JEDDAH: Saudi Arabia is positively encouraging the development of its mineral resources and welcoming foreign investment, said Nabeel Ekram, director of mining at the Ministry of Petroleum and Mineral Resources in an address at the MENA-EX mining forum in Jeddah yesterday.
Moreover, despite the turmoil in the global economy and the withdrawal of Rio Tinto Alcan (RTA) from the massive bauxite development project with Maaden mining, Maaden President and CEO Abdallah Dabbagh settled concerns by saying that the project continues though rephrased to come on stream about two years later than originally planned.
Delivering an encouraging message on behalf of Deputy Minister of Petroleum and Minerals Sultan Al-Shawli, Ekram noted the Kingdom’s policy of increasing the participation of mining activities in the national economy and “of diversifying income and increasing state revenues.” Referring to the new mining code — 2005, which, he said, had already yielded a significant increase in applications for exploration and mining licenses.
The code, already the subject of favorable comment by mining professionals, is particularly attractive in a globally competitive market largely because of its transparency, first come first serve principle and low tax liability of just 20 percent after which 100 percent of profits can be repatriated.
“Other incentives include the absence of technical and financial qualifications for reconnaissance and exploration licenses, and absence of advance payment or profit sharing requirements,” said Ekram.
Sharing the latest figures for inward mining investment, Ekram said that by the end of 2008, 1,406 active mining concessions had been granted to over 700 companies and individuals. Fifty nine exploration licenses, which covered an area in excess of 135,000 km2, had been given for precious metals, base metals and ornamental stone. Demonstrating the interest of foreign investors, Ekram said that out of the 84 reconnaissance licenses for minerals issued, 13 included foreign entities.
Exploitation licenses, including mining and raw materials quarrying licenses, totaled 57 at the end of 2008 and covered an area of 1,207 km2. Of these, 22 were for cement, 21 for industrial minerals and 14 for precious metals, iron, phosphorous, bauxite (the raw material for aluminum) and peridot (a semi precious gem).
Reflecting the need for construction materials, 1,148 building materials quarrying licenses were issued together with permits to export 4.7 million tons of ornamental stone. Despite the severe downturn in the global economy, and the decline of stock markets by 50 to 60 percent and petrochemical prices by 70 percent over the last six months, Brad Bourland, chief economist and head of proprietary investment at Jadwa Investment, said he looked forward to post-bubble consolidation.
He added that Saudi banks were well capitalized and although their lending had declined in the last six months they were “still solid and pretty robust.” He said Saudi banks were expanding their lending to the corporate market but were reducing lending in the consumer market due to them mainly lending to finance credit card and personal debt in an economy that had only a small mortgage market.
He also noted that the Saudi budget was, for the first time since 2004, one of deficit lending. “There is nothing wrong with that once in a while,” he said, adding that the government had plenty of assets and cash reserves. Foreign assets, not leveraged but largely in high grade government bonds, totaled $450 billion in 2008, he said. Trade he opined would stay in surplus, but drop in 2009.
Against this patchy financial background, recent news that RTA had, due to financial pressures, withdrawn from the joint venture bauxite development deal guaranteed the close interest of delegates in the presentation by Dabbagh.
Setting out the history and current status of Maaden’s position, Dabbagh reassured delegates that with the phosphate exploitation projects and the new arrangements made with RTA together with other plans on the books, Maaden was in a strong position. Noting that whatever happened in terms of the economy, the need for phosphates in the form of fertilizer could only increase. “People have to eat,” he said. “Saudi Arabia has by far the lowest production costs in the world and that makes us very competitive indeed even as prices fall.”
In a post session interview, Dabbagh detailed the RTA arrangements and prospects for Maaden to Arab News. “Rio Tinto has had certain issues that affected it being a partner with equity. They already have a lot of debts and are cash constrained,” he said, adding that Maaden would buy the necessary technology from them and has entered into a technical services agreement.