New Royalty Rates for Strategic Minerals

October 12, 2023

The Indian government approves an amendment to determine royalty rates for vital minerals: lithium, niobium, and rare earth elements (REEs). This decision follows the removal of six minerals, including lithium and niobium, from the list of ‘specified’ atomic minerals, potentially opening doors for private sector participation through mineral concessions auctions.

Expanding Mineral Access

These regulatory changes build upon earlier efforts to streamline mining leases and licenses for 24 critical minerals, essential in supply chains for electric vehicle batteries, energy storage devices, and high-end motors.

Lithium’s Importance

In February, India identified substantial lithium resources in Jammu & Kashmir, marking a significant development for the country. Lithium is a critical component in rechargeable lithium-ion batteries, powering electric vehicles, laptops, and mobile phones.

Aligning with Global Norms

The amendment to the Mines and Minerals (Development and Regulation) Act, 1957, aligns India’s royalty rates with international standards. This shift creates opportunities for commercial exploitation through auctions facilitated by the central government or states, making auctions more attractive to bidders.

Competitive Royalty Rates

After the Cabinet’s decision, lithium mining will incur a 3% royalty based on the London Metal Exchange price, while niobium will also have a 3% royalty calculated on the average sale price. REEs will carry a 1% royalty based on the Rare Earth Oxide’s average sale price, providing a transparent framework for auctions.

Encouraging Domestic Mining

The Ministry of Mines established guidelines for calculating the average sale price of these minerals, a crucial factor in determining bid parameters. Promoting domestic mining aims to reduce imports and foster industries related to electric vehicles and energy storage solutions, contributing to India’s energy transition and net-zero emissions commitment by 2070.

India’s Lithium Push

India’s endeavor to enter the lithium value chain extends beyond Jammu & Kashmir to explore lithium extraction from brine pools in Rajasthan and Gujarat and mica deposits in Odisha and Chhattisgarh. This effort aligns with India’s economic strategy to reduce reliance on Chinese imports of lithium-ion energy storage products.

Rare Earth Elements in EVs

Rare earth elements (REEs) pose challenges to the electric vehicle supply chain, as much of global production and processing occurs in China. These elements play a crucial role in EV motors, particularly in permanent magnet motors that enhance motor efficiency.

Environmental Concerns

Rare earth mining often involves large open pits that can harm the environment and disrupt ecosystems when not properly regulated. Environmental damage may result from waste-water ponds containing acids, heavy metals, and radioactive materials.

Niobium’s Versatility and its Global Sources

Niobium, a corrosion-resistant metal, is used in various alloys, including stainless steel, improving strength at low temperatures. It finds applications in jet engines, construction materials, and even MRI scanners and particle accelerators.

The primary source of niobium is the mineral columbite, primarily found in countries such as Canada, Brazil, Australia, and Nigeria, highlighting the importance of diversifying sourcing channels for this critical mineral.

« Previous Post Next Post »