Golden opportunity for old Indian mines

With gold prices at a dizzying high, Indian miners are turning to innovative ways to extract valuable ore

India is the world's biggest importer of gold, buying a record 960 tonnes last year alone.

According to one estimate, Indian household vaults hold gold equivalent to 50% of the country's GDP.

Technology of Business

You would think with those kind of figures, the nation must produce a significant amount of the precious metal domestically.

But domestic production is very low. The biggest problem is that India has consistently underinvested in gold exploration.

It was not always like this.

Historically, India was one of the great mining regions - and is home to one of the world's deepest gold mines.

Kolar of gold

In the southern Indian state of Karnataka, about two hours away from the city of Bangalore is a region called Kolar Gold Fields.

A hub of activity for over a century, the mines here shut in 2001 when gold prices fell to unprofitable levels.

The area is now in a state of neglect. Rusted rail wagons that once used to carry gold-bearing ore lie by the roadside.

The paths are overgrown with weeds, and buildings that used to house the mine workers and equipment are now derelict.

Mining apparatus used in Kolar New techniques are used to mine for traces of gold - even tiny amounts are worth a fortune

Old "headframes" - metal structures above the entry to the actual mine shafts - are the only indicator of the once thriving mining activity in the region.

Bharat Gold Mines Limited used to own the lease to mine an area that was about 16km long by 3km wide.

It was shut down nearly a decade ago as it became too expensive to continue operations.

Ignored ores

With little use of technology, only high-grade ores were mined to extract gold. Deeper ores which had smaller amounts of gold were ignored as the companies couldn't afford to mine them.

Also, as the mining sector was tightly controlled by the Indian government, it was difficult for private investors to bring in capital or technical expertise to the region.

Until now, only one government agency, Geological Survey of India, has been involved in exploration across the country.

So India has explored only 7-9% of their mineral resources, while countries such as Australia have achieved almost 100% geophysical and geochemical surveys.

India produces three tonnes of gold a year, while Australia mines 280 tonnes.

A cross atop a tower in Kolar The community's church is dedicated to the 'Mother of Mines'

New evidence suggests that this gold belt is an underdeveloped resource.

Also in India's favour is the price of gold. As prices have jumped nearly 40% in the last year, many here feel that it makes economic sense to restart operations and revive the old mining town around it.

In 2001 the price of gold was at one of its lowest levels at $280 a troy ounce. But it has since risen dramatically and reached a record high of $1,920 a troy ounce in September 2011.

Diamond core

Drilling in test sites around the hills, exploration company Kolar Gold is mapping potential mines.

Using a process which uses diamond core drills, they take long cylindrical samples of rock.

These samples are then checked thoroughly for any evidence of of minerals, and some are sent to laboratories for further study.

Some even have visible specks of bright shiny gold.

While the main mining area is still owned by the defunct state-run company, the surrounding hills too could hold a lot more metal.

Listed on the Alternative Investment Market (AIM) of the London Stock Exchange, Kolar Gold says it has the international investors and technical expertise to extract even low-grade ores.

Richard Johnson is chief operating officer. Having spent many years in similar mines in Australia and South Africa, he says Kolar looks positive.

"Using a method called Induced Polarization (IP) survey, we lay out extensive wires in shallow pits across this vast area.

A dilapidated miner's carriage in Kolar The old machinery, like this carriage down to the mine, has been left in disrepair

"We then send electrical current through it so the ground and the surfaces of metallic minerals get charged.

"Once we calculate the stored energy, we get clues into what minerals are there in the area."

Using this method, Kolar Gold has completed 40km of detailed surveys over its South Kolar area and found three significant anomalies.

This has given them "highly prospective" targets for follow-up drilling, rather than blindly looking for targets in the area.

10 grams

With technological advances in the mining industry, and the high price of gold, even finding six to eight grams per tonne would be worthwhile financially.

Kolar Gold hopes to find an average of 10 grams per tonne.

But mining is an expensive business.

