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 Arabia starts trial of the first wind turbine in Al-Jouf

Saudi Arabia starts trial of the first wind turbine in Al-Jouf
Updated 05 August 2021

Saudi Arabia starts trial of the first wind turbine in Al-Jouf

Saudi Arabia starts trial of the first wind turbine in Al-Jouf
  • Dumat Al-Jandal is poised to become the largest wind farm in the Middle East

RIYADH: Saudi Arabia has started the operational trial of the first wind turbine at Dumat Al-Jandal wind farm, which once fully operational will reduce CO2 emissions by nearly 1 million tons annually and supply 72,000 homes with clean energy.

The turbines comprise towers, blades, and nacelles, which will be assembled at the project site, 900 kilometers north of Riyadh in the Al-Jouf region. The project will include 99 Vestas wind turbines, each with a hub height of 130 meters and a rotor diameter of 150 meters.

The Kingdom’s first utility-scale wind-power source is being developed by a consortium led by EDF Renewables of France in partnership with Abu Dhabi-based Masdar. The Renewable Energy Project Development Office of Saudi Arabia’s Ministry of Energy awarded the project to the EDF Renewables-Masdar consortium in January 2019 after a competitive tender.

Its tariff of $21.3 per megawatt-hour (MWh), the lowest bid submitted, was reduced to $19.9/MWh at financial close, making Dumat Al-Jandal the most cost-efficient wind-energy project in the world. According to the US-Saudi Arabian Business Council, the development of Saudi Arabia’s renewable energy sector could create up to 750,000 jobs over the next decade, as the Kingdom pushes to generate 7 percent of its total electricity output from renewables by 2030.

It will also benefit from a 20-year power purchase agreement with the Saudi Power Procurement Co., a subsidiary of the Saudi Electricity Co., the Kingdom’s power generation and distribution company. Saudi Arabia’s renewable energy program aims to contribute to a sustainable future, preserve nonrenewable fossil fuel resources, and safeguard the Kingdom’s international energy leadership, according to the King Abdullah City for Atomic and Renewable Energy. That way, the program aims to ensure greater long-term global energy market stability.

Renewable energy projects, including wind and solar, are planned across more than 35 parks in Saudi Arabia by 2030.


Saudi youth move away from cash, says report

Saudi youth move away from cash, says report
Updated 05 August 2021

Saudi youth move away from cash, says report

Saudi youth move away from cash, says report
  • Revenue in the Saudi e-commerce market is projected to reach $7.05 billion in 2021, according to data firm Statista

RIYADH, DUBAI: Saudi youth are increasingly drawn toward using digital payment channels rather than cash, a trend indicating that the Kingdom’s plan to create a cashless society is on course.

Only 18 percent of Saudis aged between 16 and 22 years use cash, while almost half of the people who are 60 and above still prefer using cash, a report by Fintech Saudi showed.

The report also showed that only 20 percent of the population in the central region of Saudi Arabia, which includes the capital Riyadh, use cash in their everyday transactions, while 37 percent of those living in the western region, use paper money in their daily dealings.

The use of paper currency is declining at a rapid pace.

Fintech Saudi survey results showed that around 60 percent of individuals Kingdom-wide still use paper money at least once a week and one out of four people in Saudi Arabia uses cash every day.

Under Saudi Vision 2030, the Kingdom aims to increase the number of non-cash transactions to 70 percent by 2025.

“The coronavirus disease (COVID-19) outbreak has led to an acceleration in cashless activity with digital payments increasing by 75 percent over the last year, while cash withdrawals from ATMs and other payment points have declined by 30 percent over the same period,” the report said.

Revenue in the Saudi e-commerce market is projected to reach $7.05 billion in 2021, according to data firm Statista. 

The numbers are expected to show an annual growth rate of 5.38 percent in the coming years, resulting in a projected market volume of $8.69 billion by 2025.


Gulf economies expected to grow 2.2 percent this year, says World Bank

Gulf economies expected to grow 2.2 percent this year, says World Bank
Updated 05 August 2021

Gulf economies expected to grow 2.2 percent this year, says World Bank

Gulf economies expected to grow 2.2 percent this year, says World Bank
  • Most GCC countries are expected to continue to post deficits over the coming years
  • The countries that posted the largest deficits in 2020 — Bahrain, Kuwait and Oman — are expected to remain in deficit until 2023

RIYADH: Economies of the Gulf Cooperation Council (GCC) will likely grow at an aggregate 2.2 percent this year after a 4.8 percent contraction last year caused by the pandemic and lower oil prices, the World Bank said on Wednesday.

“With recent progress made with the rollout of the COVID-19 vaccine globally and with the revival of production and trade worldwide, the prospects for an economic recovery are firmer now than at the end of last year,” it said in a research report.

“Although downside risks remain, the forecast stands for an aggregate GCC economic turnaround of 2.2 percent in 2021 and an annual average growth of 3.3 percent in 2022–23.”

