Long the world’s largest producer of oil, Saudi Arabia now seeks to unlock a treasure trove of minerals beneath its sands while using the endowment generated by decades of hydrocarbon revenue to invest in mining elsewhere, notably Africa.
This has the potential to dramatically raise the kingdom’s geopolitical and economic stature on the world stage at a time when the importance of oil is fading in the face of the green energy transition.
Saudi Arabia is reinvesting oil rents into critical minerals mining and processing to diversify from reliance on hydrocarbons and to future-proof its economic future – Christopher Vandome, Chathan House
The minerals push is part of the kingdom’s ‘Vision 2030’ to diversify an economy welded to oil, a state of affairs that has stifled investment and development on other fronts. This coincides with a liberalisation drive under Crown Prince Mohammed bin Salman that has softened some of the harder edges of an austere and ultra-conservative brand of Islam.
“Saudi Arabia is reinvesting oil rents into critical minerals mining and processing as a means to diversify away from over-reliance on hydrocarbons and a need to future-proof its economic future,” Christopher Vandome, a senior research fellow at international affairs think tank Chatham House, told MiningMX.
“Saudi sees itself as being at the centre of a mining super-region straddling Africa, the Gulf, Middle East and Asia. And it has been highly strategic in building partnerships that straddle wider geopolitical divides – courting the USA, Russia, and African states.”
Diverted by a decades-long focus on oil – a classic case of what development economists call the ‘resource curse’ or ‘oil curse’ – Saudi’s mineral potential has remained untapped.
But it is widely regarded to be immense, triggering a new resource scramble in the kingdom. Saudi Arabia estimates its undiscovered mineral potential to be worth a staggering $2.5-trillion – 40% bigger than its current gross domestic product.
“Exploration projects over the past two decades have unearthed extensive deposits of precious and industrial minerals throughout the country. These include not only gold and silver, but also copper, tin, tungsten, nickel, chrome, zinc, lead, phosphates, iron ore, bauxite, potassium ore and even table salt,” the Saudi embassy in Washington DC proclaims on its website.
After decades spent churning out the fossil fuels linked to anthropogenic climate change, this places Saudi at the coalface of global decarbonisation efforts.
And it is actively seeking foreign investors in the mining space, using its accumulated oil wealth to offer funding for greenfield exploration.
“The mineral endowment is tremendous. There is a lot of activity, the government is making it very easy to apply and to facilitate. Saudi is the only place on earth that I am aware of that you get grant funding for greenfield exploration. They really want to aggressively develop the exploration because they know it takes a bit of time to get to a mine,” said Tim Keating, a mining investment consultant based in the Middle East.
This activity is transparently displayed on the kingdom’s National Geological Database Portal, also known as a cadastre.
Saudi Arabia, through its state-owned mining company, Ma’aden, also plans to explore on the Red Sea floor for minerals for commercial exploitation.
ESG and human rights
Such activities in an ecologically sensitive marine area will place them in the cross hairs of conservationists, and this is hardly the only concern about mining and the kingdom from an ESG (environmental, social and governance) perspective.
Saudi Arabia has liberalised but remains an authoritarian state. Finally allowing women to have more freedom of movement and drive a car is hardly progressive in the 21st century.
“Mining companies and investors in the sector should be concerned by the well-documented, egregious and wide-ranging rights abuses recorded against nationals, Indigenous Peoples and other minorities and migrant workers in Saudi Arabia,” Michael Clements, director for International Programmes at the Business & Human Rights Resource Centre, told MiningMX.
“Although the Kingdom has presented an appearance of openness to international media, culture, sport and politicians in recent years to attract investment, the country remains a near black box of information.
“There is an alarming lack of transparency on rights violations happening on the ground – owing to severe restrictions on civil society and media freedoms – as well as on the business relationships and agreements being maintained. This should raise serious red flags – particularly for a sector like mining, where abuse is endemic.”
The centre says its data show that Saudi Arabia is one of the worst 10 countries in the world for abuse against migrant workers.
In an age when ESGs have risen to the top of the corporate agenda, such issues will not escape investor scrutiny and are on the radar screen.
Frank Hallam, CEO of Vancouver-based Platinum Group Metals (PTM), which is studying the establishment of a standalone PGM smelter and base metals refinery in Saudi Arabia, said the company initially had ESG reservations about doing business in the country.
The government of Canada’s view is what is in the past is in the past – Frank Hallam, Platinum Group Metals
The background here includes a freezing of diplomatic relations between Canada and Saudi Arabia for five years between 2018 and 2023 over Ottawa’s criticism of the kingdom’s human rights record.
