• Rio Tinto plans to shut the Bunder mine by the end of December
  • Co. to discuss with government possible third-party takeover

A day after Rio Tinto Group announced plans to shut the Bunder diamond mine in central India, the Mines Ministry said it will analyze if mining at the site is viable because of environmental concerns.

The deposit is located in an ecologically sensitive zone and it’s not clear if the mine can be auctioned again, Mines Secretary Balvinder Kumar said in an interview in New Delhi. Rio Tinto said Monday that it would work with the federal government and the state of Madhya Pradesh to examine options for another investor to take over the project.

Development of the mine about 500 kilometers (310 miles) southeast of New Delhi has been stymied by delays in environmental approvals that would allow the clearing of a forested area important to tiger and other wildlife habitats. The deposit was discovered in 2004.

“The Bunder mines fall under a zone that has thick forests,” Kumar said. “The environment ministry says only deep and underground mining can be done in these areas. We need to examine if we’ll be able to exploit this block commercially.”

Rio Tinto had hoped to bring Bunder into production as early as 2019 and the project was pegged as one of only four new mines to enter production in the next decade.

“Transfer of the block is not an option under the new mining policy, so the only way is re-auction,” R.K. Sharma, secretary general of the Federation of the Indian Mineral Industries, said by phone from New Delhi. “If the government doesn’t re-auction the mine because of environmental reasons, then Rio Tinto will not get back any of the money it spent on the exploration.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE