No white gold rush: Why interest in Kashmir’s lithium reserves is lukewarm

The lack of bidders at the first lithium auction, which ended in the second half of January, was a sobering reality check. (Tarun Kumar Sahu/Mint)
The lack of bidders at the first lithium auction, which ended in the second half of January, was a sobering reality check. (Tarun Kumar Sahu/Mint)

Summary

  • Last year, the Geological Survey of India announced it had established lithium reserves of 5.9 MT in Jammu & Kashmir’s Reasi district, putting India among the top 10 countries with such reserves. That’s a big deal. However, private companies have been reluctant to bid. We tell you why.

New Delhi: On the morning of 9 February 2023, there was an unusual buzz at the A.P. Shinde Symposium hall of the National Agricultural Science Complex in New Delhi. That day, the Geological Survey of India (GSI), the country’s premier mineral exploratory body, was to propose its annual programme for the upcoming field season (2023-24) besides sharing various findings of the last five years with respective state governments.

It’s a routine yearly exercise that does not attract much attention, but GSI officials knew things would be different this time. They had stumbled on something nobody could ignore.

The agency shared 16 geological reports and 35 geological memorandums with state governments covering 51 mineral blocks across 11 states. Further, it also handed over 17 reports of coal and lignite with total resources of 7,897 million tonnes (mt) to the ministry of coal.

But one report overshadowed everything else. The GSI, for the first time, had established lithium reserves of 5.9mt in the Salal-Haimana area of Reasi district in Jammu and Kashmir. The finding was based on exploration carried out by the agency in the shadow of the pandemic in 2020-21 and 2021-22. In one stroke, this put India among the top 10 countries with lithium reserves.

The impact was immediate. At least half a dozen companies said they were interested in developing the precious resource.

Suitors included high-profile names such as Sajjan Jindal’s JSW Group. Jindal told the Financial Times in April 2023 itself that he would “100 percent bid for the lithium blocks" a claim he would reiterate in March 2024. Hindalco Industries, Ola Electric, Vedanta Group and Shree Cement were some of the other interested parties.

Sajjan Jindal, the chairman of JSW Group.
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Sajjan Jindal, the chairman of JSW Group.

State-run Coal India Ltd, forever looking to diversify beyond coal, also showed interest. In its annual report for 2022-23, the company said: “We are exploring the acquisition of lithium, cobalt, and nickel assets abroad and have amended our Memorandum of Association (MoA) to include non-ferrous and critical minerals. We are currently identifying suitable overseas assets for mergers and acquisitions."

Buoyed by such interest, the government moved quickly. Critical minerals, including lithium, were off limits for private miners in the country back then. In August 2023, the rules were amended to let private miners bid for these resources. By November, the stage was cleared for auction of the resource. The reserves put up for bidding in Kashmir were among 20 blocks comprising minerals worth an estimated 45,000 crore.

“For the first time ever, we have identified a critical and deep-seated mineral. We have not just identified but we have also put it up for auction today," said Prahlad Joshi, former minister of mines, on 29 November 2023.

Lithium is a critical component in the global war against climate change and forms the bedrock of the batteries that power industries such as energy, consumer electronics and transport.

The lack of bidders at the auction, which ended in the second half of January, was a sobering reality check. The reserves in Kashmir received only two bids, forcing the government to cancel the auction—less than three bidders makes the process invalid. Mint could not ascertain the identity of the two bidders—the government does not reveal the names in case of a failed bid.

Lithium is a critical component in the global war against climate change and forms the bedrock of the batteries that power industries such as energy, consumer electronics and transport. The metal’s demand has zoomed in the last decade, earning it the moniker ‘white gold’, and is set to multiply manifold over the coming years.

For an import dependent economy like India, the discovery of the reserves is a big deal, justifying the hype around its discovery. Why then is the industry reluctant to walk the talk?

 Prahlad Joshi, the former minister of mines.
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Prahlad Joshi, the former minister of mines. (X)

Unproven Reserves

The biggest factor deterring most companies from the bidding process is that the reserves are unproven and highly speculative. There are four stages of exploration for any mineral deposit—G4, G3, G2 and G1—as classified by the United Nations International Framework Classification for Reserves/Resources (UNFC-1997). The reserves in Kashmir are classified under G3, the second stage of preliminary exploration, after reconnaissance.

G3 findings are inferences about mineral resources, where quantity, grade and mineral content have been estimated with a low level of confidence. Following this, geologists undertake more intense exploration to reach the G2 stage of general exploration, and then the final G1 stage of detailed exploration. It can take years to decades to get from one stage to the next.

The deposits in Kashmir, for example, were first mapped and reported by the GSI a quarter century ago, in 1999. This was the G4 stage. It has taken nearly 25 years to get to G3 from that stage. In the next stage, G2, more studies are done to estimate the minerals’ shape, size and grade. The process gets expedited from one stage to the next but still takes years. The final G1 stage of detailed exploration, where characteristics of the deposit are established with a high level of accuracy, is when the mineral is any closer to actual extraction.

“International experience shows it takes, on average, 16.5 years from the discovery of critical minerals to production. In addition, J&K’s resources are currently at an inferred G3 stage, so further exploration will be needed to determine the extent of the reserves that are economically recoverable," said Siddharth Goel, lead, energy programme at the International Institute of Sustainable Development (IISD).

Typically, bidding is most intense for G1 minerals, so the lack of bidders comes as no surprise for experts within the mining community.

International experience shows it takes, on average, 16.5 years from the discovery of critical minerals to production. —Siddharth Goel

“Bidding for resources with preliminary exploration is considered very risky as there is no certainty either on the quantity or quality. Companies find it difficult to put a fair value of the resource based solely on GSI’s assumptions," said B.K. Bhatia, additional secretary, Federation of Indian Mineral Industries (FIMI), an industry body.

