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From Washington to Beijing, global capitals are racing to secure supplies of critical minerals, the strategic resources that power today's electric cars, renewable energy, advanced electronics, and modern defence applications.
India has already announced a National Critical Minerals Mission, auctioning 34 blocks so far across five tranches, but its path to self-reliance in this crucial sector remains riddled with challenges.
For starters, the auctions include blocks offered with shallow exploration but aggressive bidding, raising viability concerns. Then there remains the question of boosting processing facilities as well as production timelines.
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 and is planning to undertake advanced-level exploration (G2) 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.
The government also plans to launch a single-window clearance portal by December to speed up mining approvals, including those for critical minerals, to address concerns over low exploration levels and procedural delays.
Lifecycle of critical minerals
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.
Need to strengthen exploration base
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 mineralisation but reveal little about commercial viability. A higher exploration level helps boost industry participation and, thus, avoid annulments.
Mineral deposits are explored in four steps — Reconnaissance (G4), 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 including 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 estimate Reconnaissance Mineral Resource or identify mineral potential, while a mining lease is granted only at a G2 level, establishing Indicated Mineral Resource.
In the six tranches of auctions so far, 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 lack of bidders. The sixth tranche of auctions is ongoing.
Exploration shows 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), 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.
Bidding too aggressive?
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 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 in an interview.
He also said that commodity 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 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.
Need for better processing capacity
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.
A long road, but milestones established
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.
