Peninsula prospects

By Mike O'Driscoll
Published: Tuesday, 25 May 2010

Although there remain challenges, an abundance of untapped mineral deposits, increasing demand, and clear political will and support to develop the mineral sector has brought the Arabian Peninsula under the investor spotlight

In terms of natural resource development the Arabian Peninsula has long been associated with oil and gas, and remains one of the world’s leading suppliers of these fossil fuels. However, the region is also underlain with some important industrial mineral deposits, certain of which have the potential to become significant sources of supply.

Increasing interest in pursuing development of Arabian industrial minerals has been driven by three main factors:

  • Arabian government policies to significantly accelerate development of infrastructure, and so prompting an upsurge in associated manufacturing industries as key domestic consumers of industrial minerals (eg. construction materials, cement, glass, ceramics, plastics)
  • Arabian government policies to significantly develop natural resources other than oil and gas, ie. minerals and water, leading to a modernisation of mining legislation and opening up of exploration areas and licences in a bid to attract foreign investment
  • outside the region, the last few years have witnessed keen interest by mineral consumers and traders alike to seek alternative sources of mineral supply to China, in particular: magnesite, barytes, graphite, fluorspar, bauxite, talc.

While the region is rich in mineral occurrences, it is Saudi Arabia and Oman which have been witnessing the greatest interest in mineral development projects.

Dietmar Alber, divisional manager, Minerals & Metals Division, of leading grinding equipment supplier, Hosokawa Alpine AG, Germany told IM: “What we see is that [development of] silica and ground calcium carbonate has been rising in recent years and newcomers in this industry are investing every year, as demand in Saudi Arabia and the region is huge and permanently increasing.”

Alber also identified energy intensive industries such as fibreglass, ceramics, and glass as growing. “Cheap energy and availability of good raw materials combined by the policy of diversifying the industry (away from oil and oil related) are the drivers, backed up of course by the general fast development in the whole region. Investments were knocked off course during the recent recession, but are picking up now.” said Alber.



Construction at Ras Az Zawr, the location for
part of Ma’aden’s phosphate operations. Ma’aden


Infrastructure & economy

The location of the Arabian Peninsula is such that it sits between the European/North African region, and that of Asia, and of course is central to Middle East markets. Strategically, this would appear initially attractive, although it must be underlined that some of the prospective mineral deposits, especially in Saudi Arabia, are some distance from commercial ports, and also require basic highway and/or rail access. Along with basic evaluation expenses, infrastructure costs remain one of the main hurdles in developing Arabian mineral projects to commercial fruition.

For example, a cornerstone of the major bauxite/alumina and phosphate projects in north-east Saudi Arabia is the successful completion of a new 1,408km railway linking Riyadh with the mineral-rich northern region including Al Jalamid, Qassim, Hail, and Al Jawf.

The main line will be connected with branch lines to join AzZabirah and Jubail and when completed is envisaged to transport >12m. tonnes of minerals and other materials to the country’s ports.

Economically, the region has suffered from the recession, impacted by the Saad-Algosaibi debt default and Dubai World’s debt restructuring, recovery has not been swift. The oil price remains a key influencing factor, which has picked up, and there has been some easing in the financial markets allowing the private sector to think about investing again.

In the main, most Arabian economies are expected to have respectable growth rates of 3-4% for 2010. Qatar’s impressive 24% growth forecast is owed to anticipated gas projects coming on stream. Oman and Qatar appeared to ride the recession the best.

A Bank of America-Merrill Lynch report published March 2010 forecast Saudi’s GDP for 2010 to reach around 3.9%, representing quite a leap from official GDP estimates of 0.2% for 2009. This report, and one by Shuaa Capital, considers that the current economic slowdown will not hamper the Saudi government’s aim to push through with infrastructure expansion plans.

Saudi Arabia has allotted the highest budget for infrastructure development in the entire Gulf Co-operation Council countries (GCC), with expenditure expected to reach $160bn., a rise of 9.1% from the 2009 budget allocation. One driver for this has been the population growth in Saudi Arabia over the past 20 years which has resulted in a housing shortage.


The Arabian Peninsula




Saudi Arabia

On 5 April 2010, Saudi Arabia’s government adopted the Ninth Five-Year Development Plan for the period 2010-2014. Amongst its 13 objectives, were No.7: “diversification of the economic base horizontally and vertically, expansion of the absorptive and productive capacity of the national economy, boosting its competitiveness and maximizing the return from its relative advantages.”; and No.10: “Development, preservation and rational use of natural resources-particularly water resources- protection of the environment and the development of its regulations within the framework of sustainable development.”

