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MINING SECTOR REPORT :::: April – 2012

INDUSTRY STATISTICS for (BSE Metal Index) Conglomerates’ (all data in Rs. Cr. Except per share data)

No Company FV Equity Networth Net Sales PAT Book

Value

RONW

(%)

D/E

Ratio

Price

17.04.2012

P/E

Ratio

P/BV Dividend

Yield -%

1 SAIL 10 41,304 370,695 426,871 49,047 89.75 13.94 0.520 96.10 9.53 1.07 2.50

2 Tata Steel 10 9,594 469,452 293,964 68,657 487.45 16.36 0.640 461.55 6.55 0.94 2.57

3 Hindalco Ind 1 1,915 297,005 236,269 21,369 155.10 7.42 0.240 128.00 10.63 0.83 1.17

4 JSW Steel 10 2,842 169,462 231,632 20,107 577.75 15.04 0.87 750.45 6.35 1.02 1.63

5 Sterlite Ind 1 3,361 232,289 152,888 14,197 69.11 6.24 0.240 108.40 31.24 1.57 1.01

6 NMDC 1 3,965 192,145 113,689 64,992 48.46 38.82 - 169.10 8.68 3.49 1.95

7 Hindustan Zinc 2 8,451 225,332 99,121 49,005 53.33 24.11 - 125.55 8.97 2.35 0.80

8 Jindal Steel & Power 1 934 86,893 95,546 20,641 92.98 26.75 1.33 507.40 22.86 5.46 0.30

9 Sesa Goa 1 869 115,888 82,490 34,328 133.34 36.52 0.150 190.05 7.37 1.43 1.91

10 Bhushan Steel 2 425 58,277 69,677 10,051 274.44 20.47 2.83 395.00 8.55 1.44 0.13

11 Coal India 10 63,164 178,160 4,644 46,961 28.21 28.12 0.080 350.05 26.86 12.41 1.11

Source: Capitaline

KEY POINTS:

The mining industry in India is momentous for its economic development. The sector makes available raw materials to other basic industries like Auto, Power, Infrastructure, construction etc. and also contributes to India’s exports. Not only that, it also provides an employment opportunities. It has a strong multiplier effect on the rest of the economy as each penny engendered from it generates 2.4 times the direct and indirect output in the economy. States like Jharkhand, Orissa and Chhattisgarh are especially dependent on mining for their economic development.

The input of mining and quarrying sector to GDP for the year 2010-11 was ~2.26% (Source: Central Statistical Organisation).

India ranks among the globe's apex 10 nations for its core competency commodity reserves of coal and iron ore. In 2009-10 in world production India was second in barytes, chromite and talc/steatite/ pyrophillite, third in coal & lignite and bauxite, fourth in iron ore and kyanite/sillimanite, fifth in manganese ore, steel (crude) and zinc, fifth in bauxite, eighth in aluminium and tenth in magnesite.

The industry has the potential for elevated growth and attracting investment to the exploratory stage of mining. Soaring long-term demand from the steel industry is expected to boost iron ore industry whereas positive trends in power sector will propel demand for coal. Key drivers for growth will include booming construction, automobiles and power industries which are expected to support the Mining sector. With the general consent is moving towards higher mechanization & technologies, increased participation of private sector, increased productivity and less state interference to nourish and grow this sector.

QUICK NUMBERS:

In terms of volume, India’s mineral production grew at a CAGR of 4.88% during the period

2007-2011 and is predict to grow at a CAGR of 7.90% during the period 2012-2016.

The total value of mineral production (excluding atomic minerals) during 2010-11 was

2,00,609.38 crore.

Foreign Direct Investment up to 100% is permissible for exploration of all non-fuel and non-

atomic minerals.

The number of mines which reported mineral production (excluding minor minerals,

petroleum (crude), natural gas and atomic minerals) in India was 2628 in 2010-11.

410

47

3

23

Fuel Metallic Non Metallic Atomic Minor Minerals

INDIA PRODUCES 87 MINERALS

METALIC

Ferrous

Non Ferrous

NON METALIC

Mineral Fuels

Precious Stones

Others

MINING INDUSTRY:

Minerals are precious natural resources that are finite and non-renewable. It forms the primary raw materials for numerous basic

industries hence; minerals constitute the back-bone of economic growth of any nation. The past of mineral extraction in the country

dates back to the days of the Harappan civilization. The distribution of minerals in the country is scatter and mineral density varies

from region to region.

India ranks among the globe's apex 5 nations for its core competency commodity reserves of coal and iron ore. The metallic

production is accounted for by iron-ore, copper-ore, chromite and/or zinc concentrates, gold, manganese ore, bauxite, lead

concentrates. Amongst the non-metallic minerals, more than 90 percent of the aggregate value is shared by limestone, magnesite,

dolomite, barytes, kaolin, gypsum, apatite & phosphorite, steatite and fluorite. The hunt for minerals did not remain only on the

land mass alone but extended to off-shore areas and deep seas. Large reserves of oil were discovered in the off-shore areas and

their exploitation opened up new and exciting vistas in the oil sector thereby conserving huge foreign exchange reserves. In the

Indian Ocean, India has explored successfully the presence of poly metallic nodules lying on the ocean floor at a depth exceeding

3000 metres which bear metals such as copper, cobalt, nickel, manganese, etc. The Eastern States−Jharkhand, Chhattisgarh, Orissa

and Southern States− Andhra Pradesh, Karnataka−as well as Rajasthan in Western India are the most important mineral-rich regions

in the country. The total mineral potential area in India covers 5.75 lakh sq. kms, of which only 75,000 sq. kms. area has been

explored in detail so far.

