Today, the country’s eminence lies in its prowess as a manufacturing centre. The country which was once the source of the biggest and best diamonds is now the largest importer of rough diamonds and the leading exporter of polished diamonds. But with Rio Tinto’s find at Bunder in the state of Madhya Pradesh, and the confidence of the company that it is the biggest diamond discovery in recent times, India is all set to get back on the rough track. Nilan Singh goes digging for information on India’s diamond mining connection present and past; and speaks to the two most active exploration companies in India, De Beers and Rio Tinto.
Recently, media reports have been agog with Rio Tinto’s diamond finds in Bunder in the state of Madhya Pradesh, India, about 500 kms southeast of Delhi. In fact, international news agency Bloomberg, quoted company sources as saying that its “Bunder project in India is the world’s biggest diamond discovery in the past 10 years.”
A company report states that the Bunder pipes were discovered in 2004 as part of a reconnaissance exploration programme. A Prospecting Licence was granted in September 2006 allowing the start of an Order of Magnitude study. Rio Tinto announced the lodging of mining lease applications over the project in 2008.
According to the report, the Bunder project includes a cluster of eight lamproite pipes hosted by flat-lying Proterozoic sedimentary rocks. Drilling and sampling has so far focussed on the Atri lamproite, two coalesced pipes with a surface area of 17 hectares.
The Order of Magnitude study indicated that the Atri pipe is amenable to conventional open pit mining and diamond processing technology.
“All formalities are in the clear. Rio Tinto will get its licence for diamond mining soon,” the Financial Chronicle quoted a senior official of India’s mining ministry as saying.
Rio Tinto, too, confirmed that things were moving in the right direction. Stefanie Loader, Project Manager Bunder Project, Rio Tinto (see full interview below) said, “The mining lease application was submitted in June 2008 and has been recommended by the Madhya Pradesh state government to the central government for approval. We are looking forward to receiving the in-principle approval which will then allow us to commence the mine plan and other approvals that will pave the way for development to commence.”
Commodity Online, quoted Bill Champion, managing director of Rio Tinto Diamonds as saying, "We are delighted with the progress of the Bunder Project, which has the potential to be a world class operation. Rio Tinto has a strong track record of introducing new productions into the market and significantly enhancing their value. We are committed to ensuring a stronger, healthier and environmentally secure community at Bunder, as we have done across all of our diamond operations."
While all the current excitement is focused on Bunder, a much smaller development has gone unnoticed – for the first time, India made it to the list of diamond producing countries as per the Kimberley Process Certification Scheme’s (KPCS) Annual Global Summary 2009 which states that India produced 9,317 cts of diamonds worth US$ 1.66 million. While this is small, very small potatoes – even peanuts - compared to what mining majors, both countries and companies of any importance produce on an average annually, its significance lies in that it represents a foot put on the first rung of the ladder.
Also, in September this year, NMDC Ltd., a Government of India enterprise. is reported to have announced an auction of rough diamonds from its Panna mines in Madhya Pradesh worth approximately $1 million. “The company eyes at raising Rs 4-5 crore from the auction of 9,700 crore rough diamonds, produced from its Panna mines,” a company source is quoted as saying.
The mining operations at these mines which had shut down in 2005, over environmental issues, resumed in August 2009, after receiving a conditional approval from the Supreme Court.
Recently, the Madhya Pradesh government also allloted a prospecting licence to an exploration and production subsidiary of Reliance Industries Limited, for diamond mining. Following this, the subsidiary will be able to prospect over an area of 1800 square kms spread over the Rewa, Sidhi and Satna districts in Madhya Pradesh, an official release announced recently. Reliance, it is believed, plans to put in around Rs 1000 crore (Rs. 10 billion) in prospecting work
Currently, the Mines and Mineral Development and Regulation (MMDR) Bill is being discussed and is expected to be passed by Parliament in the next month or so. It envisages formulating of a Mining Policy – or rather, re-contouring it - in a manner aimed to attract further interest and investment from international mining companies. Mining Ministry sources have been reported as saying, that they expect the country to attract Rs 1,00,000 crore (Rs. 1000 crore) per annum in Foreign Direct Investment for mining exploration for gold and diamonds, as a result. However a clause for earmarking 26% of an operational mining company’s profits to local/displaced persons has come in for hot debate within mining circles. However, be that as it may, the fact is that things are definitely hotting up on the mining front. Gone are the days when the mining landscape was untrammeled and serene – even sluggish. The forthcoming years in the immediate future will definitely see some foot stomping action, with diamond mining too getting on the rough track.
