Page 13 - Mines and Minerals Reporter eMagazine - Volume October 2021

INDUSTRY ANALYSIS

excessively high, leaving very lit-
tle for the companies. Tables 1
and 2 show estimated earnings
from iron ore and limestone auc-
tions respectively, while Table 3
reflects the overall earnings of
State governments from all auc-
tioned mines. The assumptions
made in computing this estimate
apply to all tables:

• The estimate of the quantity
and grade of resources in a
mineral block is not the
final quantity that can or will
be mined.
• The ministry uses the average
sale price (ASP) of the
Bunder diamond mine in Madhya Pradesh. Originally, evidence mineral (by state, and by grade) to determine the value of
of the minerals was discovered by the Anglo-Australian mining the minerals.
company Rio Tinto in 2004. However, little progress was made • This ASP will fluctuate over the lifetime of the mine and
to convert the exploration efforts into a mine, and in 2017, will likely not reflect the aver
Rio Tinto announced that it would be ‘gifting’ the project back age value used when the The auctions show that
to the Government of Madhya Pradesh (Rio Tinto, 2017). The ministry made its estimates. winning bids have been
mine was then auctioned in 2019, and Essel Mining won the • Of the 97 blocks auctioned, excessively high, leaving
ML with a bid of 30.05 percent. Besides iron ore and lime- nine were for CLs. However, very little for the compa-
stone, peculiarly high bids (ranging from 75 percent to 200.05 there is no guarantee that nies.
percent) were received for the six graphite mines. the prospecting efforts
shall lead to a viable mining operation, and this will result in
Earnings for the Government lower-than-expected government revenues.

Using the results of the auctions and exploration data on
the estimated quantity of mineral resources, the Ministry
of Mines makes some implicit assumptions to calculate how
much State governments can expect to earn over the lifetime
of the mines. The auctions show that winning bids have been

For the 97 mines auctioned, the miners will, on average, pay
the respective State governments 102.9 percent of the value
of minerals. This is primarily due to the large winning bids
for the 42 auctions of iron-ore and iron-ore and manganese
blocks. These bids consistently exceeded 50 percent and in 22
auctions exceeded 100 percent. Over and above the payment
of operational expenses, auction commitments, and statutory
payments, miners also need to pay corporate taxes, forest and

OCTOBER 2021 / MINES & MINERALS REPORTER 11