Rio begins appeal against ruling that blocked its Warkworth coal mine expansion

Rio Tinto’s (ASX, LON, NYSE: RIO) lawyers are scheduled to appear at the highest court of New South Wales Wednesday, to appeal against an earlier ruling that favoured residents of Bulga, a village near the Warkworth coal mine, who said the company’s pit expansion would wreck their community.

The state is joining Rio in the three-day trial that begins today. Its outcome, agree experts, may reshape the regulatory environment of Australia’s economy, heavily dependent on natural resource extraction.

The country’s coal industry is struggling with a supply of the commodity and China’s cooling economic growth. About 11,000 coal mining jobs have been lost since late last year as giants such as Rio Tinto itself, BHP Billiton (ASX: BHP), Glencore Xstrata (LON: GLEN) and Brazil’s Vale (NYSE:VALE) have been cutting costs and closing down non-core divisions.

Last year, Rio Tinto obtained the state government approval for a US$546 million development of its Warkworth mine, which is in the Hunter Valley region, from 2020 until 2033.

The open-pit operation is part of a larger mining complex producing about 12 million metric tons a year of thermal and coking coal for the local market and customers in Asia.

If the appeal succeeds, writes Matt Siegel for The New York Times, Warkworth’s expansion will proceed as approved by New South Wales last year. This is, within 2.6km of Bulga.

But if it fails, he warns it could set a precedent that favours local communities over the economic interests of state governments.

“That would upend a system that has traditionally given primacy to the interests of large mining companies,” Siegel writes.

Rio Tinto told The Daily Telegraph that even if the appeal is successful, it might come too late to save the 1,300 jobs it is planning to axe at the mine, as the company has already spent close to four costly years trying to secure the project’s approval.

Image by Jeremy Buckingham MLC