The state government believes the basin and adjoining border areas have large deposits of diamonds MAHANADI RIVER BASIN/ MAHASAMUND/CHHATTISGARH

Everyone, John Burgess will tell you, is an enemy. The 41-year-old India head of Rio Tinto, one of the world's largest mining companies, has been in the business long enough to know that it pays to be paranoid. And in Chhattisgarh, a central Indian state where the company expects to find diamonds, the enemy could well be the man sitting next to you in a hotel lobby. Burgess is a frequent visitor to the state. He stays at Hotel Babylon, the best capital Raipur has to offer by way of accommodation to an executive with a multinational firm. That's where he meets with this writer, in Babylon's lobby. The conversation starts well, but is soon interrupted. A Caucasian-looking man wearing the uniform of western tourists in India-floppy shorts and T-shirt-has positioned himself (strategically, Burgess suspects) in a sofa within hearing distance. "Excuse me," says Burgess, "but are you from De Beers?" The man isn't, Burgess loses some of his edginess and the conversation continues. Rio Tinto, says Burgess, has made some headway in diamond prospecting in Chhattisgarh. In mid-May, the company drilled a borehole at an undisclosed location in the state and Burgess' reticence indicates that it may have well hit pay dirt. "Diamonds is a competitive game," says Burgess. "I will not reveal it (the location of the borehole)." Realising that the whole thing is beginning to look like an exploitative multinational trying to hoodwink a poor state-Chhattisgarh's per capita income is a mere Rs 7,072 as compared to the national average of Rs 13,721-he hastily adds that the company keeps the government in the loop.

De Beers hasn't been idle either. One day in the middle of April this year, villagers in Chirama and Korar in the Bastar district were woken up by the sound of a low-flying aircraft. This was a geophysical survey aircraft hired by De Beers and equipped with electromagnetic survey equipment that detects diamond-bearing rocks. The company needed to have the data cleared by a clutch of government agencies, including the Intelligence Bureau, but is now engaged in studying the data closely.

India knew of diamonds (and appreciated them) much before the rest of the world did, some say as far back as 600 B.C. All known diamond fields were (and remain) on the eastern side of the Deccan Plateau, 500,000 square kilometres of pre-Cambrian rock formations whose geological history can be traced back to super-continent Gondwanaland. Golconda, the field that produced the famous Kohinoor, and Panna both fall in this region. Interestingly, so does the Mahasamund area of Chhattisgarh, part of the alluvial basin of the Mahanadi river. That's probably where Rio Tinto's borehole is, although no one, not even the Chief Minister of Chhattisgarh Raman Singh, and Shivraj Singh, Principal Secretary (Mining), who doubles up as Managing Director of the state's Mineral Development Corporation, knows for sure. "What we all know is that they (Rio Tinto) have made significant progress in exploration," says Singh, who looks more like an academic than anyone associated with diamonds in any way. "Drilling is research and any drilling data is important business intelligence," counters Burgess, who has a team of 12-odd geophysicists stationed at Chhattisgarh-they work out of the Babylon. This writer met one and couldn't help but notice the mud stains on his grey T-shirt. He could have slipped on a puddle outside the hotel, or it could have come from working in a river basin.

Burgess' reticence indicates that Rio Tinto may well have hit paydirt in the Mahasamund area JOHN BURGESS/ INDIA HEAD/RIO TINTO

In 1990, the Madhya Pradesh government's geology department discovered diamondiferous kimberlite rock-a geological name for a rock containing diamonds; named after South Africa's famous Kimberly mines-in Mainpur near Raipur. Five years later, it stumbled across another in Tokapal in Bastar district. The Tokapal kimberlite is reportedly the largest kimberlite rock in the world, although it is yet to yield any diamonds. If the state government's Singh is to be believed, the Mahanadi basin and adjoining areas in the border of Chhattisgarh and neighbouring state Orissa have large deposits of diamonds. Chhattisgarh's diamond fields, a government website proclaims, will belong "in the top bracket 22 economical diamond mines in the world, once full production starts". If all goes well, declare some officials in the government's mining department, the companies can hope to mine around five million carats of diamonds a year that could be worth anything between $800 million (Rs 3,600 crore) and $900 million (Rs 4,050 crore). India's only extant diamond field, in Panna in Madhya Pradesh, produces only 85,000 carats a year. That could explain why everyone is headed for Raipur.

