Skip to main content

Adani-POSCO agreement on sensitive coalmining project in Australia sends "shivers down global investors"

By Our Representative
Institute for Energy Economics and Financial Analysis (IEEFA), a Cleveland, Ohio, US-based independent research group, has pushed the panic button by saying that top industrial Gujarat-based Adani Group’s latest announcement of agreement with South Korea-based multinational company, POSCO, for joint investment in the Australia’s coal mining project in Queensland province is likely to “send shiver down the spine of global coal investors.” An Adani release said, the two have signed a “binding agreement” to develop a “rail line to open up the Galilee Basin coal reserves in Queensland”, which will “ lead to the opening of the Carmichael mine project.”
Proposed to be 388 km and would have a construction cost approaching A$3bn, the IEEFA said, “Adani suggests a key aspect of this agreement is that POSCO will provide some equity financing for the rail project, and that POSCO’s involvement should open up debt project financing from Korean banks.” Tim Buckley, IEEFA’s Director of Energy Finance Studies, Australasia, who signed the statement, said, “This project requires a thermal coal price well in excess of US$100/t to be commercially viable – it is currently sitting at US$60/t to US$70/t.”
While Adani has been accused by environmentalists in India and Australia for "overlooking" the damage to ecological concerns at Adani Port and SEZ in Gujarat and the coalmining project in Australia, POSCO is under fire in Odisha for its alleged move to "displace" thousands of tribals from their land while implementing its port-to-steel project (click HERE). While the Adanis were recently given clearance by the Supreme Court for its port and SEZ project, Greenpeace continues with its campaign against the Australian project even now (click HERE).    
Buckley said, “Adding 60Mtpa of additional supply will have a materially adverse impact on the global seaborne price of thermal coal. 60Mtpa equates to a 6% expansion of global supply, at a time when most coal mining companies are evaluating mine closures. Opening up the Carmichael project will help facilitate upwards of 200Mtpa of additional thermal coal supply. Combined, a 30% expansion of global supply over the medium term will see the global thermal coal remain under pressure, and could in isolation drive the long term coal price permanently down 20% from current commodity analysts’ projections.”
Buckley opined, “This must surely send a shiver down the spine of any investor who has their money in global coal debt or equity investments, and rightly so.” The agreement comes when a proposed Korea‐Australia Free Trade Agreemen is currently being debated by the Australian Senate, which, according to Buckley. “will provide POSCO the right to sue the Federal and Queensland Governments in an international tribunal beyond the Australian legal system, should the government undertake any law or policy that POSCO deems to harm their rail investment.”
Buckley warned, “Adani Mining is yet to detail how it proposes funding a new $4‐5bn 50Mtpa coal export terminal at Abbot Point, nor the $5‐6bn required to construct the 60Mtpa greenfield thermal coal project at Carmichael. The remote location requires a massive capital outlay for greenfield construction of the mine, the railway and the coal export terminal, plus the associated water, road, airport, power and water infrastructure. This has been identified by Adani Mining as totally A$16.5bn.”
IEEFA has estimated the cash cost of production free‐on‐board (FOB) will be north of US$60/t including maintenance capex, rail and port charges and Queensland government royalties. “Given the low energy content of the Carmichael coal (identified by Adani Mining at 5,200‐5,400kcal NAR) and the very high ash content (identified as mostly in excess of 25%), the Carmichael coal is likely to be sold at a 20‐30% discount to the Newcastle benchmark (with a 6,000kcal NAR, 11‐14% ash content)”, it added.
“Given the Newcastle benchmark is currently trading at well below US$70/t, Adani Mining would be looking at revenue of below US$50/t, giving rise to a material cash loss on every tonne of coal sold,” Mr Buckley said,, adding, “The Adani Group has been reported to be seeking shareholder approval for a 16,000 crore (US$2.6bn) equity raising across the three Adani listed vehicles – Adani Enterprises, Adani Ports and Adani Power.”
“Any international investor considering participating in this capital raising should carefully review the purpose of the raising. The Adani Group has the attraction of providing strong leverage to the long term development of India’s power, ports and infrastructure markets. If the proceeds of the issue are then redirected to funding Australia’s biggest thermal coal mining complex, right on the edge of the Great Barrier Reef UNESCO listed World Heritage area, investors beware,” he said.
In its statement, the Adani Group said, “The rail project will lead to the opening of the Carmichael mine project which will deliver, in excess of 10,000 jobs, and will also provide vital opportunities for Australian Infrastructure development and contribute to energy security of India by lighting the lives of millions of Indians. This is the first major step towards finalising the Project’s construction contracts and we are proud to be associating with a partner of POSCO’s E&C standing. The binding agreement will enable us to develop a cost efficient rail solution and this relationship gives Adani access to Korean market, POSCO’s expertise and capital."

