It was 1973. Elvis Presley’s concert from Hawaii was watched by more than 1 billion people. Queen Elizabeth II opened the modern London Bridge. The Watergate scandal was heating up. Pink Floyd’s seminal Dark Side of the Moon album was released.
In India batsman Rahul Dravid was born and the Government nationalised the country’s coal mines – a process it had started two years earlier.
With the Coal Mines (Nationalisation) Act only Coal India and Singareni Collieries were able to operate coal mines there. That has gradually changed to allow some steel and power generators to run coal mines that supply solely to their operations.
The Indian Government is moving to further liberalise its coal market. There are also plans for several massive coal-fired power stations to be built – some generating up to 4MW.
This is just the sort of opportunity major mining contractors such as Thiess have been waiting for. Some key mining contracts are expected to be let soon.
The companies in charge of these captive coal mines are power producers, not coal miners. There are big benefits for them to bring in specialist miners.
For Thiess and other Australian mining contractors trying to break into the Indian market it is an opportunity to win a tender to run one of these mines and use it as a showcase.
A note from Thiess India says the company is watching the liberalisation in India’s coal sector.
“Given the rate at which India’s economy is growing and the focus of successive governments in India on infrastructure development, Thiess India sees tremendous opportunity in the mining sector in India,” the note says.
Austrade senior trade commissioner South Asia Michael Moignard said the changes in the Indian coal sector were exciting for Australian companies wanting to break in there.
“You have Coal India and Singareni Collieries,” he said. “Singareni deals with underground coal. Coal India produces about 80 percent of India’s coal and is predominantly above ground. However, over the past years they haven’t been able to keep up with industry requirements.”
Moignard pointed to the plans for the development of 4MW power plants as an opportunity for Australian contract miners to finally crack the Indian market. He said there were also opportunities for suppliers of exploration software and technology.
“A lot of these coal-fired stations are due to come online in 2011-12,” Moignard said. “They will need to start getting the mines up and running now.
“Three to four years ago there was no movement at all in the coal sector. Because of the needs of the power sector we are starting to see some interesting opportunities arising.
“A number of companies such as Leighton and Thiess are bidding for contracts in these new coal mines. Those contracts are expected to be let soon.”
Besides those captive coal mines, Moignard sees opportunities in the coal sector with the major players too. “Coal India is a major purchaser of equipment and services,” he said.
While there seems to be some hope on the coal front, the news is not so bright in the metalliferous sector. The major problem here is Indian mining law.
One of the main concerns is the exploration permitting process. Foreign miners rail against the lack of transparency and certainty in the exploration permitting process.
One fear is a miner will find something but have its exploration lease expire before it can get a mining lease approved, only to have another company come in and take its claim.
Moignard said one of the key issues was that explorers needed to get approval from the government of the state they were operating in as well as from the central government.
One possible solution would be to leave the power to grant exploration and mining leases in the hands of state government much as it is in Australia.
The Hoda Committee report has recommended some fixes for these transparency and certainty issues. However, Moignard said, that report had been in front of the Indian Government for the past 18 months.
“They are looking to bring in new mining laws. Those will make it easier for companies to take exploration leases,” he said.
“The leasing process is quite flexible in India. A number of companies will find things but find they are getting held up in getting the mining lease.
“There hasn’t been a mining lease given for iron ore in the past 20 years.”
This uncertainty is sad given India’s high prospectivity. There are plenty of diamonds to be found, there is gold throughout and iron ore on both sides of the subcontinent. The Deccan plateau in the country’s heart is said to be geologically similar to Western Australia’s Yilgarn region.
Moignard said there was about 200 billion tonnes of iron ore waiting to be proved up in India.
The majors are circling. Rio Tinto, BHP Billiton, Anglo American and DeBeers are all keeping an eye on the progress of new mining laws there.
This uncertainty has not stopped some Australian players carving a niche in the Indian market. Queensland-based drilling contractor Mitchell Drilling has set up an operation there and, according to Moignard, is doing a strong trade.
India is often seen as the next cab off the rank after China in terms of a market for Australian minerals. It too has a growing population. Indeed, it is expected to overtake China as the world’s most populous nation in the not too distant future.
Moignard sees India as a different market. “But we need to be looking at both China and India over the next 10 to 15 years,” he said.
There is certainly likely to be significant demand for iron ore even if it does not come from within.
“My personal view is I wouldn’t be surprised if they start importing iron ore in the next few years,” Moignard said. “The Government has stopped iron ore exports. What’s going to move iron ore needs is the steel industry. They are talking about 100 million tonnes per annum of steel being produced by 2013 or 2014.”
Australia’s gold and diamonds are also in high demand in India – largely for jewellery production.
“There is $4.5 billion worth of gold going through India,” Moignard said. “India is our biggest export market for gold.
“Big areas for Australia are gold, followed by coal followed by copper.”
