CANBERRA: Adani Mining has suspended preparatory engineering work on its Carmichael project in Australia, one of the world’s biggest untapped thermal coal deposits.
The Indian company said, however, that it remains committed to the A$16bn project in Queensland that has become a potent symbol of the battle between environmentalists and the fossil fuel industry.
“As a result of changes to a range of approvals . . . it’s necessary to synchronise our budget, project timelines and spending to meet those changes,” said Adani in a statement on Wednesday.
Adani has told several contractors to suspend work on the project, which includes development of a mine, construction of a railway line and expansion of the Abbot Point port. It has appealed to authorities to expedite the approval process, noting that after five years of development the “need to finalise those approvals and timelines is critical”.
The Carmichael mine in the Galilee Basin has become the focus of a global campaign by environmentalists who argue that burning coal causes irreparable climate change. Other companies plan to develop mines in the basin and their projects would probably depend on Adani’s railway line and port.
Financial experts question the viability of the Carmichael project after a halving of thermal coal prices since the peak of the commodities boom in 2011.
Adani’s project has become the focus of a divestment campaign led by 350.org, which has extracted pledges from a dozen global banks including HSBC and Deutsche Bank that they will not fund the port project, which sits near the Great Barrier Reef world heritage site.
Daniel Morgan, commodities analyst at UBS, said the thermal coal market looked well supplied for several years and it was difficult to justify funding the project. “At some point a decision has to be made on whether to proceed or reduce funding to the project. That time may have arrived,” he said.
Jeyakumar Janakaraj, head of Adani Mining Australia, said last month the Indian group’s ownership of ports, power stations and mines meant the Carmichael project remained commercially viable.
“We have a pit-to-plug strategy and we will make money even at current prices,” he said.
Adani has spent A$1.2bn on the first phase of the project, which is estimated to cost A$7bn. Total investment could reach A$16bn.
Wednesday’s development comes as Gautam Adani, the billionaire founder, puts the finishing touches to a restructuring in which Adani group’s mining, ports and power operations are separated.
The changes, outlined this year, involved Adani spinning out new listed ports and power businesses to simplify the complex main holding company, Adani Enterprises.
Adani’s unlisted Australian projects affect its Indian listed entities only indirectly, but analysts say the huge related expenses could slow Adani’s attempts to expand rapidly in other business areas, such as solar energy.
“It was clearly a mistake to invest so heavily in an Australian coal business, and Adani are struggling with what to do,” said Prabodh Agarwal, head of research at India Infoline, a broker in Mumbai.
“At the time they did it because it looked as if India wouldn’t have enough domestic coal, but now we know domestic production is going up under [Prime Minister Narendra] Modi, so the idea of importing coal into India from Australia just doesn’t make much economic sense.”
