JEDDAH, 16 February 2005 — Saudi Arabian Mining Company (Maaden), which is seeking foreign investment to carry out a number of vital projects, intends to produce 100 tons of gold within 10 years.
Dr. Abdullah Dabbagh, president and chief executive officer of Maaden, said he was hopeful that the newly revised mining investment law would attract more foreign funds to the sector. The law, which was passed by the Cabinet on Sept. 13, 2004, is expected to make the mining sector the third pillar of the economy, alongside hydrocarbons and petrochemicals.
The law, which has simplified and streamlined the procedures for obtaining exploration and mining licenses, offers local and foreign investors a number of benefits, including tax-free import of equipment and spare parts, the right to obtain multiple licenses, and the ability to explore for various minerals in the licensed area.
The law’s chief objective is to boost production of gold and remove financial restraints on foreign companies. “Maaden plans to produce 100 tons of gold within 10 years and this requires SR2 billion in investments,” said Muhammad Hani Al-Dabbagh, vice president for precious metals operations. Maaden was established with a capital of SR4 billion in 1997 in order to utilize the Kingdom’s rich mineral resources. The company, which is involved in huge projects, is now estimated to be worth several billion dollars. The UK-based Tertiary Minerals, the only foreign mining company present, owns the exploration license for the Gurayyat tantalum deposit, described by Tertiary as the world’s single largest source of a metal used in the electronics industry.
The president hopes that $7 billion worth of projects planned by Maaden, which currently employs 600 people, will create tens of thousands of jobs. Its flagship project is to convert bauxite from a planned mine at Zubairah in the north at a refinery and smelter at Ras-Al-Zawr on the east coast.
The company also plans a phosphate fertilizer plant at Ras Al-Zawr, powered by a new oil-fired power station, with exports facilitated by a planned port. Dabbagh puts the cost of the project at $4.6 billion, against the $1.2 billion at Maaden’s disposal. Foreign capital is seen as a means of bridging the gap. “We would like others to share the risks and opportunities,” said Dabbagh. Maaden has spoken to major international companies, thought likely to include Alcoa and Alcan, and Chalco, the leading producer of aluminum in China. “We are close to the markets in India and China where aluminum consumption is growing, and we have very cheap energy, which is the most important cost for running an aluminum plant,” the Financial Times quoted the president as saying.
Maaden has set up four companies, for gold, phosphate, aluminum and industrial metals respectively. The idea is to give the state the flexibility eventually to dispose, through initial public offerings of its mining industry stakes.
In May last year, the government approved steps to privatize Maaden, which is fully owned by the government. The company intends to sell 40 to 50 percent of its stake in the precious metals sector in which the company has invested SR600 million. “We are expecting a royal decree on Maaden IPO within a few months,” the vice president told Al-Eqtisadiah, a sister publication of Arab News.