With mineral mining a major focal point of the Omani government’s plans to diversify the country’s economy, the sector has seen revitalised interest in recent years, from both domestic and foreign investors. The sector’s newly adopted strategy to develop through comprehensive, large-scale concession agreements is opening up more territory and streamlining the business side. New geological surveys are being conducted, while additional financing arrangements are easing market entry.
With the sultanate’s economy anticipating a major injection of new investment in 2023 and beyond – and as oil and gas revenue rises, and the impact of the Covid-19 pandemic fades – growth across the economy should also boost demand for minerals. Indeed, with the sector capable of providing everything from building aggregates to gold and copper, mining in Oman looks set to see a significant increase in activity in the years to come.
Structure & Overview
In 2014 the government set up the Public Authority for Mining (PAM) to be responsible for sector regulation and promotion. Two years later, the holding company Minerals Development Oman (MDO) was established to act as PAM’s executive arm. In August 2020 PAM was dissolved, with its responsibilities transferring to the Ministry of Energy and Minerals (MEM), the sector’s primary government authority. The Oman Investment Authority (OIA), the country’s sovereign wealth fund, began to oversee MDO in 2020 to better align its policies and regulations with the goals of Oman Vision 2040, the country’s long-term economic development blueprint. MDO is responsible for attracting investment to both the upstream and downstream segments across the entire range of the sultanate’s mineral resources.
In 1979 the government launched Oman Mining Company, which was charged with leveraging copper reserves in the northern city of Sohar, where it also built concentrator, smelter and refining facilities. The company later moved into mining silver, gold, chromite, limestone and silica in other blocks. The company was transferred to the OIA in 2020 and then placed under MDO in 2021. MDO has since embarked on a debt restructuring programme, as well as further exploration and survey work in Oman Mining Company’s concession areas.
As for the downstream segment, in July 2021 the MEM created a new unit, Industry Development of Energy and Minerals, which concentrates on processing, refining and other in-country, value-adding activities as Oman seeks to keep as much of the minerals sector’s value chain as possible onshore. The MEM also works with MDO on surveys. In August 2022 the two bodies began an aerial geophysical survey targeting Masirah Island in its first phase, with further phases focusing on other regions.
New Mining Law
In 2019 the new Mineral Wealth Law was adopted through a royal decree, replacing the previous mining law from 2003. The new legislation reiterated the sovereign ownership of all the sultanate’s mineral wealth and PAM’s role as the sole entity in charge of issuing mining licences, concluding concession agreements, and inspecting and enforcing mining laws and regulations – functions the MEM now discharges. Meanwhile, the Foreign Capital Investment Law that took effect at the beginning of 2020 eased regulations regarding foreign investors, allowing for the 100% foreign ownership of companies in a number of sectors, including mining. However, certain projects have been offered to Omani investors alone, with 13 out of the 110 mineral areas identified for development open to international investors as of March 2020. The MEM did announce though in August 2021 that it was in the process of establishing large concessions and opening smaller public mining sites to bidding from both local and international investors.
When announcing plans to offer tenders for 15-20 mining blocks in February 2020, PAM said that new licences would be issued within 14 to 20 weeks of a successful bid, a move meant to address previous concerns in the sector over the length of the process. The minimum licensing period also increased from one to five years, while concession agreements are now valid for no fewer than 20 years and no more than 30 years, giving mining companies much greater security when making commitments to develop large-scale projects.
Royalties vary according to the mineral mined, with the minimum rate at 5% of the value of the ore produced annually. This differs from previous practice, which saw royalties fluctuate between flat rates of 5-10%. The maximum size of a licence area increased from 3 sq km to 5 sq km – a larger area must be granted via a concession agreement – and investors can have more than one ore on a single licence, potentially boosting returns. Inspectors were given greater powers, while penalties for violations have been made more severe, with an approved rehabilitation plan obligatory and a minimum of 1% of sales going to a corporate responsibility fund administered by a government agency.
Plans & Progress
Oman is in the middle of its 10th five-year plan, this one covering 2021-25. One of the key goals is economic diversification, with mining one of six non-oil sectors highlighted for growth in Vision 2040. The sector’s contribution to GDP in 2021 was calculated at 0.5%, with the target being 0.7% by the end of the plan in 2025.
Key to this is the new mining law and the offering of large-scale concessions through a one-stop shop. A successful bidder receives a pre-approved site with a bundle of permits and other facilities secured in advance. The licence holder will also have access to integrated databases of geological, geophysical and exploration surveys for their concession areas. The processing of the various licences, visas, environmental impact assessments and other legal requirements has also been made smoother. The MEM believes these changes will help to optimise the utilisation of the sultanate’s mineral resources and improve the sector’s sustainability. The large size and longer-term nature of the concessions also reduce risk for investors, making projects more commercially viable and bankable. Greater bankability is expected to serve mining outfits well when they seek potential long-term financing agreements from banks and other financial institutions.
