Saudi Arabia, a future mining power?

At the last Future Min­er­als For­um, held in Riy­adh in Janu­ary 2024, the King­dom of Saudi Ara­bia clearly stated its ambi­tions: “Saudi Ara­bia has the vis­ion, the min­er­al resources, a large mar­ket, region­al rela­tions and the right geo­graphy to become a key play­er in the min­er­als value chain¹.” Metals are thus at the heart of the post-oil strategy known as “Vis­ion 2030,” designed to pre­pare for the diver­si­fic­a­tion of the Saudi eco­nomy. The goal of a glob­al eco­lo­gic­al trans­ition will require energy and, above all, metals to cope with the deploy­ment of digit­al and low-car­bon tech­no­lo­gies (bat­ter­ies, wind power, sol­ar energy, hydro­gen, etc.). Fully aware of this, Riy­adh intends to imple­ment a multi-pronged strategy to become a key play­er in its mar­kets. On the one hand, the King­dom of Saudi Ara­bia is pro­pos­ing a sus­tained policy to encour­age the devel­op­ment of a nation­al min­ing industry. On the oth­er, it is seek­ing to stim­u­late for­eign invest­ment in its ter­rit­ory. Finally, it aims to become the region­al cen­ter for energy and met­al trade between the min­er­al- and met­al-rich coun­tries of Cent­ral Asia and Africa.

At a time when the cli­mate crisis is for­cing the decar­bon­isa­tion of energy sys­tems and a shift away from fossil fuels, Saudi Ara­bia needs to rethink its eco­nom­ic mod­el, which is largely based on the hydro­car­bon sec­tor. Oil alone accounts for 60% of the kingdom’s budget rev­en­ues and more than 75% of its exports². Aware of these chal­lenges, the Gulf’s largest oil-rich mon­archy is pre­par­ing to diver­si­fy its eco­nomy with the launch of its “Vis­ion 2030” devel­op­ment plan in 2016. The plan aims to attract for­eign invest­ment to the coun­try and sup­port a num­ber of busi­ness sec­tors, includ­ing edu­ca­tion, tour­ism and min­ing³.

After being the world’s lead­ing sup­pli­er of oil through­out the 20th cen­tury, Saudi Ara­bia is dream­ing of becom­ing a region­al – or even glob­al – lead­er in the met­al industry. The idea is to exploit the min­er­al poten­tial of its sub­soil and devel­op an effi­cient indus­tri­al base in the min­ing and metal­lurgy sec­tors. In fact, the kingdom’s min­er­al reserves have recently been re-eval­u­ated upwards (doub­ling since 2016), at around 2,500 bil­lion dol­lars by the Saudi Geo­lo­gic­al Sur­vey (SGS), even though more than half the ter­rit­ory remains unex­plored⁴. The Saudi sub­soil is said to be par­tic­u­larly rich in gold, cop­per, zinc, lead, and nick­el, as well as phos­phate, rare earths, baux­ite, lith­i­um and man­ganese. All fun­da­ment­al resources for the low-car­bon trans­ition. These resources could put the king­dom in an ideal pos­i­tion to become a metals pro­du­cer cap­able of sup­ply­ing its own indus­tri­al sec­tor, and then poten­tially export­ing a por­tion to world markets. 

The Saudi government’s nation­al min­ing pro­ject is over­seen by the Min­istry of Industry and Min­er­al Resources⁵ and the SGS, which is respons­ible for provid­ing geo­lo­gic­al inform­a­tion on the country’s soil and sub­soil. In 2023, Riy­adh launched sev­er­al ini­ti­at­ives to attract for­eign investors, includ­ing a $182 mil­lion pro­gramme of incent­ives for min­er­al explor­a­tion. The king­dom has also developed its reg­u­lat­ory frame­work to facil­it­ate out­side invest­ment and the grant­ing of min­ing licences, not­ably through the launch of 33 new explor­a­tion licences. The state-owned min­ing com­pany Ma’aden⁶, set up in 1997, aims to facil­it­ate the devel­op­ment of the kingdom’s min­er­al resources. It has also become a key play­er in Saudi strategy. With sales in excess of $10 bil­lion, annu­al growth of 25% over the last 3 years⁷ and a mar­ket cap­it­al­isa­tion of around $50 bil­lion, it is one of the most dynam­ic and attract­ive com­pan­ies in the sector.

In 2023, Ma’aden teamed up with the Saudi Sov­er­eign Wealth Fund⁸ (PIF) to cre­ate Man­ara Min­er­als in response to growth in the country’s min­ing sec­tor. As soon as it was cre­ated, this Saudi joint ven­ture acquired 10% of the Brazili­an min­ing group Vale Base Metals (VBM)⁹. This part­ner­ship is designed to sup­port growth in the energy trans­ition metals mar­ket, as VBM is a major pro­du­cer of cop­per and nickel.

