India’s new mineral policy likely to offer incentives for explorers

KOLKATA (miningweekly.com) - India’s proposed New Mineral Policy (NMP) is expected to offer a slew of monetary incentives to private domestic and foreign companies to undertake mineral exploration activities across at least 100 mineral blocks across the country.

The NMP, the details of which were not yet in the public domain, was slated to be unveiled within the next few months, and was expected to offer investors in mineral exploration projects an assured revenue stream even if they decided not to undertake mining operations post discovery of resources.

To further sweeten deals for exploratory investments, in the case that no significant or economically viable discovery post exploration was made, investors would be entitled to reimbursement of exploration expenses based on pre-determined parameters.

According to an official privy to the NMP, the twin incentive structure would be ensured through a two-stage auction of around 100 mineral blocks.

In the first stage, a ‘reverse auction’ would be held under which mineral exploration companies would put in their bids to secure exploration rights of the blocks which would be based on bids for royalty (in case of successful discovery) or compensation claims (in case of no discovery).

The successful bidder in the reverse auction would be the exploration company bidding for the lowest share of royalty payable by a miner to the provinces or lowest claims of reimbursement in case of no discovery.

Post successful exploration, when a mineral block was subsequently put up for auction for extraction of resources, the exploration company could be offered the first right of refusal to match the highest bid and secure mining rights of the block explored by it.

The official pointed out that under these provisions, an exploration company would be assured of a definite revenue stream from the share of royalty received by the provincial government from miners over 50 years or the entire validity of the mining lease, even if the exploration company did not undertake mining operations.

He said that to make it a win-win option for domestic and foreign mineral exploration companies, in the case of no discovery, the latter would be compensated for its investments from the National Mineral Exploration Trust, based on a predetermined cost reimbursement structure for specified minerals.

According to the Mines Ministry, which was working on the contours of the NMP, the deal sweeteners were necessary to attract private investments in exploration as private investments accounted for just 10% of total current investments in mineral exploration, with the bulk accounted for by government agencies.