A miner works in the Al Amar gold mine, southwest of Riyadh. The mining and quarrying sector made up 30.1 per cent of the kingdom’s nominal gross domestic product in 2018. Reuters
A miner works in the Al Amar gold mine, southwest of Riyadh. The mining and quarrying sector made up 30.1 per cent of the kingdom’s nominal gross domestic product in 2018. Reuters
A miner works in the Al Amar gold mine, southwest of Riyadh. The mining and quarrying sector made up 30.1 per cent of the kingdom’s nominal gross domestic product in 2018. Reuters
A miner works in the Al Amar gold mine, southwest of Riyadh. The mining and quarrying sector made up 30.1 per cent of the kingdom’s nominal gross domestic product in 2018. Reuters

Saudi government works to make mining sector more attractive to investors


Michael Fahy
  • English
  • Arabic

Saudi Arabia needs about $13 billion (Dh47.7bn) in private sector investment to fully exploit the potential of the kingdom’s $1.3 trillion worth of mineral endowments, a new report has said.

The study into the country's mining sector by the US-Saudi Business Council describes the outlook for the sector as “very favourable”, citing government initiatives to encourage investment. These include a planned update of the kingdom’s mining investment code to make it more investor-friendly and the development of a National Geological Database marking out exploration opportunities. The government has also earmarked 14.3bn riyals (Dh14bn) “with the aim of making it easier to conduct business and improving data quality to reduce the risks associated with investing in new mining properties”.

"The main aspect the government is attempting to drive is private sector participation. This has been a significant challenge as [Saudi Arabian Mining Company] Ma'aden has been the sole entity responsible for the development of the mining sector," the report's author, economist Albara'a Alwazir, told The National.

Ma'aden is majority owned by the Public Investment Fund, the kingdom's sovereign fund. PIF's governor, Yasir Al Rumayyen, recently became chairman of Ma'aden. The company earned 1.9bn riyals in profit in the first nine months of the year on revenue of 10.3bn riyals.

The mining and quarrying sector made up 30.1 per cent of the kingdom’s nominal gross domestic product last year, but that figure included oil and gas extraction. Excluding this, the sector contributed 1.4 per cent of GDP. Although small, this figure has been growing at a compound rate of almost 5 per cent a year as Ma’aden has undertaken huge projects in the north of the country mining bauxite for an aluminum smelter and phosphates for fertilser use.

Under the Saudi Arabia's  Vision 2030 economic diversification plan, the Ministry of Industry and Mineral Resources is looking to increase contribution of mining to GDP to 240bn riyals in 2030, up from a stated 17bn riyals.

The Saudi Geological Survey identified 5,574 metallic and non-metallic mineral sites by the end of 2018. Of these, 2,919 contain non-metallic materials such as phosphates, silica, marble, limestone and quartz, and the remaining 2,533 have metallic deposits — gold, zinc, copper and tin-tungsten.

Gold production has been one area of relative success for the kingdom, with extraction rates growing at a compound rate of 12.5 per cent between 2010 to 2018, reaching 415,000 ounces by the end of last year. The kingdom has a target of producing a million ounces by 2025, with three new mining sites already identified in the Makkah region. A 2.3bn riyal contract was awarded to Finnish equipment company Outotec and Indian contractor Larsen & Toubro in April to develop two of these, Mansourah and Massarah, which are expected to produce an average of 250,000 ounces of gold per year over their lifespan.

Phosphates are perhaps more important to the kingdom, however, with two mega-projects already under way — Ma’aden Phosphate Company is a 21 billion riyal joint venture between Ma’aden (which holds a 70 per cent stake) and Saudi Basic Industries (30 per cent), while the Ma’aden Wa’ad Al Shamal Phosphate Company has been the subject of 31 billion riyals of investment.

Production at the first phase of the latter began at the end of last year, and the mine is expected to form the centrepiece of an industrial city that will attract 86bn riyals worth of investment.

Yet, while Ma'aden has played a prominent role in bringing major projects to the market, more could be done to help SMEs in the kingdom get involved in the sector, Mr Alwazir said.

"The limitations placed on SMEs who wish to enter the market are numerous but most notably consist of very low bank appetites to extend credit, lack of a domestic capital market whereby SMEs can raise capital, and public equity exchange regulations that dampen the ability to list due to minimum capitalisation rules," he said.

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This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.

Plan to boost public schools

A major shake-up of government-run schools was rolled out across the country in 2017. Known as the Emirati School Model, it placed more emphasis on maths and science while also adding practical skills to the curriculum.

It was accompanied by the promise of a Dh5 billion investment, over six years, to pay for state-of-the-art infrastructure improvements.

Aspects of the school model will be extended to international private schools, the education minister has previously suggested.

Recent developments have also included the introduction of moral education - which public and private schools both must teach - along with reform of the exams system and tougher teacher licensing requirements.

Tips for SMEs to cope
  • Adapt your business model. Make changes that are future-proof to the new normal
  • Make sure you have an online presence
  • Open communication with suppliers, especially if they are international. Look for local suppliers to avoid delivery delays
  • Open communication with customers to see how they are coping and be flexible about extending terms, etc
    Courtesy: Craig Moore, founder and CEO of Beehive, which provides term finance and working capital finance to SMEs. Only SMEs that have been trading for two years are eligible for funding from Beehive.
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