Mineral deposits are valuable natural resources which are very crucial

raw material for infrastructure, capital goods and basic industries. As a

major resource for development the extraction and management of

minerals has to be integrated into the overall strategy of the country’s

economic development. The exploitation of minerals has to be guided

by long-term national goals and perspectives. India's mining sector is

highly stratified. There are a number of giant, mostly state-owned

mines that have a great effect on entire production and in unison there

are a bulky number of small and unproductive mines, many of them

unlawful. 5% of operating mines in India produce about 50% of the

nation's mineral output. Given the sector's strategic and economic

significance, there is noteworthy government involvement, with the

segment dominated by state-owned companies or Public Sector

Undertakings (PSUs) such as National Aluminium Corp (NALCO), SAIL,

National Mineral Development Corp (NMDC) and Coal India.

India is gifted with huge resources and reserves of metallic and

non-metallic minerals, which made it very advantageous for the

growth and development of the mining sector in India. Mining

sector is one of the very essential segments of our economy.

India produces as many as 87 minerals, which include 4 fuel, 10

metallic, 47 non-metallic, 3 atomic and 23 minor minerals

(including building and other materials).

Source: Ministry of Mines Annual Report 2010-11

TRENDS IN VALUE OF MINERAL PRODUCTION, EXPORTS & IMPORTS

The Trend of Index of Mineral Production for the Last 5 Years (Base 1993-94 = 100)




VALUE OF MINERAL PRODUCTION BY GROUPS

MINERAL PRODUCTION

Based on the overall trend so far the index of mineral production

(base 1993-94=100) for the year 2010-11 is estimated to be

208.83 as compared to 193.36 for 2009-10 showing a positive

growth of 7.43%.

The total value of mineral production (excluding atomic minerals) during

2010-11 has been estimated at 2,00,609.38 crore, which shows an increase

of about 11.83% over that of the previous year. During 2010- 11, estimated

value for fuel minerals accounts for `1,35,243.81 crore or 67.42%, metallic

minerals, `41828.44 crore or 20.85% of the total value and nonmetallic

minerals including minor minerals `23537.13 crore or 11.73% of the total

value.

MINES OWNERSHIP:

In the federal structure of India, the State

(provincial) Governments are the owners of

minerals located within the periphery of the

State concerned. The Central Government is

the owner of the minerals underlying the

ocean within the territorial waters or the

Exclusive Economic Zone of India.

The State Governments grant the mineral concessions for all the minerals located within the boundary of the State, under provisions

of the Mines and Minerals (Development and Regulation) Act, 1957 and Mineral Concession Rules, 1960. For minerals specified in

the First Schedule to the Mines and Minerals (Development and Regulation) Act, 1957, before granting the mineral concession,

approval of the Central Government is necessary. Also, the Central Government notifies certain minerals as ‘minor’ minerals from

time to time for which the absolute powers for deciding on procedures of seeking applications for and granting mineral concessions,

fixing rates of royalty, dead rent and power to revise orders rest only with the State Government.

POLICY FOR FOREIGN DIRECT INVESTMENT IN THE MINING SECTOR

Ever since the elocution of the National Mineral Policy, 1993, India has made excellent progress in pulling of foreign investment in

the sector, with attractive incentives. The National Mineral Policy was revised in 1994 and as a result, private investment (both

domestic and foreign), has been permitted for the exploration and exploitation of the following minerals: Iron – ore, Copper,

Manganese, Lead, Chrome ore, Zinc, Sulphur, Molybdenum, Gold, Tungsten ore, Diamond, Nickel and Platinum group of metals.

2628

574 608

1446

2999

574700

1725

3150

574719

1857

All Minerals* Coal (including Lignite)

Metallic Minerals Non-Metallic Minerals

NUMBER OF REPORTING MINES

2010-11 2009-10 2008-09

Gujarat6%

Andhra Pradesh9%

Jharkhand6%

Madhya Pradesh

5%

Rajasthan8%

Karnataka4%

Orissa10%

Goa4%

Assam4%

Chhattisgarh8%

Remaining10%

Offshore26%

SHARE OF STATES IN VALUE OF MINERAL PRODUCTION 2010-11(estimated)

Gujarat14%

Andhra Pradesh

14%

Jharkhand11%

Madhya Pradesh

10%Rajasthan

8%

Karnataka8%

Orissa6%

Tamilnadu6%

Maharashtra6%

Chhattisgarh5%

West Bengal4%

Remaining8%

NUMBER OF MINES - STATEWISE (FY2010-11)

Public Sector74%

Private Sector26%

PRODUCTION CONTRIBUTION 2009-10



The entrepreneurs wishing to bring foreign direct investment in the non-fuel and non-atomic mineral mining sector are entitled to

bring in the foreign equity just by informing the Reserve Bank of India, termed as ‘Automatic Approval’. Automatic approval of

foreign direct investment up to 100% is permissible for exploitation of all non-fuel and non-atomic minerals. For being eligible to

obtain a mineral concession in India, a transnational/ foreign Company will be required to incorporate and register as an Indian

company under Section 3(1) of Companies Act, 1956. There is absolutely no bar to the extent of foreign holding in such a company,

as long as it is registered in India. The Indian company can thereafter apply for mineral concessions to the State (Provincial)

Government concerned.

