Iran is looking to take advantage of its massive untapped mineral wealth through foreign investment, but undeveloped infrastructure looms as a barrier to future growth.

To say that Iran has significant untapped mining wealth might be an understatement; the Islamic Republic is home to 7% of the world's total mineral reserves, an estimated value of USD770 billion. With 1.7 billion tons of mineral reserves discovered in early 2017 alone, the potential for new operations is tremendous. Indeed, some analysts believe that mining could become bigger than oil if given adequate resources. Development work stalled in recent years due to international sanctions that prevented investment from foreign firms, but since regaining access to the global economy in 2016, speculation work has been underway to increase production. With government leaders eager to kickstart the economy again and investors eager to access the nation's mineral riches, partnerships are a natural fit, and the upcoming years should see a flurry of activity.


Iran's mineral riches cannot be ignored. Iran's deposits of copper, iron, uranium, and lead are all among the world's 10 largest, and it is also home to significant stores of zinc, aluminum, and chromite. Yet, its production of all of the above minerals is largely underdeveloped; mining contributed just 1% to total GDP in 2015. This was in large part due to the imposition of sanctions, yet the domestic development of the sector has lagged behind countries with similar mineral wealth. The number of mines in Iran grew from 3,125 in 2005 to more than 5,000 in 2010, but GDP growth did not grow proportionally due to the size of the mines, the international restrictions placed on Iran's trade in recent years, and the drop in global commodity prices. Government officials estimate that more than 70% of Iran's mines are small-scale operations that employ fewer than 10 miners. This naturally limits the efficiency and potential of the sector, as these projects often have old and inefficient energy and transportation infrastructure. Complicating issues, these small operations have been unable to attain the credit needed for capital improvements due to sanctions and the resulting credit crunch in the Iranian financial industry.

With the sanctions out of the way, however, the industry is ready to be come a larger part of the economy. Mining fits several of the Iranian government's development goals; it is labor-intensive, high-value added, conducive to large long-term investment projects, and less susceptible to fluctuations in commodity prices than oil. As such, the Iranian government is in the midst of plans to increase the sector's output over the next few years. The government's Sixth Five-Year National Development plan calls for more than USD18 billion in government investment and USD50 billion in foreign investment in the mining sector by 2021 in the aim of raising mining's share of GDP to 1.5%. When sanctions were lifted in 2016, talks began in earnest with foreign firms, and Italian, French, and Australian firms expressed interest.

Iran signed a USD2 billion contract between Iran's mining agency and private Italian companies to develop a mining company in the port city of Chabahar in early 2016, but most deals signed so far have been smaller investments of a few hundred million dollars. The is due to a few primary reasons: lingering concerns still remain over Iran's relationship with Western leaders and the possibility of future sanctions still hangs over the country. The long-term nature of mining projects leaves foreign firms vulnerable to losing money on their investments if Iran's position shifts over the period of the deal. Iran's political climate is also a hurdle; though the government has taken steps to streamline regulations and ease the path for investors, it still a politically fraught market almost entirely controlled by a government that is adjusting to meeting international transparency standards for the first time in years. Finally, Iran's larger infrastructure issues have served as a barrier to development. With the industry's potential constrained by the lack of adequate transportation options, the amount of development needed to make large mines profitable has been a deterrent. Iran has been working to relieve these bottlenecks, and today there some 3,500km of railroads under construction, but significant work remains to bring transportation infrastructure up to the level it would need to be to support large mineral transport volumes. Looking to the future, the resolution of these issues will be key to the development of the industry.