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NewsIMIDRO in the Course to Development & Progress

IMIDRO in the Course to Development & Progress

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2016/01/05Date:
Iranian Mines and Mining Industries Development and Renovation Organization (IMIDRO) as one of the three developmental organizations in Iran, was established with an aim of preparing the ground for development of mining and mineral industries.
At the beginning of its creation in 2002 the organization could provide conditions for the growth of sectors such as aluminum, steel, copper, iron ore, coal, gold, lead and zinc. In fact, the wheel of steering the complex in early 2000s was handed to skilled managers who had already worked on projects such as Mobarakeh Steel, Khuzestan Steel, Sarcheshmeh Copper, etc. It seemed that continuation of the course for boosting this sector of the non-oil economy was bright and promising.
But in the middle of the last decade and following changes made in the macro management and decision making process in the country conditions were changed to such an extent that in the course of five years IMIDRO witnessed the appointment and dismissal of six chairmen. Meanwhile, the organization’s chart changed three times none of which was consistent with organizational strategies.
As a result, a former formidable organization in development, with a high level of cooperation with domestic and foreign private sectors turned into a stagnant organization with weak financial strength. Meanwhile, many promises were given for the development of different parts of the country. One outcome of these promises was definition of economic projects in the light of political and emotional outlooks. In every city establishment of a steel factory was promised without mentioning an economic plan to supply primary needs such as water, electricity, gas and raw materials and even taking into account the financial aspects.
Meanwhile, under conditions that IMIDRO was expected to transfer projects implemented with the partnership of the private sector after their launch, suddenly and under the outlook imposed concerning privatization and Article 44 of the Constitution, sources of income of this large organization were weakened by ceding shares of the companies under its coverage to unspecialized sectors. This is while one of the basic principles of these transfers was to meet demands of new projects with an aim of initiating development in mines and mineral industry. In this way and in the course of a few years over 21.5 billion tomans of the shares of IMIDRO companies were transferred under the cover of privatization and in return resources obtained through those transfers were directed elsewhere.
The most obvious impact of these factors was blocking the progress of the projects, lack of credit, lack of integrated management, and delayed payment of the contractors. This in turn resulted in a drop in the growth of this sector under circumstances that each of these sectors like steel, aluminum, copper, coal, etc., adhered to the complex’s technical and financial factors within the organization, in provinces and in the government institution and they had to be addressed. Under these circumstances many parliamentarians, experts, journalists, etc., had questions in this regard and expected convincing answers. 
Milestone: Fortunately, with the coming to power of the 11th government and due to changes in the outlooks and taking rational macro decisions, conditions changed gradually. Meanwhile, by delegating the responsibility of leading this organization to me, projects were formulated and implemented to bring the organization out of the prevailing condition. Consultations and exchange of views with heads of associations, private companies, investors and experienced managers in this sector were parts of the measures taken in IMIDRO in September 2013.

The most urgent issue ahead of IMIDRO was to update and implement the strategy and reform of the organizational structure. Therefore, with the help of a veteran academic team and in compliance with the wishes of the Supreme Leader and the President, policies of the ‘resistant economy’ and plans of the Industry, Mines and Trade Ministry, renovation of the organizational strategy began. After months of research and review, the plan was approved in the presence of the Minister of Industry, Mines and Trade in the calendar month of Khordad (June) this year.

Under these conditions, removing the barriers in the way of development of this sector was considered one of the practical measures to be taken by IMIDRO. In other words, the new management assumed office at a time that IMIDRO’s financial and human assets had been weakened due to unprincipled transfers. Parent companies that are pillars of development of mines and mineral industries had been put in the list of transfers!
National Steel Company, Iran Minerals Production and Supply Company, and Mineral Investment Insurance Fund (one of the duties of which is to pay subsidies to the mining sector) were in the list.
Such a measure, although seems necessary and even vital, not only took a lot of time of the managers of the organization but even involved the main structure of the government in order to bring the derailed train back on its track. Fortunately, this important task was realized in the second half of the last calendar year and the separated pillars of IMIDRO were put back together.
On the other hand, one of the main priorities of the organization was to put into motion some projects which had been delayed between 4 and 12 years. The number of these projects was about 30 which had to become active under conditions that financial resources even for running IMIDRO itself was close to nil. Under such conditions, financing was maintained through different domestic resources, holding negotiations with 37 foreign companies (mainly top European and Asian companies) and formulating plans for simultaneous execution of projects with the help of managers and experts in this field. 

