Datacom aims to capitalise on Saudi Arabia’s technology wave

RIYADH: Saudi Arabia’s mining sector is on the cusp of a transformative era, with the kingdom determined to become a global leader in the industry. But have you ever wondered what treasures lie beneath its land?

Saudi Arabia is rich in minerals that are essential to several global industries. The kingdom is transforming into a leading exporter of various types of energy, moving away from its traditional role as an oil producer.

It has great potential to produce minerals essential for the energy transition, such as aluminium, copper and rare earth metals, as well as minerals needed for global agriculture.

The strategic focus on economic diversification has placed the mining sector at the top of national development plans. The Kingdom’s mineral wealth is estimated at SR9.4 trillion ($2.4 trillion).

Open for business

According to the World Risk Report 2023 by British research and advisory firm MineHutte, reforms in Saudi Arabia’s mining sector over the past five years have made it the fastest growing regulatory and investment-friendly sector in the world.

The report also shows that the Kingdom ranks second when it comes to issuing permits.

This comes as Saudi Arabia saw a 138 percent increase in the number of mining licenses issued since the introduction of the new mining investment law in 2021.

According to Gaute Andreassen, a partner in Bain and Co.’s Advanced Manufacturing and Services and Energy and Natural Resources divisions, some resources have already been mined, but there is still a significant amount that has not yet been tapped.

“Saudi Arabia’s mining sector has for many years been focused primarily on phosphate for fertilizers and bauxite, which is used in the production of aluminum. These two will also represent a significant portion of the sector’s activities in the future,” Andreassen told Arab News.

He added: “Looking ahead, there is evidence of additional endowments, for example of rare earth elements and also of copper that can be extracted. The question is whether these resources are commercially viable.”

Rabih Nassar, Consulting Partner for Resources and Industrial at PwC Middle East, believes that besides phosphate and bauxite, there are other key minerals that are considered particularly promising for the development of Saudi Arabia’s mining sector.

“At the FMF (Future Minerals Forum) 2024, it was highlighted that Saudi Arabia is rich in minerals such as phosphates, gold, copper, zinc, lithium and rare earth elements. Each of these minerals serves different global markets and industries,” said Nassar.

According to Nassar, gold remains in high demand, not only for jewelry and investment purposes, but also for technological applications in the electronics and aerospace industries due to its excellent conductivity and corrosion resistance.

Copper is essential in electrical engineering, electronics, construction and new green technologies such as electric vehicles and renewable energy systems.

He also stressed the importance of zinc, which is mainly used for galvanizing to protect steel from corrosion, making it essential in the construction and automotive industries. This metal is also crucial in the production of batteries and alloy materials.

Lithium plays a crucial role in the battery industry, particularly for electric vehicles and renewable energy storage systems.

In addition, rare earth metals are crucial for the production of permanent magnets used in wind turbines, electric vehicle motors and various other electronic devices, such as smartphones and computers.

Attracting investments

At FMF 2024, held in Riyadh in January, Saudi Arabia presented its strategy to attract investment in the mining sector through regulatory reforms, competitive tax frameworks and greater transparency.

Nassar told Arab News that the kingdom is improving its geological databases and conducting comprehensive surveys to better map its mineral resources, allowing investors to make more informed decisions.

He explained the importance of this work in the context of the continuous improvement of regulatory frameworks to create a favourable investment climate.

“These efforts are complemented by strong government support and streamlined processes for mining permitting and operations,” he said, adding: “These initiatives will provide extensive expertise and capital, as well as promote knowledge transfer and capacity building, ensuring the sustainable development of the mining sector.”

Chris Braun, a partner in Bain and Co.’s Retail and Energy and Natural Resources practices, also outlined what the kingdom will do to attract both domestic and international investment to support the exploration and development of Saudi Arabia’s mining resources.

“The kingdom is already setting up several industries that will be consumers of significant portions of these minerals. That’s a very good start. In addition, Saudi companies have shown that they can work well with international partners in pursuing mining opportunities,” Braun said.

He added: “A key prerequisite for future success is validating the country’s mineral wealth and investing in exploration.”