It costs around $100 to drill about a meter of earth and an additional $50 to pay for a geologist to analyse the sample rock.

Workers at a labour camp in Kolar Local workers want the government to bring in buyers for the old mines

After paying £2.2m for a prospecting licence for South Kolar, the company also paid £4.7m for 13 licences around the Kolar mine.

They are investing more money for drilling in the north and the south of the outer Kolar area.

The company estimates there is between 1m and 10m ounces of gold in this outer belt, including deep underground mines and shallow pits.

Although drilling has yielded positive results, Mr Johnson says the company doesn't expect to find gold overnight as it is a slow process.

"But with the next five to six years, we hope to find some new mines."

Re-opening

But the prized catch would be the old mines itself.

That's because they have a proven record - producing approximately 25m ounces of gold at an average grade of 15.9g per tonne over 120 years.

So Kolar Gold has tied up with 17 BGML mine workers unions to petition the courts to revive the defunct mines.

While the Supreme Court of India is yet to reach a decision, former miners still living in old labour camps are hopeful.

An old abandoned mine shaft It is at the still-plentiful old mines where the real gold rush can restart

If the government goes ahead with the plan, these men have the first right to the mines.

Yeshwanth Raj was a supervisor at BGML. He says that for the community, the mines were the only source of livelihood.

Once they shut down, basic services in the area - like sanitation, healthcare, water supply and education - also closed.

"The government should put out a global tender to find bidders to revive the company. There is still a lot of gold left here.

"We need international companies to come with the right technology and money to get back the earlier golden days of this place."

Unexplored resources

But the precious metal is not just underground, it's also in the "tailings" - heaps of grey-white residue left behind by old mining activity. Some estimates suggest as much as 20 tonnes of gold.

Experts reckon over 90% of mineral resources in India are unexplored and need investment.

Yeshwanth Rajm, a former miner Yeshwanth Raj says the closure of the old mines also hit local services

Anjani Agrawal, a specialist in metals and mining from Ernst & Young, says India needs better technology both the the exploration and production stages.

He says the main reason why India remains under-explored is that mining leases and exploration licenses have not been given for large areas, even when there are indicative gold reserves.

There are also serious technological challenges in exploring deeper, as well producing gold from low grade ores.

The government seems to have realised gold mining in the country has potential.

The Mining Ministry is now proposing to raise domestic gold production five-fold to 45 tonnes a year.

They want to provide a series of incentives to mine owners and firms which make gold as a by-product of smelting copper ore.

Karnataka state government-owned Hutti Gold Mines is the biggest operational mining firm in the country.

They too want to reopen some of their closed mines to look for low-grade ore, and plan to expand production through joint ventures with international players.

Another listed private gold miner, Deccan Gold Mines, also wants to speed up operations.

Back in the Kolar Gold Fields, the employees pray for their future at the local church dedicated to the Mother of Mines.

If the government of India decides to reopen the mines, it will not only add lustre to this town, but could also kick-start a new gold rush in the country.

More on This Story

The BBC is not responsible for the content of external Internet sites

More Business stories

RSS

Business Live

  1.  
    10:41: Pork pie probe
    A picture of a Sainsbury's Melton Mowbray Pork Pie

    The Competition and Markets Authority (CMA) has launched an investigation into the merger of two pork pie makers. Pork Farms' plans to buy Kerry Foods' chilled savoury pastry (CSP) business, which includes pork pies, sausage rolls, pasties and slices, quiches and scotch eggs. The market is worth about £1bn a year. The CMA is worried the business will be too big will face competition from only 1 or 2 other suppliers.

     
  2.  
    10:23: Swiss interest rates turn negative

    Switzerland doesn't want your money. That was the message earlier this morning when the Swiss central bank cut interest rates to minus 0.25%, cutting the value of large sums of money left on deposit in the country. The negative interest rate is being applied to "sight deposits" - a form of instant access account - of more than 10m Swiss francs (£6.5m).

