INTERVIEW: Ma’aden mines Saudi Arabia’s untapped mineral wealth

INTERVIEW: Ma’aden mines Saudi Arabia’s untapped mineral wealth
Illustration by Luis Grañena
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Updated 18 October 2020

INTERVIEW: Ma’aden mines Saudi Arabia’s untapped mineral wealth

INTERVIEW: Ma’aden mines Saudi Arabia’s untapped mineral wealth
  • CEO Mosaed Al-Ohali explains the national mining champion’s pivotal role in Saudi Arabia’s economic future

Saudi Arabia is renowned for its “black gold” hydrocarbon resources, but it is Mosaed Al-Ohali’s job to ensure that the rest of the Kingdom’s mineral wealth is exploited to the full in the big economic transformation underway as part of Vision 2030.

After a three-decade career at the petrochemicals giant SABIC, Al-Ohali earlier this year became CEO of Ma’aden, the Saudi mining company that has been given a central role in the National Industrial Development and Logistics Program (NIDLP), a key part of the Kingdom’s diversification strategy.

“Achieving the industrial and manufacturing perspective of Vision 2030 will be heavily dependent on the availability of the minerals needed to produce metals required in manufacturing,” he told Arab News.

“As the national mining champion, we play a central role in the economic diversification of the nation. We are also applying advanced minerals exploration techniques and technologies to extract minerals that will further develop Saudi Arabian industries.”

Oil has been the engine behind the country’s modern economic development, but there are many other precious materials beneath its rugged terrain. The Kingdom is the biggest producer of gold ore in the Middle East, and gold has been mined here for thousands of years.

It is also rich in the minerals that power the global economy — aluminum via bauxite, copper, phosphates and other base metals, as well as the rare earth metals that are in increasing demand by high-tech industries.

The Kingdom’s Energy Ministry recently estimated its untapped mineral resources to be worth about SR5 trillion ($1.33 trillion). Under Vision 2030, the government is aiming to triple the mining and metals sector’s contribution to gross domestic product and create 200,000 jobs directly and indirectly by 2030.

“Saudi Arabia has vast under-explored territories compared with other world-class mining countries. Ma’aden’s goal is to capitalize on that to become one of the world’s top mining companies, and we are making great strides in achieving this goal,” Al-Ohali said.

“In 2019, Ma’aden tripled its exploration spend and plans for more in 2020. The increase in exploration spending is focused on brownfield drilling, assessment of potential greenfield targets and continued drilling at many prospective locations to maintain healthy ore reserves. We are working on two more gold mines that we expect to bring on stream around the middle of the decade,” he added.

The COVID-19 pandemic has affected those plans to some degree. Ma’aden’s operations in the Kingdom felt the brunt not only of lockdowns — the company put in place a strategy to “prevent, detect and isolate” outbreaks of the virus in its mining camps — but also the global economic shock that hit the commodities markets especially hard.

“In terms of our current operations, the impact of COVID-19 on our local and global supply chains and distribution networks have been manageable so far, but it is still too early to say how the pandemic might impact the business in the coming period, especially if there is a second outbreak,” he said.


BIO

BORN: 1959, Unaizah, Al-Qassim Province

EDUCATION: Master’s degree in chemical engineering, King Fahd University of Petroleum and Minerals

CAREER

  • Chemical engineer, Saudi Petrochemical Company
  • Senior executive adviser, SABIC
  • CEO, Ma’aden

Al-Ohali estimated that the pandemic would mean a delay of “a couple of months” in overall expansion plans.

Global commodity prices had been suffering even before the pandemic, with the US-China confrontation casting a cloud over world trade. But, Al-Ohali said, in some parts of the world there has been a “good adjustment” to the new economic environment, with China and other Asian countries experiencing a pick-up in demand.

Aluminum prices have been “inching up,” and there is steady demand for fertilizers and phosphates in some parts of the world.

“We currently export our products to about 22 countries across all continents. We serve the farming industry in all major regions in Asia, Africa, the Americas and Australia. Our aluminum products serve mainly the local market, as well as key countries in Asia, Europe and North America,” he added.

Ma’aden’s supply chain and market reach were strengthened by the acquisition of Meridian, an African fertilizer group, as well as through joint ventures with other international mining companies. 

The bright spot of the pandemic lockdown for Ma’aden has been the performance of gold on international markets. “We are very happy to have gold as a major part of our business. It is a counter-cyclical commodity in some respects, and has virtually acted as a built-in hedging mechanism for us. It was seen as a ‘safe haven’ investment around the world,” he added.

