Rakisa Holding Company, the lead developer of the Prince Abdulaziz bin Musaed Economic City in Hail, and a consortium of BNP Paribas and BMG Financial Advisors have signed an MoU to set up a new SR1.5 billion ($400 million) mining company in Saudi Arabia.

“The signing of the MOU was in line with the general strategy of the company to invest in the region’s resources,” chairman of Rakisa Holding Company Abdullah Al Rakhis was quoted in the Saudi press as saying. The new firm will be called North Mining Company
“The studies we have conducted for the Economic City in Hail anticipate an annual growth rate of 9.1 per cent in mining-related investments,” Al Rakhis said.
The development could turn the northern region into a hub of manufacturing as well as another centre for Saudi mining.
News about the new company came as an expert predicted there would be a GCC investment boom in the mining sector regionally and globally
The expanding GCC aluminum and steel industries have triggered mining upstream investments to ensure feedstock security. With the expected IPO of state-owned Saudi Arabian mining company Maaden this year, the general investment public will become aware of the asset class, said Dr Eckart Woertz, programme manger, economics, at the Gulf Research Centre in Dubai.
Woertz said the investor appetite would go abroad. Besides Maaden there are few mining investment possibilities in the Gulf. The Oman mining industry (mainly copper and chromite) is small and not publicly listed, while in the UAE some exploration has been done, but it is too early to tell whether any meaningful mining industry could develop out of these efforts. Remarkably, Yemen, where the publicly listed Canadian exploration company Cantex has identified significant nickel, copper and gold deposits, offers some potential.
The GCC countries are ramping up their aluminum industry to take advantage of cheap energy inputs, which can make up to 40 per cent of production costs. Their worldwide market share is expected to rise from the current five per cent to over 10 per cent by 2010 and up to 18 per cent by 2015. The steel industry is also rapidly expanding to satisfy the needs of the local construction boom. With booming commodity prices, GCC producers have started to worry about feedstock security and the bottom line, Woertz says.
Dubai Aluminum (Dubal) has acquired a 25 per cent stake in Canadian Global Alumina and the rights to the alumina produced in its Guinea refinery for $200 million. Furthermore, Dubal reached an agreement with Larsen & Toubro to develop a $3.6 billion alumina refinery with a capacity of 1.5 million tonnes each year and an adjacent smelter in the Indian state of Orissa. As these projects still fall short of meeting the necessary supplies required by Dubal by a wide margin, further upstream acquisitions in the future are a possibility.
The GCC steel industry is no different. Demand for direct reduction iron ore pellets is expected to increase from 5 million tonnes to 24 million tonnes in 2012. Not surprisingly, Saudi Arabian Hadeed has taken up a 14.8 per cent stake in Australian Sphere Investment, and Qatar’s Qasco has bought a 9 per cent stake in the same company. Sphere Investment owns a 50 per cent interest in an iron ore mine in Mauritania. Finally, upcoming Australian iron ore producer Grange Resources held talks with regional companies about a possible joint venture.
Feedstock issues may have been behind the recent takeover of steel and iron ore pellet producer Gulf Industrial Investment Company by Gulf Investment Corporation (GIC) as well, Woertz says. GIC bought the 50 per cent stake of its joint venture partner, Brazilian CVRD, to gain full control.