The ban on imports of mining machinery has compelled Iran’s large mines to operate at 50% of their full capacity while the country’s small- and medium-sized mines are on the verge of closure, says the deputy head of Iran Mine House.
“This is a disaster for our mining industry. It has been a few years since this ban has come into effect. The decision was made on faulty grounds to begin with,” Hamidreza Amirian was also quoted as saying by the news portal of Iran Chamber of Commerce, Industries, Mines and Agriculture.
The official explained that after banning automobile imports a few years ago, the government put mining vehicles in the same category. Presently, mining companies cannot import 100-ton and 150-ton dump trucks and 200-ton and 300-ton loading machinery.
“Officials say the reason behind this ban is to support domestic machinery production, whereas there is no such thing as domestic production of most mining machinery. These heavy machineries are produced by only six or seven companies worldwide. At present, we cannot become a producer,” he said.
Amirian called on the government to reconsider its decision and said, “There are 5,000 abandoned mines and 3,000 gravel and sand mines that need machinery to resume operations. Our local production cannot even meet 10% of their demand for machinery.”
Noting that economic sanctions imposed on Iran don’t allow the import of new machinery, he said, “We can only purchase secondhand ones, which too is not allowed because we have ‘sanctioned’ ourselves.”
Hesameddin Farhadi, the head of Mining Commission with Isfahan Chamber of Commerce, says due to the ban, Iranian miners have to purchase mining machinery at four times the global price.
“A secondhand loader is priced at around $115,000 in the international market but due to the shortage of this heavy machine in the domestic market we have to purchase it for 130 billion rials [$500,000],” he added.
According to this official, most of the mining machinery used in Iran today were imported in the fiscal 1985-86, which has decreased the efficiency of mining sector by 50-60%.
“Mining machinery are means of production, yet officials in the Ministry of Industries, Mining and Trade have somehow put them in the same category as luxury goods! Due to the shortage of foreign currency reserves, economic instability and in a bid to lend support to local production, imports of luxury cars have been banned and the same was applied to mining machinery and vehicles. These officials need to reconsider their decision and exclude means of mining production from the regulation,” he said.
Mehrdad Akbarian, the deputy head of the Mines and Mineral Industries Commission of Iran Chamber of Commerce, Industries, Mine and Agriculture, says the mining sector currently needs to be supplied with 25,000 machine and vehicles.
“Over the years, two factors have impacted the price of mining machinery. One is the depreciation of the Iranian rial against the dollar and the other is the shortage of these machines in the local market. The latter has made matters much worse. If a machine is valued at, for example, $80,000 in the international market, you cannot buy it for less than $160,000 in Iran, because the options are very limited,” he aded.
Referring to the declining investment in the mining sector, he said the industry is faced with a series of problems these days, but the ban on imports is currently the most pressing issue.
“Not all countries have set up production lines to meet their demand. They purchase them from the global brands and instead launch businesses offering sales services, spare parts and maintenance,” he said.
According to Alireza Baqeri, the head of the Mining Commission of Birjand Chamber of Commerce, around 20 years ago, Heavy Equipment Production Company (HEPCO) made strategic mistakes in its decisions and planning such that it came close to bankruptcy a few years ago.
“Because they want to bring it back into the game, the government has banned the import of mining machinery,” he said.
HEPCO is an Iranian corporation that manufactures construction equipment, railcars, trucks, forklifts and industrial machinery used in oil, gas, energy, metal and mining industries in Arak, Markazi Province. The company is the largest heavy equipment manufacturer in the Middle East. It was established and registered in 1972, with the intention of assembly and production of heavy equipment.
Noting that government support to HEPCO has in fact spelled trouble for mining companies, he said, “More than 7,000 mines in the country are waiting for HEPCO to see if they can provide the required machinery or not. Some 70% of Iran’s mines are small-sized. HEPCO is not capable of meeting their demand for small machinery either, let alone heavy ones.”
Noting that Iranian miners are in urgent need of renewing their fleet, he said, “Loaders, bulldozers, graders and excavators are not luxury automobiles and the fact that they have been placed in the same category is absurd.”
Baqeri called on the government to take action and lift the ban as soon as possible.
Mineral Diversity, Reserves
Iran is home to 81 types of minerals with reserves totaling 37-40 billion tons, according to Alireza Shahidi, the head of Geological Survey and Mineral Exploration of Iran.
Construction materials, including gravel, rubble stones, sand and different types of stones, account for 62% of Iran’s mineral reserves, metal minerals constitute 10-15% of total reserves and the rest are non-metallic minerals.
“Gold reserves are increasing on a daily basis. Recently, new mines have been identified in South Khorasan Province, the reserves of which, we hope, should help increase the country’s mineral wealth to 100 billion tons,” he said.
