The second International Exhibition for Mineral Exploration and Development (MENA-EX 2009) opened for business on a positive note yesterday morning with the Kingdom described to mining experts as offering “limitless opportunities, limited only by your own vision.”
Inés Scotland, MD and FEO of Citadel Resource Group, noted that as a result of the global financial crisis business growth had slowed. She added that the mining sector would on the long term recover.
“Saudi Arabia and the MENA (Middle East & North Africa) region is the new mining development area,” she told Arab News after her speech covering the establishment of her company in the Kingdom.
“They have been very open and supportive throughout the process,” she said, commenting on the Kingdom’s help in the establishment of Citadel. She added that mining interests were a new feature to the government. “There is a shortage of infrastructure as yet and still some way to go, but we had no real problems at all.”
Scotland felt that Saudi Arabia would reap considerable benefits from the development of a healthy mining industry as it would create wealth and downstream employment, encouraging the growth of a whole new infrastructure of knowledge and skills together with entrepreneurial skills. The mining industry, she opined, had giants, but the support services and ancillary industries were often small to medium sized businesses.
“Saudi Arabia is in a good position to become the next mining power,” she said. “It is one of the world’s 25 largest economies and 16th in ease of doing business. With a modern mining code, transparent process going from exploration to prospecting licenses, and full foreign ownership, it has great potential,” she said.
Local financing by banks, Scotland found, followed a familiar pattern. “Banks like a diversified lending portfolio and here that is quite difficult to achieve as most seems to be downstream petrochemical projects, industrial real estate and the like. Mining de-risks their portfolio to some extent and they like that,” she said.
Scotland said that as the Middle East is not a mining region, local banks do not have a lot of expertise in the field. She added that this would cause them to look to Australian or European banks to be lead financers and carry out the technical due-diligence process. She, however, felt that local banks would come in and back a consortium.
Scotland said a lot of the local talent produced by universities in the Kingdom naturally went into the oil industry with few “hard rocks” geologists. “However with Maaden taking on a higher public profile, then more will think about mining as a career path.”
Albert Momdijan, MD and head of the Middle East and Africa investment banking for Caylon-Credit Agricole, took up the idea of the need to raise public and financial awareness of the mining potential of the Kingdom.
“Mining in the Middle East needs to raise its profile and educate commercial bankers in the region as there is a tendency for them to focus on easier projects,” he told delegates. He added that there was no real IPO (initial public offering) culture and that 98 percent of the Saudi market was financed by retail investors. And more long-term equity investors were needed.
He said that regional banks were small in comparison with the size of the projects open to financing and that out of $ 65 billion investment in the region in the last few years, “80 to 85 percent were by international banks.”
He concurred that the Middle East had not sufficiently raised its mining potential or the profile of the possibilities and that made it “a great place to invest in.”
Asked if the global recession would affect the mining industry, Momdijan said that although commodity prices — steel, copper, gold and oil — had dropped, they would recover, especially when India and China had weathered the current global financial storm.
“Long term, investment in mining will have great returns because the movements in prices are cyclical,” he said.