Diversification into developing mineral resources, the country’s “Third Pillar”, has continued since the 5th Five-Year Development Plan. A new mining law, introduced in 2004, allows for companies to work with Saudi Arabia’s state-run Saudi Arabian Mining Co. (Ma’aden), or through joint ventures with local companies.

The country has a vast array of potential resources, including: barytes, bauxite, bentonite, dolomite, feldspar, fluorspar, garnet, graphite, gypsum, kaolin, limestone, magnesite, mica, nepheline syenite, olivine, phosphate, rare earths, refractory clays, silica sand, sillimanite, and zeolites (see table p.57).

Interest and activity in evaluating and exploiting these minerals has certainly increased. The Deputy Ministry for Mineral Resources (DMMR) is the sole agency responsible for implementing the provisions of the Saudi Mining Code and Regulations. For 2008, the DMMR reported that a total of 488 licenses were issued and renewed in 2008. These included 269 new licenses, 192 comprising Building Materials Quarry Licenses, 49 Reconnaissance Licenses, 14 Exploration Licenses, 5 Raw Materials Quarry Licenses, and 9 Small Mine Licenses.

The total number of active licenses for 2008 was 1,408, an increase of 94 licenses over 2007. The total area covered by licenses was in excess of 75,000km2. In 2008, license holders exploited 325m. tonnes of minerals, an increase of 15m. over 2007.

Industrial mineral highlights for 2008 exploration included six mining locations for the exploitation of limestone, pozzolan, aggregates, crushed materials and sand in Riyadh, Mecca, Eastern province, Baha and Jizan; and seven mining complexes were surveyed with a total area of 8,290km2 for silica sand, phosphate, barytes and aggregates in Mecca, Tabuk and the Northern Borders.

Ma’aden

In 1997, Ma’aden was established to drive private investment in the mining sector, and in 2004 initial steps were taken to privatise the company. Ma’aden is spending $16bn. to develop the kingdom’s phosphate, bauxite, gold, and various industrial minerals.

The two primary ongoing projects under Ma’aden include its Phosphate Project at Al Jalamid (a j-v with SABIC aiming at 3m. tpa DAP and 200,000 tpa phosphoric acid) and Aluminium Project at Az Zabirah (4m. tpa bauxite targeted) and Ras Az Zawr (1.8m. tpa alumina plant at Jubail planned).

On 22 March 2010, Ma’aden announced that it was evaluating the exploitation of a second major phosphate resource in the north of Saudi Arabia to supply merchant grade phosphoric acid to the fertiliser, food, and animal feed industries.

A feasibility study is underway for mining the Al Khabra deposit in the Umm Wual licence area located 40km north-east of Turaif. The project envisages an open pit mine and simple beneficiation process adding almost 1.5m. tpa Ma’aden’s scheduled phosphate capacity (see table p.57).

Ma’aden industrial mineral projects include the Zarghat magnesite deposit, and kaolin and “low grade bauxite” at Az Zabirah, the latter for cement applications. However, Ma’aden was unable to comment on the status of these developments, which are understood to remain at early stages of development.

In August 2009 Ma’aden signed a SR95m. contract with Al Olayan Descon for mine infrastructure work at the Al-Gazalah (Zarghat) magnesite deposit 160km south-west of Hail, in addition to construction of a new processing plant at Medina.

Ma’aden stated that the mine will produce around 140,000 tpa magnesite for the next 20 years feeding the plant facility at Medina which is to produce caustic calcined and dead burned magnesia. Ma’aden also stated that it had completed extensive environmental and social impact studies for the project. The project has an investment cost of $63m. and is planned to be operational in 2010.

The kaolin and bauxite deposits at Az Zabirah became operational in early 2008, and estimated commercial scale production, costing $4m., is envisaged at 250,000 tpa cement grade bauxite and 50,000 tpa kaolin.

The company is also active in exploration for other minerals including refractory clays, nepheline syenite, sillimanite, graphite, bentonite, attapulgite, diatomite, silica, garnet, wollastonite, and mineral brines.

UMIC

Based in Jeddah, United Mining Investments Co. (UMIC) operates several industrial mineral mining and processing projects, including the mining of limestone and marble. Mining Licences have been awarded for feldspar, quartz, and andesite deposits, and UMIC plans to commence mining operations in the near future.

The product range that UMIC is planning to supply to the market includes: crushed lime, marble and feldspar; ground calcium carbonate (GCC); precipitated calcium carbonate (PCC); finely ground (micronised) feldspar; and quartz (for details on these projects, see IM June 2009: Seeking Saudi Minerals).

Anwar Al Farasani, marketing manager, UMIC, considered the following as key to the country’s success in mineral development: Saudi Arabia has an enormous amount of quality mineral deposits; they have been untapped until recently; cheap energy resources results in lower operating costs; and there is good market potential.

