Building the third pillar

20 May 2014

With its Waad al-Shamal phosphates city project, Maaden is bringing employment opportunities to remote areas of Saudi Arabia

When Saudi Arabian Mining Company (Maaden) advertised for six security guard jobs at its planned $7bn Waad al-Shamal phosphates city in the north of the kingdom, it received 600 applications from local job seekers. 

The interest in even minor roles in Maaden’s latest project not only highlights the importance of Riyadh’s industrial diversification plans, but also shows the distance the company has travelled since its formation in 1997.

After starting out as a gold mine operator, Maaden now also has two world-scale joint ventures producing aluminium and fertilisers at Ras al-Khair in the Eastern Province. It is also leading the development of Waad al-Shamal phosphates city, the most ambitious fertiliser project under construction anywhere in the world.

Transformative investment

Such is its scale that Waad al-Shamal has attracted the world’s largest fertiliser firm, the US’ Mosaic Company, as well as the Middle East’s largest listed company, Saudi Basic Industries Corporation (Sabic), as partners. More importantly, the scheme looks set to completely transform one of the most under-developed areas of Saudi Arabia, with the promise of thousands of direct and indirect employment opportunities for nationals.

Maaden will own 60 per cent of the project, with Mosaic taking a 25 per cent share and Sabic the remaining 15 per cent. The US company will also contribute $1bn towards construction costs, as well as lending its expertise to the design, construction and operations of the complex.

Waad al-Shamal is situated close to Turayf near the border with Jordan and was chosen due to its proximity to the Al-Khabra phosphate mine. The measured reserves of the Al-Khabra deposit are estimated to be 236 million tonnes. Its phosphate is low in heavy metal content and therefore suitable for industrial use, fertiliser and food production, and animal feed.

Such is its scale that Waad al-Shamal has attracted the world’s largest fertiliser firm, the US’ Mosaic Company

Maaden and its partners plan to start phosphate processing at Waad al-Shamal by late 2016. Its output is expected to total 16 million tonnes a year (t/y), including 3 million t/y of phosphate fertilisers and 440,000 t/y of downstream products that will be used in food, detergent and animal feed production.

The infrastructure investment includes roads and utilities. A rail line will also be built to connect the city to the North-South railway to transport the output from the processing facilities to Ras al-Khair in the Eastern Province, where Maaden has a number of other world-scale minerals operations.

The various construction packages for the project were awarded to engineering, procurement and construction (EPC) contractors in the second half of 2013, and groundbreaking work began in February this year.

On budget

The combined value of the EPC contracts is $3.7bn. When the front-end engineering and design and project management consultancy contracts, respectively carried out by the US’ Jacobs Engineering and Fluor, are included, the cost of building the process plants and mining operations has come in at the $4bn budget initially estimated by Maaden.

However, the Waad al-Shamal project is not without its challenges. The main issue during the construction phase is having to move manpower and equipment to one of the most distant and underdeveloped areas of Saudi Arabia.

Once construction is completed, the main difficulty will be attracting locals with the requisite educational qualifications and work experience to fill the thousands of skilled engineering and technical positions needed to operate the site.

Maaden sales revenues by business unit
Business unit20122013
Aluminium 01,015
Industrial minerals126151
Infrastructure 21
DAP=Diammonium phosphate. Source: Maaden

“I find it extremely unlikely that Maaden will be able to fill all of the available roles [at Waad al-Shamal] with locals,” says an executive from a Saudi Arabia-based engineering firm. “There will have to be a gradual Saudisation process that could take a decade to fully implement.” 

MEED reported in late 2013 that Maaden was aware of the issues it faced in procuring local manpower and had already started several initiatives aimed at solving the problem.

Khalid al-Luhaidan, vice-president of aluminium at Maaden, told delegates last year at the Middle East Process Engineering Conference in Bahrain that priority will be given to local candidates, but only if they have the right qualifications to carry out their duties. Specialist schools are being set up in the area to offer training to locals. Students from nearby schools are also being encouraged to enter further education, and any that show aptitude in science and mathematics will be fast-tracked.

Additional initiatives are being implemented that aim to foster better relationships with local suppliers and increase the amount of raw materials and services procured in the surrounding area. Ensuring locals from remote regions are encouraged to undergo training and development is more imperative for Maaden than for other natural resources companies such as Saudi Aramco or Sabic.

