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Iran .... deals with slump in oil prices.

Iran hikes mines royalty

IRAN, March 12, 2015

Iran will require private mines to pay an extra royalty to the government as a slump in oil prices forces the Opec producer to raise revenues elsewhere, an industry executive said.

The move, likely to be implemented at the start of Iran's new financial year later this month, may shut more iron ore mines in the Islamic state and further reduce exports already cut by falling prices of the steelmaking commodity.

Iron ore is Iran's biggest non-oil export. The country was the fourth largest supplier to top market China last year, although its shipments were far lower than those from Australia and Brazil.

"During 2014 at least 30 per cent of private iron ore mines in Iran have shut down and we expect more will be closed in 2015 with prices continuing to fall and because of the new regulation," Keyvan Ja'fari Tehrani, head of international affairs at the Iranian Iron Ore Producers and Exporters Association, told Reuters in a phone interview.

Iran has about 150 private iron ore mines which produce around 11 to 12 million tonnes annually, comprising over a fifth of last year's output and mostly sold overseas.

Under the new regulation, private mines will pay a royalty of up to 25 per cent of their iron ore sales, said Tehrani, on top of the current royalty of around 220,000 Rials ($8) per tonne. State-owned mines, which produce the bulk of the country's output, already pay the extra tax.

Iran is facing a budget shortfall following a slide in oil prices, said Tehrani, with the government forecasting a crude price of $70-$72 per barrel for the fiscal year starting March 21, well above current levels below $60.

"To compensate for this budget shortage, the Iranian government has no choice but to increase local taxes for all commodities, services and minerals," said Tehrani.

Emails seeking comment from Iran's Ministry of Mine, Trade and Industry were not answered. An official at the Iranian Mines and Mining Industries Development and Renovation Organisation, a major state-owned holding company active in the country's mining sector, declined to comment.

Iran's iron ore exports are likely to fall by 20-25 per cent this year given the new royalty and weaker prices, said Tehrani. Shipments fell 15 per cent to 20 million tonnes last year as world prices nearly halved, he said.

A global glut stoked by low-cost producers from Australia and Brazil, just as China's economy has slowed, has dragged down iron ore to below $60 a tonne, putting pressure on higher-cost rivals.

Tehrani said the government was not planning to impose a 10 per cent tax on exports of unprocessed iron ore earlier eyed for the incoming fiscal year. - Reuters




Tags: Iran | Royalty |

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