You may think that Indian power and energy companies have lost interest in developing new Queensland coal mines.
Not so. Adani Group are quietly working away preparing for further development of their Carmichael mine.
Will the Galilee Basin coal mines be developed?
Queensland coal mines have taken a hit over the past few months with mining companies deciding to cut costs in order to survive the price drops of metallurgical and coking coal.
Coal prices are the catalyst for mining development and in turn cause a ripple effect in the mining jobs market. When the coal price drops, mining contractor numbers can decline as mining operations are put under the fiscal microscope.
Quick to jump on these types of events, the media creates a new view of the industry using the information it has been given at any one time.
“a new demand for coal”
If history teaches us anything, it’s that nothing is certain and that outcomes can change at a moments notice. World markets change and global events can trigger massive demand for commodities. Take the Japanese tsunami that hit 2 years ago when the nuclear power stations were rendered useless. There was a new demand for coal to fire up the power generating plants. Since then Japan has relied heavily on coal to service its power industry.
India has serious coal supply problems
India is another country with serious internal issues when it comes to providing its population with power and lighting to drive industry and economic growth.
Indian company Adani has been active in Queensland for some years now and has invested heavily in buying up coal tenements as well as spending big on purchasing the Abbot Point coal terminal.
Adani has plans to develop a 60 million tonne per annum (Mtpa) thermal coal mine in the north Galilee Basin. This is about 160 kilometres (km) north-west of Clermont in Central Queensland.
Massive coal projects – never before seen in Queensland
This is a massive project and as such there have always been doubts about the viability of the coal mines given the immense task of building the infrastructure to access the coal resource.
Plans are in place to transport the coal via a privately owned rail line connecting to the existing Aurizon rail infrastructure near Moranbah, and shipped through coal terminals Abbot Point and/or the Port of Hay Point (Dudgeon Point expansion).
“coal mine will have a lifespan of some 90 years”
It`s expected the Adani Carmichael Coal Mine and Rail Project will have a lifespan of some 90 years and will create thousands of mining jobs for Queensland locals.
As far as Adani are concerned (as indicated on their website), this massive Queensland coal project is still viable and they continue to make plans by investing in developing the infrastructure.
“Adani continue to make investment plans”
In fact, just last month, Adani took delivery of a coal loader to its Abbot Point location. The 1250 tonne coal ship loader marks the end of a 12 months project.
Adani had shipped the coal loader to Korea for refurbishment where it underwent a massive overhaul. The shiploader had been in operation for over 20 years and was in desperate need of an upgrade.
The recent investment sends a clear signal that Adani have not walked away from the project.
Financial market analysis pours cold water on Galilee Basin projects
On the other side of the coin, there have been recent articles sprouting up on financial and investment websites that have slammed the Adani Galilee Basin project as non-viable.
“received the backing of the federal and Queensland governments”
There have been three separate projects proposed for the Galilee with the cost of development estimated at over $11 billion. All projects have received the backing of the federal and Queensland governments and EIS approvals were either underway or already endorsed. These mammoth coal mining projects were expected to create thousands of coal mining jobs in Queensland.
However, according to a new report by the Institute for Energy Economics and Financial Analysis, the lull in coal prices and the expense of development costs would make these projects too expensive, given the majority of the coal would be shipped directly to India to satisfy the country`s burgeoning demand for electricity.
One of the driving arguments raised in the report is that retail electricity prices in India are much lower, therefore the concern is that profitability would be none-existent for coal-fired power generation companies who used imported coal.
“costs far outweigh the profits”
The report bases its findings on the fact that the location of coal deposits in the Galilee Basin means the additional costs of getting the coal from the basin to the port and out to India, far outweigh the profits.
As it stands today, Indian coal producers are having their own internal issues getting their hands on a reliable coal source. Recently the Indian government cancelled many mining tenement leases because of corruption in the industry ““ which has further tightened the coal market and caused power companies to look for external suppliers.
“GVK who shelled-out around $1.36 billion in Queensland”
With Indian coal producers unable to supply enough coal to satisfy local energy demands, India`s Adani Group invested $525 million in 2010 to acquire the Queenlsland Carmichael lease. Hot on their tail were rival Indian group GVK who shelled-out around $1.36 billion in 2011, in a joint venture with Gina Rinehart`s Hancock Prospecting, for a separate coal tenement lease.
Also in the picture is Clive Palmer`s China First mine which is scheduled for completion by 2017. It is expected that this project will produce around 40 Mtpa of coal for export.
These 2 projects alone would mean massive infrastructure investment which would include railway networks lines and port facilities in environmentally sensitive areas close to the Great Barrier Reef near Townsville and Mackay.
The report goes on to highlight that, since the mining leases were granted, international coal prices have dived, meaning that on the current project modelling Indian power stations fired by coal from the Galilee Basin would have to almost double the price they charge for electricity.
It`s also been said in the report that assuming that the Galilee Basin was to go ahead, the coal deposits remain very expensive to develop. Remember, this was a report written by the Institute for Energy Economics and Financial Analysis, (http://www.ieefa.org/) who are
Indian power companies hit back at the report
A spokesman for GVK in India hit back hard at the Institute for Energy Economics and Financial Analysis report, saying GVK remained fully committed to the Queensland coal project in the Galilee Basin and scoffed at the doubts expressed in the report.
“GVK firmly committed to Galilee Basin projects”
“We remain firmly committed to the development of our Galilee Basin coal assets and we are continuing to develop our projects to a point where construction can commence,` the spokesman told Fairfax Media.
“If analysts are applying the same cost structures found in other existing regions, such as the coal mining activities in the Queensland Bowen Basin for example, to our large-scale greenfield site, they would clearly get their figures wrong.”ť
“GVK says its mine will be immune to the volatility of cyclical coal prices”
The coal in the Galilee Basin is found at shallow depths and is very flat. This means excavation costs are considerably less and delivers coal to the end user at a competitive price which ensures the GVK mine is comparatively immune to the volatility of cyclical coal prices.
A global supply shortfall in the coming years is expected to create strong demand for coal and GVK`s Queensland assets were uniquely positioned to fill this gap.
The Galilee Basin coal assets are very different from other mines because of their projected low production costs and highly sought after high coal quality and low sulphur emissions.
GVK said they are continuing to develop their Queensland Galilee Basin coal projects to a point where construction can begin. They went on to say they wouldn`t be pushing ahead if they thought the projects was not viable.
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