Marcel de Groot
The Role of a Thriving Junior Exploration Sector in Driving Saudi Arabia’s Mining Industry
Saudi Arabia’s mining industry is set for significant growth as part of the Kingdom’s Vision 2030 initiative, which aims to diversify the economy and unlock the potential of its rich mineral resources. Yet, this ambitious vision faces a challenge that is reshaping the global mining landscape: a significant reduction in exploration efforts by major mining companies and a dramatic decline in new mine discoveries over the last two decades. MinEx Consulting has estimated that in recent years approximately 75% of mine discoveries were made by junior explorers, and since 2000 more than two-thirds of discoveries are from juniors. To address this issue and ensure a steady pipeline of mineral resources, Saudi Arabia is working to cultivate a thriving junior exploration sector.
The Decline in Major Mining Company Exploration
In the past two decades, large mining companies have shifted their focus from early-stage exploration to developing and expanding existing assets or investing in derisked assets or companies. This trend is driven by financial pressures, the high risk of greenfield exploration, shareholder demand for immediate returns, and the high costs associated with early-stage exploration. Consequently, the number of significant mineral discoveries made by these companies has declined.
According to industry data, fewer Tier-1 deposits (i.e., large, long-life, and high-quality mines) have been discovered in recent years. Many major mining companies now solely rely on acquiring projects discovered by junior explorers rather than undertaking the high-risk exploration activities themselves. This global trend demonstrates the importance of junior exploration companies as the primary drivers of new discoveries, particularly in underexplored regions like Saudi Arabia.
Junior Explorers Are Critical for Saudi Arabia
Saudi Arabia’s mineral potential is immense (estimated to be US$2.5 trillion of resources) with the Arabian Shield alone hosting significant deposits of gold, copper, zinc, and rare earth elements. However, large portions of the country remain unexplored or underexplored. Junior exploration companies are uniquely positioned to bridge this gap.
These companies bring agility, innovation, and a willingness for calculated risk that larger companies often avoid. By employing proven exploration techniques and targeting greenfield areas, junior explorers can unlock new mineral resources and provide the early-stage discoveries necessary to sustain the mining industry.
Addressing the Discovery Deficit
Globally, the mining industry faces a discovery deficit, with fewer new mines being found to replace depleting reserves. In Saudi Arabia, this challenge is particularly pressing as the Kingdom seeks to establish itself as a leading mining hub and the recent announcements regarding the construction of new smelters in country by international mining groups.
Saudi Arabia’s new mining investment law and the support of the Saudi Geological Survey are critical elements for success. These initiatives create an attractive environment for exploration by providing access to geological data, streamlining permitting processes, and offering incentives for foreign and domestic investors.
Overcoming Challenges for Junior Explorers
While the opportunities are vast, junior exploration companies in Saudi Arabia face several challenges. Access to funding remains an important success factor, as exploration is inherently high-risk and requires substantial investment. Additionally, the emerging stage of the Kingdom’s mining sector means that certain specialized infrastructure, local expertise, and industry partnerships are still developing.
Saudi Arabia continues to address some of these obstacles with initiatives like the establishment of the Manara mining investment fund—a new fund to support early-stage exploration through grants—and partnerships with global mining players that provide the support needed to foster a strong junior exploration sector.
Not all Juniors are Created Equal
Over the years, it has become clear that the majority of major mine discoveries have been made by a small group of explorers. Serial mine finders like David Lowell and David Daoud, have been at the forefront of some of the biggest mineral discoveries in the world. The common key ingredients for success include decades of experience with regional geology, a deep passion for discovery, and the ability to see things differently. These attributes not only drive discoveries but also open doors to capital. Recognizing these traits of success, Saudi Arabia is awarding certain licenses based on merit, ensuring that top tier teams have access to promising exploration grounds.
A Collaborative Future
The reduction in exploration efforts by large mining companies highlights the need for collaboration across the industry. By working together, juniors and majors can create a healthy partnerships where juniors focus on exploration and discovery and majors provide the capital and supporting expertise needed to develop these discoveries into operational mines in Saudi Arabia and around the world.