OBG talks to Sultan J Shawli, Deputy Minister for Mineral Resources

Interview: Sultan J Shawli

To what extent is rail network development a “game changer” for Saudi Arabia’s mining industry?

SULTAN J SHAWLI: Due to their bulky nature, the main way to transport rock and mineral products is by rail. Railroads have become vital to Saudi Arabia’s mineral industry, especially as phosphate deposits and other viable reserves are located in remote locations. A rail network provides a cost-effective means to transport phosphate concentrate for processing and export. Several railway projects are in the construction and testing phases. Saudi Arabia plans to link the industrial cities of Jubail, Yanbu and Ras Al Khair to a network that connects them to mining centres. The initial operations will link phosphate mines at Al Jalamid and the bauxite mine at Al Zabirah to processing facilities at the industrial city of Ras Al Khair on the gulf coast.

What would attract more international mining firms?

SHAWLI: Saudi Arabia encompasses geologically diverse areas that contain a wealth of resources, including some of the world’s largest ore deposits. In the past few years, the Kingdom has made fundamental changes to its business climate for the sector. New mining investment and foreign investment laws were ratified, income tax regulations were changed and corporate taxes were reduced. Foreign investors are attracted by the availability of potentially viable reserves, transparent laws and regulations, the security of mineral titles, the transferability of mineral rights and the availability of local capital. The Mining Investment Law treats investors on a first-come-first-serve basis, and specific time periods for processing applications have been enshrined in the regulations. Security of titles is safeguarded in the law, because exploration licences are exclusive and their holders automatically get licences upon meeting certain requirements. Furthermore, the fiscal regime is very competitive. The Kingdom has reduced its tax rate to 20%, making it one of the lowest to foreign investors in the world. As to the availability of capital, Saudi Arabia’s banking system is favourable to lending to mining projects and public funds, such as the Public Investment Fund and the Saudi Industrial Development Fund, are financing mineral projects.

How can the sector’s ecological impact be reduced?

SHAWLI: The Mining Investment Law stipulates that the holder of a mining licence must carry out several steps to this end. First, they must undertake an environmental impact study approved by the Presidency of Meteorological and Environmental Protection, whereby the licensee takes all measures to preserve and protect water resources, the environment and wildlife from hazardous waste or environmental damage. Second, licensees are obliged to conduct rehabilitation and maintenance of the licensed area to leave it in a safe and orderly condition. Lastly, the law demands protection and reporting of archaeological sites, buildings and any other relics found within the licensed area.

Looking forward, what role will the industry play in the economic growth of the country?

SHAWLI: Presently the mining sector accounts for about 2% of GDP, but we expect this to increase to over 8% by 2020. Mining can be the third pillar of the economy with the high-quality mineral projects that are already producing or under construction. This is a realistic goal given the modern investment law, transparent regulations and incentives. The Kingdom has over 1000 gold occurrences, significant phosphate deposits and one of the Middle East’s main bauxite deposits.

How are downstream industries developing?

SHAWLI: The ministry promotes value-added processing, and licences are issued if a project’s technical and financial capabilities match their requirements. Value-adding firms process phosphate into chemical fertilisers and bauxite into aluminium products. The ministry is also studying silica sands to ensure it can derive the maximum downstream value from silica. The viability of copper and zinc smelters is also being examined.