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In 1931 King Abdulazziz al-Saud, the founder of the modern Kingdom of Saudi Arabia, appointed a geologist to investigate the possible existence of oil and minerals in national territory. The investigation was successful: oil was found in the Eastern Province and gold in the Western portion of the country.
Saudi Arabia possesses more mineral resources than any other country in the Gulf region. The Kingdom of Saudi Arabia possesses large deposits of various minerals including bauxite, copper, gold, iron, lead, silver and tin as well as non-metallic minerals.
Over the years the Kingdom's mineral wealth was exploited through public-private partnerships. In 1935 the Government granted a mining concession and signed an agreement with a British-American consortium to operate the gold mine of Mahd ad Dhahab.
The mining sector in Saudi Arabia is regulated by the Deputy Ministry for Mineral Resources (DMMR), an independent agency within the Ministry of Petroleum and Natural Resources. Its initial objective was to administer a systematic geologic mapping and mineral exploration program. It is charged by the Government with the collection, interpretation, and dissemination of information on all mineral resources other than gas and petroleum. DMMR activities are primarily concerned with the implementation of the Mining Code and include promotion and licensing of mining development, mining investment, supervision, fee collection, safety and protection of the environment specifically in the mining sector.
Initially there were two areas of study since the geology of the Kingdom can be divided into two main zones:
In 1997 the Kingdom established the Saudi Arabian Mining Company (Ma'aden) in order to regulate mineral exploration and mining. Mining projects owned by the Government or in which the Government was participating were consolidated. Ma'aden provides infrastructure mining projects in remote areas. Ma'aden owns the Mahd adh-Dhahab and as-Sukhaibirat mines and holds exploration licences for the gold deposits in Wadi Bidah, Al-Hajar, Ad-Duwaihi,Samran, Sheban, Zalm and Hamdah,for phosphate ore in Wadi Al Sarhan and Turaif, for magnesium in Zargat, Jabal Abt and Jabal Al Rukham, for zinc in Al Khnaiguiyah, as well as licenses for exploration of industrial metals in Jabal Sodah.
In 2008 the government privatized Ma'aden and it is now a listed company on the Saudi stock exchange. The company is active in gold, industrial minerals, phosphate, aluminium, infrastructure and has a joint venture with Sahara Petrochemicals Company to produce ethylene dichloride, caustic soda and other chemicals.
Saudi Arabia is a gold exporter and mines 150,000 ounces per year. Due to new mines and expansion, the Kingdom hopes to reach a target of 400,000 ounces per year by 2015.
Ma'aden is dedicated to ensure that all mining activity in the Kingdom continues to be conducted using innovative technologies and with the utmost respect for environmental performance and preservation. The company is evaluating the potential of several industrial minerals and base metals deposits with the intent to expand its mineral portfolio. Some of the industrial minerals under investigation include refractory clays, low-grade bauxite, kyanite, graphite, pure limestone for Ground Calcium Carbonate (GCC) and Precipitated Calcium Carbonate (PPC) products, potash in near surface brine aquifers, REE and iron ore. The relevant base metals under investigation include sediment hosted copper, VMS (volcanogenic massive sulphide) lead-zinc and mafic to ultramafic hosted nickel-copper deposits.
Meanwhile, the Ministry continues to stimulate and encourage investment in mineral resources by both the public and private sectors. The Ministry has complied a comprehensive database on the geology and mineral resources of the Kingdom, which has been made available to the public and includes maps, databases, archives and reports.
Ma'aden has actively sought strategic partnerships with the private sector in order to commercially exploit
what has already been explored.
The development of the mining sector occupies a prominent position in Saudi Arabia's program of diversifying its economy away from oil. The Government's strategy includes establishing industries for extracting and processing the minerals, developing the transportation infrastructure to make the minerals accessible for processing and streamlining export procedures.
These goals require a significant amount of capital investment. To meet that need, the Saudi government has earmarked roughly $11.9 billion dollars for mining and mineral development through 2020. Non-oil mineral activity in Saudi Arabia is expected to grow at a rate of 10% per annum.
The Mining Code was revised to further encourage both national private sector and foreign investment in the mining sector. Under the new Code, the Ministry of Petroleum and Mineral Resources can issue seven types of licences. Investors can choose from three non exploitation licences and four exploitation licences.
Non-exploitation licences include reconnaissance and material collection licences. According to the latest available Saudi Central Bank report, there were 1,269 mining licenses, including 65 for prospecting and 32 for exploration. Eleven mining concessions were granted for various metal ores such as gold, copper and zinc and thirty mining concessions for exploiting ores for the country's cement industry.
Mining licences may be issued for up to 50 square kilometers for a thirty-year renewable term. No royalties are payable and surface rentals are charged at an annual rent of $2666 per square kilometer. No surface rental is charged for exploration licences. Mining equipment imported for the project is exempt from import duties. There are three main routes into the mining sector in Saudi Arabia:
Setting up a mining company requires an additional licence from the Saudi Arabian General Investment Authority. There is a SAR 1 million (USD $266,667) capital requirement. There are three types of licences which can be obtained under the Mining Law:
The Ministry maintains a register of licences which can be inspected by prospective investors. There is also a register of pending applications. Both need to be reviewed prior to making a new application.
