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InterviewIran Eyes Foreign Investment in Mining Sector

Iran Eyes Foreign Investment in Mining Sector

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2016/01/05Date:

Why the mining sector has failed to attain its due position in Iranian economy?
One of the advantages of Iran is the diversity of its minerals to such an extent that out of Mendeleev’s Table close to 70 minerals are available in the country. Nevertheless, so far serious exploration work has been conducted only on 10 to 15 of these minerals. This is while even on these elements, exploration work has been carried out at superficial level. In fact, one of the main reasons behind negligence towards the country’s mining sector and inadequate investment in this sector is presence of massive oil reserves. The mining sector has always been in the shadow of oil and recently of gas sectors and with regard to state-run structure of the economy, there have not been sufficient mobility and dynamism in the mining sector.
Another reason behind lack of investment in the field of mining, especially in exploration area, is the high risk of investment which has caused the mining sector to lose its attraction in comparison with other investment markets. As long as the bank interest rates stand at 28 to 30 percent, this sector will not be able to attract the private sector capital.
The government in the past eight years has practically kept distance from the area of mining exploration and large mining industries and the private sector has not been able to fill in the gap of the public sector during these years.

Development of mineral industries is in dire need of huge investment; don’t you think IMIDRO’s involvement in development projects would result in enlargement of government?
I do not believe that the government should be enlarged. A smaller and more dynamic government would be more efficient. The government should play a leading and commanding role. However, when there is no proficient private sector in the country to implement major national projects; when there is no efficient banking system with links to the international banking system and capable of handling huge amounts of capital, and when we are faced with the sanctions, restrictions in transfer of money, and infrastructural shortage I believe the government cannot refrain from playing its role in the development of economy.
The government should support major projects. The government should contribute to the exploration field, which has a high risk. Obviously, when the government carries out preliminary exploration studies, the risk level would reduce to less than 50% and the project could be transferred to real private sector.

More than 3,000 mines are privately administered, why there is so much sensitivity over transfer of 15 large state-owned mines?
First of all, in the transfer of these mines and mineral industries competence must be taken into consideration and the work should be handed over to capable companies. Meanwhile, I believe that in major investments the government should maintain a share of up to 20%. Iran is a developing country and it should not pose as a developed nation. Prescriptions suitable for developed countries could not be applied to Iran. If you review the combination of the shareholders of privatized companies in Tehran Stock Exchange you will find out that the number of petty shareholders hardly stands at 20% and the rest are big shareholders. The best model of privatization is to turn state-owned companies into public joint stock companies and transfer them to TSE. Beside these measures, strong regulations should be formulated to support the rights of consumers and prevent monopoly. These two issues are unfortunately overlooked in our country.
The method of calling for tender so that major quasi-governmental companies hold control of the mineral industries in the country is not called privatization.

Do you have any specific plan for participation of the private sector in this field and for privatization of 15 major state-owned mines?
Through pathology of the trend of privatization in the past, we have changed the process of privatization and transfer and are engaged in ceding 10 big mines. At present, we have two types of transfers in IMIDRO. Generally, in mineral industries we have acted on partnership basis. For example in the field of Sangan iron ore mines, we have put the mineral concentrates and pallet industries up for partnership and the amount of government share there will be less than 50%. In transfer of mines, we have generally tendered the task of exploitation and the winner can make investment and start operation within the framework of macro policies of IMIDRO. They will pay the exploitation right to IMIDRO while the private sector will bag the profit for a long time.

Is there any need for the presence of government in all development plans of mineral industries?
We do not believe in the presence of the government. The government grants loans to its development companies such as IMIDRO, IDRO and petrochemicals and these companies make investment in line with strategic plans and macro development targets. The law has allowed us to make up to 49% investment in development projects. We have requested that $5 billion be given to IMIDRO from the National Development Fund as loan and return it after completion of the projects.

What is the responsibility of IMIDRO in formulating development strategy and the mining industry plan?
As a developmental organization, we consider making investment in the field of research and education and formulating plans for exploration and extraction as one of the responsibilities of IMIDRO.
Of course, this does not mean intervention on behalf of IMIDRO but rather an attempt to support and guide activists in this field for partnership and investment.