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  • Population, mn: 31.5
  • GDP, US$bn: 646.4
  • GDP per capita, US$: 20,028.6
  • Inflation, CPI ave: 3.5
  • Budget Balance, % of GDP: -12.8
  • FX, LCY/US$: 3.8
  • Mining GVA, US$bn: 146.2
  • Mining Industry Value, US$bn: 3.3
Regulatory Risk Rating
51
0
100
Score: 51
Substantial Risk
Saudi Arabia's Mining Code reflects a genuine attempt to open the country up to foreign investment in the mineral sector; the legislation is short, simple and somewhat sweet for the Middle East. It reflects, we think, input from lawyers and geologists, with the latter having had too much influence at times in its drafting.

Corruption Potential Index

Score: 40
Very High Corruption Potential

Corruption Risk Index

Score: 31
Very High Corruption Risk

Regulatory Risk Rating

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Environmental Overview Commentary plus sign

SAUDI ARABIA ENVIRONMENTAL REGULATION

GENERAL

Saudi Arabia is one of the largest countries in the world covering two thirds of the Arabian subcontinent. It is the largest country in the Middle East. Saudi Arabia is generally an arid country, with a few exceptional sub-humid regions on the southwestern escarpments. Western Saudi Arabia is dominated by a mountain chain running the entire length of the country, formed by the Hejaz and Asir Mountains and overlooking the fertile Tihama coastal plain. This mountain chain runs parallel to the Red Sea and rises to between 1300 - 3000 m. above the sea level. This fertile crest then falls away towards the east forming a desert plateau to the dry interior, or the Najd, which contains the great sand deserts of the Empty Quarter, Nafud and Dahna. The eastern region lies on the Arabian Gulf coast and contains salt flats. Saudi Arabia has key biological sites that include freshwater wetlands, isolated mountain massifs, juniper woodlands, marine islands, sea grass beds, mangrove thickets, coral reefs, salt marshes, algal beds, acacia woodlands, rawdahs (meadows) and wadis (valleys).

PRINCIPAL LEGISLATION AND REGULATOR

The principal environmental legislation is the General Environmental Law (15 October 2001). It is supplemented by Rules for Implementation and The Environmental Protection Standards. Article 13 of the law indicates that all persons engaged in production, servicing, or other activities, shall take the necessary precautions to prevent contamination of surface, ground and coastal waters, that may be caused by solid or liquid residues, to preserve the soil and land, curb its deterioration or contamination, and to limit noise pollution. The Deputy Ministry of Mineral Resources and the Presidency of Meteorology and Environmental Protection are responsible for regulating environmental permitting in respect of mining matters. The law precludes the operation of a mine without an approved EIA, but not necessarily its construction, depending upon the circumstances.

EIA PROCESS AND OTHER PERMITS

Article 5 of the General Environmental Law requires an environmental impact assessment (EIA) to be prepared at the feasibility stage, in respect of projects that cause negative effects on the environment. According to The Environmental Protection Standards of 1982, projects are to be segmented into three categories, as follows:

  • First Category: Projects With Limited Environmental Impacts: This category covers projects which are not expected to have tangible negative environmental impact, such as: minor expansions of power lines not exceeding 10% of their total lengths; expansion of existing roads not exceeding 15% of the existing length or width; and modification or expansion of an existing marine berth which does not involve any pollution impact or effective dredging of the site.

 

  • Second Category: Projects With Significant Environmental Impacts: This category covers the projects that may, or are expected to, have some significant environmental impact requiring the development of a specific environmental assessment report, addressing certain environmental or technical details. Such projects include: steel and iron mills and metal foundries whose production is less than 150 tons per day; metal and iron treatment and galvanization plants with a production of less than 25 tons per day; quarry, crushing, asphalt and batching and mixing and prefab; concrete plants; power transmission lines and transformer stations; and the construction of divided roads less than 50 km in length, excluding highways, tunnels, causeways, bridges and railroads.

 

  • Third Category: Projects With Serious Environmental Impacts: these are projects whose construction and operation are expected to have serious negative effects on man and the environment and thus require a comprehensive environmental impact assessment. They include the following: steel and cast iron plants with a production capacity in excess of 150 tons per day; metal electroplating plants with a capacity in excess of 25 tons per day; cement plants; metal (and minerals) extraction; and lead smelting plants.

