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

BBC Business Live

  1.  
    AEROFLOT RESULTS 08:18:
    Aeroflot

    More airline news. Russia's state-controlled Aeroflot reports a loss of 1.9bn roubles (£35m) for the first half of 2014. That compares to a 45m rouble profit a year ago. The slowdown in the economy and a fall in the value of the rouble against other world currencies are among the reasons.

     
  2.  
    QANTAS 08:03:
    Kangaroo

    Shares in the Flying Kangaroo are up 7.3% at A$139 in the wake of its hefty loss. "We are focused now in the short to medium term on the transformation program," said chief executive Alan Joyce. "We are not actively out there looking for an airline investor." Investors are actively buying its shares though - a new law is opening the doors to foreign investment in the international arm of the airline.

     
  3.  
    AA RESIGNATIONS 07:48:
    AA logo

    There seems to be some upheaval at the top of the AA. Its chief executive Chris Jansen is resigning immediately. The chief financial officer Andy Boland is leaving too.

     
  4.  
    ICE SALES 07:39: Radio 5 live
    Alex Brown of Exeter Chiefs takes part in the Ice Bucket Challenge

    The charity ice bucket challenge appears to be boosting the sale of ice cubes. Tesco says they're up 20%. Paul Doughty, managing director of The Ice Company told Wake up to Money his firm had been busy restocking supermarkets - which saw big sales last weekend. But he explained that this was a bit of a challenge. "At this time of year, we are actually ramping down production, sales get run down over the summer, and we start to reduce our staffing levels in our factories through August."

     
  5.  
    LIVING WAGE 07:31:

    What is is? It is set at £8.80 an hour for London and £7.65 for the rest of the UK. Find out here. The minimum wage - the government's base line, is £6.31.

     
  6.  
    PADDY POWER 07:26:
    Paddy Power pic from website

    Betting giant Paddy Power says pre-tax profits are down 13% at £62m for the first half of the year. The company says many football punters had "dream weekends" in January and March, with 16 and then 17 teams of the 21 most backed winning. "This proved costlier than John Cleese's divorce", says Paddy.

     
  7.  
    HAYS RESULTS 07:16:

    Profits have risen at the recruitment business Hays, which operates in 33 countries. Profits rose 12% in the past year to £132m. Dividends are up 5%. "In many of our global markets, the vast majority of professional and skilled recruitment is still done in-house, with minimal outsourcing to recruitment agencies which presents substantial long-term structural growth opportunities," the company said.

     
  8.  
    LIVING WAGE 07:05: BBC Radio 4

    On the TUC Living Wage story: TUC general secretary Frances O'Grady tells Today that women come off worse because there is low value attached to the jobs women tend to do, such as care working and shop work.

     
  9.  
    LIVING WAGE 06:53: BBC Radio 4
    Care worker

    Today is discussing the Living Wage concept. In many parts of Britain, women working part-time earn less than the Living Wage, says the TUC. Three quarters of part-time women workers in Lancashire do, as do two thirds of part-time women workers in West Somerset. TUC chief Frances O'Grady explains: "The minimum wage is an absolute floor, the Living Wage is the level that means you can take your children on holiday for a week - nothing fancy." The minimum wage is £6.31.

     
  10.  
    QANTAS 06:42:

    Can Qantas solve its huge financial problems? The BBC's Phil Mercer in Sydney says: "The airline's annual accounts have become a horror story of decline as it tries to chart a path back to profit and sustainability". Read more.

     
  11.  
    MALAYSIA AIRLINES 06:32: BBC Radio 4

    Can an airline survive two major plane disasters in a single year? Today says that's the question for Malaysia Airlines. Those who have flown on the airline recently report near empty cabins. Can Malaysian Airlines survive? David Learmount from Flightglobal thinks so. "Malaysia will be given a chance by the government and it will be given some money. People don't like seeing airlines go bust," he told Today listeners.

     
  12.  
    BUSINESS LENDING 06:22: Radio 5 live

    Wake Up to Money looks forward to later this morning when the Bank of England will give us an update on its Funding for Lending scheme - introduced two years ago to encourage banks to lend to small businesses. It's not been a rip-roaring success: a previous report said, despite all that help, the amount of money being lent was down £2.7bn over the first three months of this year.

     
  13.  
    QANTAS 06:12:
    A Qantas Airline plane gets takes off at Sydney Airport in Sydney on August 28, 2014

    Overnight Australia's national airline Qantas reported a huge loss of A$2.8bn for the past year - its biggest ever. That was partly due to writing down the value of its planes by A$2.6bn. Qantas added weak domestic demand, poor consumer spending and rising fuel costs also contributed. Chief executive Alan Joyce tried to put some gloss on the figures: "There is no doubt today's numbers are confronting... but they represent the year that is past".

     
  14.  
    SCOTTISH INDEPENDENCE 06:03:
    Saltire

    Pro-independence business people in Scotland have hit back. 200 of them have signed a letter, appearing in the Herald online, saying that the business case for independence "has been made - and it's strong and ambitious". They add: "The real threat to Scotland is the real possibility of a British exit from the European common market".

     
  15.  
    Rebecca Marston Business reporter, BBC News

    The monitor has been fitted and off we go. You can plug in to us bizlive@bbc.co.uk or @bbcbusiness. Here until 13:00.

     
  16.  
    06:00: Ian Pollock Business reporter, BBC News

    Good morning, the Business Live page will have its finger on the business pulse, just for you.

     

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.