Iran is also among the 15 top major mineral and metals rich countries, with about 37 billion tonnes of proven reserves, and more than 57 billion tonnes of potential reserves – in total worth $800 billion in 2014.
What strikes any economic observer of Iran is that the country not only possesses extensive underground resources – be it hydrocarbon, mineral or metal – but that it also ranks quite high globally in the production of many. Iran with about one percent of the world’s population holds more than seven percent of the world’s mineral reserves. The facts and statistics are set out in the table below (1) and the information in this article follows the same sources.
Such extractable underground resources play a very prominent role in both Iran’s national economy and global trade. Following possible international agreements and lifting of sanctions, and given the expected higher economic growth rate, increasing sustainable investments and activity in the minerals and metals mining sector is crucial for Iran’s development path.
Iran’s Underground Resources
Iran’s hydrocarbons have the significant place in the economy, as is well known. In 2011, Iran was considered to be the world’s 4th ranked producer of crude oil and condensate (natural gas liquids), accounting for about 5% of global output and with 2% of the world’s crude oil refining capacity – along with 9% of proven global oil reserves; it was also the world’s 4th ranked producer of natural gas, holding 16% of proven natural gas reserves. Iran also produced over 2 million tonnes of coal and over 1 million tonnes of coke in 2011.
But Iran is also among the 15 top major mineral and metals rich countries, with about 37 billion tonnes of proven reserves, and more than 57 billion tonnes of potential reserves – in total worth $800 billion in 2014. Iran also has extensive mineral and metal based production and processing industry: more than 70 metals and mineral commodities are ored, refined or manufactured; more than 2% of the world’s output of barite, feldspar, nitrogen, and sulfur; and more than 1% of the world’s output of cement, industrial sand (or glass), iron ore, and molybdenum. Iran also globally ranks as: the world’s largest zinc reserve holder; the 9th largest copper reserve; 12th iron reserves; 5th largest producer of strontium; has 1.6% of the world’s total output of cement and 10th in terms of cement export; 11th largest reserves of lead; has 1.2% of world’s total output of sodium chloride; 3.7% of barite; world’s 2nd largest producer of gypsum after China and an estimated 9% of the world’s output; and, of course, Iran is the world’s oldest, finest and largest producer of turquoise stone. Astounding indeed.
Industry Structure
The industry structure is slightly complicated. By 2011, 5,500 potential mines existed in Iran, of which over 3,000 were operating, and extracting an estimated 220 million tonnes per annum. The majority of these mines were private while 218 were Government owned: with nearly 100,000 persons directly employed (and a further estimated 400,000 indirectly). The largest number of employees are in mining for decorative stones and gravel (28,000 persons), iron ore (13,000), lime stone (7,200) and copper ore (5,300), respectively: of which only half the employees are considered as “skilled”. There were also about 900 active mining cooperatives, with about 46,000 members and 9,000 workers.
The total value of production in the metals and minerals mining sector (including coal) was about $5 billion (the exchange rate of the time - $/1200Rials – has been used throughout). The total input and material costs of this production were about $1.3 billion (of which wages/salaries were about $700 million). The expected value added (i.e. sector GDP) was about $3.7 billion: or probably less than 1% of national GDP. Most of the value added was in mining of iron ore, copper and building material and stones. Many factors may have contributed to the small contribution of mining to GDP, including: lack of suitable infrastructure, legal barriers, exploration difficulties, and government control over resources. However, once mining-related industry production (e.g. including final metals and cement production) is also considered, the sector contribution rises to about 5% of national GDP.
Iran’s mineral reserves are estimated to be valued at $800 billion (2014), while investment in underground resources extraction has been estimated by some to be at 30% of all investments in recent years. About $600 million of investment was undertaken in the mining sector in that year – most of it, again, in iron ore and building material. It is also estimated that between 2000 to 2010 about $2 billion was invested in the mining sector. The Tehran Stock Market, as a further indicator, had nearly half of its capitalization in mineral industries in 2009: and given the sectors high profit margin (of 60% or so).
The above is also well indicative of the link between iron ore and building materials with urban development and infrastructural building: the two latter being probably Iran’s main economic growth engines. As further indicators, Kerman province is the largest producer of mining value added, followed by Yazd province; they are also the largest investment provinces respectively. Some further production highlights are indicated below.
Copper. The Sarcheshmeh mine in Kerman Province contains the world’s second largest single reserve of copper ore. It also has gold. In 2010, Iran ranked 10th in copper ore production and 12th in copper cathodes production; and exported over $1billion worth of copper cathodes. The National Iranian Copper Industries Company (NICICO) is one of the largest companies listed on the Tehran Stock Exchange.
Iron and Steel. Iran produced about 33 million tonnes of iron ore (fines, lumps and concentrate) in 2011 – ranking as the 9th largest producer of iron ore – mainly from the Chadormalu and Gol Gohar Iron Ore mines (which together account for 80% of iron ore production in Iran). Chadormalu Mining and Industrial Company produced 10 million tonnes of iron ore and is the largest iron ore producer listed on the Tehran Stock Exchange; while Gol Gohar Iron Ore Company produced 7 million tonnes of iron ore, and its pellet plant near the southern city of Sirjan is the biggest of its kind in the Middle East (producing 5 million tonnes of iron ore per year, enough for production of 2.5 million tonnes of steel).
