Alexandre Rocha*
São Paulo – Saudi Arabia is interested in attracting Brazilian companies to the mining sector in the country. Last week, the president of Saudi Arabian Mining Company (Maaden), Abdallah Dabbagh, visited Brazil to address the matter with national companies in the sector and, according to him, talks are promising. "There are good opportunities for companies from Brazil," he said to ANBA, after a visit to the offices of the Arab Brazilian Chamber of Commerce, in São Paulo the largest business centre in Brazil, in the southeast of the country.
Maaden, a state-owned company in the mining sector in Saudi Arabia, is currently undergoing a privatisation process that should be completed up to the end of this year. The company is going to establish joint ventures with private companies to explore four sectors: precious metals, phosphates, bauxite and industrial minerals. Currently, the largest share of company revenues, of US$ 250 million a year, come from production of gold. The idea, however, is to invest heavily in the extraction of other minerals for export.
"Saudi Arabia has depended on gas and oil for a long time and the government has been trying to diversify the economy," stated Dabbagh, who is a geologist. He was in Brazil, at the invitation of the Brazilian Foreign Office (Itamaraty), together with other Saudi executives: the vice president of the petrochemical sector at Saudi Arabian Basic Industries Corporation (Sabic), Homood Al-Tuwaijri, and the director of the energy area at Saudi investment authority, Abdulwahab Al-Sadoun. They visited large Brazilian companies in the areas of petrochemicals and mining, as well as state owned companies like Petrobras and the Bank of Brazil. Below are the main stretches of the interview:
ANBA – How does Maaden operate?
Abdallah Dabbagh – We are a joint stock company, and 100% of our shares belong to the government, but our objective is privatisation up to the end of the year. We started operating nine years ago with initial capital of US$ 1.2 billion. Today we have four mines in operation and a mining and processing company with diversified activities. The activities are divided into four main areas. The first is precious metals, like gold and silver, in which we have four mines operating producing around 350,000 ounces of gold a year and another two mines, one under construction and another in development for expansion of operations. And we feel that it is a good opportunity for companies in Brazil to explore Saudi Arabia with us.
How about other areas?
The second is phosphates. We are developing a US$ 1.2 billion project for production of diamonium phosphate for use as fertilizers, and it should be ready in 2009 producing 3 million tonnes a year. These fertilizers are used in Brazil and there is demand for them. The third is the area of bauxite. We are developing bauxite mines for production of alumina at a refinery and from there we will smelt for the production of aluminium. We therefore have a totally integrated aluminium industry. This project is being developed at the cost of US$ 4.5 billion and should be concluded up to 2010. The fourth area is that of industrial minerals and we are producing magnesite, kaolin, silicates and other minerals.
How will the privatisation process be managed?
It will be done in two ways. First we are going to double the company capital on the local market and then we are going to establish joint ventures in these specific projects with international partners who have technology and experience in operations and on the market.
What participation may foreign companies have?
This discussion is taking place at the moment. There are some Brazilian companies and companies from other countries with whom we are talking and that is why I am here.
But will it be possible for a foreign company to have more than 50% of the business?
That is going to depend on the company profile, on its specialty and experience, etc. Foreign companies also have the option of going to Saudi Arabia on their own, as we have a new mining law that has been approved and permits foreign companies to explore and develop mines in Saudi Arabia.
How much is the company capital now?
The capital is being evaluated by the JP Morgan bank. The initial public offering should generate an increase of US$ 3 billion to US$ 6 billion, but this is just a raw figure.
What are company annual revenues?
Nowadays revenues come practically only from gold and last year they totalled around US$ 250 million. The other megaprojects, as I like to call them, are still under development.
And do you import any raw material or do you only produce there?
Some of the processes require imports of raw materials, but we are not here after that. We are here to talk to companies that have know-how in the area we operate in.
And how were these talks?
They were very positive. Companies here operate on international standards and I met very professional and hospitable poeple. I liked my stay here very much, although it was very busy. I liked the diversity of people, the activities under development and the friendship that was offered to us by all very much, especially by the Ministry of Foreign Relations, who invited the delegation to come and meet our colleagues in the sector.
Could you say what companies you visited?
At the moment the talks are confidential, but as soon as we have an agreement we will make them public.
Is there a minimum value that private companies must invest?
No, the investment will be based on what is negotiated between Maaden and the partner company.
But will there be a tender?
No, the agreements will be negotiated.
Is production turned to the domestic market or to export?
Currently all the gold stays on the local market, but production of fertilizers and aluminium will be 95% turned to the foreign market. We are going to produce, as we have said, around 3 million tonnes of diammonium phosphates and around 720,000 tonnes of aluminium per year.
Can we therefore say that Maaden is interested in attracting Brazilian companies and that there are good perspectives in this sense?
Yes. And I can say that Saudi Arabia has opened itself to foreign markets. We entered the World Trade Organisation (WTO) at the end of last year, there have been great reforms in legislation to encourage foreign investment, we have a new mining law that is very competitive and permits almost everybody to ask for a license for exploration.
When will there be more talks with Brazilian companies?
Within the next two months.
Why has the Saudi government decided to open the market?
Saudi Arabia has depended on gas and oil for a long time and the government has been trying to diversify the economy. In this respect, the mining sector has great potential for job generation for youngsters, for taking development to rural areas where these activities occur and also to improve the infrastructure in the country.
*Translated by Mark Ament
