 "Long-term benefits from mining law change")
The government has taken a slew of initiatives in the past few days, and Wednesday was not different when the Cabinet cleared a mineral exploration policy. This is a positive step, as it will enable private companies’ participation in exploration for the first time. While India has been speeding up clearances to increase mining activities, the latest move will help make the country a major mineral producer. Also, while a host of activities have been seen in iron ore, bauxite, coal, there are many others where exploration needs a push. The policy is expected to pave way for auction of 100 prospective mineral blocks approved by Geological Survey of India for exploration.
The suppressed Street reaction is also due to the fact that the demand environment remains weak. Kamlesh Bagmar of Prabhudas Lilladher says the demand cycle has to improve for any benefits on the policy front to be visible and mining activities to gain momentum. In the recent past, while one may have seen lot of action in mines allocation, the benefits are yet to be seen. Even as Coal India ramped up production in FY16, subdued demand led to increased inventory levels and hence, the company had to go slow on production during the March quarter till inventory levels reduced.
G Chokkalingam of Equinomics Research says looking at the down-turn in mineral prices, we might not see a rush by players for exploration activities and hence, near- to medium-term benefits are limited but in the long term, it will accrue benefits.
However, while the current scenario of subdued demand and benign commodity prices might not be conducive, there are long-term positives. Increased exploration will lead to more avenues and more number of mines that can be developed to production levels. This will provide access to crucial minerals many companies are vying for, enabling them to fully integrate their operations. Notably, the companies will be able to access these minerals by sharing revenues with the government rather than paying huge lump sums.
The suppressed Street reaction is also due to the fact that the demand environment remains weak. Kamlesh Bagmar of Prabhudas Lilladher says the demand cycle has to improve for any benefits on the policy front to be visible and mining activities to gain momentum. In the recent past, while one may have seen lot of action in mines allocation, the benefits are yet to be seen. Even as Coal India ramped up production in FY16, subdued demand led to increased inventory levels and hence, the company had to go slow on production during the March quarter till inventory levels reduced.
G Chokkalingam of Equinomics Research says looking at the down-turn in mineral prices, we might not see a rush by players for exploration activities and hence, near- to medium-term benefits are limited but in the long term, it will accrue benefits.
However, while the current scenario of subdued demand and benign commodity prices might not be conducive, there are long-term positives. Increased exploration will lead to more avenues and more number of mines that can be developed to production levels. This will provide access to crucial minerals many companies are vying for, enabling them to fully integrate their operations. Notably, the companies will be able to access these minerals by sharing revenues with the government rather than paying huge lump sums.