KOLKATA (miningweekly.com) – In a deal sweetener ahead of mineral block auctions by Indian provinces, the federal government has relaxed rules governing mining leases and offered greater flexibility to mining investors.
In a set of new rules, titled Mineral Concession Rules 2016, the government relaxations included free transferability of mining leases when ownership of an asset changed or when multiple mining leases were merged, to enable economies of scale of mining operations and improved cost efficiencies.
The rules, released last week, stated that any successful bidder at the forthcoming auctions would be entitled to transfer the original mining lease subject to the condition that the new entity also fulfilled all other eligibility criteria as a miner stipulated in the auction rules.
Further, mining leases granted following the auctions would be open for amendment through registration of supplementary leases, which would facilitate mining investors including non-mineral areas.
Clarifying the move, an official in the Mines Ministry said that this provision would enable large miners to take over several small operations stretching over less than 50 ha in non-mineral areas, which were currently either closed or nonperforming, and existing operators seeking an exit route.
It was pointed out that under the current dispensation, where mining leases were nontransferable, investors were not able to monetise their assets in the course of the life of the asset and were also prevented from consolidating mining operations through mergers and acquisitions as the mining leases could not be transferred to the new entity.
The relaxation of mining lease rules comes ahead of a meeting of the Union Cabinet of Ministers this week, which would give the final nod for the auction of 100 mineral blocks by various provincial governments.
The Geological Survey of India has identified the 100 blocks across 22 provinces. Each block stretched over 100 km2, with mineral potential for iron-ore, limestone, manganese, tungsten, nickel and rare earths.
Bids from investors would be sought for a reverse auction, based on royalties to be offered. The government had already determined that successful bidders would be indemnified if no mineral resource was discovered and the indemnity would be funded through the new corpus of the National Mineral Exploration Fund.
However, no clarity had yet emerged on how a successful miner or explorer would be reimbursed if a viable reserve was found, but the company still intended to exit the project.
The government has proposed that investors at the exploratory stage be entitled to revenue sharing from royalties paid by the subsequent new project investor for a period of 50 years. However, as reported by Mining Weekly Online, Indian provincial governments were not ready to part with any portion of royalty receivables from projects within their geographies.