Mainkar led the teams that found potentially diamond-bearing kimberlite rocks in Mainpur and Tokapal DATTA MAINKAR/DY. DIRECTOR (TECH.)/DIRECTORATE OF GEOLOGY & MINING

The Rs 4,000-Crore-A-Year Play

Today, there are as many as six companies locked in a battle for the state's diamond reserves. De Beers and Rio Tinto have grabbed the most lucrative mineral blocks for reconnaissance (read: large area mineral prospecting), largely on account of getting there first. De Beers India has won reconnaissance permits (RPs in mining-lingo) for 6,000 square kilometres over six districts; Rio Tinto has RPs for a similar area over five districts; and last year, the two companies were locked in a lobbying war to gain control over mining activities in the Mahanadi basin in Mahasamund district. Another multinational mining major, BHP Billiton, will soon enter the race. Then, there are the smaller companies. Bangalore-based Geomysore Services, the wholly-owned exploration arm of Perth-based Australia India Resources, is currently engaged in prospecting for gold, copper and zinc, but its Chairman Charles Devenish says that "we will also be looking at diamonds in Chhattisgarh some time in the future". Steel major Jindal Steel & Power is planning to search for diamonds in the Jashpur region. And Bhopal-based Emperor Granite has won the RP for a 1,000-square km belt in Kanker district. Today, of the state's 135,000 square km, some 17,000 square km is being scoured for diamonds. The government has decided to double the area as and when other mining companies apply for RPs.

It is likely they will hit something. Chhattisgarh is, arguably, the richest state in India in terms of mineral wealth. It has all of India's known coal and tin ore, a fifth of its iron ore, and rich deposits of bauxite and dolomite (which is used in some forms of cement). Alexandrite, a rare gemstone, has been found in the Deobhog area near Raipur and semi-precious stones like rubies and blue sapphires can be found in some quantity in southern Chhattisgarh.

The process of exploring for diamonds is divided into three phases, with companies being given licences in each. In the first, an RP, for a maximum area of 10,000 sq km per company, is issued for three years. At the end of the second year, the company has to relinquish half this area. If a company is able to narrow down the area of its search to 25 sq km, it is granted a prospecting licence (this is the second stage). And if a company strikes gold, sorry diamonds, it is issued a mining licence. Once the field starts producing diamonds, companies pay the state government 10 per cent of their revenues as royalty. Both the government and the companies currently prospecting for diamonds expect to hit a mine in the next three-to-four years. Chief Minister Raman Singh also hopes to reap the benefit of the multiplier effect. By insisting that the diamond-cutting and polishing industry should be established within the confines of Chhattisgarh, he can boost employment and industrialisation of what is essentially a tribal state.

A Game of High Stakes

That Rio Tinto, De Beers, and BHP should fight it out for Chhattisgarh's diamond reserves isn't surprising. De Beers, a twentieth century monopolist and a pure diamonds player, controls almost half the world's $8-billion (Rs 36,000 crore) diamond output. Rio Tinto is a pure mining company (the largest of its kind) and has stakes in both Diavik, the underwater Canadian diamond mine that is the richest in terms of value, and Argyle, the Australian mine that is the world's largest. The two companies are arch rivals and a possible new source of some five million carats a year that could increase global supply by a disastrous 5 per cent if not controlled properly-globally, the price of diamonds is kept artificially high by ensuring that supply is always marginally lower than demand-is something neither player can ignore.

Campbell sees a lot of areas in India where there is a potential to find diamonds ALAN CAMPBELL/ EXPLORATION MANAGER/DE BEERS INDIA

The fact that companies have to hand over half the land for which they own an RP at the end of two years makes the business extremely competitive. A company's survey data may point that there's a higher chance, but only marginally, of finding diamonds in the area it chooses to retain. If a rival has access to this data, it could bid for an RP for the land that reverts to the state. For the record, the company itself can bid anew for the same land. This is what makes diamond industry execs like Burgess paranoid about data safety.

While the prospects of finding diamonds in the Mahanadi basin seem bright, the companies themselves will not relax till they have a mine in place. "Diamond exploration," says Geomysore's Devenish, "is the most expensive and riskiest business going. It is the hardest mineral to find and you need deep pockets to enter the business." Burgess seconds that opinion, adding that one out of every 100 kimberlite rocks discovered in the world end up as mines. De Beers, for instance, couldn't find any economic diamond mine in Australia even after a 40-year search. Yet, it found a mine in Botswana, Jwaneng, (today, one of the richest mines in the world) in just five years.

And so, for the next four-to-five years, De Beers, Rio Tinto and a clutch of others will invest between $5-10 million (Rs 22.5-45 crore) a year prospecting for diamonds in India. "You need to be very patient," says Alan Campbell, Exploration Manager, De Beers India. "India has lots of areas where there is a potential to find diamonds. After all, India was the home of great diamonds like the Kohinoor (109 carats) and the Great Mogul (807 carats)." Could there be a few Kohinoors at the end of this rainbow? Well, hope springs eternal.