What is the history of National Iranian Copper Industries Company?
In 1972 Sarcheshmeh Copper Mines Company was established to exploit the world class Sarcheshmeh copper mine. The mine is located 160 kilometres southwest of Kerman city in central Iranian plateau. With initial one billion and two hundred million tonnes of copper sulphide ore reserves was and is one of the largest copper mines of Iran. In 1976, the company changed its name to National Iranian Copper Industries Company to exploit not only Sarcheshmeh mine but to discover and exploit all copper mines of the country. In fact, responsibility and ownership of all mines was awarded to the company since then. The company was running by government but between 2006 and 2008 it was entirely privatized through Tehran Stock Exchange and currently it is a public stock company.
What kind of mining potentials does NICICO have and what are its products?
Iran is located on one of the global copper belts and its copper ore reserves contain 21 million tons of copper metal. It is actually one of the richest countries in the world. Meanwhile, National Iranian Copper Industries Company is granted to operate country’s largest copper mines. Sarcheshmeh, Songun and Miduk mines are the largest ones across the country. Currently NICICO produces over 1.1 million tons of copper concentrate at an average grade of 25 percent from these three big mines. On the other hand, by 260 thousand tons of copper mine output, NICICO is the 16th largest copper producing company in the world. By launching new expansion projects and by increasing the productivity of existing plants, the company’s mine and refined copper output will be increased in the years ahead. However a large part of the country’s area has not been explored and we hope that by increasing explorations all over the country, we witness a considerable increase of the company’s copper reserves.
Regarding the products, copper and molybdenum concentrates, molybdenum oxide, copper anode, anode slime, copper cathode, sulphuric acid, copper slab, copper billet and 8 mm wire rod comprise the major products of the company. Currently, by relying on a wide range of its products, NICICO not only meet the domestic needs of all consumers, but also exports a considerable part of its products.
How do you evaluate the performance of the company on export and generally on its sales in recent years?
In recent years, one of the main challenges of the company was the international sanctions imposed on the country which harmed Iranian companies remarkably. Most of the losses were due to problems in transferring money of the exported products as well as reduced access to consumables and some crucial spare parts. In the meantime, however, despite intensive pressures, NICICO managed to have a 124 percent increase in its exports in 2014-2015 compared to the previous year. During this period the share of exports from the company’s total sales increased from 20 percent to 36 percent compared to previous year. Although the company’s revenues have decreased compared to years 2010-2011 due to copper price decline; however increased levels of exports have led to improvement of the conditions.
Expansion of target markets based on quality products is another measure that has been on the agenda to increase the level of sales. By lifting intensified international sanctions which in recent years had made problems for the company’s sales, the level of total sales will increase this year and in upcoming years. By signing new long term sales contract with costumers after removing imposed sanctions, the company’s products have been booked by the purchasers.
Earlier you mentioned the company’s plans to increase production, what specific plans does the company have in this regard?
Regarding development projects, NICICO has always tried to increase its capacity to improve its ranking among world copper producers. Thus, in recent years the company had planned to implement 36 new development projects. But the sharp drop in global copper prices caused difficulties for all companies including NICICO. Revenues declined in recent years so revising the expansion projects was necessary. Thus by reassessing its plans, and by taking into account the new circumstances of the world market, NICICO made a decision to withdraw from half of the planned projects. This decision cut 42 percent of costs and led to better management of the financial resources, where the savings are being spent in essential development projects of the company to speed-up their implementation. Also these savings impressively improved cash flow of the company which led NICICO to a better management of price decline crisis and decreased revenues. By accelerating the more profitable mining projects, new concentrator plants in Sarcheshmeh and Songun commissioned recently and NICICO is following up to exploit new copper mines in Kerman and Yazd provinces and also to invest in a copper hydrometallurgy plant in Songun. Smelter and refinery plants of the company are being modified and equipped with modern technology.
