Adani Group and Queensland govt come to an agreement over royalties payments

Indian conglomerate Adani Group on Tuesday agreed to pay royalties on coal produced from its US $16.5 billion Carmichael coal project in Australia after it struck an agreement with the Queensland government to help the controversy-hit project move forward.

While Adani did not disclose the royalties it will pay, Australian media reported that the Group will pay a flat rate of US $5 million in coal royalties a year for five years, with interest to be paid on any royalties deferred. The agreement with Queensland government "meets Adani's expectations and requirements," the company said in a statement, without providing details of the accord. With an agreement with state government in place, Adani said a final investment decision on the mine would be made at the company's next board meeting.

It had last week deferred an investment decision on the project scheduled for May 29 after delays in reaching an agreement on royalty terms. In the statement, Adani Chairman Gautam Adani described the move as a "benchmark decision" that showed the "strong commitment" of the Queensland government to the project. "I thank the Premier, Annastacia Palaszczuk, and the elected members of the state for their continued support to make this happen," he said. The Carmichael coal project, Australia's largest, has been delayed since first being proposed in 2010 due to protests by green groups over its environmental impact.

Gautam Adani Chairman, Adani Group

The royalties arrangement means the project is back on track to generate 10,000 direct and indirect jobs in regional Queensland."

Originally seen producing 60 million tons a year from six open-cut pits and five underground mines, a scaled-down first stage is now planned to produce 25 million tons a year of coal and will cost over US $4 billion. Other phases will come later. Projections of a global glut of coal and prolonged low prices notwithstanding, Adani is pushing ahead with plans to build the mine that would produce thermal coal to generate electricity and operate for six decades. About 15 million tons of coal produced from the project in the northern Australian state of Queensland will be shipped to India for generating electricity. To accommodate later stage mine production, Adani will also expand the port capacity from 50 million tonnes per annum to 120 million tonnes per annum of its owned and operated bulk coal port facility at Abbot Point near Bowen in North.

The future of the so called biggest mine in the world and largest in Australia was put on hold recently after the state cabinet's split on the royalties payment. Adani wanted the Queensland government to delay the start of royalty obligations on the coal mine it hopes to build in Queensland's Galilee Basin. The project involves dredging 1.1 million cubic metres of soil near the Great Barrier Reef Marine Park, which will then be disposed of on land. The Adani Group entered Australia in 2010 with the purchase of the Greenfield Carmichael coal mine in the Galilee Basin in central Queensland, and the Abbot Point port near Bowen in the north.