Meijin Energy Stops Promoting A $6.7 billion Huashi Coal Project

Recently, according to foreign media reports, Shanxi Meijin Energy is planning to invest A$6.7 billion in the development of China Stone power coal project in the Galilee Basin of Kunzhou, or will be stranded. It is reported that MacMines Australia, an Australian subsidiary of Meijin Energy Australia, has stopped bidding for mining leases for a large coal mine in Kunzhou. Meijin Energy is the largest coking enterprise in Shanxi Province, China. Huayuan Company is a wholly-owned subsidiary of Meijin Energy.

In November last year, the Queensland Resources Committee approved a Chinese investment of A$6.7 billion in the Galilee Basin to develop Huashi Export Power Coal Mine.

Huashi Power Coal Mine covers an area of 20,000 hectares. The project includes a new open pit mine, power coal mine and related infrastructure, including airstrip and accommodation. It is estimated that 38 million tons of coal will be produced annually after putting into operation, thousands of jobs will be created, and the mining rights fee of A$188 million will be increased annually for the Kunzhou government.

The Kunzhou Government confirmed that in March this year, Huayuan said it would "voluntarily not apply" for five mining leases. However, Huayuan still holds the exploration license for the project and has the option of re-applying for mining leases in the future. Sean Ryan, a senior attorney at the Kunzhou Environmental Protection Office, said he was surprised that Huayuan had been approved by the state but stopped advancing the project, which prevented it from progressing. If the company re-applies for mining leases in the future, it will need to go through a time-consuming process. Russell Phillips, Chief Executive Officer of Huayuan, said the future of the project was still under discussion, but he also said it would never be cancelled.

Huayuan did not explain the reasons for abandoning the application for mining lease. Some analysts believe that the project is no longer in line with China's interests in coal, and because it is difficult for the company to obtain funds for coal development projects, the project is "not feasible" financially. Tim Buckley, a financial analyst at the Institute of Energy Economics and Financial Analysis, said that the Chinese government had made it very clear that it wanted to gradually reduce high-polluting coal-fired power generation, and importing more expensive coal was contrary to that goal. In March, China increased its imports of metallurgical coal from Australia, but Australia's power coal exports to China continued to decline, according to data released this month by the Australian Bureau of Statistics.

He also pointed out that another key problem was that Huayuan could not obtain the funds needed to develop Huashi project. China's four largest state-owned banks are reluctant to lend to them, and companies have to find their own ways to raise funds.

An energy researcher said that the Adani coal mine near the Huashi project had changed its plan to build a railway, which was also an important reason why Huayuan stopped promoting the Huashi project.

Adani initially planned to build a railway between the Galilee Basin and Abbot Point pier by applying for a $900 million North Australian Infrastructure Fund. The Huashi project had hoped to use the railway to transport coal to the port.

But in November last year, Adani changed the original planned railway to connect only to the existing Aurizon railway network and no longer to the coal terminal at Cape Abbott. The Huashi project itself has no plans to build large-scale railways.