Saudi Arabia – a nation built upon the extraction and export of hydrocarbons – is facing a series of challenges as it tries to gradually transition away from fossil fuels and diversify its economy. Its developing mining and minerals sector will play a huge part in that process.
It is now the second-largest crude oil producer – sitting just ahead of Russia and below the US – with the desert nation extracting almost 12.5 million barrels of oil a day (mbbl/d) from its vast proven reserves of around 267.19 billion barrels (bbbl).
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The kingdom remains heavily reliant on oil revenues to fund government spending and push forward with large infrastructure projects planned under its Vision 2030 strategy, announced in 2016 and aimed at refocusing its economy away from oil.
However, the kingdom is about to make a substantial investment in its mining sector, banking on growing demand for energy transition minerals such as lithium, cobalt and nickel, as well as gold and some rare earth metals.
According to GlobalData’s Market Assessment of Mining Industry in the Kingdom of Saudi Arabia 2023 report, the nation is well positioned to become a leading mineral commodity supplier and a major player in the global mining industry, thanks to massive natural resources and a number of government initiatives.
Saudi Arabia’s General Authority for Statistics (GASTAT) revealed that the mining and quarrying industry contributed around 35.73% of the country’s gross domestic product (GDP) in 2021, a percentage that is set to grow.
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By GlobalDataThe kingdom’s mining production also saw a yearly rise of 0.40% in October 2024, with levels remaining steady since 2016, according to GASTAT, while its mining GDP rose to $58bn (SR217.5bn) in the third quarter of 2024 (Q3 2024) from $56bn in Q2.
In 2016, Saudi Arabia revealed Vision 2030, a wide-reaching plan to diversify its economy away from fossil fuels and support (among other industries such as tourism and technology) the mining sector, targeting an increase in mining’s GDP contribution from $17bn in 2019 to $75bn in 2035.
Pat Thaker, editorial director (Middle East and Africa) at the Economist Intelligence Unit, the research division of the Economist Group, told GlobalData, Mining Technology’s parent company, that “Vision 2030 aims to reduce the kingdom’s heavy economic dependence on oil”.
Saudi Arabia has two distinct advantages when it comes to large projects: extensive financial resources, and freedom from lengthy bureaucratic processes and prolonged decision-making, Thaker said.
According to additional GlobalData research published in May 2024, the Saudi mining sector is expected to expand substantially in the coming years, with the kingdom actively seeking mining collaborations. In November, it signed nine metals and mining investment deals with a total value of $9.3bn, seen as another step in the Vision 2030 plan, which aims to attract $100bn annually in foreign investment by 2030.
In January 2024, the Saudi Ministry of Industry and Mineral Resources signed memorandums of understanding with four countries – Egypt, Morocco, the Democratic Republic of Congo and Russia – to enable shared initiatives and knowledge transfer.
Saudi Arabia’s vast mineral wealth
According to Saudi Arabia’s National Centre for Industrial and Mining Information, the country’s mineral wealth was estimated at SR9.4trn as of April 2024. Its non-oil sectors accounted for more than 50% of GDP for the first time in 2023, up from 47.4% in 2015.
“Mining is a small industry now, but we are looking to quadruple the size of the sector by 2030, and we are already hitting the targets we set for 2025,” said Khalid Saleh Al-Mudaifer, His Excellency Vice-Minister for 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 domestic needs, under the National Minerals Program, which will drive growth in the mining sector and capitalise on the kingdom’s vast mineral wealth.”
Trillions needed for investment
In a separate speech given in early December at the Resourcing Tomorrow conference in London, Al-Mudaifer also highlighted the sector’s underperformance in exploration and volatile commodity markets – and perhaps most important – the need to acquire trillions of dollars in investments over the next few years.
“For Saudi Arabia, resourcing tomorrow is not just a concept, it is our legacy. The discovery of our oil reserves transformed not just our nation but also the global energy markets. It taught us the value of responsible resource management, long before sustainability become a global imperative,” he said.
