Stephanie Smail reported this story on Tuesday, July 29, 2014 08:16:00

CHRIS UHLMANN: As debate rages over the environmental effects of Queensland's huge Carmichael coal project, there's doubts the mine will ever be operational.



Indian coal giant Adani has won environmental approval to start what could be the biggest black coal project in Australian history.



But industry experts say the Galilee Basin is too remote, the coal quality is too low and Adani will struggle to find the money it needs to get started.



Stephanie Smail reports.



STEPHANIE SMAIL: The Carmichael coal mine, west of Rockhampton, would be one of the biggest in the world, producing about 60 million tonnes of coal a year.



But India's Adani Group needs to find the cash to establish rail access and water and power supplies in the remote region first.



Tim Buckley is from the Institute for Energy Economics and Financial Analysis.*



TIM BUCKLEY: You've got existing coal mines in Australia that are operating right next to a railway line, five times closer to the port than the Carmichael deposit. And yet the owners of those mines are proposing to close them down.



How is it that a mine that is already fully operational, with all of the capital invested already, is considering closing at a time when a mine with none of the capital employed and none of the infrastructure required can in any way make sense?



STEPHANIE SMAIL: Tim Buckley argues the Adani Group isn't in a position to pay for the next step.



TIM BUCKLEY: The company already has $12 billion dollars of net debt and they have a huge number of projects on the boil in India. They're requiring another $5 billion or $10 billion worth of capital expenditure over the next five years.



So it's a major question how they're going to just locate a spare $16 billion dollars to actually make this project happen.



STEPHANIE SMAIL: Michael Roche from the Queensland Resources Council admits securing the finance for the project won't be easy.



MICHAEL ROCHE: They've recently announced a big Korean company, Posco, as their partner in the rail project. They are very serious about moving ahead with appointments of other contractors. Everything that I see and hear from Adani suggests to me that they are serious. But pulling together the capital for such a large project does have its challenges.



STEPHANIE SMAIL: Mr Roche argues infrastructure hurdles have been overcome in Australia's mining sector before.



MICHAEL ROCHE: They're the very same challenges that are being tackled by Hancock Prospecting's Roy Hill iron ore mine. It's not unusual to have a mine that needs to build a lot of its own infrastructure. We've done it before in Queensland. A lot of the infrastructure that we now take for granted in the Bowen Basin wasn't there in the 1950s.



So there's nothing unique about the challenges facing this project that haven't been tackled with big mining projects all around Australia.



STEPHANIE SMAIL: Mr Buckley points out the world of thermal coal has changed dramatically since Adani bought the Carmichael project three years ago.



He says he's not sure why the group is pushing ahead with the expensive mine.



TIM BUCKLEY: Maybe it's a question that they don't want to have to write off the $525 million that they paid to buy the right to proceed with this project. I mean, if they walk away from the deal then they lose $525 million plus, all of the capital that they've sunk into the project subsequently in the last three years.



So it's a huge bite for a company of Adani's size to walk away from a project where they've invested $6-700 million already and they'll probably get nothing for it.



STEPHANIE SMAIL: Michael Roche argues there is plenty of demand for thermal coal. He insists the future of the Carmichael mine is promising.



MICHAEL ROCHE: Between now and 2030 India will be demanding an extra 290 million tonnes of coal. China: over 300 million tonnes. And, in total, just in Asia, the demand for thermal coal will grow by nearly 800 million tonnes.



CHRIS UHLMANN: Michael Roche from the Queensland Resources Council ending Stephanie Smail's report.





*EDITOR'S NOTE: (15 August 2014): The original broadcast of this story failed to disclose Tim Buckley is also the managing director and portfolio manager at Arks Investment Management, a clean energy fund.