On 30 October 2022, the Saudi Arabian Minister of Industry and Mineral Resources announced that Saudi Arabia is planning to auction five new mining exploration opportunities for local and international investors in 2023. These five new sites contain deposits of copper, zinc, lead and iron and are being auctioned in line with the new Mining Investment Law.
The Ministry of Industrial and Mineral Resources is Saudi Arabia's principal government entity responsible for ensuring adherence to the new Mining Law. The main features of this area of law include licensing provisions, sustainability provisions, financing, monitoring and inspection.
The Mining Law specifies the following types of licenses that are open to foreign investors:
- Reconnaissance license: an initial geological survey license to identify and scan the geological environment for the presence of minerals. The period of the reconnaissance license will not exceed two years for the area designated by the applicant, and it may be extended or renewed for a single additional period not exceeding two years.
- Exploration license: a detailed activity that leads to the exploration of sediment by geological, geophysical, or geochemical methods. It is also used in relation to drilling of all kinds, or any other appropriate method, in any location, in order to determine the presence of these sediments, their extensions, quantities, types, and the feasibility of mining them.
The period of this license is up to 15 years in total with a maximum five-year initial term, plus one or more renewal periods of not more than five years each. It is worth mentioning that the Mining Law grants the holder of the exploration license the exclusive right to obtain a utilisation/exploitation license for the relevant license site.
- Exploitation license: to extract ores and minerals (mining or quarrying), including any direct or indirect activity necessary to achieve this. The maximum licensed area is 50 kilometres for utilisation and exploitation, with a duration limitation of 60 years (inclusive of renewals and/or extensions) and an initial term of up to 30 years.
The exploitation license also includes the following:
- Mining license: for the purpose of extracting useful minerals or formations from land or marine areas, including direct or indirect mining activity;
- Small mine license: for areas that do not exceed one kilometre;
- Building materials quarry license: this is limited to locations from which rocks or minerals are extracted; and its initial period does not exceed 10 years; and
- General purpose license: which is a license that allows the holder of an exploitation license to establish facilities or use lands outside the exploitation-licensed site.
Other features of the new Mining Law
Moreover, the Mining Law requires that all mining activities take place on land owned by the government, private parties, or marine areas, with the exception of: 1) land occupied by holy places; 2) land occupied by military installations or areas reserved for hydrocarbon operations; or 3) land and marine areas that are excluded on the basis of a decision by the Saudi Council of Ministers.
The Mining Law also outlines the mechanism for applying for licenses, their expiry, renewal and termination. In addition, the implementing regulations of the Mining Law details the procedures for applying for the licenses, the violations and penalties.
The Kingdom of Saudi Arabia is seeking to diversify its economy away from oil by investing hundreds of billions of dollars into Vision 2030, initiated by Saudi Arabia's Crown Prince Mohammed bin Salman. Mining is one of the sectors that has been identified for expansion.
This sentiment is best summarised by His Excellency Mr. Bandar bin Ibrahim AlKhorayef, who stated the following:
"Following the launch of Vision 2030, the Ministry of Industry and Mineral Resources has been working to establish a world-class mining jurisdiction in support of transforming the mining sector into the third pillar of Saudi national industry. Critical to these efforts has been to ensure an investor-friendly environment that is underscored by transparency, ease of doing business, and ESG compliance."
Mining clearly represents an important sector in this region, and the introduction of the new Mining Law signifies a positive step in establishing a reliable framework with which non-Saudi Arabian entities can take comfort.
For more information on the above, or if you have any queries, please contact Imran Mufti or Rana Alassaf in our Projects team. They have co-authored this article with Wissam Chbeir, partner at AlGhazzawi & Partners, a firm with whom we have a cooperation agreement.