Saudi Arabia, a nation built on the extraction and export of hydrocarbons, faces a number of challenges as it attempts to gradually transition away from fossil fuels and diversify its economy. Its developing mining and minerals sector will play a huge role in that process.
It is now the second largest producer of crude oil, just ahead of Russia and below the United States. The desert nation extracts nearly 12.5 million barrels of oil per day (mbbl/d) from its vast proven reserves of around 267.19 billion barrels (bbl).
The kingdom remains heavily reliant on oil revenues to finance public spending and push forward major infrastructure projects planned under its Vision 2030 strategy, announced in 2016 and aimed at reorienting its economy away from oil.
However, the kingdom is about to make a substantial investment in its mining sector, betting on the growing demand for energy transition minerals such as lithium, cobalt and nickelas well as gold and some rare earth metals.
According to GlobalData’s Market Assessment of the Mining Industry in the Kingdom of Saudi Arabia 2023 report, the nation is well positioned to become a leading supplier of mineral products and a major player in the global mining industry, thanks to its enormous natural resources. and a series of government initiatives. .
The General Authority of Statistics of Saudi Arabia (GASTAT) revealed that the mining and quarrying industry contributed about 35.73% of the country’s gross domestic product (GDP) in 2021, a percentage that will increase.
The kingdom’s mining production also saw a 0.40% annual increase in October 2024, with levels remaining stable since 2016, according to GASTAT, while its mining GDP rose to $58 billion (SR217.5 billion) in the third quarter of 2024 (Q3 2024). from $56 billion in the second quarter.
In 2016, Saudi Arabia unveiled Vision 2030, a wide-ranging plan to diversify its economy away from fossil fuels and support (among other industries such as tourism and technology) the mining sector, with the aim of increasing Saudi Arabia’s GDP contribution. mining from $17 billion in 2019 to $75 billion in 2035.
Pat Thaker, editorial director (Middle East and Africa) of the Economist Intelligence Unit, the research division of the Economist Group, told GlobalData: Mining TechnologyAccording to the parent company, “Vision 2030 aims to reduce the kingdom’s heavy economic dependence on oil.”
Saudi Arabia has two clear advantages when it comes to large projects: ample financial resources and freedom from lengthy bureaucratic processes and lengthy decision-making, Thaker said.
According to additional research from GlobalData published in May 2024, the Saudi mining sector is expected to expand substantially in the coming years, and the kingdom will actively seek mining collaborations. In November he signed nine investment agreements in metals and mining with a total value of 9.3 billion dollars, seen as one more step in the Vision 2030 plan, which aims to attract 100 billion dollars annually in foreign investment by 2030.
In January 2024, the Ministry of Industry and Mineral Resources of Saudi Arabia signed memorandums of understanding with four countries (Egypt, Morocco, the Democratic Republic of the Congo and Russia) to enable shared initiatives and knowledge transfer.
According to Saudi Arabia’s National Industrial and Mining Information Center, the country’s mineral wealth was estimated at SR9.4 trillion as of April 2024. Its non-oil sectors represented more than 50% of GDP for the first time in 2023, compared to 47.4% in 2015.
“Mining is now a small industry, but we aim to quadruple the size of the sector by 2030, and we are already achieving the targets we set for 2025,” said Khalid Saleh Al-Mudaifer, His Excellency Deputy Minister of Mining Affairs. , Ministry of Industry and Mineral Resources, Kingdom of Saudi Arabia.
Al-Mudaifer, speaking to a US media outlet in early December, added that “the mining and minerals sector will be able to provide the necessary materials for our own internal needs, within the framework of the National Minerals Program, which will promote the growth of the mining sector. and capitalize on the vast mineral wealth of the kingdom.”
Khalid Saleh Al-Mudaifer, His Excellency Deputy Minister of Mining Affairs, Ministry of Industry and Mineral Resources of the Kingdom of Saudi Arabia, speaking on Resourcing Tomorrow in London in December. Credit: Caroline Peachey.
In a separate speech given in early December at the Resourcing Tomorrow Conference in LondonAl-Mudaifer also highlighted the sector’s poor performance in exploration and volatile commodity markets – and perhaps most importantly – the need to acquire trillions of dollars in investments over the coming years.
