The tough race for critical minerals continues despite viability fears

While the auction of mines has attracted high bids, just how many of these mines will actually be commercially viable remains to be seen

From the US to China, countries around the world are racing to secure supplies of critical minerals that help power everything from electric cars and renewable energy to advanced electronics and modern defence applications. 

India, which has substantial deposits, has already announced a National Critical Minerals Mission, having auctioned 34 mines — or blocks — so far across five tranches. But its path to self-reliance in this crucial sector is riddled with challenges. 

For starters, some blocks have triggered surprisingly aggressive bidding in spite of the fact that these mines are only offered for shallow exploration. This has raised concerns around viability. Then there remains the need to boost processing facilities as well as production timelines. 

China’s recent sudden tightening of rare earth exports has come as a wake-up call for countries seeking to diversify sources of critical minerals. The episode underscored how vulnerable nations remain to geopolitical shocks, and why building self-sufficiency in critical minerals like lithium, graphite, nickel and rare earth elements has become a strategic priority. India’s National Critical Mineral Mission, acceleration of auctions, deeper exploration efforts and rule changes stem directly from this global push: the recognition that without secure access to critical minerals, ambitions in electric mobility, electronics, defence and renewable energy will remain exposed. 

India has identified hundreds of millions of tonnes of critical mineral resources, according to the Geological Survey of India. For instance, it estimates over 310 million tonnes of rare earth elements, nearly 73 million tonnes of graphite, and approximately 12.3 million tonnes of lithium. These auctions cover blocks in over a dozen states — including Chhattisgarh, Odisha, Jharkhand, Karnataka, Tamil Nadu, Uttar Pradesh, and Madhya Pradesh — and span a variety of deposits such as tungsten, vanadium, glauconite, cobalt, chromium, lithium, nickel and potash. 

As reported in this newspaper earlier, the government is no longer considering a cap on bid premiums — the additional percentage of future revenue paid to the government on top of the base price — for critical mineral blocks. It is also planning to undertake advanced exploration before putting them up for auction — a significant policy recalibration aimed at boosting investor confidence. 

Separately, the Ministry of Mines has amended the Mineral (Auction) Rules, 2015, introducing clear timelines and accountability mechanisms with an aim to ensure faster operationalisation of auctioned blocks. 

Business Standard also reported earlier that the government plans to launch a single-window clearance portal by December to speed up mining approvals, including those for critical minerals, which would address concerns over procedural delays. 

Lifecycle 

The journey of a critical mineral from discovery to market spans several stages — exploration , auctioning, mine development, and processing or refining. Exploration, conducted in four stages (G4 to G1), establishes the presence and quantity of mineral deposits. Once explored, blocks are auctioned as composite licences or mining leases, depending on the level of survey. Successful bidders then obtain environmental and operational clearances before starting production. The extracted ore finally undergoes processing and refining, a stage in which India currently lacks adequate capacity. 

Data shows most of the critical mineral blocks put up for auction so far were offered with only preliminary or reconnaissance-level data, which indicate the presence of minerals but reveal little about commercial viability. A higher exploration level helps boost industry participation and, thus, avoid potential annulments. 

Mineral deposits are explored in four steps or levels — reconnaissance (G4, the most basic), preliminary (G3), general (G2), and detailed (G1). Each step gives more information and confidence about the mineral’s quantity and quality,

corresponding to four resource categories – reconnaissance (low confidence), inferred (low but improvable), indicated (moderate), and measured (high confidence). 

The government grants licences based on these exploration parameters. A composite licence can be auctioned after a G4 level is done to identify mineral potential, while a mining lease is granted only at a G2 level, establishing ‘Indicated Mineral Resource’. 

In the six tranches of auctions held so far (the sixth is ongoing) the government has offered 77 fresh blocks. Data sourced from the ministry of mines shows that out of these, as many as 66 are for composite licences, suggesting that most blocks offered have low exploration levels. Of the 56 blocks put up for auction across five tranches, 34 have been successfully auctioned, while the rest were annulled owing to a lack of bidders. 

