The company developing a greenfield coal project at present may appear to be brave, but at least three such projects are at an advanced planning stage in Australia.
The first is Meteor Downs South in Queensland. This will be a small, low-cost operation, entailing open-cut mining and simple processing. It will produce thermal coal (used for electricity). Subject to final approval by the proponents (a Chinese company and a Japanese company), construction will commence by the end of the year.
The second is a much larger, Chinese-driven project: Hillalong, also in Queensland. With an estimated capital cost of A$600 million, this will produce coking coal (used for steel manufacture) and thermal coal. Subject to government approvals, construction is expected to commence in mid-2017.
The third, in the Hunter Valley of New South Wales, is to be developed by the Indonesian company, MACH Energy. It purchased the project (Mt Pleasant) from Rio Tinto in early 2016. It is the largest of the three projects in terms of production, which will be around 10 million tonnes per year of thermal coal. Construction is expected to commence by early 2017.
These projects are a sign of confidence on the part of the proponents in the outlook for coal. In addition, they may all be keen to secure their own sources of supply in Australia.
Coal prices fell precipitously between 2013 and 2015. However, in the past six months, coking-coal prices have increased, while thermal-coal prices have been more-or-less steady. An encouraging sign?