Saudi Arabia currently produces about 150,000 ounces a year (o/y) of gold from five mines located in the west of the kingdom. Saudi Arabian Mining Company (Maaden) has ambitious plans to boost this figure. By 2015, it hopes to be producing 400,000 o/y.
The timing could not be better for Maaden’s plans. Gold is trading at record highs of about $1,500 an ounce as investment capital pours out of currency and into commodities.
The exploration, study and subsequent start-up costs for its plans are relatively high, with major infrastructure needed for the four new mines proposed. One major cost is a 450-kilometre pipeline that will bring treated sewage effluent (TSE) from Taif in the Mecca Province to be used in the mining process.
Using TSE for mining is a good sign the kingdom’s varied sectors are starting to work together
Using TSE for mining is a good sign the kingdom’s varied sectors are starting to work together for the greater good of the country. The use of TSE processed by utility companies for industrial production may be a small step, but it is a step in the right direction.
Maaden is wary of the high start-up costs, but economists say gold prices will remain high for at least the next five years. This makes the likelihood of a swift return on investment for Maaden and any subsequent partner high.
The mining firm’s efforts at increasing production, then monetising the kingdom’s other natural resources is admirable. A real mining industry is now starting to take shape across Saudi Arabia.
As a precious metal, gold is different to mining bauxite or phosphates, but the same technical skills are required to extract it, which will result in more locals learning those skills. Increased production will also likely fuel a boom in gold smelting and jewellery making.
Extracting a natural resource and adding further value has long been the aim of Riyadh for its oil and gas sector. Increasing gold production takes that one step further.