It remains vital for GCC countries — which include Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, the UAE — to diversify their economies, the World Bank said, as oil revenues account for over 70 percent of total government revenues in most GCC countries.

It said it expects Kuwait and Qatar to introduce a value-added tax (VAT) this year, following the example of other GCC states that have implemented the revenue-diversifying measure in different phases over the last few years.

On the fiscal side, most GCC countries are expected to continue to post deficits over the coming years, the World Bank said, after shortfalls intensified last year because of the coronavirus crisis.

The countries that posted the largest deficits in 2020 — Bahrain, Kuwait and Oman — are expected to remain in deficit until 2023, but with narrower ratios than in the 2020 downturn. While a rebound in oil prices may lift economic prospects in the short term, the World Bank said downside risks to its outlook are “extremely high” because of the region’s heavy exposure to global oil demand and the service industries.

“Mobility restrictions including for international travel may hurt attendance at future high-profile events in the GCC — the 2020 (rescheduled to 2021) World Expo in the UAE and the 2022 Federation Internationale de Football Association (FIFA) World Cup in Qatar,” it said.


SABB records net profit of $504 million

SABB records net profit of $504 million
Updated 05 August 2021

SABB records net profit of $504 million

SABB records net profit of $504 million

JEDDAH: The Saudi British Bank (SABB) recorded a net profit after zakat and income tax of SR1,889 million ($504 million) for the six months ended on June 30, 2021.

This is an increase of SR7,785 million or 132 percent compared to the loss of SR5,896 million for the same period in 2020.

Operating income of SR3,984 million for the six months ended June 30, 2021, a decrease of SR703 million, or 15 percent, compared to SR4,687 million for the same period in 2020.

Lubna Suliman Olayan, board chair of SABB said: The bank’s “performance in the second quarter of 2021 builds on the progress made in the first quarter of the year, as we continue the implementation of our five-year strategic plan.”

She said the bank is now focused on supporting the Kingdom’s economic transformation.


Yemen central bank injects old riyal bills worth billions into market to challenge Houthi ban

Yemen central bank injects old riyal bills worth billions into market to challenge Houthi ban
Updated 04 August 2021

Yemen central bank injects old riyal bills worth billions into market to challenge Houthi ban

Yemen central bank injects old riyal bills worth billions into market to challenge Houthi ban
  • The Houthi ban has forced travelers to Sanaa and other areas controlled by the militant group into buying old banknotes from the black market at a higher rate

ALEXANDRIA: The Central Bank of Yemen in Aden has injected billions of riyals in old large-sized 1,000 banknotes into the market to address a chronic shortage of cash.

The bank also implemented several other economic measures to control the chaotic exchange market and put an end to the fall in the Yemeni riyal.

Since late 2019, the Iran-backed Houthis have banned the use of banknotes printed by the Yemeni government in Aden, creating a severe cash crunch in areas under their control which has led to local exchange firms and banks stopping paying salaries and raising remittance charges.

The Houthi ban has forced travelers to Sanaa and other areas controlled by the militant group into buying old banknotes from the black market at a higher rate and carrying Saudi riyals or US dollars.

In a challenge to the Houthis, the central bank has put billions of riyals in old banknotes into the market and started withdrawing the newly printed 1,000 banknote. Yemenis can get old banknotes from local banks and exchange firms.

However, the Houthis warned people against using the large banknotes and published copies and serial numbers of the newly circulated cash.

In a bid to regulate the exchange market and curb the plunging value of the riyal, the central bank has tightened regulations for opening new exchange shops or firms, demanding that applicants produce a three-year feasibility study prepared by a certified accountant showing estimated budgets.

Existing exchange companies must now send their annual financial statements to the bank, use an approved software for their financial activities, apply international financial reporting standards, and audit their accounts by accountants certified by the central bank.

Some Yemeni economists, however, have cast doubt over the central bank’s ability to enact the regulations after the Yemeni riyal on Wednesday broke another historic record low against the dollar.

Local money traders told Arab News on Wednesday that the Yemeni riyal was trading at 1020 to the dollar in government-controlled areas, compared to less than 980 a month ago. When the war broke out in late 2014, the Yemeni riyal was sold at 215 to the dollar.

The Yemeni government previously relocated the central bank’s headquarters from Sanaa to Aden, floated the Yemeni riyal to bridge the gap between the official rate and the black market, closed many exchange shops, and printed billions of riyals to pay public servants. But all the measures proved ineffective on the ground as the Yemeni riyal continued to drop.

Waled Al-Attas, an assistant professor of financial and banking sciences at Hadhramout University, told Arab News: “The central bank is required to control the market and close unlicensed exchange shops in parallel with tightening control and procedures on existing exchange entities.”

He noted that the latest injection of cash into the market had boosted foreign currency speculation activities and pushed up inflation.

“The large 1,000 banknote that the central bank pumped into the market represents an additional burden and additional liquidity that will cause more inflation, higher prices, and speculation on exchange rates,” he added.

The continuing devaluation of the Yemeni riyal has pushed up food and fuel prices in government-controlled areas and triggered protests.