MINING MAR KE T O P P O R T UNI T Y P R O F I L E | I N D I A E X E C U T I V E S U M M A RY

India has always been home to a variety of metals and minerals and it maintains an unchanging position as the largest producer of sheet mica, the world’s third largest producer of coal, the fourth largest producer of iron ore and the fifth largest producer of bauxite. In addition to these natural resources, India also hosts significant reserves of copper, zinc, gold and about 26 other metallic and minor minerals. This is not news since mining has existed in India for the last 6,000 years with the oldest lead and zinc mines located in Karnataka, the oldest copper mines in Khetria and the oldest gold mines in Karnataka as well. The mining industry globally and specifically in India is experiencing sharp fluctuations over the last few years. These changes have been triggered by the economic slowdown, escalating fuel prices, competition from countries like China, floods in Australia that affected transportation costs and India’s own fiscal policies— resulting in major changes to India’s mining industry. JUNE 2011-05-25

In order to adapt to these changes, Indian mining companies are changing from being price-takers to price-makers. With iron ore, coal and gold prices firming up, underpinned by a strong global demand, most commodities are beating past commodity cycle pricing trends. Mining transactions have seen a sharp rise since 2005, with global merger and acquisitions (M&A) deals spiking to US$80 billion in 2010. Consequently, private equity (PE) players are becoming increasingly attracted to the large amount of short-term cash being generated by mining companies. With high mining costs in developed countries like Canada and the U.S., assets in India are being acknowledged as an attractive alternative to meet a growing global demand. In India, mining companies realize that digging deeper into Indian soil is not enough to meet this demand, paving the way for a new trend where acquisitions and joint ventures are emerging. Therefore, mining companies are sourcing raw materials globally with Indian miners open to travelling the world in search of acquisitions. These companies are ensuring that by exporting finished products to an eager market, India still continues to lead as a primary source of metals and minerals worldwide.

This report digs deeper into the nature of the Indian mining industry to explore its real potential for companies in India and worldwide that want to share in its success.

MARKET OVERVIEW

The foundation for industrial development in any country rests on its metallurgical and mineral supply. India has always had an abundant supply of these natural resources which has ensured there is no lack of raw materials like coal, petroleum, steel, copper, aluminum and other metals. Products mined in India include a total of 84 minerals consisting of four fuels, 49 nonmetallic industrial minerals, 11 metallic minerals and 20 minor minerals.

trend. For example, in 2010 metal prices dropped as a result of the global downturn. Indian iron ore producers were impacted on the international front by China’s growing popularity as a preferred supplier by countries like Australia. The diamond export market experienced a drop of nearly 25 per cent of its workforce in 2010 and Indian diamond exports of cut and polished diamonds fell by 31 per cent to US$5.2 billion. If external forces are beyond the industry’s control, its natural growth is also being impacted by the inadequate railway network which in turn affects cost efficiency triggered by higher transportation costs. Even more challenging is the sector’s lack of natural resource assessment. Several areas continue to remain unexplored and the mineral resources are not completely assessed. The distribution of minerals in the known areas is uneven and varies quite drastically from one region to another. In recent times, the mining industry has also been facing issues of large-scale displacements, dangers to animal habitats, environmental issues like pollution, corruption and resistance of locals and deforestation. However, these deterrents are falling by the wayside as relaxed statutory and regulatory policies are paving the way for innovation and efficiency improvements. Several countries are viewing the Indian landscape with interest, and partnerships and collaborations in uncharted areas are increasingly more common.

OPPORTUNITIES

Figure 1: Source: Department of Mines, Government of India As a 6,000-year-old industry, mining in India leads in the global production of mica and ranks among the top 10 for the production of chromite, coal, iron ore, bauxite, manganese and aluminium. India’s coal sector is expected to reach US$40 billion by 2020 while metal ore is predicted to reach US$15 billion by 2016. Oil and natural gas is now a US$10 billion industry and mining equipment is moving towards US$5 billion per year. Keeping this trend in mind, in 2008 financial services company Edelweiss predicted that by 2012 this industry will reach US$30 billion — around 2.5 per cent of India’s GDP. The industry is typically characterized by a large number of small mines that operate as proprietary or partnership ventures and in 2009 nearly 3,000 of these reported mineral production. However, it is the public sector that plays a dominant role in mineral production accounting for 67 per cent or approximately US$15.67 billion of the industry’s total value. Until 2009, the industry displayed optimistic trends moving towards higher mechanization, increased participation of the private sector, and focused more on productivity and less on statutory interferences. However, in the last year or so, both internal and external forces are working against this natural JUNE 2011-05-25

