systems.

Moreover, rare earth elements are crucial for the production of permanent magnets used in wind turbines, electric vehicle motors, and various other electronics like 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 enhanced 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 work with continuing to enhance regulatory frameworks in order 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 extended 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 practices, 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 on establishing several industries that will be off-takers for significant portions of these minerals.That is a very good start. Beyond that, Saudi firms have shown 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 transportation, housing, reliable utilities, and digital access.

“Finally, Saudi Arabia needs to ensure there is sufficient access to critical capabilities and a qualified labor force. Both non-skilled and skilled labor is critical and making sure the Kingdom educates enough mining engineers should be a key priority,” he stated.

Encouraging Private Sector and Foreign Investments

When it comes to foreign investments in Saudi Arabia, the Kingdom presents an attractive destination for those seeking long-term returns and strategic partnerships.

According to PwC, a range of new opportunities and incentives can be anticipated that the Kingdom will extend to both the private sector and foreign investors.

“The government has overhauled 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 underscores the sector's importance 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 on import duties for mining equipment.

“The Saudi Industrial Development Fund also offers financial support such as loans with competitive interest rates to encourage investments in mining-related technologies and infrastructure,” Nassar said.

Developing state-of-the-art mining infrastructure can generate significant investments, such as the construction of rail networks, ports, and roads designed to support the mining and transport of minerals.

These developments aim to reduce logistical challenges and operational costs for mining activities.

Saudi Arabia is heavily investing in geological surveys 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 the exploration risks and costs associated with mining ventures,” the PwC Middle East consulting partner said.

Furthermore, the Kingdom encourages joint ventures between local and international firms as a central strategy.

These partnerships facilitate technology transfer, share expertise, and combine resources for exploration and development projects, making investments more attractive and feasible for foreign companies.

Additionally, the country promotes sustainable mining practices by offering incentives for projects that prioritize environmental conservation, use renewable energy, and implement green technologies in their operations.

“This aligns with global environmental standards and appeals to environmentally conscious investors. These initiatives position Saudi Arabia as a prime location for mining investments, offering extensive opportunities and support to both domestic and foreign investors,” Nassar said.

Saudi Arabia is not sitting back and waiting for the 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 has on offer.

Alkhorayef is currently on a South American trip - set to run from July 22 to 30 – and has already participated in a roundtable meeting hosted by the Federation of Industries in Sao Paulo, where he invited Brazilian companies to invest in Saudi Arabia’s burgeoning mining sector.

What’s next?

When asked to envision Saudi Arabia’s mining sector's future trajectory, Andreassen explained that the Kingdom is well-positioned for success due to its substantial reserves of critical minerals that are important both regionally and globally.

“Saudi Arabia sits on a lot of the levers that are likely to yield success in mining. It has access to many minerals that are critical for the region and globally in the years to come. Through a local major 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 the Vision 2030, gives us high comfort that the Saudi government will continue to support the sector and ensure it has the right ramifications to grow profitably and fuel the economy.”

This support is expected to boost the economy through job creation and revenue from the sale of minerals and mineral-derived products like metals, fertilizers, batteries, and cars.

On another positive note, PwC has a bright outlook on Saudi Arabia’s mining sector, stating that it is poised for significant growth, supported by governmental reforms and investments.

“The main opportunities include the expansion into new minerals and the integration of cutting-edge technologies for exploration and processing,” Nassar stated.

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 pivotal in Riyadh's efforts to steer away from oil dependency, focusing on tapping into substantial reserves of phosphate, gold, copper, and bauxite.
 


Closing Bell: Saudi main index slips to close at 11,982

Updated 6 sec ago
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Closing Bell: Saudi main index slips to close at 11,982

  • Parallel market Nomu slipped 27.72 points, or 0.11%, to close at 25,740.79
  • MSCI Tadawul Index lost 16.44 points, or 1.09%, to close at 1,494.11

RIYADH: Saudi Arabia’s Tadawul All Share Index slipped on Sunday, losing 117.19 points, or 0.97 percent, to close at 11,982.30. 

The total trading turnover of the benchmark index was SR5.01 billion ($1.33 billion), as 61 of the stocks advanced and 166 retreated. 

The Kingdom’s parallel market Nomu slipped 27.72 points, or 0.11 percent, to close at 25,740.79. This comes as 30 of the listed stocks advanced while 42 retreated. 

The MSCI Tadawul Index also lost 16.44 points, or 1.09 percent, to close at 1,494.11. 

The best-performing stock of the day was Nayifat Finance Co., whose share price surged 9.98 percent to SR14.54. 

Other top performers were Red Sea International Co. and Saudi Industrial Export Co. 

The worst performer was Alistithmar AREIC Diversified REIT Fund, whose share price dropped by 3.72 percent to SR8.80. 

Other worst performers were Arriyadh Development Co. and BinDawood Holding Co.

Mayar Holding Co. has announced that it submitted to the Capital Market Authority on Sept. 7 seeking approval for issuing a Saudi riyal-denominated convertible sukuk program valued at SR500 million, set to span 24 months.