Hallam said the perceptions were that “… investors in the West, in North America in particular, would be somewhat hesitant or even put off about the concept of investing in or with Saudi Arabia. There was the question of human rights, the question of women’s rights, and some of the tensions between Canada and Saudi Arabia.”
But Ottawa and Riyadh patched things up last year, a diplomatic thaw that makes it easier for Canadian capital to flow to Saudi Arabia.
“The government of Canada’s view is what is in the past is in the past and the current Saudi government is moving in the right direction and they see rights and freedoms improving and they would rather do business with them and look forward,” Hallam said.
“We had our first visit to Saudi Arabia in 2023, and immediately upon arriving we were surprised about the nature of society there, it was much more open and vibrant than we had anticipated. People moved about and were busy and doing their work, women were in the workplace and out and about, some were in traditional dress and some weren’t. No one seemed too fussed one way or the other.”
Political tap dance
While the Canadian-Saudi dust-up is receding in the rear-view mirror, PTM must navigate the shifting sands of the South African state, which recently ushered in a government of national unity after the ruling African National Congress (ANC) saw its share of the vote in a national election fall 17 percentage points to 40%.
The processing facilities that PTM is aiming to build in Saudi Arabia will be to process PGM concentrate from South Africa, where the Canadian company has a platinum project in the Waterberg region. The fate of that project in part hinges on the Saudi project.
“We are seeking a permit from South Africa to export PGM concentrate from South Africa, so that is a fundamental hurdle to overcome in order to be able to send material to Saudi Arabia. And the stance of the South African government is that their preference is for beneficiation in country, that’s logical. The question becomes whether there is capacity for Waterberg,” Hallam said.
South Africa for years has been plagued by chronic power shortages as state-run power utility Eskom, which has serious solvency issues, struggles to keep its ageing fleet of coal-fired power stations running in a reliable way.
The power situation has improved markedly in 2024, not least because of a rush by businesses and households to install solar, but investor perceptions remain sour in this regard.
“If you were going to build your own smelter in South Africa, which we’ve looked at, the demand on power would be something you would need to consider. And we believe it would be manageable and would succeed. However, when we speak to investors about the concept, they’re initially excited and then say ‘what about the power?’ That’s a perception that’s hard to answer,” Hallam said.
This also points to possible commercial friction between South Africa and Saudi Arabia as both are keen to ‘beneficiate’ or process minerals on their own soil to add value.
“While Saudi Arabia’s main objective is for increased domestic processing, they have also been supporting of infrastructure projects in Africa and have begun discussions on investing in processing capacity on the continent. In this area, Saudi will feel that it has the financial resources to move quickly and put money into projects faster than the EU, US, UK or other international partners looking to secure minerals. Saudi sees a competitive advantage and an opportunity to be a major player and alternative to China for mineral sourcing. In so doing, Saudi may become a proxy for the US in Africa,” Chatham House’s Vandome said.
“For South Africa, there will be areas of collaboration but also of competition. Saudi is a new member of the expanded BRICS, and South Africa has been keen to engage the gulf nation both on mineral exports and on investing in processing in South Africa. But there are already areas of competition, including for example on the location of the new platinum refinery.”
“Saudi Arabia has shown it is willing to deploy the capital at a time when many private-sector players are scaling back on investment – Gracelin Baskaran, Center for Strategic and International Studies
Saudi Arabia is certainly keen to invest in South Africa’s mining space at a time when it is battling to attract fresh capital given its many challenges.
But Western banks are increasingly reluctant to provide finance for new coal projects because of the fossil fuel’s links to climate change, but the Saudis have the cash to fund such initiatives.
This is a sign that while Saudi Arabia is keen on green metals it also doesn’t have an issue with investing in dirty minerals.
Regarding green or critical metals and minerals, the kingdom announced late last year that it planned to invest $15 billion to take stakes in such projects and operations in Africa.
“It is a lucrative partnership for African countries in particular − Saudi Arabia has significant capital and experience in using its natural resources to become a development success story − both of which African countries are looking for,” Gracelin Baskaran, a senior fellow at the Center for Strategic and International Studies, said in a commentary last year.
“Saudi Arabia has shown it is willing to deploy the capital at a time when many private-sector players are scaling back on investment. It has also shown that is willing to provide African countries with the support to ensure they get more from their resources,” she said.
Saudi may ruffle some South African feathers over the location of a smelter, but it is entrenching its capital − and diplomatic weight − in the African mining space, making it an exciting space to watch.
This article was updated as a previous version incorrectly said Saudi state miner Ma’aden had signed a joint venture agreement with Optimum Coal Mine to develop the Mmamabula Energy coal mine.