Over the last few years, the Indian mining sector has witnessed a dramatic number of mining-centric M&A and fund-raising activities as mining contractors look for ways to raise funds for large mining projects. Even as joint ventures and alliances continue to be forged between mine lease owners and mining contractors creating opportunities for private equity, the Indian government is helping out by offering a wide range of concessions to investors. While attractive regulations are a bonus, the real draw lies in its low labour and conversion costs, large quantities of natural, high-quality reserves and a healthy export market. However, one disadvantage is that that many mines are stuck with old technologies and processes. These companies acknowledge that they need to do a complete transformation to gradually align their operating costs with international standards. Costs for Indian mining companies are at least 35 per cent higher than those of leading coal exporting countries such as Australia, Indonesia and South Africa. To ensure maximum productivity, these companies need to invest in new technologies, improve processes in the planning and execution of projects and institutionalize a comprehensive risk management framework. These factors are opening up numerous opportunities for international companies with strong expertise in these areas.

1. ESTABLISHMENT OF JOINT VENTURES WITH INDIAN MINING FIRMS TO DEVELOP VIRGIN MINE PROPERTIES India has approximately 85 billion tonnes of mineral reserves that remain unexplored. Along with coal, oil and gas reserves, the mineral inventory in India includes 13,000 deposits/prospects of 61 non-fuel minerals. Spending on mining is a small when compared to other competing emerging mining markets and the investment gap is likely to be covered by the private sector. India is also now turning towards joint ventures between foreign and domestic partners to mobilize finances and technology to secure access to global markets.

INDIAN MINING INDUSTRY STRENGTH Iron ore India has 25 billion tonnes of iron ore resource. Average metal content of 60 per cent as compared to the world average of 40-45 per cent.

metals, chromite and manganese ore, and fertilizer minerals. While India has 7.5 per cent of the world’s total bauxite deposits, aluminum production is only three per cent of world capacity, indicating the need for new capacities. The main opportunities in the mining sector (excluding coal and industrial minerals) are in the development and production of surplus commodities such as iron ore and bauxite, mica, potash, a few low-grade ores, mining of small gold deposits, development of placer gold resources located on the frontal belt of the Himalayas, known mining deposits of economic and marginal categories such as base metals in Bihar and Rajasthan and exploitation of laterite for nickel in Orissa, molybdenum in Tamil Nadu and tin in Haryana.

Australia’s construction and contract mining group Leighton Holdings have two contracts worth AU$1 billion for developing and operating a coal mine project in Jharkhand, India.

Coal

2. EXPORT OF COAL TO INDIA — QUANTITY

At 58 billion tonnes, India has seven per cent of the world’s coal reserves of high ash content and relatively lower quality. Bauxite Proven gibbsite reserves of nearly 3.3 billion tonnes — easy conversion to alumina.

India meets about 70 per cent of its coking coal needs through imports from countries including Australia, Indonesia and the U.S. India’s coking coal requirements could increase by nearly 22 per cent to 85.34 million tonnes in 2011-12. India imported 36.1 million tonnes of coking coal in 2010, a 33 per cent annual jump and Australia was by far the biggest supplier of coking coal to India, contributing 84 per cent with U.S. imports accounting for five per cent, New Zealand was at three per cent and South Africa at 2.3 per cent. Local power producers and miners are now scouting for coal assets in Indonesia, Australia, Mozambique and the U.S. to ensure committed supplies and guard against price fluctuations. This is a good time for countries with strong coke assets to forge relationships with Indian mining companies.

