E Energy & Mining

Prominent Mining Expert: SMEs, the driving force behind Iran’s mining sector

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As part of its initiative to reduce Iran’s reliance on oil revenues, the country has set hopes on the mining sector. Iran has set the ambitious goal of doubling mineral exports to $18 billion by 2021 and increasing mining and mining industry's share of GDP to 8 percent from the current 6 percent.

That objective is beset by a litany of challenges both on the macroeconomic and inter-sector levels. A recent report by the Iranian Parliament’s Research Center, the legislative body’s think tank, urged the government to speed up exploration if it wants to fulfill its 2021 vision, warning that the depletion of existing mines’ reserves are rapidly unfolding. This underscores the need for Iranian firms to tie up with foreign counterparts in order to benefit from modern exploration technology.

In order to explore the current circumstances in Iran’s mining sector, Iran Europe Business Digest (IEBD) interviewed Bahram Shakouri, President of Mining and Mining Industries Commission at Iran Chamber of Commerce, Industries, Mines and Agriculture. He is also Managing Director of Mobin Mining & Road Construction, a company active in the mining sector with nearly 3 decades of experience.

As one of the most recognized names in the industry, Mobin has earned the distinguished achievement of having stripped and extracted one billion tons of minerals during its lifetime.

Shakouri has 25 years of management experience in Iran's private sector and is a frequent keynote speaker in domestic and international seminars on mining and marketing.

Mindful of the effects of unilateral U.S. exit from the multilateral nuclear deal with Iran _ known as the Joint Comprehensive Plan of Action (JCPOA) _ in May, Shakouri vows to be committed to fulfilling his vision of developing current and future mining projects through the acquisition of cutting-edge technology and tapping the local workforce.

In 2016, his company won a bid to develop a part of Mehdiabad's lead and zinc mine through a 24-year contract. The project aims to turn Mehdiabad _ located in central Iran _ into the biggest zinc concentrate producer in the world in 10 years.

Here’s the full text of our interview with Shakouri:

Where does Iran stand in terms of mines and minerals in the world?

According to the World Economic Forum, the value of our natural resources stands at $27.3 trillion including oil, gas, forests and finally minerals. A major portion of our natural resources are comprised of minerals.

The value of our mineral resources now stands above $1,500 billion. The variety of our mineral resources is also significant with close to 57 billion tons of mineral reserves.

We are located on a copper belt. For several mineral resources, we have good rankings in the world. In the field of copper, zinc, iron ore and even rare earth elements like lithium, vanadium and aluminum _ especially now that the world is moving toward electric cars and batteries with longer lives and the use of these rare elements like vanadium and lithium in their production has increased _ Iran possesses these minerals.

What are the attractions of Iranian mines including their appeal to foreign investors?

In the economy, there are 6 key factors and any country that possesses them will have advantage over other countries. In my view, one of the advantages of Iran is the possession of resources and reserves.

Right now, we have one percent of the world’s territory, one percent of the world’s population but we possess 7 percent of the world’s mineral reserves.

Certainly, this has been through a 7 percent discovery, which have been mostly on the surface, but if we continue this and conduct explorations all across the country _ which naturally foreigners can help a lot by providing modern equipment in the area of explorations _ if we use that, then our 7 percent share will increase 3-4 times more. This shows that Iran has investment advantages that many others don’t when it comes to reserves and resources.

How do you assess Iran’s export market for minerals and processed mining products?

Politics in our country is not at the service of economy. Unfortunately, the economy is at the service of politics and international relations have not been so good.

After Iran and world powers achieved the Joint Comprehensive Plan of Action (JCPOA) in 2015, good things were happening but unilateral U.S. withdrawal from the nuclear deal has cast some doubt over participation of Western firms in Iranian projects. This also affects Iran’s mining sector. But the mining sector has many potentials and one of the attractions for foreign investors is the huge consumption market.

We are located in a region that has 8 percent of the world’s population and 12 percent of the world’s economy. So, a population of 600 million lives in our region and we have a very good advantage in terms of proximity and access to this big market.

Minerals are the base for production of many goods in the world such as mobile phones. Therefore the consumption market is one advantage. And another advantage is Iran’s human resources and abundance of educated human work force.

So, with foreign technology and investment coming into Iran, this skilled work force could be very useful, especially in the field of engineering, since Iran has one of the biggest number of engineers in the world at costs lower than the global average. This can be a good advantage for foreigners to come and invest in Iran.

And one of our advantages is abundance of energy at low cost. For example, natural gas plays a big role in the production of steel. Iran is home to the world's fourth largest proven oil reserves and the world's second largest natural gas reserves.

You see that in the world they buy gas, condensate it and turn it into LNG and transport it at high costs to their countries and then use it in production of many products including steel but in our country, luckily, we have the advantage of cheap natural gas. We neither pay the cost of transportation nor the cost of LNG, not even taxes. This can be a very good advantage for foreigners to come and make investments.

