Our net outlook bias for the metals and mining sector globally is modestly negative. Metals and mining companies face persistent cost pressures from declining ore grades and high reinvestment requirements. Even as producer prices and input costs remain elevated, overall earnings and cash flows have come under pressure since the spike in inflation over 2021-2022.

Still, demand for metals remains solid. We expect hard assets--including mines, mills, furnaces, and smelters--and robust balance sheets will become increasingly important to mitigate risks, such as regulatory disruptions and cash flow constraints.

In our key assumptions, we forecast that metal prices will remain stable amid economic headwinds and that companies will prioritize financial discipline. This, together with decade-low debt levels and limited M&A activity, will help preserve credit quality, despite volatility.

Saudi Arabia Bucks The Global Trend

Saudi Arabia's proactive measures and substantial resources endowment may help offset continued cost pressures and support the resilience of the flagship domestic metals and mining companies' credit profiles. Unlike some global peers, some of the largest Saudi metals and mining companies benefit from strong government support, new regulatory frameworks--such as the Mining Investment Law--and significant government-led capital investments in mega projects and domestic infrastructure.

We expect these initiatives will spur domestic demand for metals, reduce import dependency, and over time improve the sector's operational efficiency. They will also support the domestic metals and mining sector's capacity to meet rising global demand, notably for base metals and minerals.

The country boasts large reserves of metals and minerals that the world needs in large quantity in the future. Base metals--including copper, nickel, and lithium--are critical for the energy transition, while minerals, for example phosphate fertilizers, are essential for food safety.

Chart 1

Chart 2

According to the last "Vision 2030" 2023 annual report, the mining sector contributed about $400 million in revenues to Saudi Arabia's economy. As per the report, the Saudi government plans to increase the sector's GDP contribution to $75 billion in 2030 from about $17 billion in 2024.

Saudi Arabia's internal industrial growth is central to this transformation. We expect that sustained momentum in Vision 2030 investments and associated activity in construction, logistics, domestic manufacturing, and mining will lead to an average headline GDP growth of about 4% over 2025-2028.

The Saudi government aims to invest $40 billion annually in local giga and mega projects via the Public Investment Fund (PIF). As investments in infrastructure and manufacturing rise, we expect local demand for metals will increase substantially.

Government initiatives, such as the investment of close to Saudi riyal (SAR) 29 billion ($7.7 billion) in the Wa'ad Al-Shamal project, with a focus on phosphates and a $100 billion funding plan targeting critical minerals by 2035, intend to reduce import dependency and stimulate domestic production. These funding measures are critical to support Saudi Arabia's internal growth and, with that, its economic diversification.

Industrial Growth Could Fuel Domestic Demand

Domestic industrial expansion is key to increase the local demand for metals. Giga projects--such as Neom, Red Sea, Qiddiya, Roshn, and Diriyah, among others--can transform Saudi Arabia's urban landscapes and boost the demand for construction materials and high-value metals.

For example, Neom's integrated industrial clusters and Qiddiya's focus on sectors such as entertainment, travel and tourism, utilities, hospitality, and transportation are projected to ramp up the local consumption of steel, aluminum, and copper.

These projects, which benefit from funding and infrastructure investments, aim to reduce the country's import costs for metals (including iron, steel, precious and semi-stones), by creating a solid domestic market for metals and minerals. Import costs stood at about $20 billion-$24 billion for 2024 as per the General Authority for Statistics (GASTAT).

Saudi Arabia's metals and mining sector also benefits from the country's geographic position, with access to important markets in Europe, Asia, and Africa representing a competitive advantage. Still, the large scale development of the sector hinges on the implementation of clear and predictable regulations, notably on openness in international contracts, or ease for foreign investors to partner with local companies and government entities to gain access to resources, expertise, and market knowledge.

Untapped Reserves Spell Opportunity

Saudi Arabia possesses vast, yet underexploited, mining and mineral resources. Current estimates value these reserves at approximately SAR9.375 trillion ($2.5 trillion), marking a 90% increase from the valuation of SAR5 trillion ($1.3 trillion) in 2016. This upward revision incorporates newly discovered rare earth elements and transitional metals, along with significant increases in phosphate ore, copper, zinc, and gold reserves.

Saudi Arabia's western region--dominated by the Arabian Shield, the Red Sea coastal plain, and volcanic fields--hosts most of the country's mines, while the northern area is rich in phosphate deposits (see chart 3). These geological advantages provide a solid foundation for future exploration and production activities.

Chart 3

Advancements in exploration technologies, such as AI-driven geospatial mapping and digital data analytics, further enhance the efficiency and accuracy of resource assessments. This will likely accelerate project timelines, optimize resource allocation, and, ultimately, boost the sector's output.

State-Owned Entities Dominate The Sector

Saudi Arabia's metals and mining industry predominantly relies on state-owned entities that form the backbone of the country's non-oil diversification strategy. The Saudi Arabian Mining Company (Ma'aden, not rated) remains the flagship operator and one of the largest mining companies globally.

