How Gulf States are investing their money in mining

In 2023, Rothschild Bankers who worked for the Zambian government were nearing completion of a shortlist for buyers of a valuable copper mine.

Mopani is a rare but troubled asset that was once owned by the resources giant Glencore. It has attracted offers of hundreds of millions from major mining companies eager to access a metal crucial for clean energy technologies in the future.

After the list was narrowed to China’s Zijin Mining, and South Africa’s deep-level excavation specialist Sibanye Stillwater, a third candidate appeared out of nowhere: an obscure United Arab Emirates company called International Resources Holding.

Behind the scenes, IRH, the parent company of International Holding Company (the $240bn business empire owned by the powerful Abu Dhabi Sheikh Tahnoon Bin Zayed al-Nahyan), had been courting Zambia’s highest government officials for almost two years.

IRH agreed to purchase a 51% stake in the mine in December for $1.1bn, and became the fastest newcomer of the past decade. “What stood out. . . “Their intention was to invest in mining,” said a Zambian official, who was tasked with nurturing this budding relationship. “They were far and away the best in terms of their ability to facilitate.”

The Mopani agreement, finalised at end-March, represents a major shift in the global mining industry. Gulf nations are diverting petrodollars in order to diversify beyond fossil fuels and secure minerals such as copper, nickel, and other minerals that can be used for power transmission lines, renewable energy, and electric cars.

Saudi Arabia, which is also a major player, wants to see mining contribute $75 billion to its economy, up from the current $17 billion, by 2035. Oman is building what could be the largest green steel plant in the world, which will use iron ore mined from Cameroon. Meanwhile, Qatar Investment Authority (QIA), the sovereign wealth fund of the gas-rich state, has become Glencore’s second biggest shareholder.

Tom Harley, the managing director of Dragoman – a mining consultancy that works with Gulf countries – says, “The region is ripe for a major mining sector.” “The Saudis have such a palpable ambition: if they can achieve even 60 percent of what they want, that will be huge.”

The entry of these middle-powers into the crucial minerals battleground represents a welcome alternative for resource-rich countries in Africa, Asia, and Latin America to decades of exploitative agreements underpinned either by western colonialism, or Chinese debt. Hakainde Hichilema, the Zambian president, said in March that anyone who understands risk management wants to make sure that they are not putting all their eggs in one basket.

They believe that by selling to Gulf States, they can avoid tensions between the US and China regarding their resources such as copper, iron ore, and lithium – which both countries need to power their economies. The Zambian official says that “getting investment from the Middle East helps to avoid being perceived as favoring one region over another.”

Industry insiders warn that Gulf investment is not without risk. The sovereign wealth of a country can create opacity, complexity and complication when mining projects and communities need more accountability and transparency.

Washington, however, has welcomed the Gulf region’s growing role in mining as it helps to break Beijing’s monopoly on processing vital minerals. According to senior US government officials and executives from trading and mining houses, the US actively brokers Saudi, Emirati, and Qatari investments in more risky jurisdictions such as the Democratic Republic of Congo where western companies have difficulty entering, to keep China out.

The Middle East is a neutral location for international mining groups that are also trying to navigate US-China tensions regarding natural resources. It offers an alternative venue for capital, corporate headquarters, and minerals processing. SRG Mining announced its move to the UAE in February, after it was caught up in a political storm in Canada due to a failed collaboration with China’s C-One.

“[The Gulf States] trade freely with the US and Chinese.” Mark Cutifani is the chair of Vale Base Metals. Saudi Arabia purchased a 10% stake in this copper and nickel producer last year, for $2.6bn. “We are a Brazilian joint venture in Indonesia run by a Canadian company, and the Saudis own 10% of us.” Welcoming the next phase of the complexity of politics in the world.

To meet global climate change targets — by building solar power, turning car fleets electric and bolstering electricity grids — about $4.1tn needs to be spent on mining, refining, and smelting critical minerals, according to consultancy Wood Mackenzie.

