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��������Ƶ’s mining industry is indeed undergoing a significant transformation, driven by the Kingdom’s rich mineral resources and substantial investments aimed at establishing it as the third industrial pillar alongside oil and petrochemicals. 

Under the National Industrial Development and Logistics Program and Vision 2030, the focus is on leveraging local resources and labor, utilizing financial tools like public-private partnerships, and embracing innovations from the 4th Industrial Revolution.

This ambitious strategy aims not only to enhance the sector’s contribution to the national economy but also to position ��������Ƶ as a global industrial and logistics hub. 

However, its success will depend on addressing infrastructure and regulatory challenges that could affect the development timeline and overall effectiveness of the sector. By tackling these obstacles, the Kingdom can realize its vision of a diversified economy with a robust mining industry at its core.

What lies beneath

��������Ƶ’s mineral wealth is substantial, with estimates valuing it at SR9.4 trillion ($2.5 trillion) as of April 2024. This wealth includes untapped deposits of key minerals that are in high demand globally. Notably, bauxite is essential for aluminum production, while phosphate, gold, zinc, copper, and rare earth elements are critical for manufacturing high-tech products like smartphones, electric vehicle batteries, and wind turbines, as well as various defense applications.

The Kingdom has already made strides in developing mining. The sector's contribution to GDP is expected to increase to $70-$80 billion by 2030 from $17 billion currently, creating over 200,000 jobs. Through the state-owned mining company, Ma’aden, the Kingdom has invested substantially in exploration and exploitation activities. 

Key projects include the Al-Duwayhi gold mine, the Wa’ad Al-Shamal phosphate mine, and various copper and zinc projects.In December 2023, Ma’aden announced significant gold reserves along a 100-km stretch south of the existing Mansourah-Massarah gold mine in the Al-Khurmah governorate of the Makkah region and plans to intensify drilling activities around Mansourah-Massarah this year. The volume of gold reserves in Mansourah and Massarah was estimated to be 7 million ounces at the end of 2023. This marks the first discovery as part of Ma’aden’s intensive exploration program launched in 2022, which aims to build a mineral production line.

From upstream to downstream

Integrating mining activities with downstream processing to enhance the minerals-to-metals value chain is a core strategic aim of the Kingdom for fostering industrial diversification and sustainable growth. By linking mining with advanced manufacturing, the Kingdom seeks to position itself as a key player in the global supply chain for critical minerals, especially those needed for the energy transition.

A prime example is the Kingdom’s leveraging of its significant bauxite reserves to produce aluminum, which is used to manufacture solar panel components. Ma’aden’s Al-Baitha mine benefits from access to low-cost and low-carbon electricity, and this in turn has enabled the mine to establish the world’s lowest-cost aluminum smelter. This aluminum is used in renewable energy projects.

The Kingdom is also tapping into its lithium deposits for the development of EV batteries. ��������Ƶ has invested substantially in EV production, launching its own brand, Ceer, and investing in Lucid, another EV brand majority-owned by the Public Investment Fund.

Fostering collaboration

To expand its reserves of critical minerals and secure long-term supply chains, the Kingdom is investing in overseas mining assets through Manara Minerals, a joint venture between Ma’aden and PIF. In 2023, Manara entered a major partnership with the mining giant Vale SA. 

The collaboration will see Manara invest in Vale Base Metals’ multibillion-dollar capital program aimed at increasing the production of the critical minerals for the energy transition, such as copper and nickel. 

In parallel, the Ministry of Industry and Mineral Resources is strengthening cooperation with governments to support minerals exploration and enhance knowledge transfer. In January 2024, the ministry signed agreements with Egypt, Morocco, Congo, and Russia. It also announced SR685 million in incentives to reduce risks for early-stage exploration companies. 

Attracting foreign investment

��������Ƶ seeks to establish itself as a pivotal player in the global mining industry by attracting private investment and has set a target of attracting $200 billion in foreign direct investment by the end of the decade. 

To achieve its goals, the government has introduced a raft of measures aimed at fostering a more investor-friendly environment. In 2021, ��������Ƶ introduced the Mining Investment Law to streamline the process of obtaining exploration licenses. Since its implementation, the country has seen a 138 percent increase in the issuance of exploitation licenses, highlighting the significant impact of these reforms on the sector.

It also introduced into the regulatory framework environmental protection provisions to enhance the sector’s appeal to international investors, among whom ESG has become more of a focus. 

In early April 2024, the Ministry announced six new mining investment opportunities for local and international investors as part of its “Accelerated Exploration” initiative. The ministry invited bids for new exploration licenses for gold, copper, zinc, lead, and silver ores across the Kingdom, covering a total area of more than 940 sq. km.

Yet, the effectiveness of these measures in attracting significant FDI will depend on the Kingdom’s ability to address concerns about regulatory stability and operational transparency. 

Demonstrating a steadfast commitment to regulatory reforms and operational transparency is essential for convincing investors of a stable and predictable business environment. 

For instance, the Kingdom’s launch of the National Geological Database in 2021 by the Saudi Geological Survey aims to map and analyze the country’s mineral resources comprehensively, providing reliable data to investors and enhancing transparency in resource availability and exploration opportunities. While initial measures are promising, the ongoing challenge lies in sustaining and enhancing these efforts to ensure continued investor confidence.

Navigating the path to success

Looking ahead, ��������Ƶ’s mining sector is positioned for considerable growth, driven by new discoveries, financial incentives, and the expansion of existing projects. The upcoming 4th Future Minerals Forum in January 2025 is expected to contribute to strengthening the sector, building on key outcomes from previous forums, such as creating a regional center of excellence to facilitate investments and improve mineral supply chains. Large-scale mining projects will enhance output and provide economic opportunities, including infrastructure development in remote areas.

However, several challenges remain. The high initial costs of establishing mining operations, especially in remote regions, and a lack of local expertise might continue to deter investment. Additionally, infrastructure gaps, such as the distance between mines and industrial hubs or ports, complicate logistics and drive up transport costs. Previous Future Minerals Forums have highlighted these issues, emphasizing the need to improve infrastructure, from roads to ports, to ensure more efficient logistics and operations.

To overcome these challenges, expanding international partnerships with mining companies and technology providers will be instrumental as they will boost technical know-how and facilitate the sharing of best practices. Promoting sustainable mining practices, such as integrating renewable energy sources like solar and wind, can address sustainability concerns, as demonstrated in South Africa, where mining companies have successfully integrated solar and wind power to reduce emissions despite the high initial costs.

��������Ƶ’s focus on investment facilitation, sustainability, and technology integration is key to unlocking its potential. By improving logistics and incentivizing the use of renewable energy, the Kingdom can attract responsible investment and enhance operational efficiency. Addressing high startup costs and technical expertise through partnerships will further reduce barriers to investment, ensuring long-term growth and investor confidence in the Kingdom mining sector.

Nassar Al-Nassar is a senior manager at SRMG Think. He is an expert in political economy research, particularly in the MENA region.