Sri Lanka’s mineral export potential is vast, yet the industry believes that actualising this growth requires the establishment of a complete, investor-friendly ecosystem.
In an interview with The Sunday Morning Business, Damsila Resources Ltd. Director and Chamber of Mineral Exporters (CME) Secretary Dr. Sandun Dalpatadu explained that the sector’s slow progress stemmed from a lack of a cohesive industrial ecosystem and regulatory delays, among other issues.
He further highlighted the need for market-driven value addition and long-term policy certainty to attract the capital-intensive investments required for strategic minerals.
Following are excerpts:
China is dominating the mineral supply chain. Given how global demand for the mineral sector is shaping up, how do you view the competition in the global market for a country like Sri Lanka?
China is not just dominating the mining aspect of the resourcing industry; more critically, it dominates processing, refining, and downstream integration. It does not simply mine its own domestic resources, it imports minerals from across the globe and excels at refining them. Because China has entire ecosystems, its downstream integration is incredibly strong.
However, if you look at current global trends, there is a great push for supply chain diversification. Major economies are looking to diversify, so they are no longer solely reliant on a single supplier.
This is an opportunity for us. We cannot compete with China on scale, as it is the second largest economy in the world. Instead, we must focus on the reliability of our supply and high quality. We should look at integrating into regional and global value chains to see where we can plug in.
For instance, an Indian delegation visited us last year to discuss critical mineral supply. This is a major area of interest now. Graphite, for example, is essential for new energy vehicles. By securing supply streams for these specific minerals, Sri Lanka can position itself effectively rather than attempting to compete directly with China, which is not a realistic goal.
Furthermore, competition for minerals is more than just the raw material. It depends on processing cost structures, regulatory certainty, and logistics. Sri Lanka is already a logistics hub, and we should leverage this advantage to remain competitive.
Could you elaborate on the global demand and export potential for value-added minerals that Sri Lanka could realistically tap into? How would you explain the country’s raw material to value-added product ratio in mineral exports?
Global demand for minerals is driven by several factors, including the energy transition from coal to clean energy, the electronics industry, advanced manufacturing, and construction. There is a common misconception that Sri Lanka exports raw minerals, but that is rarely the case.
Today, very few buyers look for raw minerals. Sri Lanka engages in beneficiation, which involves upgrading minerals through grading, micronising, and specialised processing. In the quartz industry, for example, we produce ultra-fine micronised powders for specific applications. We also produce fillers and zirconium-based powders. From quartz, a finished product is also made in Sri Lanka now, which is engineered stone (artificial marble).
Ultra-fine quartz composite powders are also produced for the automobile component and semiconductor markets. We also produce calcium carbonate-based fillers and zirconium silicate powders. Also, graphite in Sri Lanka is now used to produce specific lubricants and also powder for carbon brush production. Thus, we are already doing a fair amount of processing to add value.
Meanwhile, this deeper value addition that is usually discussed is only viable if the market exists at a competitive price. While we have the capability to produce almost anything if the technology and other inputs are available, it must be economically feasible. Value addition for its own sake is not helpful if we cannot compete on price, quality, and scale with other global producers.
Regarding the ratio of raw to value-added exports, Sri Lanka has moved beyond pure raw mineral ore exports, but further downstream processing requires a complete ecosystem. This requires more than just the mineral itself; it requires available inputs, affordable energy, infrastructure, skilled labour, logistics, financing, and stable policy. Simply having high-quality graphite in the ground does not automatically make in-country value addition to produce finished goods economically viable.
What are the emerging value addition efforts being explored by the mineral industry at present?
The industry is currently focused on market-driven value addition rather than headline-driven projects. The industry is looking for realistic, scalable options like improving purity levels to move up the mineral value chain. We should aspire to meet these technical specifications rather than jumping straight into manufacturing end-products such as fibre-optic cables or solar glass, which are much further downstream.
Our focus remains on purity, consistency, particle size, and impurity control. If you look at quartz, these powders must meet very strict requirements because they are integrated into complex industrial production lines globally and meeting them provides significant returns.
We need clear policies and commercially viable fiscal structures to make deep value addition projects feasible. It is encouraging to see companies moving away from just selling basic mineral powders and instead looking at the specific requirements of the end user to match those specifications.
How lucrative is rare earth production for a country like Sri Lanka and how are we leveraging these in the value addition sector?
Rare earths are a major topic in the international resource industry right now, but in my view, while it can be lucrative, this is not a quick or simple opportunity for Sri Lanka. The real value lies not in mining, but in separation, refining, and downstream manufacturing. These processes are highly capital-intensive and require advanced technology and expertise in mineral science.
To develop this sector, we need strong governance, environmental safeguards, and regulatory clarity. We will likely need international partners to move forward. Given that there are identified deposits offshore as well, in my opinion the Government should treat these as strategic assets. Thus, it is a long-term play that requires a deliberate, strategic approach to leverage effectively.
Are there specific protectionist concerns that are limiting value addition in the country? Which areas need to be expanded to generate more revenue from mineral value addition?
Certain approaches can unintentionally be perceived as protectionist. If we were to categorise Sri Lanka’s processing as primary or secondary processing, simply restricting their export without enabling a domestic value addition ecosystem may cause the industry to contract. If exports are constrained but local conditions for further processing are not established, we will not be competitive enough for downstream processing without the right environment.
To expand into further downstream value addition, we must first ensure proper access to minerals. We can see that the Government is addressing this issue by formulating ways to allow access to certain identified mineral deposits, which is a positive step.
