India’s Quest For Rare Minerals

ON FEBRUARY 9, Geological Survey Of India (GSI) said the Salal-Haimana area of Jammu’s Reasi district may have 5.9 million tonnes lithium deposits. The news generated enormous interest as the country’s push for electric vehicles (EVs) has led to a surge in demand for lithium batteries. With India almost entirely dependent on imports for lithium, the cost of batteries has been rising. Experts expect a multifold increase due to massive demand-supply mismatch by 2030.

But the euphoria was short-lived. The exploration was preliminary, technically called G3 stage of mineral resource assessment. GSI had taken two decades to move from reconnaissance, or G4 stage, where resources are mapped, to G3 or prospecting stage, where quantity of deposits is inferred. In the next stage, G2, studies will estimate shape, size and grade of the mineral. Finally, G1, or detailed exploration, will establish the characteristics of the deposit with a high degree of accuracy. The last stage will involve studying commercial feasibility. Mining approvals and then extraction will take many more years. This means India is still decades away from mining lithium in a big way. Lithium availability (ideally, a processing ecosystem, too) is crucial for India. The government has allocated ₹18,100 crore for a production-linked incentive scheme for advanced chemistry cell battery to develop a battery ecosystem for implementing its green mobility plans.

The announcement served a crucial purpose though. It brought into limelight India’s intent to address the growing need to discover and extract what can be broadly categorised as ‘new-age energy minerals’ that are being sought-after globally for use in futuristic technologies in EVs, renewable/nuclear energy, defence, hydrogen mobility, etc. In fact, the meeting of GSI’s Central Geological Programming Board (CGPB) where the lithium find was announced also gave a major thrust to exploration of strategic and critical minerals in its annual plan for FY24. CGPD formulated 115 projects on strategic & critical minerals (including 16 on fertiliser minerals). Of these, 81 aim to identify deposits of strategic minerals, including lithium, cobalt, nickel, molybdenum, vanadium and light rare earth elements (REE) where India is almost 100% import-dependent today. The aim of these baby steps is securing supply of products whose demand from transportation sector alone is estimated to grow 51 times (lithium), 31 times (cobalt) and 20 times (nickel) by 2040. Demand for some of these could rise even further if ambitious plans for wind and solar energy capacity addition materialise. “The world will need at least 384 new lithium, graphite, nickel and cobalt mines in next 12 years,” says R.K. Sharma, secretary general, Federation of Indian Mineral Industries (FIMI).

This will not be easy as India’s exploration has been skewed towards surface mass minerals such as iron ore, coal, limestone and bauxite with little focus on deep-seated minerals such as REE, battery minerals, gold and diamonds. In FY22, mineral production, excluding minor minerals, fuel minerals and atomic minerals, was ₹1.33 lakh crore but the share of deep-seated minerals was just 4.82%. That share is much higher in most mineral-rich countries. For instance, deep-seated minerals account for 55.93% of Canada’s mineral production.

India has a lot of catching up to do. Its mineral wealth is yet to be fully explored, assessed and extracted. The key is to introduce a policy framework to make private sector, which has the technology for deep mining, part of the mining growth story. And to be impactful, it has to be time-bound. Are we on the right path?

Global Race

Global financial services company Credit Suisse’ “Supertrends 2023 Investing Reimagined” report in April had a new sub-theme under its climate change super-trend category — Metals Of The Future. “Solar/wind farms and EVs require more minerals than equivalent fossil fuel-based technologies. For example, an EV requires six times the mineral inputs than an internal combustion engine car, while an onshore wind farm requires nine times the mineral inputs of a gas-fired thermal power plant. The entire transition starts with these basic materials, and investors should thus consider the entire manufacturing process and not just the finished end-product. We remain convinced that our Supertrends continue to offer investors with a multi-year investment horizon an opportunity to diversify their asset allocation,” says Daniel Rupli, head of Single Security Research, Credit Suisse. The report quotes International Energy Agency (IEA) data to suggest that demand for silicon and REEs needs to increase three-fold through 2030. Demand for lithium for battery systems should see the sharpest increase of almost 20 times between 2021 and 2030, it says.