Limited gains 

“Industry feedback indicates that the level of exploration data provided, particularly for critical mineral blocks, is limited. The G3 or G4 level of exploration may not meet the expectations of major private firms, who typically seek G1 or G2 level reports to make investment decisions,” said Vinod Kumar, partner and leader (manufacturing), at PwC India. 

Satnam Singh, senior practice leader and director at Crisil Intelligence, also said that G3 or G4 levels of exploration are insufficient to establish the viability of a project. 

Acknowledging the issue, a senior official said the ministry of mines is working to ensure advanced-level exploration (G2) before putting critical mineral blocks up for auction. “Higher-level exploration is a costly exercise, but it will be done to boost industry confidence in the availability of critical minerals,” he said. 

Despite weak exploration, India’s auctions have triggered aggressive bidding. Companies have offered unusually high bid premiums for the different mines available for auction. Of the 34 blocks auctioned so far, 15 have attracted bid premiums above 50 per cent, with some going as high as 752 per cent, 400 per cent, and 320 per cent, according to government data. Eleven of these are graphite blocks. 

“Except for graphite, bids for other minerals have remained moderate so far. But as this is a sunrise sector, competition is expected to intensify and companies will look to tap the commercial potential of these resources,” a senior government official, who declined to be identified, said. 

H P Modali, managing director of Deccan Gold Mines Ltd, said his company’s bid for the Bhalukona-Jamnidih block, a nickel and copper acreage in Chhattisgarh, was stretched. “The 20-21 per cent bid (20-21 per cent above the base price) was a bit of an overstretch. Ideally, a 10 per cent premium would have been more reasonable since exploration for gold, precious metals, and critical minerals is a high-risk business,” he told Business Standard. 

He also said that mineral prices play a major role in determining viability. “Right now, prices are good, so companies may be able to afford higher bids. But if prices fall later, it becomes very difficult to sustain operations,” Modali said, adding that miners should be given production-stage relief. 

Analysts agree that such high bids may keep serious players away. 

“Companies often submit bids with unusually high premiums. In an adverse scenario of market prices and high operations costs, it could become challenging to sustain the project,” warned Crisil’s Singh. 

The ongoing sixth tranche of auctions is also expected to test whether investor enthusiasm for critical minerals remains strong amid questions over their long-term economic viability. 

Long road 

Besides the block viability issue, processing capacity for critical minerals, too, needs an urgent boost. India currently has little capacity to refine the minerals it seeks to secure, leaving it heavily dependent on imports in the interim. 

“India's critical mineral processing facility is still in its nascent stage, with limited capacity and capabilities,” said Singh. Kumar of PwC added that the country remains “nearly 100 per cent import-dependent for refined lithium, cobalt, and nickel", exposing a value chain bottleneck. 

Singh also flagged a technological gap: “The discovery of deep-seated deposits requires cutting-edge technologies, precise drilling, and extensive surveys, which are resource-intensive. Indian exploration companies with such specialised capabilities are limited,” he said. 

Even after auctions, turning a block into a mineral-producing mine takes years. It takes 5–7 years for a mining lease block to come into production and 7–10 years for a composite licence block. 

To address these delays, the mines ministry has recently amended the Mineral (Auction) Rules, 2015, introducing intermediary timelines for post-auction activities to ensure faster operationalisation of mineral blocks. 

The amendment sets clear milestones between the issuance of the Letter of Intent and the execution of mining leases, with penalties for delays and incentives for early production. The move aims to improve monitoring across the stages of mine development and prevent bidders from holding on to blocks without starting operations. 

Despite the gaps, industry experts and policymakers agree on one thing: India’s critical minerals push cannot rely on auctions alone. Taken together, the voices suggest a sector at an inflection point, one that must balance ambition with realism as India builds the foundations of a strategic mineral future.