{UAH} GOING AFTER ALLAN BARIGYE THE FORUM BULY WITH HARD FACTS ->We will not attack his family but self with facts Part 843

Inside Saudi Arabia’s plan to dominate mining

REUTERS/Faisal Al Nasser

Saudi Arabia sees vast riches beyond oil within its reach. The kingdom’s broad-ranging ambition, a top mining official told Semafor, is to extract the more than $2.5 trillion in metals in its soil, invest in minerals extraction around the world, and capture as much of the minerals value chain as possible.

“Saudi Arabia is being transformed. Through this transformation we want to be an economic powerhouse,” Khalid al-Mudaifer, the vice minister for mining, said. “To be an industrial [power], we need minerals. To build projects, we need minerals. Therefore, mining of Saudi Arabia [is] the first step, bringing minerals from outside is the second step, third step is to build Saudi Arabia as a hub.”

As part of its “Vision 2030” effort to refashion and diversify its economy, the kingdom is adding mining as a “pillar” of its industrial foundation — joining the mainstays of oil, gas, and petrochemicals — and creating a new economic backstop against the eventual decline of fossil fuels. It aims to use its targeted role as a commercial, refining, and research hub to attract companies in other minerals-dependent sectors, from electric-vehicle makers to battery manufacturers, while bolstering its domestic infrastructure along the way. It is, however, unlikely to join a largely Western club of buyers and sellers that Washington envisions as heading off the formation of an OPEC-like grouping for minerals.

“Saudi Arabia needs more minerals, and different types of minerals,” Mudaifer said. “We developed our mining strategy to make mining an economic driver … And we developed our mining strategy to also provide for developments for remote areas.”

KNOW MORE

Mudaifer is a minerals specialist — he has been vice minister for mining since 2018, and for the seven years prior he ran Saudi Arabia’s state mining company Ma’aden, armed with degrees from the country’s King Fahd University of Petroleum and Minerals.

In a wide-ranging, nearly hour-long interview, he outlined Saudi Arabia’s aims, its plans, and its challenges.

Objectives

When it came to Saudi Arabia’s ambitions in the sector, Mudaifer did not beat around the bush: “Our strategy is for minerals or mining to maximize their value to the kingdom.” He said Riyadh was focused on capturing “the high end” of the EV manufacturing process, including battery making as well as the expensive and complex metals required to build modern cars. “It’s the entire value chain, whenever possible.”

Scale

Mudaifer also provided more details on Saudi Arabia’s January announcement that the country may hold up to $2.5 trillion in untapped mineral resources, largely phosphate and rare earths. This figure, he said, covers “economically exploitable resources with current technology and current infrastructure”— in effect saying that this figure may be revised upwards as extraction technology, shipping infrastructure, and market prices improve. (It is already an upward revision from a prior forecast of $1.3 trillion.)

Beyond such improvements, Mudaifer argued the kingdom had for decades been under-explored when it came to minerals. “When oil was good enough, we stopped most [mining exploration] activity,” he said. “We are exploring so we will know more.” A regional geoscience survey is about 40% complete. Taking into account all those factors, he continued, Saudi Arabia likely had trillions of dollars more of minerals reserves in its territory.

International targets

Despite Saudi Arabia’s huge aspirations and potentially huge scale, Mudaifer acknowledged that “whatever we mine in Saudi Arabia will not be enough for Saudi Arabia,” because while the kingdom holds large concentrations of certain resources, other ones critical for manufacturing such as nickel, cobalt, and lithium are found elsewhere. That prompted the kingdom to establish its Manara Minerals fund, a state-backed venture that aims to increase Riyadh’s access to minerals worldwide and potentially help funnel them to processing facilities in Saudi Arabia. One of its earliest investments so far has been to take a 10% stake in a copper and nickel-focused spinoff of the Brazilian mining giant Vale.

Those minerals could then be refined into more lucrative products within Saudi Arabia, developing the kingdom into a hub: “We have the leadership, the vision, the geographic location, the infrastructure, and the energy.”

Mudaifer also largely shrugged off suggestions from Western diplomats I spoke to that Saudi Arabia’s global mining ambitions would inevitably put it into competition with China, which has similar goals. (Such a contest would likely be viewed favorably by Washington, which regards Riyadh as a key ally, and Beijing as a global rival.) Though China had been the dominant investor in mining and minerals abroad in prior years, Mudaifer dismissed the premise that the kingdom would have to compete with China, saying: “If [the energy transition] is to be successful, the whole world needs to invest.”