For the financial year 2009-10 India exported 59.976 million cts of cut & polished diamonds for US$ 18.244 billion against imports of 149.857 million cts of rough valued at US$ 9.047 billion. This represents more than double the centre’s rough diamond imports worth US$ 4.337 billion a decade back. If one considers that the total world rough diamond production for 2009, as per KPCS, was 124.805 million cts valued at US 8.636 billion, it is clear that India’s off-take – though it cannot be matched one-to-one as several other factors come in – is really large in sheer quantity and value.
Moreover the size of the Indian diamond industry, with the number of factories it has put up and workers it employs, continuously demands rough to keep the wheels rolling. Added to this is the important factor of continuously high rough prices. Barring the recessionary period when rough prices were under pressure for some time, there has been an upward trend in rough prices and over the past year, it is reported that they have crept back to the June 2008 level. High rough prices, in turn, have been continuously putting pressure on manufacturing margins. Thus, it is not difficult to understand that the industry would welcome a domestic supply of rough well within its grasp.
Though the Bunder production is not likely to come onto the market in the immediate future, and the Panna production is not significant enough, these developments spell hope. They also act as a spur to further efforts by these and other companies, especially as there have not been many such discoveries recently and analysts believe there are only that many diamonds left to find.
Given the fact that mining companies which have been present in and conducting explorations within the country for well over a decade, it is entirely within the realm of feasibility that India could emerge as an important rough diamond producing nation. If that were to happen, the circle will be closed. And at a more practical level, it would boost the Indian diamond industry even further.
“The subcontinent is one of our priority exploration areas”
Stefanie Loader. Project Director, Bunder Project, Rio Tinto, fields some questions abut Rio Tinto’s mining activities in India.
Could you give us a brief background of Rio's Indian mining division?
Rio Tinto has a long history in India. The Rio Tinto Diamonds’ Mumbai office was established in 1989 in recognition of the growing importance of India as a major trading partner and a diamond cutting centre. Our Mumbai office plays an important role in our sales and marketing strategy with approximately two thirds of Rio Tinto’s diamond production by value being cut and polished in India.
Rio Tinto has been exploring since 1996 for diamonds and other minerals in India. Bunder is the most advanced diamond project worldwide for Rio Tinto, and is the first mining lease application in India for the company. The project is one of a number of projects being progressed by Rio Tinto in India with the aim of becoming a significant producer of metals and minerals in the country.
Which areas does Rio have prospecting licences for in India?
Rio Tinto holds a number of prospecting licenses or has applications for prospecting licenses in several states in India, including Madhya Pradesh, Andhra Pradesh, Karnataka, Maharashtra and Chhattisgarh.
What initial tests have been done at Bunder?
An economic viability study, or in Rio Tinto parlance, an Order of Magnitude study, was completed in 2008 which involved preliminary geological, metallurgical, engineering, social impact and environmental impact studies. This work included exploration drilling and sampling and surveying. In 2009 we established a specialised diamond sample processing plant at the project site, which is essential for metallurgical and processing studies as well for the recovery of diamond samples for evaluation.
What are the expectations as a result of these initial tests?
The order of magnitude study defined an Inferred Resource of 37 million tonne containing 27.1 million carats. Our studies concluded that this resource could support an economically viable mining operation.
We are currently conducting detailed geological, metallurgical, engineering, social impact and environmental impact studies to determine the best development option for the project. We take a very disciplined approach to these studies as for all Rio Tinto projects, we recognise that access to resources comes with an obligation to take good care of them. It is also important to note that we realise we can’t do this all on our own and in undertaking these geological, economic, social and environmental studies we are working in partnership with community, government and non governmental organisations
How will the plan for Bunder unfold in terms of timelines? – Up to commercial mining and when the diamonds will actually come on the market?
We expect to complete our current work and have a detailed blueprint for project development at the end of 2012. The timeframe for development then depends on gaining the necessary approvals and permits to commence construction including, critically, the grant of our mining lease.
