Gina Rinehart’s plan to dig an open cut coalmine in the Galilee basin is “unbankable and unviable”, an analyst says, despite the dismissal of a supreme court appeal against it by conservationists.
A Queensland judge on Friday rejected a challenge to the Alpha mine, upholding an earlier land court ruling that while the mine’s share of global carbon emissions was “both real and of concern”, blocking it would have no effect as the world market would find coal elsewhere.
Supreme court justice James Douglas dismissed a key argument by environmental group Coast and Country that the land court consideration that “environmental harm that might be caused by another coal mine somewhere else in the world” was irrelevant under state environmental laws.
“Although the objective of the (Environmental Protection Act) is environmental protection in the context of ecologically sustainable development, it does not require the (land court) to ignore what is likely to happen elsewhere in the world, even if this particular mine does not go ahead,” Douglas said in his judgment on Friday.
The supreme court ruling allows Rinehart’s joint venture with Indian conglomerate GVK to retain its Queensland government-issued environmental approval for Alpha, which is subject to monitoring of groundwater impacts.
However, Tim Buckley from the institute for energy economics and financial analysis said Alpha was a dim business prospect for GVK Hancock.
“This issue is still absolutely about the absence of commercial viability and bankability,” he said, citing coal prices, GVK’s problems with funding and its failure to pay Rinehart for its share to full rights to proceed with the project.
Bruce Currie, one of three landholders who originally fought Alpha in the land court, said he felt “failed” by the supreme court. He said Alpha and other Galilee basin mines would have a worse impact on central Queensland rural industries “than the shutting down of the live trade and the rural debt issue combined”.
The land court had dismissed the miner’s claim that Alpha’s emissions, which would contribute 0.16% to global emissions through the burning of its proposed 30MT of coal a year, were “negligible”.
But Justice Douglas said the court’s finding was based on the evidence which showed that “whether or not the proposed mine proceeds, there will be no effect on global demand for coal and therefore no effect on the amount of greenhouse gases emitted globally”.
Buckley said Alpha had been bedevilled by a dramatic collapse in thermal coal prices in the past year. The sinking of the Newcastle benchmark price for 5500kcal coal to a new decade low of US$42 last month was a further sign of long-term market decline, he said.
GVK still did not have full rights to proceed with the project, he said, having been unable to stump up the US$560m final down payment for its share to Rinehart’s Hancock Prospecting, which was due a year ago.
The share price of GVK Power and Infrastructure, the Bombay-listed company that provided the collateral for the project, has slumped 20% this year. Its market value is now US$170m but it needs to raise up to $10bn to spend on the mine.
“How is a company with a market capitalisation of US$170m going to afford a $5bn to $10bn capital expenditure program, given they’ve got $3bn in debt already on balance sheet?” Buckley said.
Aurizon, the Queensland rail company that plans a joint rail venture with GVK for Alpha, indicated last month in its annual results it would be not be revisiting the merits of the project until “next decade”.
A spokesman for GVK Hancock disputed the views of Buckley, a onetime Citigroup analyst. “When the Alpha coal project comes online it will be one of the lowest-cost coal producing operations in Australia,” he said.
“If purported analysts are applying the same cost structures found in other existing regions, such as the Bowen Basin for example, to our large-scale greenfield site, they would clearly get their figures wrong.”
The spokesman said the large, shallow and flat geology of the mine site allowed for “techniques that will deliver a free-on-board price that ensures our mine is comparatively immune to the volatility of cyclical coal prices”.
He claimed Galilee basin coal was “high quality, low emission and low cost” which gave a strategic advantage over competitors to supply Asian electricity markets.
“For Queensland and Australia, the development of the Galilee basin represents the most significant piece of regional and economic development we have seen for decades and poses thousands of jobs and tens of billions in royalties,” he said.
“Turning our back on this resource will only serve to weaken economic development in our nation and deliver absolutely no reduction in global carbon emissions.”
The National Australia Bank announced this week that it would not fund Galilee coal projects, including Adani’s Carmichael mine and Alpha.
Alpha’s environmental approval was issued by former environment minister Andrew Powell last year subject to further groundwater monitoring.
But Currie, who said he would have joined conservationists fighting the mine in the supreme court if he could have afforded the legal costs, said Galilee mines including Alpha would “destroy our groundwater supplies” and ruin a cattle business his family had “spent all our lives building”.
“Basically we’re left in a position where we’re relying on the minister and the government to protect us,” he said.
“And if the coalition is anything to go by, we are extremely fearful.”
Lawyers with the environmental defenders office, which brought the action for Coast and Country, also argued the land court was legally obliged to make a decisive final ruling on the mine. The land court had instead recommended that it be refused environmental approval – or alternatively be granted it subject to groundwater monitoring.
However, Douglas found that ruling, and the subsequent environmental approval issued by Powell – who was in any case not bound by the land court recommendation – were both valid.