To meet the surging demand driven by the energy transition, the mineral sector “requires about $6trn of investment by 2035, or four-times the market capitalisation the top 20 mining companies in the sector”.
He added that to “bridge this gap, the industry means to attract significant new capital, potentially opening doors for new players including sovereign funds, and oil and gas companies.”
“The sector also faces a major talent gap, as an experienced generation of operators, geologists and engineers are retiring, with a lack of investment during the 1990s now impacting the industry,” he continued. He estimated that Saudi Arabia would need “maybe 400 mining professionals and engineers to work in the industry, while numbers working the industry globally has been on the decline”.
The challenges are “enormous”
Speaking earlier in 2024, Al-Mudaifer admitted that Saudi Arabia faces “enormous challenges” and the kingdom needs “to go ten-times faster for our development of minerals and mining”. He outlined three challenges the country faces: policy, innovation and material supplies.
With mining being “one of the least-trusted industries, we still need to streamline permitting processes if we are to deliver on the material transition. We also need clearer and quicker policies on recycling of minerals.”
As for innovation, “we need to do more recycling of materials, particularly batteries. We also need improved technology for extraction.” When it comes to materials, “we need a supply that will cover the quadrupling of production”.
The need to de-risk
Saudi Arabia’s untapped mineral resources include key commodities such as bauxite, copper, gold, lithium, magnesium, silver, zinc and several rare earth elements – all materials needed for electric vehicles and renewable energy projects.
“The energy transition will require minerals, lots more minerals,” added Al-Mudaifer, “and to get hold of them, you need more supply, and that requires investment, infrastructure, policy change and innovation”, as this will help “de-risk whatever risks might be”.
Minerals “need to come from a new jurisdiction and Saudi Arabia is just such a place,” he added. One of its first moves was to make itself “attractive to investors and offer an investor journey. The investor is the king for us.”
The kingdom invested heavily in offering new information to any organisation looking to come into 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, previous mining operations identified more than 5,300 mineral locations. As of January 2022, Saudi Arabia had a total of 1,990 mining licences including 32 reconnaissance, 633 exploration, 165 exploitation and 1,160 building and material quarry licences.
Leveraging mineral wealth, reliable supply chains
The Saudi Minerals Programme, revealed in early 2024, is aimed at leveraging mineral wealth to ensure reliable supply chains and sustainable economic development.
It will focus on de-risking exploration investments in the nation, facilitate new discoveries within existing facilities and encourage greenfield projects. This is expected to attract junior miners and foster partnerships with international investors.
Bandar Ibrahim Alkhorayef, Saudi Ariabia’s Minister of Industry and Mineral Resources, said in July the programme – part of the nation’s broader strategy to maximise the value derived from its mining sector – has a pivotal role in ensuring a steady supply for local industries and significant projects.
Golden future
Last year, Saudi Arabia was the 27th-biggest gold producer, with output up by 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 start-up of projects like Saudi Arabian Mining Company’s (Ma’aden’s) Mansourah and Massarah project. Ma’aden announced the find in December 2023.
According to Ma’aden figures, at the end of 2023, the volume of gold reserves in the region was estimated to be seven million ounces, with an annual production capacity of 250,000oz.
GlobalData research indicates gold deposits can be found throughout Saudi Arabia’s Central Arabian Gold Region, which stretches from the Red Sea coast to the country’s heart, and in September 2022, the SGS confirmed the discovery of huge deposits of gold in the Aba al-Raha locality of Medina.
Jonathan Cordero, CEO of Saudi Gold Refinery, one of Saudi Arabia’s leading gold refining and mining companies, said: “In Saudi Arabia, mining is seen as the third pillar, which means there is other pillars. And so, it is a holistic approach of transforming the entire ecosystem, the entire economy. I think that is exactly the right approach.”
He was speaking at the Resourcing Tomorrow event.