Gold continues to play a prominent part in growth plans, Al-Ohali said. “We have started construction of our largest and most ambitious mine initiative, the Mansourah & Massarah gold project. This is an $880 million undertaking that will leverage the tremendous mineral wealth of Saudi Arabia and help us achieve our strategic goal of increasing gold production to 1 million ounces per year.”

Two years ago, Ma’aden embarked on one of its most ambitious plans in the Kingdom — the Wa’ad Al-Shamal Minerals Industrial City, a development of seven world-class integrated plants with the capacity to produce 3 million tons of phosphate fertilizer products per year. As one of the largest integrated phosphate centers in the world, the development will serve the growing global need for fertilizers.

“Our growth ambitions in phosphate are high. We are currently constructing our third ammonia plant which is around 50 percent completed for a capacity of about 1.1 million tons per year. We are also in the process of exploring our next phosphate mega-project, set to produce 3 million tons per year,” he added.

Recently, Ma’aden put in place a $4.1 billion financing facility that allows the Wa’ad Al-Shamal business to move to full operational status. “This refinancing is especially important as it now has a very active and clear plan to resolve its design problems and ramp up production to full throughput toward the second half of 2021,” Al-Ohali said.

Since its initial public offering in 2008, Ma’aden has been listed on the Tadawul stock exchange, with the Public Investment Fund as its majority shareholder. That kind of backing gives it deep financial pockets, but Al-Ohali is conscious of the needs of some shareholders for an income stream in the form of dividends, as well as the capital growth the shares have traditionally earned.

The global commodity price downturn and the economic effects of the pandemic combined to produce losses for the first two quarters of the year, but Al-Ohali said the long-term outlook for the core business segments remains positive.

“It is difficult to speculate on what the remainder of the year will look like, but I can assure you that Ma’aden has inherent strength in its aluminum value chain. While heavily leveraged for the time being, we feel confident of our operating margins to generate ample cash to take care of all our obligations,” he added. 

Ma’aden’s financial potential has been enhanced by the passing earlier this year of the mining investment law. “It is a big step in the efforts the government of Saudi Arabia is taking to facilitate the growth of the mining industry and enhance its role in building a diversified and sustainable economy,” Al-Ohali said. Ma’aden was closely involved in the framing process for the new legislation.

“The updated law focuses on enhancing the governance and transparency for current and future mining investments, and boosting the confidence of investors by providing transparent and sufficient mining data that allows investors to conduct feasibility studies, as well as providing a clear process for licensing.

“It also supports the sustainability of mining investments by preserving the environment, and complying with health, safety and environmental regulations for workers in the national mining industry and local communities,” he added.

The legislation is also likely to facilitate new relationships with foreign investors and industry partners. Ma’aden already has long-standing ties with Alcoa of the US in the Ras Al-Khair Industrial City, and with Barrick Gold of Canada in copper production. It also has a strategic partnership with PhosAgro of Russia.

“We constantly explore growth through wholly owned opportunities or with strategic partnerships to improve our ability to serve our global customers and solidify our position on the global stage,” Al-Ohali said.

“We have the competitive edge to achieve success and we strive to build Ma’aden’s brand and ensure it is recognized for quality and value. Our experienced and talented people are well able to deliver on our promises,” he added.


Saudi mining portal received 4,073 license applications since launch

Saudi mining portal received 4,073 license applications since launch
Updated 25 September 2021

Saudi mining portal received 4,073 license applications since launch

Saudi mining portal received 4,073 license applications since launch
  • The Kingdom plans to launch a comprehensive geological survey to map the country’s mining potential

RIYADH: Saudi Arabia’s Ministry of Industry and Mineral Resources has received 4,073 applications through its online portal since it was launched earlier this year, it said in a statement on Saturday.

The ministry has issued 1,092 licenses to investors seeking opportunities in the Kingdom’s mining sector, and is processing a further 1,446, it said.

The sector is witnessing a rapid transformation and attracting investors from around the globe since the launch of a new mining law earlier this year.

According to geological surveys dating back 80 years, the Kingdom has an estimated reserve of untapped mining potential valued at $1.3 trillion.

Saudi Arabia’s mining industry has already attracted some major foreign investors. American industrial corporation Alcoa has a 25.1 percent stake in two companies, Ma’aden Bauxite and Alumina and Ma’aden Aluminum, as part of $10.8 billion joint venture with the Saudi Arabian Mining Co., Ma’aden, located in Ras Al-Khair Industrial City in the Eastern Province.

The Kingdom plans to launch a comprehensive geological survey to map the country’s mining potential.

