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YEAR IN REVIEW: Coal scene in doubt with changes on the horizon

THE second quarter of 2011 proved to be a turbulent one for the Australian coal industry, with Qu...

Lauren Barrett
YEAR IN REVIEW: Coal scene in doubt with changes on the horizon

However, the most noticeable change in the Australian coal sector during the second quarter of 2011 had to be the growing Indian interest in Queensland’s coal and infrastructure assets.

In April, ILN reported Indian energy giant GVK Power was looking to purchase Kevin’s Corner and Alpha projects, with associated infrastructure, from Gina Rinehart’s Hancock Prospecting for $A8 billion.

At the time, GVK was believed to be conducting due diligence on the sale with Ernst & Young and seeking to raise the funds for the deal.

The two mines have a total resource of more than 7 billion tonnes of coking coal and both are estimated to be able to produce 30 million tonnes per annum of coal for 30 years.

Back in May, another Indian conglomerate, Adani Group, outbid major international rivals to purchase the 99-year lease of the Abbot Point coal terminal from the Queensland government for $1.83 billion.

Adani reportedly outbid Hong Kong-listed Cheung Kong Infrastructure Group, Macquarie Group and Deutsche Bank’s real estate investment business RREEF for the terminal.

At the time of the acquisition, Adani chairman Gautam Adani said Abbot Point was the perfect business opportunity.

“Abbot Point is our contribution to India’s increasing global ambition and will boost synergy with other businesses of the group,” he said.

While Indian investment in Queensland started growing, the state government had its own agenda when in April it revealed its eight criteria for the proposed strategic cropping land policy, aimed at protecting the environment against mine developments.

However, the mining industry felt it could threaten future coal mine projects, with Association of Mining and Exploration Companies Queensland state manager Ross Musgrove labelling the laws as “reckless”.

Speaking about the proposed laws, state resource management minister Kate Jones said they would provide definite protection for the environment.

“Strategic cropping land is a finite resource that must be conserved and managed for the longer term and the release of this proposed criteria is the next step in our efforts to provide strong protection for Queensland’s food bowl,” she said.

The Queensland government declared parts of the Surat and Bowen basins off-limits for future mining developments.

About 42 million hectares or 24% of Queensland’s total land area fell under the SCL policy.

In the meantime, NSW was also undergoing its own changes to mining legislation.

In April, 17 coal project applications or modification proposals under assessment by the NSW Department of Planning and Infrastructure were left in limbo when the newly elected O’Farrell government scrapped part 3A of the state’s planning laws.

At the time, the premier said transitional arrangements would be put in place to deal with more than 500 part 3A applications already in the system.

Among the projects left in limbo were Xstrata Coal’s application to extend mining at the West Wallsend longwall mine and Centennial Coal’s proposal to extend the life of its Awaba underground mine by four years.

Speaking on the decision to scrap part 3A, premier Barry O'Farrell said it was “time to give planning powers back to local communities”

Then in May, the NSW government dropped another bombshell when it confirmed a 60-day freeze on new exploration for coal and coal seam gas.

NSW planning minister Brad Hazzard announced the moratorium as part of the state’s transitional arrangements in which exploration licence applications would have to be exhibited for public comment and extraction licence applications would have to be accompanied by an agricultural impact statement.

However, NSW Minerals Council acting chief executive officer Sue-Ern Tan questioned the effect of the freeze.

“It is not clear what this moratorium will achieve and we will be seeking further information from the NSW government,'' she reportedly told the Sydney Morning Herald.

In other news, Oaky North took the first prize for Australia’s longwall production leader when it recorded output of 8.74 million tonnes run of mine in 2010.

Oaky North’s strong run was evident when it became the dominant producer for the 2009-2010 financial year with a sky-high result of 9.69Mt ROM.

Its nearby Oaky Creek No. 1 mine came in third place with production of 5.57Mt last year, giving Xstrata Coal Queensland the top three positions of 2010.

The fight against the Gillard government’s proposed carbon tax started gaining momentum in the second quarter of 2011 with Australian Coal Association executive director Ralph Hillman declaring the carbon tax would put future coal projects and future mining jobs at risk.

A survey by the Australian Coal Association found the proposed tax could strip 4700 jobs out of the black coal mining industry in three years and cost the industry $22 billion in its first nine years.

Coal companies’ concerns for the tax heightened in June when research by investment bank Citi found Whitehaven Coal’s profits could be cut by up to 10% if the federal government succeeded in introducing a $50 per tonne carbon price.

In the report, it said Coal & Allied would be among the worst hit while net profit after tax for “pure play” coal miners would drop about 4% for a carbon price tag of $20/t.

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