India to Revive Kolar Gold Fields in Karnataka as Gold Prices Soar

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Researched by Industrial Info Resources (Sugar Land, Texas)--The Indian government recently announced plans to revive the Kolar Gold Fields (KGF) in the southern state of Karnataka. The Union Cabinet has approved the project. In 2001, gold reserves at the 121-year old KGF mine were found to be dwindling, which resulted in the government declaring the mine non-viable and shutting down operations. The KGF mine, which is considered to be the second-deepest gold mine in the world, has the potential to produce 10 tons per year of gold over a 15-year period. The mine is about 120 kilometers from Karnataka's capital city of Bangalore.

Three separate parliamentary studies were conducted in 1994, 1997 and 2000 to assess the resource potential at the mine. The studies indicated that KGF had at least 3 million tons of untapped gold ore reserves. Gold deposits also were found in tailing dumps at the site.

According to recent reports, during the first half of this fiscal year, the demand for gold in India grew 94% from the same period last year to 365 tons. A sound economic recovery also helped in the value of gold demand increasing from almost $6 billion to $13 billion. The jewelry industry was one of the biggest consumers of gold. During the first half of the fiscal year, the demand for this precious metal in this sector grew 67% to 272.5 tons. The volume of gold investments increased a staggering 264% to 92.5 tons, in comparison to 25.4 tons in 2009.

The "Gold Demand Trend Report - Second-Quarter 2010," published by the World Gold Council (London, England), indicates that the jewelry industry in India and China will become growth drivers for global gold demand. While the jewelry industry in other countries is facing a decline of nearly 5%, this sector is witnessing an upward trend in China and India. Industry experts are of the opinion that global gold prices may exceed the all-time high price of $1,264 per ounce recorded in June this year. This fiscal year, the global price of gold, which was $1,078.50 per ounce in January, increased to $1,207.50 per ounce and $1,264 per ounce in May and June, respectively. As on September 6, 2010, the price was $1,249 per ounce. During this period, the price of gold in India was $1,074.70 per ounce in January, $1,207.80 per ounce in May, and $1,257.60 per ounce in June. As of September 6, 2010, the price of gold in India was $1,254.30 per ounce.

In a related development, spurred by the growing demand for gold in the country, Deccan Gold Mines Limited (Bangalore, Karnataka) is expediting production at its mine. Hutti Gold Mines Limited (Bangalore), which is the only gold producer in India, is scouting for joint venture partners to expand its operations.

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