Mining firms embrace bumper interest from the Middle East

Mining executives have welcomed a sharp upswing in investor interest from the Middle East, as Gulf states seek to expand their critical mineral ambitions and take on established global players.

Critical minerals refer to a subset of materials considered essential to the energy transition. These resources, which tend to have a high risk of supply chain disruption, include metals such as copper, lithium, nickel, cobalt and rare earth elements.

“The interest in rare earths in this part of the world is phenomenal,” Tony Sage, CEO of U.S.-listed rare earths miner Critical Metals, said during a business trip through the Middle East.

“I didn’t expect it because, you know, they can’t mine it. There [are] really no discoveries in this area, but they want to be able to participate somehow in the downstream,” Sage told CNBC by telephone.

His comments come as policymakers and business leaders flock to Saudi Arabia’s Future Investment Initiative (FII) in Riyadh, an event nicknamed as the “Davos in the Desert.”

The annual event, which got underway on Monday, is being held under the theme: “The Key to Prosperity: Unlocking New Frontiers of Growth.” It is expected this year’s FII will lean into areas such as artificial intelligence, particularly as the oil-rich kingdom continues with its mission to diversify its economy.

Analysts say Gulf states, led by the likes of Saudi Arabia and the UAE, are increasingly seeking to leverage their financial capital and geographic location to capture critical minerals market share.

A series of targeted acquisitions and international partnerships forms a key part of this regional strategy, according to an analysis by the International Institute for Strategic Studies (IISS), with Gulf states seeking to present themselves as alternative partners to Western nations.

Critical Metals, for its part, has partnered with Saudi Arabia’s Obeikan Group to build a large-scale lithium hydroxide processing plant in the kingdom.

Kevin Das, senior technical consultant at New Frontier Minerals, an Australian-based rare earths explorer, linked investor interest in rare earths from the Middle East to exponential growth in the field of AI.

“It’s no surprise that you’re seeing interest, not just in the Western world, but spreading into the Gulf States because I think people are realizing that we’re probably on the cusp of an AI boom,” Das told CNBC by telephone.

“If you start to see the emergence of robotics, every robot is going to need these rare earths. And I think the supply is only going to get tighter,” he added.

Rare earth elements have emerged as a key bargaining chip in the ongoing U.S.-China trade war, although global stocks rallied on Monday amid investor hopes of thawing tensions between the world’s two largest economies.

U.S. officials have touted the prospect of China delaying strict rare earth export controls as part of a high-stakes summit between President Donald Trump and China’s Xi Jinping on Thursday.

Rare earths refer to 17 elements on the periodic table whose atomic structure gives them special magnetic properties. These elements are widely used in the automotive, robotics and defense sectors.

Shaun Bunn, managing director at London-listed Empire Metals, said his company had also received considerable investor interest from the Middle East.

“I think that it is very much part of the kingdom’s strategic push to diversify away from its oil. I mean, they are always going to make the most money out of oil at the moment at least, but they are trying to diversify,” Bunn told CNBC by telephone.

Analysts have flagged a number of barriers facing the Gulf states’ push for critical minerals, however, noting that regional players remain marginal producers at present.

“Many of Saudi Arabia’s mining ventures remain in early or even conceptual stages, and the country still depends on foreign partners for expertise, such that it may take years for Saudi Arabia, and the Gulf states more generally, to scale up enough to dent Chinese dominance or to fully meet Western demand,” Asna Wajid, research analyst at IISS, said in an analysis published in late July.

“Many in the West, moreover, may be wary of replacing their dependence on China with dependence on the Gulf states, which already exercise considerable strategic leverage due to their oil and gas supplies,” Wajid said.

China is the undisputed leader of the critical minerals supply chain, producing roughly 70% of the world’s supply of rare earths and processing almost 90%, which means it is importing these materials from other countries and processing them.

U.S. officials have previously warned that this dominance poses a strategic challenge amid the pivot to more sustainable energy sources.