Rare earth extraction | A tale of two lithium deposits

To ensure that rare earth discovery does not remain just an exciting headline, India needs to overcome the ‘Exploration-Extraction Gap’

In the vibrant landscape of Indian mining, we find a fascinating yet challenging reality. While exploration data is available for numerous mineral blocks, many of these projects struggle to progress into successful commercial production. This is known as the ‘Exploration-Extraction Gap’, and it presents an opportunity for growth and improvement.

Agencies, such as the Geological Survey of India (GSI) and the Mineral Exploration and Consultancy Limited (MECL), have done a good job in identifying valuable mineral deposits. However, the leap from identifying these resources to economically extracting them is often filled with hurdles that can discourage private investors, leaving significant wealth hidden beneath the surface.

What are the reasons behind these challenges:

Enhancing Exploration Rights: Companies often lack guaranteed mining rights for their discoveries, creating uncertainty. By addressing this, we can boost investment in promising exploration projects.

Improving Infrastructure: Many mineral deposits are in ‘greenfield’ areas without essential infrastructure. Investing in roads, railways, and power is crucial for unlocking these resources.

Simplifying Regulations: Lengthy approval processes for environmental and wildlife clearances can take five to 10 years. Streamlining these procedures will help projects adapt swiftly to market changes.

The 2013 discovery of 5.9 million tonnes of lithium in the Salal-Haimna region of Reasi, in Jammu & Kashmir, attracted global attention. However, as of early 2026, the project is in a ‘hibernation’ state after being auctioned at the G3 stage, which has made private companies hesitant to begin commercial production.

The setback isn't due to a lack of resources, but rather discrepancies between geological data and economic feasibility. To understand why private companies are hesitant, clarity on the ‘G’ hierarchy: G4 is the stage where the location is identified; G3 is when deposits are confirmed; G2 is when the size and quality of the deposits are defined; and G1 is the stage when the deposits are ready for extraction.

Challenges

The GSI has assessed the J&K site as G3 stage, indicating an ‘inferred resource’ with low confidence. Investors usually prefer G2 or G1 stages.

Another challenge for the J&K site is the source of the deposit. Lithium is typically sourced from brine or hard rock, but here the deposit is primarily clay-hosted. There is no viable large-scale technology for extracting lithium from clay, thus, this requires extensive R&D. This increases project uncertainty.

Lithium prices soared after the discovery, but they fell by more than 80% due to declining electric vehicle (EV) demand in 2024 and 2025. High extraction costs and low market prices make the J&K block less appealing to investors.

The Reasi region's proximity to the Line of Control (LoC) poses security risks for mining companies, raising operational costs. Additionally, the extraction process consumes around 2.2 million litres of water per ton of lithium, creating sustainability concerns within the delicate Himalayan ecosystem,

The differentiator

The J&K lithium deposit episode highlights a key lesson: that resources in the ground do not guarantee wealth in the bank. Without advanced processing technology and accurate data, even significant discoveries can struggle to attract buyers. Against this, the lithium projects in Chhattisgarh illustrates why some mining endeavours succeed.

While the claimed deposit size in J&K is 5.9 million tonnes, the G3 stage deters potential investors. The Katghora block in Chhattisgarh, with just 0.04 million tonnes, offers more precise data for investors. J&K's lithium, embedded in bauxite clay, poses extraction challenges, while Chhattisgarh's lithium, found in hard rock, utilises proven methods from Australia and China. The Katghora block, is in Korba district — known as India’s ‘Power Hub’ — has robust infrastructure, including railways and skilled labour. The geographical challenges in J&K would require significant infrastructure investments, thereby escalating the economic costs of extraction.

In late 2025, the Ministry of Mines pivoted from focusing on exploration size to economic extraction. The GSI resumed fieldwork to improve data indiaquality, while the ministry sought international technology partners from Argentina and Australia to enhance lithium extraction from clay before inviting new bids.

Without substantial investment, the J&K deposit discovery could remain just an exciting headline. By addressing these challenges creatively and collaboratively, we can unlock the vast potential of India’s mineral wealth, and pave the way for innovative brighter mining solutions.

Sunit Roy is a petrophysicist who retired as Group General Manager, ONGC.

(Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH)