Sajjad Ghoroqi, the deputy head of Industries and Mining Commission of Tehran Chamber of Commerce, Industries, Mines and Agriculture, has elaborated on bottlenecks in Iran’s mining Industry.
Despite enormous mineral riches, the country has yet to unlock its full potential in the key sector. A translation of an article written by the official for the chamber’s news portal follows:
Four important mining issues were on the agenda of TCCIM’s Industries and Mining Commission in the second half of the fiscal 2021-22, including “supply of mining machinery”, “solving the problems of price and quality explosives”, “determining the strategy of the government vis-a-vis mining royalties by supporting small mines” and finally “offering solutions to remove the blockage of mineral reserves.” Following the commission’s expert reports and specific proposals, significant changes were observed in the government’s approaches.
Pressing Need for Machinery
Machinery accounts for more than 70% of the costs of mining operations in the world.
Modernization, diversity and availability play a key role in the development of mining activities and reduction of costs. However, Iranian miners face countless problems when it comes to the supply of machinery. Due to restrictions regarding imports of machinery and low domestic production capacity, there is a great demand for mining machinery in the country.
Estimates show that the country’s mines need more than 25,000 mining machines. In addition, 17,000 mining machines with a lifespan of more than 20 years need overhauling.
The production capacity of the largest manufacturer of mining machinery in Iran (according to the financial statements of fiscal 2020-21) was 1,808 machines but its actual production was only 21 machines, only one of which pertained to the field of mining. Therefore, even if the company were to operate at full capacity, it will fail to meet the needs of miners.
TCCIM proposed that the government allow mine-owners and contractors to import mining machines, besides giving “competitive support” to domestic machinery manufacturers.
Accordingly, it is economical and necessary to shift the focus and approach of these companies from complete “manufacturing of parts” and “development of machine maintenance services”, given the country’s aging mining sector and high domestic demand.
Surging Costs of Explosives
The use of explosives is the only and most cost-effective method for extracting minerals in the country, if the regulations are enforced. Drilling and blasting operations account for 17.4% of mining costs in Iran whereas these operations account for 5-7% of the costs of extracting minerals in countries with advanced mining technology.
Last year [fiscal 2021-22] saw a 285% increase in the price of explosives, which was not in line with changes in exchange rates or inflation or diesel prices.
The commission has made proposals to prevent a further increase in the price of explosives. On the other hand, the low quality of explosives has seriously hurt exploration programs.
It is essential that the Ministry of Industries, Mining and Trade monitor the quality of these materials. In addition to the three existing centers in the country, it is also necessary to issue permits to two new emulsion gel production units to meet the needs of mines located in northwest Iran (like Sungun Copper Mine) and those in the northeast and eastern Iran (such as Sangan).
Exponential Rise in Mining Royalties
A significant increase in government mining royalties began in the fiscal 2019-20 so much so that they increased by 43%, 88% and 254% from the fiscal 2019-20 to the fiscal 2021-22, reaching 100 trillion rials (more than $366 million rials at the current exchange rate).
However, it seems that mineral production in the fiscal 2022-23 will decrease because of challenges associated with the supply of electricity and gas. Therefore, the fivefold increase in mining for royalties are unrealistic.
Also, estimates show that 80% of government revenues obtained from royalties in the fiscal 2021-22 were the share of large mines; only 20% of these revenues were gained from small-scale mines. Hence, the significant increase in government royalties will have a negative impact on small mines.
Large mines have access to resources while small mines, many of which are located in less developed areas, grapple with high expenses and lack of access to diverse resources. Small mines are vulnerable to even minimal changes in costs; they might be forced to downsize or shut down.
The government is advised to seriously rethink the increase in fees and charges it imposes on small mines. We hope that the government will use the so-called mining fee-calculating software in the new Iranian year (started March 21). Accurate, fair and objective calculation of fees and charges for each mine is one of the features of this software.
Confined Mineral Zones
The Supreme Council of Mines set the specified area of 150 square meters for open pit mines and 250 square meters for underground mines in the fiscal 2013-14. However, the presence of minerals between the two mines is very likely, therefore a significant amount of minerals are within the confines of the two inaccessible areas.
A review of the rules and regulations of countries with advanced mining industry such as Australia, Canada and Chile shows that the distance between the mining areas is not considered; interventions by the governments are aimed at avoiding conflicts and mineral waste.
Therefore, given the technological advances in the preparation and registration of high-precision maps and the availability of this technology in Iran, the commission has proposed that restrictions should be removed from mining areas; we need to avail ourselves of the experiences of Australia, Canada and Chile in resolving any likely disputes between operators sharing a common border.
