India's Critical Mineral Auction: A Rocky Road Ahead

Despite auctioning 38 critical mineral blocks, India is unlikely to benefit by 2030 due to exploration challenges and technological hurdles. The auction includes lithium blocks in Jammu & Kashmir and Chhattisgarh, facing issues in commercial viability. The government is also seeking overseas assets to ensure mineral security.

Icra on Wednesday said that benefits from the 38 critical mineral blocks that have been put on sale are not likely to accrue in the current decade ending 2030 as the mines are not fully explored.

''The preliminary stage of exploration for most of the domestic blocks that are currently being auctioned suggests that their commercialisation and associated benefits are unlikely to fully accrue in the current decade ending 2030. Therefore, India's downstream manufacturing facilities are likely to remain exposed to potential future supply shocks of critical minerals in the intervening years,'' Icra said in a statement.

The government is auctioning two lithium blocks in the ongoing auctions. The one in Jammu & Kashmir has clay deposits. While the technology for extracting lithium from hard rock and brine deposits has matured, the same for extracting lithium from clay deposits remains untested globally. Given these challenges, the J&K lithium block received less than three bids, resulting in a re-auction of the block, Girishkumar Kadam, Senior Vice-President & Group Head, Corporate Sector Ratings, Icra said.

On the other hand, the lithium block being auctioned in Katghora, Chhattisgarh is a hard rock deposit. The ore here belongs to a broader class of lithium-bearing minerals named lepidolite. China is a large producer of lithium from lepidolite ores. Therefore, competition to acquire the Katghora mine is likely to be much higher compared to the J&K block.

However, given the inferior grade of explored domestic ores, advancement in mineral beneficiation/ processing technology remains critical for commercialisation of domestic critical mineral resources, Kadam added.

Apart from developing domestic critical mineral resources, the government is parallelly looking at acquiring overseas assets from key resource-rich regions like South America, Australia, and Africa as an alternate measure to ensure mineral security.

Khanij Bidesh India Ltd, a joint venture of public sector enterprises NALCO, Hindustan Copper, and Mineral Exploration Company, recently became the first domestic player to acquire overseas lithium brine assets in Argentina.

The country's lack of reserves of critical minerals necessary for the green transition has resulted in 100 per cent import dependence for minerals like lithium, cobalt, and nickel. Therefore, the Centre recently started the process of auctioning 38 blocks of critical minerals. Moreover, with the risk profile of exploration activities being significantly higher for deep-seated, critical minerals over superficial or bulk minerals, the mines ministry introduced the auction of 'Exploration Licence' to enable a more attractive risk-return framework for bringing specialised overseas mining companies.