Metals & Mining: ambitious growth target Faisal AlAzmeh, CFA >> Merrill Lynch KSA Company [email protected] The NTP has focused on several areas relating to domestic drivers, i.e., housing, retail, trade and finance. However, a core part of the Saudi government’s transformation strategy is to focus on expanding the Kingdom’s mining potential. Saudi Maaden has historically been Saudi’s mining champion, but the mining sector currently contributes only around 2% to the Kingdom’s GDP. The NTP has set a high target for the sector: its contribution to GDP growing by 50% to SAR97bn by 2020 and sector employment increasing by 40% to 90k. While the first target could be achieved given the amount of capital that is currently being deployed in the sector, the latter part is questionable in our view as capital intensive projects are not the best means for employment generation. Government focus on mining to boost jobs and growth The focus on mining is driven by the ample and growing resources available. The Kingdom’s largest mined products are phosphates, bauxite and gold. It supplies around 8% of global DAP production and has the largest integrated aluminium company in the world. Ma’aden continues to discover new gold and copper sites as well. We believe the outlook for mining is encouraging and the contribution to GDP targeted by the government could be achieved. We believe investments in this sector faces two hurdles: 1. Diversification — the base metal cycle lags that of oil but is eventually driven by the same global drivers (global growth). Furthermore, the NTP has currently set a low number for its capital commitments to the industry (USS82mn), achieving the targeted diversification and job creation at the moment seems to be highly dependent on attracting private sector capital. This would require attractive incentives schemes such as energy subsidies, tax exemptions or ease of issuing work permits for expats. However, at the moment, these have not bee