The Forum for Partners in Iran's Marketplace

September 2017, No. 85

Mines & Metals

Golden Triangle of Iron Ore, Coal and Natural Gas

One of the basic policies in the Resistance Economy is preventing crude sale and mines are one of the priorities for employment and production.

Iran’s mining sector possesses numerous valuable reserves and foreign investors tend to have a presence in this sector. Based on the studies conducted, so far about six thousand mines with 70 types of mineral substances have been located in Iran.

In addition, the country has 15,000 promising mineral regions with 40 billion tons of definitive reserves worth more than $770 billion. Twelve large and important mines as well as 8% of the zinc and 3% of the lead reserves of the world are in Iran and our country is the fourth manufacturer of decorative stones in the world. Iran’s proven copper reserves amounts to over 30 million tons. The Iranian Mines and Mining Industries Development and Renovation Organization (IMIDRO) in the past four years, by giving priority to the issue of exploration, surveyed 250 thousand square meters in order to exploit more reserves and thus attract domestic and foreign investment towards mines.

The role played by mines in the gross domestic product (GDP) and economic development and employment is not that much noticeable and according to the mining authorities of the country, this sector is in need of serious attention and support within the framework of a sound and accurate planning.

What follows is an interview with Mehdi Karbasian, Chairman of IMIDRO Board, on the position of mining sector in Iran. 

There are abundant grounds for implementation of Resistance Economy in the mines sector but less attention has been paid to the mines in the 6th Development Plan.

What is the status of the mining sector?

Mine is a God-given natural feature not all countries are enjoying. At present Iran is among the top 15 countries in mineral terms with regard to extraction and exploration and one of 10 large countries in terms of mineral reserves. With further exploration and extraction undoubtedly we will be promoted to a better situation in the world market. 

In the year designated as “production and employment” year what is the plan for further utilization of the mining sector?

One of the basic policies in the Resistance Economy is preventing crude sale and mines are one of the priorities for employment and production. By reducing crude sale and through the approach for processing mineral reserves realization of the country’s economic targets has been placed on the agenda. 

Are there virgin mining capacities in Iran?

In the mining sector, Iran has high capacities. For example, Mehdiabad Lead and Zinc Mine is the world’s second biggest mine the extraction of which started in the 1330s (1950s) and in the next two decades about 57 thousand meters were drilled. This mine possesses over 600 million tons of mineral reserves of zinc, sulfide and oxidized soil and about 185 million cubic meters of tailings. 

Currently what is the status of Mehdiabad mine?

In last year’s international auction, an Iranian consortium consisting of zinc producers and some successful contractors won the auction for a period of 24 years. The consortium by paying mining royalties will conduct construction operations for a period of four years and utilize the mine for 20 years to build the 800-thousand-ton factory. The mine faces some problems for utilization and has foreign applicants for participation. At the beginning of the administration of the 11th government, efforts were made for cooperation with this company and the consortium but for different reasons it did not happen. 

What is Iran’s position in zinc production, and what would be the effect of the utilization of this mine on promoting its ranking?

Utilization of the mine will lead to the supply of 420 thousand tons of zinc ingots needed by different factories in the country and with the production of zinc in this factory Iran will be promoted to the eighth place in global ranking and we hope that more zinc mines would become operational. 

How much the big mine rich countries on average take advantage of their mineral capacities in the field of production and employment?

According to 2015 statistics, most of the successful and progressive countries in the mining industries fetched about $87 billion through extraction of mines and by processing them created an added value of about $640 billion. The figure stood at about $2,400 billion in downstream industries and created one to 10 million job opportunities. 

How much did the incompletion of the mining chain cause crude sale? What measures have been taken in recent years to prevent crude sale?

In the year 1392 (2013-2014) mineral cycles, especially in the steel sector, were unbalanced and the comprehensive steel plan was formulated. In the 1404 (2025) Horizon, we should accomplish a production of 55 million tons. In the past year, we reached an export volume of 6 million tons which is a clear indication of the Resistance Economy with the introversion and extroversion approach and our products are being exported. Our country has iron ore, coal and gas mines and their combination along with the abundance of expert work force can undo the knot of the mining sector. With the completion of the unfinished factories and establishment of new factories crude sales can be prevented and wide employment can be created. 