“For Saudi Arabia, resourcing tomorrow is not just a concept, it is our legacy. The discovery of our oil reserves transformed not only our nation but also global energy markets. “It taught us the value of responsible resource management, long before sustainability became a global imperative,” he said.
To meet the growing demand driven by the energy transition, the mining sector “requires around $6 trillion of investment by 2035, or four times the market capitalization of the top 20 mining companies in the sector.”
He added that to “close this gap, the industry aims to attract significant new capital, potentially opening doors to new players, including sovereign fundsand oil and gas companies.”
“The sector is also facing a significant talent gap, as an experienced generation of operators, geologists and engineers are retiring, and a lack of investment during the 1990s now affects the industry,” he continued. He estimated that Saudi Arabia would need “perhaps 400 mining professionals and engineers to work in the industry, while the number of workers in the industry globally has been declining.”
Speaking in early 2024, Al-Mudaifer admitted that Saudi Arabia faces “enormous challenges” and that the kingdom needs to “go ten times faster in our minerals and mining development.” He outlined three challenges facing the country: politics, innovation and materials supply.
Since mining is “one of the least reliable industries, we still need to optimize permitting processes if we want to meet the material transition. “We also need clearer and faster policies on mineral recycling.”
Regarding innovation, “we need to recycle more materials, especially batteries. “We also need better technology for extraction.” As for materials, “we need a supply that covers quadrupling production.”
Saudi Arabia’s untapped mineral resources include key raw materials such as bauxite, copper, gold, lithium, magnesium, silver, zinc and various rare earths – all materials necessary to electric vehicles and renewable energy projects.
“He energy transition “Minerals will be needed, many more minerals,” Al-Mudaifer added, “and to get them you need more supply, and that requires investment, infrastructure, policy changes and innovation,” as this will help “eliminate risks, whatever they may be.” be the risks.” could be”.
The minerals “have to come from a new jurisdiction and Saudi Arabia is precisely one of those places,” he added. One of its first steps was to become “attractive to investors and offer a journey for investors. For us, the investor is king.”
The kingdom invested heavily to offer new information to any organization that wanted to enter the country, and the “Saudi Geological Survey (SGS) has also helped us attract investors, as well as helping us discover new mineral resources, including rare earth metals.” he added.
According to recent data from the SGS, more than 5,300 mineral deposits were identified in previous mining operations. As of January 2022, Saudi Arabia had a total of 1,990 mining licenses, including 32 reconnaissance, 633 exploration, 165 exploitation, and 1,160 construction and material quarry licenses.
Saudi Arabia’s Minerals Programme, unveiled in early 2024, aims to harness mineral wealth to ensure reliable supply chains and sustainable economic development.
It will focus on de-risking exploration investments in the country, facilitating new discoveries within existing facilities and encouraging greenfield projects. This is expected to attract young miners and foster partnerships with international investors.
Bandar Ibrahim Alkhorayef, Saudi Arabia’s Minister of Industry and Mineral Resources, said in July that the program, part of the country’s broader strategy to maximize the value derived from its mining sector, plays a critical role in ensuring consistent supply for local industries and important projects. .
Last year, Saudi Arabia was the 27th largest gold producer, with production up 16% from the previous year, according to GlobalData.
Gold production is expected to grow at a compound annual growth rate of 6% between 2023 and 2027. This will be aided by the commissioning of projects such as Saudi Arabian Mining Company’s (Ma’aden’s) Mansourah and Massarah. Ma’aden announced the discovery in December 2023.
According to Ma’aden figures, at the end of 2023, the volume of gold reserves in the region was estimated at seven million ounces, with an annual production capacity of 250,000oz.
GlobalData research indicates that gold deposits can be found throughout Saudi Arabia’s gold region, which stretches from the Red Sea coast to the heart of the country, and in September 2022, the SGS confirmed the discovery of huge deposits of gold in the town of Aba al-Raha. of Medina.
Jonathan Cordero, CEO of Saudi Gold Refinery, one of Saudi Arabia’s leading gold mining and refining companies, said: “In Saudi Arabia, mining is considered the third pillar, which means there are other pillars. Therefore, it is a holistic approach to transform the entire ecosystem, the entire economy. “I think that’s exactly the right approach.”
I was speaking at the Resourcing Tomorrow event.
“Saudi Arabia Ready to Exploit the Future as It Looks Beyond Oil” was created and originally published by Mining Technologya brand owned by GlobalData.
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