Saudi Arabia Investing Heavily in Its Mining Sector

Mining industry in Saudi Arabia was never a major player in the Kingdom’s efforts to wean away from its reliance on hydrocarbon revenues and has contributed less than 1% to the nation’s Gross Domestic product (GDP) so far.

However, things started to change in the last few years when the government announcing plans to invest heavily in its mining sector to capitalise on the growing demand for minerals such as gold, phosphate, copper, zinc bauxite and rare earth minerals which are critical for energy transition across the world.

In fact, Saudi Arabia’s Minister for Mining and Minerals Bandar Al-Khorayef revised the estimated value of untapped mineral resources in the Kingdom – from $1.3 trillion in 2023 to $2.5 trillion, a significant increase from previous estimates.

Even the UK-based consultancy firm MineHutte said that Saudi Arabia’s mining sector had been one of the world’s fastest-growing regulatory and investment-friendly environments for five years. After the passing of a new Mining Investment Law in 2021, there was a 138% increase in the number of exploitation licenses issued, it added.

Besides gold, the government has been mining phosphate, bauxite, copper, zinc, feldspar and silver, which are considered strategic for the European Union. However, copper and feldspar, accounted for less than 0.5% and below 2% off global production, respectively.

With mining becoming important part of Saudi Arabia’s “Vision 2030,” the government said that it has set a target to invest around $46 billion by 2030.

Ajlan Bros., one of the leading investment companies in the Kingdom, in partnership with the British firm Moxico Resources, won the license for the exploration of Saudi Arabia’s Al-Khunayqiyah mining site project, where zinc and copper deposits are estimated at around 26 million tons in 2022. The consortium plans to invest around $14 billion by 2030.

Currently, the state-owned Saudi Arabian Mining Company (Ma’aden) operates 17 local mines and sites. To get more information scientifically by using geological data, the government has launched a $530 million survey programme in 2020 in cooperation with the Chinese Geological Survey.

The Saudi government has been actively seeking to attract international companies and in 2021, a new legislation to facilitate foreign companies get mining licences was enacted and this had a telling effect as the number of mining licences had increased from eight to 19 and exploration licences from 58 to 259 by end of 2023.

To make things much easier, the government will be streamlining the process starting February 2025 and instead of getting licence for mining, interested companies will have to complete a simplified registration process and foreign investors will receive equal treatment with Saudi companies.

Other regulations for mining companies, including licences for extraction projects, are drawn up by the Ministry of Industry and Mineral Resources, which in January 2024 launched a $182 million exploration funding programme aimed at reducing financial risks for companies.

Role of PIF

Saudi Arabia’s sovereign wealth fund –Public Investment Fund (PIF), which owns 65% stake in Ma’aden, has been playing key role in the development of the country’s mining industry. PIF and Ma’aden have formed a joint venture Manara Minerals Investment Company for this purpose.

Though the PIF has allotted $15 billion for mining activities, within and outside the Kingdom, it was increased to around $30 billion in the coming decade.

Local demand Up

According to Saudi Arabia’s Vice Minister for Mining Affairs Khalid Almudaifer, the local demand for minerals in Saudi Arabia was steadily increasing over the last few years as the Kingdom has taken up several giga construction projects as part of Vision 2030.

This was in addition to the initiatives outlined in the National Industrial Strategy, which aims to transform Saudi Arabia into a leading industrial powerhouse contributing to global industrial supply chains, he explained.

In a statement, Almudaifer said that the Ministry’s strategy focused on securing the essential minerals needed for the Kingdom’s industrial transformation through strengthening the local mining sector. This sector witnessed numerous regulatory and legislative initiatives and achievements in recent years.

He also reminded about the financial incentives provided to support the mining projects and by doing so, the government has succeeded in attracting investments through its mining competition program.

The government plans to offer 50,000 sq. km, which is 10 times more than that of 2023 for exploration, by 2025. Saudi Arabia has enhanced the efficiency of its mining regulations to align with global environmental and social sustainability standards, he added.