THE THIRD PILLAR

Saudi Arabia 2016 | ENERGY | FOCUS: MINING SECTOR

The first international mining conference was organized in Saudi Arabia in a bid to enhance awareness of the $19 billion worth of opportunities in the sector. Exploiting the country's vast mineral reserves will not only allow the government to diversify its economy, but will position the country as a leading regional hub and a global player in the industry.

The Saudi Mining & Minerals Exhibition & Symposium took place in Riyadh in October 2015, the first international event on the mining sector held in Saudi Arabia. More than 3,000 participants learned about new government policies presented by local authorities and about the latest technologies showcased by the over 50 exhibitors who gathered from 10 different countries around the world.

In a challenging era for the oil-based economy, Saudi Arabia aims to significantly increase the contribution given by the mining industry to the Saudi economy. HE Ali Al Naimi, Minister of Petroleum & Mineral Resources, said in a keynote speech at the opening ceremony that the government is aiming to more than triple the GDP of mining from the current SAR80 billion to SAR260 billion by 2030.

The sector started receiving attention two decades ago, when, in 1997, a royal decree established Saudi Arabian Mining Company (Ma'aden) and tasked it with facilitating the development of Saudi Arabia's mineral resources. Today, the partially privatized company is implementing its Ma'aden 2022 strategy, which eventually will lead the company to a place among the top-10 producers in all export-oriented industries.

Several projects could be implemented totaling $19 billion worth of opportunities. Under execution or pre-execution, downstream projects (processing plants) have an estimated value of $15 billion, while upstream projects (extraction, mining) would account for the remaining $4 billion.

With the Kingdom's finances under stress, the government's keenness to develop the mining and minerals sector is no surprise. And it is no surprise that mining has gained the appellative of “third pillar" of the economy after oil and petrochemicals.

Although Saudi Arabia's sands hide vast mineral wealth greater than any other Gulf state, the industry is still at an early stage of development.

In order to boost the sector's growth, the government has allocated as much as $12 billion to be invested before 2020 to build the necessary infrastructure for the extraction of the minerals, create the transport network, and improve procedures for export of precious rocks.

Nearly 50 different minerals have been identified with 1,273 sites of precious metals and 1,171 sites of non-precious metals. The list of available minerals includes: silver, limestone, zinc, phosphate, bauxite, magnesium, and copper. Among all the minerals identified, at least 15 are industrial minerals and, therefore, commercially viable. With proven reserves of 20 million tons, Saudi Arabia is also the second-largest gold producer in MENA after Egypt, and exploiting significant new deposits would boost production growth even further.

In order to make this industry function, the Technical & Vocational Training Corporation (TVTC) is establishing the Waad al-Shamal City training institute. The vocational center is due to open in 2017 and will train 2,500 students annually. This institute will be the second of its kind in Saudi Arabia since Ma'aden, and the TVTC had established the Kingdom's first mining and minerals vocational training in 2012. This will be an effective way to curb unemployment while supplying a skilled workforce so that companies can meet Saudization requirements. The sector currently employs 265,000 people directly and indirectly, and the ministry's goal is to create 100,000 more jobs by 2030.

The MENA region hosts over 30% of the world's mineral reserves. However, regional issues such as water scarcity, infrastructure deficits, and social and environmental pressure from local communities have, for some time, discouraged investment and exploitation, thus deterring the industry's development.

Today, if compared with its regional peer countries, Saudi Arabia offers the highest risk/reward rate, but the government aims to override investors' concerns and to provide them with a generally more stable and appealing business environment. Saudi Arabia is in fact currently expanding its logistics network with new maritime ports and the 2,400km North-South Railway (NSR) route, as well as implementing a more reliable regulatory framework. The New Mining Code is expected to cut bureaucracy, ease extraction procedures, and lower operational costs while also granting investors a 20% reduction in tax liability.

According to the Saudi Arabian General Investment Authority (SAGIA), competitive 30-year mining licenses, the low cost of energy, the booming domestic construction sector, and first-mover benefits are other distinct advantages that make the mining industry a lucrative target for investment. Government support for mineral developments is also visible in the establishment of the Mining Investment Services Center.
Experts agree that with the massive size and scale of opportunities involved, the sector can surely become the much needed “third pillar" of the country's economy, and that Saudi's rich, unexplored landmass is all the Kingdom needs to become a mining and minerals superpower.