Coordination-Cum-Empowered Committee (CCEC) Meeting Ministry of Mines, Government of India March 13, 2015 Rules for Implementation of MMDR Amendment Ordinance, 2015

2 Implementation of MMDR Amendment Ordinance,2015  SBICAPs - ‘Transaction Advisor’ for implementing provisions of MMDR Amendment Ordinance, 2015  Auction Mechanism Develop auction methodology/procedures for major minerals Develop benchmark(s) for Geological and Feasibility Reports Develop Model Tender Documents and Model Contracts Organise Stakeholders consultations Assist few State Governments in carrying out a few auctions  Rule Modifications

3 Proposed Auction Mechanism and Legislative Framework

4 Mineralisation Requirements Mining Lease (ML)  Level of exploration Detailed (G1) or General (G2)  Pre-feasibility needed Local Geology, Mineralogy, Host Rock Mining- pre-production plan Identified potential environmental constraints Infrastructure Land  Block size and exploration level?  Different minerals? 4 type of deposits  Who will determine/ validate mineralisation ?  Estimating Average Grade ? Issues in Mineralisation Composite Lease (PL-cum-ML)  Preliminary Exploration (G3) - Inferred (333) Mineral Resource

5 Valuation of Identified Mineral Block Estimated Value Total Estimated quantity of reserve/resource ‘X’ 12-month average of IBM notified State level price of mineral (average grade)

6 End Use Reservation  Proviso to Section 10B(6) “…Reservation for a particular mine or mines for a particular end use…”  End Use definition 100% end use of the mineral excavated  Participation up to 1.25 times the mineral requirements for 50 years for the installed capacty & under installation(Signed MoU).  Issues in End Use Reservation End user does not use all grades – mineral conservation. Joint ventures Stand alone Beneficiation plants

7 Bidding | Pre-requisites Pre-requisites for auctioning by State Government  Block Identification  Evidence of Mineral Contents  Requirements for earmarking for end use industry  In principle statutory clearances Forest(Stage I) Wildlife, etc.  In principle consent of land owners  In principle consent for transfer of Revenue land for start of mining / prospecting operations  Area not reserved under Section 17A

8 Bidding Mechanism- Mining Lease (ML) Category A (>500Cr) & B (5-100Cr)  Similar to coal auction model  Ascending forward auction  Multistage process – Technical Bid with Initial Offer Auction with floor price of Highest Initial Price Offer of Eligible Bidder Only Top 50% bidders ranked on Initial Offer eligible to participate in Auction – to give Final Offers. Highest final offer Category C(<100Cr) & D(Small Deposit<5ha)  Ascending forward auction  Multistage process – Technical Bid with Initial Offer Auction with floor price of Highest Initial Price Offer of Eligible Bidder  Eligibility restricted to locals, tribals, co-operatives.

9 Bidding Parameters - ML Mining Lease (ML) & Composite Lease (PL-cum-ML): Revenue Share or Fixed Rate/ Tonne – Choice to States Normative Production Sharing Model (NPS Model)  Bidders would be required to quote a per cent of production as the bidding parameter.  Payable Amount equal to the multiple of: 1. Actual production from the mine; 2. % quoted by the Successful Bidder 3. Average price of the mineral as published by IBM for a period of twelve months immediately preceding the month of payment. Fixed Rate With Escalation Model (RWE Model)  Bidders would be required to quote a rate per metric tonne as the bidding parameter.  Payable amount equal to the multiple of 1. Rate quoted by the Successful Bidder as escalated on a year on year basis as per the [escalation index] 2. The actual production from the mine

10 Bidding Mechanism- PL-cum-ML  Category 1: All notified minerals & Minerals other than notified minerals, if the Value of Resources is more than 200 Cr  Ascending forward auction NPS Model only  Category 2: Minerals other than notified minerals, if the Value of Resources is equal to or less than 200 Cr  Single price bid auction

11 Bidding | Performance and Payments Mining Lease (ML)  Upfront Payment – 1% of Valuation– payable in 3 installments  Performance Security – 2% of Valuation – Bank Guarantee (BG)  Royalties as applicable  Performance commitments (minimum production, etc.)  State Government to take over other minerals extracted from the block  Quarterly payments Composite Lease (PL-cum-ML)  No upfront premium at PL stage  No Royalties at PL stage  Performance commitments (exploration)  Performance Security – 0.5% value of block at PL stage - BG  At ML stage – all payments/ milestones as per ML  Quarterly payments at ML stage

Thank You