However, Al Farasani also explained the challenges to IM: “The challenges faced are that many mine sites require access roads and site preparation, and there is a lack of downstream industries to boost mining activities. There is not a single company in the whole of Saudi Arabia dedicated for mining services. Mining industries are compelled to seek service from construction companies for core drilling and sampling.”

According to Al Farasani, there are just two laboratories in Saudi Arabia, but with limited scope of work and not in possession of modern equipment required for the sample analysis.

On a positive note: “Saudi Arabia has got good demand for calcium carbonate. Quite a huge quantity is being imported and the same holds good for other industrial minerals like feldspar and bentonite.” said Al Farasani.

Oman

To the south-east of Saudi Arabia, covering an area of some 309,000 km2, Oman is becoming a beacon of mineral interest. Oman’s mineral resources are expected to be a large source of revenue and growth for the Omani economy outside the oil and gas sector, presenting a wide array of project opportunities for investors.

Advantages in Oman include a politically stable country strategically located with access to the Arabian Sea and to India, China, GCC, Africa and many other Asian and European countries. Oman also has excellent infrastructure in terms of communication, road, health and educational facilities as well as the availability of skilled and semi-skilled labour. Above all, there is low cost energy and investor friendly rules and regulations which attract foreign and domestic investment.

There is a comprehensive legal framework laid out in the Ministry of Commerce and Industry’s Mining Law (Royal Decree 27 of 2003) relating to the issuance of mining licenses, dispute resolution in the mining sector, and environmental protection.

Chris Spencer, chief executive officer, European Environmental Minerals Ltd, UK, has spent some time working in Oman. He told IM: “The Sultanate of Oman is big country with a lot of potential projects and really not an awful lot of development, given its size and location. There is a constantly increasing demand for building materials”.

Mineral highlights identified by Spencer include: abundant chromite bearing peridotite pods; very pure dolomite deposits at Mahil Sanub and Mahil Qurrayat to the west of Muscat; marble in Suwayq for glass and fillers; salt extracted from salt pans or “sabkhahs” near the developing port of Duqm; and gypsum at Shuwaymiyah, near Duqm.

Infant industry

As with Saudi Arabia, Oman’s industrial minerals industry is in its infancy and has few sophisticated developments. There are many companies involved in producing construction materials such as aggregate and armour rocks. Oman has two cement plants, but five more Industrial Licenses have been issued and they are seeking raw material sources. Two container glass plants are also active but are using imported silica sand.

Limestone is mined for India’s steel industry which requires >25m. tpa. Dammam Formation limestone has been tested to be one of the best for the steel industry from Oman. Elsewhere, good, white quality limestone is being micronised for the paints, plastics and other industries, and there is a lime and hydrated lime plant.

Gypsum is used as a retarder in the cement industry in Oman and the UAE. There is a small plasterboard factory in south Oman utilising Omani gypsum. Another plaster board factory has been set-up to produce load bearing plasterboards. These load bearing plaster boards are reinforced with silica sand. The technology has been developed by Rapidwall, Australia.

Two ceramic tile plants in Oman are producing red body glazed ceramic wall and floor tiles in various sizes. They are utilising 100 locally available raw materials. A third factory of ceramic tiles is also planned.

Emerging projects

There are several projects either planned or already underway in the mineral sector, including plans to establish a “Minerals-City” to serve as a hub for a number of mineral based downstream processing projects.

The Minerals City is planned by Takamul Investment Co., a majority Omani government-owned investment vehicle having Oman Oil Co. as the majority shareholder. The initiative is among a portfolio of downstream ventures being pursued by Takamul in the metals, petrochemicals and minerals sectors, involving potential investments in excess of $2bn.

The project is to include a $450m., 100,000 tpa salt and 500,000 tpa soda ash project in partnership with Tata Chemicals Ltd, of India, and a 40,000 tpa silicon carbide processing facility at a cost of $40 million, in partnership with SNAM Abrasives, also of India. The project is expected to be launched in the fourth quarter of 2011.

Over the last few years Gulf Mining Materials Co. has emerged with a number of mineral projects for the region including exploration of kaolin, limestone, and calcium carbonate (marble).

In February 2010, Gulf Mining started up Oman’s first chromite processing plant, aiming to supply non-metallurgical grades for refractory, abrasive and foundry markets. The company has been active in chromite mining since 2006, but had been exporting only crude ore.

The 15,000 tpa plant is located in Wadi Mahram, near Wilayat Samayil, and sources chromite from a nearby deposit at a Cr2O3 content of 34-42%. Gulf Mining also purchases raw material from a number of smaller miners in the region to process at the Wadi Mahram plant.

