Economy, Business And Markets

Small Iron Ore Mines Face Closure

Small Iron Ore Mines Face ClosureSmall Iron Ore Mines Face Closure

Some iron ore mines will be forced to shut down if the export market for the product does not improve, warned the deputy minister of industry, mine, and trade, Mehdi Karbasian on Sunday.

“Considering the sharp decline in global iron ore prices, there is a slowdown in iron ore exports. The situation affects the smaller mines in particular as they are unable to cover their expenses”, warned the deputy minister who is also the head of the Iranian Mines and Mining Industries Development and Renovation Organization (IMIDRO), Eghtesadnews reported.

The IMIDRO head predicted the slump in the iron ore sector to persist in the coming fiscal year (starting March 21), observing that China’s demand for the product has reduced significantly ever since it began importing cheaper iron ore from Australia; adding that the global prices of iron ore are most probably going to sink in 2015 due to lower demand.

Statistics indicate that Iran’s iron ore export decreased by almost 40% in the current Iranian calendar year (ending March 20) compared to one year before. Steel market experts say while Iran has a monthly capacity to produce 2 million metric tons of iron ore, the figure currently stands at less than 20,000.

The Australian government’s decision to lessen the export tariff on iron ore helped the country take hold of the global market as the biggest supplier of the product; luring even the biggest consumer of the mineral, China, to its list of customers. Analysts say if such collusion continues between the two countries, all of the small iron ore mines across Iran will be totally eliminated from the market in the next three to four years, as it happened to 40% of Iran’s privately owned mines last year.

The Australian government’s support was not limited to the iron ore sector. Canberra recently decreased all mine royalties by 50 percent. This is while Iran has increased the royalties for the next Iranian year by 30 percent – a decision that raised the ire of many mine owners. Based on global mining standards, mining royalties should not exceed 10 percent.

Apart from high mining royalties suggested by the administration, the country’s mining sector is faced with other obstacles. One of the serious problems faced by mining companies and investors is the lack of sufficient data which could help them explore mines in a more efficient way.

Over the past decades, the budgets allocated to mine exploration and aerial surveys have been very tight. Experts say while many countries implement aerial exploration operations to detect resources in the depths of 1,000 to 1,500 meters, the average depth of explorations in Iran does not exceed 150 meters.

Meanwhile, the IMIDRO deputy head, Amir Khorrami-Shad said on Sunday that a three-year comprehensive plan would explore 200,000 square kilometers of the country’s soil with a 12.25 trillion rial ($448.8 million based on the official exchange rate) budget, according to IRNA.

“The project kicked off in January 2014 and will cover 100,000 square kilometers of the northeastern province of Khorasan-e-Razavi,” the IMIDRO deputy head said.

The government has assigned the ministry of industry, mine, and trade; the IMIDRO, and the Geological Survey of Iran to jointly perform exploration operations across the country.