     
  3.  
    10:08: Russia crisis

    A thinly veiled threat for the European Union from President Putin. "Do they the [EU] want a stable guaranteed supply of energy resources from Russia that they desperately need?" he asks. "If they don't want it, well, then it's not going to happen. There are no other energy sources other than from Russia," he warns.

     
  4.  
    Black Friday bonanza Via Email Maeve Johnston UK Economist, Capital Economics

    While the effects from Black Friday should prove to be temporary, it is clear that the underlying picture is very strong. With consumers' discretionary spending power likely to be boosted by the drop in the oil price, confidence strong, and real incomes set to record their strongest growth in more than a decade in 2015, we remain optimistic on the prospects for retail sales over the next year.

     
  5.  
    Via Twitter Office for National Statistics

    "'Black Friday' helped boost household electrical goods by 32% in Nov 14 compared to Nov 13"

     
  6.  
    09:55: Russia crisis

    Mr Putin starts using hunting metaphors: "There are some people that want the Russian bear to lie down and eat berries," Mr Putin says. That way they can chain him and remove his "teeth and nails." The crisis should be an opportunity to change the structure of the economy otherwise Russia could end up "skinned and hanging from a wall" Mr Putin says.

     
  7.  
    09:52: Russia crisis

    If you think the Russian government is bureaucratic you should see the bureaucracy of the European Union, says Mr Putin. Even the Russian president has started making jokes about the EU now. Nigel Farage will be delighted.

     
  8.  
    09:47: Rouble remains volatile
    Rouble dollar

    The rouble has been bouncing around while President Putin has been speaking. It is trading around the lows for the session with a dollar buying more than 62 roubles, but earlier the rouble had strengthened to 58 to the dollar.

     
  9.  
    09:39: Russia crisis

    Mr Putin's press conference continues. He says the country will be back on its feet within two years. Growth will be inevitable, he says. Growth in the world economy will increase the need for energy resources, he says. But Mr Purtin says the economy still needs to be more diverse. $419bn of reserves will not be wasted he says. The government will fulfil its social obligations, he adds.

     
  10.  
    09:33: Black Friday bonanza
    John Lewis shop window

    Retail sales surged at their fastest rate in more than a decade in November, according to the Office for National Statistics. Retail sales volumes grew 1.6% from October and showed annual growth of 6.4%, the fastest annual pace since May 2004. Those figures were helped by the popularity of Black Friday this year.

     
  11.  
    09:23: Russia crisis

    Mr Putin says he hopes to see some strengthening of the rouble over the next few days. What happens if oil prices fall further? He says the government will focus its attention on those people that really need its help. He's guaranteeing to pay pensions and social security but he has just opened the door to "reduce some social spending".

     
  12.  
    09:21: Russia crisis
    President Vladimir Putin

    "I think everybody understands the most important situation of the day is that of the national currency," Mr Putin says. He blames "outside factors" for the fall in the rouble. Mr Putin says: "We have also failed to do a lot of what we had planned in terms of diversification over the last 20 years". "I think the central bank and the government are taking adequate measures to deal with the situation," he adds.

     
  13.  
    09:19: Russia crisis

    President Putin's annual press conference has begun and he's getting straight to the point and talking about the economy. So far it's just the numbers, unemployment is low, he says, below 5% and Russia's industrial complex should have grown by 3% by the end of the year. The government budget is running a surplus of 1.9%, he adds.

     
  14.  
    09:07: Russia crisis BBC Radio 4
    Vladimir Putin

    Russian president Vladimir Putin holds his end-of-year news conference this morning. Anne Applebaum, a former editor of the Economist, says Mr Putin's legitimacy as leader is based on a pact with the Russia people that he will bring them stability and rising living standards. In return the Russian people will live with the fact they don't really have democracy and will tolerate a great deal of corruption by him and the people around him, she says.

     
  15.  
    09:04: Russia crisis BBC Radio 4

    Anne Applebaum suggests the Russian people are likely to begin to question whether Mr Putin should stay in power if they are not getting anything in return, such as rising living standards. But there is no mechanism to remove him, she says. The test is whether he can keep the economy going over the next couple of months, in the meantime he can blame the West for the problems, or elements within Russia says Ms Applebaum.

