Adani receives green light for controversial Australian coal mine

After a battle lasting almost a decade, Adani Mining's controversial AU$2 billion thermal coal mine, the Carmichael mine, has just had its groundwater plans approved by the Queensland Government. This brings to an end what has been a polarised debate about the financial and environmental credentials of the project. All Commonwealth Government and Queensland State Government environmental approvals have now been received for the project, meaning the project has no further regulatory roadblocks.

The Carmichael mine has begun construction in the Galilee Basin in central Queensland and will be the biggest coal mine in Australia. Up to 60 million tonnes of coal will be produced each year. The Carmichael mine is ultimately controlled by the Adani Group, an Indian multinational conglomerate, and the majority of the coal produced will be exported to India.

The Federal Government has welcomed the approvals as a "great win" for jobs as Adani Chief Executive Lucas Dow estimated the project will create 1,500 direct and 6,750 indirect jobs.

The proposed mine is one of six waiting for approval in the Galilee basin. Commonwealth Resources Minister Matt Canavan is now calling on the Queensland Government to approve other coal mines in the State. Premier Palaszczuk said that the Government had taken a sensible approach in approving the Carmichael mine and reiterated that it won't be the last mine the Government approves as long as projects stack up financially and environmentally.

Avoidance of a coal mining royalty rate increase

On 11 June 2019, the Queensland Government in its State budget vowed not to raise coal royalty rates for three years if leading coal mining companies in Queensland agree to voluntarily raise AU$70 million in funds in contribution toward an AU$100 million regional infrastructure fund. The fund is intended to provide investment into regional infrastructural projects in towns that the coal mines operate. The regional infrastructure fund is aimed at improving economic and social infrastructure across resource communities. The State Government plans to contribute the other AU$30 million to the fund.

The Queensland Resources Council will ask the council’s member companies to contribute AU$70 million to the fund over a three year period.

Western Australia

Brine miners rent reduction

On 25 May 2019, an amendment to the Mining Regulations 1981 (WA) (Mining Regulations) to reduce annual rent payable by miners of minerals found in liquid assets came into effect. The term "minerals dissolved in brine" is not defined in the amended Mining Regulations, but will include potash lithium and other mineral salts dissolved in liquid. The amount of rent in respect of "minerals dissolved in brine" reduced by 88 percent from AU$18.70 to AU$2.32 per hectare for the first five years of a mining lease, and then it will increase to AU$4.64 per hectare each year thereafter.

The reason behind the rent reduction is that mining minerals in brine is excessively costly compared with "hard rock" mining because the miner must obtain a mining tenement over the whole of the liquid asset. Due to the requirement to obtain such a large tenement, the rent costs are high compared to a "hard rock" mining project. The Western Australian Government anticipates that reducing the annual rent for "minerals dissolved in brine" will act as an incentive for investment in tenements over liquid assets.

Western Australian producers expected to benefit from the amendments include Agrimin, whose project in the East Pilbara has the potential to become the largest and lowest cost supplier of seaborne sulphate of potash in the world.

Withdrawal of Environmental Protection Authority Greenhouse Gas Guideline

In March 2019, the Environmental Protection Authority (EPA) withdrew its proposal to release guidelines requiring energy and resource projects within Western Australia to completely offset their greenhouse emissions due to State Government pressure to seek consultation from the industry. The EPA, however, plans to reissue the guidelines requiring large energy and resource companies to completely offset their greenhouse emissions from new resource projects. The key requirements include new resource projects emitting more than 100,000 tonnes of CO2 a year to be completely carbon-neutral. If implemented, this requirement will potentially impose large costs on the project proponent.

According to certain sources in the resources industry the existence of such guidelines could potentially significantly damage investor confidence in new projects in Western Australia with a corresponding impact on the economy and jobs. The EPA is promising further consultation to ensure that the guidelines are clear, can be practically implemented, and effectively inform assessment and advice in the execution of the EPA's obligation under the legislation.


State government proposal to introduce a gold production royalty

Victoria is currently the only state in Australia with no gold production royalty in place. On 27 May 2019, the Victorian State Budget was handed down with a plan to introduce a 2.75 percent gold production royalty (royalty) on gold mines in Victoria commencing after 1 January 2020. The proposed royalty rate will be higher than the 2.5 percent royalty imposed in Western Australia. In 2017, the Western Australian Government attempted to increase the gold royalty rate from 2.5 percent to 3.75 percent, however, the measure failed to be passed by the Western Australian Parliament. If the proposed royalty rate is passed by the Victorian State Parliament, the revenue raising measure is expected to raise approximately AU$56 million each year for the Victorian Government.

The Victorian Government has been criticised by the resources industry for failing to properly consult with local mining operations concerning the economic impact of the proposed royalty. The current record high gold price that has meant that gold projects that were not previously viable may now be economically viable. However, the majority of gold producers within Victoria are generally considered marginal and the imposition of a new royalty may have a significant impact on the continuing viability of some gold producers.

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