The mining lease application was submitted in June 2008 and has been recommended by the Madhya Pradesh state government to the central government for approval. We are looking forward to receiving the in-principle approval which will then allow us to commence the mine plan and other approvals that will pave the way for development to commence.
What sort of investment is Rio considering in Bunder? Over what period of time?
Viability studies determined that project development could be expected to require Rs. 2200 crore (Rs 22 billion) investment for a capacity of around 5 million tonnes per year of ore processed. The timeframe for development is dependent on gaining the necessary approvals and permits to commence construction including, critically, the grant of our mining lease.
What are Rio's overall estimates of diamond mining in India? How prospective is it?
India is the historical home of diamonds and was the most significant global source of diamonds until the 18th century. We believe that the sub-continent has significant potential for further diamond discoveries and is one of our priority exploration areas worldwide.
Are there any studies on the matter that the company would like to share with us?
I think it is useful to note that Rio Tinto has a long history of partnership with the Indian diamond industry through the entire value chain. In addition to our upstream activities with the Bunder project we have also been focussing our efforts much further downstream as we believe there is considerable room for expansion in domestic demand for diamonds in India.
In India the long tradition of gold consumption is starting to move towards increased diamond consumption. There is a fast-emerging middle class aspiring to buy diamonds, and strong regional differences in quality preferences provide opportunities for wide range of product segments. As a result, we are very focussed on developing a strong connection with the Indian retail community to deepen our understanding of the market and our ability to promote Rio Tinto’s diamond production.
What other areas of mining are Rio interested in India?
Rio Tinto mines and processes a broad portfolio of minerals and metals worldwide. Our strategy is to focus on quality opportunities for the growth of the company. We are therefore interested in opportunities for the full range of mining opportunities in India.
Are there any comments you would like to make about policies and working in India? Is there anything that can be done to help either speed up things or make diamond prospecting/mining more efficient, effective?
We continue to work constructively with the Governments of India and Madhya Pradesh in progressing the Bunder Project. We are aware that the MMDR Act is being reviewed and we look forward to seeing the details of the draft. Indications are that the new Act will address a number of the issues to speed up the approval processes which will be welcome.
“We are Here Because India is Prospective”
De Beers India Chairman and Managing Director, Rajiv Bhandari, who has been associated with diamond mining and exploration in India a long period of time speaks about the company’s ongoing efforts.
De Beers has been amongst the first movers to start the process of exploration in India. How do you assess India’s potential for diamond mining?
We are here because India is prospective. DeBeers first set up the office in the early 1990s, but it was not till much later that the reconnaissance permits were first allocated.
Which areas are you looking at for exploration?
Our licences span Madhya Pradesh,Chhatisgarh, Karnataka Andhra Pradesh, Maharashtra and Orissa. We are currently focusing attention in the Mehboobnagar area of Andhra Pradesh and the Panna region.
What have been the results so far?
Since we first began exploring, we have discovered approximately 50 kimberlites of which four were discovered during the current year.
Exploration is a very high risk area to be in – it is well known that out of say 5000 kimberlites discovered in the world, less than 1% have yielded economically viable mines.
In India, in the areas we are exploring, unfortunately none have been diamondiferous. However that does not in any way take away from our enthusiasm to continue operations here.
Our policy and strategy is still focused on finding that elusive mine.
What is the investment De Beers has made in the area? What is the current set up that De Beers has in this area?
Currently we have a treatment plant and an exploration division based in Bangalore. We have a team of 50 people including earth scientists and tech team supporters. Here I must add that is an all Indian team, very talented and we are proud of them.
We have expended Rs. 120 crore (Rs. 1200 million) till date on exploration efforts.
Are the current government policies adequate? Are there any changes required?
Early bottlenecks have been sorted out and since then, there is a greater understanding from both state and central governments, all of which have been very supportive towards the development of mining in general.
There is a new mining law being talked about, and there has been some discussion about the 26% profit sharing with local, displaced persons that the legislation seeks to introduce. But we have no comment till we see the outcome of the legislation.
The Company has always been undertaking community development work. We are actively involved with an NGO, LEPRA, which works to rehabilitate HIV + and destitute women. We also make sure that when our team goes out to any area, we get local manpower to assist us and we try and impart training to them to upgrade their skills. We take our CSR responsibilities seriously.
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