Global Mining Finance: Investing in Iran getting ‘easier’

By Davide Ghilotti
Published: Thursday, 27 October 2016

With a treasure trove of 68 minerals and the government's will to bring in international capital, investors were told that they should be looking at Iran as a business prospect for mining commodities including dolomite, bauxite and rare earths.

Iran is keen to attract external business partners to invest in local mining companies, exploration projects and pursue business opportunities within the country, delegates heard at the Global Mining Finance conference held in London in October.

After a full decade of inte-rnational investors being absent from the Iranian economic environment, the lifting of trade barriers is creating opportunities to exploit the large local mineral resources, according to Farzad Moshfeghi, founder of UK-based financial consulting company Finity Asset.

"Exploring or investing in Iran has become easier and simpler than in other countries," Moshfeghi told attendees in London.

There are over 5,000 operational mines in Iran at present, extracting 12 metals and 36 non-metal ores. Metallurgical and non-metallurgical deposits are estimated at a total 55bn tonnes.

Additionally, the country’s large territory holds reserves in 68 types of minerals, worth an estimated $700bn.

The majority of operational mines (about 90% of the total) are owned by the government, mainly through state-owned companies. State-controlled IMIDRO is the largest, with a big portfolio of mining projects.

"Most of the mines are state-owned, but the government is actively looking for investors," Moshfeghi said.

"There are mines in Iran that are commercial. Many of these mines will need technology [updates]," he told IM.

This confirms what IM heard at the 23rd IM Congress in Prague this summer, when Iranian speakers highlighted the need to improve processing technology at domestic mining facilities, to achieve better efficiency and quality of mining output.

Sanctions

Moshfeghi acknowledged that despite the lifting of trade restrictions, a number of other limitations on financial operations remain in place, and it is unclear when these will be phased out. Operating in US dollars remains difficult, for example, as is business between Iranian and foreign banks.

As an exhibitor at ceramics trade show Tecnargilla told IM in September: "Western banks still don’t operate with Iranian banks. We hope it gets better but, for the moment, it’s impossible [for us] to do business there"(see p15).

Moshfeghi stated that it will be political factors such as the outcome of the approaching presidential elections in Iran and the US that will determine whether the process will continue.

At the same time, he told IM: "People and businesses are expecting change, and I don’t expect this process to [be derailed]."

Dolomite

Moshfeghi stated there is an opportunity for Iran to enter the international minerals market with a view to balance out China’s quasi-monopoly on some mineral commodities.

He named dolomite as one of these. Iran holds large deposits of the refractory mineral, of which China controls about 80% of global supply.

Dolomite was listed by the European authorities as one of the so-called 'critical minerals’ of which Europe would need to ensure stability of supply in the coming years.

"Iran can definitely play a role in dolomite exports," he told IM.

Besides dolomite, he named rare earths, bauxite, lithium and chromite as other noteworthy industrial minerals that investors should look into.

Public opinion 'moving against capital’

  • Will to monitor capital flows
  • Worsened public perception
  • Investors urged to play safe

Davide Ghilotti

Investors with a view to funding mining projects now have to face an environment of widespread scepticism against private capital, delegates heard at the Global Mining Finance Autumn conference.

Financial investments and financial instruments such as funds and offshore jurisdictions have come under close scrutiny by the public and political authorities, which has led to stricter regulations on transparency and information disclosure, Ashley King-Christopher, partner at UK-headquartered law firm Charles Russell Speechlys LLP, told attendees.

"The public opinion is moving against private capital," he said, citing recent media cases such as the Panama Papers (an archive of leaked documents published by international media outlets disclosing a long list of holders of offshore companies based in Panama) as having negatively influenced the perception of financial capital in the eyes of the western public.

Additionally, countries that were historically tight-lipped about the information they held about companies operating through their systems – such as Switzerland – are beginning to open up to the concept of information sharing with other nations, on the back of political pressure to clamp down on tax evasion and tax avoidance.

These factors have converged to create a situation in which investors are increasingly concerned about the financial instruments they use to carry out their business and have to plan their steps when working across jurisdictions on mining projects.

"All of this is about perception. Companies need to have this in mind from planning stage so that their operation – and their image – is not tarnished," King-Christopher said.

This growing uncertainty has resulted in slower movement of capital, he said: "The current scenario is not favourable for private capital to get out. Investors are pressured into sitting on it without moving it."

Amid this rapidly-changing outlook, the jurisdictions where investors base their work and the legal systems they can resort to are crucial to ensure business continuity.

King-Christopher urged investors to keep their financial structures in OECD jurisdictions "whenever possible", as OECD regulations provide a clear framework in which to operate. He added that investors should also make sure they remain tied to the British legal when working on projects in developing countries.

Brexit

Commenting on the possible consequences of Brexit, King-Christopher predicts that private capital should not be affected even in a future scenario when the UK is no longer part of the European Union.

"Private capital doesn’t care about EU passport laws," he said.