Critical Mineral Blocks: Getting mining auctions right is key for India's growth ambition

mining

The proposed auction of 20 ‘critical mineral’ blocks will mark a new beginning in the history of mineral exploration and production in India. The initiative is a logical conclusion of India’s sustained efforts over the last few years to secure supply of key minerals that would dominate the technology space for years to come and are important for the country’s growth ambition.

According to media reports, India’s auction offerings will include lithium and graphite blocks. Both are important for energy transition. Graphite is used for battery anodes. Known as ‘white gold,’ lithium is critical for energy transition, aerospace, defence and telecommunications. Though China does not have maximum reserves of these minerals, it controls the global supply.

Chinese Dominance

Australia produces 50 per cent of the white gold, followed by Chile and China. However, 90 percent of Australian exports are directed to China. According to the World Economic Forum, Beijing controls 60 percent of the global battery-grade lithium refining capacity.

The situation is slightly different in natural graphite where Turkey has maximum geological reserves. China has the third largest reserves but it contributes 65 percent of the mine production and refines more than 90 percent of the world’s graphite. According to Statista, one-third of the graphite imports of the US come from China.

The huge control over key minerals is testimony to Beijing’s strategic play in the sector for the last two decades and the leveraging power they have over the world economy. Beijing has now started using it for geostrategic reasons.

Last month China imposed restrictions on the export of certain types of graphite products, under the pretext of ‘national security.’ In August, they restricted the export of chip-making metals, gallium and germanium.

Clearly, Beijing has a ploy, and that’s a huge concern for the Indian ambition to attract manufacturing investments, relocating from China. India is aiming big in the areas of electric vehicle manufacturing, semiconductors, mobile phones and military hardware. Each one of them needs critical minerals.

India’s Late Start

As of now, Delhi is fully dependent on imports for lithium. At 8,300 metric tonnes in 2022 - down from 1,70,000 metric tons in 2015 – India’s annual graphite production is a fraction of China’s 8,50,000 MT.

Graphite and lithium are not the only concerns. In July this year, the Narendra Modi government released a list of 30 minerals – including rare earth - which are “critical” for the national economy.

India is fully dependent on imports, particularly from China, for at least 10 minerals including, lithium, cobalt, nickel, vanadium, niobium, germanium, rhenium, beryllium, tantalum, and strontium. The others are also not produced in great quantities in the country.

The problem is two-pronged. First many or most of these minerals are found in deep-seated reserves. Naturally, they are hard to find or require a focused approach, which was absent in the past.

The Planning Commission (now NITI Aayog) identified the need in 2011. However, the scam-tainted Manmohan Singh-led UPA government of the day was barely in a position to take it forward. They were struggling with more immediate issues in the coal sector.

The first five-year term of the Modi government (from 2014) went largely to stabilise the coal sector and bring it out of state control. On the brighter side, the auction of coal assets to private miners, beginning in 2020, helped create a playbook for commercial extraction of critical minerals.

The journey was long. Between 2017 and 2020, GSI (Geological Survey of India)  and the atomic mineral division together devised a strategy to explore the strategic and rare earth minerals. Between 2020 and 2023, the annual exploration projects in the critical mineral sector doubled from 60 to 120.

Opportunities Aplenty, Challenges Too

The initiative paid off. Between February and October this year, GSI declared lithium finds in Jammu & Kashmir, Rajasthan, Karnataka, and Jharkhand. At 5.9 million tonnes of prognostic reserves, the J&K find is distinctly large.

Geologically, the Indian conditions are suitable for finding a majority of the strategic minerals. However, that needs better technology and ecosystem to attract private players. The recent developments suggest the government is serious about it.

The Mines and Minerals (Development and Regulation) Act is amended to declassify six key minerals – including lithium – from the list of ‘atomic minerals’. To entice investors, royalty rates for lithium and niobium are fixed at three percent. For rare earth, the rate is only one percent.

With the framework in place, India is now heading for auction. This is a new area, so more tweaks in rules and regulations may be required in the days to come. The trick lies in learning it fast. The benefits will be enjoyed by the entire mining sector.

Meanwhile, Delhi must ensure control over these minerals in proven destinations. Khanij Bidesh India Ltd (KABIL) – the joint venture of the state-owned National Aluminium Company, Hindustan Copper and Mineral Exploration Company – is entrusted with the job.

China’s clout in the mineral market, the inexperience of state-owned miners in acquiring assets abroad, and the poor track record of Indian public sector JVs; are three major hurdles before KABIL. The JV reportedly has engagements with Argentina and Australia.

Pratim Ranjan Bose is an independent columnist, researcher, and consultant. His X handle is @pratimbose. Views are personal and do not represent the stand of this publication.