Most discussion of Vision 2030 focuses on high-profile initiatives such as the Saudi Aramco initial public offering and pays little attention to plans for the liberalization and expansion of Saudi Arabia’s mining sector. In many cases, the kingdom’s valuable nonhydrocarbon natural resources are overlooked. Yet the government claims that its undeveloped metal and mineral resources could be worth as much as $1.3 trillion, and as much of the media fanfare surrounding the Aramco IPO continues to fade, the mining sector’s transformation may begin to come to fruition.

Saudi Arabia’s mining and metal and mineral processing industry contributes about $17 billion to the kingdom’s gross domestic product per year and employs approximately 250,000 people. Mining activities comprise 15% of the sector’s contribution while the remaining 85% is linked to the value created by the midstream and downstream processes that follow extraction. The Vision 2030 plans have set lofty goals, and for Saudi mining, the original document envisions the sector as a $25.86 billion industry by the end of 2020 creating 90,000 additional jobs. While this is ambitious, the mining sector approaches Vision 2030 with the benefit of experience that other newly created sectors in the kingdom do not yet have, giving it stronger footing to reach these targets.

The Saudi government aims to achieve its goals for the sector through measures detailed in the National Industrial Development and Logistics Program, the most important of which are likely to be the creation of a national geological survey and the streamlining of licensing procedures for foreign firms. Though it will take time to determine to what extent these reforms achieve their intended effects, recent structural and managerial changes to state-owned entities in Saudi Arabia provide important clues about the government’s approach to its plans for this sector.

The division of the Ministry of Energy, Industry, and Mineral Resources into two separate agencies garnered widespread attention after the surprising removal of veteran Saudi technocrat Khalid al-Falih from his ministerial position. However, another important development came as a result of this decision. The creation of the Ministry of Industry and Mineral Resources distinct from the behemoth Saudi energy industry means that the agency charged with overseeing the transformation of the mining sector will have greater regulatory autonomy. Tasked with leading the Ministry of Industry and Mineral Resources is Bandar Al-Khorayef, a veteran of the Saudi private sector through his years at the Alkhorayef Group, where he previously served on the board of directors. Additionally, Khorayef is a board member of Saudi Arabian Military Industries, another high-priority component of Vision 2030.

Further, in a move that was less publicized than Falih’s removal from the ministry and the Aramco board, Falih was also replaced by Yasir al-Rumayyan as the chairman of the board of directors of the Saudi Arabian Mining Company, commonly known as Maaden. Rumayyan manages Saudi Arabia’s sovereign wealth fund, the Public Investment Fund, and is also the chair of Aramco. That he fills the same role at Maaden may be instructive as to how closely the government plans to follow through on its stated intentions for the mining sector, as well as the degree to which the Public Investment Fund may be directly involved in the process.

Created in 1997, Maaden is 65% owned by the Public Investment Fund, with the rest of its shares traded on Riyadh’s Tadawul stock exchange. Unlike other more well-known elements of Vision 2030 that aim to create new industries in sectors like defense and entertainment, the plan to expand the mining sector’s contribution to non-oil economic growth is firmly rooted in an industry and a state-owned entity that already have proven track records in the kingdom. There is a wide range of mineral resources that the Saudi government has expressed interest in cultivating, including copper, zinc, and uranium. Currently, however, Maaden’s output consists mostly of aluminum, phosphates, and gold. Despite the considerable size of the Gulf Arab aluminum industry, which accounted for about 8% of global production in 2018, Saudi Arabia is not a large exporter of aluminum products and 60% of Maaden’s production is consumed domestically. Maaden’s leadership has likely taken this into consideration, as there seems to be little interest in increasing exports to compete with larger regional producers like the United Arab Emirates and Bahrain, which plan to increase the scale of their operations. Additionally, uncertainties over international trade disputes and prospects for both global and domestic growth in the near term may on their own provide enough incentive to dissuade Maaden from betting too heavily on the aluminum trade.

In a recent interview, Maaden Chief Executive Officer Darren Davis stated that the company’s plans for future expansion center mostly around its well-established phosphate and gold operations. Maaden produces phosphates, which are commonly used in agricultural fertilizers, in a joint venture with Saudi petrochemical heavyweight SABIC, the Saudi Basic Industries Corporation. Davis highlighted the potential for exports to key producers of agricultural products around the world, particularly in East Africa. Saudi Arabia also enjoys close proximity to South Asia, home to some of the largest fertilizer importers worldwide. Wherever phosphate markets go in 2020, Maaden seems confident in its ability to perform as a top supplier after raising $5 billion in debt to refinance its phosphate facility and acquiring an 85% stake in Mauritius-based fertilizer distributor Meridian. Maaden is also in the early stages of conducting its largest ever gold exploration operation in efforts to increase its gold production from current levels at 425,000 ounces a year to 1 million ounces annually by 2025.

The Saudi government has also expressed its intent to open the sector to additional firms, both foreign and domestic. The National Industrial Development and Logistics Program cites underexploration and a lack of local industry players as key challenges facing the industry. The program is seeking two critical reforms to attract foreign firms that can provide more resources and thereby optimize each segment of the process, from extraction to sale. Saudi authorities plan to create a national geological database that will provide a greater degree of transparency about the potential for further exploration in the kingdom. The second step is to increase ease of access for foreign firms by streamlining the licensing process to between 60 and 90 days. This would be a substantial improvement from the current six-month average processing time.

A subtle feature of the National Industrial Development and Logistics Program plan remains an assessment of how energy price reforms in the kingdom will impact mining operations. Mineral extraction and its associated processes are highly energy-intensive activities. The Saudi Electricity Company, the kingdom’s national utility, currently charges 18 halalas (slightly less than $0.05) per kilowatt-hour for industrial electricity consumers. This is the same rate the company charges residential consumers for their first 6,000 kWh per month, after which the rate increases to 30 halalas per kWh. It is also a substantial discount from the 32 halalas per kWh paid by government consumers. Power price reform has been a crucial concern facing Saudi policymakers for years, but if reforms to industrial power prices that remove government subsidies are to coincide with liberalization of the mining sector, this could discourage international investors.

The decline in foreign direct investment in Saudi Arabia over the last several years leaves room for skepticism that liberalizing more of the Saudi economy will attract significant amounts of previously untapped foreign capital. Viewing the government’s aspirations for the mining sector in the context of the grandiose plans of Vision 2030 may do even less to inspire a great deal of interest in Saudi mining. Conversely, devoting more of its own resources to this industry is perhaps one of the more viable plans that the government has put forth to expand the kingdom’s non-oil GDP and boost FDI. A profitable industry that produces commodities with sustainable global demand may be very attractive to international investors, provided that industry stakeholders follow through on plans for greater transparency in Saudi geological data, streamlining of licensing processes by regulators, and other structural reforms.

Compared to other government pursuits such as the creation of a domestic defense industry, a civilian nuclear power sector, and the Aramco IPO, the expansion of the mining industry appears to face a relatively manageable set of challenges. If the industry and its regulators are able to navigate these challenges successfully, the mining sector may become a critical component of economic diversification, providing tangible economic benefits the kingdom needs.