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Barnaby Joyce says falling coal profits could scupper Shenhua's NSW mine Barnaby Joyce says falling coal profits could scupper Shenhua's NSW mine
(about 1 hour later)
One of the Coalition’s fiercest campaigners against the emissions trading scheme, agriculture minister Barnaby Joyce, has said the declining profitability of coal was a big factor in the fight against the $1.2bn Shenhua Watermark mine.One of the Coalition’s fiercest campaigners against the emissions trading scheme, agriculture minister Barnaby Joyce, has said the declining profitability of coal was a big factor in the fight against the $1.2bn Shenhua Watermark mine.
Joyce, who famously predicted lamb roasts would rise to $100 under the former Labor government’s carbon price, told his local newspaper the increasingly tenuous economics of coal could influence Shenhua on its Liverpool Plains project.Joyce, who famously predicted lamb roasts would rise to $100 under the former Labor government’s carbon price, told his local newspaper the increasingly tenuous economics of coal could influence Shenhua on its Liverpool Plains project.
“One of my greatest allies now, to be honest ... is a thing called economics,” Joyce told the Northern Daily Leader.“One of my greatest allies now, to be honest ... is a thing called economics,” Joyce told the Northern Daily Leader.
“The spot price of coal is about $60 a tonne. They sold a coalmine in north Queensland the other day for one dollar.“The spot price of coal is about $60 a tonne. They sold a coalmine in north Queensland the other day for one dollar.
“I’m sure there’s people vastly smarter than me back in China saying, ‘Why are we about to invest hundreds of millions of dollars into something that we can buy, if we really wanted one’.”“I’m sure there’s people vastly smarter than me back in China saying, ‘Why are we about to invest hundreds of millions of dollars into something that we can buy, if we really wanted one’.”
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Joyce’s comments appeared to be at odds with Tony Abbott’s declaration that the future for coal was “bright” and that “coal is good for humanity”.Joyce’s comments appeared to be at odds with Tony Abbott’s declaration that the future for coal was “bright” and that “coal is good for humanity”.
The Chinese state-owned Watermark mine has been approved by the NSW government and the federal government, which set conditions under the water trigger legislation designed to assess the environmental impacts of significant projects. The Shenhua proposal is for a 35 square kilometre open-cut coalmine which will deliver 10m tonnes of coal per year.The Chinese state-owned Watermark mine has been approved by the NSW government and the federal government, which set conditions under the water trigger legislation designed to assess the environmental impacts of significant projects. The Shenhua proposal is for a 35 square kilometre open-cut coalmine which will deliver 10m tonnes of coal per year.
After environment minister Greg Hunt announced the decision, Joyce said the “world had gone mad”, given the mine sits on a ridge above highly fertile farming land in his electorate of New England. Joyce may face a challenge from the former local member Tony Windsor, who signalled he might run at the next election.After environment minister Greg Hunt announced the decision, Joyce said the “world had gone mad”, given the mine sits on a ridge above highly fertile farming land in his electorate of New England. Joyce may face a challenge from the former local member Tony Windsor, who signalled he might run at the next election.
But over the weekend, Joyce defended Hunt’s approval of the mine.But over the weekend, Joyce defended Hunt’s approval of the mine.
“I think that Greg Hunt, [with] the information that he was given, has done the best that we can ask for,” he said.“I think that Greg Hunt, [with] the information that he was given, has done the best that we can ask for,” he said.
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“He has maintained that he will continue to be in negotiations and discussions about the issues and, if further information comes to light, he’ll act.”“He has maintained that he will continue to be in negotiations and discussions about the issues and, if further information comes to light, he’ll act.”
Tim Buckley, of the Institute of Energy Economics and Financial Analysis, said Joyce was broadly right about the declining profitability of coal.Tim Buckley, of the Institute of Energy Economics and Financial Analysis, said Joyce was broadly right about the declining profitability of coal.
He said Shenhua’s annual report, released last week, showed its net profit was down 42.6% year on year, with internal coal production down 10.1% and total coal sales down 24.2%.He said Shenhua’s annual report, released last week, showed its net profit was down 42.6% year on year, with internal coal production down 10.1% and total coal sales down 24.2%.
