Could India eventually produce as much gold as China?

Nobody would laugh at the rupee anymore.

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Is India Sitting on a Gold Mine?

An interview with Sandeep Lakhwara, managing director of Deccan Gold Mines

By Rajalakshmi Nirmal
The Hindu, Chennai, India
Sunday, October 19, 2014

India has very large resources of gold, several geological studies say. One estimate (2005 study) puts the country's primary gold resources at about 491 tonnes. But the country hardly finds a mention in the global list of large miners. It produces just three-four tonnes of gold annually. Sandeep Lakhwara, managing director of Deccan Gold Mines, a listed gold exploration and mining company, talks about the issues faced by the industry and the country’s prospective gold reserves.

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Q: For how many years have you been in this business? How many operating mines do you have currently?

A: We have been in this business for the last 12 years, but essentially we are still explorers and do not have operating mines yet. We are prospecting in many regions within the country -- almost in 60-70 places. We are fairly optimistic of at least a dozen of these yielding deposits that are mineable. The grades may vary from 1-2 gm a tonne to 3-4 or 5 grams a tonne.

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Currently there is only one gold mine that is operational -- the Hutti gold mine in Karnataka. It produces about three tonnes of gold per annum. The potential in India is huge. Over the next two decades we could produce about 300 tonnes per annum, similar to what China produces currently. China started mining two-three decades ago and is one of the world's largest producers.

Does India really have such large reserves?

We believe so. However, unless you explore, it is difficult to ascertain the actual quantity of reserves. But to find and produce 300 tonnes over the next two or three decades is not an unreasonable assessment.

What is the process involved in exploring?

First and foremost, based on historical data and study by the Geological Society of India, we zero in on a particular area we think may have potential and apply for a Reconnaissance Permit (RP), which gives us the right to explore that area.

In India, the RP is granted generally for a period of three years. If after doing basic exploration we find that the area has a strong potential, we then apply for a prospecting licence.

This gives us the right to undertake full drilling in that area. The various rock samples we obtain from drilling are then analyzed to narrow down to the area where the potential for a gold deposit is high. We then apply for a mining license.

How much time does it take to find a deposit?

Globally, it takes about 10 years to make a discovery from the time you start exploring. But in India it takes longer, because of the time taken to obtain licenses. In India the RPs take one or two years, prospecting licenses about two to five years, and another five years or more to obtain a mining license. There are some licenses that are pending for more than a decade. The delay has mainly been due to lack of clarity in the regulatory system and the lengthy process for approval.

For a prospecting licence, for instance, you start at the Tahsildar level in the village where you are prospecting. Then the file goes all the way to the Centre to the Ministry of Mines, and again comes all the way down for actual execution.

What is the cost of exploration?

The exploration cost involves the cost of geological surveying, sampling, assaying, drilling, and the cost varies depending on the size of the resource (the larger the resource, higher the cost), the type of ore and the kind of drilling.

Let me tell you about a particular mine at Ganajur, in Karnataka, where Deccan Gold has applied for a mining license. Since this is an open-pit mine, the cost of mining would be about $400-600 an ounce. The global cost of mining, which is about $950-1,000 an ounce, is for underground mines.

Why do we not see many private players in gold mining?

Regulatory hurdles are the main reasons. The time it takes to obtain approvals and licenses makes the whole project economically unviable. Opening up of the sector can help explore the untapped gold reserves within the country. This, in turn, can reduce our dependence on gold imports.

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