This comes following a previous statement where the company announced the recommendation of its board of directors to issue the convertible sukuk denominated to finance the company’s working capital and capital expansions, according to a Tadawul statement.

Bawan Co. has announced it signed a binding memorandum of understanding with Petronash Global Limited, or the seller, to acquire all of the latter’s outstanding shares. 

A bourse filing revealed that Bawan would pay the seller an initial amount of $80 million in exchange for 80 percent of the company’s shares. 

Under the terms of the agreement, Bawan will also pay the seller a maximum of $60 million, subject to the company achieving set financial targets over the next three years.

Bawan will purchase the remaining 20 percent of the company’s shares after the audited financial statements for 2027 or 2028 are issued, with an agreed valuation method and specified mechanism.

The firm’s entire shares are valued at $175 million, subject to it achieving set financial targets over the next three years.

Established in 2000 in the UAE, Petronash is recognized as a prominent worldwide producer of custom-engineered solutions for the oil and gas industry. 

Operating predominantly in the Saudi market, the company boasts around 1,000 employees and a network of factories in Dammam in Saudi Arabia, Dubai and Abu Dhabi in the UAE, the Qatari capital Doha, and Chennai in India, encompassing a total manufacturing space of approximately 120,000 sq. meters. 

Catering mainly to national oil and gas firms in the GCC countries, Petronash also exports its offerings to regions in the Far East, Africa, and the Americas.


GCC, Indonesia begin free trade agreement negotiations

Updated 19 min 38 sec ago
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GCC, Indonesia begin free trade agreement negotiations

  • Deal is expected to strengthen economic ties by creating new opportunities for trade and investment
  • Saudi delegation will be led by the General Authority of Foreign Trade

RIYADH: The Gulf Cooperation Council and Indonesia are set to begin the first round of negotiations for a free trade agreement in Jakarta, the Saudi Press Agency reported. 

The talks, being held from Sept. 9-13, aim to lay the groundwork for a comprehensive trade agreement, focusing on enhancing economic cooperation between the bloc and the Southeast Asia nation. 

Key areas of discussion will include trade in goods and services, investment, and customs procedures, as well as rules of origin, technical barriers, sanitary and phytosanitary measures, digital trade, and trade remedies. 

The initial round seeks to set the principles for the agreement and then finalize it within 24 months. The negotiations will also address trade challenges, facilitate information exchange, and build mutual trust to pave the way for further discussions. 

The discussions follow a joint statement signed in July by the GCC Secretariat and the Indonesian government, marking the formal start of the talks. 

The potential agreement is expected to grant Gulf goods and services preferential access to the Indonesian market through tariff reductions, simplified customs processes, and streamlined regulations. 

The Saudi delegation, led by the General Authority of Foreign Trade, includes representatives from the Ministries of Commerce, Energy, Investment, Environment, Water and Agriculture, and Industry and Mineral Resources. This team will ensure the negotiations align with Saudi trade objectives and policies. 

The Saudi team is tasked with supervising the negotiations to ensure they align with the Kingdom’s trade objectives and policies while coordinating with countries that share similar trade interests. 

This agreement is expected to strengthen economic ties between the GCC and Indonesia by creating new opportunities for trade and investment. 


Saudi telecom firm Mobily signs 6-year deal to boost operational efficiency

Updated 26 min 19 sec ago
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Saudi telecom firm Mobily signs 6-year deal to boost operational efficiency

RIYADH: Saudi Arabia’s telecommunication company, Mobily, is set to enhance its operational efficiency with a new six-year contract, which represents over 5 percent of its total revenues for 2023.

The agreement, signed with Jeddah-based Red Bull MOBILE, a future networks communications firm, is expected to positively impact Mobily’s finances starting from the fourth quarter of 2025, according to a statement on Tadawul.

Mobily, listed on Saudi Arabia’s Tadawul stock exchange since 2004, has a share capital of SR7.7 billion ($2.05 billion), consisting of 770 million shares valued at SR10 each, fully paid as of Dec. 31, 2020.

This strategic move aligns with Mobily’s vision of evolving into a leading technology, media, and telecommunications company. It aims to transform customer and community experiences through innovative products and services. The new contract also provides Mobily with opportunities to expand its market reach and boost productivity by utilizing its network infrastructure to support mobile virtual network operators.

In March, Mobily was recognized by Brand Finance as the fastest-growing telecommunications company in the Middle East for 2024. The company’s value increased by approximately 18 percent from the previous year, reinforcing its position as a major player in the region’s telecom sector. This growth reflects Saudi Arabia’s broader objectives of advancing digital transformation and enhancing ICT services within the Kingdom.

Brand Finance also ranked Mobily’s CEO, Salman bin Abdulaziz Al-Badran, among the top 10 global business leaders in brand protection. This recognition highlights the impact of various initiatives he has implemented since joining Mobily, also known as Etihad Etisalat Co., in 2019, and his significant contribution to the company’s growth.

