In its latest report on the Middle East and North Africa mining outlook for Q1 2015, the Business Monitor International has predicted tentative signs of an opening for Iran's mining sector. The following is part of the BMI report:
Iran's ongoing negotiations with western powers present the first glimmer of hope for the country's mining sector in years. Our core scenario is for negotiations to continue and for limited sanctions relief to be rolled over until 2015. This will benefit the mining sector as it is one of the beneficiaries of an easing of sanctions. On the upside, if negotiations are successful, it is a game changer for the country's beleaguered mining industry and could make the country a key centre of global mining investment in the coming years. While the Iranian government remains largely reliant on the exports of oil and gas for revenue, the BMI believes the mining industry possesses immense potential to become an important economic growth engine propelling the country forward. That said, the BMI remains cautiously optimistic towards the future growth prospects of Iran's mining industry as companies investing in the region will continue to face near insurmountable challenges on multiple fronts if negotiations are not successful.
A Commodity Powerhouse...
Iran could become one of the most important mineral producers in the world. The country is home to some 68 minerals, with more than 37bnt (billion metric tons) of proven reserves and 57bnt of potential reserves. These include considerable deposits in coal, iron ore, copper, lead, zinc, chromium, uranium and gold. The Sarcheshmeh mine in Iran holds the second largest copper deposits in Asia, accounting for 25.3% of Asian reserves and around 6% of global reserves.
These copper deposits are primarily located in Kerman province in the Porphyry copper belt to the southeast, as well as in the far northwest of East Azarbaijan province.
With Potential in Sight
In line with our expectations, the abundance of mineral wealth has attracted a steady stream of foreign investors into Iran’s resource extraction industry over the past decade. These include the likes of Rio Tinto, Persian Gold, CITIC Group and China Aluminium International.
The Iranian government has implemented a 20-year vision plan aimed at attracting $20bn into the mining sector in an attempt to boost production targets across the country.
Despite the government’s wish to attract capital inflows into the mining sector, the BMI believes that Iran’s operating environment presents too great a challenge for most potential investors. Whilst the prospect of an agreement with western powers presents the first glimmer of hope for the country’s beleaguered mining sector, in our view, the sector will remain a regional laggard over the coming years unless a breakthrough can be reached. Indeed, even if sanctions were lifted, it would take years before the country’s mining sector could reach potential given the substantial investment and political stability needed.
Iran’s industry, mine and trade ministry plans to attract more Chinese investment in the country’s mining sector by offering fruitful projects, according to ministry official Mohammad Fatemian, reports Fars News. During a meeting with Iran-China Stone Association in Tehran, Fatemian stated that there are good grounds for foreign investment in Iran and that the government would do its best to facilitate the presence of foreign investors.
Significant mines in Iran include coal, metallic minerals, sand and gravel, chemical minerals and salt, with the country reportedly ranked among 15 major mineral-rich nations.
Investment on Tenterhooks
Iran’s economy has been hit hard by US and EU sanctions on the country’s hydrocarbon and banking sectors over its nuclear energy program. The BMI believes the economic hardship in Iran as a result of the western sanctions is likely to jeopardize the influx of foreign investment as it becomes increasingly hard for companies to source for project financing.
The sanctions imposed will be a detriment to Iran’s operating environment and will prove to be a significant impediment towards future mining investment.
