American report says Carmichael and Alpha “commercially unviable”

Galilee Basin mines face a dim future, and will struggle to find investors according to a report released by an American anti-coal group.

The claims that finding investors will be difficult due to the dropping coal prices, foreign ownership and mines not yet proving their operational worth have met strong criticism from coal miner GVK, APN reported.

The report was released by the Institute for Energy Economics and Financial Analysis (IEEFA), an organisation which counts among goals the mission to “reduce dependence on coal”.

Author and IEEFA finance director Tom Sanzillo said the GVK Alpha mine and Adani Carmichael mine were massive risks for investors.

“The huge scale, greenfield nature and foreign ownership of these two projects brings an almost unprecedented level of financial complexity and risk,” he said.

“This project faces an increasingly difficult hurdle in securing funding due to the rapid deterioration of coal project profitability following a halving of the coal price.

“The increased probability of a structural decline in thermal coal raises the financial risks involved.

Sanzillo said the Galilee coal project proposals were “highly unlikely to proceed without the support of the four Australian bank majors.”

“IEEFA estimates that the most advanced Galilee coal greenfield projects, both run by Indian conglomerates, face a combined $21 billion in infrastructure costs, including rail and port construction,” he said.

“These projects are commercially unviable, reflective of the enormous capital investments required, the relatively low quality thermal coal involved, globally depressed seaborne coal prices and the lack of any of the necessary infrastructure required.”

GVKs Josh Euler struck back against the report, suggesting their analysis was flawed as it was based on other coal operations, and that GVK had already made significant progress with identifying investors for the Alpha mine.

“If analysts are applying the same cost structures found in other existing regions, such as the Bowen Basin for example, to our large-scale greenfield site, they would clearly get their figures wrong,” he said.

“Even in the current market conditions, our Galilee Basin coal assets are differentiated from other mines due to their projected low production costs, sought after coal quality, advanced stage of approvals, advanced stage of construction readiness and access to a proposed viable transport solution connecting our assets to export markets.”

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