Economy, Business And Markets

2,200 Mines Inactive

2,200 Mines Inactive2,200 Mines Inactive

According to deputy minister of industry, mine and trade, Ja’far Sarqini, 2,200 mines out of 7,600 mines in the country remained inactive over the past Iranian calendar year (ended March 20).

The inactivity of almost 29% of the national mines is a real cause for concern for a country whose mining sector is looking to increase the annual extraction of minerals to 450 million metric tons by the end of the current Iranian calendar year (March 20, 2016).

Careful scrutiny reveals that there are two major reasons, among others, behind the vast closure of mines: environmental disputes and lack of liquidity or investment.

It is noteworthy that the term ‘abandoned mine’ is understood differently in Iran from what it is often defined in developed countries. An abandoned mine is generally defined as a mine whose reserves are depleted while many of the 2,200 inactive mines in Iran have been abandoned due to lack of mining equipment, and disputes between the mine owners and the department of environment or the local residents.

 Shortage of Liquidity

High costs of extraction and lack of financial resources have led to the closure of hundreds of mines across the country. According to mining sector experts, the profitable investments in the construction and housing sector discourage the financiers to inject their capital into mining projects, Eghtesadnews reported.

The reluctance of private sector investors has given way to the government to embark on starting up a large number of mining projects. However, the budget deficits during the past few years, caused by western sanctions against Iran – over its nuclear energy program – as well as the sharp declines in global oil prices, have hampered the funding of these projects by the government. That is why the Iranian Mines and Mining Industries Development and Renovation Organization (IMIDRO) – as the country’s major state-owned holding company active in the mining sector – has concentrated its efforts during the past 18 months to absorb as much investment as possible from the private sector companies to start mining projects, revive the abandoned mines, and set up processing facilities for steel sector and other metals.

Another reason why there are so many inactive mines, however, is the depletion of mineral resources after extracting for a certain period, while the mine owners have no financial resources to continue exploration in adjacent areas to discover new reserves – though scientifically the mines should do so before they start extraction.

Another issue that has been largely neglected is the presence of huge resources of mineral gangues in the mines that process the extracted minerals immediately after extraction. Old and outdated mining machinery and equipment in processing stages prevent mining firms from fully exploiting the minerals and the mineral gangues contain remarkable amounts of precious minerals which can be recycled and used to revive inactive or abandoned mines.

 Environmental, Local Disputes

Disputes with local environmental authorities is yet another contributing factor to the closure of dozens of mines across the country. Although mining firms have been instructed to meet the environmental standards in implementing their exploration, extraction and processing projects, a number of exploiters have ignored the critical issue, leading to the department of environment banning the activities of these mines. Sand mining, for instance, mainly carried out over open pits in Iran, is a source of river pollution. According to mining sector officials, gold and lead mines are among the mines with the highest levels of contamination.

Moreover, over the past years, especially during former president Mahmoud Ahmadinejad’s presidency, numerous mine exploitation concessions were granted to individuals who in turn used low-interest loans to engage in other businesses. Consequently, the mines were left abandoned. Such mines need to be divested to qualified individuals or mining firms.

The mining industry, like many other economic sectors, is looking forward to seeing positive moves by the administration, who has vowed to support the private sector through different instruments such as tariffs and loans. According to mining sector analysts, the lifting of sanctions will  work to the benefit of the sector, since the import of modern mining equipment will be much easier while foreign investors are widely expected to contribute to the mining projects. After all, Iran is among the ten mineral-rich countries in the world with at least 68 different types of minerals and 57 billion tons of mineral reserves, out of which 43 billion tons are proven.