Adani announces coal mine construction will begin
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Adani announces coal mine construction will begin

Federal Labor says Adani's Carmichael mine has failed to live up to its economic promises after the Indian mining giant announced it will self-finance a dramatically smaller project than originally planned.

Adani Mining chief executive Lucas Dow on Thursday said the scaled-back project would be "100 per cent financed" from within the Adani conglomerate, clearing a major hurdle for the highly contentious proposal.

It has been revised down to a smaller rail line project and coal volumes to reduce the investment risk.  Construction at the central Queensland mine site will soon begin, the company says.

The mine project was once priced at $16.5 billion and would have been Australia's largest. It suffered years of delays due to legal challenges and a failure to secure private sector finance in Australia or overseas.

Adani will finance the Carmichael mine itself after failing to secure external finance.

Adani will finance the Carmichael mine itself after failing to secure external finance.Credit:Andrew Quilty

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The project is seen as a circuit breaker that will encourage other projects seeking to mine the Galilee Basin's huge coal reserves, and will thrust debate over the future of Australia's coal industry to the forefront of the federal election campaign.

Mr Dow on Thursday said Adani will now build a smaller open-cut mine "comparable to many other Queensland coal mines".

People gather at Parliament House in Canberra in February to protest the proposed Adani mine.

People gather at Parliament House in Canberra in February to protest the proposed Adani mine.Credit:Dominic Lorrimer

Production is expected to start at about 10 million tonnes a year and ramp up to 28 million tonnes, down from the initial plan of 60 million tonnes a year. The capital cost is now estimated at $2 billion.

Mr Dow said the project was environmentally sound and "today's announcement removes any doubt as to the project stacking up financially".

"We will now deliver the jobs and business opportunities we have promised for north Queensland and central Queensland, all without requiring a cent of Australian taxpayer dollars," he said.

Mr Dow says the Carmichael project will deliver more than 1,500 direct jobs and the government put the number of direct and indirect jobs at 7,000. This is far fewer than the 10,000 jobs Adani previously promised.

Resources and Northern Australia Minister Matthew Canavan congratulated Adani on "its focus and commitment to the project in the face of longstanding, ill-informed protest activity and an indecisive state Labor government."

"Adani’s ability to re-scope and finance its Carmichael mine and rail project proves it is a viable, job-creating concern which stands on its own two feet financially and environmentally," he said.

Federal Labor's position on the project had fluctuated. The party has been sceptical of the project's economics and environmental credentials but has refused to bow to pressure from environmentalists to revoke Adani's approvals if it wins office.

On Thursday, Labor's resources spokesman Jason Clare said Adani's project was now "vastly smaller than the mega-mine that was originally proposed".

Resources Minister Matt Canavan had strongly backed the Adani project.

Resources Minister Matt Canavan had strongly backed the Adani project.Credit:AAP

"We said the project as first proposed would not stack up, and it didn’t. We said it wouldn’t create the jobs that were promised to Queenslanders, and it won’t," he said.

As Fairfax Media has previously reported, Indian mining magnate Gautam Adani was recently valued at $US15 billion on the Indian stock market - a quadrupling in his wealth in four years -  potentially giving him the means to back the Australian project from within his group of companies.

It is not clear whether Adani's self-funding decision will still require some external finance, such as margin loans with Indian banks.

Adani had been seeking a $1 billion taxpayer loan through the Northern Australia Infrastructure Fund to finance a 388-kilometre rail line required to transport its coal to port for export. The bid was vetoed by the Queensland Labor government ahead of the state election.

In September Adani announced it would save $1.5 billion by scaling down the rail line. It will now build a shorter narrow gauge line to connect with Aurizon's existing rail track.

The mining project is yet to finalise state and federal environmental management plans, but Adani claimed these were "routine" and would soon be complete. Several legal challenges to the project are also in train.

Queensland Nationals MP George Christensen, a vocal proponent of the Carmichael project, said Adani's announcement proved the "naysayers" wrong.

“I say to the reckless law-breaking extreme greens and your Labor mates – accept defeat because it’s all go as far as Adani is concerned," he said.

Global industry analysis firm IBISWorld on Thursday expressed surprise at Adani's "high risk" decision.

Global coal demand had a "gloomy outlook" and India, expected to be the mine's main export market, was rapidly transitioning to renewables, it said.

The Australian Conservation Foundation chief executive Kelly O’Shanassy said the development presented a clear choice to the major parties.

"Do they support opening up a massive new coal basin right when the world’s climate scientists desperately warn we must rapidly transition away from burning fossil fuels to halt global warming?

"Or do they stand with the millions of Australians who want this mine stopped to help secure a safe climate and stable communities?"

She said the mine still faced a number of regulatory and other hurdles, and was under investigation by the Queensland government for breaches relating to illegal bore holes.

Activist group GetUp! said Adani's announcement came as 100 bushfires were ravaging Queensland. Climate change from the burning of fossil fuels has been associated with a greater bushfire risk.

Spokesperson Sam Regester said the Queensland government was yet to decide on Adani's water licence and an indigenous land use agreement and urged it and federal Labor to "stand up for us and stop this coal mine".

Minerals Council of Australia chief executive Tania Constable said the announcement was "a welcome boost for regional communities, jobs and the Australian mining industry".

Nicole Hasham is environment and energy correspondent for The Age, The Sydney Morning Herald, Brisbane Times and WAtoday.

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