     
  16.  
    08:56: GM suspends Russian sales
    GM logo

    GM has suspended sales of cars to Russian dealers, blaming the the "volatility of the rouble exchange rate", Bloomberg reports. Cadillacs, Opels and Chevrolets already ordered will be delivered at the agreed price, the reports says.

     
  17.  
    08:44: Newspaper review
    Business pages

    Let's have a quick look at the business pages. The Financial Times leads with that thawing of relations between Cuba and the US. It also says plummeting oil prices have hit renewable energy firms. The Telegraph says that BT is looking to raise £2bn by selling shares to fund its purchase of EE. The Times says that investors have been spooked by Russia's crisis and are abandoning emerging market debt.

     
  18.  
    08:28: North Sea oil crisis
    North Sea Oil platform

    North Sea oil firms and service providers are cutting staff and investment to save money and the industry is "close to collapse" the independent explorers' association Brindex has said. Falling oil prices are now beginning to make North Sea oil production too costly it suggests. Brent Crude has now fallen below $60 per barrel and has fallen nearly 50% since the summer.

     
  19.  
    08:10: Sony cancels The Interview

    A cinema in Texas is replacing The Interview with "Team America: World Police" says Radio 5 live presenter Rachel Burden. That might make Texans feel a bit better about the hacking of Sony Pictures, which North Korea is thought to be involved in. As well as satirising gung-ho Americans Team America World Police ridicules Kim Jong-il, the father of North Korea's current leader Kim Jong-un. Take that North Korea!

     
  20.  
    07:56: Royal Mail privatisation Radio 5 live

    "There's a huge opportunity for financial institutions to game the system," Lord Myners tells Radio 5 live. He's talking about the process of "book building" whereby big investors like pension firms and insurers are approached and asked what they think a firm is worth. Transparent digital auctions would be a better way of fixing a price. says Lord Myners.

     
  21.  
    07:42: Royal Mail privatisation BBC Radio 4

    "I think actually the sale of Royal Mail was a well-balanced complex exercise and the government managed to achieve its objective, Lord Myners tells Today. When asked why UBS forecast a price of 450p for Royal Mail shares, around the time the 330p a share price was set, Lord Myners argues that is an example of the so-called "Chinese Walls" within investment banks working.

     
  22.  
    07:23: Sony cancels The Interview
    Movie poster for The Interview

    Jon Taplin who produced Martin Scorsese's Mean Streets and The Last Waltz makes some interesting points on Radio 5 live about Sony's withdrawing The Interview. He points out that the biggest US movie chain AMC is owned by a Chinese firm. Many movie theatres are in shopping centres and AMC says it was under pressure from those shopping centres who were worried that shoppers would stay away if The Interview was playing. (The hackers had warned of 911-style attacks).

     
  23.  
    07:08: Mobile phone coverage Radio 5 live
    mobile phone user

    There's been a "huge row" between mobile operators and companies says BBC technology correspondent Rory Cellan-Jones on Radio 5 live. The result is today's announcement that firms will invest £5bn in mobile kit to achieve 90% geographic coverage by 2017. That £5bn was going to be spent anyway says Rory, the companies wanted the government to abandon a "national roaming" scheme that they hated.

     
  24.  
    06:52: Local government pensions BBC Radio 4

    Local government pensions schemes are "staggeringly inefficient and a national embarrassment", according to the right leaning think-tank, the Centre for Policy Studies which has published a report calling for a radical overhaul of them. Currently 89 separate schemes in England and Wales are £47bn in deficit, it says. The report comes on the same day as the local government finance settlement.

     
  25.  
    06:48: Local council spending Radio 5 live

    Later this morning, councils in England will find out how much money they are likely to get from the government for the next financial year. Councils are expecting a 12% cut in their budgets. They are saying that the situation is "virtually unsustainable and services will start buckling under the strain", according to BBC political correspondent, Iain Watson. The government argues that councils have coped well with cuts so far, Iain says on Radio 5 live.

