(Minews) - Iran will cut mining royalties to help its struggling iron ore miners, but that will reduce revenue for a government already reeling from lower oil prices, an industry executive said.
Iran had been hoping to offset falling oil income with revenue from other sectors, but its efforts have been hampered by tumbling prices of minerals such as iron ore - the country's top non-oil export.
"Just two days ago the government said it will reduce the mining royalty by between a third and a half," Keyvan Ja'fari Tehrani, head of international affairs at the Iranian Iron Ore Producers and Exporters Association, told Reuters at the Metal Bulletin iron ore symposium in Vienna.
The royalty is currently around 220,000 rials ($8) per tonne. The government will reduce it by between a third and a half for both publicly owned and private mines on a case-by-case basis.
Iran is facing a budget shortfall following oil's slide, said Tehrani, with the government forecasting crude at $70-$72 per barrel for the fiscal year starting March 21 versus current levels around $65.
Brent oil prices have tumbled from more than $115 a barrel a year ago.
Tehrani said the government's bid in March to impose an extra 25 percent royalty on all iron ore sold by private mines had fallen by the wayside.
"They announced it but they didn't apply it. They still haven't claimed it from any private mine," said Tehrani.
State-owned mines, which produce the bulk of Iran's annual output of about 45 million tonnes of ore, do pay the extra royalty, however.
Private mines in Iran were hit particularly hard by the iron ore price slump, with about half of their 11-12 million tonne production capacity shut down last year.
Iran was the No. 4 supplier of iron ore to top market China last year, exporting some 20 million tonnes, though Tehrani said he expects overseas sales to fall to just 12 million tonnes this year, even without the extra 25 percent royalty.
On the positive side, with so many private mines shutting shop last year, Tehrani said he does not expect more to do so this year if prices stay at current levels of around $60 a tonne.
Iron ore prices <.IO62-CNI=SI> hit a low of $46.70 a tonne in early April, and at around $60 a tonne currently are still at only about half the level seen a little over a year ago, making it difficult for producers such as Iran to compete.
