These firms are betting on India’s thrust on power
production, infra development and indigenous manufacturing to raise the demand
for minerals
Mining start-ups are mushrooming in India as the country
aims to boost production of natural resources to spur economic growth.
These companies, offering technical assistance, consultancy,
research and even financing services, are betting on India’s thrust on power
production, infrastructure development and indigenous manufacturing to raise
the demand for minerals such as coal, iron ore and bauxite.
“Mining for iron ore is only around 200 million tonnes (mt)
while for coal it is about 400 mt. This will double in the next five-six years
with the auctions and the provisions of the Mines and Minerals (Development and
Regulation) Act,” said Monica Bachchan, director at Metalogics Projects
Management Services Pvt. Ltd.
“Further, the potential for mining in the country is at over
500 billion tonnes, which will slowly open up in the following years,” Bachchan
added. She and partner Bharti Mishra, both in their 20s, provide consulting and
information services on mining and auctions.
Projecting similar growth, Virginia Mining Resources, a company
started by former Indian Administrative Service officers and private mining
industry experts in August 2014, sees mining-sector revenue at $30-35 billion
in the next five years, from $5.5-7 billion now.
“With the slew of reforms expected to vitalize the sector,
we believe a reasonable return on investment is expected, subject to conducive
regulatory environment,” said Vineet
J. Mehra, managing director of Virginia
Mining Resources. “Our ultimate aim is to be a pure-play miner. We want
to be another Rio Tinto originating from India.”
This start-up has clients such as Adhunik Metaliks Ltd,
Adhunik Power and Natural Resources Ltd, GVK Power and Infrastructure Ltd,
Dalmia Bharat Ltd, Essar America, Essar Algoma, Essar Power Ltd and JSW America
to whom it provides consulting, exploration, project management, mine
management, audit, financing, reclamation, equipment selection and other
geological services.
“Contract mining is emerging as a good business
opportunity,” said Rakesh Arora, managing director and research head at
Macquarie Capital Securities (India) Pvt. Ltd. “With reforms in the mining
sector, the growth rate is expected to pick up sharply and the need for
specialist mining companies is going to increase.”
Two other start-ups have equally strong beginnings—one of
them is already a coal block owner and the other got incorporated four years
ago.
Araanya Mines Pvt. Ltd, incorporated on 12 January with a paid-up
capital of only Rs.5 lakh, won the Lohari coal block in Jharkhand for Rs.2,438
a tonne in the government’s coal block auctions in March.
Veer Resources and Projects Pvt. Ltd, an early starter, was
incorporated in May 2011 with a paid-up capital of Rs.1 lakh for mining and
quarrying.
Thin margins
Competition is already intensifying in the sector owing to
the sheer number of start-ups in the midst of larger companies such as the
Aditya Birla Group’s Essel Mining and Industries Ltd and Adani Mining of the
Adani Group.
“The big consultancies in this sector have dropped their
tariffs, so the smaller ones like ours have to survive on minimal margins and
at times with no profits,” said Bachchan of Metalogics. “We are sure that the
market will open up soon and times will change for us.”
That said, companies still have rosy projections.
“We are expecting revenue of $10-12 million and we have a
sufficient incoming order book to back it up,” said Mehra of Virginia Mining,
which is bidding for two large mining projects in the country that would
require it to raise significant debt.
Both Mehra and Bachchan said a special policy for junior
miners and creation of a skilled workforce in the mining sector would be
helpful for future growth.
According to data from the mines ministry, India has
approximately 316 iron ore mines and 556 coal mines, several of which operate
in the country’s central and eastern regions, bastions of Maoist rebels.
The mining sector has seen a turbulent past as many iron ore
mines were closed until a few years ago owing to illegal mining and
environmental degradation. Coal mines also saw troubled times as the
Comptroller and Auditor General of India’s office accused the government of
allocating coal blocks in an inefficient manner during 2004–09.
With legal challenges behind it, the government is pushing
the sector to produce more so that India can be self-sufficient in minerals.
By Ruchira Singh, Livemint
30-6-2015
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