Deccan Gold Mines Ltd Management Discussions.


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) have actively pursued gold exploration activities through adoption of modern methods and latest technology in all of its exploration prospects.

With a portfolio of green-field and advanced stage gold projects, DGML has been accumulating and developing some of Indias finest gold prospects and despite all odds, is continuously working towards its long standing vision of bringing into production the first private sector gold mine in the State of Karnataka, South India.

The key project of DESPL is the Ganajur Gold Project situated in the State of Karnataka. Apart from this, DGML and DESPL have also got high potential pipeline of Projects that are at various stages of development like Mangalagatti, Bhavihal and Hirenagnur Projects in the State of Karnataka. Mineral concession applications over these Prospects are under consideration at the Government of Karnataka.


India is the second largest gold market (800-900 tonnes p.a. of domestic demand on average) and accounts for around 25% of Worlds gold demand. Gold supply in India is primarily met through imports with less than 1% coming from local mining and about 10% from recycling.

The difference between consumption patterns in India and other countries is two-fold. First per-capital consumption of gold in most countries is channeled through financial products. Second, unlike other countries, every household in India buys gold and mostly in its physical form. The total gold stock in India with the domestic households and institutions is estimated at 23,000 - 24,000 tons.

The strong significance of household savings in gold is both due to deep rooted traditions and economic reasons. Gold has been a wealth preserving asset, as a hedge against inflation, in collateralizing lending and in ensuring credit access to rural households.

(Source : NITI Aayog Committee Report titled ‘ Transforming Indias Gold Market - February, 2018)


Full details of exploration work undertaken by the Company are contained in “Report on Exploration Activities” forming part of this Annual Report. The status of our applications is contained under the heading “Status of mineral concession applications”.

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


In the years 2012-2015, the Indian Government started promoting the auction regime for grant of mineral concessions. However, Section 10A(2)(b) was introduced in 2015 to protect the rights of mineral concession applicants who had invested time, effort and money to progress from Reconnaissance Permit to Prospecting Licence or Mining Lease as the case may be.

On May 16, 2020 the Honble Finance Minister made an announcement under Atmanirbhar Bharat Scheme for enhancing private investments in the Mineral Sector and for bringing reforms in mineral sector. Pursuant to this, the Ministry of Mines, Government of India (Central Government) issued a Notice dated August 24, 2020 wherein it was stated that in order to implement the announcement made by the Honble Finance Minister, legislative amendments to the MMDR Act, 1957 and Rules made there under were being considered. A note on the proposed reforms in the Mining Sector was enclosed to the Notice and comments / suggestions were invited from the general public, Government of States and Union Territories, Mining Industry, Stakeholders, Industry Associations and other persons / entities concerned on the proposed mining reforms. In the proposed reforms, under the heading titled

“Resolving legacy issues to move towards an auction only regime for allocation of mineral resources”, it was stated that since continuing with the existing provisions of Section 10A(2)(b) will cause huge financial loss to the State exchequer, the Amendment Bill seeks to amend the existing provision of Section 10A(2)(b) and reallocation of such mineral blocks through transparent method of auction. It is also proposed for appointment of an authority to decide the value of expenditure incurred for exploration in such legacy cases whose rights will be terminated and to reimburse the exploration expenditure from funds under National Mineral Exploration Trust (NMET).

In the above backdrop, the Company has shared its concerns and objections along with other industry players to the Government authorities. The same is summarized hereunder:

• The Company relied on the doctrine of Promissory Estoppel and Doctrine of Legitimate Expectation which has been upheld by the Indian Supreme Court in many cases. Amending / deleting the legislation post facto and applying it retrospectively will result in litigation and no development in these highly prospected areas and gold production will suffer as the matter could be tied up in Courts for years to come.

• In spite of many domestic and foreign companies choosing to leave India for ‘friendlier investment jurisdictions, the Company remained committed with the faith that its rights under Section 10A(2)(b) would be rightfully protected. The Company has followed all due processes and moved from Reconnaissance to Prospecting Licences and in some cases on to Mining Leases all the while submitting all the Companys technical data to various Government Departments.

• This data has been generated after large investments of capital as well as time and technical expertise - without which these discoveries simply would not exist! The data submitted by the Company should not be used to auction areas prospected by the Company as such a step would be legally and morally wrong.