The report, however, flags concentration of production. Top three lithium, cobalt and REE producers control over three-quarters global output. While Democratic Republic Of The Congo accounts for 70% of the world’s cobalt production, China produces about 70% of the world’s REEs. Continuity of supply is thus a major concern for countries transitioning to clean energy. Some have already initiated protectionist measures (in U.S., EV is eligible for full tax credit only if a certain percentage of battery components and critical minerals has been extracted or processed in U.S. or countries that have a trade agreement with U.S.) while others are getting into trade deals with resource-rich countries to reduce supply risks. India needs both — trade agreements as well as increase in local production of critical minerals — for its mega energy transition plans.

“India is endowed with 95 minerals, including metallic, atomic and non-metallic minor minerals. But it has to travel quite a distance in leveraging new energy minerals classified as battery minerals and REEs,” says Subrakant Panda, MD, Indian Metal & Ferro Alloys, and president, FICCI. “There is definitely going to be a surge in demand as India becomes more hi-tech. It is important to formulate a long-term strategy to ensure uninterrupted supply,” he says.

Vivek Bharadwaj, secretary, Ministry of Mines, says new-age minerals are a rage globally. “People are talking about this everywhere you go. Every country identifies its critical minerals based on its deposits. U.K., for example, has identified 18 such minerals. Canada has identified 31,” says Bharadwaj.

According to him, many countries have come out with policies to ensure supply of critical minerals. India is also thinking about addressing policy concerns. “We need to focus on processing. China does not have the largest lithium reserves but the ore is sent there for processing. It is not that India does not have processing technology; we need to work on substitutes and more efficient technologies,” he says. In fact, Indian Bureau Of Mines (IBM) has acknowledged the need for more R&D to prepare India for lithium extraction; extraction of elements from mineral compound/ lattice is more complex than from a single mineral deposit. IBM is equipping its labs to extract lithium and potash from mineral lattice.

India’s Readiness

In a report, New Age Energy Minerals, published in May, FICCI says India is estimated to possess 5% of global REE resources but accounts for only 1% global production. China, which has 34% REE resources, dominates with 70% market share. U.S., which has 1% REE resources, is the second-largest producer with 14% share of global production. REE is a group of 17 elements found in varying combinations along with other minerals in earth’s crust (based on their atomic weight and electronic configuration, they are further classified as Light REEs and Heavy REEs). These elements, though used in small quantities, are an essential part of high-tech products in automotive, green energy, electronics, biotechnology, defence and aerospace sectors.

The FICCI report also covers four key battery minerals — lithium, cobalt and nickel that are used in cathode, and graphite, used in anode of lithium-ion battery. It says use of lithium in batteries has grown from 30-35% in 2014 to 80% in 2023. Cobalt has grown from 40% to 65%. Out of 26 million tonnes global lithium reserves, Chile holds 36%, followed by Australia (24%). In India, apart from the estimate of 5.9 million tonnes in J&K, preliminary surveys indicate presence of 1,600 tonnes lithium in Marlagalla-Allapatna area in Mandya district of Karnataka, says the report. India does not produce cobalt though its estimated deposits are 44.91 million tonnes — present in Odisha, Jharkhand and Nagaland. Cobalt is a byproduct of copper, nickel, zinc or precious metals. Nickel deposits, estimated to be around 189 million tonnes, are also confined to these three states. However, unlike other battery minerals, India produces graphite, though much below potential. India’s graphite ore reserves are estimated to be 194 million tonnes. The country produced only 31,900 tonnes in FY20. Graphite resources are concentrated in J&K, Odisha, Jharkhand and Arunachal Pradesh.

The private sector is confident it can explore and mine new-age minerals. “You need private capital in exploration. It is a risk and a private businessman has risk-taking ability. Because of rules and regulations, a government enterprise cannot be risk-taking,” says Arun Misra, CEO, zinc business, Vedanta & Hindustan Zinc Ltd.