Braun further emphasized the importance of developing infrastructure to support mining operations, which are often located in remote areas. This includes modern transportation, housing, reliable utilities and digital access.

“Finally, Saudi Arabia must ensure that there is sufficient access to critical capabilities and a skilled workforce. Both unskilled and skilled labor are critical and ensuring that the kingdom trains sufficient mining engineers should be a top priority,” he said.

Stimulating the private sector and foreign investment

When it comes to foreign investment in Saudi Arabia, the kingdom is an attractive destination for anyone seeking long-term returns and strategic partnerships.

According to PwC, we can expect a range of new opportunities and incentives that the Kingdom will offer to both the private sector and foreign investors.

“The government has revised its mining laws to make them more favorable to investors,” Nassar said.

This includes streamlining the application and approval processes for mining permits, ensuring transparency and reducing regulatory restrictions.

The creation of a dedicated ministry for mining underlines the importance of the sector and provides investors with a direct point of contact.

Investors in the mining sector can also benefit from tax incentives, such as lower tax rates and import duty exemptions on mining equipment.

“The Saudi Industrial Development Fund also provides financial support, such as loans with competitive interest rates, to stimulate investments in mining-related technologies and infrastructure,” Nassar said.

The development of advanced mining infrastructure can generate significant investment, such as the construction of rail networks, ports and roads to support the extraction and transportation of minerals.

These developments are aimed at reducing logistical challenges and operational costs for mining operations.

Saudi Arabia is investing heavily in geological exploration and has taken major steps to make geological data more accessible to investors.

“This initiative, known as the Saudi Geological Survey, provides detailed and reliable data, reducing the exploration risks and costs associated with mining projects,” the PwC Middle East advisory partner said.

In addition, the Kingdom encourages joint ventures between local and international companies as a central strategy.

These partnerships facilitate technology transfer, share expertise and pool resources for exploration and development projects, making investments more attractive and feasible for foreign companies.

In addition, the country promotes sustainable mining practices by providing incentives for projects that prioritize environmental conservation, utilize renewable energy and implement green technologies in their operations.

“This is in line with global environmental standards and appeals to environmentally conscious investors. These initiatives position Saudi Arabia as a prime location for mining investments, providing comprehensive opportunities and support to both domestic and foreign investors,” Nassar said.

Saudi Arabia is not waiting for industry to come to the kingdom.

Minister of Industry and Mineral Resources Bandar Alkhorayef is proactive on the world stage, visiting countries he believes can benefit from the significant growth potential the Kingdom has to offer.

Alkhorayef is currently on a trip to South America, scheduled for July 22-30. He has already participated in a roundtable discussion organized by the Federation of Industries in Sao Paulo, where he invited Brazilian companies to invest in Saudi Arabia’s emerging mining sector.

What’s next?

When asked to visualize the future development of Saudi Arabia’s mining sector, Andreassen explained that the kingdom is well positioned for success due to its significant reserves of critical minerals that are of both regional and global importance.

“Saudi Arabia sits on many of the levers that are likely to deliver success in mining. It has access to many minerals that are critical to the region and globally in the years ahead. Through a local major player in the mining sector in the kingdom. It has the potential to become a global champion if it continues its growth trajectory,” he said.

Andreassen continued: “The fact that minerals and mining have been given such a prominent position in Vision 2030 gives us confidence that the Saudi government will continue to support the sector and ensure it has the right impact to grow profitably and boost the economy.”

This support is expected to boost the economy by creating jobs and revenue from the sale of minerals and mineral-derived products such as metals, fertilizers, batteries and automobiles.

Another positive is that PwC has a positive outlook on the mining sector in Saudi Arabia, saying the sector is poised for significant growth, supported by government reforms and investments.

“Key opportunities include expansion into new minerals and integration of advanced exploration and processing technologies,” Nassar said.

He added: “By harnessing the potential of its abundant mineral resources and implementing strategic initiatives, the mining sector will become a key driver of economic diversification and sustainable development.”

Mining plays a crucial role in Riyadh’s efforts to reduce its dependence on oil, with an emphasis on tapping into significant reserves of phosphate, gold, copper and bauxite.