Lack of Know-how

The other big reason for the tepid interest is lack of technical know-how within the industry when it comes to mining lithium. Most of the lithium being mined globally today is found either in the form of brine—accumulation of saline groundwater enriched in lithium—in South America, or in the form of hard rock, in Australia. The lithium in Kashmir is neither brine nor hard rock but clay deposits mixed with other minerals, including bauxite. Commercial-scale extraction and production of such deposits is yet to be tested globally.

“While the technology for extraction of lithium from hard-rock and brine deposits has matured, the technology for extraction from clay deposits remains untested globally. Given these challenges, the J&K lithium block received less than three bids," said Girishkumar Kadam, senior vice president at Icra, a rating agency.

India’s domestic mining industry is largely made up of local companies, including public sector undertakings. Multinational firms such as Rio Tinto and BHP have tried to enter the market but with little success. Their absence has resulted in a lack of technical expertise, especially in the area of exploration and prospecting.

“Global mining companies haven’t had a good experience in India. We auction our mines here unlike the ‘first come, first served’ system followed by most other mineral-rich countries like Australia and Canada. Global firms are not very comfortable with this given the uncertainties and risks involved in mining," said Hanuma Modali, managing director, Deccan Gold Mines, a gold exploration company.

Sensitive Location

A third stumbling block is the location itself. Situated 50 kilometres from the line of control in the country’s most politically volatile state, Kashmir is one of the least mined regions in the country. Added to that, the Himalayas are an ecologically fragile mountain range as the land subsidence in nearby Ramban earlier this year and Joshimath in Uttarakhand last year show.

Lithium mining can take a heavy toll on the environment—it takes about 2.2 million litres of water to extract one tonne of the metal. Any mining efforts run the risk of resistance from not just the green lobby but also the local population.

“Large resource discoveries in ‘peripheral’ regions far from the capital and locus of government power are often politically destabilizing, especially when those resources are discovered in areas dominated by ethnic or religious groups that face significant discrimination," said Cullen S., senior fellow at the Peterson Institute for International Economics, a Washington-based think tank.

Lithium is the Future

There is no denying the importance of the soft shiny grey metal that every country is hankering for today. Due to its ability to pack energy, lithium is the key component in batteries that power modern appliances, ranging from smartphones, laptops and smartwatches to wearables and tablets. Beyond appliances, the metal has applications in other industries, such as the power sector, where it supports stationary grid storage for solar and wind energy and transport for electric vehicles (EVs).

With no production in the country, this is a massive deficit area for India. Lithium-ion imports shot up from just $94 million in 2014-15 to nearly $3 billion in 2023-24 (see table). This is only the start and as demand for electronics, renewable energy and electric vehicles (EVs) rises, so will the clamour for lithium.

According to the International Institute for Sustainable Development (IISD), a Canada based independent think tank, demand for lithium in India is expected to grow from just 1,634 tonnes in 2022 to between 60,000 and 93,000 tonnes by 2050 (see table). Currently, the consumer electronics sector accounts for more than half of this demand, but this will change in future. The big driver could be EVs. From under 25% today, EVs could account for nearly 75% of the demand.

“The estimated demand of critical minerals like lithium, nickel and cobalt is half of the reserves that are already known and economically recoverable today. Therefore, the abundance of these raw minerals does not limit a smooth transition to EVs. However, local discovery, like the one in Kashmir, is important due to strategic reasons," said Amit Bhatt, India managing director, International Council on Clean Transportation (ICCT), an American think tank.

“While the discovery is great news, further exploration is needed to better understand the quality and quantity of the deposit, and identify whether the material can be mined economically using the processes available today," said Bhatt.

Where does all the lithium come from right now? While the South American lithium triangle of Bolivia, Chile and Argentina accounts for more than half of the global reserves, production is concentrated in Australia, Chile and China. But having the resource and mining isn’t enough. Lithium also needs to be refined and that is where China has a stranglehold, accounting for two-thirds of world’s refining capacity.

Not surprisingly, around 75% of imported lithium ion in India comes from China. Alongside mining the reserves in Kashmir, India would also need to set up sufficient refining capacity to be truly self-reliant.

“India will need to secure access to capital and technology to extract lithium as well as build processing and refining infrastructure," said Goel of IISD. “The uncertainty surrounding the scale of the reserves, coupled with the long-time lag before production commences, means that India cannot be complacent in sourcing lithium externally to meet its clean energy manufacturing ambitions."

Even if everything eventually falls into place, it will be years before lithium production takes off in India. But it will be a start.

A file photo of a lithium deposit in La Corne, central Quebec.
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A file photo of a lithium deposit in La Corne, central Quebec. (AFP)

Second time lucky?

Fortunately, despite the failure of the auction in the first round, neither the government nor the industry has given up on Reasi. The reserves were listed again in the third tranche of auctions (for critical minerals) that concluded last month. In the run up to the auctions, senior leaders of the industry again made positive noises.

“We have taken the documents for many of the mines that are coming…the auctions are happening. We are interested, we have looked at lithium, graphite, nickel and copper, which seems to come with nickel in some mines," Satish Pai, managing director of Hindalco Industries, told Moneycontrol in February 2024, less than a month after the failed lithium auction.

“Mining is a part of JSW Group’s activity and lithium is very important. We will certainly participate when the government comes for the auctioning of these mines," group chairman Sajjan Jindal said once again, in March.

With the new government in, the results of the lithium auction could potentially be one of the first big announcements. When that happens, Kashmir’s white gold may finally have some prospectors.

Mint reached out to the Vedanta Group, Hindalco, JSW Group and Shree Cement for their comments but did not receive any response.

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