Adani may exit US$16.5bil mine without deal

Minister: Coal project dependent on royalties agreement

SYDNEY: India’s Adani Group could walk away from its US$16.5bil Carmichael coal project in Australia unless a royalties deal can be reached with the state government, according to federal Resources Minister Matthew Canavan.

The Queensland government’s failure to agree the terms of the royalty regime for the mine may jeopardize the development in the state’s Galilee Basin, Canavan said in a phone interview yesterday.

Adani was due to make a final investment decision on May 29 for the Carmichael mine, but deferred that on Monday citing uncertainty over royalty payments.

Adani’s approval for the project “is contingent on the Queensland government coming to a decision on their royalties policy,” Canavan said.

“You can’t expect Adani to make a multi-billion dollar decision if they don’t know what tax they will pay.

“The ball is now in the Queensland government’s court.”

Australia’s largest coal project - which could fuel power generation for 100 million Indians and create 10,000 jobs in Queensland - has been delayed several times since first being proposed in 2010 due to protests and court claims from green groups concerned about its environmental impact.

Westpac Banking Corp. barred lending for the project in April due to a new policy on coal emissions.

Gautam Adani, the bilaire chairman of Adani, said in March it could start mining coal from Carmichael in 2020.

An earlier royalties deal proposed by the state in March would see Adani pay less in the early years of the project but the same overall sum over the 60-year life of the development, Canavan said.

Adani will likely pay A$100mil to A$150mil a year in royalties based on its first phase target of producing 25 million tonnes a year of coal, with the final payment dependent on the prevailing coal price, the minister said.

Adani expects to raise about US$2.5bil to build a rail line connecting the mine with Abbot Point port over the next two years.

The group will raise about US$800mil via equity and the rest through debt.

That includes a controversial A$900mil loan from the government-backed Northern Australia Infrastructure Facility, which Canavan said continues to be assessed.

Federal labour leader Bill Shorten said while royalties need to be determined at a state level by the Labour government, he opposes using federal taxpayer money to subsidize the mining project.

If the Adani project “is a commercial success then it doesn’t need the taxpayers to underwrite a bil dollar loan to a multi-bil dollar coal company,” Shorten said at a press conference.

“That’s our position, what Queensland does is ultimately a matter for them.”

Annastacia Palaszczuk, premier of Queensland, didn’t immediately respond to a voicemail request for comment. — Bloomberg