Ma'aden and PIF to set up joint venture to pursue global mining investments

The partners will provide $3.2 billion in additional funding once business develops

A worker processes gold-rich metallic ore at Al Amar Gold Mine, which is among several mines operated by Ma'aden in Saudi Arabia. AFP

Saudi Arabian Mining Company, one of the biggest miners in the Arab world, has teamed up with the kingdom’s sovereign wealth fund, the Public Investment Fund, to pursue global mining investment opportunities.

Ma'aden, as the Saudi miner is known, signed an agreement with PIF for a joint venture that will invest in international mining assets to secure the supply of strategic minerals, it said in a statement on Wednesday to the Tadawul Stock Exchange, where its shares are traded.

Ma'aden will control 51 per cent of the new company, which will have paid-up capital of 187.5 million Saudi riyals ($50 million).

The two partners agreed to provide additional funding of almost 12 billion riyals as the “business of the new company develops”.

The funding will come through capital increases or “otherwise”, as agreed between the joint venture partners, Ma'aden said.

“Ma'aden’s maximum contribution shall be 6.01 billion riyals, unless Ma'aden and PIF agree otherwise in the future,” it said in the bourse filing.

The joint venture will require approval from Ma'aden’s shareholders, who will meet at a later date to vote on the transaction.

The company is expected to have a "positive overall financial impact on Ma'aden in the long term" and it will announce material developments at a later stage, it said.

Ma'aden operates several extraction sites and mines in Saudi Arabia to produce gold, copper, iron ore and strategic minerals.

Mining is a key component of Saudi Arabia’s Vision 2030 plan, which aims to reduce the country's dependence on hydrocarbon revenue. The kingdom, Opec’s top oil exporter, aims to more than triple the mining sector’s contribution to the nation’s economic output by 2030.

The PIF, which is at the heart of Riyadh’s economic diversification efforts, is a major driver of the domestic economy. It holds stakes in some of the kingdom’s biggest conglomerates and financial institutions.

Under a five-year strategy announced in 2021, PIF aims to more than double the value of its assets under management to $1.07 trillion and to commit $40 billion annually to develop Saudi Arabia's economy until 2025.

Globally, it holds stakes in public and private companies including Meta and Alphabet. The fund has set up more than 30 new companies and tripled its assets in the past few years.

The Ma'aden-PIF joint venture will initially invest in mining assets involved in iron ore, copper, nickel and lithium extraction. It will invest as a non-operating partner, taking minority equity positions, the company said.

“This will provide physical offtake of critical minerals to ensure supply security for domestic minerals downstream sectors and positioning Saudi Arabia as a key partner in global supply-chain resilience,” Ma'aden said.

The two partners want to capitalise on cheaper valuations of mining assets. The global economic slowdown and fears of a looming recession have dented commodities markets. However, metals such as copper and lithium are critical to energy transition and are expected to bounce back strongly as economic headwinds fade.

Copper prices fell about 20 per cent from their high point last year as demand destruction concerns dragged the market down. They recovered some lost ground recently as China relaxed Covid-19 restrictions, brightening the demand outlook, said Carsten Menke, head of Next Generation thematic research at Julius Baer.

“The long-term structural outlook for copper remains bright. We believe copper is set to join the energy-transition-driven battery-metals super cycle, with prices rising back to $10,000 per tonne and potentially beyond,” he said in a recent research note.

“Short-term setbacks should thus be seen as longer-term buying opportunities.”