GVK Hancock has delayed its Alpha Coal project by one year as it struggles to line up funding for the $10 billion dollar project.
The Alpha project, 79 per cent owned by Indian conglomerate GVK and 21 per cent owned by Gina Rinehart's Hancock Prospecting, involves two coal mines in the Galilee Basin, a 495 km standard gauge railway line as well as the port facilities at Abbot Point, approved by the government approval earlier this month.
The delay comes as GVK’s vice chairman said the initial target for the project had been overly ambitious and had to be pushed back due to its size and complexity, Economic Times reported.
"There was a small delay in approvals, but frankly the main reason is that the target was unrealistic, given the size and scale," Sanjay Reddy told Reuters.
GVK now expects to cut its stake to 51 percent and reach financial closure by the third quarter of 2013, Reddy said.
"While we have already started our preliminary discussions with bankers and financiers, these will start taking serious shape once we have the construction contracts also in place," Reddy said.
GVK says it is still committed to building the Alpha project.
"Even in this environment, the reason why this project is going to take off is primarily because of our cost," Reddy said.
"Our free-on-board cost per tonne for the life of mine is going to work out to around A$55 a tonne."
The Alpha project is set to create 650 jobs during port construction while the combined Alpha mine rail and port project will provide 1800 on-going, intergenerational operational jobs and employ 4000 people during construction.
The company estimates that returns to government for each year of construction will exceed $1 billion.