Mumbai-based Varun Group, which has interests in steelware and mining of gold and diamonds, has found what it describes as rare earth and heavy mineral deposits in Madagascar, Africa. A total of 266.8 million tonnes has been discovered in 10 blocks.
The company is already in talks with potential partners, both Indian and international, to develop the ten blocks. Analysts expect the discovery to be a game changer for the group which also owns 1,111 blocks measuring 6,950 square kilometers for uranium mining, with thorium and gold as by-product.
Confirming the find, an official said through its overseas arm, the company has discovered ten heavy mineral sand mining blocks covering an area of 62.5 square kilometre in Ankilimitraha, Belay and Analapatsy areas of Anosy region in the Republic of Madagascar.
The total heavy mineral resources in these permit areas is about 266.8 million tonnes which contains 221 million tonnes of ilmenite, 1.84 million tonnes of rutile, 1.84 million tonnes of leucoxene, 9.2 million tonnes of monazite (which is usually associated with the lanthanide series rare earth elements), 18.4 million tonnes zircon, 9.2 million tonnes of garnet, 2.76 million tonnes sillimanite and 9.2 million tonnes of spinel.
“This is a very encouraging find for the group. Ilmenite and rare earth minerals are in high demand. The demand growth, coupled with an uncertain supply situation, creates a deficit market in many elements,” said Varun Industries vice president, A P Dhurandhar.
Stating that the value of the different minerals ranges between $250 to $1000 per tonne, the vice president said the mining life of the deposit is expected to be approximately 40 to 50 years.
The company is conducting the next stage of scoping study and analysing the mineral content. It expects to start producing in the next six to eight months with an initial production of around 1,00,000 to 5,00,000 tonne per annum of the concentrate.
The Indian firm’s find is expected to help boost supply in a market that is tightly controlled by China. China supplies 93% of 17 key rare earth elements, and has clamped on mining in certain areas as well as limited export quotas.
Analysts say that the Chinese government may further reduce export quotas. “This has sparked concerns among heavy users like Japan and the United States. Prices have doubled in the last two weeks following fears of supply restrictions by China,” said Sarth Shukla, analyst at a broking firm.
However, it was just a matter of time before China could see some competition and its percentage of supply diminish resulting in a weaking of its hold on the rare earth minerals market. The recent find in Japan and by the Indian firm could well destablise China’s position.
India contributes close to 2% of the world supply. The vice president of Varun Industries said the overall rare earth oxide demand is set to increase by 12.5% by 2015.
The company registered a 65% growth in net profit last year. Total income increased by 92% in FY2010-11, while profit after tax increased by 65%. The impact of the new reserves will be fully captured in the earnings of FY13.
The company has also discovered gold at Madagascar Mines with their joint venture partner Torian Resources, formerly known as Cluff Resources Pacific. According to recent test reports, one tonne of ore from the mine has 9 to 16.5 gram of gold with an average of 12 gram per tonne of gold against the conventional six to seven gram of gold found in the same quantity of ore in other mines.