Iran’s plans to start lithium mining by 2025 may extend lifeline to battered economy

Officials last week announced substantial lithium reserve discoveries in the Hamedan province

Pieces of lithium in an ore sample. Lithium is the lightest metal on Earth and is a key component in electric vehicle batteries. AP

Iran plans to start mining lithium ore from two newly discovered deposits in the next two years, which may prove to be a lifeline in the medium term for an economy battered by high inflation and the rapidly declining value of its currency.

The country announced the discovery of significant lithium deposits — a key element in the production of electric vehicle batteries — in its western provinces of Hamedan last week.

The reserves contain about 8.5 million metric tonnes of lithium, which is often described as white gold due to its value, a senior official of the Iranian Ministry of Industry, Mines and Trade told state-linked Press TV.

If the estimate is right, this will be one of the largest lithium ore discoveries in the world and could potentially support the manufacturing sector in Iran and boost its exports.

Lithium, which has a wide range of industrial uses, registered a spectacular two-year price rally described as “insane” by Tesla’s chief executive Elon Musk and “unreasonable” by China’s EV manufacturer BYD.

Prices rose to as much as $86,170 a tonne in November last year but have since come down to about $52,000 a tonne.

With the projected value of the lithium-ion battery market projected to grow to $193.13 billion by 2028, from $44.49 billion in 2021, according to research from Fortune Business Insights, many countries have made it their strategic aim to secure supply.

It took Iran about four years of exploration to find the deposits, and its Ministry of Industry, Mines and Trade is currently assessing its technological capacity as part of efforts to start up the mines through a partnership with private investors.

Iran is also searching for more lithium deposits in the area, Press TV reported.

However, the scheduled start of extraction by 2025 means there is no immediate relief for the Iranian economy.

Iran’s inflation crisis is showing no sign of abating, with consumer prices expected to soar by an average of 40 per cent this year, according to International Monetary Fund data.

The country’s economy is expected to grow by 2 per cent in 2023, slower than the 3 per cent it achieved in 2022 and 4.7 per cent a year earlier.

At the end of last month, Iran's currency traded at 601,500 rials against the dollar on the unofficial market, forcing regulators to intervene.

It was at 490,000 to the greenback on Tuesday, according to the foreign exchange site Bonbast.com.

The rial has fallen sharply against the dollar since nationwide protests broke out in mid-September, which led to strikes in the energy sector and the country's steel industry, as well as the increasing isolation of Iran.

Western sanctions remain in place after Tehran raised its enrichment of uranium to levels that could allow it to create a nuclear bomb.

Europe and North America have also imposed new sanctions on the regime following the killing of hundreds of protesters and the jailing of tens of thousands during the recent unrest.

Iran has also faced new sanctions for supplying one-way attack drones, also known as Kamikaze drones, to Russian forces in Ukraine.

Europe and the US have spent about $130 billion on assistance for Ukraine since Russia’s invasion began a year ago, and have reacted angrily to Tehran’s growing military partnership with Moscow.

Iranian authorities have blamed the currency's fall on “the enemies' plot” to destabilise the country, repeating a common government line that the economy is being undermined by foreign saboteurs.