• Indias image as an investor friendly nation will be further dented internationally. Laws once established and relied upon by the industry cannot be altered and that too retrospectively. As it is, investment in the exploration and the mining sector has suffered enormously in India because of the lethargic regulatory regime in existence where mineral concession applications are held pending for years on one pretext or the other.

Gold exploration / prospecting is a high risk/reward business with a long gestation period. Exploration companies explore multiple areas and may be successful with only one area in terms of finding gold. Exploration companies undertaking the risks do so in the hope that one successful discovery from the many areas that are explored will return high rewards for its shareholders who have invested in the business for long periods of time. Reimbursing exploration expenditure incurred to these companies is no solution to the rewards the shareholders may otherwise have realised.

In our opinion, the quickest way to develop the gold mining industry in India is through approval of valid Section 10A(2)(b) cases as areas over which mining leases have been applied have already been prospected and mineable gold reserves identified with the execution of mining lease being the trigger to commence gold production. The Projects, when operational, will bring in the much needed investment and create thousands of direct / indirect employment opportunities coupled with economic development in such areas.

There are at least five gold exploration companies operational in India with Australian interests and are jointly sitting on gold reserves of several million ounces of gold that could be mined in the near term if their Section 10A(2)(b) applications are approved.

To sum up, if these rights are taken away from us through amendment / deletion of Section 10A(2)(b) and our technical data is then used to auction our discoveries to the highest bidder, we will have no other option other than to approach the Courts to seek justice. These discoveries would then remain undeveloped and tied up in litigation well into the future. Such a retrospective move would indefinitely delay domestic gold production, send a concerning message to the investment community and put an end to any further exploration, particularly for the much needed precious metals.


India is among the highest consumers of gold in the World. With inadequate domestic supply, the demand is met through imports, adversely impacting upon the countrys Current Account Deficit. Over the years, policies around gold have targeted reduction in gold imports without necessarily taking into cognizance the size of the industry it supports, the current and potential employment opportunities and scope for exports. There are significant new opportunities for development of the industry under the Make in India initiative. (Niti Aayog Committee Report on “Transorming Indias Gold Market - February, 2018)

The following excerpts from CIIs Report (December, 2019) titled “Towards a Globally Competitive Minerals and Mining Industry” are worth noting.

The minerals and mines industry is key to Indias growth ambition of a USD 5 trillion economy. Despite its obvious importance, the industry has remained fledgling, as evident from its declining contribution to GDP, foreign investment and employment. The industrys share in Indias GDP (in real terms) is a low 2.6% in 2018-19 down from 3% in 2011-12. Whilst the industry has had a fairly liberalized investment policy for a while, this has not resulted in large volumes of foreign investment, primarily due to a weak enabling eco-system. Automatic FDI approval needs to be supplemented with predictability in the regulatory environment and policy stability.

Given Indias rich mineral reserves, clearly, there is significant potential for growth. Accordingly, it is imperative to urgently ensure expeditious development of the sector. The CII suggests the following vision for the sector: ‘contribute 3% of Indias GDP by 2024-25, in a socially, environmentally safe and commercially viable manner, taking cognizance of the countrys interest.

The CII Report identifies twelve areas which must be addressed so as to develop and boost the Indian mining industry. One of this is ‘Exploration particularly for non-bulk minerals (eg gold) by the private sector. The Report observes that exploration for non-bulk minerals by the private sector has come to a near stand-still in the last few years on account of 3 major reasons - inadequate incentives, unavailability of financing and limited technology & skills for certain types of exploration.

Exploration for gold is an expensive and high-risk proposition with extremely low success rates. Currently, there is no seamless licensing regime from exploration to mining rendering the value of an exploration licence totally uncertain. Accordingly, most major international mining geographies have adopted the ‘first come route. Auctioning the license at each stage acts as a disincentive for exploration.

Key interventions suggested are:

• Introduce a seamless transition from exploration to mining license

• Permit sale of license at any stage, at the sole discretion of the concessionaire with a right to the Government to match the price accepted by the concessionaire within a prescribed time limit. This move is likely to encourage the emergence of junior explorers.

• Direct SEBI to examine providing special dispensation for prospecting companies.

To sum up, if a proper blend of strategy and policy is adopted, which is attractive, stable and long-term, Indias gold production could grow from its current low level and the Company will play a leading role in this direction.


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.


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. Our mission is to increase the known gold resources base of the country in a way that enhances the well being of its people, the environment, and the investors and stakeholders of the Company.


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.