Mineral Varieties
The new concession strategy is oriented around developing mineral resources that have a clear strategic value in industry. Metallic minerals that can be used in new, sustainable technologies, such as clean energy generation and batteries, are therefore of particular interest to Oman. The sultanate can draw on the presence of a wide variety of different minerals that are used in different technologies, and roughly two-thirds of the country’s available minerals have yet to be mined.
There are three main regions for mineral mining in Oman: the mountainous regions in the northeast near Muscat; a central region surrounding the port of Duqm; and a southern region around Salalah. Copper, gold and aggregates are mined in the first area, and there are potential reserves of nickel laterite, basalt, zinc and lead in the region. Marble, limestone, dolomite, manganese, laterite, clays, sand silica, gypsum and salt are mined in the central region, and there are potential reserves of lithium, coal, quartzite and carbonite. The desert areas stretching inland from Duqm to the border with Saudi Arabia have salt and potash mines, as well as potential deposits of lithium. The third area around Salalah has proven deposits of limestone, dolomite and gypsum, with potentially exploitable deposits of clays and silica.
Oman is a major producer of limestone, with some 8.3m tonnes of output in 2021. However, output has dropped from a high of 19m tonnes in 2017 due to resources becoming depleted. Restoring limestone output is therefore another objective of MDO and the MEM’s sector development efforts.
Another of the sultanate’s major mineral and export commodities is gypsum, as Oman is one of the world’s largest producers of the mineral. The sultanate produced 12.3m tonnes in 2021 and exported some 8.7m tonnes of the total, giving Oman a 44% share of gypsum exports to Asia, the Middle East and South-east Africa, the main destinations being India and Bangladesh. It was reported in April 2022 that a MDO survey in Shaleem, in southern Oman, uncovered further large reserves of gypsum. Shaleem also has deposits of other industrial minerals, such as limestone and dolomite, along with deposits of metallic minerals such as gold, copper and chromite.
Nasser Al Maqbali, CEO of MDO, told the OIA’s quarterly bulletin in March 2022 that the company had recently discovered an estimated 15m tonnes of high-purity limestone in its Wadi Al Jizi concession area. Wafra Mining, which MDO owns, plans to produce around 1m tonnes of limestone annually from its concession in this area.
Copper has long been a major commodity for Oman, with the main exploited reserves in the northern mountains. Indeed, this region is where the Oman Mining Company has done much of its work over the years. The segment is re-emerging thanks to the copper and gold project at Al Washihi Majaza in the Al Mudhaibi wilaya (province), which is set to be commissioned in April 2023. The project is run by joint venture (JV) Al Hadeetha Resources, which comprises the Australian firm Alara Resources, and Al Hadeetha Investments and Al Tasnim Infrastructure Services. Some 16m tonnes of copper ore is set to be commercialised at the mine, making it the largest single copper resource in the sultanate once in operation, processing some 1m tonnes of copper ore annually. Alara is also involved in the Daris Copper-Gold Project 150 km west of Muscat. Overseen by another JV that includes Al Tamman Trading Establishment, Daris is adjacent to Alara’s Awtad Copper-Gold project.
Other Players
Leading gypsum companies include Oman Industries Gypsum and Global Mining Company (GMC), which are both based in Salalah. GMC has a downstream arm, Gypcore, that manufactures gypsum board and other minerals. Also under its remit is Global Marble Manufacturing, which produces artificial marble. Kunooz Gypsum, a subsidiary of Kunooz Oman Holding, is also in the process of developing gypsum board and gypsum powder factories in the Dhofar Governorate.
Elsewhere, Mawarid Mining has been operating in Oman since 2000, having processed some 6m tonnes of copper ore through 2022 at its Lasail copper concentrate plant. The company also has a project at Al Ghuzayn, which aims to extract some 6.4m tonnes of massive sulphide ore for processing over its lifetime. Another MDO development is Mazoon Mining in the Yanqul wilaya of the Ad Dhahirah Governorate, where there are five mines with copper reserves of up to 16m tonnes and an annual production capacity of roughly 1.6m tonnes.
Chromite is another important mineral in Oman, with the key entity involved in its extraction and commercialisation being the Oman Chromite Company (OCC), which estimates that there are some 30m tonnes of this mineral located within the borders of the sultanate. OCC produced 25,900 tonnes of chromite ore in the first half of 2022, up from roughly 9300 tonnes during the same period in 2021. The company signed an investment agreement with MDO to explore two new sites, one in the Al Buraimi Governorate and the other in the North Al Batinah Governorate. Other major industrial minerals projects include a large gabbro quarry run by Ahjaar Mining Company that started commercial operations in September 2021, with some 211m tonnes of gabbro estimated to be within the concession area.
