Why investors did not pick up Jammu and Kashmir lithium block in auction

• The Ministry of Mines was forced to scrap the auction for the lithium block in Jammu and Kashmir’s (J&K’s) Reasi district for the second time, following weak investor response.
• This comes nearly 18 months after the announcement of the discovery of an inferred deposit of 5.9 million tonnes of lithium ore, pitched as among the largest deposits in the world, in Reasi.

Why were the auctions scrapped?

• The first auction was annulled after less than the required minimum of three bidders cleared the first round.
• Another auction was annulled last week, after failing to clear the first round despite the minimum bidder requirement being waved off this time around, as per auction rules. The second attempt saw no qualified bidders at all.
• “Critical Minerals are [being] auctioned in the country for the first time. Like any other auction… the required number of responses may or may not be received,” the Mines Ministry said when sought for comments. With respect to the J&K lithium block, the “ministry is examining whether further exploration is required”.

Why have investors kept their distance so far?

• Mining industry difficulties around extracting and processing lithium from hard rock pegmatite deposits - like the ones found in Reasi - combined with underdeveloped mineral reporting standards used in tender documents played a significant role in deterring investors.
• According to a document with the Mines Ministry, during the first auction attempt, prospective bidders had a number of complaints - from the bid document having limited information of the block to the block being too small “to apply modern mineral systems-based tools”. Another query asked if any beneficiation study had been conducted to assess the feasibility of extracting and processing lithium from the resources identified in J&K, to which the ministry replied in the negative.

Why is there a need to improve reporting standards?

• According to experts, India’s current resource classification rules largely based on the United Nations Framework Classification for Resources (UNFC) do not provide sufficient information to determine the economic viability of mining a mineral block.
• Clarity on the economic viability of mining lithium is especially important as the extraction process is expensive, and with global lithium prices falling significantly over the past few months, miners are increasingly eager to maintain their margins.
• “In the absence of resources/reserves reports compliant to internationally recognised reporting standards, the auctioning system is not going to yield the desired results. Many allottees of critical mineral blocks may not even start the work despite being successful in the auction,”.
• NACRI has developed and maintained the Indian Mineral Industry Code (IMIC) since 2019, which is recognised by CRIRSCO as a compliant code.

What can we expect next?

• In case the government decides to move ahead with further exploration of the Reasi block, before another auction attempt, new findings may provide more clarity to potential investors on the nature of resource present, which at present is only “inferred”.
• Alternatively, the government can choose to skip the auction process and reserve the area for the undertaking of prospecting or mining operations through a government-owned company, as allowed under the Mines and Minerals (Development and Regulation) (MMDR) Act.
• “As per the critical mineral blocks are concerned… 14 blocks out of the 38 blocks have been successfully auctioned and preferred bidders have been declared,” the Mines Ministry said in its response. In other words, 24 of the 38 blocks could not be auctioned off in the first attempt. The ministry has re-offered some blocks in a second attempt, like the Reasi lithium block, and intends to re-offer many more.

What is the status of other lithium deposits in India?

• Last month, the Mines Ministry successfully auctioned off India’s first lithium block in Chhattisgarh’s Korba district. The bid was won by Kolkata-based Maiki South Mining Pvt Ltd on June 24 for an auction premium (a percentage additional charge on the hammer price) of 76.05%.
• Also in Korba, just south of this auctioned off lithium block, a private exploration company funded by the National Mineral Exploration Trust (NMET) has found hard rock lithium deposits ranging from 168 to 295 parts per million (ppm).
• Further exploration could yield an even larger reserve estimate.
• Lithium exploration in other states, however, has not been as fruitful, meeting minutes of a top NMET committee revealed.
• In Manipur, efforts to explore lithium in Kamjong district were stalled due to resistance from locals in the area. “The committee decided to drop the item for the time being due to local issues,”
• In Ladakh’s Merak block, very close to the border between India and China, a lithium exploration funded by NMET yielded “results (that) are not encouraging”...