Queensland approves Australia's largest coal mine

But the $17-billion Carmichael project could have trouble raising the financing

Against howls of protest from opponents, the Queensland government has approved mining leases for Adani Group's Carmichael coal mine. But the US$17 billion coal, rail and port project still faces significant obstacles in obtaining financing.

The state on Sunday approved three leases covering an area containing 11 billion tonnes of coal, in Queensland's Galilee Basin.

The go-ahead follows compensation deals achieved in March with Australian landowners, reached after almost six years of environmental assessments and legal battles.

“This is a major step forward,” Queensland premier Annastacia Palaszczuk said in a statement. “Some approvals are still required before construction can start, and ultimately committing to the project will be a decision for Adani.”

The Carmichael project has faced relentless opposition from organizations ranging from the United Nations to green groups fighting new coal projects, which has scared banks from lending to the project. In October, the company got a big relief when the Australian government re-issued the environment approval for the project under what environment minister Greg Hunt called “the strictest conditions in Australian history."

The state on Sunday approved three leases covering an area containing 11 billion tonnes of coal, in Queensland's Galilee Basin.

First proposed in 2010, the massive coal project —set to produce about 60 million tons of coal a year mainly for export— has been reviewed several times in response to concerns highlighted by authorities and stakeholders.

An earlier plan to dump 3 million cubic metres of soil dredged at Abbot Point into the sea about 25 km (15 miles) from the Great Barrier Reef was rejected. Since then, the company has signed up buyers for about 70% of the 40 million tonnes coal the Carmichael project is due to produce in its first phase, with production expected to begin in 2017.

However it likely won't be clear sailing for Adani between now and then. The company is fighting legal battles against two environmental groups opposed to the project, and at least one analyst quoted by The Financial Times says financing will be difficult to obtain. Tim Buckley, from the US-based Institute for Energy Economics and Financial Analysis, told the FT that with China banning new coal-fired power plants in 15 provinces and shutting down 1,000 million tonnes per annum of surplus coal capacity, "proposals like Carmichael are stranded assets and entirely unneeded and unbankable."

The depressed, oversupplied global coal market is also no selling point.  Several large lenders including Deutsche Bank and HSBC have refused to back the project, the publication notes.

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