 

A first category project requires completion by an environmental specialist of a preliminary environmental report; a second category project requires a summary environmental report and details of project design; a third category project requires the preparation of an environmental impact assessment (EIA) by a qualified consulting firm. In the case of an EIA, the decision maker is to consider the nature and magnitude of the intended activity and the existence of similar projects at the site or similar sites; the extent of depletion of natural resources by the installation, particularly agricultural lands and mineral resources; the location of the installation and the nature of the surrounding environment and nearby residential habitats; and the type of power used.

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Mining Overview Commentary plus sign

SAUDI ARABIA MINING REGULATION

GENERAL

Saudi Arabia is the largest country in the Middle East. It is surrounded by Jordan and Iraq to the north, Kuwait to the northeast, Qatar, Bahrain and the United Arab Emirates to the east, Oman to the southeast and Yemen in the South. The country hosts several mines, including gold, zinc, kaolin, phosphate, bauxite and magnesite mines (some with base metal credits). At least one major mining company (Barrick) is developing a mine in the country (a copper deposit) and another (Alcoa) has a joint venture in the aluminum sector.

Saudi Arabia embarked on a reform program to diversify its economy and reduce the dependency of the country on hydrocarbons. In the mineral sector this program resulted in a new mining code in 2004. The result has been increased competition (and cooperation) with the Saudi Arabia Mining Company (Ma’aden), which was formed by Royal decree in 1997 to facilitate the development of Saudi Arabia's mineral resources. It was originally wholly-owned by the Saudi Government before its shares were floated on the Saudi Stock Exchange (Tadawul) in 2008. Both the Barrick project and the Alcoa project are in joint venture with Ma’aden.

PRINCIPAL LEGISLATION AND REGULATOR

The principal minerals legislation in Saudi Arabia is the Mining Investment Law (MIL), Royal Decree No. M/47 (4 October 2004), which is administered by the Ministry of Petroleum and Mineral Resources. The law provides that all mineral resources are State property (MIL, Art. 2). Foreign companies may participate equally in the acquisition of mineral titles. There are also regulations that apply to the sector. Environmental matters are governed by the MIL and the General Environmental Law, which requires an EIA for all mining projects.

GRANT AND FORMS OF MINERAL TITLE

The MIL considers, among other licences, reconnaissance, exploration, mining, small scale mining and quarry licences. Set out below are the key elements of some of these licences:

  • Reconnaissance Licence: The licence is issued for a period of two years (MIL, Art. 31) and may be renewed for a further period of two years (Exec. Reg., Art. 37); it does not confer the exclusive right to an exploration licence and is non-exclusive. The MIL suggests that it may be necessary in order to access non-confidential data held by the Ministry (MIL, Art. 32(5)).

 

  • Exploration Licence: The licence is an exclusive licence insofar as the covered minerals are concerned and provides the right to obtain a mining licence upon a discovery (MIL, Art. 35). It is granted for a period of up to five years and may be renewed at the discretion of the Ministry for up to the same period. It appears plain from the legislation that more than one exploration licence and mining licence can be granted over the same ground in respect of different minerals. Note that a holder is required to deliver any drill core that is obtained from the licence area to the Minister (MIL, Art. 36). The maximum size of an exploration licence is 100 sq. kms. (Exec. Reg., Art. 38). There are minimum expenditures obligations, which are specified in Appendix 1 to the Executive Regulation.

 

  • Mining Licence: A mining licence is issued for a period of up to 30 years and renewable for a similar period (MIL, Art. 44). The holder must have the technical and financial competence to carry out the contemplated work (MIL, Art. 11). The licence carries the right to exploit and to perform any direct or indirect activities to achieve the exploitation (MIL, Art. 37).

 

Transfers are only permitted upon consent of the Minister (MIL, Art. 13) and consent can be obtained from the Minister to mortgage a licence (MIL, Art. 14).

DEVELOPMENT CONSIDERATIONS

 Mining projects are categorised as Category 3 projects under the applicable EIA provisions, meaning that they are expected to have serious negative effects on man and the environment. As such, they require a comprehensive environmental impact assessment prepared by a qualified consulting firm. The Ministry is to consider, in granting environmental approval: the nature and magnitude of the intended activity and the existence of similar projects at the site or similar sites; the extent of depletion of natural resources by the installation, particularly agricultural lands and mineral resources; the location of the installation and the nature of the surrounding environment and nearby residential habitats; and the type of power used. Where needed, surface rights can be compelled by order of the Minister (MIL, Art. 23).

ENVIRONMENT REGULATIONS

See Saudi Arabia Environmental Regulation.

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