The five-year program will conduct geophysical and geochemical surveys and create detailed mapping of more than 700,000 sq. km of the mineral-rich Arabian Shield area in Saudi Arabia.

The Vision 2030 reform plan identified the mining sector as a potential third pillar of the Kingdom’s industrial growth, alongside petroleum and petrochemicals. The country is investing SR14 billion to develop the sector.

About $45 billion in private and public sector investments have gone into the mining sector over the past decade, mainly in phosphate and aluminum production.

The Kingdom also plans to auction two major mining licenses in 2022 for commodities including gold, copper and zinc, as the Kingdom aims to triple the mining sector’s contribution to the national gross domestic product to SR240 billion ($64 billion) and double the number of jobs to 470,000 by 2030.


Egypt extends natural gas exploration auctions to end of September

Egypt extends natural gas exploration auctions to end of September
Updated 25 September 2021

Egypt extends natural gas exploration auctions to end of September

Egypt extends natural gas exploration auctions to end of September
  • Nine new exploration licence awards announced

CAIRO: Nine international natural gas exploration auctions that were announced in March have been extended until the end of September, said the Magdy Galal, chairman of the Egyptian Natural Gas Holding Company.

Galal also announced that nine new natural gas exploration agreements have been signed with international companies, bringing the total number to 44. The new exploration licenses will lead to investment of nearly $1 billion with signature grants amounting to $24 million, he said during the company’s general assembly headed by the Minister of Petroleum.

Last year witnessed eight new discoveries of natural gas, two discoveries in the Mediterranean and six in the Western Desert, adding an estimated 600 billion cubic feet of new reserves.

Four projects were implemented for the development and production of gas from the discovered fields with investments of more than $4 billion, and 15 new wells were placed on the gas production map, with an average daily production of 1.4 billion cubic feet of gas and more than 25,000 barrels of condensate.

The total average production of natural gas amounted to more than 6.8 billion cubic feet, covering the entire needs of the local market. The average daily local consumption of natural gas amounted to more than 6 billion cubic feet.

The electricity sector consumed the most gas, accounting for more than 60 percent of production, followed by the industrial sector with more than 22 percent and the petrochemical and gas derivatives industry with about 11 percent. Domestic home and vehicle use took and 6 percent.

Exports of natural gas were made to Jordan through pipelines, and liquefied natural gas has been exported to global markets with a total of 71 shipments from the Idku and Damietta facilities.


China crypto crackdown reveals scale of digital yuan ambitions

China crypto crackdown reveals scale of digital yuan ambitions
Updated 25 September 2021

China crypto crackdown reveals scale of digital yuan ambitions

China crypto crackdown reveals scale of digital yuan ambitions
  • All crypto trading and mining deemed illegal in China
  • China's central bank digital currency could launch as soon as 2022

LONDON: If there’s one thing the Chinese Communist Party likes it is control.

A raft of edicts from President Xi Jinping this year have asserted the government’s control over ever larger swathes of the Chinese economy and the everyday life of Chinese people.

The financial cost of these measures is difficult to accurately gauge, but billions of dollars have been wiped off the value of tech companies, including Alibaba, Didi and Tencent, following a squeeze on their activities, including limits on how long children can spend playing online games.

There have been considerable financial costs too from China’s crypto crackdown, which intensified yesterday with a blanket ban on all crypto transactions and mining. Ten agencies, including the central bank, financial, securities and foreign exchange regulators, vowed to work together to root out “illegal” cryptocurrency activity, the first time the Beijing-based regulators have joined forces to explicitly ban all cryptocurrency-related activity.

That represents a major escalation from May this year, when China banned financial institutions and payment companies from providing services related to cryptocurrency transactions. It had issued similar bans in 2013 and 2017.

Despite an initial drop in the value of cryptocurrencies on Friday, they stabilized on Saturday and most analysts don’t see the measures having a long-term effect on the value of crypto assets.

“For the institutional crypto industry, it won’t change much as those who could leave already left and those who couldn’t have either closed or gone under the radar,” said George Zarya, CEO at digital asset prime brokerage and exchange BEQUANT. “The retail market most likely has gone under the radar and will continue to support market volumes.”

The biggest financial cost is to Chinese businesses involved in trading and mining cryptocurrencies.

Virtual currency mining had been big business in China before May, accounting for more than half the world’s crypto supply, but miners have been moving overseas.

“[China] will now lose around $6 billion worth of annual mining revenue, all of which will flow to the remaining global mining regions,” said Christopher Bendiksen, head of research at digital asset manager CoinShares, citing Kazakhstan, Russia and the United States as beneficiaries.