How much attention has been paid to the mine and mineral industries in the 6th Development Plan?

There are abundant grounds for implementation of Resistance Economy in the mines sector but less attention has been paid to the mines in the 6th Development Plan. This issue should be taken into consideration that the private sector in order to be encouraged for investment needs to be paid more attention. Part of the mining sector which is relative to exploration is managed by the government and IMIDRO within the past two years has started exploration of 250 thousand km but the need for public support is still being felt. 

What kind of support should the government offer?

The Mine Insurance Fund could play a significant role in the development of the mining sector, while the capital allocated to the fund with the coordination of the government and the Majlis has increased from 100 billion rials in the year 1394 (2015-2016) to 1,100 billion rials. However, it is not a big amount and our proposal is an investment of $300 to $500 million for every five years in order to enable the fund to support the private sector active in the exploration and extraction of mines. The main point is that if we have strong resolve to invest in the mining sector, there are solutions; one is that the private sector be specifically activated because investment in mining is a risk and this risk should be covered by the government through the required support but when it becomes operational it would entail sustainable revenue.

Another point is the absence of infrastructures in the mining sector. Given that the mines are mostly located in remote areas, there are problems about the road, electricity and transportation that the government should remove them. We should accept that elimination of these problems necessitates capital. 

What is the role of development organizations such as IMIDRO in the development of the mining sector?

Due to the problems prevalent in the private sector active in the field of mining and that return of capital in the mining sector is slower than other sectors of economy, there is less incentive for making investment in this sector. Under such circumstances the role of development organizations such as IMIDRO which offers the required support to the private sector becomes further clear. This is at a time when in recent years IMIDRO has been beside active sectors and involved in bilateral partnership. 

How would you assess the status of privatization in the mining sector?

Privatization was not soundly implemented in most sectors and IMIDRO following privatization practices in the recent years is owing 35,000 billion rials for selling 70% of the properties of the organization which is separate from 200 billion rials that has been given in previous governments as the settlement of the debts but has never returned and this caused problems for the organization. 

How would you evaluate investment in the field of mining?

After the Joint Comprehensive Plan of Action (JCPOA) grounds were prepared for the arrival of technology to Iran. We can benefit from the knowledge of the world and with the necessary guarantees and by utilizing insurance attract more investment in the mining sector. Japan, South Korea, Germany and Italy are among the countries which have announced readiness for participation and investment but this requires cooperation of the Ministry of Economy, Ministry of Foreign Affairs and the Central Bank to provide the required facilities so that investment would be attracted.  

What measures should the government take for the development of mining?

First all the executive agencies should accept that the mining sector has proper capacity for the economic development of the country and is in need of special support. If we could get the raw materials from inside the country which is possible in many industries, more value added will be obtained and more job opportunities will be provided. Meanwhile, this requires cooperation of other branches and the Majlis takes the basic measures in the field of facilitating the existing rules and regulations. Sound planning should be made so that in a medium 5-10 year term parts of the activities will be completed. For example, geology and exploration should be conducted in a medium-term period and although measures have been taken still more steps should be taken in this regard. 

Have some resources been allocated from the National Development Fund to the mining sector?

Some assistance has been given by the National Development Fund to the mining sector and loans have been put in the list but the serious problem in this field is the resources of the fund. Some of those who have received loans from the fund for different reasons are not capable of paying back and there are large amounts of arrears. Although the mining sector is among priorities of the fund to offer facilities, it needs a more specific look. 

How is the export situation of iron ore and its processed products?

Still certain amounts of iron ore are being exported. Last year 20 million tons of iron ore was exported about which some points are important. We should explore more iron ore and last year we only explored 7 million tons which should increase to 40 million tons. Perhaps more exploration is in need of innovation and new technology. This point should also be taken into consideration that there is no problem if sometimes raw materials are exported but the revenues obtained through sales should be spent on making investment in the same sector and should not be spent as current expenditures.


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  September 2017
No. 85