Glencore Xstrata have dumped plans to develop a coal export terminal on Balaclava Island, blaming the decision on poor market conditions.
Xstrata Coal had been studying the potential for a new coal export terminal at Balaclava Island over the past three years.
The terminal, 40km south of Rockhampton, was set to create a 35 million-tonne-per-annum capacity complex to service the Bowen and Surat Basins.
However, the company today announced its decision to cease work on the project immediately.
“The decision has been made as a result of the poor current market conditions in the Australian coal industry, excess port capacity in Queensland, specific shipping limitations and concerns about the industry’s medium-term outlook,” the company said in a statement.
The move casts doubts over the future development of a coal mine near Wandoan on Queensland’s Western Down’s region
Xstrata is proposing to develop the largest open-cut coal mine in the Southern Hemisphere, but is yet to make a final investment decision.
The $7 billion project north-west of Toowoomba would mine 30 million tonnes of coal per year over three decades, and planned to use Balaclava Island as its export terminal.
However doubts were cast over whether the project will go head, with Glencore chief Ivan Glasenberg telling investors he was in favour of less risky investment decisions.
"We prefer to distance ourselves from greenfield projects which create more risks," Glasenberg said.
Glasenberg also schooled miners on the theory of supply and demand, saying the industry had been saturated with new mines that lead to a surplus in metals and shrinking profits.
“We've always been wanting to keep building and keep putting the cash which we generate into new assets. That's what we've got to stop doing as a mining industry. We've got to learn about demand and supply,” he said.
Glasenberg argued that stalling the development of new mines will help prolong higher commodity prices.
Glencore merged with Xstrata in April in a $US34 billion all-share acquisition deal making it the biggest mining company in the world.