Deccan Gold expects gold production by end-2010

By Ruchira Singh

MUMBAI (Reuters) - India's Deccan Gold Mines Ltd expects to start gold production by end-2010 with the new mines policy likely to help the company speed up its exploration activity, a company official said on Wednesday.

"There has been a lack of adequate exploration in India because of regulatory issues," Sandeep Lakhwara, managing director of Deccan Gold, told Reuters in an interview.

"The new policy addresses these concerns and is a confidence building measure."

The company is targeting 4 tonnes of gold production annually, he said.

India's cabinet approved a long-delayed mining policy last week that could ease investment by foreign and domestic companies in the mining sector.

The policy could ease delays in grant of permits, guarantee a hassle-free move from prospecting to mining stage, and give a bigger time frame for exploration activity, Lakhwara said.

Currently, Deccan Gold, along with its associate mining companies, is awaiting the government's nod for 70 prospecting licences, 30 of which are for gold prospecting.

The company has been engaged in preliminary exploration since 2000 under reconnaissance permits from the government, Lakhwara said.

"Not all the 30 locations could have gold deposits. Even if we set up some mines it would be a huge success," he added.

With preliminary exploration focussed on Karnataka, Andhra Pradesh, Kerala and Rajasthan, Deccan Gold believes a target of 4 tonnes of gold production a year would be "feasible," Lakhwara said.

Deccan Gold, listed on the Bombay Stock Exchange, is owned by Rama (Mines) Mauritius Ltd, a company promoted by Australian individuals.

It expects some of its prospecting licences, that allow it to conduct detailed feasibility studies to ascertain gold deposits, within six months of the new mines policy coming into place.

At the next stage, that could take a year or two, the company could set up processing and production facilities, Lakhwara said.

India is believed to have rich deposits of gold, he said.

"Geologically, India is very similar to other countries where gold deposits have been found and on that basis, India should have a large quantum of gold," Lakhwara said naming Australia, Africa and Canada.

India's gold production is just a speck in the world's output of around 2,500 tonnes, the only producer being Hutti Gold Mines in Karnataka with about 3.5 tonnes of gold annually.