All that glitters in Indian mining is not gold say exploration companies

BHUBANESWAR: Charles E.E. Devenish has owned a jewellery shop in Perth, has been an early investor in both the Australian and Canadian mining boom, set up a ruby-cutting unit in Vietnam, as a 17-year-old student walked from France to India once and spent the last 26 years in pursuit of a dream - to develop a new gold mine in India.

Seventeen years after the company he founded discovered a gold deposit, Deccan Gold, India’s only listed gold mining company is faced with the possibility that its $40 million investment would have been for nothing.

The Narendra Modi government wants to put mineral areas that it has, and may not have, up for bidding. These include five-hundred odd mineral deposits that companies like Deccan Gold claim vested rights to under a section of the Mines and Minerals (Development and Regulation) Act, 2015 that the Mines Ministry now wants to delete.

If the government goes ahead with its reported amendment it would be the worst experience of his very rich life, said the 79-year-old.

“This is very unfair to have 26 years of work and our life wiped off. We spent money and we did it in good faith. I am well past the age to be heartbroken, but I would be distressed for India,” Devenish told the Economic Times.

Companies such as Deccan Exploration Services Private Limited's (DESPL) believe their vested rights are protected by law under the 12 Jan 2015 amendment to the MMDR Act.

The amendment spared two sets of leases: one, under Section 10 (A) 2(c), where the government had given a letter of intent or prior approval and another, under Section 10 (A) 2(b), where the exploration had been recognised by the state and the applicant could move seamlessly to the next level, explains Supreme Court advocate Naveen Kumar.

“The first got just two years to get environment and other clearances that state agencies have to grant. The Supreme Court’s forest bench headed by (former) Chief Justice Jagdish Singh Khehar had sought a flow chart of environment clearance while hearing the T.N. Godavarman matter. The court was informed that with all departments acting diligently, these would still take an average of four years,” said Kumar whose clients have challenged the lapse of their pending applications.

DESPL’s application for a mining grant over 72 acres in Ganajur in Haveri district of Karnataka falls under the second category that had no sunset clause.

In 1993 India opened with a New National Mineral Policy allowing private and foreign companies to explore and mine minerals such as copper, diamond, gold, iron ore, nickel and zinc. Wedged as it once was 180 million years ago between Africa and Australia on the Gondwanaland, India’s mineral potential was no secret.

In April 94 the United Nations sponsored an international roundtable conference in New Delhi drawing everyone that had any interest from De Beers and Rio Tinto to independent investors such as Devenish. It is here that he met state geologist Dr V.N. Vasudev who would go on to make several important discoveries for the company, the most exciting among them being the one at Ganajur in 2003. It is the first gold deposit discovered in a virgin area since the opening up of the sector.

Dr Vasudev shares credit for the discovery with Dr Harish Kumar. "Unlike the average 1-2 metre wide veins at the Kolar Gold Fields, the gold-bearing zone at Ganajur are 40 metre wide. This can be mined by open pit, like iron ore is,” Dr Vasudev told ET.

At the 1994 investors meet, Devenish recalls, they discussed a single-window clearance. It still takes 140 government tables to just process a prospecting license. He has a detailed colour-coded chart mapping these approvals and checklists that he has shared with Government. “That process is like playing snakes and ladders, plod your way up and you never know when you slide back four stages,” he said.

Two years after the discovery, in 2006, DESPL applied for a mining grant, confident it had established the reserve sufficiently. As required the government of Karnataka willing to grant the lease sought prior approval from the Centre. On 24 July 2015, seven months after amending mining laws to introduce auctions, the Mines Ministry granted this.

It had “inadvertently” cited a wrong section of the law and it clarified less than two years later that the approval was to be granted under Section 10(A)2 (b) of amended act. All other terms and conditions were to remain the same. In fact, the Ministry clarified that its earlier direction to states to scrutinise pending applications was NOT, it highlighted in bold, for cases that had prior approval as was the case with DESPL’s.

Karnataka’s commerce and industry department dilly dallied. It now had concerns over the lease it had recommended and wanted the law department’s view. “After the law department okayed the project in April of 2018 the department said assembly elections were due, and it could not act,” said Sandeep Lakhwara, MD, Deccan Gold.

In Dec 2018 the company moved the High Court which on 21 March 2019 directed the state to grant the lease in six weeks but to no avail. Ironically, a high-level committee had already approved more than 300 acres land for a processing plant for this mine capable of 750 kg of gold a year.

In October of 2019, Deccan Gold filed a case of contempt of court orders. Lakhwara says it was during this hearing that they found out that Centre had on 22 July 2019 written to the state asking for its prior approval to be kept in abeyance.

Deccan Gold and the unlisted Geomysore Services India’s experience with prospecting applications near India’s only gold mine at Hutti in Raichur district has been just as frustrating. After a decade of litigation, the SC in May 2018 directed the state to process the applications which were still pending. The Australian government has been extremely supportive of Adani, pointed out an official.

India produces 1.4-1.6 tonnes of gold while importing 800-900 tonnes or worth $ 33 billion of foreign exchange in 2018-19. China produced 420 tonnes of gold, Australia 325 tonnes and South Africa 129.8 tonnes.

Speaking on condition of anonymity, a bureaucrat who dealt with these files said, “Once you have introduced auctions which are fetching 70-80 percent extra revenues in premium, how do you expect me to grant a lease for free? It was wrong of the Centre to have left Section 10 (a) 2(b) while asking us to maximise revenue under the amended law.”

The bureaucracy and end-users, such as steel players who use iron ore as feed, have one roadmap for the mineral sector. Geologist, prospectors and mining companies believe this is short-sighted and uninformed. Exploration is different from mining, gold and diamonds are different from bulk commodities such as iron ore and coal.

In 1883, a boundary rider in the barrier range of South Australia figured the oddly broken hill on their sheep stead must have a mineable deposit of tin. Charles Rasp convinced his colleagues to bet on it. They formed a “syndicate of seven” applied for adjoining mining permits and floated a company.
The Broken Hill Proprietary Company would go on to mine silver, transform this part of the country and become the world’s largest mining company, now called BHP Billiton.

Mining is about making a discovery, prospecting, establishing the viability of the deposit and bringing it into production – reducing risks and increasing value in the process. It could easily take a decade to find and develop a mineable deposit.

The high-risk, high-reward business can be supported by millions of Indians, who as Devenish points out, “bet on every ball bowled in a cricket match.” That is why Deccan Gold chose to list on the Bombay Stock Exchange.

A model that Canada encourages with flow-through shares, while current mining rules in India continue to restrict fundraising through the sale of shares. A combination of artisanal mines of precious and base metals and scientific small scale farming could change India, said Devenish who speaks just as passionately about his Macadamia trees.

The premise to all of this is that risks will be rewarded, that a successful exploration would be converted into a promised grant. No private exploration has taken place since the 2015 amendment following which mining companies such as Rio Tinto and De Beers have practically shut their exploration wings in the country. “More than 2300 years ago, emperor Ashoka built the world’s largest economic empire on these gold and diamond mines, some spices and peacocks. Why does India always try to reinvent the wheel?” asks Devenish.