United Mining Investments Company

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From a resource perspective, most people associate Saudi Arabia exclusively with oil, which is no surprise given the country’s massive reserves and the fact that revenues from exporting oil makes up the bulk of the Saudi economy.

Even those who knew of Saudi Arabia’s other hidden treasures always seemed to have dismissed the idea of mining for them, deeming the whole exercise as un-economical, while possibly also assuming that it is only the Saudi government which has the resources to undergo such operations.
However, more and more observers, investors and entrepreneurs are beginning to see that when it comes to this enormous Kingdom which forms the majority of the Arabian Peninsula there is certainly much more than what meets the eye.   

The IRJ’s Faisal J. Abbas caught up with Dr. Abdullah Basodan—the chairman of United Mining Investments Company (UMIC), a privately owned venture which, back in 2004, brought together a group of leading businessmen and technocrats to pursue opportunities in the non-oil natural resources sector and within five years managed to increase its capital from 1 million Saudi Riyals to 50 million Saudi Riyals (1 USD = 3.75 SAR).
“A continent rather than a country”

The way Dr. Basodan sees it, Saudi Arabia is so huge and well-diversified it could very well be a continent rather than a country. He explains that the country’s Western region is quite mountainous and very rich with various geologies, hence the existence of a vast ray of mineral resources.

“These facts are well known within the specialized circles but unfortunately not at large,” says Dr. Basodan who explains that recent years have witnessed a significant increase in awareness on the international level of the availability of mineral resources in Saudi Arabia.

Mineral surveys on a country-wide level started around the late 1950s-early 1960s, more recently, the task was handed over to the Saudi Geological Survey (SGS), which is mandated (by the Government) to actively identify minerals and unearth all hidden treasures within Saudi Arabia. 

So what is there to be found in Saudi Arabia? “You name, we’ve got it!” answers Dr. Basodan adding: “The UMIC mandate, which is set out by our share-holders and charter, is to focus on industrial minerals such as Feldspars, Limestone and Quartz.”

“However, on the Non-Industrial Mineral side—you will find everything from Fluoride, Silca-sand to Nickel to Zinc, it is all here,“ he elaborates.

Satisfying the market

UMIC aims to satisfy the huge local demand for resources, it also aims to do the same on a regional and international level.

According to Dr. Basodan, what helps fuel this passion for mining are several factors: firstly, Saudi Arabia is a massive country. Secondly; the investment environment is attractive, and thirdly, the local knowledge is substantial thanks to a vast pool of human resources which include local engineers and geologists.

However, a highly relevant question would be if it is really feasible to rely on locally mined industrial minerals, given the whole industry is still very young and for most non-government owned players economies of scale still need to be achieved?

“The cost-effectiveness aspect of our operation is quite good, in the sense that we are a lean and mean company,” replies Dr. Basodan, who points out that the only cost element that is not under UMIC’s control is the cost of transportation. “Again, this country is almost a continent, there are huge distances which need to be covered from mines to factories.” 

What doesn’t help as people who have been to Saudi Arabia know very well is the lack of an existing railroad network. “The government has embarked on building such a network; however, the only means available at the moment are land transportation,” explains Dr. Basodan.

He also points out that the Saudi Government provides huge local subsidies for the trucking business and that because UMIC isn’t in the transportation business, it obviously has to outsource this aspect of operation.

However, that single element will be sorted out once the railroads are up and running and UMIC will only become even more competitive once that happens.

“Raising the Feldspar”

UMIC’s next major project is producing the Feldspar which is a resource that enters into large number of industry, mainly: the glass and ceramic industries.

According to Dr. Basodan, Saudi Arabia is rich with Feldspar which is of ‘top quality world-wide’­—hence it made much sense for UMIC to commission an initial pilot project with approximately 600,000 tonnes of feldspar micronized feldspar per annum.

“This is quite significant for a pilot project, but it is an indication of the huge resource base we are working with,” says Dr. Basodan who explains that the “initial various industry users of this resource in the kingdom and in the region have been quite good,” and the next step is “to secure a long-term purchase contracts for our resource, for Feldspar—locally, regionally and eventually internationally.”

Apart from the local Saudi market, UMIC eyes three strategic markets at the moment: The United Arab Emirates (UAE), Kuwait and Italy where it has the advantages of existing relations and proximity. Both the UAE and Kuwait are fellow Gulf Cooperation Council (GCC) countries, while Italy as a Southern European country benefits from the ease of importing via the Red Sea, which runs in parallel all along the Western Province of Saudi Arabia, where UMIC is based.

More importantly, Dr. Basodan argues that another major factor to these commercial ties is that UMIC products’ quality matches the requirements of industry users and long-term relations with key industry players in those countries. 

Environment, health and safety

So how does a newly established mining company operate in a time of extreme environmental awareness? The answer according to Dr. Basodan is by not only making the environment a major area of concern for your own company, but by also helping other industries in the Kingdom to meet environmental standards.

For example, Dr. Basodan explains how UMIC works with a number of the power and water producers in Saudi Arabia by tackling the issue that some of the major plants that belong to these two industries emit lots of sulphur.

“We entered in contracts with a number of these players to upgrade their facilities to use FGD (Fuel Gas Desulphurisation)” he says while adding: “So we supply these units with high-quality Limestone, once they use in their production—their emission becomes really environmentally friendly.”

On the other hand, Dr. Basodan emphasizes that all operations at UMIC are certified by The Metrological Environmental Protection Agency (MEPA) in Saudi Arabia. He says that MEPA is a quite active agency and continuously enforcing the international standards for environmental protection ine country.

On the other hand, Dr. Basodan stresses that UMIC believes that its most valuable resource of all is its human resources. “We go out of our way to make sure their health and well-being is being taken care of and this is also done by implementing the standards of MEPA in our facilities to the limit.”

The company also invests a lot into training—this is a matter that is taken seriously according to Dr. Basodan who says this is despite that the fact that employees in this field in particular come with a high level of sophistication as enigneers and workers come with a degree, experience and good training, contrary to their counterparts in many other industries in Saudi Arabia and the region.

However, he also reveals that UMIC is actually working on building a major training academy in Saudi Arabia in cooperation with the Arab Mining Company which is based in Amman, Jordan.

Enough to share

As pointed out earlier, UMIC managed to take its capital up from 1 million to 50 million Saudi Riyals within five years. Dr. Basodan anticipates that the company will probably double or quadruple its capitalization in years to come.

He says that mining is one field of business in Saudi Arabia that is too huge for one single or even ten local companies to harness its benefits. “The cake is too big and can be shared between local and international investors”, he argues.

Furthermore, he reaffirms that UMIC is a privately-owned entity which was formed by a group of internationally-oriented group of investors.  “We have a long track record of dealing and partnering up with foreign investors and companies and the investment environment is quite attractive from regulatory and taxation point of views,” he argues as he concludes: “We believe that the set-up in this country for foreign investment is perfect.”

http://umic.com.sa