Vedanta had invested in exploration after buying Hindustan Zinc. “If it had bombed, it would have hurt, but the company was lucky. It got the material. That’s how mining grows. India has copper (mined only by public sector unit Hindustan Copper) but we are still importing it. If copper is privatised, people will put money in exploration; same for uranium and thorium. You disinvest, and the entire game opens up,” says Misra.

Next growth will come from strategic minerals, including zinc, cobalt, nickel, lithium, copper and gold, which are good for environment, says Misra. “These are future minerals. Copper is critical because of its electrical conductivity. You can’t have solar power with aluminum conductors. Similarly, electronic chips require gold connectivity as the metal has zero resistance. Solar needs silver as you want very fine panels. So, these are the minerals of the future. We are also looking for exploration licences,” he says.

Policy Thrust

On August 9, Central government notified the Mines And Minerals (Development And Regulation) Amendment Act, 2023, to amend the Mines and Minerals (Development And Regulation) Act, 1957, to allow allotment of exploration licences for deep-seated and critical/strategic minerals. The changes filled a gap as the 1957 Act provided for only two types of concessions to private entities through auction — a mining licence and a composite licence for prospecting followed by mining. The amendment introduced a provision for grant of concession for full range of exploration from reconnaissance to prospecting.

Coal and mines minister Pralhad Joshi said while introducing the Bill in Lok Sabha that exploration licences would incentivise private sector participation in all areas of exploration of critical and deep-seated minerals essential for development and national security. “Lack of availability of critical minerals or concentration of extraction or processing in a few geographical locations may lead to supply chain vulnerabilities. The future global economy will be underpinned by technologies that depend on minerals such as lithium, graphite, cobalt, titanium and REEs. Critical minerals have gained significance in view of India’s commitment to energy transition and achieving net-zero emissions by 2070,” he said.

World over, deep-seated minerals are explored by private companies (called junior mining companies) which get rights over a large area on the basis of baseline survey data to explore from the reconnaissance stage and bring it up to the level required for starting mining operations. The amendment will allow such companies to be active in India too, though they will have to operate within the overarching auction regime.

The changes permit grant of exploration licences for about 30 deep-seated, critical and strategic minerals which include the four battery minerals, REE, copper, zinc, lead, selenium, gold, silver, diamond, rock phosphate and platinum group. By opening up the sector to private businesses, government hopes to tap India’s 6.88 lakh sq. km. of obvious geological potential area of which only about 1.97 lakh sq. km. has been identified by GSI under its G4 (reconnaissance) survey so far.

Further, the amendment excludes six out of 12 atomic minerals from the restricted list of items allowed to be explored and mined only by government entities. These minerals — beryl and other beryllium-bearing minerals, lithium-bearing minerals, niobium-bearing minerals, titanium bearing minerals and ores, tantallium-bearing minerals and zirconium-bearing minerals and ores — have applications in space industry, electronics, communications, energy sector, electric batteries and are critical for meeting net-zero emission commitment.

The changes are in line with National Mineral Exploration Policy, 2016, which allows harnessing of technical expertise, technological capability and financial resources of private sector to tap the country’s mineral resources.

But FIMI is not very excited about the changes.

Gaps Galore

Fraser Institute’s Annual Survey of Mining Companies, a global ranking of countries on investment attractiveness based on policy perception and mineral potential of each country, ranked India 53rd among 96 nations in 2012. It was 97 among 104 countries in 2016. After this, it did not figure in the list, indicating it is not an attractive investment destination in the eyes of the global mining companies. This happened after introduction of National Mineral Exploration Policy, 2016. “The policy was announced, and the amendment to the Act {Mines and Minerals (Development and Regulation) Amendment Act 2015} took place in 2015 when this government came to power. The main feature was introduction of auctions. But a policy where everything is based on auction is not going to work,” says Sharma of FIMI.

