Iran Steps In to Invest in Afghanistan Iron Ore Mine

Iran wants to invest in Sangan iron ore mine of Herat Province, located in border areas between Afghanistan and Iran, Afghan media reported.

As mineral resources from Sangan iron ore mine on the Iranian side are nearing depletion, Iran is willing to invest in the Afghanistan part of the mine to fulfill its need of raw materials for its factories, Wadsam news agency reported.

The two countries have yet to reach an agreement on where to process the mineral resource.

Afghan acting minister of mines, Nargis Nehan, said based on Afghanistan’s policy, extracted mineral resources should be processed inside Afghanistan.

Last month, Iran’s Ambassador in Kabul Mohammad Reza Bahrami said the two countries started talks on Iranian investment in Afghanistan’s mining sector.

“We have held talks with Afghanistan’s government on investment in mines in the country, particularly the Sangan mine,” he said.

Behrouz Borna, the deputy head of Geological Survey of Iran, has been quoted as saying that Iran can use its experience and expertise in the mining sector to beat its two main rivals in the region, India and China, in exploiting Afghanistan’s untapped mineral reserves.

“Since systematic mineral exploration has never been carried out in Afghanistan, many of the country’s mineral-rich zones are still untapped. The presence of Iran in Afghanistan’s mining sector will highly benefit both sides,” he said.

According to the GSI official, Afghanistan’s oil and gas reserves, estimated at about $223 billion, are dwarfed by the country’s $1 trillion mineral reserves, including iron ore, lithium, cobalt and gold, as well as precious stones such as emerald and lapis.

> Railroad Connection

Iran and Afghanistan are also working to link their rail networks.

When completed, the railroad connection will link the Iranian city of Khwaf in the northeastern Khorasan Razavi Province to Herat, Afghanistan’s third-largest city.

The first section of the route, from Khwaf to the mine-rich city of Sangan, became operational in late 2016. The second section extends to the border city of Shamtigh in Afghanistan.

The other two sections are in the Afghan territory covering 114 km from Shamtigh to Herat. The 62-km Section 3, connecting Shamtigh to Ghurian, is being built by Iran.

The corridor in its entirety, from Herat to Khwaf, will connect Iranian mineral plants to those of Afghanistan, while also connecting Afghan deposits to the international waters in the south of Iran.

This will be Afghanistan’s first railroad link to Iran and the country’s only link to Persian Gulf and Sea of Oman.

Upon completion, the railroad will be used for transportation of both passengers and cargo. However, exploiting its cargo capabilities is a priority for both governments, according to Reza Ahmadi with Iran’s Ministry of Roads and Urban Development.

Ahmadi believes the railroad will have the capacity of transporting 27 million tons of cargo a year.

> Iran: A Major Iron Ore Producer

Iran, whose nominal iron ore production capacity is 80 million tons/year, has proven iron ore reserves of 3.1 billion tons, which were expected to be consumed by 2035. The country’s ore reserves were estimated at 5 billion tons, with an average Fe content of 46%, according to the Iranian Steel Producers Association.

According to the Iranian Mines and Mining Industries Development and Renovation Organization’s latest report, iron ore concentrate had the biggest share in Iran’s mineral production during the first 11 months of the last fiscal year (March 21, 2017-Feb. 19), registering a 15% growth year-on-year.

Production of granulated iron stood at 6.02 million tons, up 10% YOY.

Iranian miners exported a total of 20.67 million tons of iron ore in the last fiscal year (March 2017-18), according to statistics released by market analyst, Keyvan Jafari Tehrani, and SteelMint.

China was Iran’s primary iron ore shipment destination, as it accounted for 19.66 million tons of overall exports. It was followed by Malaysia with 313,150 tons, Russia with 44,000 tons, the UAE with 30,000 tons, Pakistan with 25,000 tons and other destinations with an aggregate of 607,265 tons.

Iran was the sixth largest supplier of the commodity to China in 2017, as shipments to the industrial giant make up about 91% of Iranian iron ore miners’ exports. Iran’s share of Chinese iron ore imports stood at 2.3-2.5% in 2013. The country exported a total of 23.5 million tons, over 90% of which went to China.

Chairman of IMIDRO Mehdi Karbasian put Iranian Sangan Mine’s iron ore reserves at 1.2 billion tons in 2015, which make it a “world-class” iron ore mine.

Iran's Sangan Mine is located in Khaf County in Khorasan Razavi Province about 300 kilometers southeast of Mashhad.

According to the IMIDRO chief, Sangan zone’s mines meet over 23% of Iranian steelmakers’ raw material demand.

Back in December, two iron ore processing plants were inaugurated in Sangan region. The first project was a 5-million-ton per year pellet-making plant constructed by Opal Parsian Sangan Mineral and Industrial Company.

Over 11 trillion rials ($220 million) were invested into the pellet plant in a partnership between Opal Parsian and IMIDRO, Iran’s largest mining holding.

National Industries and Mining Development Company was the investor in the second project, a 5-million-ton per year iron ore concentrate plant. It was established through the investment of 8 trillion rials ($190.4 million).