Shenhua 1 Billion Ton Coal Project On Hold Due To Australia Law Change

The world's largest coal miner, Shenhua Group Corp., has suspended its billion-ton Watermark coal project after the government of Australia's New South Wales state cancelled existing planning laws due to objections from farm groups.

The Watermark project--the first-ever overseas development by China's Shenhua, which accounted for around 6% of global coal sales in 2009--will be suspended pending a replacement for the state's 'Part 3A' planning system, the company said.

"We are on a complete hiatus until the government lets us know what's happening," a Shenhua spokeswoman told Dow Jones Newswires. "We are continuing with some baseline environmental studies, but nothing major until we get information or direction."

New South Wales is home to the Hunter Valley, the world's largest coal export basin, as well as significant gold and copper deposits.

The state's planning minister, Brad Hazzard, on Thursday introduced legislation in the state parliament to replace the 3A system, a controversial process that critics said allowed the state government to approve major projects over the heads of local communities.

But Shenhua said it needed more certainty before proceeding further with the project. "It's all very well saying we won't come under part 3A, but that means nothing until we know what it will come under."

Shenhua is currently preparing a feasibility study for the Watermark project, which sits on the fertile Liverpool Plains region inland from New South Wales' Central Coast and hopes to start construction in 2013 for a mine producing around 10 million tons of coal a year.

But farm groups in the region have objected strongly to the development and the nearby Caroona project, a 500 million-ton resource being developed by BHP Billiton Ltd. (BHP).

Executives say that project approvals have become harder, with numerous projects put on hold since a new state government was elected in New South Wales in March with a promise to revise the existing planning system.

In April, White Energy Co. (WEC.AU) cancelled its planned A$500 million acquisition of Cascade Coal Ltd., citing the tougher regulatory environment since the change of government.

Mining groups have also objected strongly to a 60-day moratorium imposed by the government last month on the granting of new exploration leases.

 
   -By David Fickling, Dow Jones Newswires; [phone]; [e-mail]