Higher gold prices prompt consortium to restart historic mine in India

An Australian-Indian consortium is bidding to acquire gold a mining lease for the now-defunct Kolar fields in in the southern Indian state of Karnataka, which were once a source of wealth for the British Empire.

The ancient Kolar gold mines, located about 100 km east of Bengaluru in Karnataka, produced some 25 million ounces over 150 years before being abandoned in 2001 as gold prices sank.

By reopening the ancient Kolar gold mines, India may be able to provide for at least part of its ever-rising demand for the yellow metal.

But Australian miner Citigold Corp and Indian conglomerate Essel Group believe it is time to revive gold mining in the area, as the Delhi has announced plans to auction at least three gold mines this year, including Kolar, Reuters reports.

The Brisbane-based company said Monday it has partnered with the Essel Group to bid for the mining assets.

The decision comes as gold prices have climbed in recent weeks amid expectations the US Fed would be more cautious raising interest rates this year.

At its March policy committee meeting, the Fed said it expected to raise rates two times this year, down from the four times it previously expected, amid concerns about the global economy. Higher rates make gold less attractive compared with yield-bearing assets.

The Fed’s gradual rate hikes have also weighed on the US currency, making dollar-denominated gold more attractive to other currencies holders.

If the companies succeed at reopening the mines, India may be able to provide for at least part of its ever-rising gold demand — which is the world’s second-biggest behind China’s. In 2015, the yellow metal imports climbed 2% to 849 tonnes in India, according to the World Gold Council.

Much of the domestic demand today is being met through imports — 900 tonnes in fiscal 2015 — even as thousands of tonnes are currently kept in its many temples.