How to Read a Mining Auction Tender: A Step-by-Step Decode for New Bidders

Practical guidance to derisk your bid, structure your numbers, and avoid
disqualification — by DecodeMine

Introduction — Why Most Bidders Miss the Hidden Details

Every year, state governments release dozens of mineral blocks for auction. Many first-time
bidders skim the summary and overlook critical clauses scattered across the Notice Inviting
Tender (NIT), geological reports, statutory clearances, and the draft Mine Development and
Production Agreement (MDPA). One missed detail can cost crores or even lead to
disqualification. This guide shows you how to read the tender systematically — the same way we
do at DecodeMine.

Step 1 — Start with the NIT (Notice Inviting Tender)

Find the official NIT on the state Directorate of Geology & Mining site or the e-auction portal.
Extract these essentials into your notes:

• Mineral and block identity (name, coordinates, area)
• Exploration level (G2 vs G3) — this affects data confidence
• Land class (forest vs non-forest) and implications
• Financial baselines (reserve price logic, ASP linkages)
  Decode Tip: Treat the NIT as the master index for your diligence. Build a checklist and tag each
  clause you’ll validate later.

Step 2 — Examine the Geological Report and Resource Table

The geological report is the block’s scientific backbone. Review:

• Total Geological Resources by category (proved/probable/inferred)
• Grade distribution (e.g., Fe%, Mn%, CaO/MgO/SiO₂)
• Cut-off grades, recovery factors, borehole density and spacing
• Any material uncertainties or data gaps
  Decode Tip: G3 blocks carry higher uncertainty. Adjust bid aggressiveness and insist on
  sensitivity ranges for tonnage, grade, and recovery.

Step 3 — Map Statutory Clearances and Land Classification

Read the tender’s sections on forest, environment, revenue, and surface rights carefully.
What to check and why:

• Forest: Does the block fall under forest? Expect diversion requirements and longer timelines
  (high risk).
• Environment: EIA 2006 applicability, appraisal category, baseline data gaps (medium risk).
• Revenue: Private vs government land split; acquisition/consent implications (medium risk).
• Surface rights: Grant conditions; settlement/compensation clauses (medium to high risk).
  Decode Tip: Forest-heavy blocks are not “no-go,” but time and cost are often underestimated.
  Build an explicit clearance timeline and scenario-based costs.

Step 4 — Understand the Financial Conditions

Consolidate all monetary commitments and align them with cash-flow timing:

• Bid Security / EMD: Refundable deposit lodged with technical bid (often ~0.5% of value)
• Upfront Payment: Payable post-award, usually in tranches (~0.5% of value; varies)
• Performance Security: Bank guarantee tied to expected royalty (check MDPA specifics)
• Royalty + DMF/NMET: Statutory dues paid as you mine (mineral-specific percentages)
  Decode Tip: Tie each item to a timeline — when cash leaves your account vs when production
  cash-flows begin. Your bid should survive a 6–12 month delay scenario.

Step 5 — Scrutinize “Special Conditions”

Critical clauses often sit near the end:

• Consortium/joint bidding rules and net-worth thresholds
• Data room access and clarification windows
• Minimum technical experience requirements
• Payment schedules; interest/penalty provisions
  Decode Tip: If experience criteria are tight, plan your consortium early. Don’t leave eligibility
  fixes to the last week.

Step 6 — Read (Not Skim) the Draft MDPA

The MDPA is the contract you will actually live with. Confirm:

• Production milestones and time limits
• Reporting obligations (e.g., IBM/MoM portals), audit and inspection rights
• Termination triggers and liquidated damages
• Frequency and method of royalty/levy payments
  Pro move: Build a “compliance matrix” mapping each clause to an internal owner, evidence to
  maintain, and reporting cadence.

Step 7 — Build a Bid Model (Financial + Risk)

Create a transparent, assumption-driven model that you can defend:

1. Estimate recoverable reserves and ROM; derive product splits (lumps/fines, concentrate
   yields).
2. Link ASP and royalty assumptions; include DMF/NMET and logistics.
3. Run NPV, IRR, and payback with at least three scenarios (base, downside, upside).
4. Stress-test for delays in forest/environment clearances and capex overruns.
   Decode Tip: Numbers beat narratives. A clean, well-structured model with clear
   assumptions prevents costly bidding mistakes.

Step 8 — Summarise Red Flags Before You Bid

Common risks and how to mitigate them:

• Data uncertainty: G3-heavy, sparse drilling → Use confidence scoring and bid conservatively.
• Forest dependency: >60% forest cover → Model clearance timelines and add explicit cost
  buffers.
• Low ASP margin: Tight spread after royalty/levies → Run sensitivity on ASP, optimise
  logistics and processing.
• Legal clause risk: Ambiguous MDPA terms → Seek legal review and maintain a clause-to
  compliance matrix.
• Heavy upfront/security: Large near-term outflows → Check banking capacity and timeline
  stacking vs revenue start.

Conclusion — Don’t Bid Blind

A tender isn’t just a PDF. It’s a multi-crore commitment with legal, environmental, and financial
implications. DecodeMine’s mission is to help bidders decode, derisk, and de-stress their bid.