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Analysts question viability of Adani's Carmichael coal mine in Queensland

Source: eNCA, May 14, 2019

Reuters reported that a crash in Australian thermal coal prices is raising fresh questions about the viability of a controversial Adani’s Carmichael coal mine in Queensland coal mine just a week ahead of a national election in which climate change is a key issue. Wood Mackenzie analyst Mr Victor Tanevski said "I think a lot of people are doubting as to whether it will see the light of day. Benchmark Newcastle 6,000 grade coal would need to be close to USD 100 a tonne for the mine to break even. The mine is unlikely to start commercial production until the middle of the next decade at the soonest, if at all. A profit margin of USD8-12 a tonne is half the averages of 2017 and 2018, highlighting how rapidly the market has turned since the Paris agreement on climate change.”

He added that “Apart from the economics of the mine, Adani faces other headwinds, including an Australian coal boom that has probably peaked.”

Adani has said it is aiming to start producing 10 million tonnes a year of coal from March 2020, but analysts say the target date is optimistic. Adani estimated in January that total costs of bringing the coal to port via rail would be USD 39 a tonne. Based on current market prices, the selling price for the mine's lower-grade thermal coal would be just over USD 47, suggesting a profit margin of USD 8-12 per tonne. Adani said the this estimate takes into account royalties, processing fees and the cost of financing part of a rail line to the export terminal,

News Source: REUTERS