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.