National Mineral Policy 2006 - Department of Mines

undertaking prospecting and mining, even in respect of areas prospected by private sectorinvestors.1.28 The NMP states that the states and Centre will play their regulatory roles in theirrespective domains. In fact, one of the most serious concerns expressed in the manypresentations before the Committee relates to the confusion between the relative roles of thestates vis-à-vis the Centre. While the issue of value addition has been posed as a separateterm of reference for this Committee and will be dealt with separately, there are other areaswhere the states disregard the spirit of the MMDR Act. These mainly concern statutory andprocedural issues in the NMP. It is necessary to ensure that states do not make laws, rules,and guidelines that are not in harmony with the Central laws and national policy.1.29 The NMP commits the State to facilitation of finance for mine development andexploration. However, financing of exploration projects carries with it the element of risk andreturns are not always guaranteed. The economics of mining is a little more complicated thanthat of industry generally because prior to investment finance, risk capital is needed forexploration. This needs to be in the nature of venture funding because finds in the form ofadequately large ore bodies may not be forthcoming. Hence, operations have to be carried outon a large enough scale to enable set-offs (i.e. of no-find operations against finds). It is due tothe uncertainty in finding economically viable ore bodies that exploration projects facedifficulties both on the equity and debt front. It is, therefore, necessary to promote suchfinancing proactively by encouraging venture capital.1.30 For encouraging private sector initiative in the matter of raising risk finance forprospecting, the Committee found the Canadian model to be very attractive. Canada, which isknown to be the main mining based economy of the world, spends more on exploration thanany other country. Mining in Canada has grown as a result of investment in mining byfinancial institutions and institutional investors, such as investment funds (both debt andequity), through stand alone small- and medium-scale exploration companies known asjuniors. These companies, numbering in the hundreds, are specialists with state-of-the-arttechnologies in detailed exploration and, to some extent, in mine development but not inmining proper. They raise finance from the financial markets for taking up a prospectingproject. The end product is the data in respect of a mineable ore body, which is then sold tointerested miners along with the ML. Variations of the model are also available, where, for17