Mining grew by 6.3 percent year-on-year (y-o-y) in the first quarter of
2018, according to data issued by the General Authority for Statistics on
July 2.
Coupled with expansion in non-oil manufacturing (4.6 percent) and
government services (3.4 percent), the strong performance of the mining
sector helped drive overall GDP growth to 1.2 percent over the period,
breaking a run of four consecutive quarters of negative growth.
The industry also helped offset slower growth in the oil industry (0.6
percent), along with contractions in retail and hospitality (-0.5 percent)
and construction (-2.4 percent).
Private investment to boost mining contribution
The expansion in mining activity comes amid a push to attract private
investment into the sector to further develop it as one of the main
contributors to the economy.
On July 9 Khalid Al Falih, the minister of energy, industry and mineral
resources, announced
the completion of an adjusted mining investment system designed to
incentivize investment in projects.
Under the revised mechanism, the Kingdom aims to build a comprehensive
database of its mineral resources, intensify exploration and develop new
funding methods for projects.
The development aligns with the Kingdom’s Vision
2030 economic strategy, which looks towards greater private sector
involvement to diversify the economy away from its dependence on
hydrocarbons.
As for the extent of mining’s contribution, Al Falih said the government
plans to make the sector the third pillar of the economy, alongside oil and
downstream petrochemical production.
The Ministry of Energy, Industry and Mineral Resources (MEIMR) seeks to
increase mining’s contribution to GDP from $17bn currently to $64bn by 2030,
as well as generate more than 25,000 new jobs in the industry.
Strong mineral reserves strengthen prospects
The pursuit of these goals is likely to be supported by high levels of
mineral deposits: the MEIMR estimates the Kingdom’s mineral wealth at around
$1.3trn, with gold reserves put at $240bn and significant deposits of
bauxite, copper and phosphates. Related: Is
Oil On Its Way To $80?
This figure could rise further as more survey work is undertaken. In
February officials said the Saudi Geological Survey had at least five more
years of testing to undertake to identify and quantify new deposits.
Rising demand and commodity prices could make the country’s mining sector
an attractive buy, with leading local extractor the Saudi
Arabian Mining Company (Ma’aden) experiencing higher returns this year.
Half-yearly results showed an 82.9 percent y-o-y rise in net profits to
SR1.2bn ($320m), and the company cited an increase in sales volume and
mineral prices as factors underpinning growth.
One commodity that Ma’aden is looking to develop is copper, according to
Darren Davis, the company’s acting CEO.
“We would like to be a lot bigger in copper,” he told international media
on August 6. “We think it is a great metal for the future.” Related: Will
Canada’s $30 Billion Megaproject Be Approved?
While looking at buying into assets overseas, Davis said Ma’aden wanted to
build on its existing domestic copper operation, which currently consists of
a single mine located 350 km south-east of Jeddah that began production in
2016.
Mining growth to spur development in related industries
Continued expansion in the mining industry is expected to present growth
opportunities to firms operating in related sectors, with the expected
quadrupling of mining’s economic output to require significant investment in
dedicated infrastructure, equipment and technology.
While Saudi Arabia is investing extensively in its rail network, providing
heavy-moving capacity and linking its mineral reserves with ports and
logistics hubs, demand for earth moving and loading equipment, engines and
rail rolling stock for moving the take from the new mines is set to rise
sharply in the coming years.
In mid-May Saudi-U.S. rail services joint venture Savage Saudi Arabia
delivered five new locomotives and two locomotive booster units to Ma’aden’s
Wa’ad Al Shamal Phosphate Company, to be used to move mining offtake to the
industrial towns of Wa’ad Al Shamal and Ras Al Khair.
By Oxford Business Group
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