GROSS DOMESTIC PRODUCT FROM MINING & QUARRYING SECTOR

The Gross Domestic Product (GDP) accrued from mining and quarrying sector at 2004-05 prices is estimated by Central Statistical

Organisation (CSO). The advance estimates of GDP (at 2004-05 prices) for the year 2010-11 in respect of mining and quarrying sector

accounted for about 2.26% of GDP. The contribution of mining and quarrying sector to GDP for the year 2010-11 is estimated at

`1,10,482 crore which would indicate an increase of 6.2% over that in the previous year.

Indian mining sector is exemplified by a large

number of infinitesimal operational mines. The

number of mines which reported mineral

production (excluding minor minerals, petroleum

(crude), natural gas and atomic minerals) in India

was 2628 in 2010-11 as against 2999 in the

previous year. The sector is highly stratified.

There are a number of giant, mostly state-owned

mines that have a great effect on entire output

and at the same time there are a huge number of

undersized and ineffective mines, many of them

illegal.

During 2009-10, the Public Sector continued to play a dominant role in mineral

production accounting for 74.48% or `1,19,385.86 crore in the total value. Small

mines, which were mostly in the private sector, continued to be operated manually

either as proprietary or partnership ventures. India's ranking in 2009-10 in world

production was second in barytes, chromite and talc/steatite/ pyrophillite, third in

coal & lignite and bauxite, fourth in iron ore and kyanite/sillimanite, fifth in

manganese ore, steel (crude) and zinc, sixth in bauxite, eighth in aluminium and tenth

in magnesite.

COST ADVANTAGE

•Lower Labor and convesion cost specially in the production of Steel and Aluminium

•India is strategically located for exports.

BOOSTING GOVT. POLICIES

•100% FDI is granted by the Indian government under the automatic route for mining of metal ores, including precious metals and minerals.

•Govt. is promoting investments in the sector

PROFUSE RAW MATERIAL

•India is rich in mineral resources and has large reserves of primary metal ores such as iron ore, bauxite, chromium, manganese & titanium.

•24 billion tonnes of iron ore reserves —the fifth-largest reserve base in the world

•2.4 billion tonnes of bauxite reserves —the fourth-largest global reserve base

•240 million tonnes of manganese reserves —the second-largest reserve base worldwide

•57 million tonnes of chromium reserves —the third-largest reserve base in the world

-

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

2004 2005 2006 2007 2008

US

$ B

n.

SIZE OF METAL AND MINNING SECTORMARKET OVERVIEW

The sector was valued at 3,835.4 billion in 2008, recording a year-on-year

growth rate of 32.7% and a compound annual growth rate of 22.9% from

2004 to 2008.

Note: Here it is assumed that, the metals and mining sector comprises of the

aluminium segment (only production of primary aluminum is considered), the base

metals segment (consisting of lead, zinc, copper, nickel and tin), the coal segment

(consisting of primary coal —anthracite, bituminous and lignite), the iron and steel

segment (consisting of production of crude steel, pig iron and direct reduced iron),

and the precious metals and minerals segment (consisting of gold, silver, platinum,

palladium, rhodium, and industrial and gem-quality diamonds).

MINING ADVANTAGE TO INDIA

SWOT ANALYSIS:

STRENGTHS:

Government Support:

The government offers an extensive array of concessions to investors in India, engaged in mining activity. Few are as

follows,

Mining in specified backward districts is eligible for a complete tax holiday for a period of 5 years from

commencement of production and a 30% tax holiday for 5 years thereafter.

Environment protection equipment, pollution control equipment, energy saving equipment and certain other

equipment eligible for 100 percent depreciation.

Source: Metals & Mining in India, November 2009

One tenth of the expenditure on prospecting or extracting or production of certain minerals during five years

ending with the first year of commercial production is allowed as a deduction from the total income.

Export profits from specified minerals and ores are eligible for certain concessions under the Income tax Act.

Minerals in their finished form exempt from excise duty.

Low customs duty on capital equipment used for minerals; on nickel, tin, pig iron, unwrought aluminium.

Large quantity of high quality reserves: India is the largest producer of mica; third largest producer of coal and lignite &

barytes; ranks among the top producers of iron ore, bauxite, manganese ore and aluminium.

Easily availability of Labors at low labor and conversion costs.

Strategic location: Propinquity to the developed European markets and fast-developing Asian markets for export of

Steel, Aluminium

WEAKNESS:

Poor employee productivity: The output per miner per annum in India varies from 150 to 2,650 tonnes compared to an

average of around 12,000 tonnes in the U.S. and Australia.

Un-skilled and inexperienced Labor force

Mining Techniques is divided into two types: surface mining and underground mining. In India opencast mining is being

preferred by manufacturers over underground mining which has led to land degradation, environmental pollution and

reduced quality of coal as it tends to get mixed with other matter

There is no complete solution to deal with the fly ash generated at coal power stations. Clean coal technologies, such

as Integrated Gasification Combined Cycle, where the coal is converted to gas, are available, but these are expensive

and need modification to suit Indian coal specifications.

Poor infrastructure facilities and obsolete Mining technologies

High rate of accidents

Lack of R&D programs and training and development, low innovation capabilities

There is limited access to capital, and mines are becoming ever more costly to discover, obtain, develop and produce.