Salt is a mineral produced on a large scale in Oman, with the segment consisting of salt in brine, rock salt and solar salt. Brine is used in enhanced oil recovery projects to make oil operations more efficient, while rock salt is used to remove water from finished oil refinery products. Solar salt, which is produced by evaporation in large ponds, has a high purity level and is used as a water softener. Duqm Salt Factory, which was established by Global Integrated Engineering to give local producers a larger share of the salt market, has a solar salt capacity of 135,000 tonnes per annum (tpa). The company’s clients include Petroleum Development Oman, Occidental Petroleum Corporation and Halliburton. MDO is also pursuing Naqa Salt, a project aimed at producing high-purity sea salt.
Downstream
MDO is pursuing downstream development as part of wider efforts to boost domestic value-added. One such initiative is Sohar Titanium, a strategic partnership between MDO, Dubal Holding and Stork International Group, via Gulf Titanium Company. The OR43m ($111.8m) project is located on a 120,000-sq-metre site in the Sohar Free Zone and aims to produce 150,000 tonnes of titanium dioxide a year once it starts commercial production in 2025.
As a shareholder in Oman Synergies Casting, a JV with Synergies Casting India to produce 2.1m tonnes of aluminium wheels for vehicles, MDO is providing technical and administrative support to the initiative, located in the Sohar Industrial Area. Commercial operations for the project have been under way since July 2022. MDO is also working to develop downstream projects in magnesium metal, silicon metal, ferrosilicon and limestone calcination.
Performance
Since the implementation of the new mining law and concessions strategy, there has been a notable acceleration in mining activity in the sultanate. Even so, the Covid-19 pandemic negatively impacted the sector’s development as it affected industry supply chains and production.
In terms of gross output at constant prices, the mining and quarrying sector accounted for OR426m ($1.11bn) in 2019, a figure that fell to OR387m ($1.01bn) in 2020. Gross value added declined from OR263m ($684m) to OR239m ($621m) over the same period. As the effects of the pandemic waned, the sector began to recover lost ground, with gross output rising to OR393m ($1.02bn) in 2021, while gross value added rose to OR243m ($632m).
Concessions
February 2020 saw a fair amount of activity, with PAM announcing plans to offer 15-20 pre-approved areas for bidding that year and OCC receiving eight new exploration licences.
More recently, in March 2022 MDO signed 12 exploration-to-mining agreements covering 21,480 sq km for a 30-year period. The agreements are for eight sites mostly in the North and South Al Batinah, Al Buraimi, Al Dakhiliya, and North and South Al Sharqiyah governorates. According to MDO, the sites have prospects for gold, copper and chromium.
In April 2022 the MEM launched bidding for four blocks ideal for potash mining covering some 9500 sq km, three of which are located in the Umm Al Samim desert, while the fourth is in the Mahout wilaya. The blocks were made available to both local and international companies.
Three more concessions were offered in October of that year, covering an area of just over 2.5 sq km in the Ibra wilaya in the Al Sharqiyah North Governorate. While the combined area of the sites is significantly smaller compared to other concessions in Oman, they have commercial amounts of aggregates that can be used in construction and building materials. The concessions have been reserved for experienced, Oman-based companies only. In December 2022, 12 concessions areas were assigned by royal decrees to MDO. In the downstream segment, the foundation stone at Sohar Titanium was laid on November 13, 2022. Company officials said they expect the plant to be operational by 2025, producing an estimated 150,000 tonnes per year.
Outlook
The period ahead promises additional blocks and bidders, as MDO and other mining entities along with the relevant regulatory bodies continue to develop the sector. Indeed, with the wider economy showing signs of a strong rebound – GDP growth rose from -3.2% in 2020 to 3% in 2021, with the IMF predicting a growth of 4.3% in 2022 as of November of that year – a healthier investment climate overall should help accelerate this trend. Major infrastructure projects – spearheaded in particular by funds such as Rakiza, a JV managed by Oman Infrastructure Investment Management – should see domestic demand for minerals used in construction expand, with downstream projects also expecting lucrative contracts.
At the same time, hydrocarbons revenue from high oil and gas prices also bodes well for investment in downstream projects, boosting mining value-added. A further boon is likely to be infrastructure projects related to transport and communications, as mining concessions are often in areas that are difficult to access. A stronger road and rail network is one of the Omani government’s priorities, and such improvements would benefit the mining sector’s upstream and downstream segments in the years ahead.
Although global mineral prices generally rose following Russia’s invasion of Ukraine in February 2022, prices started to soften later in the year and are widely expected to fall further in 2023. Factors such as the impact of China’s pandemic policies on demand, the continuing war in Ukraine, anti-inflationary measures in Western economies – including higher interest rates – and climate change remain external headwinds that could affect wider economic growth. However, with a raft of domestic moves looking to counter to these challenges, mining companies in Oman look set for growth as a result of new activity and investment in the sector.
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