After the introduction of the auction system, 296 mineral blocks were offered under composite licence and mining licence categories. Even though 201 mineral blocks were auctioned under mining lease, there were only 40 operational mines as on May 19, 2023. “Auction makes it costlier. Let’s take iron ore. If cost of iron ore goes up, downstream products like steel become costlier, which will make engineering products and projects more expensive. You will be out-priced in the global market. Today, mineral blocks are allocated to public sector companies and are operational. Private sector gets them in auctions and state governments get auction money. But private mines remain closed. Someone should check what happens after the auctions,” he adds.

Industry believes even the latest changes to encourage full range of exploration of deep-seated minerals may fail to attract private investment as they are within the broader auction-centric mining policy. Junior mining companies, which lead exploration, are mostly formed by experts themselves, usually two or three geologists. When the geological department puts preliminary assessment data in public domain, whoever applies first gets exploration rights for specific area/mineral. The condition is that you have to spend a particular amount per hectare every year. Otherwise, the liability is heavy. Success rate is 1:100 in most cases, though in some minerals like diamond, it is much more. Junior mining companies, financed by venture capital and hedge funds, do most discoveries in Australia, Indonesia, South Africa, U.S. and Canada. They can transfer the concession in full or part during the exploration period or after the conclusion of the exploration. The main difference between this model and what India has introduced now is the system of auction at every stage. Sharma considers this a dampener. “The law says exploration licences will be granted through auction. The companies will have to locate the area they want to explore and then the state government will auction that. The money the company raises for this is not free. So, I have located the area, I have borrowed funds, I go to the state government, and the government auctions it, which means I may not get that area (win the bid). For argument’s sake, let us say I get the area. Then, the government asks me to come back with all the data, and within one year, it will auction it again. If I get (the mineral block), it is fine. Otherwise I will have to wait 15 years to get the (invested) money. Who will come? This is the new policy they are talking about,” says Sharma. “We have enough professionals here, but funding mechanism is not there, and policy environment is not conducive enough,” he adds.

Way Ahead

Every stakeholder agrees that the need of the hour is to expedite exploration. India is exploring less than 10% of its potential strategic and critical mineral deposits. Given that private investments will take time to come in, government should invest more. Utilisation of money of National Mineral Exploration Trust, funded through a cess on mining companies, could help. India’s annual $170 million spending on mineral exploration is a fraction of what other countries spend. According to the global exploration budget data for 2022 from S&P Global Commodity Insight’s Corporate Exploration Strategies, global aggregate non-ferrous budget increased 16% year on year to $13 billion. Latin America accounted for the largest increase, up $603 million, or 23%, to $3.26 billion with Chile, Peru, Argentina and Ecuador contributing the most. Canada closely followed with a $596 million increase, up 29% to $2.68 billion, the report said.

Industry-academia collaboration is another area that needs attention. One example is the tie-up between Hindustan Copper and Indian Institute of Technology (Indian School of Mines), Dhanbad, for collaborative and sponsored research projects. The collaboration is aimed at providing Hindustan Copper technical assistance, guidance and consultancy for enhancing copper ore production through state-of-the-art technologies, improvement in productivity and tackling environmental clearance issues. Assistance for trying out unconventional exploration methods is also part of the agreement.

FICCI has proposed a dedicated policy framework which can make more room for private sector exploration of REEs.

However, India’s surging demand for such key minerals also requires short and medium-term plans. Acquisition or sourcing agreements with friendly countries can help build a processing ecosystem by the time Indian minerals are ready to be exploited. The FICCI report has proposed Indian investments in Australia, Latin America, Turkey and Indonesia for securing mineral assets such as lithium, graphite, cobalt and nickel in the medium term. It has also suggested dedicated financial institutions and financing programmes for new energy minerals.

As India’s dreams for climate-friendly technologies catch on, the pressure for secure and uninterrupted supply of crucial raw materials is bound to build up. That will act as an indirect catalyst for exploration.