Tuesday, April 22, 2014

MENA Mining (II): Saudi Arabia


About two years ago I placed a number of posts in my Blog (under different name at that time) providing general overview of MENA mining. At this time I am returning to these posts with some new updates. The reason – I am scheduled to make a short presentation at the Mena Mining 2011 Congress that will take part in Dubai in October this year. This would be a part of Mining investment Opportunities Session and the title is “Investment attraction of MENA mining”. For the next couple of months I plan to publish some posts that would reflect latest developments in selected countries – that would actually serve as a basis for understanding my conference presentation. This is not an attempt to make a detailed analysis, rather an effort to pinpoint to certain considerations, providing links to useful documents.
Saudi Arabia (I)

Two things come to mind when you think about Saudi Arabia – Mahd Al Dhahab  (the “Cradle of Gold”) with King Solomon’s mines; and enormous wealth that the country has due to its rich oil reserves. However, there much more behind this in the Kingdom itself, and in its history. I will not go into details about politics and economy – there is so much information on the Web about it – among this abundance I recommend to look at very good overview on the country that is presented in Washington Post Post International Spotlight. Saudi Arabia , with this page, specifically dedicated to mining. General discussion is also provided by  2010 Investment Climate Statement– Saudi Arabia – U.S. Department of State, Bureau of Economic, Energy and Business Affairs - March 2010.

Of course, hydrocarbons make a significant input to the Kingdom’s economy, but its vast territory also hosts substantial resources of other minerals: bauxite, copper, gold, iron, lead, silver, tin and a number of non-metallic minerals. Excellent overview - Mineral Resource Potential and Its Development in Saudi Arabia by MAHMOUD ALI DARWISH and NAZIR AHMAD BUTT – provides detailed description of the subject with geologic data and maps. This is also summarized by this visual graph:
  Source:  Mining in the Arab World - Ma’aden and the Kingdom of Saudi Arabia by  Dr. Hany Dabbagh Vice President SBU Precious Metals and Exploration of Ma’aden

Another interesting mining resource is described in this (1981) post of the Saudi Aramco World – developing extraction of minerals from Red Sea - zinc, copper, silver, lead, cadmium, cobalt:
“According to geologists, the entire Arabian Peninsula is slowly rotating counterclockwise, and - over geological lengths of time - gradually closing the Strait of Hormuz, narrowing the Arabian Gulf and widening the Red Sea. As a result of this tectonic movement, deep rifts have opened at the bottom of the Red Sea through which mineral components from within the earth are being spewed into the seawater by volcanic processes.”
This mining initiative, in cooperation with Sudan, is slowly going on for some years; in 2010 some progress was announced.

Describing all initiatives and situation in mining is not my task now, but this can be found in the links that I proved in this post. However, I would like to pinpoint some important issues – this is required to clearly understand the general topic of my narration – investment attractiveness of Saudi mining.

First Development. As of today the three pillars emerged as the backbone of the Kingdom’s economy – the ones that are shown on the left graph, minerals’ mining being the youngest, but one of the most rapidly developing. From the historic point, it is worthwhile to note, that the Government made one of the crucial and, to my opinion, the most wise decision: do not wait - and put minerals’ mining as the important economic policy accent – as opposed to some critics that were suggesting to sustain minerals as a reserve, till the times when the oil sources would be depleted. Indeed, this type of mining effort takes quite a while, and cannot appear instantly - when it is needed - by a magic wand move.

The second crucial effort, in my opinion was implementation of a 2004 Mining Investment Code. This was a result of meticulous work of appropriate Government bodies; but what makes the difference, as compared with other countries, - the articles were worked out in close dialogue with relevant commercial companies. The site of deputy Ministry for Natural Resources provides access to much useful information, including Mining Investment Code
 Otherwise, Mining Investment Code can be downloaded here.

I will further elaborate on some advantageous feature on the Code, here I would like to mention that this substantially expedited procedural bureaucracy required for obtaining relevant government permits and licenses: from 30 to 60 days, depending on the type of document. As an illustration, here is a graph:

The third crucial effort is provision of investors’ incentives, that I will list later on.

And the last, but not least – infrastructure development. Besides all mentioned above, I consider this the most striking element, that differentiates Saudi Arabia from any other country. Indeed, a conventional saying “infrastructure is the bottleneck of mining” is 100% true; and many fabulous mining projects are on hold due to bad or inadequate infrastructure. Of course, most countries of the world cannot afford big spending like the Kingdom does, but this is definitely one of the key advantages of the country in mining. As an example here is an extensive railway network developed:

This vast railway network is a key to success in bauxite mining, which is enhanced by Ras Al Zour with associated roads.

As opposed to many countries that are relying on the imported mining experts and labor, the Kingdom’s Government initiated another unique venture:establishment of Saudi Mining Polytechnic (SMP) in the city of Arrar. This is developed under the auspices of the Technical and Vocational Training Corporation; sponsored by Ma’aden and international companies. It is scheduled to open in the near future and will provide students’ sponsorship.

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