MINING BELT LAND VALUATION IN INDIA
Saturday Brainstorming Thought (298) 25/10/2025
By:-Er. Avinash Kulkarni
9822011051
Chartered Engineer, Govt Regd Valuer, IBBI Regd Valuer,
Rera Certified Consultant, Black Money Act Regd Valuer
Land valuation within India’s mining belts is a complex process influenced by a range of technical, regulatory and economic factors
The valuation methods vary significantly depending on the projects development stage, from early exploration to an operational mine
Key considerations include the mineral content, proximity to infrastructure, prevailing market prices and mandatory rehabilitation and resettlement provisions
Methodologies for mining land valuation
1) Income Approach (Discounted Cash Flow)
This is the most common method for developer or operational mines
It calculates the lands value based on its projected future cash flow, discounted to its present value
The process typically involves these steps
A) Estimate the quantity and grade of mineral reserves
B) Determine the mine’s potential production capacity and lifespan
C) Estimate the capital and operating expenses
D) Forecast future revenue based on mineral sale prices
E) Calculate the Net Present Value (NPV) of the projected cash flow
2) Cost Approach
This method focuses on the cost of reproducing or replacing the asset
It is rarely used for valuing mining properties because the cost of construction has little correlation to the value of the mineral deposit
However, it may be used to value surface assets like plant and machinery
Factors influencing valuation in mining belts
The valuation of land in a mining belt is determined by a combination of general real estate principles and specific mining-related criteria
1) Mineral Reserves
The quantity, quality (grade) and type of mineral reserves found on the land are the most significant factors
Geological exploration data is vital for determining the total and economically extractable reserves
2) Location and Infrastructure
The lands proximity to existing infrastructure, such as roads, railways and ports affect the cost of transportation
A location near major industrial centers can also drive up demand
3) Regulatory Environment
India’s complex and evolving mining regulations are a major factor
The Mines and Minerals (Development and Regulation) Act, 1957, and subsequent auction rules govern the grant of mining leases and composite licensed
4) Land acquisition and compensation
For land acquisition, companies must adhere to the Right to Fair Compensation and Transperency in Land Acquisition, Rehabilitation and Resettlement Act (RFCTLARR), 2013
This includes providing fair compensation and R & R benefits to affected families
In cases of disputes, the compensation amount may be decided by a tribunal
5) Environmental and Social Factors
Environmental Impact Assessments (EIAs), social license to operate, and sustainability concerns can influence projects value
Environmental mitigation and restoration costs must be factored into the valuation
6) Economic Trends
Macroeconomic conditions, market demand for specific minerals and fluctuations in commodity prices, particularly for exports are all vital to projecting Profitability and thus Valuation
Specialized Valuation Considerations
1) Valuation based on Development Stage
A) Exploitation properties
The value is speculative and reflects the potential for discovering a viable mineral deposit
It may be based on costs or market multiples of exploration expenditure
B) Development properties
For projects with demonstrated reserves (based on a feasibility study), Discounted Cash Flow (DCF) methods are suitable
C) Production properties
These operational mines are typically valued using an income approach, such as DCF, to account for the actual cash flows generated
2) Assessing royalty and taxes
The valuation must account for royalties and dead rent, which can vary based on the mineral and the stage of the lease
Some mineral royalties are based on national or international reference prices published by the Indian Bureau of Mines (IBM)
Mining Economics
The economic performance of a mining company is largely determined by the volume output and the cost of production
Factors influencing mining Economics
1) Depth and hardness of ore
2) Accessibility of location
3) Size of operation
4) Grade of mineral
5) The key additional variables for a surface operation
6) Waste that must be moved in order to mine a tonne of ore
7) The size of equipment that can be employed
8) The distance the ore must be transported for processing
9) Those for an underground operation are
10) The geometry of the ore body
11) The mechanical characteristics of the rocks
12) The amount of water that must be pumped from the mine
13) The cost of labour (of which underground mining is a more intensive user)
Procedure for estimation of mineral deposits
1) Volume of deposits available
2) Quality of deposits
3) Recoverable deposits
4) Saleable deposits
5) The likely rate of future outputs
6) The cost of operation with regard to current and potential profitability
7) Location advantage proximity to the areas of demand
8) Transport facilities
9) Infrastructural facilities
Data required to Valuer for scrutiny
1) The market value of the land as per local survey as agricultural land
2) Title deeds referring to the mine lands
3) Extent of mine lands
4) Shape of the land
5) Classification, survey sketch of the land as per revenue records
6) The Geological expert opinion by the Geologist about the nature of the mineral in the land
7) The location map showing the bore-well details
8) The mine area purchased in relevant to the GSI bore well
9) Mining licence obtained from the concerned district forum
10) The report given by Geological Survey of India, which includes the chemical analysis of mineral deposit in that area
11) Quality of mineral deposits
12) Viability of the selling the minerals in the open market as ore
13) Clearance from the Pollution Control Board
Valuation of Mineral
1) Total Extent of land
2) Total Extent taken for mining purpose
3) Depth of persistence
4) Total volume of mineral deposits in the above property
5) Bulk density of mineral
6) Core recovery percentage
7) Total quantity of mineral deposits with core recovery percentage
8) Adopted cost of mineral
9) Total value of mineral deposits
Tentative Profitability or Market Potential of mine lands
1) Selling price per metric tonne
2) Mining expenditure inclusive of all per metric tonne
3) Profit per metric tonne
4) Total quantity of minerals deposits estimated for land area based on qualitative analysis as core recovery per metric tonne
5) Tentative Profitability or potential value of mine lands
If Mine land property offered as Collateral Security
If the property is offered as Collateral Security, then the valuation of mineral deposits can be ignored and need not be considered
After the mineral has been mined out, the market value of the land will get considerably reduced
The present market value of the land as dry land only has to be taken
If Mine land property offered as Primary Security
The mine land property can be treated as Primary Security for the development of mines in the extraction of ore from the property and procurement plant and machineries for the ore extraction operation in this mine for which the valuation of mineral deposits can be considered
1) Total value of the mineral deposits
2) Tentative Profitability or potential value of mine land as per analysis