Less operational efficiency compared to global peers. Mining costs of Indian companies are at least 35 percent higher

than those of leading countries such as Australia, Indonesia, and South Africa. To match productivity, our miners need

to invest in innovative technologies, improve processes in planning and execution of projects, and risk management

framework.

High rate of illegal mining

OPPORTUNITIES

India has an estimated 85 billion tonnes of mineral reserves remaining to be exploited. The investment gap likely to be

covered by the private sector. India welcomes joint ventures between foreign and domestic partners to mobilise

finances and technology and secure access to global markets.

Potential areas for exploration ventures include gold, diamond, copper, lead, zinc, nickel, cobalt, molybdenum, lithium,

tin, tungsten, silver, platinum group of metals and other rare metals, chromite and manganese ore, and fertiliser

minerals.

Considerable potential exists for setting up manufacturing units for value added products.

There exists considerable opportunities for future discoveries of sub-surface deposits with the application of modern

techniques. Current economic mining practices are generally limited to depths of 300 meters and 25 percent of the

reserves of the country are beyond this depth

Strengthening of logistics for Minerals distribution - In India, the logistics infrastructure such as ports and railways are

overstrained and expensive and act as bottlenecks in development. In addition, capacity addition by the Indian

Railways is necessary to increase freight capacity from the producing regions to demand centers in the northern and

central parts of the country.

Focusing on technology for future like tighter emission standards and development of inexpensive clean technologies

THREATS:

Elevated rate of accidents and poor productivity due to unskilled and inexperienced manpower

Negligible importance given to the environmental concerns

High rate of illegal mining

The extended lead times and bureaucracy associated with permits, concession, investment projects and company

registration

PRODUCTION TRENDS:

The value of metallic

minerals in 2009-10 at

32,274.29 crore

decreased by about

10.52% over the

previous year. Among

the principal metallic

minerals, iron ore

contributed 26864.84

crore, 83.24%.

METALLIC MINERALS AND ITS COMPONENTS (2009-10)

Iron ore 26,864.84 83.24%

Zinc concentrate 1,290.85 4.00%

Manganese ore 1,269.54 3.93%

Chromite 1,183.41 3.67%

Bauxite 456.36 1.41%

Copper (concentrate) 362.54 1.12%

Silver 338.84 1.05%

Gold 331.39 1.03%

Lead concentrates & tin concentrates 176.52 0.55%

Total 32,274.29 100%

27%

63%

Public Sector Private Sector

Source: United States Geological Survey

IRON ORE:

Iron is the most commonly used metal globally. It is one of the

prominent components in making steel, representing almost 95% of all

metal used per year. It is used primarily in structural engineering

applications and in maritime purposes, automobiles, and general

industrial applications (machinery). The production of iron ore was

218.64 million tones in 2009-10, which registered an increase of 2.67%

over the previous year. As shown in the chart, about 27% of the total

production was shared by Public Sector Companies like SAIL (including

IISCO), NMDC, etc. The pie of Private Sector is 63%.

Mining iron ore is a high volume low margin business, as the value of

iron is significantly lower than base metals. It is highly capital intensive, and requires significant investment in infrastructure. For

these reasons, iron ore production is concentrated in the hands of a small number of players. Regionally, nearly the entire

production of iron ore (96%) accrued from Orissa, Karnataka, Chhattisgarh, Goa and Jharkhand during the year. The remaining 4%

production was reported from Andhra Pradesh, Madhya Pradesh, Maharashtra and Rajasthan.

COPPER:

Copper is an elastic metal with high thermal and electrical conductivity. It is used as a conductor of heat and electricity, a building

material, and a constituent of various metal alloys. The key applications of copper are in electrical wires (60%), roofing and plumbing

and industrial machinery. Copper is a vital metal being used in areas such as defence, space programme, railways, power cables,

mint, Telecommunication Cables, etc. The production of copper concentrate was at 124 thousand tonnes in 2009-10 which got

decreased by about 9.48% as compared to the previous year. Copper consumption in a country is an indicator of its stage of

economic development. Per capita consumption of copper in India is in the order of 0.50 Kg as compared to 10 Kg in developed

nations.

Presently, the demand for copper is met by two major sources viz. Copper ore mined from indigenous mines and imported

concentrates. The indigenous mining activity among the primary copper producers is limited to only Hindustan Copper Limited. The

other primary copper producers in the private sector import the required mineral in the form of concentrate. However, the scenario

is being changing drastically after coming of the other two primary producers of Copper in private sector namely M/s Hindalco Ind.

Ltd. and M/s. Sterlite Industries, Jagadia Copper, Continuous Cast Rod plants of M/s TDT and M/s Finolex. The capacity for

production of primary copper in India has risen from a mere 47,500 tonnes per year till 1997 to 9,99,500 tonnes at present, resultant

to which India is now a net exporter of refined copper.

CHROMITE:

Chromite is used as a refractory material as it has

high heat solidity. As shown in the chart India ranks

second in Chromite production globally. The

production of chromite was at 3.41 million tonnes in

2009-10 which got decreased by 16.22% as

compared to the previous year. Orissa reported

almost entire output of chromite (99%) in the

country. A nominal production was reported from

Karnataka.

