Middle Eastern investment in industrial mineral projects is
on the rise as the region looks to diversify against its
historic reliance on oil and gas.
Speaking at the Mines and Money 2015 conference in London in
December, Mohamed Mughal, CEO of Dubai-based First Forte
Consultancy, said that the Gulf Cooperation Council (GCC)
states were witnessing strong investment growth in local steel,
aluminium, phosphate and cement capacity.
He said that the Arab region was home to around 67 steel
plants and that its steel industry was continuing to grow at
approximately 5-6% per annum, compared to much of the rest of
the world where steel consumption is stagnating or even
Middle Eastern investors, which typically consist of
sovereign wealth funds, "family offices" and
locally-headquartered conglomerates, are looking for "stable,
long-term [mining] projects with opportunities to invest
upstream and downstream," Mughal said.
He explained that for the family offices and conglomerates,
in particular, investments in mining projects were usually made
"with a view to bringing parts of the downstream into the [GCC]
region". This is one way of bringing non-hydrocarbons reliant
industry into the Middle East, he said.
In terms of where different GCC states are putting their
money, Mughal said that UAE was still investing in coal, iron
ore and copper but that garnet was also an important target
commodity. For Oman, phosphate, iron ore and gypsum projects
are among the top recipients of funding, while Jordan is
becoming increasingly involved in the phosphate industry.
Mughal noted that investors are interested in both the
mining projects themselves as well as mining equity, although
the priorities tended to vary according to the type of
investor. For those looking to invest directly into mining
developments, he said that in order to receive funding the
projects had to be structured in a certain way and allow Middle
Eastern investors the option of taking small stakes.
Offtakes, Mughal said, were also becoming increasingly
common between Middle Eastern companies and mining projects,
including many developments in Africa.
The lifting of international sanctions against Iran is a
specific focus for many GCC investors, Mughal said. He said
that funding groups were "just sitting and waiting for the
country to open up" and that there would be a "whole pool of
capital" available to be poured into the country, once the
green light was given by international regulators.
He noted that Iranians are among the most academically
educated in the Middle East and that this would create a
positive environment for investors.
Others were more cautious about the Iranian opportunity,
however. "Iran has signed a deal with the Americans not to go
nuclear, but my understanding is that this agreement can easily
be broken," said Rudolph de Bruin, founding partner of private
equity group, AMED.
"Mining companies looking to get into Iran had better take
out good insurance," he added.
Iran’s government, meanwhile, is encouraging
the perception of the country as a promising new market for
mining activity, in place of oil. At the end of November, the
country’s Deputy Minister for Industry, Mine and
Trade, Mojtaba Khosrowtaj, said in an interview with
Bloomberg that, "the Iran of the future is one where
mining can gradually start replacing oil."
"We have asked potential investors to pay attention to the
mining sector," he added.
Iran is opening $30bn-worth of energy projects and $29bn of
mining deals to investors once international sanctions imposed
on Iran are officially lifted,
Bloomberg’s report said. Khosrowtaj noted
that metals discovered in the country, such as copper, lead and
higher-priced rare earth elements, could be worth "much more"
than the nation’s oil industry revenue of around
$30bn, assuming crude prices of $40/barrel and exports of 2m
barrels per day.
In 2012, more than 40 minerals were mined in Iran and around
20 metals and minerals were processed or produced in Iran,
according to US Geological Survey (USGS) statistics. The USGS
states that the country has more than 3,000 active mines, most
of which are privately owned. However, the sector is still
using equipment developed 15-20 years ago because of a lack of
funds to due to sanctions, Khosrowtaj said.
"We could use new technologies. Expansion of construction
projects in oil and gas or mining is reliant on banks and
insurance companies, and sanctions have delayed them," he
added. "With lifting of sanctions, there will be new
opportunities that will accelerate growth."