Outsourcing the Critical Minerals for India from Africa | Challenges and Opportunities

About the author – Dr Devarajan Mylappally, MAusIMM, a leading Indian exploration geologist, has more than three decades of experience exploring for precious and base metals, both domestically and internationally.

In this article, he highlights how the current Indian approach for sourcing critical mineral supplies, both through domestic exploration and through alliances abroad, needs fixing and why it is important to convert the critical minerals crisis into an opportunity to revamp its mineral exploration ecosystem. 

Indian mines for Critical Minerals are not going to happen anytime soon.

Since the launch of auctions for critical minerals in 2023, the government has offered 81 blocks across five tranches — 56 blocks offered for the first time, and 25 auctioned again after failing to attract bidders earlier.  Of these 81 blocks, 34 attracted a sufficient number of bidders to move forward, 33 saw fewer than three technically qualified bidders, and 14 received no bids at all, leading to the cancellations. Considering the low success rate in mineral discovery, India has no option other than to look abroad for sourcing its critical mineral requirements. 

Africa as a potential hub for critical minerals

Although the Indian government has been strengthening partnerships with countries like Australia, Canada, and Chile through initiatives such as the Minerals Security Partnership (MSP) to secure mineral assets overseas, most recent studies show that the African continent, especially central and eastern Africa, is set to emerge as a global hotspot for critical mineral resources. Countries such as the Democratic Republic of Congo, Zambia, Rwanda, Tanzania, and Uganda host rich deposits of cobalt, copper, lithium, tin, tantalum, niobium, graphite and rare earth elements (REEs), all essential for the green energy and technology transition. 

The opportunities and challenges for Indian companies, both private sector and public sector, in securing a strong foothold in the energy transition metals landscape on the African continent are briefly discussed here. 

The system of granting exploration and mining licenses

Most African countries follow a system of “First Come- First Served” (FCFS) while granting the exploration licenses. The details of the granted licenses, including their area, name of the company to which the license is granted, period of license, etc, will be available in the country’s mining cadastral web portal. Even a quick look at these portals reveals that almost all potential areas in most countries have already been allocated to various companies (for example, the Zambia portal).  Any freely available area could be of low potential for critical minerals. This means that India is already late in acquiring licenses for most potential areas. This is the reason for suggesting the JV route as a short-term measure to acquire projects. 

Any new entrant will first have to register a subsidiary in the host country and then enter into an agreement with an existing player/license holder to become a JV partner by investing in the existing company. This normally requires due diligence, preferably carried out by an independent expert consultant, who covers the technical and statutory aspects of the project and provides an impartial assessment of both the opportunities and challenges.  The due diligence will be followed by a valuation of the project, following the codes for project valuations and finally negotiations. Although the rules in the host countries typically allow transfer of licenses at a premium, acquiring an exploration license will be the first challenge for the Indian public sector companies due to bureaucratic delays in decision-making. This is an area where Indian private entities have an advantage in quick decision-making. 

However, instead of fast-tracking the acquisition of licenses, either through public sector companies or by supporting private companies, the Indian government has taken up a geological mapping program of a 9000 sq km area in Zambia. Interestingly, this area is already allocated to various companies for exploration as per the information available on the web portal. It will be nearly impossible to convert any new data that may emerge from the joint studies to India’s benefit without involving the companies that are holding licenses.

Planning and execution of exploration programs

Even after acquiring licenses or entering into JVs, the planning of an appropriate exploration program and its execution over the period of the granted license will not be a cakewalk for most Indian entities. The main reason is that Indian geologists have limited exposure to the global exploration and reporting practices. The main challenge before the Indian geologists is their lack of specialised experience in exploring any specific commodity on the global stage, from greenfield exploration to resource drilling, especially in ensuring commodity-specific Quality Assurance and Quality Control measures in the programs. The implication is that the Indian entities, both private sector and government, would require the advice of international consultants while planning and monitoring the exploration programs to ensure compliance with the global reporting codes that are mostly followed by the host countries.

The United Nations Framework Classification (UNFC), which is followed by the Indian government exploration departments, does not prepare the geologists to develop specialised skills in specific commodity-based skills.   

CRIRSCO is a grouping of representatives of organisations that are responsible for developing mineral reporting codes and guidelines in Australasia (JORC), Brazil (CBRR), Canada (CIM), Chile (National Committee), Colombia (CCRR), Europe (PERC),  Indonesia (KOMBERS | KCMI), Kazakhstan (KAZRC), Mongolia (MPIGM), Philippines (PMARC), Russia (OERN), South Africa (SAMREC), Turkey (UMREK) and the USA (SME). The CRIRSCO compliant reporting codes lay great emphasis on transparency, materiality and competence while planning, executing and reporting of exploration programs.

