Alrashid Cyber Mall, is Designed and hosted by Nova Stars Informations Services, Memeber of The Saudi Network, Trade and business informations and links to Saudi Arabia, Arabian gulf and middle east area.

Quran, Arabic and English
The Saudi Network

 
Saudi Arabia, Trade and business informations and links to Saudi Arabia, Arabian gulf and middle east area.
Member of
The Saudi Network, Trade and business informations and links to Saudi Arabia, Arabian gulf and middle east area.
Saudi Arabia Trade and Business Directory
Nova Stars Information Services, Trade and business informations and links to Saudi arabia, arabian gulf and middle east area.
Special Communication Systems
Home Table of Content Search Registration TSN Blogs

Mining

 

 

Mining Opportunities in Saudi Arabia

Among the many efforts being undertaken by Saudi Arabia to diversify its economy, is the development of mineral resources. The Arabian Shield, a geological feature that stretches along the entire Red Sea coast contains substantial deposits of precious and non-precious metals and other minerals. Most of the formation has been mapped with the assistance of the U.S. Geological Survey and its French counterpart, the Bureau de Recherches Geologiques et Minieres.

Despite the Kingdom's resources, annual imports of mineral are $1.4 billion. In a recent speech to a two day conference on mineral opportunities, Petroleum and Mineral Resources Minister Al-Naimi declared, " We in the Kingdom do not just aim at exploiting our mineral wealth and then selling the product in the world markets. Our target is to develop a national industry based on these minerals."


Mining Projects:

Overview

Saudi Arabia, in its Sixth Five Year Plan, has established a goal of 9 percent, per annum, growth in the mining sector. The private sector, which to date has invested $4.53 million in the development of this sector is expected to lead the way in developing resources. Current mining activity generates a constant demand for foreign services and equipment to support the development of this sector of the economy. According to the Department of Commerce imports of mining equipment were:

  • U.S. Million
  • 1991: 36.8
  • 1992: 40.0

Imports on 1993 and 1994 are estimated to be similar to the 1992 level. New projects under consideration may generate an additional $200 - $250 million a year in sales of equipment.

There are currently two gold mines operating in the Kingdom and numerous sites for the supply of construction materials. Typically, construction industry sites provide sand, limestone, clay and granite to local construction projects. Total capacity for these minerals is estimated by the Department of Commerce at over 20 million metric tons per year.

Over the next few year, Commerce believes, the best opportunities will be in the areas of joint ventures, investment, consulting, and technical know-how, as Saudi Arabia enlists foreign support in the development of new projects. Once companies are selected to implement the projects, equipment imports will increase. Most promising subsectors for metal mining equipment are drilling, loading and crushing machinery, pumps, processing and ventilation machinery. Mining construction material requires trucks, shovels, bulldozers, rock saws, conveyor belts, drilling and blasting equipment. Depending on the transportation methods chosen for the various projects, opportunities will exist for the construction of rail lines and the sale of rolling stock.


 

The Al Jalamid Phosphate Project

A feasibility study of the Al Jalamid Phosphate Project, 120 km east-southeast of Turayf, has been completed by Jacobs International under the direction of the U.S. Geological Survey Mission (Jeddah), on behalf of the Saudi Arabia Directorate General of Mineral Resources. The feasibility study is considered a +/- 15% accuracy "Bankable Document". Results show a 20 year discounted cash flow return on investment (ROI) ranging between 7.2% and 11.6% based upon the finished product price range from $160/t to $189/t. This price range reflects a conservative to optimistic market projection, conservative being in line with the current depressed phosphate market which has persisted for several years.

Diammonium phosphate fertilizer (DAP), the optimum finished product, provides a greater value added benefit and a stronger market entry position than phosphate concentrate but on the other hand increases the project investment from $0.75 to $1.74 billion. At the study production level, 4.5 M tpy phosphate concentrate, 1.3 M tpy sulfur, and 24 x 10,000 M Btu/yr natural gas are need ed to produce 2.9 M tpy DAP, with 1,700 personnel.

The current market situation indicates production might start as early as Year 2000 with detailed design beginning in 1996. The market strategy requires a very aggressive, well-timed move to capture 26% of the Asian DAP market. Location and availability of raw materials provide Saudi Arabia the ability to control price.

Three water wells drilled and tested at the Al Jalamid site prove a sufficient water resource exists for the life of the project. Exploration and pilot-plant tests verify adequate phosphate reserves for 20 years plus indicated reserves could add another 16 years to the project life. Additional resources in the region of 4 billion tons provide potential for similar projects.

The study includes a $0.35 billion slurry pipeline compared to a $1.25 billion railroad, for the transport of phosphate concentrate to Al Jubail 1,150 (Km). The added cost of a railroad lowers the project ROI from 7.2% to 3.1%.


