Saudi Arabia still sees gold's glitter

Ulhas Joglekar ulhasj at
Wed Nov 24 17:23:01 PST 1999

24 November 1999 Saudi Arabia still sees gold's glitter By Ghaida Ghantous DUBAI: Saudi Arabia is forging ahead with plans to expand its gold mining industry despite a drop in the sector's profitability due to fluctuating world gold prices. The cyclical nature of the mining industry would not prevent the kingdom from proceeding with expansion plans, the Petroleum and Mineral Resources Ministry said. While the sharp drop in gold prices earlier this year "may have a temporary effect on exploration and mine development, long term objectives for continued expansion of this sector remain," the ministry said. Gold prices have been sliding after rallying from this summer's 20-year lows on a pledge by European central banks to limit gold sales, lending and derivatives use. The ministry said the fall in prices earlier this year had affected the profitability of two existing mines and the projected profitability of two planned mines. The kingdom had hoped to double its gold production from seven tonnes of gold a year by 2001 with the expansion of two existing mines, Mahd ad-Dhahab and Sukhaybarat, and the startup of two new mines, al-Amar and al-Hajjar, by 2000. "Gold exploration by (state- owned Saudi Arabian Mining Co) Maaden is continuing as planned, although prospects have to be evaluated under current economic conditions," the ministry said. Maaden said earlier that plans to start up the two new gold mines in the kingdom were moving forward but "with a view toward reducing capital expenditure". It said the schedule for the al- Amar mine had been moved back to late 2001 at 500 tonnes of ore per day from a planned 1,000 tonnes per day. Maaden runs the country's largest mine Mahd ad-Dhahab which has an annual production of 170,000 ounces. It also holds a 50 per cent stake in the Sukhaybarat gold mine, which has an output of 90,000 ounces per year. Canadian-Swedish base metals miner Boliden Ltd holds the remaining 50 per cent. The world's largest oil producer and exporter is seeking to tap its substantial deposits of gold, silver, copper, bauxite and other minerals in a bid to reduce reliance on petroleum. "We are working hard to offset reduced prices (earlier this year) through increased cost efficiencies, but production levels have not been reduced," Maaden said. Saudi Arabia last year granted Maaden a 30-year concession to mine gold and silver in al-Hajar area in the southwestern part of the kingdom. Saudi Arabia's five-year development plan to 2000 expected mining to grow faster than any other sector in the period. But the sector has so far failed to grow by the nine per cent a year forecast in the plan. The ministry said the growth target forecast in the five-year development plan to 2005 was expected to be lower, but did not provide details. Saudi Arabia has been preparing to issue several new exploration licences and is revising its mining code as part of efforts to increase revenue from mining. "Extensive consideration is being given to improvements to the present (investment) code to render it more competitive with the many other new codes that have been introduced around the world recently," the ministry said. "New incentives and the removal of obstacles to potential investors are the core of this process," it added.(Reuters) For reprint rights: Times Syndication Service

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