Mineral Exploration Business is the way forward

“…The edifice of the self reliant India will stand on five pillars. The first pillar will be economy. An economy that will not bring incremental change but quantum jump…“

Narendra Modi, Prime Minister of India

By Dr Amit Tripathi and Dr V.N.Vasudev

National goals set by Ministry of Mines can be achieved only by lowering the entry barriers to starting a “mineral exploration business”. Yes mineral exploration can be a business in its own right and is also called worldwide as Junior mining business. The raw material for this business are reconnaissance or prospecting licenses and the final product are Mining Leases with resources and reserves. This business is the foundation of a booming mining industry worldwide. Mineral Exploration Companies have proven multiple times more successful at mineral discovery than large mining companies. Mineral Exploration Business has its own regulatory needs that are distinct from the Mining Industry. Fully liberalizing the the concession process, concession trading Ease of Starting Exploration with Low Entry Cost and ability to raise high risk equity funds for exploration are prerequisites to build this foundation. Doing exploration with public funds and auctioning the blocks is akin to nationalizing the highest risk part of the value chain where the risk of failure is the highest.

Worldwide Mineral Exploration Companies are MSMEs by default. This is one sector that creates multiple small businesses and by default operates in the rural areas. Encouraging this business will create employment boom in small towns and rural areas. The amendments to the extant Act should be such that they cause to start thousands of Mines and mineral MSMEs and hundreds of commercial mineral exploration companies for enhancing National Mineral Resources inventory, employment generation and reduction of import of non-bulk minerals and metals.  By lowering the cost of doing business and entry barriers, the Ministry of Mines would, at once, cause to increase the number of mineral discoveries, number of mines, rate of production, mineral supplies at competitive costs and eventually increase the number of Corporate and Income Tax payers.

Para 3.3 in The National Mineral Policy (NMP)-March 2008 and para 12.1 of NMEP-2016 serve as an excellent premise on which future amendments to the MMDR Act should be carried out.  Para 3.3 of NMP-2008 gave private sector a primary role for exploration and emphasized that “In order to make the regulatory environment conducive to private investment the procedures for grant of mineral concessions of all types, such as Reconnaissance Permits, Prospecting Licenses and Mining Leases, shall be transparent and seamless and security of tenure shall be guaranteed to the concessionaires. The first-in-time principle in the case of sole applicants and the selection criteria in the case of multiple applicants will be appropriately elaborated. Prospecting and mining shall be recognized as independent activities with transfer-ability of concessions playing a key role in mineral sector development. (para 3.3)”. Para 12.1 of NMEP-2016 “Government’s objective is to facilitate, encourage and incentivize private sector participation in all spheres of mineral exploration. Government intends to harness the Capabilities of the Private sector to discover and exploit the country’s vast mineral resources.” NITI Aayog in it’s blueprint, the “Strategy for New India@75″, released in Dec 2018 has set the following Objectives with the aim to accelerate growth in the Minerals Sector. “Double the area explored from 10% of Obvious Geological Potential (OGP) Area to 20%” and Increase the job contribution (direct and indirect) from the current 10 million (2 million in coal and Major Minerals and 8 million in Minor Minerals) to 15 million in 2022-23.

Most Private Entrepreneurs, Geologists, Mining Engineers and also PSUs strongly believe that the introduction of auctioning even for grant of exploration license (CL=PL cum ML) has taken away the rights of individuals and companies to select potential mineral-bearing areas and file applications. Auctioning has not only prevented Resource Maximization & Utilization but also heavily reduced the real-time flow of Royalty and Corporate Tax revenues. All that has been achieved in the last 5 years is PROMISE of a few lakh crores of Revenue share by a few Steel & Cement producers over 50 years mine life!!! Auctioning for grant of exploration license (PL cum ML) is currently the biggest disincentive as proven in the last 5 years. Only now, due to Corona Pandemic, MoM seems to have realized the futility of the restrictive regulations and swimming against global best practices. Auctioning for grant of exploration license (PL cum ML) is currently the biggest disincentive as proven in the last 5 years.