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If you’re the kind of person who pays attention to goings-on in the ASX’s vast junior explorer ecosystem, you may have noticed in the last few years the name of a particular Kingdom popping up quite a lot.
In case it isn’t obvious from the headline – I’m talking about the Kingdom of Saudi Arabia.
The country is known for its deep history and modern day geographical significance in Islam. It’s got the Ka’bah at Mecca, draped in its iconic black cloth kiswah.
Then, only minutes away is the mouth-watering and ever-increasing opulence of its capital city Riyadh. But the forces driving that neon jungle to rise out of the desert are, perhaps, what Saudi Arabia is best known for.
What I’m talking about are the industries attached to black gold: or crude oil, if you like.
So why is it that suddenly more and more hard rock miners are heading to Saudi Arabia – a petrostate?
COVID and the oil shock
The short answer is this: in 2020, Saudi Arabia re-wrote its mining laws to incentivise foreign investment in the country.
The country also introduced a 0% corporate tax rate in January for multinationals setting up headquarters in Saudi Arabia, covering monies earned from activities on Saudi land.
In other words, Saudi Arabia signalled to foreign mining companies they were welcome to come and explore its terrain. And Australian juniors have been listening.
But the move to encourage foreign direct investment (FDI) into the Saudi mining economy is just one part of two larger stories.
The first is the ongoing decarbonisation thematic towards net zero. To save a lot of time:
- Saudi Arabian decision makers are banking crude oil will be decreasingly valuable across the next eight decades and beyond.
- This is bad news for Saudi Arabia, whose national wealth depends mostly on oil and its associated industries.
- In response, the country is now seeking to get more serious about exploiting its own hard rock resources in advance of a future where crude oil is worth far less.
- This is informed by myriad research into the global impact of governmental ‘Net Zero’ agreements signed off in the last twenty years are likely to have.
- While most countries are lagging on meeting those targets, over the long-scale, Saudi Arabia sees writing on the wall.
So what’s the second reason? Now, I may not have a direct line to the lawmakers of the country, but I think it’s telling Saudi Arabia changed its mining laws to welcome FDI in 2020.
That was the same year crude oil prices went negative for nearly two months in the early stages of the COVID pandemic.
Saudi Arabia got a taste of what that future world with far less oil would look like: they woke up, checked their bank accounts, and saw $0.00.
Well, not literally. Nearly 52% of Saudi Arabia’s 2023 GDP was from non-oil sources. Relevant government agencies within the countries also like to report there’s US$2.5T worth of metals and other commodities to be extracted in aggregate.
Calls for Australian expertise
It is perhaps unsurprising, then, that the 2024 Davos conference at the start of the year saw Saudi Arabian delegates making calls to Australian companies for help in developing Saudi Arabia’s hard rock mining sector.
The nation also kicked off the 2024 calendar year with a USD$182M injection to boost minerals exploration within the country’s vast desert expanses.
That they would seek Australia’s collective expertise for guidance is particularly unsurprising when you consider similar inland geographies.
This could be the start of a new trend for explorers on the ASX.
After all, it isn’t just Saudi Arabia’s economic security that is threatened – in the long run – to suffer from a world where oil is less in demand. All Gulf States are facing the same problem.
Conversely, its economic security is also threatened by rising temperatures caused by global excessive hydrocarbon consumption – extreme heat saw 1,300 people die during this year’s Hajj pilgrimage.
So, with relevant Saudi decision makers seeing the writing on the wall of crude oil’s future – it’s probably a pretty safe bet the country is keen, eventually, to cut down on its own consumption and production, too.
So. It’s still early days for Saudi Arabia’s mining sector, as far as a run into the country driven by FDI goes (the nation state does, of course, already have its own domestic mining industry.)
So which ASX companies are interested in working in the region – and which stocks could offer exposure to future activity in the area?
8 ASX mining stocks to watch
Magnum Mining and Exploration
Magnum Mining and Exploration (ASX:MGU) is an Australian iron ore explorer established in Nevada but with plans to leverage Saudi Arabia’s welcome door to Australian companies (and Net Zero focus) by producing green steel in the Kingdom.
Ultimately, iron ore would be shipped to Saudi Arabia to a plant in that jurisdiction would produce environmentally-minor steel products.
To that end, the company already has an established subsidiary in the country called Midmetal (which it acquired 50% of the rights to earlier this year.)
Magnum Mining is keen to use its own HIsmelt technology at the Saudi Arabian green steel plant using alternative fuels such as biochar.
Of explorers active in the region, Magnum is in a fairly desirable position. The Saudi 50% owners of Midmetal are funding half of the development, with the Kingdom-owned Saudi Development Fund having expressed some level of interest.
Alara Resources
Alara Resources (ASX:AUQ) is a copper-gold explorer active in the Middle East with another copper producing project in Oman. It first became a producer in May of this year.
While the company’s copper operations are firmly an Omani story, management has its eyes on the largest country in the region, which is the Kingdom of Saudi Arabia.
In March last year, Alara established a subsidiary called Alara Tasnim Southwest Mining Company (ATSW) with the express purpose of applying for mineral exploration grants in the Kingdom with a view on precious metals.
