Saudi mining vehicle shifts strategy away from global M&A

A Saudi firm that was to be a key vehicle for the kingdom to invest in foreign mining assets is shifting its strategy away from global acquisitions, people familiar with the matter said, as the Gulf country increasingly prioritizes building up its domestic economy.

Manara Minerals Investment Co. — initially tasked with snapping up stakes in mines overseas and funneling the raw materials back to the kingdom for processing — now plans to pursue joint ventures or partnerships with trading firms and make debt investments, the people said, declining to be identified discussing confidential matters.

The venture between the kingdom’s sovereign wealth fund and Saudi Arabian Mining Co. could still look at some equity investments going forward, but that will no longer be its primary focus as it attempts to be more capital efficient, the people said.

Representatives for the Public Investment Fund, Manara and Saudi Arabian Mining declined to comment.

The shifts at the investment firm are the latest example of Saudi Arabia’s push for greater discipline in capital allocation and a sharper focus on investments that help boost its local economy.

The wealth fund sold a majority stake in one of the kingdom’s premier football clubs this month, and is considering cutting its funding for LIV Golf, the upstart league that cost it $5 billion since its launch in 2022.

The $1 trillion PIF said last week that it will step up efforts to boost returns and turn portfolio companies into global champions. That followed months of tough spending decisions in Riyadh, including sweeping reviews of ambitious projects like the planned megacity of Neom and a pivot toward areas more likely to attract foreign investment.

The regional conflict that saw Gulf nations bear the brunt of Iran’s attacks could add to the pressures. The Islamic Republic shut the Strait of Hormuz soon after the conflict started in late February, choking off a vital export route for Saudi Arabia and other oil-exporting countries in the region. Riyadh quickly moved to activate a cross-country pipeline to carry its crude to the Red Sea coast, from where it’s now exporting around 5 million barrels a day, or about 70% of the kingdom’s total prewar levels.

Still, the war hasn’t slowed the kingdom’s dealmaking. Savvy Games Group, a unit of the PIF, agreed to buy Moonton in March in a deal valuing the mobile games maker at $6 billion, and more recently another affiliate committed an additional $550 million to electric-carmaker Lucid Group Inc.

Launched in 2023, Manara made an early splash by buying a $2.6 billion stake in Vale SA’s base metals unit, but has since struggled to find deals at attractive valuations. The firm’s original plan was to make investments in iron ore, copper, nickel and lithium as a non-operating partner with minority equity positions.

Manara is now in advanced discussions with some of the world’s biggest commodity houses as it pushes into trading, the people said. The firm has held discussions with traders including Glencore Plc and Trafigura Group about forming a partnership, Bloomberg News reported in January.

The company has been looking to increase its exposure to metals trading at a time when prices for many commodities are near record highs and securing supplies of critical minerals becomes a political flash point from Washington to Beijing.

As part of its shift toward capital efficiency, Manara would focus on loans to miners in return for offtake rights, allowing it to benefit once production begins, one of the people said.

Saudi Arabia has made the mining industry the so-called third pillar of its Vision 2030 plan to diversify the historically oil-reliant economy, leveraging untapped resources including phosphate, copper and bauxite that are crucial for the global energy transition.

The broader Saudi goal is to quadruple mining’s economic contributions by 2030 and draw in companies to help the country become a hub for the sector. Canada’s Barrick Mining operates a copper mine in Saudi Arabia while Hancock Prospecting recently won the right to dig for metals in the kingdom.

(By Dinesh Nair, Thomas Biesheuvel and Archie Hunter)