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Golden Compass projects revenue of $27mln in the current financial year

As Saudi Arabia begins a new age of mining, with untapped mineral deposits valued at over $1.3 trillion, there is a need for home-grown expertise in exploration, drilling and processing.

One company that plans to tap into this is Golden Compass, a Jeddah-based mining operator launched in 2016 focused on gold, limestone, copper and silica — which is used in a range of products, from microchips to solar panels.

Golden Compass has two main revenue streams: the identification and valuation of underground resources, and the actual mining and extraction of minerals.

Founder and chief executive Meshary Al-Ali began his mining career with a stint in Australia, before spending nine years at Saudi Arabia’s Ma’aden — the largest miner in the Gulf region — where he was ultimately promoted to senior project engineer.

Al-Ali said he resigned from Ma’aden to establish a startup that will “be the biggest mining consulting and services company in Saudi Arabia in the first phase, and in the Middle East in the second phase.”

Beginning with a small team of geologists and mining engineers, Golden Compass has expanded to 120 staff.

Its first successful investment round came in 2018, bringing in the Saudi venture capital firm Naif Al Rajhi Investment Group. The size of that deal remains confidential, but it gave NRI a majority shareholding, and shortly afterwards, NRI injected a further SR20 million ($5.3 million).

In 2020, 10 percent of Golden Compass was bought by Saud Al Rajhi Investment Group (NRI and Saud are both part of the Al Rajhi banking dynasty) for SR7 million, valuing the company at SR70 million.

A third investment round is currently being finalized, the details of which are again confidential, with an Initial Public Offering slated for 2028.

Al-Ali told Arab News that the need for such levels of investment stems from the amount of equipment required in the mining sector.

“The big mining companies don’t necessarily want to invest their capital in rigs and drills and bulldozers, which are expensive, and which also depreciate quickly,” Al-Ali said.

He added: “If you are a multinational mining company that wins a concession for a gold or copper mine in Saudi Arabia, you will usually not run it yourself.

“You’ll contract that out to a certified operator specializing in exploration, resource and reserve estimation and core cutting — and with its own fleet of rigs, bulldozers, drills, processing facilities, laboratories, and of course manpower. And all of that requires huge capital investment — over SR 50 million so far, in our case.

“We carry out exploring, surveying, blasting, extracting, drilling — the entire circle of operations. We’ve become a one-stop shop of services for mining companies.”

The company is on a rapid upward trajectory, with revenues of SR30 million in 2020, and SR27 million in 2021, a fall partly due to management changes in their primary client Ma’aden, causing a delay in the closing of a contract. However, Golden Compass projects revenue of SR100 million in the current financial year.

“Saudi Arabia’s mining sector is booming”, Al-Ali said. “This really started with the new mining code on 1 January 2021. Saudi Arabia is now marketing its mining industry to the world and wants to bring in more global players.

“How? By enacting a very solid law that will protect the investments of foreign companies and provide easy access to information and data — for example via the National Geological Database and mapping program, which is updating a lot of redundant historical information.

“International mining companies now have a very solid law to protect them, and a good business environment in a stable country with confirmed mineral reserves — and the Saudi government now supports mining companies with 70% finance. So, it’s a total package.”

Another important new initiative is Saudi Arabia’s accelerated exploration program, where the Kingdom’s Ministry of Industry and Mineral Resources seeks to “motivate and encourage small-scale exploration companies.”

Golden Compass has bid for some of those contracts and the winners will be announced later this year.

Mining has three phases. Upstream consists of exploration and extraction. Midstream is made up of processing. And downstream is the manufacture of finished products.

“Until now, over 80 percent of Saudi Arabia’s mining sector has been concentrated on upstream”, Al-Ali noted. “But the object now is for the country to be involved in the entire value chain.”

He said one way this can be achieved is by setting up factories that process the Kingdom’s abundant silica into solar panels, with the transfer of technology and knowhow, along with the potential creation of many jobs.

“Saudi Arabia needs to diversify its income over the next 20 years,” Al-Ali said. “I think that the leaders of our mining industry are on the right track, and are building a healthy and sustainable and transparent system for investors and mining companies.”