Adani Greenlights Construction of Controversial Australian Coal Mine

CANBERRA, Australia--Indian conglomerate Adani Group has approved construction of one of the world's largest new coal mines, shaking off concerns about the multibillion-dollar mine's environmental impact and viability.

The decision comes days after Adani agreed to pay the state government royalties on the coal produced from the 16 billion Australian dollar (US$12 billion) Carmichael mine in the eastern state of Queensland.

Adani has been pushing ahead with plans to build the mine that would produce thermal coal to generate electricity and operate for six decades, despite concerns around a looming global supply glut that could weigh on prices. The company plans to produce as much as 60 million metric tons of thermal coal a year from six open-cut pits and five underground mines, which would then be shipped to India from a port facing the Great Barrier Reef.

The Carmichael mine has faced fierce opposition from anti-fossil fuel activists, who have lodged challenges on environmental grounds and campaigned lenders world-wide, including on Wall Street and in Europe, to oppose financing the development.

"We have been challenged by activists in the courts, in inner city streets, and even outside banks that have not even been approached to finance the project," Chairman Gautam Adani said in a statement. "We are still facing activists. But we are committed to this project."

Work on the mine, which has already cost Adani more than A$3 billion in port and infrastructure development, will begin sometime between July and September, he said.

Australia's government backs the project, which it hopes will create up to 10,000 jobs. The government has also signaled its support for a loan of almost A$1 billion to help Adani finance a railway from the mine in the untapped Galilee Basin to its deep water port at Abbot Point, a distance of around 250 miles. Prime Minister Malcolm Turnbull recently met with Mr. Adani to urge the company to proceed with the project, promising to clear the remaining legislative hurdles, including issues surrounding claims to the land by indigenous people.

If completed, the mine will significantly increase Australia's coal export capacity, leading to worries it will also depress global coal prices and threaten the viability of some existing mines.

The Stop Adani Alliance, comprising 20 environment groups, said the decision Tuesday was aimed at prompting an early decision from the government on granting the A$1 billion loan, as private financing for the project continued to be elusive. Several major investment banks have said they were unwilling to get involved in the project.

"Adani is yet to lure any financial institutions willing to bankroll the project, which is proving hugely unpopular with the Australian public," said Geoff Cousins, a spokesman for the Stop Adani Alliance.

Adding to worries around the project, the United Nations cultural body Unesco earlier this month urged Australia to speed up efforts to shield the Great Barrier Reef from pollution and climate risks to prevent the giant coral system from being placed on its World Heritage "danger list."

Write to Rob Taylor at rob.taylor@wsj.com

Corrections & Amplifications

This article was corrected at 0918 GMT because the original incorrectly stated it would almost double Australia's shipments of coal in the eighth paragraph. If completed, the Carmichael project will significantly increase Australia's coal export capacity.

If completed, the Carmichael project will significantly increase Australia's coal export capacity. "Adani Greenlights Construction of Controversial Australian Coal Mine," at 0709 GMT, incorrectly stated it would almost double Australia's shipments of coal in the eighth paragraph. (June 6)

(END) Dow Jones Newswires

June 06, 2017 05:28 ET (09:28 GMT)