Adani parts ways with mining services company Downer over Carmichael mine

Carmichael coal mine project in Australia

Embattled Indian miner Adani Group has parted ways with mining services giant Downer and said it will build and run the Carmichael coal mine, Australia’s biggest coal venture in central Queensland’s Galilee Basin, on its own, a media report said.

Adani in a statement on Monday revealed that both parties had cancelled a conditional $2.6 billion contract as part of Adani’s cost-cutting drive following last week’s decision by the Queensland state government to veto an A$900 million federal government loan to Adani.

The split comes after Australian company Downer became the target of a nationwide activist campaign pressuring it to quit the Carmichael project in central Queensland, abc.net.au reported.

The move raises further questions about the fate of the massive project, with Downer one of only two mine contractors – along with Thiess – considered capable of handling an operation producing up to 60 million tonnes of coal a year.

It is the latest in a long series of project hiccups for the Carmichael mine, including the veto of Adani’s application for a Northern Australia Infrastructure Facility (NAIF) loan last week, and its so far unsuccessful attempts to raise finance in China.

Adani said in a statement it remained committed to the project and the split with Downer was “simply a change in management structure”.

“Following on from the NAIF veto last week, and in line with its vision to achieve the lowest quartile cost of production by ensuring flexibility and efficiencies in the supply chain, Adani has decided to develop and operate the mine on an owner operator basis,” the statement said.

“Adani and Downer have mutually agreed to cancel all Letter of Awards and Downer will provide transitional assistance until March 31, 2018.

“Adani remains committed to develop the Carmichael project and will ensure the highest level of standards and governance.

“This will not affect our commitment or the number of local jobs across Queensland.”

Adani had intended to outsource the operation of its Carmichael mine to Downer under an agreement that was worth $2bn at the time of its announcement in 2014.

The very first act of Queensland’s newly re-elected Labor government was to make good on its election promise to veto a loan to Adani of up to $1bn from the federal Northern Australian Infrastructure Fund (Naif).

The government has said it backs the mine and wants the jobs it will create, but also says the project must be viable without taxpayer funds, including federal funds.

Adani is yet to secure funding for the mine. Earlier this month, Chinese lenders ruled out providing finance, joining Australia’s big four banks in avoiding the controversial project.