At the same time, Saudi Ara­bia is keen to host green and energy trans­ition indus­tries with­in its bor­ders. In June 2023, for example, it signed a $5.6bn con­tract with the Chinese elec­tric vehicle man­u­fac­turer Human Hori­zon¹⁰. In this way, the king­dom aims to pos­i­tion itself in the vari­ous seg­ments of the value chain, from min­ing to the pro­duc­tion of high value-added, tech­no­logy-intens­ive products. The aim of the part­ner­ship is to pro­duce around 125,000 elec­tric vehicles by 2026, using bat­ter­ies man­u­fac­tured in Saudi Ara­bia and made from Saudi metals.

The devel­op­ment of Saudi Arabia’s min­er­al poten­tial appears to be one of the pil­lars of the country’s eco­nom­ic diver­si­fic­a­tion strategy. Does this mean that the king­dom is mov­ing from an oil eco­nomy to a com­mod­ity eco­nomy? The answer is a pri­ori no: Saudi Ara­bia intends to com­bine its min­er­al poten­tial with its eco­nom­ic ambi­tions by becom­ing a glob­al energy and met­al hub.

Through its domest­ic and for­eign invest­ment pro­jects, Riy­adh is seek­ing to occupy a place in the mar­ket for the raw mater­i­als needed for the energy trans­ition. And this pos­i­tion could be facil­it­ated by its cent­ral geo­graph­ic­al loc­a­tion between the main Afric­an met­al pro­du­cers and Asi­an coun­tries. The city would become a major com­mer­cial hub. Saudi Arabia’s strategy is multi-faceted, since in addi­tion to the pro­lif­er­a­tion of trade agree­ments with Egypt¹¹, Tur­key¹² and Maur­it­ania to devel­op iron ore mines¹³, it is aim­ing to cre­ate a trad­ing plat­form for min­er­al mater­i­als and a region­al metals exchange(Saudi Met­al and Min­ing Exchange) cap­able of rivalling those of London(London Met­al Exchange) or Shanghai(Shanghai Met­al Exchange). By organ­ising the Future Min­er­als For­um¹⁴ in a min­ing and metal­lurgy sec­tor where inter­na­tion­al gov­ernance is sorely lack­ing, it also hopes to lay the found­a­tions for region­al and even inter­na­tion­al cooper­a­tion on these issues. The aim of all these ini­ti­at­ives is to strengthen Saudi Arabia’s eco­nom­ic, fin­an­cial, insti­tu­tion­al and dip­lo­mat­ic foothold, and to pos­i­tion Riy­adh as a future anchor in the glob­al metals market.

Its pos­i­tion as a com­mer­cial hub would enable it to estab­lish itself as a key ele­ment of the new “Super Region,” a concept presen­ted by the Saudi cap­it­al in Janu­ary 2024 at the Future Min­er­als Forum.

This “min­er­al super-region” stretches from Africa through the Middle East to Cent­ral Asia. It cov­ers 79 coun­tries, 3.5 bil­lion inhab­it­ants, 48% of the pop­u­la­tion and 12% of the world’s GDP¹⁵. Des­pite abund­ant min­er­al resources, these coun­tries suf­fer from a lack of infra­struc­ture, struc­tured fin­an­cing and skilled labour. Saudi Arabia’s drive for region­al integ­ra­tion seeks to fill these gaps. Cre­at­ing a syn­ergy between the vari­ous coun­tries is inten­ded to trig­ger an eco­nom­ic take-off. It intends to become a major investor in the entire value chain in the region, not­ably in order to secure its own met­al sup­ply chain. This ini­ti­at­ive is remin­is­cent, albeit on a smal­ler scale, of the Chinese determ­in­a­tion seen since 2013 in the con­struc­tion of the New Silk Roads¹⁶.

It is not cer­tain that Saudi Arabia’s region­al part­ners will let it take over the lead­er­ship of the group so eas­ily, in terms of both min­ing and trans­ition tech­no­lo­gies. Iran¹⁷ and Alger­ia¹⁸ are devel­op­ing their own min­ing expan­sion pro­jects, while Egypt and Tur­key have posi­tioned them­selves to pro­duce elec­tric vehicles in dir­ect com­pet­i­tion with Saudi plans¹⁹. So even if Saudi Ara­bia man­ages to forge prom­ising region­al part­ner­ships, region­al com­pet­i­tion remains fierce as each coun­try hopes to carve out a place for itself in the glob­al sup­ply chain.

