Mining to Saudi Arabia

(Last updated: 19 Jul 2007)

Trends and opportunities

The market

The Saudi Arabian Ministry of Petroleum and Mineral Resources is the government agency responsible for both oil and mining sectors. It is the sole agency concerned with the application and administration of mining in Saudi Arabia. The Deputy Ministry of Mineral Resources is the governmental Legislative Agency, which issues licenses and protects the government’s rights in mining.

Non-oil mineral activity is expected to grow at a target rate of 9.1 per cent per annum, which is higher than any other sector of the economy. This optimistic growth rate is partly explained by the low base from which this sector is expected to expand, but major mining schemes are already out to tender and promise to enlarge the industry substantially. Others are expected to move forward in the coming year.

Saudi Arabia holds some of the largest phosphate deposits in the world, located mainly in the north and northwest regions of the country. The impressive Al-Jalamid deposits are estimated to hold several hundred million tonnes. According to Ma’aden, this deposit will allow for the economic exploitation of phosphates for around 20 years.

However, according to market sources Ma’aden and Saudi Oger, one of the largest companies in Saudi Arabia is establishing a new 50/50 joint venture company to develop the Northern Mineral Rail Link. The joint venture will comprise a US$2.5 billion holding company, integrating mining as well as downstream phosphate projects. This 1500km rail link will cost between A$3-4 billion and will open access to the 250 million tonne bauxite kaolin deposit at Az Zabirrah and phosphate deposit at Al-Jalamid.

Opportunities

Australian consulting services, mining equipment, and the spare part sub-sector have great potential in Saudi Arabia. There will be good opportunities to supply:

• mining development and exploration services
• consultancy management work
• structured finance mining services
• equipment and spare parts

The greatest increase in sales of this type of equipment and spare parts is expected to come from products and services associated with the traditional mining of gold, iron ore, phosphate, bauxite, zinc and copper.

There are various projects that will create good opportunities in Saudi Arabia for Australian mining products and service suppliers:

• The Saudi Arabian mining company, Ma’aden, is interested in talking to leading Australian companies interested in a joint venture for the development of the bauxite deposit at Az Zabirrah. Studies show that total reserves for this open-pit mine will yield an annual rate of 2.5 million metric tonnes for at least 20 years. This deposit has the potential to supply the needs of the local aluminium industry. Ma’aden is also interested in talking to Australian clients about the alumina refinery and smelter to be implemented on the eastern province of Saudi Arabia.
• The Saudi Company for Precious Metals (SCPM) awarded an Engineering Procurement and Construction Management (EPCM) contract to an Australian company to undertake the consultancy management work to pre-qualify companies and issue the tender documents for the Bulghah Exploration Gold Project. The total cost of the Bulghah project is estimated at $121 million. SPCM also reviewed the Al Amar gold mine, which presents an additional opportunity for Australian companies.

Competitive environment

Australia's major competitors in the Saudi Arabian mining industry are the USA, UK, Canada, South Africa and France.

Tariffs, regulations and customs

Customs duties on mineral product imports such as salt, sand, stone, calcium, and clay is 12 per cent.

Industry standards

Relevant product standards are laid down by the Saudi Arabian Standards Organization. Also, under the International Conformity Certification Program, products for export to Saudi Arabia may be subject to pre-shipment inspections.

Marketing your products and services

Market entry

Saudi commercial regulations stipulate that foreign companies may establish a company in Saudi Arabia, however the most common form of market entry is through an authorised Saudi representative, agent or joint venture partner registered in Saudi Arabia.

Australian companies may sell services or products direct to Saudi firms (excluding works), but without ongoing Saudi based marketing efforts, the chances of development and a sustained market presence are severely limited.

Since April 2000, the government has allowed 100 per cent equity investment in Saudi Arabia. Generally, joint venture companies are managed by the foreign principal who provides management, marketing know-how, technical expertise and who submits bids for government or private sector tenders. To obtain a contract with the Saudi Government, foreign companies are required by regulation to appoint a Saudi service agent unless they have established a company there. The primary functions of a service agent are to obtain temporary commercial registration and assist in routine tasks, particularly obtaining visas for expatriate employees.

Australia is very well known in Saudi Arabia as a world leader in the mining sector. With these credentials, Australian mining firms are well placed to capitalise on identified opportunities and to get involved at an early stage in the fledgling Saudi Arabian mining industry. 

Links and industry contacts

Mining–related resources

Deputy Ministry of Mineral Resources - www.dmmr.gov.sa/home.php
Ministry of Petroleum and Mineral Resources - www.mopm.gov.sa
Ma'aden - www.maaden.com.sa

Government, business and trade resources for Saudi Arabia

Saudi Arabian Standards Organization - www.saso.org.sa 

Media

Arab News - www.arabnews.com
The Saudi Times - www.sauditimes.com