Hoping to target the Arabian Shield area flanking the Red Sea, Alara is also hopeful it can build up a mining services arm in Saudi Arabia to offer “mining solutions” to other local mining firms.
“[The] Saudi Arabian economy [is] currently experiencing an industrial renaissance as the Kingdom’s Vision 2030 economic roadmap continues to be rolled out” Alara MD Atmavireshwar Sthapak said at the time.
Surefire Resources
Surefire Resources (ASX:SRN) is a predominately WA-focused vanadium explorer, but, like Magnum, with an interest in downstream processing in the Saudi Kingdom.
Partnering with Saudi-based Ajlan & Bros Mining and Metals, the two companies recently extended a 12-month MOU regarding the company’s WA-based Victory Bore vanadium project.
Under a prior version of the MOU, Alara is keen to explore the pros and cons of processing vanadium magnetite concentrate in the jurisdiction.
The company’s executive suite are set to travel to Saudi Arabia over the coming months – roping in the Australian ambassador – to progress discussions.
Surefire reported in mid-August a number of Saudi Arabian companies are interested in the prospect of processing vanadium ore.
Metal Bank
Metal Bank Ltd (ASX:MBK) is an ASX explorer with an increasing focus on the Middle East & North Africa (MENA) region.
The company has already got mining rights in the Kingdom of Jordan, and the company is sniffing after copper mineralisation in that jurisdiction.
As part of its MENA expansion plans, Metal Bank only this month (August 2024) entered into a new Saudi JV entity. But it’s the company’s previous experience with the Saudi Arabian mining sector that had HotCopper users watching.
Metal Bank chair Ines Scotland used to work for a mining outfit called Citadel which also had a JV with the same Saudi partner, Central Mining Holding Company (CMHC).
That entity is a member of the Al Gahtani Group, which helped get the Jabal Sayid copper mining project off the ground.
European Lithium
European Lithium (ASX:EUR) in July of 2024 moved to set up a lithium hydroxide plant in Saudi Arabia, treating spodumene ore form its Austrian Wolfsberg project.
Notably, that deal has two other big names wrapped up in it – Saudi Arabian investment group Obeikan Group, and, NASDAQ-listed Critical Metals Corp (CMC).
CMC is a combination of European Lithium and Sizzle Acquisition Corporation; that amalgamation went through in early 2024.
The structure of the deal sees Obeikan and CRC team up to a 50/50 JV with ore sales to the plant from Wolfsberg locked in.
Earlier this year, carmaker BMW invested a multimillion dollar sum into CMC given the latter’s chance at becoming Europe’s first European hydroxide and spodumene producer.
Cassius Mining
Nanocap Cassius Mining (ASX:CMD) is a company recently pivoting to opportunities in Saudi Arabia of the more ambitious variety – the company has just over $3M in cash.
Another player setting up relationships in the Kingdom of August 2024, the company is keen to begin exploring for critical minerals in the jurisdiction.
Cassius and Segia Gulf Group – a Saudi-based industrial services outfit – have laid out, in a recent MOU, their shared vision of a 50/50 JV that would give Cassius access to Saudi government tenement tender rounds.
Cassius, as an international partner, intends to apply for government programs that would ultimately subsidise costs – perhaps a reason why the low-cash company is keen for a jurisdiction offering fairly compelling incentives.
Segia, for its part, is tasked with introducing Cassius around the traps towards establishing a presence in Saudi Arabia.
AuKing Mining
Another Nanocap, AuKing Mining (ASX:AKN) in March of 2024 entered into an MOU with another Saudi Arabian entity, the Barg Alsaman Mining Company (BSMC).
Here, Cassius and AuKing have something in common – both juniors are teaming up with Segia Gulf Group.
Back in March, Segia MD Sheikh Abdullah Al-Qahtani noted the country’s overhead goal to open up its mining sector to foreign mining companies so as to accelerate the domestic hard-rock sector.
Training of the Saudi workforce is one key element of this. Like Cassius, Segia will also be tasked with introducing AuKing around the Saudi finance and investing ecosystem.
Notably, AuKing inked that early-stage deal through the state-owned Invest Saudi entity – effectively a trade office.
Novonix
If you were surprised there was no lithium metal or battery thematic-type stocks on this list, don’t fear – because battery recycling player Novonix Ltd (ASX:NVX) entered a JV last year.
The company, alongside its Saudi partner TAQAT Development Company, is just one brick in the company’s plan to begin producing battery materials in the MENA region broadly.
Notably, the company is looking beyond the immediate Electric Vehicle (EV) battery market and into the next best thing – Energy Storage System (ESS) applications, otherwise known as ‘Big Batteries.’
Under the deal, Novonix is allowing TAQAT access to its battery recycling tech IP on a royalty-free basis.
“Novonix’s battery anode manufacturing expertise coupled with TAQAT’s anticipated strong financial support will help bring the first anode materials facility to Saudi Arabia,” company CEO Chris Burns said in April of 2023.
Notably, however – the project wasn’t mentioned in Novonix’s latest half yearly from August of 2024.
