Gautam S. Adani, chairman of Adani Group, center, attends an event in Tokyo, Japan. (Photographer: Tomohiro Ohsumi/Bloomberg)

Adani's $16.5 Billion Aussie Mine Rattled by Tax Deal Delay

(Bloomberg) -- India’s Adani Group could walk away from its $16.5 billion Carmichael coal project in Australia unless a royalties deal can be reached with the state government, according to federal Resources Minister Matthew Canavan.

The Queensland government’s failure to agree the terms of the royalty regime for the mine may jeopardize the development in the state’s Galilee Basin, Canavan said in a phone interview on Wednesday. Adani was due to make a final investment decision on May 29 for the Carmichael mine, but delayed that on Monday citing uncertainty over royalty payments.

Adani's $16.5 Billion Aussie Mine Rattled by Tax Deal Delay

Adani’s approval for the project “is contingent on the Queensland government coming to a decision on their royalties policy,” Canavan said. “You can’t expect Adani to make a multi-billion dollar decision if they don’t know what tax they will pay. The ball is now in the Queensland government’s court.”

Adani Enterprises Ltd., the flagship company of the Adani Group, said Wednesday it has deferred some budget approvals for the mine until it receives clarity from the state government on royalties.

Australia’s largest coal project -- which could fuel power generation for 100 million Indians and create 10,000 jobs in Queensland -- has been delayed several times since first being proposed in 2010 due to protests and court claims from green groups concerned about its environmental impact. Westpac Banking Corp. barred lending for the project in April due to a new policy on coal emissions. Gautam Adani, the billionaire chairman of Adani, said in March it could start mining coal from Carmichael in 2020.

Debt Plan

An earlier royalties deal proposed by the state in March would see Adani pay less in the early years of the project but the same overall sum over the 60-year life of the development, Canavan said. Adani will likely pay A$100 million to A$150 million a year in royalties based on its first phase target of producing 25 million tons a year of coal, with the final payment dependent on the prevailing coal price, the minister said.

Adani expects to raise about $2.5 billion to build a rail line connecting the mine with Abbot Point port over the next two years. The group will raise about $800 million via equity and the rest through debt. That includes a controversial A$900 million loan from the government-backed Northern Australia Infrastructure Facility, which Canavan said continues to be assessed.

Federal Labor leader Bill Shorten said while royalties need to be determined at a state level by the Labor government, he opposes using federal taxpayer money to subsidize the mining project. If the Adani project “is a commercial success then it doesn’t need the taxpayers to underwrite a billion dollar loan to a multi-billion dollar coal company,” Shorten said at a press conference on Wednesday. “That’s our position, what Queensland does is ultimately a matter for them.”

Annastacia Palaszczuk, premier of Queensland, didn’t immediately respond to a voicemail request for comment.