Kolar gold mines to be revived after nearly 2 decades, but how feasible is mining?

The mining operations at Kolar Gold Fields were shut down in 2001 as the public sector mining company was incurring huge losses.
Kolar gold mines to be revived after nearly 2 decades, but how feasible is mining?
Kolar gold mines to be revived after nearly 2 decades, but how feasible is mining?
Written by:

Nearly two decades after the gold mines shut down in Kolar, the Union government has decided to revive the mining operations. On Wednesday, Union Minister for Mines, Pralhad Joshi announced that the Union government has decided to revive Bharat Gold Mines Limited (BGML), the public sector company, which was in-charge of gold mining operations in Kolar Gold Fields. 

The Union government has charged the Minerals Exploration Corporation Limited with conducting a feasibility study, to re-evaluate whether mining operations are feasible and to analyse whether reviving the mines can be turned into a profitable venture by using new technologies. Sources with MECL said that a preliminary feasibility study was submitted to the Union Ministry of Mines in August this year. Senior officials with the Department of Mines and Geology in Karnataka said that Pralhad Joshi and Chief Minister BS Yediyurappa had discussed the issue in late August and had decided to revive the mining operations as the study had indicated profitable operations. 

The feasibility study

Speaking to TNM, an official with the MECL said that the feasibility study was to be submitted six months ago but the process of prospecting was taking more time as many areas within KGF had been mined extensively and in these areas, it would not be feasible to extract gold ore as the cost of extraction would be higher than the profits. 

“A lot of water has accumulated in between and in order to drill deeper, we would have to suction the underground water, which is not only inadvisable keeping in mind the environmental factors but the cost of extracting the ore would also be higher. We have identified a few areas but we are still in the process of identifying the type of gold vein and the movement in areas where shallow mining activity had taken place,” the MECL official said. 

Officials with the Department of Mines and Geology said that southern and south-eastern regions like Chikkaragunta of KGF have been identified as feasible areas for mining. Shanmukha, the department official in-charge in KGF, told TNM that one of the reasons why mining operations shut down on February 28, 2001, was due to lack of adequate technology to optimise the cost of mining. Besides, the gold extracted from KGF was sold exclusively to the Reserve Bank of India at rates less than the market value, which had rendered the operations unprofitable. 

“The gold mining activity became unprofitable 11 years before the mines were shut down. The recurring losses and lack of technology to optimise costs was becoming a burden on the taxpayer,” he said. 

Will new technology help optimise costs?

A senior official with MECL said that using laser mining technology, mining operations could once again begin and the Karnataka government would make profits close to Rs 1,100 crore as the technology would cut out many operational costs that existed in 2001. 

Besides, the Karnataka government is planning on not just selling the gold exclusively to RBI, but fall in line with the operations at Hatti Gold Mines, where the gold is sold to buyers at market value. 

“The gold prices are very good right now. A long-standing demand in KGF was to generate employment. Successive governments have not done this but reviving it will help this cause,” the senior official with the Mines and geology Department said. 

Dr Unnikrishnan, former Chief Finance Manager and advisor to the Union Ministry of Mines, with 39-years experience in gold mining operations, said that reopening the deep mines will not be a simple task as the essential infrastructures like hoists, winding engines, runners, underground air conditioning and the special power generation plant in the existing plant needs a complete revamp. “The cost of exhaustive repairs and the technical know-how for this has to be optimised first. Bharat Gold Mines Limited had always maintained data on proven ore reserve. At present price, much of this will be viable. Location of these mines and access points are being identified To my knowledge, using laser beam  technology for extraction of gold from the ore body will ensure a 95% recovery ratio. This can minimise extraction costs,” Dr Unnikrishnan said. 

The history of BGML and its operations

The gold mines in Kolar are located about 100 km away from Bengaluru city. When it was operational, it was the world’s second deepest gold mine with mining activity being conducted at a depth of 3,000 ft. The mines were active for 121 years and closed in February 2001. 

In 2001, the Board for Industrial and Financial Closure had called for shutting down the mines. However, in 2009, a single-bench judge of the Karnataka High Court issued an order permitting the sale of BGML by inviting global tenders in order to revive the company. The issue was appealed in the Supreme Court in 2013, which permitted the Union government to revive the mines itself. After its closure, in 2013, the Union government had sought to sell BGML to private entities. The Union government had then directed BGML to conduct a study of dumps and mines. In 2019, the Union government submitted to the Supreme Court that it would take nine months to complete a feasibility study, which was being conducted by MECL. In August this year, the report was submitted to the government, after which the announcement was made by the Union Minister. 

However, sources with the Department of Mines and geology said that optimisation of operations at BGML could occur efficiently only if the company is privatised. “Instead of using public funds to revive it, if it is privatised and the government enters into a profit-sharing agreement with the company, the government stands to benefit more as the taxpayers will not have to bear operations costs. But this too is a point of contention right now,” the senior official said.

Related Stories

No stories found.
The News Minute