Anglo American says mine auctions flawed

21 November 2016

While the country once again prepares to put on block mineral mines, the initiative might not get the desired response from foreign players. The earlier auction of 17 mines didn’t get adequate response from prospective bidders.

Anglo American plc, a major global miner, has said Indian auction system discourages foreign players as the auction process doesn’t adequately provide risk-reward incentive.

The adoption of National Mineral Exploration Policy, following which 17 mines have been put on auction so far, was specifically devised to attract FDI in the mining sector.

“With this auction system, it’s difficult to see India competing with other countries where we can invest. It’s a headwind for us,” John Vann, group head of exploration, Anglo American.

It’s granting of licences rather than auctioning off mines that, John believes, would give confidence to foreign investors.

“The analogy that comes to my mind is the pharmaceutical industry where you spend billions of dollars in research and development to develop a drug. But then, if you have to participate in an auction to see if you can manufacture and market that drug, then it’s a bad idea,” he said.

Anglo American plc focuses its business on its portfolio of diamonds, platinum group metals and copper. It owns interests in De Beers and its diamond operations are in Botswana, Canada, Namibia and South Africa. It has interests in two copper operations, phosphates business and coal assets in Australia South Africa and Colombia.

“They should look at how the system operates in markets like Australia, Canada and Chile where an exploration licence means you have a guaranteed path to development if you find something. That should be the preferred path,” he said.

“So far, 17 mines have been auctioned off having potential revenue of Rs 70,000 crore consisting of a royalty of Rs 12,000 crore. Another 37 mines, which were annulled earlier due to various, reasons would again be put into auction valued at Rs 47,000 crore,” Balvinder Kumar, secretary of mines, said.

The mines auctioned have deposits of limestone, iron ore, gold and diamonds and are located in Jharkhand, Odisha, Rajasthan, Chhattisgarh, Andhra Pradesh, Madhya Pradesh and Karnataka.

Source – DNA