SAIL, IISCO,

NMDC etc…

Tata Steel, Essel Minning,

Sesa Goa etc…

44%

18% 16%5% 4% 4% 2% 7%

South Africa India Kazakhstan Zimbabwe Finland Iran Brazil ROW

Chromite largest producers across the world

18%

82%


Source: World Gold Council

Mining of chromite is majorly dominated by private sector producers

namely, Tata Steel, IMFAL, Balasore Alloys Ltd., Jindal Strips and FACOR.

Three Public Sector Companies; viz, Orissa Mining Corporation (OMC),

Mysore Mineral Ltd. (MML) and Industrial Development Corp. of Orissa

Ltd. IDCOL) together reported 18% of the total production in 2009-10.

MANGANESE:

Manganese phosphating is used as a treatment for oxidation and deterioration

prevention on steel. Manganese makes up about 1000 ppm (0.1%) of the

Earth's crust, making it the 12th most abundant element. Land-based resources

are large but irregularly distributed. About 80% of the known world manganese

resources are found in South Africa; other important manganese deposits are in

Ukraine, Australia, India, China, Gabon and Brazil. Manganese is essential to

iron and steel & Aluminium production. The production of manganese ore at

2.44 million tonnes in 2009-10 decreased by about 12.52% compared to that in

the previous year. As shown in the chart, MOIL continued is the largest

producer of manganese ore with a share of 42% of the total production in

2009-10 followed by Tata Steel (10%). Regionally, of the total production of

manganese ore in 2009-10, Orissa contributed 25%, Maharashtra 24%, Madhya

Pradesh 25%, Karnataka 13% and Andhra Pradesh 10%. The remaining 2% was

jointly shared by Goa, Gujarat, Rajasthan and Jharkhand.

GOLD:

Gold is considered valuable and highly preferred precious metal for coinage, jewelry, and other arts since long. Gold standards have

been the most universal base for monetary policies. Besides monetary function gold has other uses in dentistry, electronics & other

fields. Out of the total world resources of gold, 15 to 20 % was obtained as a by-product during extraction of other metals. South

Africa and China are the source for a large proportion of the world's gold supply, with about 50% of all gold ever produced having

OMC, MML and

IDCOL

Tata Steel, IMFAL, Balasore

Alloys, Jindal Strips & FACOR

MOIL42%

Tata Steel10%

SMIOR10%

OMC9%

R.B.S.S.D5%

Others24%

Manganese Producers

India933

China811

US195

Germany159

Turkey144 Switzerland

116

Thailand109

Vietnam100

Russia75 Saudi Arabia

72

Top 10 Gold Consumption countries (in Tons) (2011) .....India ranks first

Source: Tradingeconomics-Comex

come from South Africa. As shown in the chart, India is world's largest consumer of gold, as Indians buy about 800 tonnes of gold

every year, mostly for jewelry. India is also the largest importer of gold. Indian households hold approximately 18,000 tonnes of gold

which represents 11 per cent of the global stock.

In 2009 – 10, India produced 2106 kg

(excluding by-product gold recovery from

imported concentrates) primary gold,

registered decrease of about 13.62% as

compared to the previous year. Karnataka

was the leading producer of gold accounting

for 99% of the total production. The

remaining production was reported from

Jharkhand.

The world’s top five producing gold mining

companies include: Barrick Gold, Goldcorp,

AngloGold Ashanti, Newmont Mining

Corporation and Kinross Gold Corporation. The only gold producing mine in India is Hutti Gold Mines Limited (HGML). It has reserves

of approximately 600 tons and produces on an average 3 tons of gold a year. International gold price have touched a historical high

of 1900.65 dollars in September of 2011 and a record low of 34.90 dollars in January of 1970.

BAUXITE:

Bauxite is an aluminium ore and is the main source of aluminium. In 2007, Australia was one of the top producers of bauxite with

almost one-third of the world's production, followed by China, Brazil, Guinea, and India.

In FY 09-10The production of bauxite in India stood at 13.95 million tonnes, a decrease by 9.76% compared to the previous year. The

four foremost companies; namely, NALCO, HINDALCO, BALCO and Bombay Minerals Limited engaged in bauxite mining in the

country, jointly contributed 66% of the total production of bauxite in 2009-10. State wise, Orissa accounted for 35% of the total

output of bauxite during 2009- 10 followed by Gujarat (19%), Maharashtra (14%) Chhattisgarh (12%) and Jharkhand (12%).

LEAD CONCENTRATE

During FY 2009-10, the production of lead concentrate was 136 thousand tonnes risen by 1.74% and that of zinc concentrate at 1277

thousand tonnes reported an increase of 4.33% over the previous year. Rajasthan accounted for the entire production of lead

concentrate and zinc concentrate during 2009-10.

NON-METALLIC MINERALS

The value of production of non-

metallic minerals at Rs.4286.94

crores during 2009-10 increased

by 5.41% as compared to the

previous year. As shown in the pie

chart, Limestone is a leading

contributor with 69.66% of the

total value pie of non-metallic

minerals in 2009-10.

