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Tesla or Not, Here We Come — Saudi Arabia Enters the Global Critical Minerals Stage

Earlier this month, the Wall Street Journal reported that Saudi Arabia was in early talks with U.S. automaker Tesla to set up a manufacturing facility in the kingdom.

While Tesla CEO Elon Musk has since denied these rumors as “utterly false,” whether or not a the two parties are in fact in talks over a rumored Saudi offer to Tesla to grant the right to purchase certain metals and from countries where the kingdom is expanding its mining footprint, is almost beside the point – the real development here is Saudi Arabia’s recent pivot away from oil towards critical minerals.

As part of his Grand Vision 2030 plan to transform the Saudi economy, the oil giant’s Crown Prince Mohammad bin Salman is preparing to invest billions of dollars into the mining sector to harness the potential of more than $1.3 trillion worth of metals and minerals the Saudi government claims are buried in the kingdom, and effectively make mining the so-called “third pillar” of the economy next to oil and gas.

Analysts say that while the crown prince’s plans are met with plenty of skepticism, even if only partially successful, implications of Saudi Arabia turning into a metals hub could have far-reaching implications not just for metals mining, but geopolitics and trade, especially if the other component of the crown prince’s plan to buy up resources from elsewhere to be refined and processed at new facilities in Saudi Arabia.

One of the first big pushes into the mining sector was a July deal in Brazil, in which Manara Minerals, established by the kingdom’s sovereign wealth fund, and Saudi Mining Co, entered into an agreement to buy a stake in Vale SA’s base metal unit, effectively making forays into the nickel and copper supply chains.

As Bloomberg reports, the kingdom’s long game is to position itself as an alternative supplier to China for the metals and minerals underpinning the green energy shift and 21st Century technologies.  The news outlet cites Khalid Al Mudaifer, vice minister of mining affairs, who said in an interview that “Saudi Arabia needs more than one engine to achieve its vision,” and that to transform itself into an economic and industrial powerhouse, the kingdom needs minerals.

In order to get there, Saudi Arabia is leaning on government subsidies and lending by state controlled funds, with the government offering big incentives – i.e. financing for up to 75% of a project and other incentives – to entice mining companies to start digging.

While so far, according to Bloomberg, auctions for exploration licenses in the country have only attracted smaller players, the crown prince’s willingness to take commercial risks might draw in the big players before long.

A good two years ago, ARPN noted that, with the clean energy transition as the catalyst, we might be leaving the Petro Age.  Saudi Arabia has clearly taken note and is taking steps to find its place in a post-Petro Tech Metals Age, by looking to boost its mining sector, and it will push forward – with a Tesla deal or without.

Back in the U.S., here’s hoping that the Biden Administration and other policy stakeholders — after taking several positive steps — also acknowledge that in a post-Petro Tech Metals Age, there is no room for simplistic “not in my backyard,” or “keep it all in the ground” mantras, and pushes forward with a comprehensive all-of-the-above strategy.