Planned new mines in the Galilee Basin in Queensland are “too risky to attract adequate investor support,” the Institute for Energy Economics and Financial Analysis (IEEFA) said in an industry brief published last week.
Looking at GVK Hancock’s Alpha and Adani Enterprises’ Carmichael projects, the report concludes that “the huge scale, greenfield nature and foreign ownership of these two projects brings an almost unprecedented level of financial complexity and risk.
The expected investment required to bring the projects to production totals US$25 billion. Yet the companies will face an “increasingly difficult hurdle in securing funding due to the rapid deterioration of coal project profitability following a halving of the coal price. The increased probability of a structural decline in thermal coal raises the financial risks involved.”
Adding to uncertainty, rail operator Aurizon has warned that its planned expansion into the Galilee Basin will not start for several years due to low thermal coal prices. "The reality is the go-ahead for the Galilee will be some years down the track," said Lance Hockridge at an investor briefing. Aurizon has signed an agreement with GVK Hancock to provide infrastructure for the Alpha development.
This could leave GVK with no option but to use Adani’s proposed railway, according to a report from the Sydney Morning Herald.
GVK, however, remains bullish on the prospects for Galilee Basin development. "Even in the current market conditions, our Galilee Basin coal assets are differentiated from other mines due to their projected low production costs, sought after coal quality, advanced stage of approvals, advanced stage of construction readiness and access to a proposed viable transport solution connecting our assets to export markets," GVK spokesperson, Josh Euler, told the APN Newsdesk.
The Ohio-based IEEFA conducts research and analyses on financial and economic issues related to energy and the environment with the aim of reducing dependence on coal and other non-renewable energy resources.
Written by Jonathan Rowland
Read the article online at: https://www.worldcoal.com/coal/27102014/world-coal-galilee-basin-development-faces-uphill-struggle-for-funding-coal1452/