VZCZCXRO7974
RR RUEHDE RUEHDH RUEHDIR RUEHROV
DE RUEHJI #0476/01 3501620
ZNR UUUUU ZZH
R 161620Z DEC 09
FM AMCONSUL JEDDAH
TO RUEHC/SECSTATE WASHDC 1657
INFO RUEHXK/ARAB ISRAELI COLLECTIVE
RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE
RUEHRH/AMEMBASSY RIYADH 8635
RUEHDH/AMCONSUL DHAHRAN 0194
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEHAAA/NSC WASHDC
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 02 JEDDAH 000476 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR NEA/ARP, EEB 
 
E.O. 12958: N/A 
TAGS: EMIN ECON EFIN EIND EINV SA
SUBJECT: SAUDI ARABIA HOPING TO TURN MINING INTO THE THIRD 
PILLAR OF ITS ECONOMY 
 
REF: RIYADH 216 
 
JEDDAH 00000476  001.2 OF 002 
 
 
¶1.  (U)  Summary:  Behind oil and petrochemicals, Saudi 
Arabia is trying to make mining the third pillar of its 
economy.  Although its mining operations are small compared 
to many other countries, and dwarfed by the Kingdom's oil and 
petrochemical sector, KSA plans to expand its mining industry 
by leveraging foreign investment and building new 
megaprojects.  Currently, two U.S. firms operate in the KSA, 
Petro-Hunt and Arabian Shield.  The Saudi government hopes 
that developing its mining sector will support its goal of 
diversifying the Saudi economy and creating jobs.  The global 
financial crisis has impeded these infrastructure 
investments, but the Kingdom remains committed to pushing 
these projects forward because of the perceived long-term 
benefits.  End summary. 
 
 
Still in the minor leagues 
-------------------------- 
 
¶2.  (SBU)  The Saudi mining sector is still "in the minor 
leagues," according to the Deputy Minister of Mineral 
Resources, Sultan Shawli, in an October meeting with ConGen 
officers.  The Deputy Ministry of Mineral Resources (part of 
the Ministry of Petroleum and Mineral Resources) is 
responsible for issuing all mining licenses in the KSA.  With 
320 million tons of exploited minerals in 2008, the Kingdom's 
mining industry is considered big for the region, but small 
compared to the rest of the world.  (Note:  The country with 
the largest mining industry in the world, the U.S., produced 
nearly 3 billion tons of exploited minerals in 2000.)  Shawli 
said that Saudi deposits include gold and other metals, as 
well as bauxite (for aluminum), phosphate, and other 
minerals.  With resources such as Al Jalamid, one of the 
largest phosphate deposits in the world with an estimated 3 
billion tons, the potential to expand the mining industry is 
significant.  The Saudi government is hoping to do this 
through increased foreign investment and new megaprojects. 
 
 
Mining licenses issuance will maintain 7% growth 
--------------------------------------------- ---- 
 
¶3.  (SBU)  The Deputy Minister said he expects mining to play 
a major role in achieving the Kingdom's development goals. 
He said his ministry's issuance of mining licenses grew by 7% 
from 2007 to 2008 to 1,408 total active licenses covering 
over 75,000 square meters, and he said he expects that rate 
to continue.  Senior Deputy Ministry for Mineral Resources 
economist Hank Shatah compared the Kingdom's mining strategy 
to its oil sector, stating, "The capital will be Saudi, but 
know-how will be international." 
 
 
Megaprojects planned 
-------------------- 
 
¶4.  (U)  KSA is building a new mining city in Ras Al-Zour, 
approximately 70 km north of Jubail in the Eastern Province, 
mostly for aluminum and phosphates (ref A).  KSA plans to 
spend $2 billion building an electric railway spanning 1,500 
km to connect the industrial city there with phosphate mines 
in the north and bauxite mines in the northeast.  (Note: 
Nearly a year later, the railroad is still reported "almost" 
finished.  End note.)  Along with phosphate plants and 
aluminum smelters, the new city will also have a power 
station and a dedicated port.  Analysts estimate that the 
total cost to build this new city will reach $25 billion. 
 
 
Little U.S. penetration 
----------------------- 
 
¶5.  (U)  Currently, only two U.S. firms operate in KSA's 
mining industry:  Petro-Hunt Middle East, a subsidiary of 
Texas-based Hunt Group which has origins in the oil industry 
dating to the 1920's, and Arabian Shield Development Company, 
a 50/50 joint venture with Al-Mshreq established in KSA in 
¶1998.  Post is currently unaware of any impending plans for 
additional U.S. presence, but the Deputy Minister told us the 
 
JEDDAH 00000476  002.2 OF 002 
 
 
Kingdom is currently negotiating with Anglo-American (a UK 
company co-founded by J.P. Morgan in 1917) to establish a new 
joint venture in KSA. 
 
 
¶6.  (SBU)  Comment:  Saudi Arabia is still focused on 
diversifying its economy and finding other avenues to support 
any fluctuations in the price of oil.  This building-up stage 
for KSA's mining industry may provide an opportunity for 
increased Saudi-U.S. business cooperation.  In past years, 
mining has been largely ignored as the Kingdom focused on 
developing its prodigious oil and gas resources.  As the 
Saudi government gradually has increased its focus on 
diversifying its economy and creating more jobs, it has paid 
greater attention to its significant mineral resources.  The 
ministers of Commerce and Petroleum have singled out mining 
as a priority for growth, hoping to create jobs for Saudis by 
developing "clusters" to use Saudi mineral deposits (e.g., 
aluminum using bauxite resources).  These plans are still in 
the development stage, but bear further attention.  End 
comment. 
 
QUINN