Projects Activated: The ‘seven steel projects’ is one of the most important projects on the agenda of IMIDRO. To this end, negotiations with the Chinese partners for financing the projects finally resulted in activating of the LCs for five projects: Sepid Dasht, Qaenat, Mianeh, Shadegan and Neyriz. For the other two projects of Baft and Sabzevar, LCs are expected to be opened soon. Totally, for the opening of the LCs for these projects China has allocated a sum of $1.8 billion.

Meanwhile, another measure which was taken in the past six months for easing the financial burden of the organization and accelerating the progress of these projects was transfer of 65% of provincial steel projects to such an extent that companies specialized in steel industry as well as large investment companies received the  shares of these projects.
Due to bypassing bureaucratic formalities, this privilege paved the way for the projects to take advantage of the National Development Fund. In addition, in the aluminum sector grounds have been prepared to open an LC for the largest 300 thousand ton project for production of this strategic metal in Iran. Other projects such as Gol Gohar 5 and 6 mass mines (separately), two coal projects in Tabas, extraction of magnesium from salty waters of Qom, Khomrud coal package and Zarand coke production no more face the financing challenge because investors from the private sector have entered the scene.
In the meantime, the graphite electrode contract which enjoys a special place in the steel industry reached the operation stage after about 12 years. Mahdiabad zinc mine (near Yazd) which was idle for long years was activated. Mahdiabad is well known as one of the world’s largest zinc mines.

Also, Venezuela cement, development of the Persian Gulf Special Zone platform, Sangan concentrates and pelletizing, titanium pilot and processing unit, antimony, Khuzestan green coke, Tabas Project No. 4, Savadkuh coke production and coal washing, Kordabad coal, Nama 500-megawatt power plant, Oxin power plant and two infrastructural projects in energy-consuming special zones known as Bar and Shurabe Tarud are among other projects which have been activated since last fall. Iranian Mines and Mining Industries Development and Renovation Organization funded 700 billion rials for activating of these 30 projects in the second half of the past calendar year.

The two points that need to be acknowledged here are: in the first instance, the projects were activated in less than one year under collective wisdom and management and the presence of investors rather than by rejecting the debs. This is tantamount to realization of the main goals of the country’s macro policies in transferring the affairs to the private sector and with regard to ‘resistant economy.’ Secondly, in the course of diversification of financing resources, the organization was able to attract companies for investment in this field which were earlier absent. For example, for the implementation of $1 billion worth Sangan concentrates and pelletizing project 29 investment groups entered the scene of rivalry which, according to the managers of the companies, had been attracted to the mining sector for the first time. This is indicative of the projection of this part of the economy’s attractions for profitmaking and its common interests for the investors: Attractions that seem to have been neglected in recent years and this is a point that was raised during negotiations with foreign companies.
Unfortunately, with the escalation of the economic sanctions imposed on the Iranian economy, little information was disseminated about potentials existing in the mining sector and many foreign companies mentioned this gap. But with the windows opened in the macro policies of the country under the 11th government, large European, Indian and Chinese companies were encouraged to cooperate in this sector. In fact, existence of rich mineral resources, abundant energy, access to open seas, neighborhood with 14 countries and skilled and inexpensive workforce are indicators that have not been ignored by the experts.
Development of Infrastructures: Iranian Mines and Mining Industries Development and Renovation Organization by taking advantage of these indicators, while reducing the financial costs, implemented projects for the development of energy-consuming industries zones in the south of the country and by defining and launching new development projects embarked on their expansion.
At present, Parsian energy-consuming industries zone in Hormuzgan Province and Lamerd in south of Fars Province which have been activated recently, are engaged in implementing infrastructures for the establishment of industries such as aluminum, steel, cement and petrochemicals.

