Amid soaring demand that is pushing up copper prices to record levels, the long-abandoned Rakha mine in Jharkhand has suddenly become a must-have property.

Public sector? Hindustan Copper Ltd had surrendered several mining permits due to stagnant copper prices throughout the 1990s and rising costs. Among the mines was Rakha, on the south-eastern border of this mineral-rich state.

In 2003, the year Hind. Copper surrendered the lease on Rakha mines, prices were at $1,500 a tonne levels. The Central government had to bail out the firm to pay for voluntary retirement of 2,000 employees at the mine.

In the race: Barfanisai president Desh B. Sikka.

Now, with global prices rebounding to $7,000 levels, Hind. Copper wants the mine back. But so do many others, including a firm backed by investors as far away as Canada.

How the state government chooses the recipient of the mine’s licence will test policies governing both mining and foreign investment. Mining is essentially a deregulated sector in India, but copper mining has largely remained under government control.

A boom in power and infrastructure projects as well as growing demand for electrical appliances is driving copper demand. Hind. Copper is the third largest producer of copper, and although its output is a fraction of Hindalco Industries Ltd and Vedanta Group’s Sterlite Industries (India) Ltd, it is the only one with mines within India. Until 1997, Hind. Copper was the only company that even produced refined copper from ore deposits.

Hind. Copper chairman Sat-ish Gupta announced recently that the firm will enter into a joint venture to raise funds to develop new mines. He didn’t return a call for comments.

But Gupta will face stiff competition from Mira Explorations Pvt. Ltd, a company backed by a non-resident Indian in Canada. In hearings in November and earlier this month in the state capital of Ranchi, the New Delhi-based Mira stressed to state authorities that it has “ready cash" to invest once it secures licences.

Mira has a financial commitment of $759 million (Rs3,006 crore) from the Commonwealth Business Council’s investment fund, of which $675 million is earmarked for mine development and $67 million for other development. It is a joint fund of nearly 60 nations, including India and Canada, that invest in infrastructure.

The NRI backer is veteran miner Desh B. Sikka, whose family owns Mira. He is raising funds through the Montreal counterpart, Barfanisai Enterprises Inc. Ironically, Sikka, the 81-year-old president of Barfanisai, discovered a copper mine for Hind. Copper in 1970—at Malanjkhand in Madhya Pradesh—before migrating to Canada. While working for the National Mineral Development Corp. in the early 1960s, he found the large Kudremukh iron ore mine in Karnataka.

Hind. Copper and Mira are also among the four bidders for the Chapra-Sideshwar block, an adjoining virgin reserve of 25mt. Other bidders include the less experienced Jharkhand State Mineral Development Corp. Ltd and East Coast Mining Pvt. Ltd, which has applied for a small portion of the 581ha area.

Many of the players are hoping that besides copper, their exploration will yield other high-priced metals that commonly occur together under the earth’s crust, such as nickel, used in stainless steel, and cobalt, an essential input for alloys and cancer technology.

At least nine firms have applied for reconnaissance permits, or preliminary survey licences, for a larger 2,730 sq. km area. They include Jindal Steel and Power Ltd, and Adi Gold Mining Pvt. Ltd, whose finances are supported by Canadian investors. Mira has applied for 1,000 sq. km and has earmarked $17 million for this.

Current mining laws say such permits are awarded to the first to apply. But the new mining policy, which is yet to get cabinet approval, suggests allowing several firms to explore and the firm that emerges with the most detailed report gets priority to conduct a detailed investigation to see if the mine is profitable.

Increased demand for copper has resulted in a surge in imports of metal concentrates, or the refined product extracted from ore, of 91% over three years. While the industry has seen a slowdown from the telecommunications sector, which is replacing copper cables with fibre optical ones, it is bracing itself for more demand from the power sector.

“At present, India is not self-sufficient in copper and imports will continue to rise until economical reserves are found and mined," said Vineet Nigam, vice-president of rating fi-rm?Icra?Ltd. He?said?prices?look strong for the next few months.

The return of Hind. Copper, which posted losses until 2004 and generated more than Rs1,000 crore in revenues in 2005-06, is viewed sceptically as a potential clash of public and private interests.

India has been making grand efforts to boost foreign direct investment in the mining industry, and states such as Jharkhand have pinned much hope for revenues and jobs on the sector.

In July, the cabinet approved Hind. Copper’s restructuring plans; the company will be enhancing its equity base by Rs78.50 crore, through a preferential allotment of 157 million equity shares to the government. Of this, Rs50 crore will be in lieu of the debt owed by the company to the government and hence a conversion of debt into equity.

According to a company official who did not want to identified, it will be able to adjust its losses by March.

But Mira hopes Jharkhand, after further hearings, rules in its favour before then. “India is on the low horizon among investors because of its complex laws," says Sikka. “There is no reason for the government to change course midstream. Let the public sector compete with private sector."