Anglo American has announced its decision to withdraw from the expansion project at the Abbot Point terminal in Queensland, Australia. The move will leave Indian billionaires G.V. Krishna Reddy and Guatam Adani as the last major investors looking at extending the terminal.
GVK Group and Adani Enterprise Ltd have been left on their own to study expansion at the Abbot Point port to export thermal coal from separate mine projects they are planning inland in the Galilee Basin at a total cost of an estimated US$ 17 billion.
Anglo’s move comes as thermal coal prices trade down close to September’s four-year low amid a global supply glut swollen by increased input form major producers, including Glencore Xstrata.
Matthew Trivett, a Brisbane based analyst with Patersons Securities Ltd, said that Anglo’s decision “further erodes confidence that the major mines being proposed in the Galilee basin can happen in the current price environment. The ongoing weakness in the coal market makes it difficult for the returns to be adequate for the massive capital expense required to bring some of these peripheral basins like the Galilee into production.”
Anglo announced yesterday that it had told the Queensland Government of its withdrawal from the Abbot Point coal terminal development. The company said it was studying port options in the state, adding that its requirements would be determined by a range of factors, including the long-term coal market outlook.
The port expansion also has drawn ire from environmental groups who are campaigning against a plan to dump dredging waste from the expansion of Abbot Point within the waters of the Great Barrier Reef Marine Park.
“The Australian coal projects require large allied infrastructure investment and high leverage, making it challenging to achieve financial closure,” said Debasish Mishra, a Mumbai-based partner in Deloitte Touche Tohmatsu’s energy and resources practice in India. “Some of the Indian players who have invested in Australia may be better off exiting these investment even at a loss.”
“For these projects to be attractive investments, you need to be quite bullish about thermal coal prices,” said Christian Lelong, a Sydney-based commodity analyst with Goldman Sachs Group Inc.“If you’re a power company, and you’re wanting to secure sources of coal, there’s plenty of coal in the market.”
Edited from various sources by Sam Dodson
Read the article online at: https://www.worldcoal.com/handling/07032014/australian_port_expansion_loses_anglo_american_backing_600/