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Global interest in Saudi Arabia’s mineral auctions surprises to upside

Interest in Saudi Arabia’s incipient mineral deposit auctions program has surprised to the upside as investors seek resources in varied jurisdictions for energy transition applications, the kingdom’s minister of industry and mineral resources, Bandar bin Ibrahim Al-Khorayef, said.

Political considerations over Saudi Arabia have not impeded investor interest, the minister said in an interview after the London leg of a roadshow to highlight the kingdom’s mineral wealth to analysts and potential investors.

With little historic mining culture, the nation needs the global community on board in strategic partnerships.

“Without global players it would be very hard to see progress in our industry and mining sector, especially mining because it is a small club … fortunately we have been able to bring our case to the global community,” Al-Khorayef told S&P Global Commodity Insights.

“They see value and they appreciate we are talking the same language, sharing the same concerns. We are tackling the challenges that they also face in other locations and we are trying to create an investment environment that can strike the right balance between the interests of everyone. There are a lot of stakeholders in mining”.

Saudi Arabian mining ministry officials have been presenting details of properties to be auctioned at industry events since last year.
At the June 24 London roadshow it was announced that eight companies — including India’s Vedanta and Aditya Birla Group, China’s Norinco, the US’s Ivanhoe Electric, Australia’s Alara Resources and the UK’s Moxico Resources — have prequalified for a July auction of rights to the well-advanced Khnaiguiyah zinc and copper project, the first of a series of deposit rights to go under the hammer.

That may encourage further investor interest.

“At FMF (Future Minerals Forum in Riyadh in January) we did not expect half the participants or demonstrations of interest and at Indaba it was clear that everyone wanted to know what Saudi Arabia is offering: the booth was just full of people asking the right questions and fortunately they were able to get answers,” the minister said.

Foreign companies have applied for “hundreds” of licenses in various projects, with one company alone applying for as many as 80 licenses, he said.

Mineral development sites for auction hold copper, zinc, gold, silver and lead: properties with nickel, PGMs, tungsten, rare earths, phosphate and iron ore may be auctioned later on.

FMF had some 2,500 people present and another 4,000 connecting virtually. At Mining Indaba, a key international congress in South Africa in May, the Saudi government committed a further $600 million to geological surveys in the Arabian Shield, almost a third of the country, Al-Khorayef said.

“The aim is to make mining the third pillar of the Saudi economy, after oil and petrochemicals, and for it to boost its contribution to GDP to between $64 billion and $70 billion annually by 2030, up from $18 billion now.”

Those are nominal GDP figures which do not take price inflation into account, nor fluctuations in metals and minerals prices.

“It is a challenging goal. Every time we meet our leaders we remind them 2030 is not far away,” the minister said. Still, “gold projects may be turned around quickly, some other projects where work is already advanced could be up and running in 18 months.”

That could be the case for the Khnaiguiyah project, ministry officials noted.

The idea is to create a minerals “hub” with companies gaining exemption from royalties payments — typically of 2% — for investment in downstream projects.

CSR views

Saudi Arabia may hold a questionable human rights record in western eyes. Investors and miners consulted at the London roadshow nonetheless said quite freely that while Corporate Social Responsibility principles are key, mining jurisdictions with known human rights, community or ecological issues continue to attract investors due to the quality of their mineral wealth.

The Middle Eastern nation may present less of an ESG risk to investors than some of its African competitors, one UK miner said.

“Because mining is a long-term business, what is really important to miners and their shareholders is a nation’s predictability and legal transparency and Saudi has that, as well as infrastructure,” the miner said. “That is better than having your investment swallowed up in sudden tax changes.”

A UK energy company executive active in Saudi Arabia highlighted the advantages of its much cheaper energy costs compared to western nations. This has spurred on bauxite and primary aluminum production in recent years, in a joint venture between local producer Ma’aden and US company Alcoa.

Neom green steel plans

As well as developing mining, Saudi Arabia was making “great efforts” to set up an estimated $4 billion ‘green’ steel hub at Neom, a smart city under construction in Tabuk province in the country’s northwest with “ambitious” green targets, the minister said.

Neom was due to bring a major green hydrogen production facility due on stream 2025. Potential foreign investors are interested in the steel development, although Al-Khorayef did not reveal names.

Likewise, a Saudi investor in a mine in Africa is set to invest with a European partner in an estimated $2 billion battery metals plant in Saudi Arabia to meet projected local demand, the minister said.
Source: Platts

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