What is the role of IMIDRO as a development organization in developing Iran’s mining and mining industries?
IMIDRO is a development organization of Iran’s government in the field of the mines and mining industries. Development organizations in world have two vital functions. The first is to invest in high risk or time-consuming projects which are not attractive to private sector but is necessary for country’s development. The second; a development organization contributes to private sector in large development activities. So some new measures with medium term goals have been put on IMIDRO’s agenda by the current government. These measures were performed in the period that the sanctions were imposed on the country and IMIDRO did not have much liquidity. The first was to activate stagnant and unfinished projects. IMIDRO could invite the private sector to collaborate on these projects and to activate them again. The second measure was to explore a new area of 250 thousand square kilometres. New explorations resulted in discovering 40 tons of new gold reserves, 400 million tons of new iron ore reserves, 300 to 400 million tons of new coal reserves. IMIDRO could set up high-risk plants such as Kahnooj titanium that had been remained stagnant for more than 20 years.
What are the advantages of Iranian metal industries and what is IMIDRO’s role in developing metals mining and increasing metals output?
Mining and mining industries need 30 billion Euros investment according to the country’s Sixth Five Year Development Plan. It is predicted that IMIDRO will be able to receive loans up to 5 billion Euros and finance 60 to 70 percent of the needed money through domestic and foreign investment. According to the Law, it is obvious that IMIDRO is not able to keep all projects and it should transfer them to the private sector maximum three years after the operation commencement. Moreover, some prestigious large foreign companies are interested to become IMIDRO's partner. This does not mean that they won't enter a partnership with private sector but they do not accept the related risks.
When it comes to metals such as iron ore, steel, aluminium, lead and zinc, Iran enjoys many advantages. Iran’s iron ore reserves are estimated to be around three billion tons. Currently we have nine uncompleted pelletizing and concentrator plants in different parts of the country such as Sangan, Golgohar, Bandar Abbas and etc which are under construction and will need iron ore in very near future. So IMIDRO was obligated to explore new iron ore mines and iron ore exploration was accelerated by IMIDRO. In this regard, IMIDRO is confident that good mines will be discovered in south east Khorasan, Razavi Khorasan, Sistan and Baluchestan, and even in the central Iran like Yazd and Kerman. New positive explorations in areas of north and south of Kerman, Fars and Yazd have been reported.
Iron ore should be directed to processing plants such as concentrators and pelletizing plants. So we need to invest in this area. The first act of IMIDRO in 2013 was updating comprehensive steel plan as well as measures to balance the supply chain, especially in iron ore and pellet production and consumption. But at the end of 2014, global iron ore and steel crisis started. The country's steel production decreased due to decline in domestic steel consumption and the stagnation of the downstream industries. Still, the crisis more or less continues in the country. However looking forward new iron ore and pellet projects have been activated. It is predicted that by the end of 2016 or early 2017 we will witness a balance in steel supply chain.
Regarding steel market, the main problem is the low level of domestic steel consumption. Per capita consumption of steel for a developing country like Iran must be 350 kg, but currently it is 200 to 220 kg. Iran's crude steel production capacity is 22 to 23 million tons but due to shortage of direct reduction pellets, last year’s crude steel output was 16 million tons and it is predicted it will reach to 17 million tons at the end of this year. Although new levels of exports records were recorded in recent years but domestic steel consumption is still very low. It is predicted that by launching new iron ore concentrator and pelletizing projects, steel production will exceed 20 million tons. However, the slowdown in steel consumption is a global issue and is not just related to Iranian steel market. Competition between steel producers in global markets is very tight and some countries are dumping their steel products.
Iran enjoys two basic advantages of high iron ore reserves and energy resources (natural gas) to produce steel. These two components can make Iran’s steel products more competitive in the world. It is obvious that to reduce steel production costs, Iran’s transportation facilities, infrastructure and ports should be modified and developed. Today, ships with hundreds of thousand tons capacity are available for shipping large amount of bulk materials such as iron ore and Iran’s ports should be modified to be able to receive very large ore carriers. Generally speaking rail transportation is cheaper than road transportation but in some cases Iran’s rail transportation is more expensive than road transportation. Iranian mines are also suffering from lack of new and modern mining equipment. Our country faces water crisis so huge water-consuming industries such as steel are being directed to areas close to the Iran’s south coasts.
