Adani Mining has lost one of its two big external customers with Korean giant LG confirming it would not be purchasing coal from the controversial Carmichael coal mine in the Galilee Basin.
This latest set-back to build the world’s largest thermal coal mine follows revelations in Fairfax Media last month that the Commonwealth Bank was no longer financial advisor to Adani.
It was reported last year that LG had signed a letter of intent with Adani to purchase four million tonnes of coal. However LG issued a statement on Wednesday saying: “The LOI concluded by and between LG International Corp and Adani Mining Pty Ltd was non-binding and is invalid as of July 21, 2015 in accordance with the expiration of the LOI”.
There has been no statement from Adani, nor has Adani informed the market since the LOI lapsed. A large resources project requires backing from banks and customers as pre-requisites to financial close.
The withdrawal of LG leaves just Korean group Posco as the only other external buyer, with a prospective 5 million tonne demand. More than half the production is earmarked for the Indian upstream company Adani Power.
CBA is Australia’s largest lender and a leading banker to resources projects around the country.
Many of the world’s biggest coal project funders – Citigroup, Deutsche Bank, Morgan Stanley, RBS, Credit Agricole, BNP, Barclays, Goldman Sachs, JP Morgan and Societe Generale and HSBC – have already said they would not fund the development of a coal project whose export facilities were to be built near the Great Barrier Reef.
The Queensland government, the federal government and the federal opposition are still backing the project but with the failure of the banks and now one of the major customers to back Adani, the future of the $16 billion coal mine is in further doubt.
Also reported here last month, the federal government is believed to be considering funding the project with taxpayer money via a resource project fund.