Crypto exchanges OKEx and Huobi, which originated in China but are now based overseas, are likely to be the worst affected since they still have some China users, analysts said. Tokens associated with the two exchanges plunged over 20 percent on Friday.

Despite all this disruption and loss of wealth, there is a major upside for China.

The Chinese government has repeatedly raised concerns that cryptocurrency speculation could disrupt the country’s economic and financial order, one of Beijing’s top priorities.

Most of all, cryptocurrencies are a threat to China’s sovereign digital yuan, which is at an advanced pilot stage. The People’s Bank of China, the country’s central bank, plans an official launch of the digital yuan as soon as 2022, following testing at the Winter Olympics.

Widespread use of the digital yuan would give Chinese policy makers greater visibility into how money flows around China’s economy.

This would help them track any illicit flows of funds, such as money laundering or terrorist financing, and it would also allow them to experiment by targeting monetary policy interventions on specific economic classes, regions or other groups.

However, by killing off independent cryptocurrencies, China closes off a huge area of financial innovation and risks reducing the dynamism of its economy in the future.


Europe needs long-term energy plan, Eni CEO says

Europe needs long-term energy plan, Eni CEO says
Updated 25 September 2021

Europe needs long-term energy plan, Eni CEO says

Europe needs long-term energy plan, Eni CEO says
  • Households across Europe face much higher energy bills due to surging wholesale power and gas prices

MILAN: Soaring gas prices as winter approaches are evidence that the EU needs to work out a long-term energy security plan, the head of Italy’s Eni has told La Repubblica newspaper.

Claudio Descalzi noted the EU imports almost all the natural gas and most of the oil it needs, making it structurally dependent on foreign supplies.

“Europe needs to have what it hasn’t got today, a structured and long-term energy security plan,” Descalzi said in an interview published on Saturday.

“I don’t think there will be problems with gas procurement, but it will cost more,” he said regarding this winter.

Eni has strategic long-term gas supply contracts with a series of gas-producing countries including Russia.

Households across Europe face much higher energy bills due to surging wholesale power and gas prices, and consumer groups have warned the most vulnerable could experience fuel poverty.

Spain has urged the European Commission to devise guidance to help member states react consistently to power price spikes without testing the rules of the bloc.

Italy’s Prime Minister Mario Draghi this week also said Europe needed to act to diversify its energy supplies and strengthen the bargaining power of purchasing countries to help curb power and gas price rises.


Under US sanctions, Iran and Venezuela strike oil export deal — Reuters

Under US sanctions, Iran and Venezuela strike oil export deal — Reuters
Updated 25 September 2021

Under US sanctions, Iran and Venezuela strike oil export deal — Reuters

Under US sanctions, Iran and Venezuela strike oil export deal — Reuters
  • Venezuela has agreed to swap its heavy oil for Iranian condensate that it can use to improve the quality of its tar-like crude