Copper Large gap in copper mining capacity — most copper producers import concentrate. Zinc Total lead-zinc ore reserves of 523 mt. 8-10 per cent metal content compared to world average of five per cent. Demand for zinc expected to increase at CAGR of 12 per cent over the next 8-10 years. Gold Gold ore reserves of 19.3 mn tonnes. Primary gold production equalled 1,788 kg in 2009-10. Diamonds Total diamond reserves of 1.2 million carats; production in 2009-10 of 4,503 carats. Potential areas for exploration ventures include gold, diamond, copper, lead, zinc, nickel, cobalt, molybdenum, lithium, tin, tungsten, silver, the platinum group of metals and other rare JUNE 2011-05-25

While the rest of the world struggles to attain pre-global financial crisis steel demand levels, India surpassed that level in 2009. Steel demand in India, as measured by apparent steel consumption (estimated as crude steel production plus imports minus exports), grew by 12 per cent CAGR over FY03-04 to FY10-11 to attain 72 Mt. India is currently producing around 70 Mt of steel. This is expected to surpass 200 Mt by 2020, on a conservative estimate. As the steel production is set to double in the coming three years, the coking coal demand would automatically double in the same period. In 2008-09, with finished steel production of about 59 Mt, India required around 41 Mt of coking coal, of which 24 Mt was met through imports. This as steel demand grows 10 per cent annually. Indian steel makers are trying to pump in more coking coal from Canada and the U.S. as traditional markets like Australia face challenges in meeting supply demands.

3. EXPORT OF COAL TO INDIA — QUANTITY

Coal-based methane exploration:

Coal mining in India is associated with 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. Traditionally, opencast mining has been favoured over underground mining. This has led to land degradation, environmental pollution and reduced quality of coal as it tends to get mixed with other matter. Most types of coal available in India are high ash and there is considerable scope in coal washing and beneficiation. India is also a major exporter of iron ores and industry is looking to improve by converting to value-added products before export.

CBM as an energy alternative is of immense value to a country like India and for investors the returns can be substantial if they invest in CBM exploration. The Indian government has already awarded around 26 CBM blocks in different coal fields of the country, however, CBM exploration technology is relatively new to India and there is limited expertise or equipment to realize its full potential. As a result, there are literally limitless possibilities to capture a significant market share in India’s CBM drilling and exploration equipment market.

Bharat Earthmovers Ltd. (BEML), a public sector unit of the Ministry of Defence, manufactures dozers, dumpers, graders and scrapers under license from LeTorneau Westinghouse, U.S. and Komatsu, Japan. Hindustan Motors’ Earthmoving Equipment Division shares technical collaboration with Terex, U.K. for the manufacture of wheel loaders, dozers and dumpers. This factory has since been taken over by Caterpillar for its Indian operations. L&T started manufacturing hydraulic excavators under license from Poclain, France. In 1980 and 1981, two more units, Telcon and Escorts JCB commenced manufacture of hydraulic excavators (under license from Hitachi, Japan) and backhoe loaders (under license from JCB, U.K.) respectively. Escorts JCB has been taken over by JC Bamford Excavators Ltd. U.K. in 2003 and is now called JCB India Ltd. Volvo has a manufacturing unit in Bangalore. Terex Corporation, U.S. and Vectra Ltd. U.K. have formed a joint venture to manufacture construction equipment in India with an investment of US$12 million. Other equipment in the Terex range are being sold through its agents in India. Technology leaders like Case, Caterpillar, Hitachi, Ingersoll-Rand, JCB, John Deere, Joy Mining Machinery, Komatsu, Lieberr,

However, India has still not been able to develop a comprehensive solution to deal with the fly ash generated at coal power stations through use of Indian coal. 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 creating opportunities for global companies in this field.

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Mining equipment: Global demand for mining equipment is projected to increase more than four per cent per year through 2013 to exceed $60 billion, triggered by increasing demand for commodities like iron ore and copper. The energy demand is also not decreasing and the two countries currently in the forefront to meet this demand are India and China. These countries are creating a demand for mining equipment and fuelling a demand for mined products globally, thereby creating opportunities for machinery producers. Innovation in the mining sector has distinctive features. It is complex, given the many dimensions of the production process from exploration to extraction and processing to resource management, recycling and mine restoration. With the downward trend in international metals and minerals prices through the nineties, many companies have placed greater emphasis on research projects related to improvements in the efficiency of processes and somewhat less emphasis on the development of new products. It is believed that about 10 per cent of expenditures are devoted to the development of existing or new products. Almost 50 per cent is devoted to developing or improving processes and about 10 per cent to developing or improving technical services. However, the bigger challenge for Indian mining companies in optimizing existing products and processes is that equipment manufacturers in India do not offer technology innovations because of low volumes and uncertain demand even though these companies have the manufacturing facilities and design. Some of the other reasons for not manufacturing the latest equipment are: 1. The Indian market cannot absorb the cost of the latest technology. 2. If manufactured in India for export markets, most of the components will have to be imported. 3. Equipment adhering to the latest emission norms cannot be used since the quality of fuel they require is not yet available in India. At the same time, off-highway construction and mining equipment do not need stringent emission norms in India.

