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GVK’s Australian partner Aurizon has decided to postpone its commitment to their coal mine development project till early next year. This will delay the project’s timeline by two years as coal prices keep falling and make it less viable to mine coal in the near future.
This is bad news for the Hyderabad company as it will have to incur $90 million of interest and operating cost per annum with no revenue in sight for two years. And to make matters worse, GVK will have to shell out $560 million by this month-end to Hancock Prospecting as payment for the takeover of the mine. Bankers say the deadline is likely to be extended as coal prices have fallen from $150 a tonne in 2011 when the deal was signed to $70 a tonne as of today.
Aurizon, Australia’s biggest railway company, was to set up 500 km railway and port infrastructure in Australia to transport coal from the Galilee basin to the coast. Aurizon had picked up a 51 per cent stake in the infrastructure facility. But with coal prices falling globally, it is becoming uneconomical for Indian companies to mine coal in Australia and ship it to customers in Asia.
GVK had planned investments worth $10 billion in Australia for development of coal mines, including $6 billion in railway and port infrastructure. The original plan was to mine coal from 2014.
An email sent to GVK seeking its comments did not receive any response.
GVK is not alone in its Australian adventure. Lanco and Adani are two other companies that have invested in coal mines. While Lanco’s project is still to make money, Adani is contemplating sale of its stake in its Australian port project for close to $2 billion. Adani is planning a massive investment of $16.5 billion to develop coal mines in the Queensland province of Australia but is facing opposition from the green brigade.
Lanco’s Australian subsidiary Griffin Coal’s production has hit a new low of 0.61 million tonnes for the June quarter, down 25 per cent year on year, according to stock exchange data. The Indian company had acquired Griffin Coal for $605 million in 2011.
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GVK’s Australian partner, Aurizon, has decided to postpone its commitment to its coal mine development project till early next year
- This would delay the project by two years as coal prices keep falling and make it less viable to mine coal in the near future