Limestone70%

phosphate7%

barytes5%

dolomite3%

gypsum2%garnet

2%kaolin

2%

talc/soapstone/steatite1%magnesite

1%

Silica Sand1%

non-metallic minerals6%

Non-Metallic Minerals

International gold prices for past 10yrs (April-02 to April-12)

LIMESTONE:

Limestone is used as building material, as aggregate to form the base of roads, as white pigment or filler in products such as

toothpaste or paints, and as a chemical feedstock. The production of limestone was 229 MT in 2009-10, an increase by 3.33% as

compared to previous year. Limestone is widely produced in India. State wise distribution; as much as 87% of the total output in

2009-10 was contributed by seven principal States namely Andhra Pradesh (22%), Rajasthan (20%), Madhya Pradesh (12%), Gujarat

(9%), and Tamil Nadu, Chhattisgarh and Karnataka (8% each). The remaining 13% of the total production was shared by other

limestone producing States.

About 41% of the total production was reported by 15 private sector companies. Some of them are Grasim Industries Ltd. (9%). The

Associated Cement Cos. Ltd.(7%), Ultra Tech Cement Ltd. (6%), India Cement Ltd., (5%), Shree Cement Ltd. (5%) and Birla

Corporation Ltd., Madras Cement Ltd. and Binani (3% each).

PHOSPHORITE/ROCK PHOSPHATE

Phosphate rock is used for the manufacturing of fertilizer, animal feed supplements and as industrial chemicals. For the FY 2009-10,

production of phosphorite/rock phosphate stood at 1547 thousand tonnes decreased by 14.26% compared to the previous year. The

entire production was from Public Sector. Jhamarkotra mine of Rajasthan State Mines & Minerals Limited (RSMML) alone accounted

for 88% of the total production. Madhya Pradesh contributed the remaining 12% of the production.

DOLOMITE:

Dolomite is used as an ornamental stone, as a source of magnesium oxide and in

the Pidgeon process for the production of magnesium. Dolomite is also used as

the substrate in marine aquariums. Its production stood at 5182 thousand tonnes

in 2009-10, which got decreased by 5.85% compared to the preceding year. Four

major companies together accounted for 55% of the dolomite produced in 2009-

10 as shown in the chart. The chief States which produce dolomite were Andhra

Pradesh (30%), Chhattisgarh (23%), and Orissa (18%). The remaining 29% was

contributed by Seven States during the year, namely, Gujarat, Jharkhand,

Karnataka, Madhya Pradesh, Maharashtra, Uttarakhand and Rajasthan.

KAOLIN

Kaolin is used in ceramics, medicine, coated paper, as a food additive in toothpaste, in light bulbs and in cosmetics. It is also used in

paint; in rubber, in adhesives and in the production of paper. The production of kaolin in 2009-10 was 2578

thousand tonnes which got increased by 23.73% as compared to that in the previous year. Around 50% of total output was reported

from Gujarat followed by Kerala (28%) and Rajasthan (13%).

59%41%


0%

2%

4%

6%

8%

Grasim Ind

Ultra Tech

India Cement

Shree Cement

Birla Corp Madras Cement

Binani

26%

12%9% 8%

45%

SAIL Rashtriya Ispat Nigam

South West Mining

Tata Steel Others

MAJOR DOLOMITE PRODUCING COMPANIES

Source: Coal India Limited

GYPSUM

Production of gypsum at 3.42 million tones in 2009-10 registered a decrease of 11.73% as compared to the previous year. By and

large, the entire production of gypsum was reported from Rajasthan (99%). The remaining 1% was from Jammu & Kashmir and

Gujarat. Two Public Sector Companies namely,RSMML and Fertilizer Corporation of India Ltd. accounted for almost the entire

production.

MAGNESITE

The production of magnesite was at 286 thousand tonnes during 2009-10 increased by 13.25% as compared to the previous year.

TALC/SOAPSTONE/STEATITE

The production of talc/soapstone/steatite in 2009-10 which was at 835 thousand tonnes got decreased by about 6% over the

previous year. Rajasthan, the principal State accounted for 74% of the total production in 2009-10. Five principal producers in

Rajasthan; namely, Associated Soapstone Distributing Co. (P) Ltd. (28%), Udaipur Mineral Development Syndicate (P) Ltd. (22%),

Parbatia Mines (3%) Nalwaya Mineral Industries Pvt. Ltd. (5%) and Katiyar Mining

and Industrial Corp. (4%) together accounted for 62% of the total production of talc/ soapstone/ steatite in 2009-10.

MINOR MINERALS

The value of production of minor minerals was estimated at 18734.45 crore in 2009-10. Andhra Pradesh has a share of 54% in the

value of minor minerals. Rajasthan was at second place and had a share of 16.6% in the value of minor minerals. Next in the order

was Uttar Pradesh with a share of 12.4%, Kerala 3.9%, Gujarat 3.8%, Madhya Pradesh 2.4%, Maharashtra 1.7% and Chattisgarh 1.2%.

ALUMINUM:

Aluminium is the most copious metal in the earths crust. It ranks second, next to

steel, in terms of volumes used due to its versatility. It is highly resistant to most

forms of corrosion, is non-magnetic, non-combustible, non-toxic and impervious

(hence used in the food and packaging industries) which is also a good conductor of

electricity. It is used in construction, transport- auto, aerospace, rail and marine

industries, packaging-protection, electrical uses, medicine-antacid, machineries and

Equipments and Castings of utensils. In India the electrical sector is the largest

consumer of aluminium. India has a 3.5% of the Aluminium share of the total global

production. The global aluminium production was 419.88 lakh tonnes in 2010. India

produced 15.24 lakh tonnes in 2009-10. The primary aluminium industry in India

consists of five producers viz. National Aluminium Company Limited (NALCO), HINDALCO Industries Limited, Bharat Aluminium

Company Limited (BALCO), Madras Aluminium Company Limited (MALCO) and Vedanta Aluminium Limited (VAL). Out of these

Companies, only NALCO is in the Public Sector. The price of aluminium fixed by the primary producers is generally aligned to the

London Metal Exchange (LME) prices. Global aluminium capacity for the 2010 is approximately 50.30 million tonnes, while

production was 41.9 million tones, which indicates a capacity utilization of around 80% in 2010 compared to 75% in 2009.

