India: Exploration Licenses' proposed to boost mining of deep seated minerals

The Government may introduce a new "Exploration License" to boost geological exploration and exploitation of deep-seated minerals in India.

A proposed amendment seeks to incentivize the full range of exploration starting from reconnaissance to prospecting, of deep-seated minerals such as copper and zinc, high-value minerals like diamond, and minerals critical for the transition to clean energy.

India's mineral policy, its amendments minor and major, and many committees have failed to incentivize the exploration of these minerals carried out worldwide, by Junior exploration companies who undertake the financial risk with the expectation of a mining grant that they can later sell. India only sees around 1% of the worldwide budget for exploration.

A revenue-maximizing route of allocating minerals, almost unique to India, was introduced in the 2015 amendment to the Mines and Minerals (Development and Regulation) Act 1957. This was followed up by an amendment allowing G4 level deposits, or of reconnaissance level data, to be auctioned as a composite license for undertaking prospecting operations followed by mining operations.

The auction regime has seen significantly high revenues from the sale of operating iron ore mines, exploration is also being funded from a National Mineral Exploration Trust, collected as a cess, through the government's nominated agencies such as MECL, GSI, and NMDC. The notification seeking comments, however, acknowledges there remains a need for an "enabling policy" to encourage and leverage the risk-taking ability of junior exploration companies for a greater appreciation of reserves of deep-seated minerals to at least a G4 level before they can be an auction.

The solution being offered is auction again, for licenses to explore large, 1000 square km, areas that make no promise of a mining grant. The exploration agency will instead, get a share of the revenues from the eventual exploitation of the block. As opposed to mining rights, now granted to the one that offers to the government the highest premium or share of the average sale price, in this case, the Exploration Licence will be granted to the one that seeks the lowest percentage of this premium. These licenses will be provided under a new section 10 D in the mining act, and consequential amendments to sections 3, 4, 4A, and 6 of the Act with the following features:

- Exploration licenses will be granted only in copper, tellurium, selenium, lead, zinc, cadmium, indium, gold, silver, diamond, rock phosphate, apatite, potash, elements of the rare earth group, and critical and strategic minerals such as lithium, cobalt, molybdenum, rhenium, tungsten, graphite, vanadium, nickel, tin, platinum group of elements, columbite, tantalite, lepidolite, scheelite, cassiterite, etc.

- For a maximum area of 1000 sq. km per license and limited to 5000 sq. km per person/company in a state

- Interested parties may suggest areas to State Government for auction

- The license is for 5 years, extendable by 1 year with EL holders having to relinquish 75% area after 3 years

- The State Government must complete the auction of the area within a year from submission of the Geological Report by the EL holder. If the State Government does not auction the area, the Central Government may conduct an auction.

The Ministry of Mines also sought comments on other proposed amendments on 25 May 2022. A further call for public consultation regarding the change in the conversion factor of the calculation of ASP for metallurgical grade bauxite was published thereafter. Comments are sought on these additional proposed changes to MMDR 1957 before 22 February 2023.