Maaden currently employs 6,000 people, and 80 per cent of its workforce is based outside of the main metropolitan areas of Saudi Arabia. The company plans to grow its staff to 14,000 by 2022, as more and more of its operations come on stream, and the majority will be in undeveloped areas.

Waad al-Shamal will make up a large proportion of that increased workforce, but Maaden is now a fully diversified metals and mining company that has operations spread across the entire kingdom.

Once all the firm’s business units are fully operational, 40 per cent of its workforce will be in the aluminium sector, 25 per cent in the phosphates sector, 22 per cent in the gold sector and 13 per cent in the corporate sector. 

Extensive experience

Maaden already has extensive experience in building an industrial city from scratch, having done so at Ras al-Khair. Ras al-Khair represents a major triumph for Maaden in that it is arguably the most successful of any of the new industrial cities being set up by Riyadh.

The Royal Commission of Jubail & Yanbu developed the infrastructure at Ras al-Khair and there is no doubt that its experience has been an invaluable factor in the city’s success. However, it is Maaden’s two anchor projects that have been the driving force.

Maaden Phosphates Company (MPC) is based at Ras al-Khair and manufactures 3 million t/y of diammonium phosphate and monammonium phosphate. MPC is a 70:30 joint venture of Maaden and Sabic, and phosphates are sourced from the Al-Jalamid mine in northern Saudi Arabia and transported by rail to Ras al-Khair. 

The integrated aluminium complex at Ras al-Khair is a joint venture with the US’ Alcoa, with Maaden holding a majority 74.9 per cent stake. The 750,000-t/y smelter is currently ramping up its operations and a 1.8 million-t/y alumina refinery and a 380,000-t/y rolling mill are being built alongside. Bauxite will be supplied domestically from a 4 million-t/y operation at Al-Baitha, 600 kilometres northwest of Ras al-Khair.

Maaden’s gold business, meanwhile, operates under the name Maaden Gold and Base Metals Company (MGBM). It has been producing gold from five mines in the western areas of the kingdom since 1988. The mines are located at Bulghah, Mahd al-Dahab and Sukhaybarat in the Medina province, and Al-Hajar and Al-Amar, both about 200km west of Riyadh.

Production increases

Maaden has ambitious plans for its gold mining operations and had proposed to increase production from 134,000 ounces a year (o/y) in 2013 to 400,000 o/y by 2015. However, it is likely this target will take at least three years longer to achieve than scheduled. Gold resources are about 11 million ounces, but MGBM wants to raise this to 20 million ounces by 2020, and has several projects under way. South Korea’s Hanwha Engineering & Construction is building a $270m gold processing plant at Al-Humiyah, about 450km southwest of Riyadh. The plant will process 2 million t/y of gold ore and is expected to be operational in 2015. 

Maaden is also investing $123m in building a pipeline to transport treated wastewater to its gold mining facilities. The pipeline will become operational later this year. 

However successful Maaden is at diversifying its portfolio, all of its products are commodities and subject to the vagaries of global markets. The company reported a 48 per cent year-on-year fall in first-quarter profits in 2014, citing lower prices for gold, aluminium and ammonia.

Maaden has come a long way since 1997 and its ambition to become the third pillar of industrialisation in Saudi Arabia is close to being fulfilled. Its role in developing remote regions of the kingdom and driving their industrialisation means it is making a vital contribution to Riyadh’s diversification plans.

But 600 candidates applying for six security guard positions is a sobering indicator of how much further the company, and Riyadh, has to go to bring employment and prosperity to some areas of Saudi Arabia.

Waad al-Shamal EPC contracts

  • Beneficiation/mine infrastructure: $554m
  • China Huanqiu Contracting & Engineering Corporation
  • Sulphur plant/power and utilities: $762m
  • SNC Lavalin (Canada)/China Petroleum & Chemical Corporation
  • Phosphoric acid plant: $933m
  • Hanwha Engineering & Construction (South Korea)
  • Diammonium phosphate/nitrogen, phosphorus and potassium plant: $600m
  • Intecsa Industrial (Spain)
  • Ammonia plant: $824m
  • Daelim Industrial (South Korea)

EPC=Engineering, procurement and construction. Source: MEED

Key fact

Waad al-Shamal phosphates city’s output is expected to total 16 million tonnes a year

Source: MEED

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