Adani Enterprises is forging ahead with ambitious plans to build Australia's biggest coal mine in the next three years, defying a collapse in coal prices to five-and-a-half-year lows as it seeks to supply power plants at home.
Australia's federal and Queensland state governments are eager to see the mine go ahead following the loss of more than 4,000 coal jobs, and Queensland has said Adani may make an announcement tied to the project when Prime Minister Narendra Modi is in Australia next week.
However, analysts and project finance experts believe the home-grown conglomerate may have underestimated the difficulties of raising funds for the US $7 billion mine, rail and port project in the current market.
They see the 2017 target for opening a mine as "highly aggressive", with no debt funding lined up, no rise in coal prices in sight, and uncertainty over coal output in the domestic market and demand growth in the country and north Asia.
"On a standalone basis, the economics just don't stack up - I'm talking about costs and return on capital. You'd need a price of about $100-$110 a tonne for it to stack up," said Daniel Morgan, global commodities analyst at UBS.
The benchmark Newcastle price for thermal coal is just US $62.66 a tonne, down 27 per cent in 2014.
The Carmichael mine in the untapped Galilee Basin has been on hold since Adani bought it in 2010, faced with a drawn-out approvals and funding process.
The infrastructure and trading conglomerate said in October it planned to start construction work in early 2015, aiming for first production from a 60-million-tonnes-a-year mine in 2017. At peak production it would boost Australia's thermal coal output by nearly 25 per cent.
To start work in the next six months, however, Adani would need to bring in a partner or pour in its own money, since it has yet to line up project debt at a time when a third of Australia's coal output is loss-making, the country's analysts said.
Saddled with a net debt of about US $13 billion, the company would need to raise around US $1 billion through a share sale, a sale of a stake in the Abbot Point port or both.
"I think Adani will move slower with Carmichael than they say," said an analyst with a broker in Mumbai, adding that there were many risks.
Adani, which has appointed Morgan Stanley to advise on selling a stake in Abbot Point, said in an emailed statement that work was "progressing well to meet the project's 2017 first coal guidance."
The home-grown infrastructure major, however, refrained from commenting on any plans surrounding the visit by PM Modi, who is close to the company's billionaire founder Gautam Adani.
Adani is also facing anti-coal campaigners who are fighting in courts to stop the mine and pressing banks not to lend for the port expansion, arguing that dredging and exports could harm the World Heritage-listed Great Barrier Reef.
In a counter attack, Adani has launched advertisements on Australian television on the economic benefits of the project.
The company is counting on lining up funding from South Korea, having named POSCO Engineering & Construction as the preferred contractor to build the 388 km rail line.
"We would note that our rail partner, POSCO E&C, has been advertising work opportunities and proposed work plans online and in trade publications for several months for early 2015," a spokesman for Adani said.
However both POSCO E&C and potential funding partner South Korea's Export-Import Bank said any agreements were at very early stages.
"It is hard to predict when a contract will be signed," said a POSCO E&C spokesman in Seoul.