Adani to Purchase Royalty Rights of Australia Coal Mine from Linc

Published Date : Aug 28, 2014

Adani Enterprises has agreed to buy the Australian mining firm’s rights to royalties to Linc Energy - an amount worth Australian dollar (A$) 155 million (USD 145 million).

The royalties from Adani is high, however is already delayed four years behind schedule regarding Carmichael coal project. The deal raises questions as to whether Adani will build the project and become Australia’s biggest mining company, amid all the antagonisms from decline in coal prices and green groups.

This final decision to agree with the Northeastern Australia project calls for a spending of A$16.5 billion in order to dig the mine, build a port and a rail line. It is certainly an agreement reflecting the Carmichael mine’s progress that has already received a final federal environmental approval last month, from the Australian government.

Adani constantly ensures that the supreme quality coal from the Carmichael mine is economical.

According to the Singapore-listed Linc, the company is doing away from A$2 per tonne royalty on the first 20 years of coal mine production (indexed to inflation). Amid the coal expansion, Adani purchased Carmichael by paying A$500 million in cash from Linc Energy and agreed to pay the royalty directly.

Adani said in 2010 that it had planned to open the mine by the year 2014 whereby, Linc at that time could earn more than A$3 billion over royalty stream.

Peter Bond, Linc chief executive said that the two companies agreed on the risk of the coal industry and other current weak coal price on a price tag of A$155 million. Adani is more focused on the outcome of drilling shale in South Australia and cashing up balance sheets. According to the analysts, it is a win-win situation for both Linc and Adani. They also added that Adani and Linc had bid 25% to 30% approximate on the Carmichael project. This simply means Adani has not given up in this game, said Tim Buckley - the director at the Institute of Energy Economics and Financial Analysis. The institute is campaigning in fossil fuels.

(1 US dollar = 1.0708 Australian dollar)