Financial viability of Hume Coal proposal questioned as energy market moves on
July 12, 2017
The Institute for Energy Economics and Financial Analysis (IEEFA) has submitted a review to the New South Wales Department of Planning and Environment warning that the proposed Hume Coal project in the Southern Highlands of New South Wales is unlikely to proceed as the world's energy markets move beyond thermal coal.
The review, entitled “Hume Coal Update 2017: Superior Alternatives are Available,” found that the project plans to produce 46% thermal coal which would be of low-quality and high ash content.
Hume Coal, a subsidiary of South Korea’s largest steel maker POSCO, has promoted the new mine as a producer of coking coal. Hume’s coking coal product, which would be about 54 percent of its output, would be inferior to the higher-quality hard-coking coal produced at other mining operations in the Southern Coalfield. This lower-quality semi-hard coking coal would attract a lower price than its competitors, further eroding the financial viability of the proposal.
IEEFA’s modelling, based on publicly disclosed information in the project Environmental Impact Statement and associated economic study, finds that the project has a negative net present value of -A$344m, despite highly conservative capital expenditure assumptions.
Meanwhile, South Korea's new president, Moon Jae-in, has initiated strong policy reforms to permanently lower the country’s reliance on imported coal amid increasing concerns about emissions and pollution.
“Investment in a high-cost greenfield mine that produces such a high percentage of thermal coal would appear to
be in conflict with this policy change,” the IEEFA report notes.