Discussion Paper: Why we need a New Mineral Exploration Policy for National Mineral Security
Continuous exploration to locate new mineral deposits with regularity is the key to mineral resource security. Mineral concession systems must start by optimizing this end of the process. Exploration constitutes a high-risk activity given the apparent randomness of mineral occurrences and the uncertainties in locating minerals hidden beneath the earth’s surface. Exploration success depends on the use of the latest technologies to generate and use multidisciplinary datasets, and calls for specialization and expertise. As is the case internationally, the private sector should be incentivized to be the main source of funding of exploration, given the high risks involved particularly in the case of deep exploration. Needless to say, there are intrinsic difficulties in discharging accountability for judiciously using substantial public funds over long periods in such high-risk situations. The model of incentivizing "Junior" exploration companies funded by venture capital has worked well in advanced mining jurisdictions, such as Canada and Australia. The amendments made in 2015 to the Mines and Minerals (Development and Regulation) Act make auctions the only method of allocation of mineral concessions at prospecting and mining stages and it is left mainly to State Agencies to conduct the preliminary exploration. Auctioning of mineral concessions, while removing arbitrariness and “discretion”, also removes the incentives for the private sector to spend huge sums to conduct exploration since they will not get the mining rights in case of success. As the Supreme Court in its Opinion dated September 27, 2012, on a Reference by the President of India under Article 143(1) of the Constitution has opined, auction is not the only (or even the best) way of discharging a public trust in alienating natural resources, and in the case of minerals, "a fortiori, besides legal logic, mandatory auction may be contrary to economic logic as well".