India’s Adani Group could walk away from its US$16.5 billion Carmichael coal project in Australia unless a royalties deal can be reached with the Queensland government, Australian Minister for Resources Matthew Canavan said.
The Queensland government’s failure to agree to 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 Monday next week for the Carmichael mine, but has postponed that, 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 multibillion-dollar decision if they don’t know what tax they will pay. The ball is now in the Queensland government’s court.”
Adani Enterprises Ltd, the flagship company of the Adani Group, said it has deferred some budget approvals for the mine until it receives clarity from the state government on royalties.
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 last month barred lending for the project due to a new policy on coal emissions. Adani chairman Gautam Adani in March said that 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$100 million to A$150 million (US$74.7 million to US$113 million) 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, he said.
Adani expects to raise about US$2.5 billion to build a rail line connecting the mine with Abbot Point port over the next two years. The group will raise about US$800 million via equity and the rest through debt. That includes a controversial A$900 million loan from the government-backed Northern Australia Infrastructure Facility, which Canavan said continues to be assessed.
Australian Labor Party leader Bill Shorten said while royalties need to be determined at a state level by the 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 billion-dollar loan to a multibillion-dollar coal company,” Shorten said at a press conference. “That’s our position, what Queensland does is ultimately a matter for them.”
Queensland Premier Annastacia Palaszczuk did not immediately respond to a voicemail request for comment.
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