But since we have poor political ties with the West and are at odds with their foreign policy, this has unfortunately affected our economy. One of its effects has been that, first, we have not been able to import and use modern technology, and, second, find a good consumption market for our products in global markets, and, finally, we have somehow been deprived of foreign finance to implement development projects.

I was talking to a German company. They have a pre-sorting facility. What does this pre-sorting do? Before we take the soil of the mine in order to use it in the production process, pre-sorting device separates the waste from the minerals. By doing that, we don’t carry the waste with us which will spare us costs. It at least, doubles the quality (composition) of the soil. When you double the quality of your soil, you will increase the economic value of your product. This is very significant for our country which has water shortage and our mines are located in areas that are water stressed. As a result, processing factories that need water can employ pre-sorting technology without a need for water and enhance the quality of soil at the same time.

So, instead of transferring water to the factory, you can transport the minerals to areas close to water and do the remaining processes there.

These emerging technologies, which we describe as the fourth wave of technology, can help us a lot to turn many of our uneconomic mines into profitable ones. The new technologies can turn very low quality soil, which we now consider waste, into high quality ones _ something that we do not have the knowledge _ and if we obtain the knowledge and technology, we can increase our reserves by about 40 percent.

Let me give another example. There is 0.2 percent copper and zinc in our [some of our] mines or there is also gold and iron or silver in it but since we lack the knowhow we cannot extract it. Thus, we treat them as waste. But the new technology can extract the 0.2 percent of your copper. Then, the 100 million tons that are considered waste can be turned into a mine itself. Therefore, our wastes become mines and this can naturally increase our reserves.

How things changed after the JCPOA for Iran’s mining sector?

The JCPOA changed the world’s attutude toward us. Although sanctions were lifted but some U.S. restrictions remained in place. The JCPOA led to direct contacts with foreigners and this significantly brought down our costs. Foreigners showed interest in investing in Iran. Negotiations began and many foreign delegations came to Iran. Banking relations were not fully established partly because of our own problems in the banking sector and a need for greater transparency in banking operations.

But U.S. exit from the nuclear deal somehow changed the circumstances. Europeans and others are standing firm and believe that the deal must be preserved. But let’s not forget that the U.S. has 25 percent of the global trade and many European companies and others that work with us have also interests in the U.S. or their shares belong to Americans. And once America asks them to either work with Iran or with them, this will have an impact. Therefore, they can easily put Iran aside. Only companies that have no interests in the U.S. market stand firm to work with us.

Does it mean that only smaller European firms will stay in Iran following the return of unilateral U.S. sanctions?

Yes. Big companies have said they would leave Iran. Giant firms that have big commercial dealings with the U.S. can’t jeopardize their interests in the U.S. market because of Iran.

But this does not apply to all companies. There are many companies [in Europe] that basically do not have any ties with the U.S. and have the most transactions with East Asian countries and the Middle East.

Anyway, we have to continue life and find a way to achieve our goals.

What’s the share of the private sector in Iran’s mining projects?

The share of the private sector in Iran’s economy has been scant. Authors who wrote the Constitution in the early days after the victory of the 1979 Islamic Revolution had leftist tendencies. They split the country’s economic system into three sectors: governmental, private and cooperatives.

They handed over more than 90 percent of economic activities (all large-scale and mother industries) to the government, distribution to the cooperatives and the useless part to the private sector.

It was in 2004 that state-owned companies began to be transferred to the private sector under Article 44 of the Constitution to increase the share of the private sector in Iran’s economy in order to facilitate economic growth.

Yet, only 17 percent of government companies were genuinely transferred to the private sector while a major part went to semi-state public companies, which are neither private nor government-owned such as foundations, Social Security Organization, etc.

So, one of the problems in this country is that the share of the private sector is very low _ 10 to 15 percent of the overall economy.

Iran’s private sector has proposed that the best way for the government is not to hand over ownership but transfer management to the private sector.

But it’s important to note that in the mining sector, 98.3 percent of Iran’s mines are operated by Small and Medium-sized Enterprises (SMEs). They include both private and government-run firms.

This shows that the share of SMEs in the mining sector is very significant. This 98.3 percent account for 65 percent of the overall output in the mining sector and 85 percent of employment. And it shows that the added value produced by the private sector is at times double or triple the state sector.

Can revenues from Iran’s mining sector replace oil income?

Under its 20-year plan _ known as 20-Year Perspective Document _ Iran has set the goal of producing 55 million tons of steel, 800,000 tons of copper and 10 million tons of gold annually.

Under the plan, Iran seeks to turn into a technological and economic powerhouse of western Asia by 2025.

That can cover 60 percent of Iran’s oil income. But the truth is that tourism has the potential to generate revenues twice the oil income if appropriate measures are taken to make that happen.


Iran-Europe Business Digest (IEBD) magazine has been launched to facilitate and promote business between Iran and Europe.