Brand Finance evaluates companies based on several key criteria, including the Brand Strength Index, revenue and profit impact, and future growth prospects.

Founded in 2004, Mobily’s major shareholders include Etisalat Emirates Group with 27.99 percent and the General Organization for Social Insurance with 6.9 percent, while the remaining shares are held by institutional and retail investors. The company offers integrated services across three main sectors: individuals, businesses, and carriers.

Mobily boasts one of the largest wireless networks in Saudi Arabia and the region, an extensive fiber-to-the-home network, and a comprehensive global data center system.

Red Bull MOBILE, established in 2008, provides 5G telecommunication services in the Kingdom, offering unique services and unmatched benefits.


Saudi AMAALA project advances with Red Sea Global awarding $6.13bn in contracts

Updated 08 September 2024
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Saudi AMAALA project advances with Red Sea Global awarding $6.13bn in contracts

  • AMAALA will offer a unique collection of assets and experiences to promote wellness, lifestyle, and human connection
  • Project expected to feature nearly 4,000 hotel rooms across 30 hotels, luxury villas, apartments, and estate homes

JEDDAH: Saudi developer Red Sea Global has awarded over 600 contracts worth SR23 billion ($6.13 billion) to global partners for the AMAALA project, aiming to welcome its first guests by 2025. 

The company, owned by Saudi Arabia’s Public Investment Fund, has partnered with firms including Al-Rawabi Hassan Allam, Shapoorji Pallonji Group, and DEPA Group, as well as Alec Engineering and Al-Ayuni Investment and Contracting Co., as part of its efforts to develop the luxury tourism destination on the Red Sea coast. 

RSG said these partners align with its vision to develop luxury and wellness destinations, focusing on responsible development practices, regenerative initiatives, and collaboration with local communities. 

John Pagano, group CEO at RSG, said: “We have achieved remarkable progress across every aspect of AMAALA, from our signature resorts and immersive experiences to essential utilities and infrastructure.” 

He added: “Our unwavering focus is on infusing sustainability and regenerative principles into every facet of the development.” 

The executive said that upon completion, AMAALA will offer a unique collection of assets and experiences to promote wellness, lifestyle, and human connection. 

The project, which emphasizes sustainability and regenerative development, is expected to feature nearly 4,000 hotel rooms across 30 hotels, luxury villas, apartments, and estate homes. 

AMAALA is a key component of Saudi Arabia’s broader push to diversify its economy, and the contracts include construction, infrastructure, and utilities for the destination. 

RSG has highlighted significant progress at key sites, including the Triple Bay Marina Village, where major structures, such as the Equinox Resort and Village Boutique Hotel, are nearing completion. 

The marina basin has also been filled, and construction is advancing on other major features, including the AMAALA Yacht Club and the Corallium Sea Marine Life Institute, the Tabuk-based company added. 

RSG’s capital spending features investments in the project’s wellness-focused offerings, including resorts like Jayasom and Clinique La Prairie, as well as several luxury hotels such as the Rosewood, Six Senses, and the Four Seasons, all set to open by 2025. 

The AMAALA project will be powered entirely by solar energy, aligning with Saudi Arabia’s environmental goals. 

RSG said that primary infrastructure works, including 35 kilometers of internal roads, power, water, irrigation, and communications systems, are nearing completion, with energization planned for December. 

The company also expects to plant 3 million trees and shrubs by year-end to enhance public spaces and landscaping. 

The Ministry of Health recently approved the design for the AMAALA Hospital, which will offer health care services to residents and visitors across the 4,200 sq. kilomeeter destination. 


Aramco cuts Arab Light crude prices to Asia

Updated 08 September 2024
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Aramco cuts Arab Light crude prices to Asia

RIYADH: Saudi Aramco has reduced its October pricing for Arab Light crude oil for Asian buyers, according to a recent price list. The state-owned oil giant has cut the official selling price of its Arab Light crude by 70 cents, bringing it to $1.30 per barrel above the regional benchmark.

This adjustment comes amid a drop in Brent crude prices, which have fallen to $71.49 per barrel—a decrease of $1.20 per barrel (1.65 percent) on the day and the lowest level in years.

Saudi Aramco has also reduced the price of Arab Light crude for Europe and the US. For Europe and the Mediterranean, the Arab Light grade is priced $0.35 above ICE Brent, while for East Asia, the price is set at $1.30 above the average of the Oman and Dubai benchmarks.

The price cuts follow Bank of America's revised forecasts, which now predict Brent crude will average $75 per barrel next year, down from a previous estimate of $80. The forecast for West Texas Intermediate has also been lowered to $71 per barrel from $75.

It is also noteworthy that OPEC+ recently decided to postpone its planned production quota reductions scheduled for October. The new agreement will maintain current production levels for an additional two months.

Citigroup had previously warned that Brent crude could dip below $70 per barrel if OPEC+ proceeded with adding production to the market. However, the two-month delay in adjusting production levels has not significantly impacted prices.