Shahidi says up until 2015, the level of exploration and investment were in tandem, now a wide gap has opened up between the two, suggesting that the costs of exploration are on the rise, IRNA reported.
The official noted that a total of 945,000 kilometers of land in Iran underwent exploration operations in the 2000s.
“The country’s mines are mostly close to the surface; [the exploitation of] hidden mineral reserves in the depths of the earth need to increase.
Overall, Iran is home to more than 7% of global mineral reserves,” he added.
Decline in Investment
A new report by Tehran Chamber of Commerce cites the Statistical Center of Iran data on the mining sector to show how investment in operating mines has declined over the years in real terms.
According to the report, the nominal investment volume in operating mines stood at 55 trillion rials ($215 million at the current exchange rate) in the fiscal 2020-21 compared to 29 trillion rials ($113 million) in the fiscal 2015-16. However, in real terms, i.e., taking into account the producer inflation in the mining sector, the investment volume shows an 18% decline from 28.2 trillion rials ($110 million) to 10.3 trillion rials ($4 million) over the five-year period.
Another important indicator is investment volume over value added. The percentage declined from 35% in the fiscal 2015-16 to a record low of 4.4% in the last fiscal year.
According to SCI, a total of 5,782 mines were operating in the fiscal 2020-21, registering a 16.2% growth year-on-year.
In terms of number, sand mines accounted for the highest share of total operating mines with 1,463 (up 17.3% year-on-year) followed by limestone with 896 mines (down 8.6% YOY) and gravel with 773 mines (up 20.4% YOY).
Khorasan Razavi, Semnan and Fars provinces had the highest number of operating mines during the period with 567, 384 and 367 respectively and Gilan, Alborz and Ilam had the lowest with 54, 53 and 47 mines respectively.
A total of 120,327 people worked in Iran’s operating mines in the fiscal 2020-21, of whom 24,802 were simple workers, 33,932 skilled workers, 7,902 technicians, 9,612 engineers, 20,184 engaged in transportation and 23,895 worked in administrative and financial departments.
The number of workers increased by 12.4% compared with the year before.
Kerman, Yazd and Fars provinces with 30,449, 14,203 and 7,433 had the highest number of workers in operating mines.
Iron ore, copper ore and sand mines had the highest number of workers with 29,783, 17,137 and 13,881 people respectively. Notably, the number of female workers increased by 361 people to 1,607 from 1,246 in the last year.
A total of 446.64 million tons of minerals worth 1.49 quadrillion rials ($5.84 billion) were produced in the year under review, of which 2.54 million tons worth $160 million were exported directly from the mines, registering an 81.5% and 70.6% decline in weight and value respectively.
Kerman, Yazd and East Azarbaijan provinces had the highest value in annual production with 811.58 trillion rials ($3.18 billion), 259.53 trillion rials ($1 billion) and 135.63 trillion rials ($535 million) respectively.
Iron ore, copper ore and sand mines had the highest annual production value with 853.95 trillion rials ($3.35 billion), 425.83 trillion rials ($1.67 billion) and 48.95 trillion rials ($191 million) respectively.
Iron ore, decorative stones and coal with 27.09 trillion rials ($106 million), 4.78 trillion rials ($18.7 million) and 4.31 trillion rials ($16.9 million) saw the highest volume of nominal investments.
Yazd, Kerman and South Khorasan provinces had the highest volume of nominal investments in operating mines with 16.09 trillion rials ($63 million), 9.9 trillion rials ($38.8 million) and 5.16 trillion rials ($20 million) respectively.
From the total investments, 32.38 trillion rials ($126 million) were made in machinery, tools and durable equipment, 2.7 trillion rials ($10.5 million) in vehicles, 1.2 trillion rials ($4.7 million) in office supplies and equipment, 13.62 trillion rials ($53.4 million) in buildings and facilities (without taking into account the purchase of land), 1.02 trillion rials ($4 million) in roads, 3.1 trillion rials ($12 million) in development and exploration, and 142 billion rials ($556,862) in computer software.
The nominal value-added generated by the operating mines hit 1.25 quadrillion rials ($4.9 billion) in the fiscal 2020-21, registering a 152.12% growth year-on-year.
Kerman, Yazd and East Azarbaijan Province’s mines had the highest share of value added with 680.55 trillion rials ($2.67 billion), 211.82 trillion rials ($830 million) and 125.58 trillion rials ($492 million) respectively.
Iron ore, copper ore and lead and zinc ore mines generated the highest value-added with 683.35 trillion rials ($2.68 billion), 395.44 trillion rials ($1.55 billion) and 42.83 trillion rials ($167.9 million) respectively.
