Work on $7b Surat Basin project still over a year away

4pm: Mining giant Glencore looks unlikely to start building its $7 billion Surat Basin coal project until later next year, according to resources expert Michael Roche.

But the former Queensland Resources Council CEO said the stars were aligning for the major coal producer after the State Government approved its open-cut mine near Wandoan, which could create up to 1300 jobs.

"Glencore will be tossing up whether it suits their interests to buy an existing mine or build a new (one)," Mr Roche said.

"You won't see sod-turning within the next 12 months."

The last piece of the puzzle is the as-yet unfunded Surat Basin Rail line to reach the Port of Gladstone, which Mr Roche estimated could cost nearly $1 billion.

Glencore, New Hope and Stanmore Coal all have developing projects in the region, meaning one or more could fund the rail.

"Glencore would most likely underwrite the missing element, which is the rail line from Wandoan to Banana and out to the Port of Gladstone," Mr Roche said.

"The Surat Basin rail cost would be far more competitive than when they were looking at it in the middle of boom.

"It's a much more reasonably priced right now - it might not (cost) $1 billion, but you wouldn't get much change from $1 billion.

"Someone could step forward to build that rail, and they just need Glencore or others to pay for it."

The company threw cold water on the approval news earlier today.

"Adding significant new tonnes to the market at this time could adversely impact the profitability of existing thermal coal production, potentially putting jobs at risk as the market adjusts downwards as a result of oversupply," a spokesman said.

"The Wandoan Coal Project will require a multi-billion dollar capital investment for both the mine and related rail infrastructure."

Mr Roche said it was in Glencore's interests to delay new coal production until the Asian markets firmed in 2022-23.

"The smart money is that one or more of the companies with coal assets in the North Surat will be ready to supply by 2022-23," he said.

"As a dominant player in the thermal coal market, it is in their interests to delay the production of new coal."

Green groups and anti-coal activists slammed news of the approval by Mines Minister Anthony Lynham.

"The approval of this mine marks a very dark day for farming in Queensland," Lock the Gate spokeswoman Carmel Flint said.

UPDATE 11am: Mining giant Glencore has thrown some cold water on the news its massive coal project in the Surat Basin has been approved.

State Mines Minister Anthony Lynham last night approved the $7 billion, 22-million-tonne coal project, based outside Wandoan in the Western Downs.

The project could create up to 1300 jobs during construction and operation, but both Glencore and sources in the State Government said its viability was dependent on market prices and whether rail infrastructure could be built.

A Glencore spokesman said the company was hesitant to rush into building the mine.

"We have been transparent with governments and the community since 2013, when the project was placed on hold, that we will continue to assess the project's timing against the global coal market," he said.

"Glencore is taking a responsible approach and will only bring on new large scale production volumes if we are confident that market conditions support such a development.

"Adding significant new tonnes to the market at this time could adversely impact the profitability of existing thermal coal production, potentially putting jobs at risk as the market adjusts downwards as a result of oversupply.

"The Wandoan Coal Project will require a multi-billion dollar capital investment for both the mine and related rail infrastructure."

The current price of thermal coal in Australia is $85.67/tonne, higher than early last year but still much weaker than the spike of November 2016.

A spokeswoman for the State Government also confirmed Glencore would likely delay construction until demand increased.

The Chronicle has contacted Glencore to find out the required price of coal needed for the mine to be viable, and whether it would ask the State or Federal Governments for funding to upgrade and create the rail link.

EARLIER: A massive $7 billion coal project in the Surat Basin region has been given the green light by State Government.

Mining giant Glencore's plan to build the first stage of a 22 million-tonne thermal coal project near Wandoan, north-east of Roma, was approved by Mines Minister Anthony Lynham this afternoon.

RELATED: $7b Surat Basin mine approval a 'dark day' for farmers

The three 27-year-old leases cover 30,000 hectares.

Once finished, it will be the first major coal project in the Surat Basin, but still needs a rail link to the Port of Gladstone for export.

The project could create 1300 jobs, according to estimates reported in May.

Topics:  coal editors picks glencore surat basin toowoomba

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