Saudi Arabia has launched a mining fund that plans to invest up to $15bn of capital in overseas assets according to people familiar with the details, as the country works to reduce its dependence on fossil fuels.
The venture, 51 per cent owned by Saudi state-owned miner Ma’aden, with the remainder owned by the country’s Public Investment Fund, will take non-operating minority stakes in mining projects internationally, the two companies said on Wednesday.
That will help Saudi Arabia, which is the world’s second-largest oil producer, to secure resources such as iron ore, copper, nickel and lithium for domestic mineral processing and other industrial activities like steelmaking.
The companies said that the fund’s initial capital would be $50mn and the two shareholders would provide just over $3bn “if additional funding is required”, according to a joint statement.
However, two people familiar with the fund’s plans said that Saudi Arabia has publicly downplayed the scale of the investment plans and that the $50mn represented its first year of working capital and the $3bn the amount intended for investment over the next 12 months.
Given the scale of projects in commodity markets, the fund is prepared to deploy more than $15bn of capital for investments over the coming years as suitable opportunities emerge, the people added. PIF declined to comment beyond the statement.
The new fund comes as the US and Europe race to catch up with China in securing access to critical minerals that are used in strategic manufacturing industries such as solar panels, wind turbines and electric cars.
The investments will provide “critical minerals to ensure supply security for domestic minerals downstream sectors and [position] Saudi Arabia as a key partner in global supply-chain resilience,” the companies said.
The fund has already had discussions with Brazilian mining group Vale about taking a stake in its base metals unit, which includes nickel, copper and cobalt assets, according to two people familiar with the details.
The strategy of the fund has parallels with Japanese trading houses, which took equity stakes in mining projects during the country’s postwar industrialisation to supply manufacturers.
Ma’aden, which is 67 per cent owned by PIF, will finance its share of the investment from its own resources, the companies said. It may also raise capital through a rights issue.
Also on Wednesday, Ma’aden said that it would buy a 9.9 per cent stake in Ivanhoe Electric, a US mineral exploration group backed by mining tycoon Robert Friedland, for $126mn, giving it access to geological surveying technology.
It also signed on the same day a joint venture agreement with Barrick Gold, the world’s second largest gold producer, to explore for minerals at the site of the Jabal Sayid copper mine.