In general, with the current development plans, the company’s copper cathode output capacity will increase to 420 thousand tons by 2018. On the other hand the development of the industries will not be possible without existence and provision of required infrastructure. Construction of rail and road infrastructures as well as water, electricity and fuel supply infrastructures are among the requirements that development of an industry depends on them tremendously. Therefore NICICO has always tried by investing in these fields not only to facilitate its development plan but to be faithful to its national and social responsibilities.
In the past few years NICICO has invested USD 12 million in copper exploration in all over the country as well as EUR 53 million and 7,500 billion Rials in infrastructure development plans. Another issue that will play a key role in the future development of the company is the company’s research and development unit. Most of the researches have been done in areas of mining, mineral processing, hydrometallurgy, pyrometallurgy, water and the environmental issues and the results of the researches have led to quantitative and qualitative development of the company’s products.
What are NICICO’s target markets and what plans does the company have to expand these markets?
Given the variety of company’s products, besides to domestic market, the Persian Gulf countries, Turkey and China, are the NICICO’s targeted markets. India and Europe markets have always been considered. The main factors affecting the company’s international target markets are economic parameters as well as threats and risks of exports. In this regard, increasing production capacity, as well as international marketing through negotiations with international companies are two main strategies to develop the company’s target markets. Moreover, development projects of the company which will be come to stream over time will help the company to hit its planned goals. Besides increasing the company’s output, maintaining and improving the quality of products has always been the top priority to expand target markets. Although the grade of the company’s copper ore reserves have decreased, but NICICO’s concentrate quality has not changed and it is one of the best branded products in the world in terms of quality and low impurities. International sanctions caused a situation where NICICO couldn’t register its copper cathode in LME. NICICO’s copper cathode is one of the best cathodes in the global market in terms of quality and compliance with standards approved by the LME (Grade A). Currently NICICO trying to register the company’s cathode in LME and also applying for registration of SHFE are the most important plans of the company in order to maintain and improve its sales.
What are the company’s strategies to deal with declining trend of copper prices in the market?
As I mentioned earlier, in order to meet new market circumstances, NICICO has revised its development projects and improved its performance in managing liquidity and has reduced the product cost. Reducing costs in the chaotic global copper market is a top priority for all large companies to survive under these circumstances. Thus, NICICO is always trying to reduce its production costs to guarantee its survival in the market fluctuations. Better management of exploration and development budgets, reducing buying copper scrap, increasing per capita production of the company and increasing energy efficiency were the most important achievements of NICICO in line with the other major copper producers in the world. In this regard, improving the efficiency of supply chain management was one of the main actions carried out in NICICO, which led not only to reduce the costs but also to re-engineer the structure and processes of the company. These improvements in the past two years decreased 15 percent of the company’s equipment, spare parts and consumables procurement costs, and it is predicted this figure will reach to 30 percent by completing the planed steps in the next two years. On the other hand, various measures taken to reduce costs of production, resulted in a 5.5 percent reduction of product cost of copper cathodes and 13 percent reduction in concentrates product cost compared to the last year. In current year, different overhead costs of the company have been decreased by 5 to 30 percent which is a promising achievement in gaining higher margins for the company. Generally, although NICICO was encountered many problems due to imposed sanctions, but certainly it has increased company’s attention to its self sufficiency capabilities. In the current circumstances which are far from those sanction days, procurement of materials and money transfer has been facilitated thus there are better prospects for the company’s future.
What potentialities does the company have to attract foreign investment?
Iran’s mineral resources, with 40 billion tons of proven reserves, 20 billion tons probable reserves, and 21 million tonnes of copper metal reserves, is among the top 10 countries in the world in terms of mineral reserves. Iran has 6 thousand mines which 70 percent of them are active and at least 10 mines are considered large according to world-scale standards. In addition to these potentials there are other advantages such as skilled labour, large domestic markets and access to open seas. On the other hand NICICO’s share from Iran’s GDP is 0.34 percent and as the largest copper producer in the Middle East region is the largest industrial enterprises in Iran. Given the especial and unique position of NICICO in Iran, attracting substantial investment for implementation of development projects have always been welcomed. Currently a big unexplored part of Iran’s area requires investment because utilizing new exploration methods and feasibility of exploitation of the country’s reserves are crucial for the country. Low copper grade of some reserves indicates the necessity of this kind of investments; therefore NICICO is trying to achieve this goal by collaboration with experienced international companies. Recently, NICICO has negotiated with some Japanese and South African companies to invest jointly in copper mines exploration. Based on the agreements, join teams are now involved in investigations and initial studies. Given the existing potentials of the country, exploration can be considered as a starting point for Iranian and foreign companies connections and future widespread presence of foreign companies in Iran’s copper industry and other fields.
