By Neha Dasgupta and Mayank Bhardwaj
NEW DELHI (Reuters) – State-owned Indian miner NMDC <NMDC.NS> is poised to win a multibillion-dollar contract to explore and mine diamonds at a large project abandoned by global miner Rio Tinto <RIO.L>, a leading local government official told Reuters.
The central state of Madhya Pradesh has asked NMDC to explore the Bunder deposits, which could contain millions of carats of diamonds, Neeraj Mandloi, principal secretary at the state’s Mineral Resource Department, told Reuters on Friday.
The state government last month awarded a smaller portion of the deposit to Essel Mining & Industries, part of Indian conglomerate Aditya Birla Group, Mandloi said. That area was valued at about $9 billion, according to estimates by Rio Tinto and the state government.
“Our geological survey has shown that the entire area, which has largely remained unexplored, is rich in diamonds,” Mandloi said of the Bunder deposit about 500 km (300 miles) southeast of New Delhi, adding that its output could be in the billions of dollars.
“We have requested NMDC to do a composite role of exploring and mining and the company has shown a preliminary interest.”
India’s Madhya Pradesh state, the only diamond mining region in Asia, could be among the world’s top ten diamond producers, studies have shown.
Rio Tinto spent about $90 million over 14 years on the Bunder project, located in a forested area that is home to tigers and other wildlife.
The company had plans to invest up to $500 million but pulled out of the project after legal battles with green activists and delays in obtaining environmental permits.
NMDC already mines in the neighboring Majhgawan mine at Panna, Madhya Pradesh, where the company has extracted about 1 million carats of diamonds, according to the company’s website.
The state has also asked NMDC to explore and mine diamonds in several other blocks, Mandloi said.
“NMDC is enthusiastic and looking forward to taking on another mine in Madhya Pradesh,” a company spokesman told Reuters.
Rio Tinto’s decision to withdraw from the project was a blow to efforts by Prime Minister Narendra Modi’s government to enlist the likes of Rio Tinto and Anglo American <AAL.L> to help India to become a major minerals and precious metals producer.
(Reporting by Neha Dasgupta and Mayank Bhardwaj; Editing by David Goodman)