According to its annual report from 2024, Ma'aden generated consolidated revenues of about SAR32 billion ($8.5 billion) and EBITDA of approximatively SAR11 billion ($3 billion) (see table 1). Ma'aden's diversified portfolio includes gold, phosphate, aluminum, and base metal mines. Its gold division produces about 450,000 ounces and its phosphate operations exceed 6.5 million metric tons annually.

Table 1

Manara Minerals, a collaboration between Ma'aden and the PIF, focuses on critical minerals, such as copper and lithium. It ensures that Saudi Arabia's supply of essential metals meets the demands posed by the energy transition.

Complementing these large-scale public initiatives, several private players play vital roles in downstream processing and niche exploration. Among others, they include Ajlan & Bros Mining, AMAK Mining Company, Norin Mining (in collaboration with Ajlan), Power Nickel, Gold and Minerals Limited Company & Artar, Skylark, and the Arabian Gulf Mining Company.

Although the private sector only accounts for about 10%-20% of the overall industry value, these firms are crucial for expanding value-added services and ensuring a comprehensive supply chain.

The Sector Benefits From Favorable Developments

Increased exploration budgets

Recent data from S&P Market Intelligence show a notable increase in Saudi Arabia's exploration budget over the past five years, highlighting the country's focus on unlocking its mineral potential (see chart 4 and table 2). This upward trend aligns with the broader Vision 2030 agenda and underlines the robust policy support.

As budgets continue to increase, the likelihood of discovering additional resources and expanding existing operations supports our view of sustainable, long-term growth of Saudi Arabia's metals and mining industry. The number of exploration companies operating in the country has already increased substantially to 133 in 2023, from six in 2020.

Chart 4

Table 2

Evolving legal framework

Saudi Arabia's regulatory environment has matured significantly, underpinning the growth of the metals and mining sector. The introduction of the Mining Investment Law in 2020 has transformed licensing practices by providing transparent, predictable, and streamlined processes.

Under this law, exploration licenses are issued for up to 15 years and mining licenses can last up to 60 years. This, along with the launch of digital platforms--such as the Saudi Mining Investment Opportunities portal--has resulted in a 138% increase in exploitation licenses since 2021 and a surge in exploration permits to 259 from 58.

In addition to the favorable regulatory framework, Saudi Arabia offers investment incentives and tax policies. A critical policy shift was the steady reduction of the mining tax rate to 20% from 45 over the past few years, which significantly increased the sector's attractiveness to foreign and domestic investors.

Inherent Constraints Impede A Rapid Take-Off

Infrastructure gaps continue to hamper a large-scale development. Most deposits are located in isolated desert regions, far from large urban or economic centers and not always well connected to large ports. Geographic limitations are compounded by structural water scarcity. In the absence of cost-efficient water desalination or water recycling projects, limited water resources could complicate mining operations and inflate mines' cost profiles.

A large-scale development of the mining sector also necessitates a skilled workforce. This requires substantial investments in education to train a large number of local experts in geology, engineering, mining exploration, technologies, or infrastructure, among others. If the large-scale development of the sector were to hinge on overseas workers, labor costs could become extremely high.

Key Considerations When Rating Metals And Mining Issuers

When we assign ratings to metals and mining companies, we mainly focus on the companies' ability to withstand cash flow volatility, which results from fluctuations in commodity prices and demand that are inherent to the sector. Metals and mining companies' business risk is therefore constrained by the industry risk, which is moderately high (4).

The size of revenues and reserves, the number of mines or plants, product types, and geographic diversification may mitigate cash flow volatility to some extent and provide protection.

A key factor when assessing the business risk within the metals and mining sector is operating efficiency. The lower the cost of production, the more resilient the company will be to swings in prices and demand. The ability to withstand shocks is determined by:

• Capacity utilization at mills and the usage of modern equipment and flexible manufacturing systems in the case of metal producers; and
• The positioning on the cost curve in the case of miners.

The value-added nature of products can be an additional competitive advantage. This is especially the case for issuers that are higher up in the value chain and offer more tailored, highly engineered metal products that are sold at higher prices than standard commoditized products, such as carbon steel.

Ratings may be constrained by country risk considerations for companies operating in high-risk jurisdictions, whose legislations affect mining licenses and royalties, among others.

We assess companies' financial credit worthiness by evaluating mainly forward-looking leverage ratios, such as funds from operations to debt or debt to EBITDA (after our customary adjustments). Free operating cash flow to debt is another key ratio for determining a company's cash generation capacity, after deducting often sizable capital expenditure and working capital swings.

Depending on where we are in the cycle, we may use a volatility adjustment to add stability to the rating.

Related Research

• Saudi Arabia Ratings Raised To 'A+' On Sustained Socioeconomic And Capital Market Reforms; Outlook Stable, March 14, 2025
• Industry Credit Outlook 2025: Metals and Mining, Jan. 14, 2025