• UAE and Saudi Arabia plan graphite processing plants fed by African mines

• Projects rely on supply from Madagascar and Namibia

• The push tests Africa’s ambitions to process critical minerals locally

African graphite producers are facing growing interest from Gulf countries as Saudi Arabia and the United Arab Emirates move to position themselves in the processing of critical minerals. On January 12, NextSource Materials said it had signed term sheets with potential investors for a processing plant in the UAE that would treat graphite mined in Madagascar. In the same week, Northern Graphite reached an agreement with Saudi conglomerate Obeikan Group for a similar project in Saudi Arabia, supplied by the Okanjande graphite mine in Namibia.

The two initiatives highlight the rising appetite of Gulf states for downstream activities in critical minerals, at a time when African producers are seeking to move up the value chain by processing these resources locally.

NextSource has been operating the Molo graphite mine in Madagascar since 2023 and is looking to strengthen its position along the value chain by building a battery anode plant aimed at the electric vehicle market. Global supply of graphite products is still largely dominated by China, prompting investors to look for alternative processing hubs in line with Western efforts to reduce dependence on Beijing for critical minerals. While Mauritius was initially considered, constraints led NextSource to shift its focus to the Middle East, with Saudi Arabia and the UAE emerging as the leading options.

A strategic positioning

When outlining its interest in the UAE and Saudi Arabia as potential locations for its future plant, NextSource pointed to simplified permitting processes, strong infrastructure, and the 10% tariffs imposed by the United States on products from the UAE, at a time when the US market is seeking alternatives to Chinese graphite. Similar arguments were put forward by Northern Graphite when it signed its agreement with Obeikan Group for a $200 million battery anode materials plant in Saudi Arabia.

“Saudi Arabia is an attractive location for our BAM plant due to its low energy and labor costs, close proximity to Namibia, strong government support, favorable financing conditions, and trade advantages that include low tariffs into the US and efficient access to European markets,” said Hugues Jacquemin, chief executive officer of Northern Graphite.

Long dependent on oil and gas, the UAE and especially Saudi Arabia are pursuing economic diversification strategies that include building new industrial value chains. Through its sovereign wealth fund, Saudi Arabia plans to invest billions of dollars in mining companies, while offering incentives to investors willing to set up operations in the country, including simplified licensing procedures.

Win-win partnerships?

Faced with the financial strength of Gulf states backed by oil revenues, African producers of critical minerals have limited room for maneuver. Namibia announced in 2023 a ban on the export of unprocessed critical minerals such as lithium and graphite, with the aim of developing local processing capacity. Tanzania, Africa’s third-largest graphite producer after Madagascar and Mozambique, has adopted a similar approach. These strategies create a “tension” with Gulf ambitions, according to Nafi Quarshie, Africa director at the Natural Resource Governance Institute. Speaking to Climate Home News, she pointed to growing “pressure” on African countries to do business with Saudi Arabia.

The question now is what form cooperation between African producers and Gulf states could take, allowing each side to meet its objectives. While African plans for local processing have yet to translate into large-scale projects, bilateral deals with Gulf countries could attract new investment into exploration and mining, in exchange for easier access to Saudi or Emirati processing facilities.

In the meantime, the agreement between Northern Graphite and Obeikan could already have a tangible impact on Namibia’s mining sector. The two groups have signed a letter of intent to set up a joint venture controlled 51% by the Saudi partner and 49% by the Canadian company. Development of the Okanjande project, which has been on hold since 2018, could resume if a final agreement is reached for the Saudi plant. The joint venture would then sign an offtake agreement for up to 50,000 tons per year of graphite concentrate from the Namibian project, paving the way for its restart.

Emiliano Tossou