[ad_1]
In a bid to spur private investment in India’s mining sector, representatives of Vedanta Group pushed the Mines Ministry to shift to an investor friendly resource classification code during a meeting on October 18, 2023. The representatives asked the ministry to consider the adoption of Joint Ore Reserve Committee (JORC) classification, developed by mining experts in Australia, as opposed to the currently used United Nations Framework Classification (UNFC), which does not mandate disclosures pertaining to the economic viability of mining exploration projects.
According to experts, India’s current resource classification rules based on the UNFC have made the prospect of mineral exploration unattractive to private companies as it fails to provide any degree of economic certainty, which in turn has hindered the flow of private investment in the sector. Between FY19 and FY23, the mining industry recorded foreign direct investment (FDI) in equity valuing $1.1 billion, just .4 per cent of gross equity inflows worth $259 billion.
A resource classification code is necessary to assess resources and reserves in a mineral block, to prepare geological reports to facilitate its auction for both exploration and mining, and for a mining company to evaluate its assets.
In the meeting, the mines ministry secretary proposed a joint working group involving Geological Survey of India (GSI) and Indian Bureau of Mines (IBM) to study the issue, as per the meeting minutes obtained by The Indian Express through the RTI. Experts point out that India’s mining industry has already developed and recommended the Indian Mineral Industry Code (IMIC) in 2019, which is based on the same template as the JORC classification, however the ministry is yet to formulate rules in line with the IMIC despite informal assurances.
The mines ministry, GSI, and IBM did not respond to emails asking for comments.
“Unlike other sectors, the mining sector deals with natural processes, the knowledge of which remains incomplete prior to the commencement of mineral extraction. It is critical for the Indian mineral sector to communicate effectively and transparently with the investment community using internationally accepted terminology and definitions, which are essential to earn their trust. This internationally accepted terminology is incorporated in the IMIC,” said Peter Stoker, deputy chairman of Australia’s JORC and principal geologist at the Brisbane office of AMC Consultants.
While the UNFC framework allows for the reporting of resources in general, which include undiscovered and uneconomic resources, the IMIC and the JORC classification, both aligned with the Committee for Mineral Reserves International Reporting Standards (CRIRSCO) template, also require the reporting of reserves, which are economically viable deposits with high geological confidence confirmed through studies at least to a pre-feasibility level. In other words, reserves indicate the likelihood of profitably mining a mineral block at the time of reporting. “You cannot report resources in the CRIRSCO system unless you establish that there is a reasonable prospect for eventual economic extraction,” explained Dr P V Rao, co-chair of the National Committee for Reporting Mineral Resources and Reserves in India (NACRI), which developed and maintains the IMIC code.
In determining the economic viability of mining projects, the CRIRSCO template considers ten modifying factors including legal, infrastructural, processing, metallurgical, marketing, environmental, and governmental factors. Globally, CRIRSCO consists of 15 members including the USA, Australia, Brazil, Canada, Chile, South Africa, and the European Union. Membership to CRIRSCO requires countries to produce reporting codes that comply with the CRIRSCO template. India was admitted to CRIRSCO in 2019 following the recognition of the IMIC as a CRIRSCO-compliant code.
“The CRIRSCO framework’s primary function is to ensure that investors and their advisors have comprehensive information that is relevant to make financial and technical decisions. This data is crucial for forming reliable opinions on the results and estimates being reported, thereby promoting informed decision-making in the mining sector,” according to Vikram Mehta, partner at EY India’s metals and mining division.
In addition to the mineral reporting template, CRIRSCO also provides a governance system to ensure competent and ethical reporting by industry professionals.
On the other hand, the UNFC framework, which is more comprehensive and diverse, has a wider application in policymaking. “UNFC is a useful tool for national governments to see beyond the horizons of an investor’s point of view and allow formulating informed policy decisions, country-specific strategic decisions, and maintenance of a national inventory,” said Shameek Chattopadhyay, managing director and principal consultant at SRK Mining Services.
“Under UNFC, all resources including mineral occurrences and mineral zones that have reconnaissance level or very low level of confidence in terms of estimation of quantity and quality are also reported, albeit under separate categories,” explained Pankaj Sinha, managing director at UK-based DMT Consulting Limited.
Importantly, while the CRIRSCO framework can be mapped onto the UNFC framework, given that the latter has a much broader scope, the reverse is not possible as CRIRSCO is far more specific in scope.
In 2015, the mines ministry notified the Minerals (Evidence of Mineral Contents) (MEMC) Rules, for which they used the CRIRSCO definitions for resources and reserves, while the framework for classification of resources was borrowed from the 1997 UNFC framework. “At the time, we told them that you cannot mix oranges and apples to say that they are one. The two are not compatible in that manner,” Rao explained.
Then, in 2021, the ministry amended the MEMC Rules and removed the definitions stated in the 2015 version. “The amended rules totally ignored the CRIRSCO definitions and the UNFC framework. At present, India is also not following the UNFC framework in toto, which was updated in 2019,” Rao added. MEMC Rules are used for the purpose of preparing geological reports for the auction of mineral blocks. Mining companies have to rely on such reports for the valuation of mineral blocks and to determine whether or not they should participate in a given auction.
According to Stoker, a shift to the IMIC will allow the Indian mineral sector to communicate effectively and transparently with the investment community. “It is another step towards realising the immense potential for private investments in exploration and mining in India, which has largely not been successful under the current UNFC mineral reporting system as the prescribed terminology and definitions are not acceptable to the global investment community,” he said.
“If the IMIC was also adopted for internal or non-public reporting, then the information available in tenders and for joint ventures and takeovers, would comply with the requirements of international banks which require reporting in accordance with one of the major codes for due diligence studies,” Stoker added.
According to Chattopadhyay, adapting India’s mining rules to the IMIC code will attract private investment to the sector by providing greater clarity on the economic feasibility of exploration projects. “The IMIC will help the Indian mining industry with access to capital for mining and exploration companies for undertaking scientific exploration, project development, and mine expansion programmes by allowing potential investors to take informed decisions to invest in a particular project, through appropriate transparency, materiality, and competency,” he said. Moreover, the IMIC also sets minimum public reporting standards for listed mining companies, which can further streamline the process of raising funds from the equity market.
[ad_2]
This article was originally published by a indianexpress.com . Read the Original article here.