 

The Wadi Sawawin Iron Ore Project

A feasibility study of the Wadi Sawawin Iron Ore Project, 900 Km North of Jeddah and 60 Km from the Red Sea Coast, has been completed by British Steel Consultants Ltd. on behalf of the Directorate General for Mineral Resources. Capital and operating costs, used in this feasibility study are considered to be accurate +/- 15%. The results show IRRs of between 3.1% and 13.8% depending on a number of factors including the design tonnage selected and the eventual sources of equity.

Following extensive testwork the technical feasibility of producing pellets containing less than 2.2% total acid gangue of Fe recoveries to concentrate of up to 75% is considered proved.

The market projections for DR grade pellets to the year 2000 indicate there are opportunities for the sale of between 1.5 and 4.5 Mtpa from Sawawin with the greatest probability being for sales at 2.2 Mtpa.

The base case for the study, an output of 2.2 Mtpa, requires a total capital investment of SR2.4 8 billion ($661 M). If the infrastructure (communities, port, power generation and water supply) is removed from the capital requirement this becomes SR 1.54 billion ($410 M).

The Directorate General of Mineral Resources prequalified 11 companies for this project in December 1994. The companies must submit final technical and commercial bids by August 1995. Companies expected to bid are:

  • Saudi Industrial Development Company
  • Aginco International Agencies & Commerce
  • AS Bugshan & Brothers
  • Stone & Webster Engineering Corporation
  • Oger Tekfen
  • Petro-Hunt Middle East
  • ABB Saudi Arabia
  • Cleveland Cliffs
  • Abdallah Contracting & Trading
  • Tata
  • Koch Transporttechnik
  • KHD Humboldt Wedag
  • Krupp Fordertechnik


  • The Az Zabirah Bauxite Deposit

Introduction

Az Zabirah is located 180 Km North of Buraydah. The South zone of the deposit is accessible by 45 to 50 km of track from the town of Qiba, from which a paved road leads to Buraydah.

In 1990 DGMR decided to carry out a definitive assessment of the Az Zabirah bauxite deposit in order to evaluate the economic potential of this commodity in the Kingdom.

Technical Summary

The bauxite layer, 2.5 km wide on average, crops out discontinuously over a length of 105 km on a southeast-northwest axis, dips 0.5 degrees northwestward, and is overlain by the cover rocks to the northwest.

North Zone - cropping out along strike for a distance of 35 km, this zone is not regarded as a priority economic target in view of the ore quality identified by preliminary drilling.

Central Zone - cropping out along strike for a distance of 25 km, this zone contains bauxite lenses up to 5 m thick but of limited extension (about 0.5 x 1 km). Although the silica content is somewhat high, this is compensated by a particularly high alumina content [in places above 6 0 percent Al(2)O(3)].

South Zone - cropping out along strike for a distance of 30 km, this zone contains the largest known bauxite lens some 12 square kilometers in area. Although the lens is barely more than 2.5 m thick, it contains the greatest reserves and is similar to quality to the ore in the central zone.

From 1990 onward the following work was completed:

  • geological mapping
  • core drilling (mainly on a regular 500 x 500 meter grid)
  • 12 exploration pits
  • 40 digest tests (by Aluminum Pechiney) for producing alumina using the Bayer process.

Evaluation of the reserves is based on the following procedures:

  • application to the bauxite layer of various cut-off grades ranging from 6 percent to 14 percent SiO(2);
  • application, in the same way, of a cut-off grade after elimination intervals with Al(2)O(3) - SiO(2) = 40 percent;
  • elimination of blocks in which the thickness of selected bauxite is below 2 m;
  • elimination of blocks with a stripping ratio above 9:1.

From these total bauxite resources, it is possible at present to exploit the following in-place mineral reserves. (In place minable reserves are defined here as that part of the reserves which can be extracted by the mining method selected.)

A cut-off grade of 14 percent was assumed for study of the base case in accordance with the economic conclusions of alumina production test carried out by Aluminum Pechiney.

Optimization of the silica cut-off grade aims to find the right balance between economic profitability and satisfactory valorization of the Kingdom's mineral resources.

The recoverable reserves (recoverable reserves are defined here as the in-place minable reserves to which a dilution factor has been applied) take account of 10 percent dilution on the tonnage (compensated by a recovery factor 91 percent) and grade modifications of +1 percent SiO(2) and -1 percent Al(2)O(3).

The project design assumes a rate of extraction of 2.5 million tons of wet bauxite (with a 12 percent moisture content) per annum over an initial period of 20 years. The total reserves in the deposit could allow exploitation to continue for almost half a century: the rate of exploitation is selected in such a way as to produce 1 Mt of alumina per year, but could easily be adjusted depending on the capacity of the future refinery.

The nearby town Qiba could accommodate the mine personnel. The existence, among others, of one lens comprising 50 Mt of bauxite in the south zone suggests that exploitation should commence in this area.