Under the law, the Ministry has the right to revoke a licence which is unused. Nevertheless, this right has been rarely enforced, despite the fact that vast areas of the Kingdom are already nominally under a licence.
In many cases, the licence holder lacks both the capital and the technical expertise to exploit the licenced claim. In these circumstances, a joint venture with the licence holder may be an appropriate avenue into the Kingdom.
In order to exploit bauxite ore in the north of the country, the Kingdom authorized the construction of a new railway. The new railway, known as the North-South Railway, will eventually run 2750 kilometers and will connect Haditha on the Iraqi border to the new port of Ras Al-Zoor on the Arabian Gulf. The 818 km long first phase, known as Phase A starts at the Al Jalamid and Al Zubairah mines. It will pass through Al Jawf, Hail, and Al Zubairah, where it will connect to processing facilities at Ras Al Zour. Along the route there will be nine bridges, 884 culverts and 22 camel crossings!
While the US$ 2.8 billion investment may seem huge, the economic rewards are enormous. Phosphate from Al Jalamid will be used to make 3 million tonnes per year of diammonia phosphate fertilizer. Bauxite from Al Zubairah will be refined into alumina and then smelted into aluminium at an adjacent smelter - making it a "mine to metal" operation. Both the diammonia phosphate and aluminium will then be exported from a new port being built at Ras Al Zour. When finished over 1 billion tonne-km of cargo will be transported each year, reducing the time from mine to port by days. The Al Jalamid mines contain reserves of 3.1 billion tonnes of phosphates, and the Az Zabirah mines contain reserves of 252 million tonnes of bauxite.
Three locomotives and 150 railway cars will transport the ore from the mines to the refinery. Each train will be 3 km long. Ma'aden will be a primary, but not the sole user of the railway. The operator, the Saudi Arabian Railways Company, is a commercial company and the route will be open for other customers as well. While the mining sector in the Kingdom is full of opportunity, there are some reasons to be cautious. Geologic information is either not in the public domain or freely accessible, the licencing procedures remain cumbersome and bureaucratic, too many licenses have been granted to speculators without the necessary expertise, capital or equipment to exploit their claims and the “use it or lose it” enforcement rules seem largely cosmetic.
For this reason, potential market entrants are well advised to secure the advice of counsel with local knowledge for assistance in obtaining licences and permits, as well as conducting due diligence.
Oman has vast mineral resources which could provide significant opportunities for foreign companies. Oman's mineral resources, though modest in comparison with Saudi Arabia, include chromite, copper, dolomite, zinc, limestone, marble, gypsum, silicon, gold, cobalt and iron. The Sultanate's vast non-metallic minerals wealth is recognized worldwide. Since 1996, production of rocks and minerals has increased eight fold. More than 150 quarrying and mining operations are going on for fill material, 71 for chromite, 183 for crushed rock, 57 for marble, three for sandstone and four each for gypsum, laterite and clay followed by one for salt and dune sand. There are several major projects underway in Oman. In the metallic minerals sector, a concession holder is planning to mine copper at Shinas and Liwa. Manganese exploration is being conducted by four companies. In the non-metallic sector, two companies export steel grade limestone. Oman holds about 950 million tons of gypsum reserves. 60% of the gypsum mined is exported for use in the construction industry.
Several industries have grown up around them as part of the national development process, which, in turn, have boosted the minerals sector's contribution to the nation's GDP as well as providing jobs for Omanis. Copper has been mined in Oman for thousands of years. Gold in particular has great potential in Oman, which is the only Gulf country with substantial gold reserves other than Saudi Arabia. During the 90's, French and Japanese companies prospected for gold at the northern and eastern parts of the Sultanate and found about 12 million tons of gold and copper.
There is also some evidence of the presence of diamonds in Housh al Qahf , east of Oman. Coal was also found in the early 80s in Sur. Studies conducted in collaboration with UN established coal reserves of about 122 million tons. The Sultanate annually produces 0.5 – 0.6 million tons of coal.
Oman's Mining Law sets out a comprehensive legal framework which includes provisions relating to the issuance of mining licenses, dispute resolution in the mining sector and environmental protection. In its bid to diversify sources of national economy, the Sultanate of Oman has opened the door to private investment in the mining sector. In compliance with WTO rules, the Sultanate's legislation ensures fair competition. The Sultanate has also conducted a number of surveys and continues to build a geological infrastructure and a database which can be used by investors. Work is underway to produce an accurate geological map of mineral wealth. The mining law allows the private sector to invest in mineral industries and explore for minerals. The Ministry also conducts pre-feasibility studies.
As in Saudi Arabia, joint ventures are a useful vehicle to enter the mining sector. The Ministry of Commerce and Industry (Oman) may issue a mining concession or license to an Omani or foreign company for a particular site. The parties typically will sign a mining exploitation agreement under which the foreign company will assist with or conduct exploitation operations under the local partner's license. The Mining Law requires any mine exploitation agreement to include provisions concerning:
As in Saudi Arabia, Oman presents a significant opportunity in the sector that should not be ignored.