In this May 25, 2017 photo, environmental activists voice their opposition to Indian miner Adani's proposed Carmichael coal mine, outside Parliament House in Brisbane, Australia. The Carmichael coal project, a massive 22 billion Australian dollar ($16.5 billion) mine that Indian resource billionaire Gautam Adani hopes to start work on this year in the remote Galilee Basin, has created an extraordinary clash between the resource and environment sectors. (Dan Peled/AAP Image via AP)
The Adani mine has been a frequent target of environmental protesters © AP

Australia’s largest rail freight operator withdrew an application for a A$1bn (US$777m) state-backed loan on Friday to build a rail line to support development of the Galilee Basin, one of the world’s largest untapped coal reserves.

The decision by Aurizon represents another setback to Indian mining groups, Adani and GVK Hancock, which are seeking financial backing to push ahead with developing coal mines in the basin. The freight operator said it was withdrawing its loan application to the Northern Australia Infrastructure Facility (NAIF), a government body, as it was unable to agree a contract with the miners. 

“Our NAIF application is, in part, predicated on having customer contracts secured. Given this is unlikely to occur in the near future we believe it is prudent to withdraw the NAIF application,” said Andrew Harding, Aurizon managing director and chief executive.

“If market circumstances change and our discussions with potential customers progress to commercial arrangements we will look at all possible financing arrangements to develop the rail solution,” he said.

Development of the Galilee Basin, along with the tar sands in Canada, one of the largest remaining deposits of oil in the world, are seen by environmental activists as key battlegrounds in the fight to phase out fossil fuels and limit global warming.

“This is a blow to Adani as it can’t move its coal to the port to be exported without building and financing the 400km rail line,” said Tim Buckley, director at the Institute for Energy Economics and Financial Analysis, who opposes the mines.

Opponents claim burning thermal coal mined from the Galilee Basin would pump 700m tonnes of CO2 into the atmosphere every year for over half a century.

Adani plans to develop the A$16.5bn Carmichael coal mine in the Galilee Basin but it is struggling to raise financing for the controversial project.

Gautam Adani, founder of Adani, announced a final investment decision in May, signalling work was beginning, but the Queensland state government this week accused the company of missing financing deadlines. 

“It all hinges on getting the finance — so it is up to the company to get the finance,” Annastacia Palaszczuk, premier of Queensland, told state broadcaster ABC.

“That project needs to stack up financially, just as every other resource company investing in Queensland needs to stack up.”

A spokeswoman for Adani said on Friday it is pushing ahead with work on the project, noting the Indian company has already spent A$3.3bn.

She said the group would find another way to finance the 400km rail line needed to connect the Galilee Basin with the port to export coal. “We are confident we will raise funding,” she said. 

Adani had initially applied for the A$1bn loan from NAIF to finance its own railway line to the basin. But the application was blocked by the Queensland government, which insisted the Carmichael mine project should not be supported by public funds.

Aurizon is the second major partner to quit the project. In December, the Indian company parted ways with Downer, a mining services company.

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