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India Bars Mine in Big Ruling

August 26, 2010

“In a landmark decision that could bode ill for dozens of other mining and steel projects in India’s remote forests, the country’s environmental minister Tuesday blocked Vedanta Resources PLC from mining in an area considered sacred by its tribal population.

A law passed in 2008 says companies can only locate on forest land after first obtaining the permission of tribal people living there. The committee report says Vedanta was illegally occupying tribal land and the company had failed to obtain the consent of the locals for the planned operation.”

Source: Wall Street Journal, August 25, 2010

Observations:

  • Vedanta planned to invest $1.7bln in development of the mine. The processing plant has already been constructed at a cost of $5.4bln. The company is also charged for buying ore from illegal mines in order to use the processing plant at efficient capacity.
  • This week miners in Vedanta’s Zambian operations called off protest actions against an outsourcing program, because the company decided to halt the program “for the sake of industrial harmony”.

Implications:

  • Delhi announced strengthening the ethics law for mining companies in May of this year. Although the discussions at that time focused on education and development for the region, this ruling shows land rights are on the government’s radar too.
  • The state of Orissa, which has supported Vedanta in the development so far, has various other bauxite deposits. Vedanta is likely to receive access to alternative deposits quickly, as the state will benefit significantly from increased employment and higher tax revenues.

©2010 | Wilfred Visser | thebusinessofmining.com

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