It is proposed that first 20 years of exploitation should comprise three successive mining phases:

Mining Phase I: A six-year period characterized by a low stripping ratio (3.3 tons of waste per ton of ore) during which conventional earth-moving equipment will be used.

Mining Phase II: A six year period during which the stripping ratio is higher (4.6:1) justifying the use of more efficient earth-moving equipment (scrapers) in terrain which should have been well reconnoitered during phase I.

Mining Phase III: An eight-year period characterized by an even higher stripping ratio (6.1:1) necessitating even more earth-moving equipment. The project has been arbitrarily limited to 20 years because subsequent years of exploitation have no effects on profitability.

The bulk ore will be transported by truck to a stockpile alongside three railroad platforms and will then be loaded onto wagons.

Maintenance workshops and offices will be on site. Electricity will be provided by two 750 Kw generators. It should be possible to satisfy water requirements (300 m3/day), essentially for damping down tracks and for personnel use, by drilling boreholes into aquifers at a depth 200 to 600 m below the site. Personnel requirements will total 199 staff, including 9 managers, 33 supervisors, and 157 skilled and unskilled workers.

For purposes of economic appraisal of the bauxite project various means of transport to Al Jubail were evaluated, including pipeline (586 km) and railroad. Three alternative railroad routes were envisaged as follows:

  • a direct route totaling 615 km
  • a route via Hafar al Babtin totaling 670 km
  • a route via Ar Riyad totaling 1,170 km

Transformation test using the Bayer process show that 2.38 tons of wet bauxite are required to produce 1 ton of alumina. Unlike many tropical bauxites, the Az Zabirah bauxite is of the monohydrate type and requires digestion under pressure at 245 degrees C. Lime and caustic soda consumption levels were determined and are shown to be of normal proportions. The bauxite is very similar to that from the Australian deposit of Weipa.

The evaluation given here comprises all work to be completed in connection with the production of bauxite loaded onto rail wagons at Az Zabirah.

At this stage, the estimated costs are calculated within a margin of +/- 15 to 20 percent.

Capital costs are summarized as follows (in millions of US Dollars at 1992 value):

Initial Capital Costs

Feasibility study costs 3.8
Engineering and preparation costs 5.5
Exploitation (equipment and mine infrastructure) 41.9
Working capital requirement 2.9
Subtotal 54.1
   
Equipment renewals, mining phase 8.1
Equipment renewals, mining phase 16.6
Equipment renewals, mining phase 21.7
Subtotal 46.7
   
Grand Total 100.8

Only the 54.1 M$ will have to be financed to put the mine into production: equipment renewals will be financed from cash flow generated by the project.

Operating costs are estimated at $4.5 per tonne of bauxite during Phase I (the first six years) rising to $4.7/t in phase two and to $5.2 in phase three because of the increased stripping ratio.

A smelter sited in the Gulf could either import feedstock or use alumina produced in a refinery at Al Jubail from Az Zabirah bauxite. In the latter case, the cost of sea transport is saved but the bauxite will have to be transported overland from Az Zabirah to Al Jubail. A refinery located in the Gulf region would benefit from low energy costs. Other costs such as caustic soda, quicklime, and manpower would be equivalent for imported or locally manufactured alumina.

Assuming a production cost of 150 $/t of alumina (the average world cost for a refinery of 1 Mt/alumina per year) calculations show that the part used to purchase the Az Zabirah bauxite (at 6 percent silica) is 54 $/t alumina (or 22,8 $/t bauxite) This is the maximum value that the Az Zabirah project can bear for bauxite delivered to Al Jubail.

For this reason it was indispensable to evaluate an order of magnitude for transport in order to assess profitability of the Az Zabirah project in four cases:

  • A direct railroad from Az Zabirah to Al Jubail represents an investment (track and rolling stock) of 452 M$ and an operating cost of 7 $/t bauxite. If included in the project, this investment results in nil profitability. If the project could use an existing rail link and pay only for the rolling stock ($34 M) the rate of return excluding income tax would be 27 percent, with payback in three years.
  • A railroad via Hafar al Batin, investment in which could be included in the project 100 percent as far as Hafar al Batin and from that point - in conjunction with the Al Jalamid phosphate project - on a pro rata basis calculated according to the tonnage transported (35 percent). Taken together with 100 percent investment in rolling stock, this represents a capital cost of 280 M$ and an operating cost of 7.6 $/t bauxite. The profitability would be very low. However, if the project only pays for the rolling stock (36 $M) the profitability would be excellent, giving a rate of return excluding income tax of 25 percent, with the payback in three years.
  • A railroad via Riyadh, assumed to exist, and for which the project would only provide a branch line and rolling stock ($44 M) and pay the operating cost of 10 $/t. This would give a project profitability excluding income tax of 15 percent, with payback in six years.
  • A pipeline would represent an investment of 365 M$ and an operating cost of 3.3 $/t bauxite, giving a profitability of 6 percent excluding income tax, with a payback in 11 years.