Iran became self-sufficient in steel production in 2009, producing 7.5 million tonnes of direct reduced iron (DRI), or 13% of global DRI production and 41% of total Middle East DRI production. Iran is the world’s 16th steel producer. The major raw steel producers in Iran are: Mobarakeh Steel Mill (estimated 47% market share in 2010); Khouzestan Steel (23%); and, Isfahan Foundry (20%). In 2010, Iran established the largest galvanized sheet production plant for automobiles in the Middle East: the plant, owned by Iran Khodro and Saipa , has a capacity of 400,000 tonnes per annum.
Aluminium. Iran’s aluminium production is expected, according to IMIDRO, to exceed 1.5 million tonnes by 2020. Planned projects include Alumina Mine’s 100,000 tonnes per annum project in North Khorasan, the 276,000 tonnes per annum South Aluminium project and the 375,000 tonnes per annum Khuzestan Aluminium project. The largest plants for aluminium production in Iran are Iralco, Almahdi, and Hormozal.
Lead and Zinc. Iran has over 220 million tonnes of proven zinc and lead ore reserves: about 5% of the world’s reserves. In 2009, it ranked 15th in the world in terms of zinc and lead production; and exported 77,000 tonnes of zinc and lead concentrate and ingot. The two important mines in Iran are: Mahdi-Abad, with 75 million tonnes of ore with a zinc concentration of 6% and a lead concentration of 2.7%; Angouran, with 16 million tonnes of ore with a zinc concentration of 26% and a lead concentration of 6%. The largest producers are: Iran Zinc Mines Development Group; Bama Mining and Industrial Co.; Bafgh Mines Co; and Calsimin Co.
Cement. Iran is the 8th cement producer in world and 2nd in the Middle East - producing over 50 million tonnes of cement per year and exporting to 40 countries. Iran constitutes 1.8% of the world’s cement production - and also 1.6% of the world’s cement consumption. It also has significant engineering capacity: IMIDRO reported that 9 countries (including Syria, Venezuela, Bolivia, Algeria, Lebanon, Ecuador, Iraq, Belarus) will have Iranian manufactured cement plants. With nearly 60 active production units in Iran, half are listed on the Tehran Stock Exchange: the main ones being Fars and Khuzestan Group (market share of 24%), Abyek (8%), Tehran (7%), and Sepahan (6%).
Governance and Financing
The Mining Code of 1998, and its amendments, regulate mining in Iran; the 5th Five Year Development Plan (2011-2015) has proposed that production capacities of mineral commodities be increased significantly; while Articles 44 and 45 of the Constitution support resources extraction and development and the prompting private sector development in this field. The Ministry of Industries, Mines and Trade administers all mineral and metal mining, smelting, and refining industries.
Various international sanctions imposed on Iran have, however, affected the mineral sector, which historically has required large investments to develop mineral deposits (especially metal ores and crude petroleum) and to process the minerals. Initially, the petroleum sector was the focus of sanctions but prohibitions on other types of transactions followed, including targeting of international investments and the provision of goods and services that could enhance Iran’s ability to import, including finance, brokering, insurance, and shipping services, as well as restrictions on Iran’s access to bonds and insurance markets, and transfers of funds to and from Iran. The Government program to phase out subsidies to the economy, together with international sanctions, made the availability of affordable energy, of funding, and access to export markets also more difficult for small and medium sized mining operations vis-à-vis the larger Government-affiliated companies.
Although most of the country’s mines are privately owned, the Government - primarily through the Iranian Mining Industries Development and Renovation Organization (IMIDRO) - controls many of the larger capacity mining and mineral-processing companies, especially those that produce aluminum, ammonia, coal, copper, iron and steel, and sulfur. The Government is, however, increasingly anticipating divesting some of its interest in mineral-related operations. IMIDRO has, since 2002, transferred Government owned assets to the value of $30 billion to the private and cooperatives sectors – using the revenue to mainly pay off general Government debt. It is also now overseeing the development of eight iron and steel plants in eight provinces of Iran. Another entity, the National Iranian Mining Company is estimated to be the world’s 23rd largest mining holding company - with 0.6% of the world’s total mining production.
The Government is seeking foreign investment for the development of the mining sector. Numerous production-capacity expansion projects and new mineral commodity development projects in Iran’s mineral sector are underway and planned – some of it through IMIDRO. In the steel and copper sectors alone, it is seeking to raise around US$1 billion in foreign financing.
There has been some foreign investment in the mineral sector over the past few years; however, international funding for capital-intensive mineral-metals projects has been limited owing to sanctions. The Government’s 20-year Perspective Plan for the mining sector intends to attract $20 billion, mostly in foreign investment, and will partly require use of “buy-back” methods for attracting foreign capital, services and technical expertise, while intending to expand exports. The types of projects eligible for such buy-back agreements and foreign loan facilities include: projects that complete aluminium metal production lines, projects that mobilise coal, iron ore, steel, copper and pigment metals production, ferro alloys projects and gold production.
source: Iran International Magazine
