“To gild refined gold, to paint the lily, to throw a perfume on the violet, to smooth the ice, or add another hue unto the rainbow, or with taper-light to seek the beauteous eye of heaven to garnish, is wasteful and ridiculous excess” – Shakespeare, King John IV, 2.
If e’er a lily were so grandiloquently gilded, if e’er there were a mining project so deliriously conceived, it was bared for all to see in a Queensland court this week in the cross-examination of expert witnesses in the Adani case.
For those with little acquaintance of this whitest of white mammals of the family Elephantidae, we refer to the lawsuit in the Queensland Land Court where Indian conglomerate Adani is trying to get approval for Australia’s biggest coal mine.
The week had begun poorly for the Indian conglomerate. It had long claimed its Carmichael mine in the Galilee Basin would deliver $22 billion in taxes and royalties. However, its own expert witness, Dr Jerome Fahrer, admitted to a figure of $7.8 billion.
This $14 billion black hole was rivalled on Tuesday when Adani’s myth of humungous job creation was also pulverised. No, 10,000 jobs would not arise, as the company had claimed, rather 1464 jobs would be generated in each year. It is a neat coincidence that both its jobs claims and its tax claims were inflated by 270 per cent.
Yet the piece de resistance came on Friday when expert witness for the opponents of the project Tim Buckley, a respected financial analyst, took the stand. Buckley told the court the assumptions in Adani’s financial model had overestimated the coal price and the yield, underestimated the mining costs, the rail costs and the discount for which the coal would sell, and breezily ignored pesky things in its calculations like interest on the debt.
To sum it up, this project has Buckley’s. That it could ever succeed without a doubling in thermal coal prices is sheer fantasy. If they dredge the Barrier Reef at Abbot Point and nearly double Australia’s carbon emissions for this shaggy pup, Queensland’s legislators will never live it down.
Figures damn themselves
Any supporters of the project that remain after this week’s testimony may contend of Tim Buckley – and other witnesses called by Coast & Country, the environmental group seeking to block the mine – “they would say that, wouldn’t they”.
But Buckley has simply recreated Adani’s own financial model. He has used their own numbers, used them conservatively, and come up with a project that will lose $9.4 billion.
How then does Adani justify its claims of profitability? It deploys coal price forecasts north of $US100 a tonne, that’s how. Buckley has merely used market forecasts. The futures market when he wrote his expert’s report priced thermal coal at $US64.55 a tonne in 2021. Since then, the price has fallen further to $US58.85. Adani has assumed the coal price will double.
Another doozy is the cost benefit analysis – Adani’s modelling predicts its mine will be 50 per cent more efficient than a suite of 14 other coal mines in Queensland and NSW. Buckley’s evaluation is pure charity. He kindly assumes Adani, whose only coal mine is in Indonesia (operating at 40 per cent utilisation), will be a mere 30 per cent more efficient than the likes of BHP, Rio Tinto, Peabody and Glencore.
There is the small matter of financing costs too. Despite a recent restructure in India that effectively cut the size of Adani’s enterprise here by 80 per cent, and consequently its capacity to borrow by the same magnitude, Carmichael requires billions in project finance. Buckley assumes the project will lose $300 million a year, even before interest on the borrowings at $400 million a year.
It is no wonder Adani’s own expert on financing, John Stamford, refused point blank in the witness box this week to comment on the financial viability of the project. He would not put his own money in it, he agreed.
As for the national interest, Buckley generously accepted Adani’s assumptions that there would be royalties should the project proceed. Not the alleged $22 billion in tax and royalties but $3.3 billion in royalties. As for taxes, if there are no profits, there are no taxes.
Were lightning to strike thrice and the coal price rampage to $US100 a tonne, any spare dollar in profit would be unlikely to find itself at the Australian Taxation Office anyway, but rather wend its way via the tax haven of Singapore to the tax haven of Mauritius.
Adani Mining in Australia is owned by an Adani company in Singapore, which is in turn owned by an Adani company nestling off the coast of West Africa in La Republique de Maurice.
“Are you aware of the effective tax rates in Mauritius,” Adani’s financial controller was asked in court. “No, I don’t know,” replied Rajesh Gupta.
“I suggest it’s 3 per cent,” said the interrogating lawyer.
But it’s not really, is it?
Though Gupta’s evidence seemed flimsy and forgetful, Adani’s expert witnesses retreated in giant strides from the company’s claims while experts for the defence demolished them, there will still be objections from the rowdy pro-development crew.
Flamboyant National MP George Christensen still says Galilee “will provide an estimated 28,000 jobs”.
Any serious observer or participant however must only conclude that, at best, this project is a dead-set punt of the longest odds.
Further to Buckley’s evidence, the forecast for a gross operating loss of $9.3 billion could double if current coal forecasts were assumed, if the financial model included carbon costs of $4.8 billion, if rehabilitation costs were included, and if the likely and realistic costs of third party infrastructure such as rail were included – another 7.6 per cent or $4.2 billion there.
The banks won’t come to the party. This project is unbankable. Though the worst outcome is that the government allows it to proceed – cowed by anti-jobs rhetoric and despite all reason – and they dredge the reef, then the thing blows up anyway.