Waratah’s coal project nixed in Queensland (September 22, 2008)

An environmental ruling against Waratah Coal’s (WCI-V, WGO-A) multibillion-dollar proposal for a major coal port development on the east coast of Australia has crushed the stock. On the news, Waratah shares were down 62%, or $1.14, to 70 on 2 million shares traded.

The news comes just a few months afterthe premier ofQueensland endorsed the A$5.3-billion (US$4.6 billion) project.

Waratah had planned to build a thermal coal mine in the Galilee Basin linked by a new 495-km rail line to a purpose-built export facility on the Queensland coast.

In mid-July, Premier Anna Bligh designated the mine and infrastructure project of “state significance” –a classification that is only given to critical infrastructure projects and is designed to help fast-track construction.

But on Sept. 5, Federal Minister for the Environment, Heritage and the Arts (and former Midnight Oil frontman), Peter Garrett rejected the proposal, ruling it “unacceptable” under Australia’s Environment Protection and Biodiversity Act.

Declaring the environment minister had “exceeded his authority” and calling the decision “wrong in law” and “not in the national interest,” Waratah chief executive Peter Lynch says he will challenge the decision in Australia’s federal court.

Lynch argues that Queensland has much to gain from the ambitious project. Under current contract prices, the proposed mine and infrastructure project would potentially generate more than A$10 billion in export revenues and over A$900 million in royalties annually for the state, the company outlines in a press release.

The Aussie junior contends that the proposed port is the most attractive natural deepwater port location on Queensland’s coast and the new facility would be built to accommodate the 350,000-deadweight- tonne Chinamax class bulk carriers. Waratah had also planned to build a heavy haul, standard gauge rail system to sup port 21,000-tonne train units. The system was to be equipped with dual gauge rail from the Bowen basin mining camp to the port to accommodate third-party users.

The Bowen basin is home to projects owned by BHP Billiton (BHP-N, BLT-L), Anglo American (AAUK-Q , AAL-L), Xstrata (XSRAF-O, XTA-L), Rio Tinto (RTP-N, RIO-L), Vale (RIO-N) and MacArthur Coal (MCC-A, MACDF-O).

Waratah’s proposed open-pit mine in the Galilee basin would have an initial export capacity of 25 million tonnes annually and was expected to have started production in late 2012.

The coal would have been processed at an on-site facility north of the town of Alpha, 160 km west of Emerald. The processed coal was then to be sent by rail to the planned export port facility.