The Adani timeline
Our best estimate of a minimum start date..if there is one
Wednesday 12 October 2016
This week's decision by the State Government to declare Adani’s super-sized rail port and coal project as critical infrastructure has once again thrust the project into the headlines.
Needless to say, what Adani is proposing is a massive deal.
According to the Indian Conglomerate, if it goes ahead the $20 billion project would create 4000 construction jobs and almost 5000 operational jobs.
To export the coal they need to build a 389 kilometre railway line to Abbot Point Coal Terminal - and the port itself will need to be dredged and upgraded. They need to build significant water infrastructure, a coal handling and processing plant, a large workers’ accommodation village and an airport to service the mine.
Adani has always said it wants to start building the project in 2017, so what does it need to do before then, and is it possible?
Adani has all the necessary Federal approvals for all elements of its project. However, that does not mean all the work is done - because that approval is conditional.
Before they can lift one shovel full of dredge material at APCT, they need to submit (and get approval for) a Dredge Material Management Plan, an Onshore Environmental Management Plan and an Offset Management Strategy. Shift Miner understands none of those plans has been completed or submitted for approval. Our estimate is six months at the very least.
At the State level, it just needs to get licences for its water pipeline, pumping stations and a dam upgrade. It’s new classification as “critical Infrastructure” may speed this up, but it will depend on how much of the work they did on water for the Federal Government’s environmental approvals can be used for the State ones.
It’s hard to imagine this taking less than six months to compile, and six months for the state government to approve - or longer if there is a political benefit.
At the local government level, Adani will need extensive approvals for most of it’s planned infrastructure. The Whitsunday Regional Council recently submitted a report indicating that the rail construction alone will cross 16 cattle properties in the first 100 kilometres and require a concrete batching plant, a rolling stock maintenance facility and a 300 person accommodation facility.
Further west, the Isaac Regional Council will need to approve the main mining camp, airstrip, road upgrades and all other power, waste and water requirements.
It is impossible to know how long that will take - but the Jellinbah Group said delays driven by personnel changes at Central Highlands Regional Council meant it took six years to open their camp this year after receiving development approval in 2010.
Given the number of council approvals Adani requires - we can’t see theirs happening in under five years - so it will depend on when work started. Either way, we cannot see them getting local government approval in under two years from today - and we're assuming they wouldn’t start building without them.
Then there is Adani’s Final Investment Decision (FID).
Standard practice in mining is for the FID to be made after the board spends a lot of time considering a pre-feasibility study and a definitive feasibility study. Although it should be noted that these are not compulsory, but the State Government has said they will not give Adani approval to dredge unless they can prove they have the funds to complete the whole project.
To Shift Miner’s knowledge, neither of the Feasibility studies have been completed, although extensive work has been done on the cost of production - which as we have previously reported - Adani expects to be around $65 a tonne.
Our guess is that a decision of this magnitude, and the risks involved cannot be made without at least a year of complex economic analysis.
Our conclusion is that if the project goes ahead, a meaningful start to production cannot happen before 2019 and that assumes all the work above is carried out concurrently. Or in other words they have the resources and desire to work on all those different processes at the same time, rather than one after the other.
Although technically it might be possible for Adani to start “production” at any time it chooses, it just depends on what you call a start.
If we use Shift Miner’s theoretical start date of 2019 (remembering this is built on a large number of assumptions) how long will construction take and when would we likely see first coal from the Galilee?
The main elements of the project are the rail, the port upgrades, and the development of the mine itself. We are assuming that this work will happen concurrently with the aim that all the work be completed at the same time, so massive infrastructure is not sitting idle.
Starting with the rail (because it will take the longest) we have calculated that this would take around 5 or 6 years to build. We used calculations made by the ATEC Rail Group when it was planning the now mothballed Surat Basin Rail project.
They expected it would take about three years to complete 200 kilometres of rail in the Surat Basin. Obviously, the completion rate will be contingent on the resources thrown at it, but both projects need to navigate significant floodplains (Dawson and Belyando Rivers) and possible extended wet-season delays, so the comparisons are probably valid.
Although you could argue the Adani proposal will be more plagued by the wet season because it is further north. Also, a sceptic (like us) would say everything takes longer than predicted - so we could see this taking at least six years.
The time frame for the dredging is a minimum of 1 year (could be much longer because there is a ban on wet season dredging) and the timeframe for port upgrades is probably around two years (just a guess). Adani expects mine development and construction to take three years, so let's go with that.
So if all that work is completed simultaneously, and there are no unforeseen delays and court actions, the earliest we can see first coal from the Galilee is 2025, with construction starting on the rail in 2019, the mine in 2021 and the port in 2022.
Hat's off to them if they can do it, but don’t be confused by the politics of this week.
This project is still years away - if ever.