Adani cancels $2.6 bn deal with Australian mining giant

The $16.5 billion Carmichael coal mine project when completed would be one of the world's largest.

Beleaguered Adani Australia on Monday said it has cancelled a $2.6 billion contract with an Australian mining services firm to cut costs, days after the Indian energy giant failed to get a concessional loan for its controversy-hit Carmichael coal mine project in Queensland.

The split with Downer comes after the Australian firm was the target of a nationwide activist campaign pressuring it to quit the $16.5 billion Carmichael project in central

Queensland, claiming it will harm the iconic Great Barrier Reef.

In a setback to Adani, the newly-elected Queensland government led by Premier Annastacia Palaszczuk last week vetoed a plan to give a $900-million concessional loan for the construction of a rail line for the Carmichael coal mine project.

She vetoed the loan to Adani Australia, fulfilling a major poll promise she had made during the election campaign to put a stop to the NAIF loan on her first day.

The Adani group had applied for the Northern Australia Infrastructure Facility (NAIF) loan worth $900 million for building the 388-km rail line to connect the major coal mine to the sea port.

The $16.5 billion Carmichael coal mine project when completed would be one of the world's largest.

The move to cancel the contract raises further questions about the fate of the massive project, with Downer one of only two mine contractors - along with Thiess - considered capable of handling an operation producing up to 60 million tonnes of coal a year, the Australian Broadcasting Corporation reported.

Adani said in a statement that it is committed to the project and the split with Downer was "simply a change in management structure".

"Following on from the NAIF veto last week, and in line with its vision to achieve the lowest quartile cost of production by ensuring flexibility and efficiencies in the supply chain, Adani has decided to develop and operate the mine on an owner operator basis," the statement said.

"Adani and Downer have mutually agreed to cancel all Letter of Awards and Downer will provide transitional assistance until March 31, 2018.

Adani remains committed to develop the Carmichael project and will ensure the highest level of standards and governance," the statement said.

Adani said both parties had cancelled a conditional $2.6 billion contract as part of its cost-cutting drive spurred on by the Queensland government's veto of its $1 Commonwealth loan bid, the ABC report said.

Earlier this month, China's two major state-run banks said they have no plans to finance the Carmichael coal mine project.

The Carmichael project, expected to create hundreds of jobs in Australia, has been facing opposition from environmentalists and indigenous groups.

The Adani Group has for over five years battled the opposition to any expansion of the Abbot Point port, saying it will cut into the Great Barrier Reef World Heritage Area.

The Adani group entered Australia in 2010 with the purchase of the greenfield Carmichael coal mine in the Galilee Basin in central Queensland, and the Abbot Point port near Bowen in the north.

Adani Australia currently employs over 800 people and has invested over $3.3 in Queensland, which is the biggest investments by an Indian company in Australia, the company said on its website.

Photograph: Amit Dave/Reuters