The yellow metal or gold is in huge demand. The price of gold crossed the historic Rs 40,000 mark per 10-grams recently. While it is going out of reach for the common man when its price increases, it is increasingly becoming a viable option for gold producers.
The Karnataka government-owned The Hutti Gold Mines Company Ltd (HGML), the only primary gold producer in India, is in an upbeat mood with the surge in gold prices as its operations have not only become economically viable but also profitable. The company hopes to double its profits during the current fiscal with the gold prices scaling new highs every day.
HGML produces barely 2.65 grams of gold per tonne of ore extracted and processed at its unit in Hutti, about 500 km from Bengaluru. The rising price of gold has encouraged the company to increase its production.
The company is in the process of increasing output by improving efficiency and reducing breakdowns. Its measures are already yielding results as gold production has gone up by 28% to 575 kilograms during the first four months of the current fiscal compared to 450 kgs produced in the same period last year.
Going by the current trends, HGML hopes to increase its gold production by 8.5% to 1.8 tonnes during the current fiscal compared to 1.66 tonnes in the last fiscal. “We have been growing consistently over the last three years. Our gold production has gone up from 1,310 kgs in 2015-16 to 1,580 kgs in 2016-17, 1,638 kgs in 2017-18 and 1,663 kgs in 2018-19. We will produce at least 140 kgs more than last year,” Richard Vincent D’Souza, Managing Director, HGML told DH.
He said the company will enhance its production much more once the ongoing expansion programme is completed. HGML’s total income and profits are on an upward curve in the last three years. Its total income has risen from Rs 403 crore in FY16 to Rs 565 crore in FY19. Similarly, its profits, which had declined from the peak level of Rs 204 crore in 2011-12 to Rs 6.8 crore in 2015-16, are on an upward curve over the last three years. It rose to Rs 31.56 crore in FY17 and Rs 80.34 crore in FY19. It expects to almost double its profits to Rs 150 crore in the current fiscal.
Over the last two years, HGML has brought down its cost of production from Rs 2,760 per gram in FY18 to Rs 2,563 per gram in FY19, while the selling price has increased from Rs 2,922 to Rs 3,166 per gram. It expects to reduce the cost of production further in FY20.
Century-old legacy
Gold extraction in Hutti goes back to the Ashokan period (c. 268 to 232 BCE). The modern mining at Hutti was started in 1887 by the Nizam of Hyderabad who established Hyderabad (Deccan) Company, which produced around 7.4 tonnes of gold by processing 3.8 lakh tonnes of ore at an average grade of 19.45 grams per tonne. In 1920, the mine was closed due to lack of funds. In 1938, detailed exploration by geological and geophysical surveys, diamond drilling and dewatering of the village Reef mine were conducted, which resulted in rediscovery of Village Zone-I and Oakley Reefs and the mine was restarted in 1947. The mine was transferred to the Karnataka government (then Mysore state) in 1956 and it was renamed as The Hutti Gold Mines Company Limited’ (HGML).
In 1985, the two loss-making copper units Chitradurga Copper Company and Karnataka Copper Consortium Limited at Kalyadi were amalgamated with HGML, which enabled the company to produce copper as well.
Expansion and modernisation
HGML is extracting around 6 lakh tonnes of ore at its underground mines at Hutti in Raichur district. It is currently extracting gold at a depth of 850 metres. Once its expansion is completed, its daily extraction of ore will go up to 3,500 tonnes and gold production is estimated to touch three tonnes per annum.
Seven years ago, HGML embarked on a Rs 240 crore expansion at its mines in Hutti. It has already sunk a six-metre wide circular shaft till the depth of 1,000 metres and it is expected to be ready for operations by January next year.
In addition to this, the company is also investing another Rs 59 corer to set up one more Ball Mill to increase the gold ore processing capacity and provide several amenities to its employees including a 120-bed hospital at the staff colony.
Vision document
HGML is also planning to prepare a vision document keeping in mind its future expansion and to extend the life of its mines.
“We are in the process of hiring an external agency to prepare a vision document which will give us new options to increase the life of our mines. We are constantly looking for opportunities to explore new gold reserves both in Hutti and adjoining areas. The document will give us a mining plan for the next 25 years,” D’Souza said.
Going by the current reserves, HGML has enough ore available for the next 69 years. According to the exploration department officials, the company has 41 million tonnes of gold ore and at a rate of 6 lakh tonnes per year, it can extend the life of its mine for the next 69 years.
“We are a debt-free company and we have enough reserves to take care of our expansion programme,” D’Souza added.
In future, the company also plans to undertake gold mining in adjoining areas and has applied to the government for permission.