In India, opencast mining is definitely more popular than underground mining. Hence, for opencast mining equipment like draglines, dozers, dumpers, shovels and excavators, the technology level of manufactured equipment needs to be on par with international standards. In the case of underground mining, the production technology is not yet entirely mechanized. There are two different methodologies of production — bord and pillar mining and longwall mining. The equipment required for bord and pillar mining such as load haul dumpers and side discharge loaders are being manufactured in India. However, the full range is not yet being manufactured. This obvious gap is creating opportunities for global companies to expand their market reach. 4. RESEARCH AND DEVELOPMENT IN THE MINING INDUSTRY India’s numerous technology research institutes are working on energy-related R&D. However, there is a possibility that they are operating in a fragmented fashion. The government may get improved recoveries on its investment by concentrating on a few important technology areas. To begin, focus may be applied for tighter emission standards and development of inexpensive clean coal technologies like the extraction of methane from coal deposits. Since R&D is a long- term and synergistic investment, several mining companies in India have their own technology centres. The objective of exploration technologies is to locate large, high-grade reserves with minimal ground disturbance and disruption to the environment. While larger companies are more open to new technologies, smaller companies simply do not have the know-how, resources or bandwidth to try out technology solutions that will help them to explore at lower costs, increased productivity and minimal damage to the environment. This results in limited mine exploration which unfortunately affects their growth.

based surveying information that can operate in real time when ore is extracted. Planning and visualizing techniques, and the use of satellites from optical and radar satellites to map geological formations and new imaging technologies are currently needed. Global companies that are pioneering telemining solutions like underground telecommunication systems, positioning and navigating systems, engineering, monitoring and control systems, teledrifting and teleproduction would benefit from partnerships with Indian mining companies. IT can process vast amounts of information creating opportunities to integrate entire operations from exploration to processing to marketing and sales. Integrated systems can link accounting systems, dispatching GPS systems, production and inventory control. The fully integrated upstream mining processes will allow for better production co-ordination, shipping and marketing. Process control systems are widely used in other manufacturing industries, but underground mining has to this point been considered too complex to make use of the systems. Recent improvements in information and communications technology will allow underground monitoring of the production cycle. Simulation studies can produce optimum crew structures, shift schedules and use of equipment, and identify bottlenecks in the process. The benefits are greater productivity from improved focus on priorities, better communication among crew and clearer expectations. There is a need for on-board sensors and off-board diagnostics such as vibration analysis and vital-signs monitoring that predict equipment failures and optimally schedule maintenance. Operational capabilities need to be extended and downtime minimized with new and more robust engineering and materials such as better lubricants and “hot-swappable” components. With the increasing use of outsourcing for maintenance, costs can be reduced considerably with electronic transmission of diagnostic data. Technology innovation offers a key opportunity for external sources.

Canadian mining industries are leading innovators in telemining. In 1996, Inco, Tamrock OY, Dyno Explosive Group and CANMET initiated a five-year research alliance called the Mining Automation Program (MAP) to develop telemining. MAP is being tested in Inco’s Research Mine in Copper Cliff, Ontario. The Canadian Mining and Metallurgical Bulletin (January 2001) describes a new generation of remote-control LHD that uses anthropomorphic tele-presence to improve efficiency and safety in telemining. The LHD senses and presents feedback in a human-like fashion.

There is an obvious growing demand for exploration innovations including global positioning systems (GPS), airborne geophysics and low-impact seismic methods that are environmentally friendly. Many of these companies will benefit from Dynamic GPSJUNE 2011-05-25

5. KNOWLEDGE TRANSFER There are a number of critical proprietary items that have to be imported by most manufacturers. These items may have a reduced duty to make the cost of equipment cheaper and competitive in the export market. In spite of the sharp hike in steel prices, profitability has been better in the last two years due to increased sales, better prices, strengthening of the rupee and continued efforts to reduce production costs. The cost of production needs to be further reduced and hence companies need to work upon human resources management to improve employee productivity. This can be tackled by proper training of manpower and proper use of the right talent in the right place which is currently lacking in the manufacturing industry. Average employee wages need to be increased to attract and retain talent.

