“Liquidity is key in concentrate production”
CEO of Chahar Gonbad Copper:

“Liquidity is key in concentrate production”

Despite the strong domestic demand for copper concentrate, some producers are operating below capacity or even have had to shut up shop. For this Insider Talk, we invited Ata-o-llah Sharifian, CEO of Chahar Gonbad Copper.

What are drivers of the concentrate market?

A lot depends on capital in the industry. Producers can sell as much as they can produce, but buying larger volumes requires greater capital intensity. However, they cannot ramp up output due to financial issues.

Iran’s capacity exceeds its actual output by one million tonnes. Smelters are operating at 50% utilization. NICICO is currently the largest consumer of concentrate. Due to some issues, we are missing not only domestic markets, but also exports. In addition to its high quality, Iranian concentrate contains gold and silver; yet we cannot sufficiently use this opportunity.

Can you produce concentrate at your full capacity?

Due to a shortfall of mine output, we cannot operate at full capacity. We have an underground mine owned by Olang and Sarcheshmeh Copper Investment Company, but we need a development plan to exploit the mine; the three-year plan is underway, but its progress has been hindered by a shortage of liquidity and problems created by some organizations. Unless we can have mine production, we have to buy ore, which is insufficient and has low grade. That’s why we can’t produce at full capacity. We have a monthly capacity of 500 tonnes of concentrate, while our actual output is about 200 tonnes per month due to insufficient ore. We extract 150 thousand tonnes of 0.7% ore per year, and produce concentrate with grades of 15-22%.

Can you easily buy ore from other mines?

Yes, we currently buy ore from small mines near the factory. We won’t need to buy ore in two months, when our own mine is exploited. There are massive reserves between Sirjan and Shahr-e Babak, but they’re not getting the attention they deserve. We have a naturally rich country and we should use its resources more carefully.

What are other issues in concentrate production?

Shortfall of ore and insufficient liquidity are the main problems. We are dealing with a lot of problems in buying raw materials and there are no organizations that can give us financial assistance; most organizations focus on getting money rather than giving loans. The smaller the industries, the bigger their problems. We used to be able to buy raw materials on credit, but now only cash spot payment is accepted. In addition to insufficient capital, we have legal problems, insurance issues, etc. It’s rather difficult to work under such circumstances, but we hope to get these problems out of the way in two months’ time.

Given that concentrate production is a lucrative business, why aren’t investors interested in the industry?

The mining business takes a lot of work and investors prefer something easier and more convenient. Every part of the business requires special technology. Using groundwater, ventilation, among other things each requires capital and technology. Safety is crucial in underground mines. With all this trouble, investors stay away from the industry.

Is foreign investment easily possible?

Yes, the country is ready to accept foreign investment; but investors generally prefer newly discovered mines so they can extract more. Chahar Gonbad mine has been exploited for 18 years and will yield copper for another 20 years. We also had an open-pit mine, which was depleted.

Given the wide applications of copper in Iran and the world, the industry has a promising outlook. Investors should also note that although underground mines take more work, copper is a never-ending business.

How much of other elements come with copper concentrate?

Our concentrate is of good quality and contains very small amounts of penalty elements such as lead, iron, and silicon. Our recovery rate is 92-95%.

What technology are you using to produce concentrate?

Our technology is devised by Iranian engineers (our own staff and with help from NICICO). We convert sulfide ore into concentrate through floatation.

Has the government had any support programs for concentrate production?

They only talk about some programs, but they have never done anything. They do have plans, but their implementation is not very obvious. For instance, it’s difficult for us to pay state-prescribed salaries; they can support us by not insisting so much on government-defined salaries. VAT is another area where the government can help; we receive added value when we turn dirt into concentrate, but we have to pay that as tax. Moreover, there is confusion over job types, and even the Social Security Organization doesn’t know how to deal with it. In addition to the 17 organizations that are working with us, parliament representatives can also be of significant help to us.

Do you have any suggestions on how to enhance the industry?

There really needs to be someone or some organization that can be used as a reference for prices; someone who can investigate why we have to buy parts and equipment with free-market dollar rates but sell our concentrate with the Nima rate.

Concentrate consumers also have to sell their cathode with the Nima rate, but the bigger the company and the larger its output, the lower its production costs and costs of parts and equipment will be. Big mines make a lot more profit than small mines.

Is there any price reference for copper concentrate?

There is a pricing formula, but with only one consumer, the producer does not have much say in the price; the consumer is king.

What is the capital intensity for establishing a concentrate production plant?

To exploit the Chahar Gonbad mine, which will be launched in about three months, about 30 billion tomans has been spent. All equipment has been bought domestically; we have not imported anything, except loaders and trucks, whose parts are all produced in Iran.

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