deccan gold mines ltd Management discussions


INTRODUCTION

Deccan Gold Mines Limited (“DGML”) is the first and only gold exploration Company listed on the Bombay Stock Exchange Limited (BSE). It was established in the year 2003 by Australian promoters with deep roots in the mining and exploration sector. Since its inception, DGML and its wholly owned subsidiary Deccan Exploration Services Private Limited (DESPL) actively pursued gold exploration activities through adoption of modern methods and latest technology in all of its exploration prospects.

Since the change in management in October, 2021 the Company has taken significant efforts to expand its portfolio in India and overseas.

INDUSTRY REVIEW

Gold plays an important and significant role in the economy of every nation, more so in India because gold is an integral part of the cultural ethos of our country.

Till a decade ago, India was the highest consumer and importer of gold which was in the range of 600 to 800 tonnes per annum which increased to 900 to 1000 tonnes per annum in the past decade.

Indias gold imports, which have a bearing on the current account deficit dipped 24.15% to USD 35 billion in 202223 due to global economic uncertainties according to data from the Commerce Ministry, Government of India. Import of the yellow metal stood at USD 46.2 billion in 2021-22.

(Source: https://economictimes.indiatimes.com/markets/commodities/news/gold-imports-dip-24-to-35-billion- in-2022-23/articleshow/100047020.cms?from=mdr)

India continues to be the second largest gold market in the World accounting for about 25% of global gold demand. Indias gold demand is primarily for catering to manufacturing of jewellery (73%) for export and domestic consumption; coins (6.9%); industrial usages (1.4%); ETFs (2.7%); and bullion (15.9%). (Source: NITI Aayogs publication “Transforming Indias Gold Market - February, 2018).

PERFORMANCE

Details about the operations of the Company including acquisition of stake in Geomysore Services (India) Private Limited and other developments including Ganajur Gold Project and North Hutti Block Prospecting Licence (PL) applications which are presently before the Honble High Court of Karnataka are provided elsewhere in the Directors Report forming part of this Annual Report.

It is pertinent to note that exploration companies by their very nature will not generate mining revenues until commencement of mining operations.

RISKS AND CONCERNS

About 4,000 tonnes is the current global demand for gold. Because of its high conductivity and non-oxidising property, gold has many practical uses in industry. Its durability under the most corrosive conditions and attractive golden-yellow colour has led to its widespread use in jewellery manufacturing.

Indias share in the global gold production is less than 0.05% despite being endowed with the potential to establish multiple new gold mines. About 700 tonnes of gold resources have been defined in different parts of India through drilling by GSI, MECL and private players. Apart from this, a large area of 280,000 sq km has been identified by GSI as having the geological potential to trigger new discoveries of gold resources. All this potential awaits to be unlocked.

On January 12, 2015 the MMDR Amendment Act, 2015 came into force. Post this, the Ministry of Mines has taken a series of steps to encourage the States to auction large numbers of Composite Licence (CL) Blocks (PL cum ML) for gold and other such deep-seated minerals. However, the response received from the industry for picking up these CL Blockshas not been up to expectations due to unattractive exploration data and the small size of the CL Blocks (<25 sq km) and the least attractive auction-mode of granting licence for exploration. Even after the grant

of CL under auction route, delays / complexities involved in the grant of various statutory clearances required for conducting exploration and mining including challenges in land acquisition, mineral processing and dumping of waste rocks and tailings mean that itll take several years for a Project to reach the production stage.

India, despite being a pioneer in gold mining and mineral processing and the very first country to use technologies to do mining at depths of over 3 km is currently trailing behind most gold-producing countries.

To sum up, the aim of Government should be maximization of mineral production leading to revenue generation through employment, royalties and taxes and not just revenue maximation through auction.

OUTLOOK AND OPPORTUNITIES

Being Indias only gold exploration company listed on the BSE, Deccan Gold Mines Limited has successfully enlarged its foot print in India and overseas and is set to become a junior to mid-tier gold producing company.

During March, 2023 the Company successfully completed acquisition of a significant stake in Geomysore Services (India) Private Limited (GMSI) which has got an advanced stage gold project at Jonnagiri, Andhra Pradesh and close to production.

During March, 2023, the Company also successfully participated in the e-auction for the Bhalukona-Jamnidih Block in Chhattisgarh for Nickel, Chromium and associated PGE Block in the State of Chhattisgarh and more details are given in elsewhere in the Directors Report forming part of the Annual Report.

During July, 2023 the Company has also initiated action to secure 60% stake in Avelum Partners LLC, Kyrgyzstan which has got an advanced stage gold project in Altyn Tor, Kyrgyzstan. Further, the Company is also initiated action to acquire 32% stake in Kalevala Gold Oy, Finland which has got gold exploration prospects in Finland.

It may also be noted that the Company has started providing mineral exploration consultancy services for clients in India / abroad. Towards this end, the Company entered into Strategic Alliance Agreements with (i) AK Corporation- FZCO, United Arab Emirates for setting up of processing plants for gold mining industry and (ii) Kartikay Exploration and Mining Services Pvt., Ltd., Nagpur, India for execution of mineral exploration and drilling work.

During August, 2023 the Company incorporated a wholly owned subsidiary under the name of Deccan Gold - FZCO, Dubai for the purpose of providing Geological consultancy and related services. This is expected to strengthen and consolidate the companys consultancy vertical.

More details on the above transactions are available on the market updates made by the Company which can be accessed at www.deccangoldmines.com / www.bseindia.com (BSE Scrip Code: 512068).

On the legislative and regulatory front, it may be noted that the MMDR Amendment Act, 2023 was passed during July, 2023. This Act has introduced the concept of Exploration Licence for 29 minerals including gold. Exploration Licences are proposed to be granted by the concerned State Government (s) through competitive bidding over an area of up to 1000 sq kms and they will be issued for a period of 5 years (extendable by a further period of two years on the request of the Licensee). Within 3 months of completion of the operations or expiry of the licence, the licensee shall submit a geological report regarding findings.

If resources are proven after exploration, the State Government conducts auction for mining lease within 6 months of submission of report by the Licensee. The Licencees will receive a share in the auction value of the mining lease for the mineral prospected by him. The share will be prescribed by the Central Government. If auction is not completed within the specified period, the State Government will pay an amount prescribed by the Central Government to the Licensee. This is expected to act as an incentive to prospective explorers under an Exploration Licence.

To conclude, DGML is well equipped to take advantage of any business opportunity that will arise and has got a well experienced technical team to assist it in achieving its objectives of creating long-term value for its shareholders.

ADEQUACY OF INTERNAL CONTROL

The Company has in place adequate internal control systems commensurate with its size and operations, which assure proper recording of transactions of its operations and also ensure protection against misuse or loss of the Companys assets. The Company has constituted an Audit Committee and has assigned to it tasks that will further strengthen the internal audit system.

SUSTAINABLE DEVELOPMENT

DGML is committed to sustainable development; we believe in creating sustainable values that our employees, business partners and shareholders can uphold and believe in. We strive to meet the needs of all our stakeholders. DGML believes in making a positive contribution to the community in which we are involved.

CAUTIONARYSTATEMENT

Statements in the Management Discussion and Analysis Report describing the Companys objectives, projections, estimates, expectations or predictions may be “forward looking statements” within the meaning of the applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include the availability of economically viable deposits, changes in Government regulations, tax regimes, economic developments in India and other incidental factors.