Comments

TRENDING

Missed call drive for VVPAT verification follows online plea to "pressure" poll panel

By Our Representative
Several political activists have begun a new campaign, asking concerned citizens to give a missed call on 9667655855 to “support the demand that 2019 Loksabha elections must be declared only after verification of 50% electronic voting machines (EVMs) with Voter Verifiable Paper Audit Trail (VVPAT) receipts.” The effort, supported by civil society networks across India, is meant to "further pressure" India's election machinery to ensure that the poll outcome becomes more transparent.

Now, top Gujarat "litterateur" close to Modi says: Godse was patriot, so was Gandhi

By Rajiv Shah
A little over a week after Prime Minister Narendra Modi criticized BJP candidate from Bhopal Pragya Thakur for calling Nathuram Godse a patriot saying he would never forgive her for the remark, a top Sangh Parivar ideologue, known to close to Modi in Gujarat, has supported her, saying her statement should be seen “within a context.” Thakur won from Bhopal by more than 3.5 lakh votes defeating her nearest rival, veteran Congressman and ex-Madhya Pradesh chief minister Digvijay Singh.

Opposition refuses to legally challenge EVMs amidst plans of "back to ballot" protest

Counterview Desk
Even as opposition to the use of electronic voting machines (EVMs) allegedly to rig polls is growing, a group of prominent citizens who have come together to form the EVM Virodhi Rashtriya Jan Andolan has controversially called for a national protest against EVMs on May 30, demanding future elections should be held only on ballot paper.

When a Pak scribe said Modi has 'proved' Jinnah’s two nation theory right...

By Zafar Agha*
It was around nine in the morning on May 24, 2019, a day after Prime Minister Narendra Modi stormed the Lok Sabha with 300-plus MPs. It was a call from a journalist friend, Muzamal Suhrawardy, from Lahore, Pakistan. I ignored the call. We liberals had a depressing day the previous evening as the opposition to Modi and BJP collapsed. The results belied reports from the ground and even assessments made by colleagues.

It's now official: Akshay Kumar has not been conferred honorary Canadian citizenship

By Our Representative
It is now official. Super-star Akshay Kumar has not been conferred any honorary citizenship by Canadian authorities, as claimed by him ahead of the 2019 elections. In reply to a query by Roshan Shah, who is a Canadian citizen living in Waterloo, Ontario, and belongs to Ahmedabad, the country’s authorities dealing with issues related with immigration, refugees and citizenship in Canada have said that only six persons have so far been granted honorary citizenship.

Savarkar in Ahmedabad "declared support" to two-nation theory in 1937, followed by Jinnah three years later

By Our Representative
One of the top freedom fighters whom BJP and Prime Minister Narendra Modi revere the most, Vinayak Damodar Savarkar, was also a great supporter of the two nation theory for India, one for Hindus another for Muslims, claims a new expose on the man who is also known to be the original proponent of the concept of Hindutva.

If EC's credibility is under question, shouldn't one "assume" EVMs might be tampered?

Counterview Desk
Gauhar Raza, scientist, documentary film maker and poet; senior human rights activist Shabnam Hashmi of the Act Now for Harmony and Democracy (ANHAD); military veteran Major Priyadarshi Chowdhury (retd); and Sucheta De and Sandeep Saurav of the All India Students' Association (AISA), have asked “individuals, organisations and people's movements” to send their endorsement to an appeal they have prepared on Electronic Voting Machine (EVM).

Govt of India overestimated GDP by 2.5%, must restore reputational damage: Ex-CEA

By Rajiv Shah
Top economist Arvind Subramanian has said that changes brought about by the Government of India in data sources and methodology for estimating the country’s gross domestic product (GDP) since 2011-12 “has led to a significant overestimation of growth”. While official estimates place annual average GDP growth between 2011-12 and 2016-17 at about 7 percent, the actual growth may have been 4½ percent, ranging from 3 ½ to 5 ½ percent during the period, he adds.

Common thread of Modi, political Hinduism, nationalism? 'Contest' of ideas isn't over

By Salman Khurshid*
Losing the 2019 election and that too in a somewhat extreme manner has confronted us with unexpected challenges: Our leadership has naturally taken it very hard and to heart but with suggested options that we cannot imagine or contemplate. Hopefully the emotions will settle soon and give us the direction to pick up the pieces and march again.

Will minorities in India be 2nd class citizens? Wake up call: Be a 'communicating' Church

By Fr Cedric Prakash sj*
India today is at a defining moment of her history. There is so much that has taken place in the past five years (and particularly in the last ten days)- that several citizens of the country are genuinely concerned about the future of the country! Will democracy survive? Will key elements of the Constitution be changed?