Analysts think Saudi Arabia’s investment in mineral exploration and mining at home and abroad might make it an integral player in the global minerals supply chain.
An S&P Commodities Insights analysis in January 2024 found that the Kingdom was accelerating its attempts to become a regional mineral mining powerhouse as the world’s leading nations compete for crucial mineral resources with new investments.
In the same month, the monarchy announced a USD 182 million mineral exploration incentive scheme and 33 new mining licenses.
Saudi Arabia’s Public Investment Fund (PIF) and state mining corporation Ma’aden founded Manara Minerals in 2023 to purchase worldwide mining assets.
In July of that year, Manara made its first high-profile acquisition, a 10% investment in Vale Base Metals.
As the world’s leading economies compete for natural resources, Saudi Arabia’s ‘Vision 2030’ reform strategy has boosted the mining sector’s importance in its economy, observers say.
Saudi Arabia, the Arab world’s largest economy and OPEC’s top oil exporter, wants to capitalise on the booming demand for battery metals.
By 2030, the Kingdom wants to quadruple mining’s economic contribution.
The minerals strategy supports ‘Vision 2030’ goals like green transition, economic digitisation, technological hub status, and military procurement localisation.
“The push for investment [in mining] abroad is complemented by additional focus on developing domestic mining,” says CRU Group principal consultant Ionut Lazar.
Saudi Arabia’s ‘Vision 2030’ goal to attract foreign direct investment relies on mining. The monarchy wants USD 170 billion in mining by 2030.
“Foreign investment and domestic development are mutually necessary to develop Saudi Arabia into a large mineral processing hub,” adds Mr. Lazar.
The Ministry of Industry and Mineral Resources reports that the Kingdom possesses proven deposits of essential industrial metals like aluminium, iron, copper, zinc, manganese, and chromium and rare earth elements like tantalum, which it has 25% of the world’s reserves.
Ma’aden acknowledged the Kingdom’s “significant gold resource potential” in the last week of December 2023.
The company’s 2022 exploration campaign yielded its first discovery at a 100km stretch south of Ma’aden’s Mansourah-Massarah gold mine.
The business reported that samples from two random drilling locations 400 metres below the surface and next to Mansourah-Massarah showed high-grade gold deposits of 10.4 and 20.6 grams per tonne (g/t).
Densities range from 1g/t to 4g/t for lower-grade mines to 8-10g/t for higher-grade mines.
Ma’aden began commercial production for the Mansourah & Massarah gold facility under the engineering, procurement, and construction contract with Outotec and Larsen & Toubro in January 2024.
Ma’aden told the Saudi Tadawul stock exchange recently that commercial production will have a financial impact in the first quarter of 2024.
Analysts think the recent gold finds are the start of a big shift toward creating a new resource pool, although it is unclear if they would affect Saudi Arabia’s export revenues and GDP.
“Gold mining can create significant economic opportunities that can attract investments,” World Gold Council Middle East and public policy head Andrew Naylor tells The National.
WGC member nations received USD 60 billion in investments in 2022.
“Our data shows about $40 billion went to local suppliers, simply showing how gold mining can be a major contributor to the local economy,” Mr. Naylor said.
The WGC anticipates large-scale gold mining to build jobs, infrastructure, and new regions in Saudi Arabia.
“Gold mines are usually in remote areas and development creates new jobs, infrastructure, and urban centres,” adds Mr. Naylor.
Saudi Arabia’s gold resources are unknown, but the WGC does not expect them to affect global demand-supply dynamics or gold prices.
“Mining remains expensive. From discovery to production, it might take years, and a new high-yielding find has only increased supply by 1.5%,” he says.
The WGC attributes gold’s performance to investment flows, fabrication, and central bank demand.
The precious metal outperformed forecasts in 2023 despite high-interest rates. It peaked at USD 2,144 an ounce in early December.
Another strong year predicted
“Gold has benefitted from economic and geopolitical risks from 2020,” says BMI commodities analyst Sabrin Chowdhury.
“In the context of continuing wars and dovish US Federal Reserve interest rate stand, we expect gold prices to remain strong this year,” she says.
MUFG commodities, ESG, and emerging markets research head Ehsan Khoman agrees.
“We expect bullion to hit a new record in 2024 with our forecast at USD 2,350/oz by year-end, owing to Fed cuts, supportive central bank demand, and its role as the geopolitical hedge of last resort,” he writes.
Saudi Arabia is diversifying away from crude exports by expanding tourism, hospitality, and banking.
By the end of the decade, it wants to treble mining’s economic output.
A 2022 Ministry of Industry and Mineral Resources assessment found over 5,300 mining locations in the Kingdom with gold, silver, copper, zinc, phosphate, bauxite, and limestone worth USD 1.3 trillion.
Official data shows Saudi Arabia controls 37.9% of the USD 16 billion Middle East and North Africa (MENA) metals and mining sector. Its mining industry rose 27% yearly to USD 194 million, reaching its highest income in 2022.
The Ministry of Industry and Mineral Resources expects local mining investments to cut Saudi mineral imports from USD 19 billion to USD 11.5 billion by 2035.
The Kingdom’s economy grew 8.7% in 2022, the highest among the world’s 20 largest economies, while the IMF predicted 0.8% growth in 2023.
Saudi Arabia’s GDP is expected to expand by 4.1% in 2024, according to the World Bank.
Saudi Arabia’s mining sector is glittering with new gold discoveries, but economists say it has a much bigger mining narrative that could propel it into the top mineral exporters.