CAN INDIA BECOME A MAJOR GOLD PRODUCER?

1. CAN INDIA BECOME A MAJOR GOLD PRODUCER? SANDEEP LAKHWARA Managing Director DECCAN GOLD MINES LTD.

2. AUSTRALIA In 1980 Australia produced a modest 17 tons of gold Between 1980 & 2000, it produced 3700 tons valued at US$46billion In 1980, identified gold reserves in Australia were 400 tons; by 2000 the identified reserves soared to 8300 tons out of which 3700 tons have been exploited, leaving the remaining 4600 tons of reserves in the ground to sustain the industry over the next 20 to 25 years at the least. More than 500 listed exploration and mining companies on the ASX Comparison of Australia, India & China – Gold Production • CHINA • China adopted a liberalised policy in gold exploration and mining more or less at the same time as India • China has now had a decade of reform in the gold mining sector allowing private investment into gold exploration & mining • In 1995 China produced 108 tons of gold which increased to 120 tons in 1996. Most production came from small & medium scale operations totalling ~1200 in all. China’s gold production reached a record of 213 tons in 2003. China has about 1000 gold mining operations. • Statistics show that about 36 exploration companies are operating in China, which in 2003 awarded 11,717 prospecting & mining rights • INDIA • Between 1967 and 1998 about 19 tons of gold has been mined from the KGF, 2 tons from Ramagiri & about 20 tons from Hutti Gold Mines – a total of about 41 tons • India’s current production is only3 tons/annum from its only producing mine at Hutti and about 6 tons as a by product of copper mining • Only one listed gold exploration Company (DGML) and a few mining companies

3. The growth of gold mining industry in Australia • Understanding of Australia’s prospectivity • Technological developments • Government of Australia’s investor friendly policies • Quantum of exploration expenditure • Access to capital from the public via listings of exploration and mining companies on the Stock Exchange

4. The growth of gold mining industry in Australia Understanding of Australia’s prospectivity • Research into geological processes and various methods of sampling of geological materials such as soils, laterite, calcrete & stream sediments to identify anomalous gold bearing spots • Understanding of weathering processes of ore bodies and introduction of large-scale opencast mining, including super- pit mining for winning low grade gold from near surface • A significant departure from conventional underground mining of high grade reef ores.

5. The growth of gold mining industry in Australia Technological developments • Development and application of latest ore treatment and extractive metallurgical techniques, especially the carbon in pulp technique for gold recovery. • Research and development in Australian Government institutions and transfer of know how to industry through widely circulated publications. • Airborne geophysical survey Instrumentation • Improvements in the sensitivity of instruments for ground geophysical surveys • Improvements in analytical techniques for detecting minute quantities of gold in geological materials • Devising portable equipment for conducting analysis in the field • Improvements in various methods of drilling

6. The growth of gold mining industry in Australia Government of Australia’s investor friendly policies • Mineral and Petroleum Resources Policy statement of 1998 - a commitment to provide investors with positive, stable framework of relevant Government policies which to a large extent remove uncertainty and promote increased investment. • Tenement system and legal framework is investment friendly; has therefore attracted large foreign investment • Grants for reconnaissance exploration and prospecting are made within a short duration of 2 to 6 months as against 12-24 months of delay in India. Consider a time limit for disposal of applications failing which “deemed approval” process applies. • There are no lengthy procedures of clearances from various organisations such as revenue authorities and the like at exploration & prospecting stages. Consider removing certain stages at the state Government level. • Government guarantees award of prospecting & mining rights to those who invest in grass roots exploration. In India, the law speaks of only preferences but no guarantees. Security of tenure is a “must have” when upgrading the prospect from RP to PL or PL to ML to attract large investments. • There are no limits on the extent of area to be granted on prospecting licence unlike India where a limit of 25sqkm is placed, with grant of larger areas subject to discretion of the State Governments

7. The growth of gold mining industry in Australia Quantum of exploration expenditure • In the recent past smaller exploration companies in Australia have raised between US $ 150-200 million for exploration purposes every year. Canada has provided a substantially higher amount of US $ 3.3 billion in the same period inclusive of capital expenditure on mining. • In India, estimates suggest that the total amount spent on precious metals exploration over the past 20 years has averaged a low US $ 35m per annum • A study of Western Australia Department of Treasury and Finance indicates that if mineral exploration investment were to increase by US $100m and be maintained for 5 years, projected cumulative benefits over next 20 years for the State would be $10.4 billion in investment, $45.8 billion in export revenue, $32 billion in gross state product and $1.7 billion in State Government revenue. All these, in addition to creation of several thousand new jobs and development of ancillary industrial units.

