If you're looking for lessons in patience and perseverance, you can learn something from Pebble Creek Mining Ltd.
The small, Toronto-listed mining company based in Vancouver has been doing business in India since 1996, looking for valuable metals through its wholly-owned subsidiary, Adi Gold Mining Pvt Ltd. It has invested about 380 million rupees ($8.6 million) in the country since then – drilling, studying and acquiring facilities – but it has yet to turn a profit.
Pebble Creek reported a loss of $779,115 in the year ended March, 2010.
Though India is mired in bureaucracy, red tape and a minefield of multiple regulators that run its provincial governments, Adi Gold persists because it recognizes there are opportunities in the high-growth economy, and because it has the technology and the skills to strike metals. The International Monetary Fund recently forecast that India's GDP will increase by 9.7 per cent in the current fiscal year.
Adi Gold has filed more than 14 applications for grant of reconnaissance permits (RPs) and prospecting licences (PLs) but it has made progress in only one state, the hilly Uttarakhand. One independent estimate forecasts 1.9 million tonnes of high-grade copper, zinc and lead can be mined in the region, with some silver and gold available.
Pebble Creek is betting on the fact that mining in India has traditionally been centred around iron ore and coal, and opportunities have been missed with other minerals. With its strong geological strengths, the company has been pushing deeper below the surface.
India opened up mining to foreign investors in a reform plan that was introduced nearly two decades ago, but it is still struggling with a messy public sector, says Vijay Mathur, senior vice-president at Adi Gold, which Mr. Mathur joined after a career as a vice-admiral in India's navy.
"We have not done any profitable work yet," Mr. Mathur says, adding the company believes the Uttarakhand project is commercially viable.
Pebble Creek has been following Geological Survey of India's (GSI) data as a starting point. "The quality of data is suspect. Nonetheless we use it," Mr. Mathur says.
The lack of incentives for the state surveyor could signal opportunity because, Mr. Mathur argues, GSI has not been diligent enough. "We are going deeper," he points out. "We believe the potential is 10 times more than what GSI found in an earlier drill."
But the hurdles the company still faces run as deep as its potential mines could be. "There is a mining bureaucracy," Mr. Mathur says. "At every stage, what normally should take a week takes six months."
Bureaucrats, for instance, are split into various departments and ask questions on wildlife, forests or villagers that may be affected by the mining. Frequently changing rules – and an excess of them – are a barrier. Mr. Mathur says there are no guarantees for getting licences, even if the company makes a find: reconnaissance, prospecting and mining leases are counted as separate stages for state permits.
The federal government in India recently proposed that mining companies share 26 per cent of their equity or profits with local communities. Though this is not yet law, firms say it increases risks in a field where one successful project often has to make up for the failure of nine others.
Pebble Creek has nonetheless pushed ahead in Uttarakhand. It started surveying the land in 1996, it got a prospecting licence in 2000, and it won a letter of intent in 2007. The company now employs 30 people and says it has created jobs and opportunities for villagers over the course of years of legwork. The firm is looking for partners so it can further enhance the advantage it believes it has in sound geological knowledge and deep-drilling technology.
"We are a small company, we are fleet-footed, we will discover (minerals)," Mr. Mathur says.
Special to the Globe and Mail
Narayanan Madhavan is associate editor of the business news pages of Hindustan Times, a leading Indian daily newspaper. He has previously worked for Reuters, the international news agency, as well as The Economic Times and Business Standard, India's leading business dailies. Though focused mainly on business and economic journalism with a strong focus on information technology and the Internet, he has also covered or written about issues including politics, diplomacy, cinema, culture, cricket and social issues. He has an honours degree in economics and a master's degree in political science from the University of Delhi.