Mirage or miracle? Wednesday 07 January 2015 | (0) LIKE a mirage on the horizon of a thirsty man, Adani’s Galilee coal project remains visible but not quite real for Central Queensland mining businesses. Adani made two notable revelations over the Christmas break. Firstly, it announced its intention to use the Downer EDI Group to build and operate its behemoth Carmichael coal project and, secondly, it is looking at a cash cost of around $62 a tonne for production at the mine. However, both announcements - while welcomed - remain hypothetical with no contracts signed despite plans for mining operations to begin in just over 12 months. Sceptics say it is just not possible to build a mine of that size, in that location, plus a connecting 500 kilometre rail line across one of the state’s biggest flood plains in that time frame. Others argue the economics of building a mine of Carmichael’s magnitude doesn’t stack up given the current coal prices. However, at every turn - and at every interview - Adani has remained resolute that despite all the challenges it will build the mine to feed soaring demand in a modernising India. In an announcement just prior to Christmas, Downer EDI Group said it had received two “Letters of Award” from Adani advising that it intended to use them as both the major operations contractor and tier one contractor for construction of the mine. Specifically, Downer would be responsible for statutory management and operation of the mine including drilling, blasting and the hauling of overburden and coal. Adani, however, will pay for the massive mining fleet required to undertake the task. In construction, Downer would also be responsible for the engineering, procurement and construction of site infrastructure. The provision of these services for between five and seven years would cost Adani around $2 billion. However, like so many earlier announcements about the Carmichael project, Downer was quick to point out that nothing is set in concrete. “Both Letters of Award are subject to the parties executing binding contracts which would be followed by pre-production and planning in early 2015 with mine infrastructure construction commencing in the fourth quarter of 2015,” Downer said in its statement. Speaking at the announcement, Adani Australia CEO Jeyakumar Janakaraj said they were transitioning into the build phase. The Carmichael mine lies at the heart of these projects which will deliver vital export opportunities for Queensland,” he said. “10,000 jobs, $22 billion in taxes and royalties to be invested right back into frontline services across our state, and crucial work opportunities for small and medium sized businesses. “This partnership with Downer reflects the clear confidence that tier one firms have in Adanis projects and we welcome the chance to work with such a respected, proven partner on this critically important task. Since those comments were made Mr Janakaraj has also told India’s Business Today magazine that despite the collapse of thermal coal prices the valuation of the Carmichael mine in central Queensland had increased. Couple with the falling Australian dollar, and cash costs would fall below $US50 a tonne, placing Carmichael among the cheapest mines in the world. “At financial close next year, our mine will be valued more than $3-3.5 billion (on investments of roughly $1 billion),” Mr Janakaraj said. “We have got about 11.05 billion tonnes of JORC-certified coal resources, and one billion tonnes of reserves themselves. “People do not have this kind of resource, and this was not achieved overnight, but through three years of drilling and exploration unparalleled anywhere. “So our investment is growing, but our valuation is growing bigger, despite coal prices going down.”
Posted on: Wed, 07 Jan 2015 03:04:58 +0000
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