These areas because of their proximity to Assalouyeh, the gas capital of Iran and the world, enjoy proper conditions for the import of raw materials as well as for exports. Also, in line with the new government’s plans and IMIDRO’s programs for production of competitive and export-oriented goods, parts of the energy-consuming industries would be established in Chabahar in Sistan-Baluchestan Province. Already partners of a three to five million ton steel project have been formed in Chabahar and works have been directed in the executive direction. Meanwhile, with the partnership of Indian and Kuwaiti investors two major steel projects with a total capacity of more than five million tons will go on stream in the Persian Gulf Special Mineral Industry Zone (Bandar Abbas).

This outlook in fact not only entails production growth but development of employment, using skilled and educated workforce, balancing development, increasing per capita income and, development of non-oil exports while gas energy will enter into the industry domain and generate high added value.

In fact activating of projects in the field of mines and mineral industry is promising dynamism of this sector of economy for domestic and foreign investors. It is considered a factor for encouraging investors. Currently, foreign investors are negotiating with IMIDRO every week in order to find a foothold in these projects.

However, one cannot ignore the obstacle that has already been thrown on the path of foreign cooperation; an obstacle which due to banking sanctions has irritated the investors. Nevertheless, foreign companies have maintained their cooperation in various forms but in the field of investment they have been able to make the preliminary arrangements and are waiting for the sanctions to be lifted.

Attraction of Domestic Investments:
Under these circumstances, IMIDRO has focused on taking advantage of the financial potentials of the private sector, investment firms and domestic holdings. In addition, attraction of the capitals of Iranians residing abroad is considered to be another part of the organization’s programs.

Meanwhile, since the beginning of the last fall up to now measures have been taken for the receipt of the arrears of the organization with regard to the transfers and beneficial interests of mines extraction and mines production in order to maintain resources for commissioning of the projects. Although the sums were not consistent with the financial needs of the organization but could meet part of the demands.
On the other hand, reference should be made to a point that has paved the way for financial challenges of IMIDRO in execution of the projects. The organization has more than 30 priority projects under implementation and the required amount for their operation is over 240 thousand billion rials. To overcome the financial bottleneck of these projects, the issue of using the financial capability of domestic companies was pursued which proved to be fruitful. In less than a year the fate of 85% of the figure was decided through private sector partnership. Thus the financial load of IMIDRO in this respect was cut to 37,000 billion rials, which entails speedy execution and acceleration of the progress of the projects. This achievement has been made after holding more than 40 meetings of the Investment Committee and review of all the projects which is the outcome of collective work of all managers and experts of IMIDRO.
Exploration: Exploration has been one of the operational aspects of IMIDRO in the past nine months and the plan was quickly put into force by conducting follow-ups. Cooperation with the Geology Organization and Minerals Directorate of the Ministry of Industry, Mines and Trade was such that a plan was devised for the exploration of 200 thousand square kilometers of the Iranian land. It was launched in the early days of last winter and heated up the activities of the mining sector.

Sangan in Khorasan Razavi Province was the first destination of the new exploration program; a place which is known as the Eastern Assalouyeh in the field of iron ore. Exploration at this level covered 12 thousand square kilometers and gradually spread to South Khorasan and Sistan-Baluchestan provinces. So far 68 thousand square kilometers of the area has been brought under exploration activities and the figure is expected to reach 100 thousand square kilometers by the end of this year. New explorations are expected to cover other areas with mineral capabilities in addition to the eastern borders of the country.

This project has been planned with an aim of ensuring supply of raw materials for the development of mines and mineral industries. Gaining access to the targets of the Vision Plan (2025) for the development of the country in this field necessitates possession of the required minerals for the steel, copper, aluminum, lead, zinc, gold, coal and even rare earth elements (REE). Therefore, such a massive program has been fulfilled in the field of exploration; a program which needs 12000 billion rials and is expected to explore twice as much as what was explored over the past 100 years.

