Endangered Lizard Adds to Billionaire’s Australian Coal Woes

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An endangered lizard is only the latest threat to building Australia’s largest coal project.

The federal court of Australia rejected the approval of Adani Enterprises Ltd.’s Carmichael mine and rail project after green groups claimed the decision hadn’t properly considered the impact on two vulnerable species. It should take six to eight weeks for the environment minister to reconsider the clearance, the government said on Wednesday.

While the original approval in 2014 had conditions to protect species including a lizard known as the yakka skink, the environment department failed to present certain documents, creating “a technical legal vulnerability,” said the Indian company, controlled by billionaire Gautam Adani, in a separate statement.

“It’s another setback for the project,” said Matthew Boyle, an industry consultant at CRU Group in Sydney who expects the mine’s start to be delayed to 2019, from the company’s estimate of 2017 given last year. “Carmichael will be developed, but probably not in the original timeframe.”

Adani’s ambitions to open up a new coal province in Queensland state to feed Indian demand face increasing doubts with coal prices down by more than half over the past four years. Environmentalists concerned about the health of the Great Barrier Reef are also fighting the development.

Languishing Prices

Adani Enterprises shares rose as much as 9.1 percent in Mumbai trading and were up 4.9 percent at 3:15 p.m. local time at 99.1 rupees. Trading volume was more than three times the daily average.

For developers including Adani seeking to build new coal mines in Australia, the economic hurdles may be bigger than the environmental or political ones.

Australia’s Newcastle coal, an Asian benchmark that surged to $136.30 a ton in early 2011, has since slumped to less than $60 amid weakening Chinese demand.

Newcastle coal prices are forecast to average $61 in 2015, $59 next year and $62 in 2017, Natalie Biggs, a U.S. analyst at consulting firm Wood Mackenzie Ltd., wrote in an e-mail Tuesday.

Power-station coal prices of more than A$100 ($74) would be needed to make those Australian projects viable, about 25 percent higher than current levels, Daniel Morgan, a commodity analyst at UBS Group AG in Sydney, said by phone.

“Prices that reflect a very well supplied coal market aren’t anywhere near where they need to be if I’m a decision maker trying to bring on that project,” Morgan said.

Indian Demand

Consumption of power-station coal in developing countries including India is set to increase, CRU Group’s Boyle said, even as a global push to cut carbon emissions threatens its use. Indian demand should rise 50 percent by 2019, he said.

“Indian thermal coal demand is still expected to be significant, and Adani is a large player in the power-utility market,” he said. “India will require the coal.”

Adani plans to build a 388-kilometer (241-mile) rail line to link the mine to the port of Abbot Point on the Queensland coast, where a proposed expansion could boost capacity by 70 million tons a year, its website shows. The company estimated last year the project would cost about A$7.2 billion.

The industry in Australia also has had an ally in Prime Minister Tony Abbott, who made headlines at a mine opening last year when he said that “coal is good for humanity.”

“Adani is confident the conditions imposed on the existing approval are robust and appropriate once the technicality is addressed,” according to the company’s statement.

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