COLLABORATION 1. Wholly Owned Subsidiary 2. Joint Venture With Indian Mining Companies 3. Liaison Office 4. Partner With a Local Trading Office ATTRACTION FOR INDIAN MINING COMPANIES IN B.C. 1. Coal Import 2. Joint Ventures to Develop Mines 3. Technology Transfer 4. Knowledge Transfer Attraction for B.C. in the Indian Mining Sector 1. Establishment of Virgin Mines in India 2. Export of Coal to India 3. Mining Equipment 4. Research and Development

R E G U L ATO RY A N D CO M P E T I V E ENVIRONMENT Indian mining law requires that mineral concessions are granted to companies registered in India under the Companies Act, 1956, irrespective of the pattern of foreign holding therein. Companies incorporated under the act can be “public” or “private” companies, with or without limited liability. The limited liability structure can be achieved through limitation by shares or by guarantee. Even an unlimited company can be incorporated under the Indian Companies Act. Foreign direct investment is freely allowed in the mining sector. The foreign direct investment can be approved either through the automatic route under powers delegated to the Reserve Bank of India (RBI) or by the government. Government approvals are granted on the recommendations of the Foreign Investment Promotion Board (FIPB). FDI of up to 100 per cent is allowed with prior FIPB approval in mining and mining separation of titanium bearing minerals and ores, its value addition and integrated activities subject to the Mines & Mineral (Development and Regulation) Act, 1957. FDI is not permitted in mining of “prescribed substances” as listed in a notification issued by the Department of Atomic Energy. The automatic approval for 100 per cent foreign direct investment is now applicable to all non-atomic minerals including diamonds and precious stones and metallurgy and processing.

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Existing companies that may not be in the mining sector but that have an expansion program in the mining sector, and the existing companies in the mining sector, are also eligible for automatic approval for induction of foreign direct investment if they propose to increase the equity base in line with the increase in the equity level, and bring in remittance in foreign currency for that purpose. In a significant relaxation of the general policy governing the process of automatic approval for foreign direct investment for the mining sector, the automatic route for foreign direct investment and/or technology collaboration is also available to those who have or had a previous joint venture or technology transfer agreement. Investors in such cases will have to file a declaration to the RBI that they have no existing joint venture for the same area and/or the mineral concerned. The RBI has given permission to Indian companies to accept investment under the automatic route without obtaining prior approval of RBI. The investors are required to notify the regional RBI officer of receipt of inward remittance within 30 days and file required documentation within 30 days of issue of shares to the foreign investor. This facility is available to the non-resident Indians and overseas corporate bodies as well. For proposals not fulfilling the parameters for automatic approval, i.e. foreign direct investment exceeding the prescribed ceilings for automatic approval, or in cases where the proposal is for acquisition of the existing shares, and in cases where investors have an existing joint venture for the same area and/or the mineral concerned, government approval is necessary. Indian companies receive automatic approval for technology transfer agreements with foreign companies provided that the terms of payments satisfy the following conditions specified by the government: 1. The lump sum know-how fee payable does not exceed US$2 million. 2. Royalty payments do not exceed five per cent of domestic sales and eight per cent of exports. Payments are subject to an overall ceiling of eight per cent of total sales over a 10-year period from the date of agreement or over a seven-year period from the date of commercial production. These payments may be net of Indian taxes. The Mines and Minerals (Regulation and Development) Act, 1957 lays down the legal framework for the regulation of mines and development of all minerals other than petroleum and natural gas. The central government set out the Mineral Concession Rules, 1960 for regulating grants of prospecting licences and mining leases for all minerals other than atomic minerals and minor minerals. The state governments have set the rules for minor minerals. The central government has also laid out the Mineral Conservation and Development Rules, 1988 for conservation and systematic development of minerals. These are applicable to all minerals except coal, atomic minerals and minor minerals.

Recent reforms in the mining sector: •

Open import of mining equipment is allowed.

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State governments are entitled to give permission to private players in all the non-fuel non-atomic minerals except 10 minerals that includes iron ore, bauxite, copper ore, manganese ore and gold.

