The mining bill the Indian Cabinet is considering includes provisions that will allow large foreign players to invest in the exploration of minerals. Under the Indian definition, this includes precious metals such as gold, silver and diamonds. Historically, large exploration companies have been unable to mine in India without guaranteeing that it will invest in exploration for a minimum period of ten years, even if exploration yields no reserves. The new bill would shorten that period to six years and would allow high technology reconnaissance before signing the six year contract.
According to the Federation of Indian Mineral Industries, gold is the only commodity that is mined in India significantly, from 1980 to 2005. The gold market in India is very strong. India is the largest consumer of gold in the world. Citizens bought 963 tons of gold last year, worth approximately $38 billion. Of this volume, 918 tons were imported. The only gold mined there currently is through the government-owned Hutti Mines, located in Karnataka. Preliminary studies have indicated that there could be significant gold deposits in the regions of Chhattisgarh, Madhya Pradesh and Andhra Pradesh.
Competition for the exploration rights could be extensive. Since the bill went on the table, eight companies have applied for licenses to explore in Goa; they are seeking gold and platinum specifically. These companies include Sesa Goa, Geo Mysore Services, Goan Mineral Resources, Sarmeta Exploration and Adi Gold Mining. Reliance Industries, which is India’s largest company by market capitalization, has a license to explore areas that the government’s Hutti Mines have already mined.
Diamond mining is another big industry in India. The UK-based Rio Tinto, which is active in a very limited capacity in India, was the first to discover diamond deposits, it was 2004 in the Chhatarpur district of Madhya Pradesh. Rio Tinto estimates that if India permitted an open pit mine Madhya Pradesh would rank amongst the world’s top ten diamond regions.
Most of the diamond mines in India were exhausted many years ago, leaving just one active mine – Madhya Pradesh in Panna. The Panna mines are operated by government owned NMDC and produce 100,000 carats annually. Several large global exploration companies, like DeBeers, have begun prospecting again in the areas of Chhattisgarh, Karnataka, Andhra Pradesh and Tamil Nadu. This marks the first time that a non-government owned company has prospected for diamonds in India in several years.
The mining bill, which will allow all this to happen, should be tabled in the winter session of parliament.
October 10, 2011
Gold, Precious Metals Mines, Silver