Government may fund South African mine that would compete with Adani

Guardian Web |

An Australian government agency is considering a multi-million dollar loan to a South African coal mine that would be in direct competition with the Adani Carmichael coal mine.

The Export Finance and Insurance Corporation (Efic) is considering the loan to develop the Boikarabelo coal project in Limpopo Province, South Africa.

The Boikarabelo mine has approval to extract 32m tonnes a year of raw coal, making it of similar size to some proposals in Australia’s Galilee Basin.

With Efic’s help, the project could lead to the development of one of the biggest coalfields in the world, the Waterberg Basin, a resource of about 75bn tonnes.

The proponent of the project, the South African-based Resource Generation Limited (Resgen), would use the resource to compete with Australian coal in international markets, particularly in India.

Related: John Hewson says $1bn loan to Adani the 'last thing' Coalition should be doing

It would have the advantage of being much closer to India, saving a week of shipping time compared with Australia’s coal ports.

A new report, African White Elephant: Should Australian taxpayers finance a South African coal mine?, has questioned the rationale of the Efic loan.

The report, published by the progressive think-tank The Australia Institute and the Jubilee Australia Research Centre, asks why Australian taxpayers should help fund the project.

“The proponent company, Resgen, does not have strong links to Australia,” it says.

“While listed on the Australian stock exchange, it is majority foreign-owned, with a South African CEO and mainly South African board. It appears to have no activities based in Australia. Its ‘Australian office’ has a South African phone number.

“While Resgen’s links to Australia are minor, its South African coal would compete with Australian coal in international markets, particularly in India.”

The report says that while Efic can lend money to non-Australian projects so long as there are other benefits for Australian exporters, it wonders what those benefits will be in this case.

Related: Adani may be forced to revamp Carmichael coalmine clean-up plans

It has also questioned Efic’s capacity to assess environmental and social risks, given it has provided finance to some of the worst social and environmental catastrophes in the Asia-Pacific region, including the Ok Tedi Mine, the Porgera mine, and the Bougainville Panguna mine.

“South Africa’s mining industry has a poor record on accountability, human rights and environmental issues, raising the risk of Efic, an Australian government entity, being linked to these problems,” it says.

Rod Campbell, a research director at The Australia Institute, says that while the size of Efic’s potential loan is confidential, he estimates it would be between $50m and $100m, given the $530m financing the project requires.

It would be much larger than Efic’s usual loans - in 2016-17, Efic has provided more than 50 loans worth a total of $150m, with one worth $85m, and the rest worth less than $10m and many less than $1m.

Campbell has questioned the rationale for Efic’s potential loan, given the Australian government is also considering making a $1bn loan to the Adani Carmichael project, to help it sell coal to India.

“Developing a South African coal mine with Australian taxpayers’ money is madness, no matter what side of Australia’s coal debate you are on,” he said.

“At best the project fails and we lose our money, at worst it leads to increased greenhouse emissions and damages our own coal industry.”

In Queensland on Thursday, the prime minister, Malcolm Turnbull, said the Adani Carmichael project was “vitally important” for Queensland’s economy.

“Let’s be quite clear about this,” he said. “If Australia stopped exporting coal to India, they’d simply buy it from another market. They’d buy it from Indonesia or they’d buy it from South Africa or Colombia.”

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:


Emerging Growth

Goldrea Resources Corp.

Goldrea Resources Corp is engaged in the acquisition, exploration and development of mineral properties located in North America.

Private Markets

The Green Organic Dutchman

The Green Organic Dutchman Ltd. ("TGOD") produces farm grown, organic cannabis for medical use. The company grows its high quality organic cannabis in small batches using craft growing, all natural…

iPRO Network, LLC

We provide the platform, tools, and resources to empower individuals and professionals to market desirable goods and services to the public, taking the place of traditional methods of commerce.