Saudi Arabia’s push to ramp up its mining investments—both domestically and abroad—is part of a cohesive strategy to diversify its oil-dependent economy. But perhaps just as importantly, it will give the country more geopolitical clout on the international stage.
Saudi Arabia is exploring mining opportunities across the globe—so far in the Arab world, Africa, and the Americas—while also unearthing precious metals in its own backyard. And there has been tangible progress on both fronts. Next to overseas deals either in the making or already closed, mining companies from around the world are bidding for exploration rights in several Saudi regions.
Saudi Arabia first drafted a national strategy to capitalise on its precious mineral and metal resources in the 90s, but the ambitious Vision 2030 initiative launched in 2016 gave it fresh impetus, turning mining into the strategy's third economic pillar alongside oil and petrochemicals.
With an untapped mineral wealth estimated at $2.5tn, the mining sector of the Arab world’s largest economy is estimated to be valued at up to $80bn by the next decade—a sizable 6% of the targeted non-oil GDP during the same period. It currently contributes less than 1% to the GDP.
A mining boom could also help boost foreign direct investment (FDI) to 5.7% of the country's nominal GDP, up from last year’s 2.4%. What’s more, a revitalised mining sector—coupled with mineral asset acquisitions—helps Saudi Arabia establish the supply chains needed for its economic aspirations. Currently, 40% of the country's GDP depends on oil revenue, but it hopes to gradually move away from this and towards clean energy and boosting its industrial output.
Incentivising exploration
To attract FDI, authorities have more than halved mining taxes from 45% to just 20%. The Australian mining company Metal Bank is one of the foreign companies that have taken advantage of the opportunity. In November, it won exploration licenses for a number of sites in Riyadh, Makkah and Asir—mostly through consortiums—and is waiting to hear back on four additional mining bids. Together, the plots comprise 850 km2 with reserves of various metals, including gold, silver, zinc, and copper.
Speaking to Al Majalla, Ines Scotland, Metal Bank's Executive Chair said her company's experience with the Jabal Sayid project—a very rich mine now operated by the Ma'aden/Barrick Joint Venture—demonstrated that Saudi Arabia's copper has "very high-grade quality".
"From talking to others in the industry, I think there is already a lot of interest in Saudi Arabia, and the government has been doing an excellent job marketing through the licensing rounds.”
It helps that Saudi Arabia's Mining Investment Law is “clearly worded and drafted to international standards" and that the holder of an exploration license has the exclusive right to obtain a mining license over the relevant site. A streamlined application process, the establishment of a national geological database and financial incentives to support investors in the sector all boost the appeal, she added.
Saudi Arabia's stability and educated workforce give it an edge over mineral-rich competitors in Africa, where instability and political strife are more prevalent.
Global and domestic partnerships
Canadian companies ANS Exploration and Tinka Resources Ltd and Australia’s Auking Mining Ltd. have also won mining projects in Saudi Arabia. Meanwhile, Canadian company Centamin has also expressed interest in Saudi mining. Its CEO, Martin Horgan, pointed out that its geological setting is similar to Egypt's, where his company currently operates the country's only commercial gold mine.
Saudi Arabian Mining Co., known as Ma'aden, operates five gold mines in the country and is also on the lookout for precious metals abroad with the support of the $925bn Public Investment Fund (PIF), the Saudi sovereign wealth vehicle.
Both bodies formed in early 2023 Manara Minerals Investment Co., which bought a 10% stake in Vale SA’s base metals subsidiary for nearly $2.5bn. It’s the joint venture’s first acquisition, which was closed in April, and more such deals are on the horizon to serve multiple purposes.
Ma'aden is poised to buy a slice in a copper mine in Zambia before the end of 2024 and is also eyeing a majority stake in Aluminium Bahrain B.S.C., or Alba. Both metals are essential to go green, with Saudi Arabia looking to produce half of its power through renewable sources by 2030.
Speaking to Bloomberg, Ma'aden CEO Bob Wilt said: "I’m very bullish on aluminium. The energy transition doesn’t happen without aluminum, so if we want to be a critical minerals and processing hub, we’ve got to control the feedstock.”
For his part, Mining Minister Bandar Alkhorayef has also shown interest in the critical minerals of Brazil, Chile and Canada, having visited the three countries in recent months. Most notably, Manara is looking for investment opportunities in Chilean lithium production.
Getting hold of Lithium stockpiles—a key component in electric vehicle batteries—is essential for Saudi Arabia's plans for EV manufacturing. It aims to produce 150,000 EVs by 2026 and 500,000 four years later.
Already-productive mining assets will provide Saudi Arabia with metal stocks almost immediately. This will help the government build supply chains considerably faster than domestic mining, which takes years to reap the rewards. For example, it took Metal Bank six years on the Jabal Sayid project to progress from early drilling to a definitive feasibility study.
Global South cooperation
Like other Gulf nations, Saudi Arabia has been forging stronger ties with countries in the Global South in recent years as part of a diplomatic push to diversify its economic partnerships and boost its geopolitical clout. To this end, Saudi Arabia has expressed interest in investing in the mining sectors of Morocco, Tanzania, the Democratic Republic of Congo and Burundi.
Such investments could also forge opportunities for greater Saudi-US-EU partnerships. According to a report by the German think tank Stiftung Wissenschaft und Politik (SWP): "The US seems to view Saudi Arabia as a strategic partner for investments in mineral-rich countries and regions that Western companies consider too risky and in which they are therefore reluctant to invest."
Meanwhile, Saudi Arabia’s “entry into the global mineral resource market and its strong ties to the US make it an attractive diversification option for the EU”, the report added.
