Adani to mine low quality coal: analyst Greg Roberts February 14, 2012 - 5:24PM
The tenements where Indian giant Adani Group plans to develop Queensland's largest coal mine contain low-quality coal, highlighting how hungry the world is for the resource, analysts say.
The company attracted negative publicity on Tuesday over plans to use cheap foreign workers to help build the project, including the thermal coal mine, a new town, port facilities, airport and railway line.
Adani recently bought beef grazier Graeme Acton's Moray Downs cattle station, in central Queensland, for $110 million.
Foreign companies, often Chinese state-owned, are increasingly buying natural resources, including farmland, for mining purposes, attracting controversy over use of food producing land.
Ord Minnett resources analyst Peter Arden said he expected India to buy more coal resources as its economy continued to grow rapidly and demand for electricity soared.
India, unlike China, contained hardly any of its own thermal coal and needed it for domestic power generation.
The proposed Moray Downs mine in the Galilee Basin is expected to produce 60 million tonnes a year with a mine life of more than a century with an estimated project cost of more than $6 billion.
The quality of the coal at the site was about 5000 to 5500 calories a kilogram (kcal), which was less than traditional averages for imports (into India) of about 6000-6500 kcal, Mr Arden told AAP.
"I think it's going to be an ongoing trend, India wants to have diversity of supply and they see Australia as a really good place to have the core part of that supply," he said.
"Indian companies are accessing what we would've previously considered as uneconomical, marginal, at best, thermal coal.
"It's going have to be a big-scale operation to be economic, I wouldn't call it really good quality coal.
"The world is hungry for thermal coal, a lot of our Newcastle and Queensland traditional thermal coal is much higher quality going into Japan and South Korea.
"They don't normally sell down around that quality but Indians are very happy to take it."
Last year, Adani put its foot on the Galilee Basin through a $3 billion purchase of Australian Linc Energy's coal tenement, including a $500 million payment and $2.5 billion in royalties.
It is reputedly the largest single investment by an Indian firm in Australia.
Adani already operates the world's biggest coal import terminal.
Even the rare idea of building a town was believable because of the proposed mine's century-plus life, Mr Arden said.
"Governments are very keen to get away from the fly-in, fly-out mentality.
"I've heard them talking about wanting towns, but it's a very big commitment to build a town," he said.
"There haven't been too many, apart from Olympic Dam (Roxby Downs)."
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