8. Gold potential of the Indian terrain • Gold was known to Indians 8000 years ago. Ancient India witnessed extensive prospecting & mining for gold. There are more than 800 old workings recorded. • Geologically, the Indian terrain is largely comprised of precambrian rocks. Similar rocks are known to contain large quantities of gold in parts of Western Australia, Canada, Africa, South America & China

9. Gold potential of the Indian terrain • There were over a hundred gold mining centres in the early part of the last century & these were mostly operated by the Britishers. The mines were located in parts of Kolar, Hutti, Gadag, Chitradurga & Shimoga in Karnataka; Wynad & Nilambur in Kerala; Kotagiri & Dharmapuri in Tamil Nadu, Ramagiri & Jonnagiri in AP State; Kunderkocha, Lawa, Mayisara & Sonapet in Jharkand; Sonadehi in Chhattisgarh; Parsori & Pular in Maharashtra. Gold panning by local people is a prominent activity in many parts of India. • From a total of 127,242 tons (1.27 million tons) of gold metal produced in the world, 76,500 tons came from precambrian terrains (Archaen & proterzoic). A major portion of India, barring the Indogangetic alluvial tract & Deccan lavas, is composed of precambrian rocks – yet our contribution to the precambrian gold resource is a meagre 1.17% (900 tons of which has come from a single precambrian belt ie Kolar) • Gold-bearing potentiality of a geological terrain can be expressed in terms of kilograms of gold per sqkm area comprising gold metal already produced + gold reserve in the ground identified by exploration & available for mining in the future. For Western Australia this index works out 50kg/sqkm, for Canada 55kg/sqkm and for S. Africa it is 80kg/sqkm. In comparison the index for India is a mere 1.6kg/sqkm (excluding Kolar) inspite of the fact that India has been known for wide spread gold mining in the past. Surely there is much scope for finding new mineable gold resources in the country.

10. How India can become a major Gold Producer? • Mineral Policy of the Government • Create mining Industry regulations that foster favourable investment into the industry • Fast track the conversion of RPs into PLs, grant of larger areas under PLs, matters relating to forest clearances, deletion of some of the time consuming unnecessary steps for grant of PLs, upgrading of the guidelines and rules to remove anomalies and security of tenure are some of the key issues that need addressing.

11. Procedural bottlenecks and inordinate delay in obtaining Prospecting Licence by RP holders The PL application file has to pass through a minimum of 77 tables. The number of days an application remains at each table is indicated by the following colour symbols.

12. Procedural bottlenecks and inordinate delay in obtaining Prospecting Licence by RP holders

13. How India can become a major Gold Producer? • Encourage investment in exploration companies – tax incentives, Stock Exchanges • Until the opening up of the exploration sector to private and foreign investment only two government agencies undertook gold exploration in the country. Discoveries require lots of exploration companies working and reworking areas of interest. • Encourage more research and development through grants, 150% write offs • The level of research and development undertaken by CSIRO in Australia and other institutions has considerably assisted the exploration industry. • Use of world’s best technologies to identify and develop prospecting areas • There has been inadequate use of world’s latest exploration and mining techniques eg of hyperspectral data to study gold-related alteration halos over large areas and use of state of the art portable equipments for analysing rock & soil samples in the field itself.

14. How India can become a major gold producer? • Exploration spend rate is increased through private & foreign direct investment • There have been several representations made to the Government by various organisations including FIMI on what improvements are required to the Mining regulations and the Act. The Government should act on these suggestions. • I believe training of appropriate government personnel in the understanding and execution of the Mining regulations is a must • Government agencies (GSI & MECL) become more actively involved with the private explorers to exchange information that could lead to discoveries. THANK YOU.