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.