Expansion into mining makes sense, as Gulf nations generate $400bn in fossil fuel revenue annually. However, hydrocarbons are set to be phased out by 2030. Saudi Arabia and UAE, which are heavily investing in new technologies, will also need a steady supply of raw material.

Richard Blunt is a partner at Baker McKenzie. The law firm represented Zambia in the IRH transaction. “They’ve got this massive advantage as they can do government-to-government deals and have patient capital yet come without the diplomatic pinch involved in choosing between Chinese and western investors.”

According to Crown Prince Mohammed bin Salman’s “Vision 2030” to modernise Saudi Arabia’s economy, the mining and minerals industry is earmarked as becoming the third industrial “pillar” next to oil, gas and petrochemicals. Tim Keating is a former mining director for Oman Investment Authority and says that “nation building” has been the driving force behind Saudi Arabia’s drive.

Saudi Arabia plans to exploit its estimated $2.5tn worth of mineral resources with the aid of Saudi Aramco and the state mining company Ma’aden. The exploration process will take many years, and possibly even more than a decade. The main obstacles are a lack water in this mainly desert area, a shortage of mining engineers and fewer high-quality minerals.

Yasir Al-Rumayyan said, “We have now the largest exploration program in the world,” at the Future Minerals Forum mining Conference in Riyadh, in January. “But we do not have all of the minerals we need for future initiatives.”

Manara Minerals is a joint venture between Ma’aden, and the Public Investment Fund, which was established last year. It aims to get metals in return for minor investments into blue-chip operations such as BHP or Rio Tinto. This is a model that Japanese trading houses have been successfully using for decades.

Gulf cash, and political cover will allow industry giants make riskier investment. Barrick Gold, the second-largest gold producer in the world, is wooing Saudi Arabia and Qatari investors to a $7bn project in western Pakistan, a province plagued with insurgents. This kind of environment would be unsuitable for most investors.

Mark Bristow is the chief executive of Barrick Gold. He says the western fund managers demand for dividends “crippled” the appetite for growth in the mining industry, leaving it desperate for long-term funding. He adds that the Gulf’s involvement will “help us open up new frontiers”.

By investing in such projects, the Kingdom hopes to establish itself as the center of a superregion that spans Africa, Central Asia, and South Asia. Saudi Arabia signed agreements in January to explore mining projects, including with Egypt, Russia and Morocco, as well as the DRC. It can use its cheap and abundant energy to process raw materials from resource rich nations that lack finance, such as India, in order to manufacture steel or electric vehicles for the rapidly growing Indian consumer market, for example.

The UAE also wants to achieve its strategic goals through mining. Thani bin Ahmad Al Zeyoudi is the UAE’s Minister of State for Foreign Trade. He says the UAE is engaging in “government-to-government” engagement on minerals, and “a lot of attention is being paid to the African continent”.

Dubai, as a major trading center for precious metals, has already established a strong foothold on Africa’s port and logistics networks, which are heavily reliant on commodities. Dubai-owned DP World won port concessions for the DRC, and more recently Dar es Salaam in Tanzania. These ports are crucial to shipping copper from Zimbabwe and Zambia.

The majority of these resources is landlocked. “There’s a great opportunity to reduce costs in the supply chain,” Mohammed Akoojee says, the head of sub-Saharan Africa for DP World. The company hopes to expand bulk shipping and double its terminals capacity within the next three to 5 years.

Much like the Chinese , the Gulf states are promising resource-rich nations an investment package centred around mining; Zambia expects the UAE to invest in agriculture, tourism and energy.

Leon Coetzer is the chief executive officer of Jubilee Metals. A london-listed miner, Jubilee Metals partners with IRH in Mopani to process waste copper. He says, “They can bring together a group of investment for infrastructure, power, logistics, and health alongside mining”. He says that bringing “an ecosystem” of investment is especially important for African nations.

