Press release- $16 Billion Carmichael Mine “Fundamentally Unprofitable, Unviable” Says Finance Analyst

SYDNEY – Adani’s proposed $16 billion greenfield coal export project in Queensland’s remote Galilee Basin will be impossible to finance says Tim Buckley of the Institute for Energy Economics and Financial Analysis (IEEFA). The Carmichael Mine was given approval by the Queensland Coordinator General earlier today.

“Evidence is mounting that coal mining in Australia is entering structural not cyclical decline. With the thermal coal price down 50% in 3 years and still falling, there is no market for massive greenfield thermal coal projects like Adani are proposing ” Tim Buckley, Director of Energy Finance Studies, Australasia for IEEFA said today.

“Financial modelling has exposed Galilee basin coal as unprofitable and commercially unviable given the lack of the critical infrastructure required and the excessive transportation costs involved.”

“Carmichael coal is in a very remote location: Carmichael is 400km from the coast and there is no rail infrastructure within 200km. There is no commercial power or water infrastructure within 200km and there is no sealed road access for 90km.

“Carmichael coal is low energy content and high ash, such that the mine proposal will continue to be challenged by permanently low thermal coal market prices. Carmichael’s all-in coal cost structure is likely to remain around the global thermal coal price for the foreseeable future, leaving no profit nor cashflow margin and hence it is extremely unlikely that any investor will take part.”

Adani’s house broker Morgan Stanley’s research report values the Indian coal conglomerate’s Carmichael project at $0 and notes: “While the company expects the environmental clearance to come through in F2H14, it does not plan to spend money on developing the mine until coal prices rise from current levels”. Spot thermal coal prices have fallen 15% to US$73/t since this report was released in November 2013.

We note the Queensland government continually seeks to overstate this project’s contribution to the State economy. While Adani Mining’s Supplementary Environmental Impact Statement of November 2013 states the total 60 year capital investment is estimated at $16.5bn, only one third or $5.1bn of this is forecast to be spent in the 8 years to 2022.