COAL

The Indian coal industry is the world’s third largest in terms of

production and fourth largest in terms of reserves. As shown in

the chart, Indian energy demand is largely met by coal. About

70% of the total coal produced is used for electricity generation

and the remaining by the steel, cement and other heavy

industries. Coal is also used as fuel for domestic purposes. The

Domestic76%

Export24%

Aluminium Sales

2% 2%9%

36%

51%

Hydro Nuclear Natural Gas oil Coal

% SHARE of PRIMARY ENERGY RESOURCES

Source: Coal India Limited

Coking13%

Non Coking

87%

coal reserves of India up to the depth of 1200 meters have been estimated by the Geological Survey of India at 276.81 billion tonnes

in January 2010. Coal deposits are chiefly located in Jharkhand, Orissa, Chhattisgarh, West Bengal, Madhya Pradesh, Andhra Pradesh

and Maharashtra. The Lignite reserve has been estimated at around 39.90 billion tonnes for Mar-2010. The major deposits of Lignite

reserves are located in the state of Tamilnadu.

Features of Indian coal Deposits:

1. Limited reserves of coking coal

2. High ash and low calorific values

3. Divergence in location of deposits and Major consumption centres

4. High cost of transport

5. Coal mining was nationalised between 1971 & 1973. Coal India was formed as PSU in Nov 1975.

Major Players

Coal India Limited: A public sector undertaking with 390 mines, it

controls 88% of the domestic coal production.

Singerani Collieries Company: It operates through a network of 50

mines.

Minerals and Metals Trading Corp: It is responsible for the conversion

of imported coal into coke for metallurgical and industrial purposes.

Key Issues of India Coal Industry:

Despite having one of the largest reserves, the Indian coal industry does not hold a position in the league of global energy

suppliers. This can be attributed to the soaring domestic demand.

To meet this requirement, substantial public investment is needed. Even the private players would need to deploy

advanced mechanisms to increase production levels.

Coal washeries are also under pressure. The onus of producing quality coal lies with this segment. It is required to sustain

high quality levels within stringent environment regulations.

Excessive government regulation continues to be a major concern for the Indian coal industry. The existing legislative

framework restricts the private sector in the establishment of coal washeries and regulated mining for specific industries,

such as power and fertilizer units.

Pit Head Price43%

Royalty/Cess/Sales

Tax13%

Transportation44%

LANDED PRICE OF COAL

MINERAL RESERVE SCENARIO IN INDIA AND WORLD

CONTRIBUTION AND RANK OF INDIA IN WORLD PRODUCTION OF PRINCIPAL MINERALS AND METALS

Commodity Unit of Quantity World Prod India Prod Contribution % India's Rank

Mineral Fuels

Coal and Lignite million tonnes 6938 566 8.1 3rd

Petroleum (crude) million tonnes 3714 33.6 0.9 25th

Metallic Minerals

Bauxite '000 tonnes 199000 14048 7.06 6th

Chromites '000 tonnes 18700 3372 18.0 2nd

Iron Ore million tonnes 2248 213 9.5 4th

Manganese Ore '000 tonnes 33400 2396 7.2 5th

Industrial Minerals

Barytes '000 tonnes 7100 2137 30.1 2nd

Magnesite '000 tonnes 24300 285 1.2 11th

Rock phosphate '000 tonnes 159000 1450 0.9 14th

Talc/Steatite/Pyrophyllite '000 tones 7400 1063 14.3 2nd

Mica tonne 300000 1243 0.34 15th

Metals

Aluminium '000 tonnes 36900 1302 3.5 7th

Copper (refined) '000 tonnes 18300 500 2.7 10th

Steel (crude) million tonnes 1224 63 5.1 3rd

Lead (refined) '000 tonnes 8900 197 2.2 10th

Zinc (slab) '000 tonnes 11400 658 5.7 3rd

Source: World Mineral Production 2005-2009, British Geological Survey *- Figures related to 2009.

Country Year 2009 Reserves

China 120,000 36,000,000

India* 2,700 3,100,000

Brazil 650 48,000

Malays 380 30,000

US - 13,000,000

Australia - 5,400,000

CIS – - 19,000,000

Other NA 22,000,000

Total 124,000 99,000,000

Source: Mineral Commodity Summaries, 2010

MAJOR PLAYERS IN THE MINING SECTOR

MINING SECTORS

MAJOR PLAYERS

Exploration and Production of Coal/Lignite Coal India Ltd.,

Neyveli Lignite Corporation

IISCO

Exploration of Metals National Aluminium Company Ltd. (NALCO)

Bharat Aluminium Company Ltd. (BALCO)

Mineral Exploration Corporation Ltd. (MECL)

Bharat Gold Mines Ltd.

Oil and Natural Gas Corporation Ltd. (ONGC)

Ircon

Hindustan Zinc Ltd.

