 "National Exploration Policy to expand mineral reserve portfolio: Report")
With only 10% of the 0.8 million sq km potentially resource-bearing area in the country explored, exploration presents a large opportunity for both domestic and international players in the country.
Anjani K Agarwal, partner and national leader (metals & mining), EY said: "The Indian minerals exploration sector presents a large opportunity for domestic and global explorers supported by the new policy framework introduced by the government.The policy provisions such as competitive bidding, revenue sharing and cost reimbursement for unsuccessful explorers are bold, innovative and move away from the traditional path adopted by most other countries. In addition to being an anchor investor, the government will also need to be a collaborative partner playing critical roles to achieve success in harnessing India's mineral potential."
In order to achieve sustainable progress, the report lists 15 critical success factors, including the availability of risk capital, a viable exit strategy for explorers, quality and availability of digital data, and private sector participation. These factors are expected to help explorers to engage, perform and succeed.
The proposed model is likely to attract risk-averse exploration service providers relatively under-utilised because of current downturn in global exploration activity.
However, it also evaluates whether this is enough to attract and engage the top global explorers having the talent, competence, leadership, sustainability and risk appetite.
According to the report, global mining is undergoing a downturn with the major miners - still prime spenders of late - having cut their exploration budgets by more than half from $9.1 billion in 2012 to $4.3 billion in 2015.The number of funded projects for mining companies listed in TSX-V exchange in Canada dropped 31% year-on-year on an average.
The junior miners, which were at the forefront of exploration activity before the global financial crisis, have now significantly cut back spends by almost one-third to $2.6 billion in 2015 from $8 billion in 2012. Volatile commodity prices and weak market sentiment towards mining, especially for junior miners, has been reflected in their capital market performance which has declined sharply compared to the broader index.
The report also notes that FDI in mining increased sharply in the last couple of years, from a very low base, on the back of reinvigorated mining sector regulations and activities. Additionally, the Government of India aims to increase the volume of mined minerals in India by 30-35% annually and increase the share of mining in GDP by 1% in the next two to three years.
"The current downturn in global exploration sector and risk aversion towards exploration companies provides an window of opportunity for India to attract and engage global explorers to accelerate exploration, which is at the source of value creation in mining," said Agarwal.