Economy, Business And Markets

Mining Sector Bids Farewell to Negative Growth

Mining Sector Bids Farewell  to Negative GrowthMining Sector Bids Farewell  to Negative Growth

The industrial and mining sectors in Iran registered a 6% growth in the first half of the current Iranian year, after having recorded negative growth for two consecutive years, according to the minister of industry, mine, and trade, Mohammad-Reza Nematzadeh.

"Non-oil exports in the first 10 months of the current Iranian year (to end March 20) stood at $42 billion, indicating a 24% growth compared with the similar period last year," said the minister during a press meeting attended by deputies of industry, mine, and trade on Saturday, IRNA reported.

Nematzadeh noted that since President Hassan Rouhani’s administration took office in 2013, it has been pushing to reverse the negative growth observed in the industrial and mining sectors, adding: “Non-oil exports are expected to hit $50 billion by the year’s end, to exceed the value of imports.”

“The ministry of industry, mine, and trade has attracted billions of dollars in domestic and foreign investments for different mining and mineral industries including iron ore, steel, aluminum and other base metals through its major holding company, Iranian Mines & Mining Industries Development & Renovation (IMIDRO),” Nematzadeh added.

An important policy pursued by IMIDRO is to explore 200,000 square kilometers of the country’s soil through aerial survey operations to detect minerals in the depths of 500 to 750 meters. The project is run jointly by the ministry of industry, mine and trade, IMIDRO, and the Geological Survey of Iran. In addition, an area of about 100,000 square kilometers, is assigned to the Atomic Energy Organization of Iran to explore for minerals required for its peaceful nuclear projects.

The aerial survey operations will be conducted by a foreign company using helicopters and special aircraft. At the end of the survey operation, the data will be made available to the investors in the mining sector.

According to the minister, the steel production chain is scheduled to be regulated by the end of March 2016 in order to achieve the objectives outlined in the National Vision Plan for year 2025.

Based on the 20-year National Vision Plan, Iran should reach an annual production capacity of 55 million metric tons of steel by year 2025, while the current production barely reaches 18 million tons per year. The plan also states that the production of iron ore concentrate should increase to 66 million tons from the current 24 million tons.

Despite the enthusiasm shown by the mining officials, achieving the ambitious targets is faced with major obstacles, one of which is insufficient funding in the mining sector, according to Mehdi Karbasian, the deputy minister of industry, mine and trade and head of IMIDRO.

“Out of the 240 trillion rials ($8.74 billion based on official exchange rate) required for the mining projects, around 200 trillion rial ($7.4 billion) has been provided by the private sector,” said Karbasian.

The deputy minister also said that IMIDRO has been eyeing foreign investments, “especially since western sanctions imposed against Iran were partially lifted.”

Another threat to the Iranian mining companies, especially the private sector, is the low tariffs on import of steel and steel products. The concern has often been echoed by the mining companies who believe the administration should levy much higher tariffs on steel imports to protect domestic steelmakers.

Mine extracting companies also have their own concerns. For example, a recent decision by the government to charge mines 30% in royalties drew wide criticism. IMIDRO is currently involved in a legal dispute with two of the country’s major iron ore mines, Golegohar in the southeastern Kerman province as well as Chadormalu in the central Yazd province over mine royalties.