LAWRIE WILLIAMS: India looking to resurrect its gold mining sector
India used to be an important player in global gold mine production principally through operations in the historic Kolar Gold Fields in Karnataka state which ceased production in 2001 due to increasing depths and declining grades making the operations unprofitable at the then prevailing gold price. In its heyday India used to produce around 80 tonnes of gold a year. Current new mined gold output is probably less than 2 tonnes.
But the Indian geology is considered favourable for finding much more gold, but Indian federal and state bureaucracy makes licensing etc. a long drawn out tedious process and few have taken the time and effort to try and overcome this. Metals Focus notes in a recent release that acquiring mining leases and gaining environmental permits takes on average four times longer in India than in other mining jurisdictions around the world, as applications have to be individually assessed by local, regional and governmental offices.
On India’s gold prospects from a geological standpoint, the consultancy notes that the geological terrain of India is similar to that of Western Australia and Southern Africa and there are recorded gold occurrences throughout the country. Gold is often associated with Archean greenstone belts, which typically exhibit much higher grades than other types of geology. It goes on to comment that India is historically underexplored; while there is almost complete coverage of surface geology, only 18% of the country has adequate baseline geochemical and geophysical data.
As has often been mentioned, India has a significant Current Account Deficit (CAD) with gold imports, which peaked at over 1,000 tonnes in 2011, a very significant contributor. Hence the high level of imposed import duties initiated to try and reduce this gold flow into the country – although this may have been countered by a significant increase in gold smuggled into the nation of perhaps 200 tonnes a year or more. But the Modi government, in recognition of India’s potential to produce a significant amount of gold from its own resources and thus help mitigate import levels, now appears to be trying to make moves to resurrect the country’s gold mining sector and is apparently now looking to fast-track the permitting process with plans to auction off mining licences for around 80 old mining tenements to both local and foreign companies who can work towards bringing them back into production. The idea here is to attract more exploration companies to India, bringing much needed investment to the sector and helping to revitalise the country’s gold mining industry.
There are already foreign and domestic gold explorers there, such as LSE-AIM quoted Kolar Gold (KGLD) which is looking to work with mostly Indian domestic companies to re-explore and re-open mines in the Kolar Gold Field. Another is Deccan Gold, a Mumbai-quoted (DECNGLD) Indian gold explorer which sees huge potential in Karnataka and Andhra Pradesh where activities have resulted in defining a number of gold prospects. But their efforts have mostly been stymied by the slow processes involved both in dealing with government entities and with other local Indian interests. Bureaucracy runs deep!
Perhaps the question is how far can the government go in actually fast tracking the permitting process and mining licence auctions – even if it cuts the process time in half that may still not be acceptable to prospective foreign explorers who have no wish to become embroiled in the huge amount of paperwork and slow processes which are still likely to be necessary. But at least it is recognition that there could be potential in revitalising the country’s gold mining sector to allay the CAD problems – and Modi himself has the reputation of promoting business and investment through cutting bureaucracy and speeding up the processes – something he had previously managed in his sometimes controversial time as first Minister of Gujarat State from 2001 up until 2014 when he became India’s Prime Minister. If indeed the permitting and licensing systems can be speeded up substantially, we could indeed see a resurgence in Indian gold mining and exploration, but there would likely be little short to medium term impact on the nation’s gold production. Longer term we could see something of a revival, but perhaps not for several years yet for anything of any significance given long lead times even in the best mining environments for turning exploration success into a new mining operation. However the apparent concentration on licences for brownfield sites could speed up the process substantially.