The Iranian government is using all avenues to boost the lackluster mining industry, as the country is losing its mining market share due to lack of funding for exploration and exploiting mineral reserves.
Late last year, Behrouz Borna, the exploration deputy of the Geological Survey of Iran warned that “GSI and Iran’s Mining & Engineering Organization are waning and this damages our mining industry.”
Miners also lack funding for developing mines. The effects of these woes are felt in the mining industry as mining companies continue to move their operations to smaller mines, instead of larger ones.
In a move to boost financing in the mining industry, the Central Bank of Iran said that mines can now be used as collateral for loans.
Commercial banks can accept mines, which have operation permits, as loan collateral, the announcement came last Saturday. “This was done due to the importance of mines in a country’s economic development and the numerous job opportunities in this sector,” the CBI said.
Analysts say that with the new law mining companies can secure fresh funding for exploiting minerals. The nine listed mining firms at the Tehran stock exchange have a market cap of 184.7 trillion rials ($5.34 billion) and total asset value of 242.8 trillion ($7.02 billion).
Of course, with plummeting commodity prices, private investment in the field will be slow, and miners are also less likely to take an expansionary stance towards exploration, as they will be hard pressed to pay the high interest rates on the loans that the banking system may provide.
The S&P GSCI Total Return – the leading measure of general commodity price movements and inflation in the world economy – has plummeted over 35 percent in the past year.
Regardless, the mining industry does need long term investment, as Iran is ranked among 15 major mineral-rich countries, but its mining sector is underdeveloped. Mineral production contributes only 0.6 percent to the Iran’s GDP.
Lack of suitable infrastructure, legal barriers and bureaucracy, exploration difficulties, and government control over all resources are some of the main factors behind Iran’s lagging mining industry.
Iran holds some 68 types of minerals, 37 billion metric tons of proven reserves and more than 57 billion metric tons of potential reserves. These reserves were worth $770 billion in 2014.
The most important mining resources in Iran include coal, metallic minerals, sand and gravel, chemical minerals and salt.
