Thursday, 24 October 2019
The Iranian Mining Market: A New Frontier for Australian METS
Austmine Limited

The Iranian Mining Market: A New Frontier for Australian METS

Economic Background and Outlook:

Iran has undergone a turbulent time within the International community in recent years. Sanctions imposed upon Iran have isolated it from trade and investment with the western world and contributed to social instability and domestic unemployment and inflation. It is estimated that Iran lost $17.1 billion in export revenue from 2012 to 2014 and Foreign Direct Investment (FDI) stagnated to a complete standstill by 2012, resulting in key sectors such as oil and gas becoming unproductive due to a lack of updated technology. However, with the lifting of sanctions on January 16 2016, brighter days lie ahead for Iran as it seeks to re-establish ties with the rest of the world. This creates an opportunity for Australian Mining, Equipment, Technology and Services (METS) companies who are targeting the energy and resources sector.

Iran is the second largest country in the Middle-East in terms of population, with 80 million people and an annual GDP of around US$400 billion. Iran has a well-educated workforce and sophisticated industries, meaning it is likely that companies will be looking for specific products and services, such as high value-adding inputs, advanced technology and management and consultancy services.

The Iranian Mining and Resources Sector:

Iran is among the most mineral-rich countries in the world, having 1% of the world’s population, but holding more than 7% of the world’s mineral reserves. Key mining sites and process facilities are located in Khorasan, which has the most operating mines in Iran, the Lut desert, Khuzestan, Kerman and Alborz. Iran is an exporter of minerals, and manufactured products that originate from these minerals, with ores, slug and ash; iron and steel; salt, sulphur, stone and cement and copper all being categories in the top 10 exports for Iran in 2015.  The government owns 90% of mining operations and related industries in Iran, but is seeking considerable foreign investment and is gradually allowing more private sector influence in the market, resulting in a range of public-private joint ventures in recent years.

Despite the vast mineral resources, mining is significantly underdeveloped in Iran. This is largely due to the sanctions imposed upon Iran, which resulted in a dramatically low amount of essential technology, equipment and machinery being imported into Iran. Iran’s equipment and machinery requirements will create opportunities for Australian METS, whose mining technology and services are among the best in the world.

The Iranian government has earmarked mining as one of the key sectors that will generate FDI and export revenue and is striving to open $29 billion of projects to foreign investors over the next few years. It is estimated that the lifting of the sanctions will take at least 3-5 years to translate into substantial mining sector growth, with interested companies needing to invest in operations for the medium to long-term.

Challenges for Australian METS:

Australian METS must be astute when initiating business, as some economic issues, will take time to dissipate. High inflation and unemployment, ageing infrastructure and financial sector inefficiencies all require important reforms in Iran. Therefore, businesses that were operating in Iran prior to the sanctions, or companies that wish to enter the market, must be fully informed of the complex legal and regulatory environment surrounding contracts and investment, and must recognise the impact that human rights and political issues may have in compromising, delaying or halting business proceedings.

In regards to challenges within the mining industry, it is estimated that most mining firms currently operate at 50-60% of full capacity. This means that significant investment and capital expenditure must be undertaken to enhance productivity and create a profitable venture. A further obstacle in the strive for efficiency is the brain drain suffered in Iran, where the most skilled and educated professionals have emigrated overseas to follow more lucrative opportunities. Lastly, competition will be extremely fierce from global companies, especially those from Europe. Therefore, Australian METS must actively market their capabilities and expertise in order to position themselves as top candidates for contracts.

Opportunities for Australian METS:

Opportunities for Australian METS within the Iranian market span a range of different services, equipment and technology. Australian METS can use their expertise to assist Iranian mining companies to update current practices and use the latest technological advancements to streamline processes and promote efficiency at mines sites and processing plants.

A recent publication by DFAT noted a substantial advantage for Australian METS, stating that, “given the similarity with Australian conditions, Australian miners and METS companies could play a major part in this sector – especially in drilling, pit-to-port infrastructure, mine remediation, water management, and corporate social responsibility.”

Austmine has developed a list of operational areas that pose significant opportunities for METS companies and urge businesses in these fields to watch the Iranian market closely:

-          Software Development

-          Trucks and heavy machinery

-          Developing best practice methods through education and consultancy

-          Mine planning and development, especially software and geological mapping

-          Autonomous mining systems

-          Environmental management and cleaner and more efficient technology

-          Mine closure and remediation

-          Safety: training, consultancy, equipment, communications and asset utilisation maintenance

-          Mineral processing

-          Water Management

Australian and Iran Recent Relations:

Following the lifting of the sanctions and the recent visit from his excellency Dr. Mohammed Javad Zarif, Iran’s Foreign Minister, a platform has been established for bilateral trade and cooperation between Australia and Iran to progress. Australia have already committed to re-establishing an Australian Trade Commission office in Tehran and current dialogue between the nations appears to be constructive and harmonious.

Austmine CEO, Christine Gibbs Stewart, who recently met with Javad Zarif, is optimistic about the opportunity that Australian-Iranian trade relations will have for METS. Chris stated: “The relationship between Australia and Iran is entering a new era, with recent talks establishing a platform for mutually beneficial trade and investment. The emphasis on the mining industry as a priority for economic growth positions Australian METS front and centre for business opportunities in Iran. Whilst there will be significant competition to break into the Iranian market, Australian METS possess the technology and services required to improve productivity and have proven experience in similar mining markets to Iran.”  

No doubt that with the commitment of the current Iranian administration to be involved in global trade, Iran is very much a ‘watch this space’ country for Australian METS.

Sources:

Business Envoy – Department of Foreign Affairs and Trade – March 2016 - http://dfat.gov.au/about-us/publications/trade-investment/business-envoy/Pages/html/business-envoy-march-2016.aspx

Mining Monthly - http://www.mining.com/iran-mining-bigger-opportunity-than-oil/

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