Speaking about aluminium, Iran’s aluminium smelter capacity is more than 400 thousand tons. In addition to this capacity there is some other under construction projects; the largest is South Aluminium Company’s (SALCO) project with 300 thousand tons planned capacity which will be operational in the next 25 to 26 months. This project will increase Iran’s aluminium capacity to 700 to 750 thousand tons. Currently negotiations are going on with some Chinese, Italian and Korean companies to invest in Iranian aluminium industries. Also couple of agreements have been signed with Indian companies to supply raw materials. In the near future a company will be founded in Chabahar Free Zone that will have several responsibilities and tasks such as carrying out feasibility studies and finding financing and investment solutions.
One of IMIDRO’s goals was activating Jajarm’s 36 thousand tons aluminium smelter project and fortunately it has progressed and it is anticipated that the project will become operational in early months of the next year.
While the bauxite explorations are ongoing but it seems that there is a little hope of discovering new and reliable bauxite reserves in the country. So other alternatives must be taken into consideration. The first option was the bauxite reserves in Guinea Conakri which were granted to Iran 25 years ago by Guinea’s government through a 25-year exploitation licence agreement but the agreement expired without any considerable progress in exploitation of the reserves. Fortunately, IMIDRO could be able to extend the exploitation license contract for another 25 years. However the efforts were not limited to one case and we are negotiating with Indian Nalco and some other Brazilian and Australian companies so that we can come to long-term agreements with raw material suppliers to buy bauxite or alumina.
Is the ground ready for foreign investors? What kind of criteria IMIDRO does have to enter a partnership with domestic or foreign investors? How much FDI has been invested in Iran’s mining sector after the sanctions were lifted?
In the mining field, there are not any legal limitations for presence of foreign investors. Foreign investors can invest from exploration to the final product of value chain. IMIDRO has announced its readiness to attract foreign investment to create partnerships in which IMIDRO’s share can be limited to 15 to 20 percent. The law has allowed IMIDRO to contribute at maximum of 49 percent to the projects. However, in the absence of investors, the share of IMIDRO increases to 100 percent.
After JCPOA the number of foreign business delegations to Iran increased. Large international companies such as Rio Tinto entered into negotiations with IMIDRO and some other companies participated in some projects as consultant or contractor. In addition, a joint venture was formed with Italians for direct investments in Iran’s mining and mining industries. Negotiations with other companies for investment are also in progress. Despite all of these efforts, investment has not happened widely so far. The reason is the banking relations between Iran and other countries have not come back to normal relations yet. The good point after JCPOA is that problems of export guarantee funds such as SACE of Italy and Hermes of Germany with the Central Bank of Iran has been resolved. Now these funds are ready to guarantee the investments and financings in Iran.
What is the prospect of Iranian mines and mining industry?
Iran is the 15th largest producer of minerals in the world ranking. It is predicted that by expanding mineral exploration, Iran will certainly be among the top 10 in the world. The historical shortcoming in the mining sector was due to the lack of progress in exploration. Considering the energy sources, accessing to open seas, the regional consumer market of 350 million people and valuable human resources, there is a very bright future for the mining and mining industries of the country. We hope that the government and the parliament pay more attention to the mining and mining industries in the Sixth Development Plan. Investing in mining is always considered as a high risk investment and the government should provide facilities to encourage the private sector to invest in Iran’s mines. Moreover, investment payback period in this area is longer than other fields. Thus, both the government and investors should wait until a mining project becomes operational. Investors are always interested in Iran's mining sector due to high diversity of minerals. It is obvious that investment in Iran’s mines will lead to long-term profitability for both the investor and the country.
Growing Interest of Foreign Investors to Invest in Iran after JCPOA
- Nov 16 2016
Many foreign investors who are willing to participate in Iran’s mining and mining industries, have chosen Iranian Mines and Mining Industries Development and Renovation Organization (IMIDRO) as their partner. The organization is a state-run partner and is capable of guaranteeing a greater certainty for foreign investors. Thus, in the course of Post-JCPOA different negotiations have been conducted with large companies in the field of mining and mineral processing industries. Mehdi Karbassian, President of IMIDRO, says that IMIDRO as a development organization is only in charge of transmission of the developed projects. According to the law, IMIDRO keeps the plant up to three years from production commencement date and then it should transfer its shares to the private sector. This organization helps to empower the private sector and is seeking to attract local and foreign investors. Here is our interview with Mehdi Karbassian, President of IMIDRO.
What is the role of IMIDRO as a development organization in developing Iran’s mining and mining industries?