Beyond access, we need affordable energy. Current discussions regarding power wheeling for the private sector could be very helpful. We also need fiscal stability. Royalties and taxes cannot change every few years because mineral projects typically span 20–40 years. Investors require that long-term predictability.
Furthermore, the Government should play a role in trade facilitation. We must attract local and international investors to help us move further up the chain. This requires a clear path for joint venture clearances and a functional National Single Window (NSW) to build the necessary ecosystem.
You mentioned the National Single Window. The industry has long requested that procedural delays be addressed promptly. What are the biggest systematic issues burdening the value addition sector? How have recent digitisation efforts or progress in NSW helped?
The main issues are time and uncertainty. We face these daily. When we submit documents to regulatory agencies, the process is not time-bound and applications cannot be tracked. For instance, it is difficult to predict how long a mining licence renewal will take. This is largely because approvals are required from multiple agencies and the process is sequential rather than parallel.
We do see a positive shift with the current Government’s focus on digitisation and NSW. While we are waiting to see how these steps improve efficiency in the mineral sector, the potential is significant. If the Geological Survey and Mines Bureau (GSMB) could handle inter-agency coordination internally and allow applications to be tracked digitally, it would greatly increase investor confidence.
Until our approvals are predictable and time-bound, attracting investment into value-added projects is rather high-risk compared to competing jurisdictions like India, Indonesia, or Thailand. Efficiency is no longer just a convenience; it is a matter of global competitiveness. If other countries are more efficient than us, markets will naturally follow them.
The new national mineral policy is yet to be established. How does this delay impact the industry and investment? How important is prompt implementation?
This is the first time that successive governments have included significant industry input in the policy-making process. Since the current Government took office, there have been further discussions and proposed changes. We were informed last December that the policy was in its final stages and would be shared with key stakeholders. We hope the final version is shared with the industry and the general public soon for final input.
While the delay hasn’t completely halted the industry, certain procedures at the GSMB are on hold until the policy is finalised. We have been told it may reach the Cabinet or Parliament by mid-February. Hopefully, these delays are temporary so the industry can move forward.
Another key issue is the duration of mining licences. How do short-term licences impact value addition and investment?
Minerals are a long-term investment. Even if a proven resource shows significant deposits, a licence issued for only a year or two creates problems. Major global projects run for decades.
While Sri Lanka may not have discovered many massive deposits yet, short licence tenures force companies to focus on short-term extraction. If a licence is only valid for three years and the renewal process is uncertain on top of policy uncertainty, companies will limit their capital investment.
A longer-term licence should be issued provided there is an adequate resource and the company adheres to regulatory conditions. We are seeing some gradual improvement here; some licences for larger deposits are now being issued for five or 10 years. If this continues, people will be more willing to invest in downstream processing because they have operational continuity.
Has Sri Lanka established sufficient Research and Development (R&D) efforts to uplift the value addition sector? Do we currently have a comprehensive database of existing mineral resources, and where do you see the gaps that should be prioritised?
Sri Lanka has good R&D institutions and brilliant people with deep geological knowledge. However, what we need now is applied, industry-linked R&D rather than only conducting research for its own sake. While basic science is important for identifying resources, our focus must shift to processing efficiency, recovery improvement, and meeting international specifications.
It is said that Sri Lanka has the best minerals in the world, but specifications can vary even within the same mine. For example, Balangoda quartz differs from Galaha quartz. Customers provide very specific requirements for purity levels. This is where R&D becomes essential.
At our company, we are collaborating with the University of Colombo to improve purity and explore new applications. These academics understand the local constraints – whether they involve processing inefficiencies, extraction methods, or resource availability.
Furthermore, we should look at supporting our existing domestic industries, such as rubber tyres, garments, and ceramics. Instead of only focusing on high-tech end products like fibre-optic cables, we can develop local minerals to support these thriving sectors. For instance, our graphite is currently being studied for use in the rubber industry.
Regarding data, investors require accessible, investor-ready mineral resource information. We pay royalties to the State, and a portion of that revenue could be reinvested into mapping and creating a centralised mineral database. We also need pilot-scale testing facilities where industry and research institutes can work together. While R&D and data accessibility are being addressed in the new mineral policy, improving these areas is a matter of competitiveness.
In your view, what are the most significant missed opportunities and the key emerging opportunities to look out for in Sri Lanka’s mineral value addition sector?
The biggest missed opportunity has been the failure to build a complete, investor-friendly ecosystem.
To attract downstream investors, we must align our royalty structures, licensing processes, and infrastructure approvals with market realities. Although done with good intentions, in the past, we saw ad hoc amendments and Cabinet papers that lacked a cohesive, long-term vision. Had we built this ecosystem decades ago, the industry would be at a different level today.
There is also a common misconception that the miner must carry the entire value chain. Globally, miners, processors, and manufacturers are usually different players who specialise in their specific fields. Policy should attract each segment of the chain individually.
The role of the regulator is to create an environment where a miner can operate efficiently, while also attracting a separate processor who sees Sri Lanka as a logical place to set up shop due to affordable energy or other specific benefits. Hence, we need to build this conducive ecosystem.
It is also important to recognise that value addition is not viable for every mineral at the same level that one may expect due to resource availability, availability of inputs or land, and environmental constraints. We can, however, market our strengths in Environmental, Social, and Governance (ESG) standards, which makes us a preferred partner for international customers (e.g. European buyers) who prioritise traceability.
Importantly, no private company will ignore a profitable opportunity for value addition. If it isn’t happening at scale, it is because the commercial environment does not support it yet. From an industry point of view, value addition should not be a result of regulatory compulsion; it should be the most logical commercial decision. We must ensure that we pursue value addition without destroying our global competitiveness.