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In Wa’ad al-Shamal, 1,200 kilometers north of Riyadh, the Saudi capital, phosphate is mined and bathed in chemicals to turn it into acid. From there, it is shipped by rail 1,500 kilometers east to the port of Ras Al-Khair. This substance is then transformed into fertilizer or its precursor, ammonia, and sails west to Brazil, south to Africa, and east to India and Bangladesh, where it ends up in the homes of farmers who, according to Ma’aden, the state-owned mining corporation that manages the mining project, produces 10% of the world’s food. The company is huge. Its domestic sales and investments are equivalent to about 2% of the kingdom’s non-oil GDP. Soon another will start sending the equivalent of another 1%.
Phosphate is not the only mineral resource Saudi Arabia is contemplating to fuel its post-oil future. On Jan. 10, the government revised its estimate of the price of its buried mineral wealth from $1. 3 trillion to $2. 5 trillion. Compared to Saudi Arabia’s oil wealth, which is worth $20 trillion at current prices, this is modest. By any other measure, it’s gigantic.
Muhammad bin Salman, crown prince and de facto ruler of the kingdom, considers the country to be an indispensable resource for minerals, adding those necessary for the transition of power, as it is today for black gold. Their intention is to achieve this without adhering to the resource nationalism that has gripped other countries, from the United States to Chile to China. Intrigued, mining chiefs and ministers from around 80 countries gathered in Riyadh as we published these lines, for the Forum on the Minerals of the Country’s Future. As if to demonstrate its commitment to openness, the kingdom signed agreements with Russia and the U. S. Export-Import Bank. He expects $20 billion worth of deals to be made at the event.
Part of the strategy is outward-looking. Saudi Arabia has created Manara Minerals, a subsidized company through Ma’aden and Saudi Arabia’s sovereign wealth fund. Manara will invest up to $15 billion in stakes in foreign mines. Last year, it paid just about $3 billion for a 10 percent stake in the base metals business of Vale, a Brazilian mining giant. The Saudis are “putting their money into what they say,” says Eduardo Bartolomeo, Vale’s chief executive.
The biggest bet, as evidenced by the Wa’ad Al-Shamal phosphate complex, is national. Saudi Arabia presents itself as an investment destination (the crusade includes advertisements in places as unlikely as the London Underground). it has created a new Ministry of Industry and Mineral Resources, eliminated price lists for imported machinery and raw materials, reduced licensing fees and royalties, introduced state aid for wages, and subsidized rents. It has also replaced a hard-to-understand mining law with similar ones to investor-friendly codes in Australia, Botswana and Canada. Licenses that took years to download are now issued in two months.
The result was a sharp increase in the number of active licenses, up to around 2,300, a fifth compared to two years earlier. About 700 of them are destined for exploration. Some pass into the hands of strangers. Medium or specialized external companies, such as Barrick Gold and Eurasian Resources Group, have received exploration permits or partnered with Ma’aden. “I’d have 50 percent of anything rather than 100 percent of nothing,” says Robert Wilt, CEO of Ma’aden.
“To attract the big players, Saudi Arabia will want big discoveries,” said Mark Bristow, chief executive of Barrick Gold. To this end, it is investing more than $180 million in exploration incentives. The Saudi Fund for Industrial Development, a government agency, will finance up to three-quarters of the project’s costs. The kingdom is also investing $200 million in an effort to map its geology and create a resource database, on top of the $500 million spent on an earlier study. Aden is also doing more exploration, Wilt says.
The government is also training a cadre of geoscientists and engineers. Such professionals are in short supply not just in Saudi Arabia but everywhere. No amount of money can get you all the people you need today, says John Bradford of the Colorado School of Mines. To ensure Saudi Arabia can get them tomorrow, it has teamed up with American think-tanks in mining research and is working with Mr Bradford’s institution to create training programmes. In November Ma’aden endowed a new undergraduate degree in mining science and engineering at King Fahd University of Petroleum and Minerals.
The princely plan may also fail. Abroad, he would possibly oppose the kind of resource nationalism that he himself avoids. Partners in Africa, battered by decades of foreign resource transfers without boosting development, insist that this time the benefits are trickling down to their economies. Saudi Arabia won’t just mine the ore and take it away, says Henry Dele Alake, Nigeria’s Minister of Solid Minerals. This would require investments in Nigerian processing and factories.
At home, Prince Muhammad’s short timelines are, sceptical executives note, at odds with those typical of prospecting, mine development and mining education, all of which take years. Unlike phosphate deposits, metal ores from deeper underground are harder to extract quickly. A harsh summer shuts down work for safety reasons, halting projects for three or four months a year. Little has been done to realise Saudi Arabia’s potential in power-hungry processing and refining, where it could excel thanks to plentiful energy.
Finally, turning the Saudi vision into truth requires radical change among miners around the world. In an unpredictable world, many would rather return their profits to shareholders than devote them to risky new projects. To replace him, the prince will need all his powers of persuasion.
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© 2024 The Economist Limited newspaper. All rights reserved.
From The Economist, license published. Original content can be discovered on https://www. economist. com/business/2024/01/11/saudi-arabia-wants-to-be-the-saudi-arabia-of-minerals
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