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Investment in Australian thermal coal to remain subdued unless prices stabilise: CommBank

Sydney (Platts)--3 Mar 2017 1232 am EST/532 GMT


There are 12 thermal coal projects featuring on the list of the most expensive upcoming resource projects in Australia, but investments in them may remain on hold unless coal prices stabilise, the Commonwealth Bank of Australia said in a report Friday.

Just one thermal coal project was listed among Australia's top 20 highest cost committed projects, while five made the "uncommitted" list -- meaning a feasibility study has been undertaken -- and six have been publicly announced.

"Producers are still reluctant to invest in new capacity despite the recovery in commodity prices over the last 12 months," the bank said.

The collapse in prices seen at the end of 2015 is still fresh in the minds of most producers, it said.

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All but two of the listed thermal coal projects are based in Queensland. "While potential job opportunities are opening up in Australia's coal mining sector in Queensland, investors need to commit to these projects for the new jobs to become realised," the bank said.

"Thermal coal prices though are down almost 30% since late November. We think new investment will remain subdued in Queensland's thermal coal sector until those prices become steady," it added.

Stanmore Coal's Range Project in Queensland is the only listed committed project, coming in at No. 20 on the list of the 20 most expensive resource projects in the country, with an indicative cost estimate of $599 million. An estimated start date for the project was not available.

Adani's Carmichael Coal Project, which includes mine and rail, is the most expensive uncommitted project in Australia, estimated at $16,500 million. The Commonwealth Bank expects it to start up this year.

Waratah Coal's China First, GVK-Hancock Coal's Alpha Coal, GVK's Kevin's Corner and BHP Billiton Mitsubishi Alliance's Red Hill Mining were the other thermal coal projects on the uncommitted list. Their cost estimates ranged from $3,000 million for Red Hill to $8,800 million for China First.

Alpha Coal and Kevin's Corner are expected to begin in 2018 and 2019, respectively, while China First is expected sometime after 2018 and Red Hill no earlier than 2021, it said.

MacMines Austasia's Project China Store in Queensland topped the list for Australia's highest-cost publicly announced resource project, estimated at $5,000 million, with an estimated start-up date of 2018, the bank said.

Also on the list were the Queensland-based Wiggins Island Coal Terminal stages two and three, valued at $2,000 million, with no estimated start-up date given, and Baosteel Resource's Talwood Coking Coal Project at $750 million.

For New South Wales, MACH Energy's $2,000 million Mount Pleasant Project and POSCO's $750 million Hume Coal Project were listed. Mount Pleasant is expected to start in 2019 while no date was given for the Hume Coal Project.

--Nathan Richardson, newsdesk@spglobal.com

--Edited by Arnab Banerjee, arnab.banerjee@spglobal.com

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