What is your outlook on the future of the copper market?
The current status of the copper market can be considered as continuation of volatile trend of major commodities in international markets. The booming copper market which we witnessed in the last decade and was created due to China’s hunger for the commodities made a fertile ground to increase exploration budgets, as well as developing new capacities in different parts of the world. The enticing high margins of copper industry in last decade encouraged many small and large scale copper companies to carry out large investments in order to expand copper capacities but due to the time consuming nature of the industry, the expansions effects can be seen in faster growth of copper supply in current decade. Unfortunately with the emergence of financial crisis in the United States and European economies early in current decade and finally slowdown of the global economy eventually influenced the China’s economy and led to decease the copper demand; this resulted in over supply of copper in the global markets and sharp drop in prices from 2011 onwards. Price levels that increased to almost 10 thousand dollars per ton in 2011 now fluctuate in the range of 4600 to 4800 dollars per ton. Even production cut policies imposed by some large producers and closure of some small plants, couldn’t prevent the decreasing trend of copper prices.
Decrease in oil prices, dollar strengthening and Euro zone problems such is UK leaving the EU are the main factors of keeping copper prices in its low levels of the recent years. These two factors helped the producing companies to decrease their production costs and survive the current difficult situation, a mater which itself supported the low copper prices. In such circumstances that companies have cut their exploration costs and capital expenditures, it is expected that in a long term outlook due to slow down of new expansion projects, the market enter a period of copper deficiencies which will result in increasing prices of this commodity. It is expected that from 2020 onwards, prices will grow steadily, but because of slow economic growth of China in comparison to the last decade, the price growth will not be comparable to the growth experienced in 2008 or 2011.
Considering aforementioned facts, it is expected that the price of copper would increase to 6,000 to 7,000 dollars per ton in the medium term. This will primarily be affected by dollar depreciation. In the long run, copper prices are expected to reach 11,000 dollars per ton; although a part of this increase will be the result of dollar depreciation.
As NICICO’s CEO, what do you think about prospect of NICICO in the upcoming years?
NICICO is known as one of the largest copper producers in Asia, but in recent years we always tried our best to be among the largest companies in the world. In critical status of copper market, the company managed to launch the second phase of Sarcheshmeh concentrator plant with an annual capacity of 160 thousand tons and second phase of Songun concentrator plant with a capacity of 150 thousand tons. By total 310 thousand tons increase in the company’s concentrate output capacity, it is expected that copper mine output will be increased by 18 percent by the end of the current fiscal year and will experience annual increase of 10 percent from the next year. By commissioning of all developing projects, almost 473 thousand tonnes of copper concentrate, 153 thousand tons of copper cathode and 175 thousand tons of copper anode will be added to the company’s current capacities. These achievements will make NICICO the 14th largest copper producer in the world by 2020; there is no doubt that this will be happen relying on the company’s current capacities and uninterrupted efforts of the NICICO’s personnel.
Bright Prospect of National Iranian Copper Industries Company
- Nov 16 2016
National Iranian Copper Industries Company (NICIO) is known as the largest copper producer in Iran and the Middle East region. NICICO as the 16th largest copper producer in the world, have always tried to consolidate its passion in global markets by continuous improving of its technology and by promoting product qualities. Ahmad Moradalizadeh, the CEO of the company says that NICICO had been able to overcome the recent challenges occurred by decline in copper prices by cutting its overhead costs; launching the expansion projects which are underway, will improve its rank to 14th largest copper producer. Here is our interview with Ahmad Moradalizadeh, the CEO of NICICO about the company’s performance and its future prospect.
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