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State governments are allowed to renew/transfer licenses/ mining leases even for the 10 scheduled minerals without referring to the central government.

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For exploration and mining of diamonds and precious stones, FDI of up to 74 per cent is permitted under the automatic route.

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For exploration and mining of gold and silver and minerals other than diamonds and precious stones, FDI is allowed up to 100 per cent under the automatic route.

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For metallurgy and processing, FDI is permitted up to 100 per cent under the automatic route.

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Private Indian companies setting up/operating power projects as well as coal and lignite mines for captive consumption are allowed FDI up to 100 per cent.

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100 per cent FDI is allowed for setting up coal processing plants subject to the condition that the company shall not do coal mining and shall not sell washed coal or sized coal from its processing plants in the open market and shall supply the washed or sized coal to those parties that are supplying raw coal to processing plants for washing or sizing. For FDI proposals not meeting the above mentioned guidelines, approval will be given by the Foreign Investment Promotion Board keeping in mind parameters such as project size, commitment of external resources for funding project costs, the company’s mining track record and financial strength, level of technology and India’s Partner Equity holding.

M A R K E T E N T RY S T R AT E G Y

Canadian mining companies can establish either comprehensive or project-based business joint ventures with local firms. Partnership with local companies is recommended in the early phase of market entry for small and medium enterprises. If the response from key clients is favourable, it is also worthwhile to open an office in India. International companies need to understand the government JUNE 2011-05-25

system of operation, therefore, working with a local liaison or trading office can be a shortcut for these companies. A foreign company has the following options as part of its market entry strategy: Wholly owned subsidiary company: This is treated as an Indian company for all regulation purposes. At least two shareholders are mandatory for a private limited company and seven for a public limited company. Joint venture with an Indian partner: Preferably with majority equity participation. This is also treated as an Indian company. Such strategic alliances are forged with local companies having substantial experience and expertise in the relevant line of activity. Liaison office: This is treated as a foreign company. Its role is limited to collecting information about the possible market and providing information about the company to prospective clients. Such offices act as “listening and transmission posts,” and are not allowed to undertake any business activity or earn any income in India unless authorized by the Reserve Bank of India. Project office: This is treated as a foreign company, intended for implementing specific projects. Branch office: This is treated as a foreign company, with the majority engaged in manufacturing, trading and consulting, and requires prior approval from the Reserve Bank of India. Canadian companies planning to export mining equipment to India are advised to check with India’s Directorate General of Mines Safety (DGMS) if its approval is required for their specific mining equipment. A list of equipment approved and the procedure for obtaining approval is also available on the website: http://www.dgms.net/approval_list.htm. Partnering with a local liaison or trading office: The Indian mining industry actively seeks foreign equipment. Procurement by Indian public and private sector mining companies is generally based on an open tender system with global tenders for large projects. The tender system generally entails a two-bid system, a technical bid and a commercial bid. The commercial bid is only open for bidders that meet the technical requirements. Price, quality, track record, conformity to specifications and ease of maintenance are some of the key factors taken into consideration in selecting a vendor. As the tender system requires constant interaction with the buyer, it is advisable to retain a local agent or representative to keep abreast of the latest developments. Companies planning to market products that require regular maintenance or availability of spares should be sure to convince the buyer of availability of training and after-sales service. In major tenders for procurement of mining equipment, Canadian

companies may consider bundling their offer with an attractive financial package to gain a competitive advantage. Some foreign companies already have either technical collaborations or joint ventures with Indian mining equipment manufacturers. Mining has been classified as a manufacturing activity under the Export Promotion Capital Goods (EPCG) Scheme. Capital goods imported for mining would qualify for reduced rates of customs duty subject to certain export obligations.

FOREIGN MINING COMPANIES IN INDIA •

Pebble Creek Resources Ltd., Canada,

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Meridian Peak Resources Corp., Canada

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Anglo American Exploration (India) BV, Netherlands

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Met Dist Group, U.K.

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Phelps Dodge Exploration Corporation, U.S.

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Transworld Garnet Co. Canada

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Rio-Tinto Minerals Development Ltd. U.K.