The Indian government has not formally approved or made the Indian Mineral Industry Code (IMIC), prepared by a national expert committee in 2019 and is aligned with the other CRIRSCO-compliant codes, the official national standard for reporting mineral resources, despite a committee being formed in 2020 to finalise its structure and implementation. As a result, neither the country is able to attract foreign investment in the exploration sector, nor are the Indian geologists able to grow their skills at par with the global exploration industry. 

The role of Indian Notified Exploration Agencies

Recently, the Ministry of Mines (MOM), government of India, explored the possibility of pushing the overseas critical minerals exploration programs using the services of the numerous ‘Notified Private Exploration Agencies’ (NEA). The notified private exploration agencies are essentially private Indian consultancy companies which are accredited to participate in the exploration programs within India as contractors to speed up the government’s efforts in carrying out exploration leading to the identification of blocks for auction.  

The NEAs are essentially consultancy companies (contractors) who have put together a group of Project Coordinators, Technical Area Experts and Team Members, obtained relevant accreditations to carry out exploration as a service for a fee. They have no experience in acquiring exploration projects, raising funds for developing projects into mining projects, either in India or abroad. These consultancy companies, which fall within the MSME category in terms of revenue, do not have the deep pockets or risk-taking capability to undertake mineral exploration abroad and sustain the programs through various stages in the challenging conditions of the host countries. They lack the financial resources to acquire projects abroad and navigate the exploration cycle, ultimately leading to production.

Junior exploration companies/Startups in mineral exploration

Globally, mineral exploration is a business and needs to be run like one. Exploration must run at a profit. Here, the profit is measured in terms of the value added to the project for every dollar spent in exploration. Globally, mineral exploration is driven by Junior exploration companies, the Startup equivalents in exploration. Such companies are often listed in the leading stock exchanges in exploration-friendly Western countries, and they stake exploration licenses in any part of the world, depending upon the mining laws and mineral potential of the host country. 

Junior exploration companies are conspicuously absent in the Indian mineral exploration ecosystem. This is because, since 2015, the rules that govern mineral allocation in India are through the auction route, which favours monopolies and established players with greater financial prowess.  

Exploration companies owned by Indians who spend their own funds in risky exploration projects abroad are only a handful in India. Only those Indian mining companies from well-known mining groups and major Mine Developers and Operators (MDOs) have some presence in this domain. As the probability of success in mineral exploration is very low, we need to have hundreds of Indian junior exploration companies exploring different parts of the world to ensure a reasonable success rate. Junior exploration companies can thrive only when the country offers an opportunity for such companies to list on stock exchanges for raising funds. Needless to say, stock exchanges will expect such listed companies to regularly submit their public reports on their exploration results prepared by ‘Competent Persons’  as per the guidelines of the globally acceptable CRIRSCO compliant reporting codes to ensure that the companies plan, execute and report the exploration programs in a transparent manner, and the reports are prepared by ‘Competent Persons’. 

The role of major Public Sector companies

It is ironic that the Indian Rare Earths Ltd, a PSU directly linked to the exploration and processing of Critical Minerals, is not a listed company yet.  There are about 8-9 Indian public sector companies that are listed on the Bombay Stock Exchange, including NMDC, CIL, HCL, MOIL, GMDC, etc. Some of these entities had ventured abroad in the past with no significant success. In spite of the poor track record in acquiring and developing projects abroad, the government of India seems to be pursuing the same tactics of acquiring projects through the PSUs. 

Recommendations for pursuing exploration as  a value-driven business

Considering the timeline from greenfield exploration to mining for geologically and metallurgically challenging critical minerals is normally 15-20 years, India should adopt a multipronged strategy. 

This should include:

• In the short term,  Indian mining companies with deep pockets should be encouraged to either acquire advanced-stage projects abroad or enter into JVs with companies holding advanced projects and mines abroad. 

• In the long term, the Indian government should overhaul the mineral exploration ecosystem by adapting the global practices in the exploration industry.

• It should encourage a large number of Junior Exploration companies to raise funds from a dedicated stock exchange in India and use these funds for exploring critical minerals projects, both in India and abroad. 

• This would also help the country develop a talented pool of competent exploration geologists with specialised skills in planning, executing, and reporting exploration programs according to the norms of the global exploration industry. 

Only when you have a large number of Indian explorers scouting and exploring projects globally will we achieve better success ratios in exploration, leading to discovery.  The present plans of sourcing critical minerals through the bureaucratically controlled PSUs will not yield timely results. 

Also Read: The global lithium race: Where does India stand?