The eco­nom­ic repos­i­tion­ing of the King­dom of Saudi Ara­bia on the min­er­al com­mod­it­ies mar­ket has led to a renew­al of tra­di­tion­al alli­ances and a new strategy on the dip­lo­mat­ic stage: multi-align­ment. While the king­dom wishes to main­tain cer­tain his­tor­ic ties, it is also for­ging new part­ner­ships by join­ing the BRICS+, in order to con­sol­id­ate its region­al dom­in­ance and glob­al stand­ing, while refus­ing to be part of a single bloc.

Firstly, the move away from oil is weak­en­ing the his­tor­ic alli­ance between the petro-mon­archy and the United States. Since 1945, Riy­adh has been linked to Wash­ing­ton through the “Quincy Pact,” which guar­an­teed oil sup­plies in exchange for uncon­di­tion­al sup­port for the rul­ing fam­ily and a com­pre­hens­ive secur­ity agree­ment for the king­dom. To renew the para­met­ers of the alli­ance, the United States and Saudi Ara­bia began talks in autumn 2023 to secure met­al sup­plies for both coun­tries in Africa²⁰. Saudi Ara­bia would take con­trol of Afric­an mines through massive invest­ment, and would then reserve part of the pro­duc­tion for Amer­ic­an com­pan­ies. For the Saudis, this would be a way of renew­ing their alli­ance in a post-oil world, while the Amer­ic­ans would gain access to Africa’s min­er­al resources. If this part­ner­ship goes ahead, Saudi Ara­bia would become the United States’ link to Africa in terms of min­er­al sup­plies, and would enable the Amer­ic­ans to re-enter the race for crit­ic­al metals, which is cur­rently dom­in­ated by China. The Lobito cor­ridor, a rail­way line link­ing Tan­zania to Angola, could also com­ple­ment this strategy²¹. On the Saudi side, the chal­lenge is also to rekindle rela­tions that had become strained with the Biden admin­is­tra­tion, and to renew a part­ner­ship that is essen­tial to the con­tin­ued exist­ence of the roy­al family.

In the East, the mon­archy is also strength­en­ing its ties with China. In addi­tion to the part­ner­ship for the man­u­fac­ture of elec­tric vehicles, Saudi Ara­bia has signed a con­tract with the Chinese Geo­lo­gic­al Sur­vey, com­mis­sion­ing it to carry out geo­lo­gic­al sur­veys over more than 50% of the coun­try²². Saudi Arabia’s ambi­tions for the “Super Region” do not, how­ever, appear to be com­pet­ing with the New Silk Roads pro­ject being pro­moted by the Chinese gov­ern­ment. The sec­ond­ary aim of this pro­ject was to meet the need to diver­si­fy and secure China’s energy sup­plies. Instead, Chinese and Saudi interests seem to be aligned, in that Saudi Ara­bia could bene­fit from the mari­time and land infra­struc­tures developed by China in its own min­er­al mater­i­als mar­ket pro­ject, without chal­len­ging the Asi­an giant’s lead­er­ship in this mar­ket. Although the two pro­jects – the New Silk Roads and the Super Region – appear at first sight to be in com­pet­i­tion, they are in fact com­ple­ment­ary, as demon­strated by the pro­ject to build a com­mer­cial port at Jazan in Saudi Ara­bia, won by a Chinese firm²³. The mon­archy also main­tains that it does not want to enter into com­pet­i­tion with China, but rather to work closely with it, as shown by its decision in 2023 to join the Shang­hai Cooper­a­tion Organ­isa­tion, an eco­nom­ic bloc led by China. 

The Sino-Saudi part­ner­ship should above all enable Saudi Ara­bia to assert itself in its rivalry with its neigh­bour, the United Arab Emir­ates (UAE), with which it is in com­pet­i­tion on sev­er­al fronts. In par­tic­u­lar, the UAE hopes to sign a free trade agree­ment with Aus­tralia to invest in the latter’s min­er­als sec­tor²⁴. Gen­er­ally speak­ing, the two coun­tries are racing to become the base for investors and busi­nesses in the Middle East, by offer­ing a stable eco­nom­ic and polit­ic­al frame­work. Secondly, as their eco­nom­ies diver­si­fy, the two Gulf coun­tries are com­pet­ing on the tour­ism front, but above all in the field of trans­ition­al innov­a­tions, where the Emir­ates stand out for their tech­no­lo­gic­al lead. So, the Saudi monarchy’s min­ing pro­ject would enhance its attract­ive­ness to its neigh­bour, strength­en­ing its pos­i­tion as lead­er in the region.