Up until 2022, exploration site licenses were assigned on a first-come, first-served basis in Saudi Arabia. With the auction of the Khnaiguiyah exploration license, the Ministry of Industry and Mineral Resources (MIMR) changed direction, welcoming competition and foreign participation with its new process. The Saudi ministry engaged NERA to design and implement an award for three mining licenses. A key objective was to establish a transparent process that would become the foundation for future MIMR awards and set a new precedent within the global mining community

NERA designed a multi-stage approach that enabled MIMR to identify the top bidder for each license. Our process began with a pre-qualification round, followed by an in-depth analysis of each qualified bidder’s proposal on its work program, social and environmental plan, and financial outlook. The top-scoring bidders from this stage were then invited to participate [depending on license type] in either:

• a multi-round auction using clock-style bidding or
• first-price sealed-bid final stage.

The design is simple for bidders, balancing price discovery and transparency with safeguards to ensure only quality bidders can win.

The first auction for the Khnaiguiyah Mining License took place in September 2022. NERA’s design encouraged top companies within the mining industry to participate: Participating entities formed consortia among themselves to increase their competitiveness, thereby increasing the quality of the bidders. The auction was highly competitive, with three qualifying consortia competing over multiple rounds of gradual price increases, before the single winner was identified.

NERA’s onsite execution of the auction process promoted confidence in the process and minimized the potential for legal challenges. Furthermore, the new process will be used for future mining awards in Saudi Arabia and establishes auctions as an attractive tool for mining awards in other countries.