But there are worries that the Gulf states could replicate the hazy resources-for-infrastructure deals advanced by Beijing through its Belt and Road Initiative that had mixed outcomes in the global south. Many countries are deeply indebted, and many projects have stagnated.

Thomas Scurfield is a senior economist with the Natural Resource Governance Institute. It’s meant to be an alternative model to China, but it may end up having many parallels.

Ebrony Peterli, an ex-miner living in Mufulira a town that is home to Mopani pits, and a critical metal smelter was thrilled to hear of new investors who were coming to revive a mine which once drove regional growth but employs only 4,000 people. This, according to his estimation, represents a third the workforce it employed in 1990.

After learning that IRH was founded only in 2022, the initial happiness has given way to skepticism. He says, “There is no transparency.” “Whom are we dealing?”

Others in Mufulira share his concerns. They want to know if IRH will hire local subcontractors, and if it has any plans to protect the local community that has been affected by the smelter’s pollution.

If IRH continues to pursue its massive growth plan, this will only become more urgent. In its company profile, it states that it wants to establish operations in “Indonesia [and] Angola as well as Kenya, Tanzania and Chile.”

IRH announced that it would bid on a stake in China’s JCHX Mining’s Lubambe Copper Mine, which is owned by JCHX Mining.

IRH plans to acquire a controlling interest in Konkola Copper Mines. The government returned the mines to Vedanta India in September. Vedanta has said that it would like to retain the majority ownership but is open to selling 20 percent of its stake. The Zambian Government has said that it would be open to having a third investor invest in KCM.

Officials in Zambia believe IRH will be able to source the technical expertise needed by Mopani from IHC. One local mining executive claims that “not a lot of attention” has been paid to building relationships with the local community. This is vital for the success of any project. Sibanye had, for instance, consulted with locals to listen to their concerns. The executive says, “I think they’re going to be caught out.”

The community’s reservations about IRH are rooted in a lack transparency regarding the people involved, their business ties and records.

Ali Alrashdi was revealed as the chief executive of the Mopani company when the deal was completed. He also runs Auric Hub in the UAE, a gold refining facility. Sibtein Alibhai is the global head of strategy at IRH, according to sources familiar with the situation. Alibhai, who was the former head of Primera Group in Abu Dhabi, a gold trader that supplied Auric gold shipments from DRC according to corporate documents and the UN, had previously been the CEO for Primera Group.

Primera received a 25-year monopoly from the DRC Government for all “artisanal” or hand-dug gold supplies. Primera pays only 0.25 percent tax under the agreement, which, according to the government, will prevent illegal mining revenue from funding conflict or entering Rwanda.

The arrangement was controversial. UN experts found “shortcomings” in Primera’s due diligence obligations, criticized its “de facto-monopoly”, and stated that smuggling continues to flourish. Primera Group has not responded to a comment request.

IRH was known as “Auric Hub Holdings” before its incorporation in the year 2022. IRH’s website states that it has operations in or is exploring prospects in seven African countries, including the DRC. However, it declined to comment whether Primera Group, or other companies, had been subsumed under it. IRH, in a press release, said that “sustainable mining” can be a powerful tool to boost economic growth and deliver a meaningful impact on communities.

If you are a resource-rich nation like Zambia, the success of Gulf investments will depend not only on your ability to deliver technical expertise, benefits for communities, and infrastructure improvements. The success of Gulf investment will depend on the Middle East’s ability to achieve its economic and strategic goals.

The speed with which the state agencies are able to move is one of the most important questions that remain about the extent of Gulf involvement. Regional rivalry and grand political deals will speed up activity. However, advisers claim that Gulf nations, particularly Saudi Arabia, are hindered by bureaucratic disputes over strategy, control, and what assets to purchase.

The issue is whether the investment will support the aspirations of the country to industrialise and diversify its economy. Kakenenwa M. Muyangwa was the chairperson of ZCCM IH, the entity in Zambia that sold Mopani.

He warns: “There is a trend – it’s like the tide.” “But trends come, and go.”