Mining Insurance Fund: On the other hand, targets of the mining sector can proceed in a balanced form at a time that they enjoy the required support in order to boost the incentives for the attraction of investment. One of the factors which strengthen the position of the Insurance Fund is investment in mining activities. In the mentioned period efforts were made so that the capital of the Fund increased fourfold from 500 billion rials to 2100 billion rials. Simultaneously a budgetary fund was allocated to this supportive body of the mining sector for the first time in the calendar year 1393 (started March 21, 2014).

In the meantime, IMIDRO by signing a 3600-billion-rial memorandum of understanding with two major domestic banks (Mellat and Tejarat) decided to put facilities for the purchase of mining equipment at the disposal of mining companies and contractors; facilities which covered 80% of the costs of the purchased machinery.

If we want to take a glance at the entire measures taken by the organization in less than a year, we can focus on the fact that IMIDRO’s total performance is based on the change in attitude of the government, including the Ministry of Industry, Mines and Trade, and IMIDRO in particular. On this basis, the organization conducted a  review and evaluation of targets ahead through compliance with macro policies stipulated in Article 44 of the Constitution, the ‘resistant economy’, strengthening the private sector and growth and promotion of the mines and mineral industries in the national economy.

The most important principle in the organization was to focus on strategy with regard to the above-mentioned macro issues. Updating exploration plans along with renewed formulation of the comprehensive steel, copper, aluminum, gold, lead, zinc plan and rare earth elements are the most prominent effects in the revision of the strategy.
Software Domain: Other tasks that lay the foundation for future development and competitiveness of this sector are related to the software domain. They include the following: Compilation of IMIDRO’s Sixth Plan and updating comprehensive plans for steel, copper, aluminum, magnesium, etc., development of new mineral industries and super alloys, transfer of coal mines extraction to private sector applicants, processing Jalalabad iron ore mines wastes, monitoring execution of the second phase of targeted subsidies, strengthening non-governmental specialized associations, conducting studies on development of coal mines and its new applications in the industry, and developing energy consumption standards.
Government Pays Special Attention to Mining Sector: With regard to the sessions that have been held with the government, different aspects of the development of the mines and mineral industry sector were outlined and the position of this area in the main body of the government was made transparent; that is the major and minor role this sector plays in the economy. To this end, the government and the President himself are aware of the generalities of the effectiveness of the mines and mineral industry sector to such an extent that a special support has begun for mines sector. The first vice-president’s support for this sector has prepared the ground for the mines sector to come out of recession.

Meanwhile, IMIDRO was asked to submit its proposals in this regard which it did. These proposals were forwarded to the government which comprised seven items concerning mines and mineral industry. In addition, the Islamic Consultative Assembly (Majlis) and the speaker of the parliament have announced their support for the development of this sector.

One IMIDRO request is for the National Development Fund to allocate credits for development of mines and mineral industry projects. These factors are considered prerequisites for the development of this sector especially that in order to compensate for the shortcomings of the recent years we should concentrate on economic leap. The reason is that targets which had been presented in the past 10 years for gaining access to Horizon 2025 were faced with obstacles which made achievement of those targets difficult.

One of the measures the Islamic Consultative Assembly took in this direction was the approval of allocation of 70% of the shares from transfer of the stocks of the organization for operation and development of projects in this sector. This measure is in contrast with the performance of previous years when stocks of IMIDRO companies were unilaterally transferred without the return of their sums to the development cycle of the mines sector. But since the second half of the last year programs have been fulfilled with the continuation of which plans under implementation gradually entered the production cycle.

The most important of these plans are provincial steel projects to such an extent that the sponge iron section of these projects is expected to become operational by the end of the current calendar year (March 21, 2015). Among the projects underway Zarshuran gold with a production capacity of three tons per year is considered the biggest gold bullion producer in the country.
One of the key issues in the progress of micro targets in this area is paying attention to the development organizations in the country. The necessity of the status of such organizations has been proved in developed countries such as Japan and the United States. These organizations in fact found and pave the way for development conditions and capabilities of the private sector. Now, considering the special outlook of the government concerning this principle, a bright horizon has been portrayed before the mines and mineral industry sector for accomplishing its micro goals.