Economy, Business And Markets

Gov’t Targets 15% Growth in Mining Sector

Gov’t Targets 15% Growth in Mining SectorGov’t Targets 15% Growth in Mining Sector

The government is planning to expand mining exploration activities in the current Iranian year (started March 21), aiming to reach 15% growth in the mining sector, which according to data by the Central Bank of Iran stood at 10.5% in the previous year, Eghtesadnews reported.

As the deputy minister of industry, mine and trade, Ja’far Sarqini, has called on the mining companies to maximize their efforts, experts believe reaching the targeted growth rate requires further support to the private sector to encourage theor active participation in mining exploration operations.

> Special Plans

Coal shortage in the previous Iranian year (ended March 20) and the critical situation faced by the coal companies which pushed them to the verge of closure, has compelled the government to support to the coal mine companies in the current year. Lack of modern equipment and financial resources in the coal sector saw many expert staff leave the companies in the past year and could force the country to resort to importing the mineral if prudent measures are not adopted. Therefore, the industry ministry has announced a new plan to help the coal sector. Although the details of the plan are not available, officials claim the plan would provide support to the coal mining companies.

The ministry has apparently postponed the plan's announcement until a final decision regarding mine royalties has been reached by the parliament. Meanwhile, to show its support to the mining sector, the ministry has put the provision of loans and incentives to mining companies on its agenda.

In addition to the loans offered by banks and the National Development Fund of Iran (NDFI), deputy industry minister also mentioned a new plan to support mining explorations. However, the plan's details and date of implementation were not specified.

Meanwhile, the Parliament’s decision to increase the mine royalties, which was announced at the end of last Iranian year, changed the situation for mine companies and provoked strong reactions by the mining sector. The lawmakers on the other hand argued that the decision was meant to prevent the sale of unprocessed, raw minerals.

Parliament has also proposed investing up to 65% of the collected mine royalties towards mining development and providing infrastructures for the sector. It has anticipated that if the royalties for the current Iranian year are not realized, only 40% will be allocated to mine development next year. This is while last year, only about 22% of the mine royalties were spent on development in the mining sector.

In the meantime, the decision-makers in the mining sector seem to be determined to expand explorations for new mines. However, since investing in the mining sector involves high risks, reaching the targeted objectives for the mining sector requires the private sector and foreign companies to invest in modern technologies for mining exploration.

Last year, the exploratory drillings reached a record high of 120,000 meters. Moreover, the new exploration operations across 200,000 square kilometers of the country resulted in discovery of 250 million tons of iron ore reserves as well as 150 million tons of coal.

According to Mehdi Karbasian, the head of the Iranian mines and mining Industries Development and Renovation Organization (IMIDRO), all the abandoned mining projects were revived last year and the organization has no stalled projects.

> Current Year Plans

After the IMIDRO successfully implemented the exploration operations in the eastern half of the country over the past year, the operations are now to be extended to the western areas including the provinces of Kurdistan, Zanjan, and East Azarbaijan. While only about one seventh of the country's area had been explored over the past decades, the new explorations are expected to lead to more discoveries in the coming years.

After the IMIDRO injected billions of rials into seven steel plants (known as provincial steel projects) and the Chinese financiers pledged to open letters of credit (LC's) for the projects, operations are expected to resume in two to three of the seven steel plants in the current year. Also the construction of South Aluminum Company (Salco), the LC for which was opened last year, is expected to begin by mid May.

The IMIDRO is also preparing to choose a contractor in the coming days for Chabahar steel project in Sistan and Baluchestan Province, which will produce 3 million tons of crude steel annually. The organization will also start construction of a joint steel project with Kuwait within the next two months. Other plans proposed by the IMIDRO include formulation of the Comprehensive Coal Plan, development of Zarshooran Gold Mine in northwestern province of West Azerbaijan, as well as preparing for extraction and production of rare earth elements (REE's).

The IMIDRO is also concentrating on finding new resources to fund the major mining projects, collectively worth about $5 billion, with participation from the private sector. The five major mining projects include Chabahar steel plant, Bandar Abbas steel plant (joint venture with foreign financier), a steel complex in collaboration with a Kuwaiti steel company, the 3rd phase of Al-Mahdi Aluminum Company, and a project in Lamerd in Fars Province to produce and export high-grade iron ore and magnesium ingots using domestic technology.

Considering that the nuclear negotiations between Iran and the major powers have led to preliminary results, possible lifting of sanctions [imposed against Iran by the West over its nuclear program] is expected to attract numerous investors to Iran's mining sector. According to mining experts, many countries have expressed interest to cooperate with Iran, but the international sanctions have so far hindered their participation. However, the global interest in Iran's mining sector will help the country move towards development in the mining industry. The important question here is whether or not the administration will meet its commitments for the current year.