Economy, Business And Markets

15% Growth Envisaged for Mining Sector

15% Growth Envisaged for Mining Sector 15% Growth Envisaged for Mining Sector

Plans by the ministry of industry, mine and trade target a 15% growth in the mining sector for the upcoming Iranian calendar year (to start March 21) from the current 10.5%, Eghtesadnews cited deputy minister Mohammad-Ja'far Sarqini as saying.

He said considering the great potential in the mining sector, if miners focus their efforts on improvement, the sector will achieve the 15% growth within the next year. "Protecting the private sector in explorations is on the agenda of the ministry in the upcoming year, which is expected to see a boom," he said, adding that the ministry will financially assist the private sector and facilities to help mining companies develop their programs.

Apart from the facilities and loans from the banks and the National Development Fund of Iran (NDFI), the administration has allocated an additional budget for the mining companies which participate in exploration operations, the official noted.

Touching upon the issue of mine royalties, which was recently increased up to 25% by the parliament for the new Iranian year, Sarqini stated that the law allows the industry ministry to invest as much as 65% of the royalties in developing new mines. According to Sarqini, the figure for the current year (to end March 20), was 22%.

"The growth in the sector depends on exploration of new mines," Sarqini noted. However, some analysts believe that the development plans face serious challenges before they can be implemented, arguing that privatization programs were run inappropriately during the years 1384-1392 (2005-2013 when former president Mahmoud Ahmadinejad was in office).

During the period, many state-owned mining companies and industrial and manufacturing corporations in the mining sector were transferred to quasi-government entities with no expertise in the sector. Analysts believe such chaotic transfers will prevent major mining projects from being launched by the private sector. They even predict that the quasi-government firms will grow in number, size, and importance in the coming year.

Many of the 30 mining projects undertaken by the Iranian Mines and Mining Industries Development and Renovation Organization (IMIDRO) will be implemented during the next two years by same quasi-government entities because the private sector is did not step in due to lack of liquidity. A number of such projects have been inaugurated so far including a cement factory in Venezuela and Zarshooran gold mine in northwest of the country, while a few others are about to be inaugurated such as Sefidabeh antimony complex.

Apart from the drawbacks of the strong presence of the government-affiliated companies in the mining sector, there are other challenges including high royalties imposed by the parliament. Mining experts believe the high royalties will press the small private sector mines so hard in the coming year that many will have to close down or declare bankruptcy.

Excess supply is another factor which has caused the mineral products prices to fall substantially over the past year. Miners, especially in the private sector, expect the administration to help them provide solutions to other problems such as the shortcomings in coal, restrictions in iron ore export, and tax hikes.

Naturally, there are also a number of other determinants which are beyond the government's control like the global fluctuation in mineral prices. Despite all the complications, the private sector is expected to reduce its reliance on the government in a bid to play a more pivotal role in the economy through empowering the private associations and syndicates.