The new plant will supply a chromite concentrate, with refractory customers in the Middle East and Asia being the primary non-metallurgical markets. Gulf Mining will ship the product through Sohar, Muscat or Jebel Ali (UAE) to overseas markets in China and India.


Selected potential industrial mineral resources of Saudi Arabia

Mineral Location Reserves (tonnes)/grade Remarks
Attapulgite Al Midra n.a.
Barytes Rabigh 200,000; 85% BaSO4
Al-Aqiq 40,000; 70% BaSO4
Jabal Hadab al Daihin 100,000; 50% BaSO4
Bauxite Az Zabirah 126m. 57% Al2O3, 5% SiO2 inferred resources Ma’aden project: 3.5m. tpa ore
Bentonite Khulays, 100km north Jeddah n.a. 200-300 metres thick
Clay (“illitic”) Jal Ajarabah “large resources” influenced by Al Jalamid phosphate project
Diatomite B’ir Hayzan n.a.
Dolomite Jabal At Tarrad, 90km east Ranyah n.a. white marble
Ar Ratratiyah, 80km south Afif n.a. white marble
Jabal Ash Shihbah, 90km west Afif n.a. high magnesia dolomite
Feldspar Bir Nabt 500,000
Al-Ruwaydhah 100,000
West Huqban 60,000
Bir Ibn Sarrar 60,000
Ablah 60,000
Fluorspar Jabal Hadb ad Dayahin Ablah
Garnet B’ir ash Shumt 124,000, 20% garnet
Graphite Wadi Irkhayman n.a.
Gypsum Jabal ar Raghamah, Maqna 33.6m.,  >90% gypsum
Sharm Mahar, Yanbu 234m., high purity, inferred
Marsa Maqbarah 66m. inferred
Sharm al Khawr 30m. inferred
Ilmenite Lakathah
Al Qahmah n.a.
Kaolin Khushaym Radi 51m., 80-90% kaolin
Jabal Shahba 30m., 90%
Darb Sid 80-90%
Az Zabirah 14m., 80% Ma’aden project: for cement, access dependent on bauxite project
At Tiniyat & Khashm Tayyarat 90m., 65%
Kyanite Jabal Kirsh West, 35km south Riyadh 1.1m., 35% kyanite*
Limestone Umm Al Ghorban, 50km east Al-Khary 45m.m3, 54% CaO Saudi Dolomite Co.
Khasm Mazaly, 25km south-east Riyadh 55.6% CaO
Wadi Hanifah, 10km north-west Riyadh 99.42% CaCO3
Al Hair 99.46% CaCO3
North Al Jurayr, Jufayr 97.10% CaCO3
Wadi Tarbah, 50km north-west Dawmat Al Jandal 200m., 55% CaO, <0.2 Fe2O3 for Az Zabirah bauxite/alumina and Al Jalamid phosphate projects.
Magnesite Zarghat, 700km north-east Jeddah 2.7m., 46% MgO Ma’aden project: 40-160,000 tpa ore, 20,000 tpa DBM, 20,000 tpa FM
Jabal Rokham 18.5m., 40% MgO Ma’aden
Nepheline syenite Jabal Sawda n.a.* Ma’aden
Phosphate Al Jalamid 534m. measured Ma’aden-SABIC j-v:  12m. tpa ore, 5m. tpa concentrate
Al Khabra, Umm Wu’al, 40km north-east Turaif 234m. 17-19% P2O5 Ma’aden project: 1.5m. tpa concentrate
Umm Wu’al 446m. indicated & inferred
Wadi An Rashed 24m.
Sanam 23m.
Thaniyat Turaif 157m.
Rare earths Ghurayyah 400m. tantalum, niobium, rare-earths, zirconium & yttrium Tertiary (Middle East) Ltd
Salt Jizan 30m., 96% NaCl Dependent upon Az Zabirah bauxite and alumina production
Sabkhat Jayb’Uwayyid 24m.
Ra’s al Qurayyah 64m.
Silica sand Tayma South 38,796 98.02 SiO2
Jibal ad Daghm 265m., 99.5 SiO2
Jabal Burmah 199m., 99.4 SiO2
Al Butain 1,650m., 98.7 SiO2
Jabal Saduwi 16m., 92-96 SiO2
Wadi Al Hadat, Jabal
Fuhah 100m., 98.2 SiO2
Talc Al Amar n.a.
Wollastonite B’ir ash Shumt 500,000, 40% wollastonite*

Sources: DMMR; Kip Jeffrey (2000) Industrial minerals developments in Saudi Arabia, paper at Industrial Minerals & Extractive Geology, 7-12 May, Bath, 2000.

n.a. data not available

* requires substantial exploration and beneficiation work.