Carmichael on solid footing to withstand industry volatility: Adani

ADANI has defended the viability of its giant Carmichael coal project in Queensland’s Galilee Basin, claiming the operation and its infrastructure will provide solid mine construction and coal export industry for the state in the medium term.
Carmichael on solid footing to withstand industry volatility: Adani Carmichael on solid footing to withstand industry volatility: Adani Carmichael on solid footing to withstand industry volatility: Adani Carmichael on solid footing to withstand industry volatility: Adani Carmichael on solid footing to withstand industry volatility: Adani

Map showing Adani's proposed Carmichael mine and rail project.

Lou Caruana

It is also on a secure financial footing and will supply the need for thermal from India for years to come, according to a company spokesman who was responding to an ABC Four Corners program on coal in Australia.

Key customers for coal mined at Carmichael, and transported through the North Galilee Basin Rail and Abbot Point Port, will be Adani’s own latest generation thermal coal plants in India, he said.

“Adani Power is India’s largest private power provider, and is well placed to speak to the demand and viability equation in key markets,” he said.

“Other offtake agreements have or are in the process of being concluded throughout Asia, with around 70% of the initial phase of production already the subject of offtake agreements.

“This reflects a sensible approach which sees anchor customers in energy-hungry markets in south Asia appropriately balanced with key customers in north Asia and elsewhere in the region. The approximate breakdown is around two thirds of exports to India and Korea, and one third to China, Taiwan and other Asian markets.”

The quality and size of the resource at Carmichael, as well as the stable regulatory environment from the state and central governments in Australia, are key drivers of the development of the mine and the infrastructure projects there, according to Adani.

“A more than 11 billion tonne resource, the coal to be mined there makes it an asset that is high caloric value, low ash, low sulphur long-term investment that will help deliver energy security for the company and for our country,” the company spokesman said.

“The mine will be in the first quartile of the global cost curve, with the cost base of the broader project also assisted by efficiency-enabling infrastructure such as the North Galilee Basin Rail.

“Adani’s cornerstone investments in the entire value chain, mine, rail and port, as well as the infrastructure in India, will be reflected in costs of landed coal in India from Carmichael that would see a return on investment even at today’s seaborne thermal coal prices.”

“Capex efficiency is key here too. The historical average of capex costs for thermal coal is around $160-180 million per million tonnes of coal. The mine at Carmichael will come in at $100 million per million tonnes.”

Other factors expected to help lower costs are free trade agreements that Australian governments of both persuasions, both the current LNP Government and the previous Labor Government, have pursued within Asia; and prospective FTAs with China, ROK and India are anticipated to be a boon for energy exports from the country.

“It is also worth noting that the port at Abbot Point is Australia’s northernmost coal port, substantially closer to India and other Asian markets than comparable Australian coal ports, allowing around a $2 per tonne saving,” the spokesman said.

India will require increases in generation and evacuation capacity, reliable, cost-effective coal mined in accordance with Australia’s strict environmental conditions, as well as coal with the right calorific and ash content for highly advanced, new generators in the Indian market, according to Adani.

“Some commentators downplayed the central role thermal coal is playing in this market; but in India at the present time, around 16.6 million tonnes is being imported per month and an additional 22,566 mega-watt in generation has been added recently to India's generating capacity,” the spokesman said.

“Of that increased capacity, 92% is coal powered – with more to come. That is, it is a rapidly expanding energy market, with growing demand met largely, but not exclusively from coal.”