The short answer: an in-built commitment to security of tenure.

 

When Crown Prince Mohammed bin Salman launched Vision 2030, which has a major focus on economic diversification, it included a plan to create a world-class mining and mineral processing sector. The Kingdom understood that, to achieve this goal, geological potential on its own would not be enough; it would also need to foster a competitive investment environment. 

 

Saudi planners immediately set to work on a thorough consultation process with industry stakeholders, investors and legal experts from inside and outside the Kingdom. The investigation found that the mining codes of tier-one jurisdictions all have the following in common: they are clear, transparent and place strict limitations on administrative discretion over existing licences.

 

The new Saudi mining code consists of a new Mining Investment Law at the top, supported by an Implementation Regulation and Guidelines, both of which came into force on January 1, 2021. The Implementation Regulations contains two key measures enshrining the Kingdom's commitment to security of tenure in the code.

 

The first of these is a "grandfather clause," which states that that in the event of a change in the Mining Investment Law, the rights of existing licence-holders will not change. This means that current applicants for Saudi mineral exploration or mining licences can proceed with confidence that their rights will be respected in perpetuity.

 

The second measure is a commitment to treat the mining sector as an engine for economic - rather than fiscal - growth. As a consequence, any taxes or royalties paid by mining companies will be deposited directly into a special fund for the local mining sector - and not to the Treasury. This fund will invest back into mineral exploration, mine projects and community development projects, ensuring the long-term success of the mining sector. 

 

This policy also translates to a commitment to avoid measures, such as windfall taxes, that have led investors to flee other resource-rich countries. Mining is a cyclical business, and governments are often quick to increase taxes on mine operators when commodities cycles are at their peak, while offering little support when cycles are their trough. The Kingdom of Saudi Arabia believes this is a mistake, and has made a commitment to ensure that both investors and the Saudi people enjoy the long-term benefits of mining activity.

 

Although the new mining code only came into effect just over two years ago, positive results are already being seen.

 

In 2022, the Kingdom granted more than 675 mining-related licences, including 215 for exploration (double the number vs 2021), 446 for exploitation, and 17 for reconnaissance licenses (a 89% increase vs 2021).

 

Last year also saw 20% of exploration licences go to entities owned exclusively by foreign investors, marking the first time that foreign companies had been granted licenses without being in partnership with local Saudi groups. Most of these licences were managed through the Kingdom's Ta'aden Portal, which offers a single point of access for mining license applications, issuance and information.

 

The first two years under the new mining code have been a clear success, and it is the Kingdom's belief that its commitment to security of tenure will ensure the growth of the sector in years to come.