COMMODITIES

MINING SECTOR REMAINS A BRIGHT SPOT IN SAUDI ECONOMY

Ma’aden, Saudi Arabia’s largest metals company, is investing USD 2 billion in expanding its production levels and creating a mining powerhouse in the kingdom.

“We continue our strategy to increase our phosphate fertilisers, gold and basic minerals capacities while at the same time focusing on improving the performance of our existing plants and aspiring to play our part to achieve the goals of the Kingdom's 2030 vision, diversify sources of income, create jobs and transform the mining sector to be the third pillar of Saudi Arabian industry,” said Mosaed Al Ohali, Ma’aden’s chief executive officer.

The Mansoura & Massarah gold mine, the company’s flagship project, is being developed as conventional open pit mines and will employ carbon-in-leach and pressure oxidation processes technology for gold production.

Once fully operational, the Mansourah-Massarah mine will produce 250,000 ounces of gold per year, helping to achieve Ma’aden’s target of 1 million ounces of gold.

The company’s revenues for the full year 2020 stood at SAR 18.5 billion, its best sales performance ever, and up 4.76% compared to 2019. The company’s net loss for the year was SAR 847 million.

Ma’aden, which is developing an impressive portfolio of metals and minerals, is spearheading the kingdom’s efforts to create value from its mineral resources estimated at more than USD 1.3 trillion.

Saudi Arabia boasts 48 different minerals and metals of which 15 are commercially viable. Its central and northern regions are home to large reserves of bauxite, silver, zinc, copper, magnesite, and kaolin, which the government hopes to monetise through private and international investments.

“The mining potential of these resources is still significantly untapped, which presents the private sector with large and lucrative investment opportunities that capitalise on and serve the under-supplied market,” according to the Ministry of Investment.

To explore the country’s proven reserves, the Saudi Geological Survey (SGS) signed contracts worth over USD 530 million with international organisations and consultants in October last year to carry out projects related to the geological survey general programme. The six-year-long programme is expected to help boost the kingdom’s mining sector, and be a significant contributor to the Vision 2030 initiative.

In addition, the kingdom is keen to upgrade its infrastructure to connect its mineral reserves to global markets.

The government is developing a 2,750-kilometre North-South railway connecting Al-Jalamid mine with processing facilities in Ras-al-Khair Industrial city (RIC), a “world-class metals and minerals city” with integrated industrial complexes, ports and an end-to-end ecosystem.

“Wa’ad Al Shamal City includes Ma’aden's phosphate mining expansion and many other large world-class facilities allowing for a production capacity of 16 metric tonnes per year.

Additionally, more than SAR 90 billion (USD 25 billion) is being invested in new mining ventures and plants to process industrial ores,” the ministry added.

Earlier this year, Invest Saudi identified an investment opportunity for a brass and copper plant facility with a 45 kiloton production capacity in the kingdom.

“The plant will produce copper and brass products for non-electrical usage in the region and has an expected payback period of 9.1 years. The project is eligible for up to 75% of project financing by the Saudi Industrial Development Fund (SIDF). Additionally, the Human Resources Development Fund (HRDF) provides 30%, 20% and 10% of Saudi nationals’ salaries for their first, second and third years of work, respectively,” Invest Saudi said.

NEW LAW

Saudi Arabia’s new mining law, which took effect in January after being approved last year, aims to boost the sector’s contribution to GDP from USD 17 billion to more than USD 64 billion. The government also believes it can reduce imports by about USD 10 billion and generate more than 200,000 jobs by 2030, placing the mining sector as the third pillar of Saudi industry.

The new law has 63 articles that spell out transparent and clear rules for the mining industry.

“The detailed procedures for the issuing of licenses will be included in the regulations; however, we can expect aggressive new timelines for the ministry and other stakeholders to adhere to when processing and approving applications,” according to consultancy Baker McKenzie. “This will be of comfort to mining companies and investors who have previously been discouraged from exploring opportunities in Saudi due to the uncertainties around licensing and lengthy processing periods.”

A number of international companies, including Canada’s Barrick Gold Corp., one of the world’s largest gold miners, US-based Alcoa Corp. and The Mosaic Co., are already operating mines in Saudi Arabia, while new ones are eyeing the kingdom’s nascent sector.