Adani Mining Pty Ltd on Thursday said South Korea's POSCO Engineering & Construction Co Ltd will build the rail line for a long-delayed A$16.5 billion ($15 billion) coal and rail project in Australia.
The cost and other details of the contract to build a 388 kilometre rail line for the Carmichael coal mine in the eastern state of Queensland will be set by the end of 2014 under a binding agreement signed on Thursday, Adani said.
POSCO E&C will help fund the rail line by buying an equity stake, Adani said. That could help Adani raise debt funding from South Korea, essential for a project that analysts have said would be uneconomic at current weak coal prices.
"The binding agreement will enable us to develop a cost efficient rail solution and this relationship gives Adani access to the Korean market, POSCO's expertise and capital," Adani Australia Chief Executive Jeyakumar Janakaraj said in a statement.
Adani bought the project in the untapped Galilee Basin in 2010, aiming to start mining in 2014. But, like others in the area, the project has run into delays due to environmental opposition and funding challenges for what would be Australia's biggest coal mine at 60 million tonnes a year.
A condition of the state government's approval for the project was allowing open access to the rail line for other coal producers, including a project planned by compatriot GVK and Hancock Prospecting, controlled by Australia's richest woman, Gina Rinehart.
GVK Hancock, aiming to start production in 2017, is working with Australian rail operator Aurizon Holdings Ltd on an alternative rail plan for its Alpha mine project, but has yet to sign a binding agreement.
"This is the largest EPC (engineering, procurement and construction) project in the region for POSCO E&C, and we will put in our best effort to maximise our engineering, procurement and financing capabilities to successfully complete the construction," POSCO E&C President Tae-Hyun Hwang said in a statement.
Adani and GVK Hancock still need clearance to expand the port of Abbot Point to export their coal. Environmentalists and tourist operators are fighting expansion plans involving dredging 3 million cubic metres of soil and dumping it near the Great Barrier Reef.
($1 = 1.0673 Australian Dollars)
Copyright: Thomson Reuters 2014
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