He said the Watermark mine was conceived almost a decade ago with a view to China’s increasing energy demand, but now demand was dropping. As a coal-fired power generator, the company’s results also reflected a drop in coal-fired electricity volumes of 5.8% year on year in the first six months of 2015.He said the Watermark mine was conceived almost a decade ago with a view to China’s increasing energy demand, but now demand was dropping. As a coal-fired power generator, the company’s results also reflected a drop in coal-fired electricity volumes of 5.8% year on year in the first six months of 2015.
The annual report linked the decline in coal to “certain factors such as the demand from downstream sectors, climate and heightened pressure for environmental protection”.The annual report linked the decline in coal to “certain factors such as the demand from downstream sectors, climate and heightened pressure for environmental protection”.
The report also said the drop in coal-fired power volumes was “mainly due to the substantial increase in power generated by non-fossil energy such as hydropower, further taking up the market share of thermal power generation”.The report also said the drop in coal-fired power volumes was “mainly due to the substantial increase in power generated by non-fossil energy such as hydropower, further taking up the market share of thermal power generation”.
Related: Battle for Liverpool Plains: Chinese coal project tears at fabric of rural NSWRelated: Battle for Liverpool Plains: Chinese coal project tears at fabric of rural NSW
“[The Shenhua mine] was a strategic move to implement the national agenda of the Chinese government,” Buckley said.“[The Shenhua mine] was a strategic move to implement the national agenda of the Chinese government,” Buckley said.
“Where it becomes an issue is, has the strategic agenda of [the] Chinese government changed sufficiently to make a different decision?“Where it becomes an issue is, has the strategic agenda of [the] Chinese government changed sufficiently to make a different decision?
“The commercial logic has gone out the door, and really, the strategic logic has gone out the door. The question is whether they are ready to acknowledge that.”“The commercial logic has gone out the door, and really, the strategic logic has gone out the door. The question is whether they are ready to acknowledge that.”
Buckley said the company had stopped importing coal for the next two years, while closing domestic Chinese mines. Given China accounted for 51% of world consumption of coal in 2014 and had continued to drop, Buckley said global consumption had passed its peak.Buckley said the company had stopped importing coal for the next two years, while closing domestic Chinese mines. Given China accounted for 51% of world consumption of coal in 2014 and had continued to drop, Buckley said global consumption had passed its peak.
“As management see this trend is accelerating rather than reversing – it is structural not cyclical – they will have to re-evaluate the strategic merit of the likely to be loss-making Australian project at Watermark,” Buckley said.“As management see this trend is accelerating rather than reversing – it is structural not cyclical – they will have to re-evaluate the strategic merit of the likely to be loss-making Australian project at Watermark,” Buckley said.
“Why build more expensive foreign coal capacity when they are closing existing domestic Chinese mines, where they have already built and own all the supporting domestic infrastructure and are employing Chinese workers?“Why build more expensive foreign coal capacity when they are closing existing domestic Chinese mines, where they have already built and own all the supporting domestic infrastructure and are employing Chinese workers?
“Watermark remains a battle between saving face and protecting their equity capital.”“Watermark remains a battle between saving face and protecting their equity capital.”
A spokesman for NSW planning minister Rob Stokes said while the project had been approved by the relevant state and commonwealth authorities, Shenhua required a mining lease and an environmental protection licence.A spokesman for NSW planning minister Rob Stokes said while the project had been approved by the relevant state and commonwealth authorities, Shenhua required a mining lease and an environmental protection licence.
“Under the Environmental Planning and Assessment Act, a mining lease cannot be refused if it is necessary for a state-significant development with an authorised development application” the spokesman said.“Under the Environmental Planning and Assessment Act, a mining lease cannot be refused if it is necessary for a state-significant development with an authorised development application” the spokesman said.
“There are 86 conditions on the NSW approval, and a further 18 conditions on the commonwealth approval. These conditions will be rigorously monitored and enforced, and if any of the conditions are breached, both the state and commonwealth governments can immediately suspend mining operations.”“There are 86 conditions on the NSW approval, and a further 18 conditions on the commonwealth approval. These conditions will be rigorously monitored and enforced, and if any of the conditions are breached, both the state and commonwealth governments can immediately suspend mining operations.”
Shenhua has been contacted for comment. A spokesman for Shenhua did not address the company’s annual report but said: “The Watermark project has a sound economic case regardless of the current coal price given the quality of the coal, multiple products available from different seams and the low expected operating costs.”