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BHP Billiton, Australia

Direct Investment: India’s Foreign Direct Investment (FDI) policy states that inflows have been permitted up to 100 per cent exemption under the automatic route omitting atomic minerals and fuel minerals making it easy for global investors who plan to enter the Indian mining sector. 1. The exploration and mining of diamonds and other precious stones have been permitted FDI inflows up to 74 per cent. 2. 100 per cent FDI has been permitted to silver and gold mining. 3. Automatic approval for FDI Inflows have been eased for those areas that have or have had an experience in the mining industry as a JV concern or any other way. 4. FDI will be permitted up to 100 per cent in accomplishing power projects. 5. Coal and lignite’s set up by Indian concerns are exempted from FDI caps. 6. FDI Inflows are permitted up to 100 per cent in establishing coal processing units provided the company is not involved in coal mining.

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C A S E S T U DY

Recent memoranda of understanding (MOUs) between Canada and India should facilitate greater access for Canadian companies to investment and other opportunities in India’s mining sector. An MOU focused on “developing and reinforcing cooperation in the fields of earth sciences and mining” has been signed between Canada’s Department of Natural Resources and India’s Ministry of Mines. The MOU establishes a framework for co-operation in areas such as exploration, technical and environmental matters, and the encouragement of improved market access and bilateral investment. Another MOU was signed between India’s Ministry of Mines and Ontario’s Ministry of Northern Development, Mines and Forestry. This MOU indicates a desire on the part of Ontario and India for developing and reinforcing their cooperation in geology and mineral resources. It is intended to promote opportunities for mineral development and investment between the two jurisdictions, and provides for co-operation on a broad range of mining sector activities, such as geosciences development, mineral exploration, mine development, mines rehabilitation, health and safety, and value-added processing. An MOU similar to the two above is expected to be signed soon between India and Quebec. In November 2010, in a bid to strengthen the mining accord signed between Ontario and India, a delegation from the Canadian province, headed by the mines and forestry deputy minister of Ontario and nine mining supply and services companies visited India. The delegation was focused on encouraging collaboration between the companies of the two countries and to share technologies, services and expertise, according to Deputy Minister, David O’Toole. “There is a direct relationship between the needs of the Indian mining industry and the kind of services we provide,”

he told reporters at a press briefing. O’Toole also said that Ontario especially was looking for public-listed privatepartnerships between the two states and also for mine acquisitions in the resource-rich province. Indian mines minister B. K. Handique and his counterpart from Ontario signed an MOU in July 2010 to promote research, collaboration and mutual investment in the minerals sector. Rather than letting it remain just a government-togovernment initiative, the Ontario government is keen to involve private sector participation in its ventures as well. The Ministry of Mines and the Department of Natural Resources, Canada entered into a co-operation program in geosciences by signing an MOU in April, 2003. A Joint Working Group (JWG) was formed to implement the MOU and five meetings have been held so far. The fifth meeting was held on May 27, 2008 in Canada. With a view to enhance the co-operation program between the two countries a Memorandum of Understanding was signed between India and Canada on June 27, 2010, for co-operation in the field of geology and mineral resources during the visit of India’s Prime Minister to Canada.

K EY CO NTAC TS

Asia-Pacific Business Centre Suite 288 - 800 Hornby Street (corner of Robson and Hornby) Vancouver, B.C. V6Z 2C5 Tel: 1-604-660-9727 Toll free: 1-888-880-ASIA (2742) www.britishcolumbia.ca [email protected] British Columbia Trade and Investment Representative Office #660/1, Akshaya, First Floor 100 Feet Road, Indiranagar Bangalore - 560 038 Tel #s +91 80 41161216 / 40933650 [email protected]

LIN K S AND R E F E R EN C ES

http://www.dhi.nic.in/MINING-CONSTN-EQUIPMENT.pdf http://www.pressreleasesworld.com/the-indian-mining-sectormarket-opportunity-and-entry-strategies-analyses-and-forecaststo-2015/ http://fedmin.com/html/kot.pdf http://www.scribd.com/doc/54961455/3/Major-TechnologicalAdvances-in-Mining http://www.cci.in/pdf/surveys_reports/mineral-mining-industry. pdf http://www.indianmba.com/Occasional_Papers/OP126/op126. html http://business.gov.in/Industry_services/mines.php http://www.docstoc.com/docs/46527739/MINERAL-ANDMINING-INDUSTRY-IN-INDIA

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