Saudi Arabia could play an important role in the critical mineral supply chains, due to its reliable and lower cost energy, optimal geological location to serve different areas, welcome investment climate and aim to diversify its industries, keynote panelists told the Future Minerals Forum held in Riyadh and virtually Jan. 12.
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In the panel on Sovereignty vs Globalization - Developing Resilient Critical Minerals Supply and Value Chains for a Clean Future Economy, Hallgarten & Company strategist Christopher Ecclestone said Saudi Arabia had "very deep pockets," and could easily decide to become, for example, a major manganese processor.
"The country is greatly situated between Asia and Europe and world's best shipping lane runs right by," Ecclestone said. "The sums are not difficult to do... it's all within shipping distance, you potentially have cheaper energy than anyone else has, so your breakeven is going to be very low on doing that. You just have to do the sums and decide this is a space you want to get into."
While there were pitfalls and sometimes being too niche might not be the best way to go, Ecclestone said there were definite opportunities in large direct shipping ores and large processing, as well as niche lithium processing.
"Saudi Arabia could do this on a large scale and become the place to process lithium," he said. "What Western auto manufacturers are looking for is to displace China, because China has a potential stranglehold on the supply of lithium-ion batteries that could shut down most western auto manufacturers within six months if they decided not to share."
However, he said this might meant that the kingdom might have to get involved in acquiring lithium deposits around the world as its feed source, as done by China's Ganfeng and Tianqi in Latin America.
"Saudi Arabia should also secure supplies of lithium by buying salars in Argentina or Chile and making sure it's got the material so no one can block it from that strategy," Ecclestone told the conference.
Incentives for investment
Eurasian Resources Group CEO Benedikt Sobotka agreed that Saudi Arabia had all the ingredients to be successful.
"What the country has done well is providing incentives for investments and being very open to investors, that's the correct strategy, but we have to be realistic about the sovereignty of supply chains," Sobotka said.
"Currently the situation in the energy supply chain for most of the energy metals, whether that's manganese, nickel, cobalt, lithium zinc or copper, is we buy metals that are produced in other countries that are refined in China and then are bought back," he said. "Fundamentally this is not sustainable.
"This is where a country like Saudi Arabia can play an important role in trying to pull back those transformation activities that are energy intensive and there are other ingredients that are all here. So the country has taken exactly the right approach to that," he said.
Under Saudi Arabia's Vision 2030 diversification plan, the kingdom aims to support promising sectors and foster their success so that they become new pillars of its economy.
In mining, Saudi Arabia is planning a number of structural reforms, including stimulating private sector investments by intensifying exploration, building a comprehensive database of its resources, reviewing the licensing procedures for extraction, investing in infrastructure, developing funding methods and establishing centers of excellence.
It was also important to focus on skills and the availability of resources, Sobotka said, adding that all resource-rich countries should strive to create a large hub around a new mine that was far beyond the initial investment, including educational institutions, transportation and logistics services, the transformation of the materials and training.
"It's not just the initial investment, but seeing that as a kernel or starting point, a catalyst for further investment and country build up and building skills," Sobotka said.
Stable framework required
Due to its long-term nature, mining also required a stable framework, added Rosseau Asset Management president and chief investment officer Warren Irwin.
"There are a lot of successful jurisdictions out there that have had long, multi-decade successful mining industries, you just have to leave it alone," Warren said. "No matter what happens, you need to keep the rules in place and give the mining companies a stable place to operate and you'll be very successful."
Saudi Arabia had "tremendous potential to bring together people not only from this area but the broader region," Sobotka said, adding that the country also had good potential geologically.
"I think what will be very important is to create transparency around the supply chain," he said. "ESG is important from an investor point of view, but also ESG from the consumer point of view will be equally important, because consumers want to have a choice and want to see what they are buying and were they are buying it from.
"Countries with a strong track record of ESG and in environmental protection and doing sustainable resource development like Saudi Arabia are perfectly positioned, because they have something to show, whereas other countries selling into the market with their non-compliant mines they can hide," he said. "That is something companies must work together all along the supply chain to make sure that isn't possible."