Hindustan Copper Ltd. (HCL)

Sikkim Mining oration

Iron Ore Sector National Mineral Development Corporation (NDMC)

Kudremukh Iron Ore Company

Steel Authority of India Ltd. (SAIL)

Orissa Mining Corporation

Bauxite Mining and Aluminium Production National Aluminium Company Ltd. (NALCO)

Copper Ore Mining Hindustan Copper Ltd. (HCL)

Rock Phosphate and Barytes Mining

Rajasthan State Mines and Minerals Ltd.

Andhra Pradesh Mining Development Corporation

GLOBAL MINING COMPANIES OPERATING IN INDIA MOUs IN THE FIELD OF GEOLOGY & MINERAL RESOURCES

MOU with Chile

MOU with Nambia

MOU with Ontario

MOU with Mozambique

MOU with Malawi

Co-operation with Mongolia

Co-operation with Columbia

Co-operation with Afghanistan

Co-operation with Quebec Province, Canada

Transworld Garnet Co. Canada

Meridian Peak Resources Corpn Canada

Pebble Creek Resources Ltd. Canada

BHP Billiton Australia

Rio-Tinto Minerals Development Ltd. UK

Metdist Group UK

Phelps Dodge Exploration Corpn USA

De-Beers Consolidated Mines Ltd. South Africa

Anglo American Exploration (India) BV Netherlands

KEY GROWTH DRIVERS

The metals and mining sector is dependent on other sectors such as power, infrastructure, automobiles, etc., for end consumption,

and the growth of the sector is directly dependent on the growth of these end-user segments.

Power sector

The power sector accounts for a large share of the consumption of aluminium and coal in the country.

The Electricity Act 2003, the National Electricity Policy and the National Tariff Policy have created a favorable business

environment for attracting investments in the power sector.

Focus on transmission and distribution (T&D) and opening up of the power sector to the private sector is expected to

notably increase power generation, transforming into amplified demand and more consumption of put in material such as

coal and aluminium.

Infrastructure sector

Our construction segment is measured to be the second largest in the nation after agriculture, employing approximately

14% of working population. There has been rising demand for construction bustle across all the segments including

infrastructure, real estate and industrial construction.

According to the census, the India’s housing scarcity was estimated at 25 million. Important infrastructure projects such as

bridges and urban construction, power projects, railways, airport modernization, real estate development, etc. provides

attractive business opportunities for steel manufacturers.

Automotive sector

India’s automotive sector is a major consumer of steel and aluminium. The constant growth in this sector is driving the

demand for both steel and aluminium. India is the world’s second-largest manufacturer of two wheelers and the fifth-

largest manufacturer of commercial vehicles. India is also among top five exporters among the Asian countries. The state’s

auto-component segment is well established, with more than 500 companies in the organized sector and about 10,000

firms in the unorganisedsector.

Cement sector

The cement sector in India is one of the major consumers of coal. The demand for cement is steadily increasing with the

rise in construction activity, thereby driving the demand for coal.

KEY ISSUES (RISKS) WITH INDIAN MINING INDUSTRY:

One of the tough concerns in India's mining sector is the lack of evaluation of nation’s natural resources. Various areas

remain unexplored and the mineral resources in these areas are yet to be assessed.

Issues related to Mining safety and ensured regulated mining

Large scale displacements, resistance of locals

Environmental matters like pollution, corruption, deforestation, dangers to animal habitats etc.

private sector participation needs to be increased

High risk and size of the capital required not available in India

The mining industry in India is momentous for its economic

development. The sector makes available raw materials to other basic

industries like Auto, Power, Infrastructure, construction etc. and also

contributes to India’s exports. Not only that, it also provides an

employment opportunities. It has a strong multiplier effect on the rest

of the economy as each penny engendered from it generates 2.4 times

the direct and indirect output in the economy. India is chiefly self-

sufficient in minerals which comprise key mineral raw materials to

industries like thermal power generation, iron & steel, ferro-alloys,

aluminium, cement, various types of refractories, chemicals like caustic

soda, soda ash, calcium carbide, etc. By and large, self-sufficient in

coal (with the exception of very low ash coking coal) and lignite among

mineral fuels, bauxite, chromite, iron, manganese ores, ilmenite and

rutile among metallic minerals. Despite high degree of self-sufficiency,

some quantities of rare minerals were imported to meet the demand

for either blending with locally available mineral raw materials and/or

for manufacturing special qualities of mineral-based products.

States like Jharkhand, Orissa and Chhattisgarh are especially dependent on mining for their economic development. However, the

mining industry in India is not able to apprehend its full potential; it contributes around 2% to the overall GDP. During FY04-09, while

the GDP in India grew at a CAGR of 8.5%, the mining industry registered a slower growth at 5.7%. The key cause is the low driving

force on exploration which accounts for less than 0.5% of the global exploration expenditure of USD 12.6 billion in 2008. However,

supported by low cost advantage, strategic location and an untapped mineral base, the industry has the potential for elevated

growth and attracting investment to the exploratory stage of mining. Soaring long-term demand from the steel industry is expected

to boost iron ore industry whereas positive trends in power sector will propel demand for coal. Key drivers for growth will include

booming construction, automobiles and power industries which are expected to support the Mining sector. With the general

consent is moving towards higher mechanization & technologies, increased participation of private sector, increased productivity

and less state interference to nourish and grow this sector.

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