CARACAS/HOUSTON/WASHINGTON: Venezuela has agreed to a key contract to swap its heavy oil for Iranian condensate that it can use to improve the quality of its tar-like crude, with the first cargoes due this week, five people close to the deal said.
As the South American country seeks to boost its flagging oil exports in the face of US sanctions, according to the sources, the deal between state-run firms Petroleos de Venezuela (PDVSA) and National Iranian Oil Company (NIOC) deepens the cooperation between two of Washington’s foes.
One of the people said the swap agreement is planned to last for six months in its first phase, but could be extended. Reuters could not immediately determine other details of the mwpact.
The oil ministries of Venezuela and Iran, and state-run PDVSA and NIOC did not reply to requests for comment.
The deal could be a breach of US sanctions on both nations, according to a Treasury Department email to Reuters which cited US government orders that establish the punitive measures.
US sanctions programs not only forbid Americans from doing business with the oil sectors of Iran and Venezuela, but also threaten to impose “secondary sanctions” against any non-US person or entity that carries out transactions with either countries’ oil companies.
Secondary sanctions can carry a range of penalties against those targeted, including cutting off access to the US financial system, fines or the freezing of US assets.
Any “transactions with NIOC by non-US persons are generally subject to secondary sanctions,” the Treasury Department said in response to a question about the deal. It also said it “retains authority to impose sanctions on any person that is determined to operate in the oil sector of the Venezuelan economy,” but did not specifically address whether the current deal is a sanctions breach.
US sanctions are often applied at the discretion of the administration in power. Former US President Donald Trump’s government seized Iranian fuel cargoes https://www.reuters.com/article/us-usa-iran-cargo-idUSKCN25A2AH at sea bound for Venezuela for alleged sanction busting last year, but his successor Joe Biden has made no similar moves.
In Washington, a source familiar with the matter said the swap arrangement between Venezuela and Iran has been on the radar screens of US government officials as a likely sanctions violation in recent months and they want to see how far it will go in practical terms.
US officials are concerned, the source said, that Iranian diluent shipments could help provide President Nicolas Maduro with more of a financial lifeline as he negotiates with the Venezuelan opposition toward elections.
Sanctions on both nations have crimped their oil sales in recent years, spurring NIOC to support Venezuela — including through shipping services and fuel swaps — in allocating exports to Asia.
In a meeting at the UN General Assembly in New York on Wednesday, the foreign ministers of Venezuela and Iran publicly stated their commitment to stronger bilateral trade, despite US attempts to block it.
Trump’s tightening of sanctions contributed last year to a 38 percent fall in Venezuela’s oil exports — the backbone of its economy — to their lowest level in 77 years and curtailed sources of fuel imports, worsening gasoline shortages in the nation of some 30 million people.
A US Treasury spokesperson said the department was “concerned” about reports of oil deals between Venezuela and Iran, but had not verified details.
“We will continue to enforce both our Iran and Venezuela-related sanctions,” the spokesperson said. Treasury “has demonstrated its willingness” to blacklist entities who support Iranian attempts to evade US sanctions and who “further enable their destabilizing behavior around the world,” the official added.
The swap contract would provide PDVSA with a steady supply of condensate, which it needs to dilute output of extra heavy oil from the Orinoco Belt, its largest producing region, the people said. The bituminous crude requires mixing before it can be transported and exported.
In return, Iran will receive shipments of Venezuelan heavy oil that it can market in Asia, said the people, who declined to be identified as they were not authorized to speak publicly.

CARGOES THIS WEEK
PDVSA has boosted oil swaps to minimize cash payments since the US Treasury Department in 2019 blocked the company from using US dollars. Washington has also sanctioned foreign companies for receiving or shipping Venezuelan oil.
Since last year, PDVSA has imported two cargoes of Iranian condensate in one-off swap deals to meet specific needs for diluents, and it has also exchanged Venezuelan jet fuel for Iranian gasoline.
The new contract would help PDVSA secure a source of diluents, stabilizing exports of the Orinoco’s crude blends, while allowing its own lighter oil to be refined in Venezuela to produce badly needed motor fuel, three of the people said.
The first 1.9 million barrel cargo of Venezuela’s Merey heavy crude under the new swap set sail earlier this week from PDVSA’s Jose port on the very large crude carrier (VLCC) Felicity, owned and operated by National Iranian Tanker Co. (NITC), according to the three people and monitoring service TankerTrackers.com.
NITC, a unit of NIOC, did not reply to a request for comment.
The vessel was not included in PDVSA’s monthly port schedules for September, which lists planned imports and exports. However, TankerTrackers.com identified it while at Jose this month.
The Venezuelan crude shipment is a partial payment for a cargo of 2 million barrels of Iranian condensate that arrived in Venezuela on Thursday, according to the three sources and one of PDVSA’s port schedules.

LITTLE ENFORCEMENT
Last year, the previous Trump administration seized over 1 million barrels of Iranian fuel bound for Venezuela and blacklisted five tanker captains, as part of a “maximum pressure” strategy, but the United States has not interdicted recent Iranian supplies to Venezuela.
The US State Department declined to comment on the deal. A Treasury spokesperson did not respond to a Reuters question on how concerned the government might be that Iran-Venezuela deals would allow PDVSA to step up exports.
US government officials have insisted they do not plan to ease sanctions on Venezuela unless Maduro takes definitive steps toward free and fair elections.
Trump’s curbs on established companies doing business with PDVSA prompted the socialist-ruled nation to turn to swaps with Iran and other countries, while trading with a series of little-known customers.
PDVSA’s new customers and swaps have allowed it to keep exports stable around 650,000 barrels per day (bpd) this year, after they zigzagged in 2020.
However, a worsening shortage of diluents has recently limited oil exports, placing the Orinoco Belt production in an “emergency,” according to PDVSA documents from August and September related to its output status that were reviewed by Reuters.
PDVSA plans to mix the Iranian condensate with extra heavy oil to produce diluted crude oil, a grade demanded by Asian refiners that it has struggled to export since late 2019 when suppliers halted diluent shipments due to sanctions, the three sources said.