     
  26.  
    06:39: Royal Mail privatisation BBC Radio 4
    Royal Mail Glasgow

    The big problem for the government was judging the price and ensuring interest from institutional investors in Royal Mail, CCLA Investment Management's James Bevan tells Today. If shares were priced too high Royal Mail might not have attracted enough interest from institutional investors. That would have meant the shares would have lost value when they debuted on the stock market, and the government "gets accused of being greedy," Mr Bevan adds.

     
  27.  
    06:33: Royal Mail privatisation BBC Radio 4

    So the report into the stock market flotation of Royal Mail has been released but James Bevan, from CCLA Investment Management tells the Today programme the report tells us "very little about what actually happened. It's more of blueprint for what should happen in the future." He says the report seems to focus more on how to deal with institutional investors in any future privatisations.

     
  28.  
    06:27: Sony cancels The Interview Radio 5 live
    A banner for "The Interview"is posted outside Arclight Cinemas

    Sony Pictures has now cancelled the release of the film that provoked a cyber attack on the company. On Radio 5 live Steve Futterman, Los Angeles reporter for CBS Radio News, says it was primarily a business decision as five major theatre chains had abandoned the comedy (called The Interview), after the hackers made references to 911-style attacks. But Mr Futterman asks: Will the film have a video release or appear on a streaming service when the situation calms down?

     
  29.  
    06:19: US interest rates Radio 5 live

    "Markets are hugely relieved that the Fed will not be tightening rates any time soon," says James Bevan, from CCLA Investment Management. On Radio 5 live Mr Bevan says the markets are now betting there will not be a rise in interest rates during the next calendar year.

     
  30.  
    06:12: Cuba new era Radio 5 live
    Havana

    "It's quite a dramatic and unexpected step," says Phillip Oppenheim, managing director of coffee company, Alma de Cuba. That's after President Barack Obama announced moves to normalise diplomatic and economic ties. Mr Oppenheim thinks that announcement could make a real difference in two or three years time. He says that Cuba is very slowly being liberalised. It's become easier to set up small businesses, for example.

     
  31.  
    06:09: Royal Mail privatisation Radio 5 live

    Peter Hahn from Cass Business School explains that big institutional investors were approached in what's known as a "pilot fishing" exercise to ascertain a price Royal Mail. They, of course, were incentivised to quote a low price. Mr Hahn says that's a slightly simplified scenario - but was basically what happened. "IPOs (initial public offerings) are always more of an art than a science," Mr Hahn says on Radio 5 live.

     
  32.  
    06:07: Royal Mail privatisation
    Royal Mail"s Glasgow mail centre at St Rollox

    The government made £180m less from the £2bn sale of Royal Mail than it could have, a report commissioned by Business Secretary Vince Cable has said. It says shares could have been valued up to 30p more than the flotation price of 330p because of the high level of demand from banks and individuals. It said future government share sales should be more transparent and the pricing could be set at a later stage.

     
  33.  
    06:03: Markets boosted by US Fed

    US Federal Reserve chair Janet Yellen had some Christmas cheer for investors and borrowers on Wednesday when she signalled the central bank planned to be "patient" before raising interest rates. Most analysts had expected the Fed to signal its willingness to raise interest rates early next year but Ms Yellen's comments suggest the bank it wiling to wait a little longer. That's given markets a boost so far today.

     
  34.  
    06:02: Ben Morris Business Reporter

    If you want to get in touch you can email bizlivepage@bbc.co.uk or tweet us @bbcbusiness.

     
  35.  
    06:00: Matthew West Business Reporter

    Morning folks. It's going to be another busy morning by the looks of things. Yesterday's reassurance from the US Federal Reserve has cheered markets in Asia and even lifted the Russia rouble. Meanwhile, Royal Mail was "underpriced" by £180m, a report into its stock market flotation has found. There's lots more to come, so stay with us.

     

Features

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.