The above figures show that the mining project becomes highly attractive and even excellent if it does not have to bear the cost of transport infrastructure. The existence at Az Zabirah of reserves with a potential life of some fifty years could be regarded as serious justification for public-sector investment in railroad infrastructure.

 


 

Khnaiguiyah Zinc-Copper Deposit

                                                 Underground Mines                                          Open-Pit
                                          
            Alternative Scenarios (1-4)                    Mine(1,000t/day)

Case Study

1

2

3

4

5

Method of Financing
Equity 100% 100% 25% 25% 100%
Saudi Industrial Development Fund (SIDF) 0 0 50% 50% 0
Bank Loan 0 0 25% 25% 0
Taxation
Foreign Investor 0 45% 0 45% 45%
Saudi Investor 0 2.5% 0 2.5% 2.5%
Profitability
Rate of Return 6.6% 5.4% 14.6% 12.4% 4.2%
Payback Period (yrs.) 8.2 8.8 6.5 6.7 9.7
Zinc Prices ($/lb. metal)
Break-Even net income .52 .52 .53 .53 .54

Source:  Directorate General of Mineral Resources Technical Report BRGM-TR-13-4                   


 

Granite

Technology:  Extraction, Cutting, Polishing

Description  
Capacity

65,000 sq. meters/year

Total Investment SR 30 million ($8 million)
Return on Invested Capital 23%
Production Cost SR 14 million ($3.7 million)
Annual Revenues SR 21 million ($5.6 million)
Payback Period 3 years

Source: Saudi Consulting House


 

Limestone

Product:  Precipitated Calcium Carbonate

Description  
Capacity

40,000 tons/year

Total Investment SR 38 million ($10 million)
Return on Invested Capital 29%
Production Cost SR 13 million ($3.5 million)
Annual Revenues SR 24 million ($6.4 million)
Payback Period 2 years

Source: Saudi Consulting House


 

Magnesium Metal & Potassium Chloride

Raw Materials:  Brines from sabkha & dolomite rock
Technology:  Precipitation, electrolysis, purification

Description  
Capacity

Magnesium Metal  10,000 tons/year Potassium Chloride  24,000 tons/year

Total Investment SR 277 million ($74million)
Return on Invested Capital 23%
Production Cost SR 48 million ($13 million)
Annual Revenues SR 147 million ($39 million)
Payback Period 3 years

Source: Saudi Consulting House


 

Dolomite

Product:  Calcined Dolomite
Technology:  Extraction (open cast method)

Description  
Capacity

50,000 tons/year

Total Investment SR 28 million ($7.5 million)
Return on Invested Capital 13%
Production Cost SR 10 million ($2.7 million)
Annual Revenues SR 14 million ($3.7 million)
Payback Period 5 years

Source: Saudi Consulting House


 

Aluminum Sulfate

Raw Materials:  Sulfuric Acid & Bauxite
Technology:  Reaction between Sulfuric Acid and Bauxite

Description  
Capacity

30,000 tons/year

Total Investment SR 27 million ($7.2 million)
Return on Invested Capital 22%
Production Cost SR 19 million ($5 million)
Annual Revenues SR 25 million ($6.6 million)
Payback Period 3 years

Source: Saudi Consulting House


 

Pozzolan

Product:  Ground Pozzolan "Volcanic Ash"
Extraction:  Extraction (Open cast method)

Description  
Capacity

100,000 tons/year

Total Investment SR 65 million ($17 million)
Return on Invested Capital 28%
Production Cost SR  22 million ($5.9 million)
Annual Revenues SR 40 million ($10.7 million)
Payback Period 3 years

Source: Saudi Consulting House


For more information about these opportunities, contact Saudi-Business-Center@The-Saudi.Net

Return to Investment Opportunities Menu

 

 

 

Car rentals in over 6000 locations worldwide

 

 

 

Back Home Up Next

Best Hotel Reservation

In Saudi Arabia & World Wide

Saudi Arabia
 Alrashid Cyber Mall, member of The Saudi Network, Trade and business informations and links to Saudi arabia, arabian gulf and middle east area.
Shopping in Saudi Arabia

Send E-mail to TSN@The-Saudi.Net with questions or comments about The Saudi Network.
1001 Arabian Network, Alrashid Cyber Mall and The Saudi Network are members of Nova* Stars* Information Services
The Saudi Network, Trade and business information and links to
Saudi Arabia, Arabian Gulf and Middle East Area.

morocco, libya, lebanon, kuwait, jordan, iraq, egypt, bahrain, algeria, yemen, uae, tunisia, syria, sudan, qatar, palestine, oman

We are Looking for Business Sponsorship or Marketing Partnership