An OPEC for minerals?

The vice minister sidestepped questions over whether Saudi Arabia would consider joining the Minerals Security Partnership, a bloc grouping both metals buyers and sellers promoted by Washington and London in an effort to head off the more adversarial oil market in which Riyadh is the de facto leader of the OPEC club of fossil-fuel exporters.

Minerals were “a totally different commodity” to oil and gas, he acknowledged — because of their extraction and refining processes, the former being harder to consolidate in one country or region than the latter — making broader partnerships more beneficial than with fossil fuels. Saudi Arabia was “in alignment with the objective of the MSP,” Mudaifer said, but he put off any firm decision on joining the organization, so far made up of 14 countries and the European Union, with major minerals extractors Australia and Canada among the members.

 

PRASHANT’S VIEW

Perhaps no country on Earth, bar China, is as ambitious when it comes to the minerals sector. Riyadh wants to be a powerhouse — a word Mudaifer used multiple times in our conversation — and its plan to elevate the role of mining and minerals is a key part of its strategy to ensure it is not left out of the energy transition, even as it continues to pump huge quantities of oil.

There are caveats, of course. For one, its targets are enormous, and it’s not always clear how attainable those targets are. Saudi Arabia’s de facto ruler Crown Prince Mohammed bin Salman has said in the past — notably in a 2018 interview with Bloomberg — that, in general, he wanted to “aim high,” adding: “If we achieve 100 percent, great. If we achieve more, even greater. If we achieve 50 percent, great! Better than achieving nothing.”

Riyadh’s effort is already well underway, and to listen to Mudaifer and other Saudi officials speak is to hear the well-worn language of Western business consultants: The kingdom has approved its mining strategy, and now has “KPIs,” “quarterly reviews,” and “traffic lights.” Opposite Mudaifer’s office is a sign for a room identified as the “Vision Realization Office.”

Yet the ambition nevertheless speaks to the scale of the task, and the ensuing opportunity: The energy transition away from fossil fuels to a cleaner economy will be highly reliant on digging up vast quantities of minerals to build EV batteries, wind turbines, solar panels, and the plethora of other technologies necessary to eliminate carbon emissions. In some respects, oil and gas powers — both companies and countries — are well suited to doing so, having already built up some understanding and comfort with extractive industries.

 

ROOM FOR DISAGREEMENT

Riyadh has a poor record on human rights, and the global mining industry is itself blighted by seemingly unending controversies over its own operations, suggesting a toxic mix. Saudi Arabia faces a number of other obstacles, something Mudaifer himself acknowledged: “When you have an ambitious plan, you will have equal challenges,” he said.

The three principal ones, as outlined to me by analysts and diplomats studying the Saudi plans are a lack of access to the talent required for specialized mineral extraction and refinery, a shortage of the water needed to actually dig up what is purportedly underground, and a heavily centralized governing apparatus with a small handful of decision-makers across government, with a heavy focus on MBS himself.

On labor, Mudaifer said Saudi Arabia would rely on imported, expatriate specialists while it developed in-house expertise, a model it utilized previously to build up its state oil giant, Saudi Aramco. Already, he said, researchers from the U.S., Europe, China, India, and elsewhere were working in the kingdom’s mining sector.

Water is also essential to mining, and Riyadh lacks significant supplies of it. The kingdom as a result is increasingly using “graywater” — waste water that does not have fecal contamination — in its mining sector: Around 80% of its phosphate and 70% of its gold is mined using graywater, according to Mudaifer. Saudi Arabia will also allocate all taxes levied from mining activities to a dedicated fund that will pay for research into an array of mining-related issues, among them reducing water use. “God, he put mines and minerals where water is not there,” he said.

Mudaifer did not speak to the question of over-centralization, though he acknowledged that the Saudi government was exerting more overarching strategic control than it had in prior decades. “Central government is a new word for Saudi Arabia: We were vertical, every ministry was almost a government by itself.”

He also disputed the characterization of Riyadh’s relationship with mining being a potentially negative one, saying the mining-related fund, which will amount to about $2 billion over the next three years, will also include funds to help mining companies “accommodate communities,” while Riyadh was “working on land use, social engagement, and training and development” over the issue. The country was also, he added, making significant investments in green cement and green hydrogen.

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