National Mineral Policy 2006 - Department of Mines

Thus, in the case of mining companies, the regulations specifically require the companies tohave a geological report (recommending completion of work programme) or positivefeasibility study or production levels exhibiting a likelihood of positive cash flows. Sincethese are particular disclosure requirements suitable for mining companies only, it helpsinvestors in evaluating a mining company on different parameters compared to othercompanies. For example, while existing companies are valued on the basis of profit earningmultiples or enterprise value to EBITDA (earnings before interest, tax, depreciation andamortisation) multiples, mining companies can be valued on the basis of their proved,indicated, or inferred reserves. Unless separate disclosures of geological data are mandatedby the exchange, the investors may not be able to obtain the data on their own and investaccordingly.OPTIONS FOR RAISING FUNDS FOR INDIAN EXPLORATION/PROSPECTING COMPANIES7.7 The Indian market segments that potentially can provide funds to Indianexploration/prospecting companies in the mining sector are the Indian private equity marketand the Indian stock exchange.Private Equity Market7.8 The Indian private equity market has shown a rapid growth over the last few years.Private equity fund investors have invested US$ 1.7 billion in India in 2004 and are estimatedto have invested a further US$ 2.2 billion in 2005. Private equity investors invest in a varietyof companies across their maturity stage:(i)Start-up capital: They provide start-up capital to early stage companies.The typical size of their investment is in the range of US$ 1 million to US$5 million. Currently, about 5 per cent of the private equity funds in Indiaare invested in such early stage companies. 1 Most of these investments arein Information Technology (IT) and IT-enabled services (ITeS), media andentertainment, and pharmaceutical sectors, and not in the mining sector.Globally, there are Special Mining Funds that invest in mining companies1 Source: Business World, 27 March 2006.139