Australia

Adani scraps Downer deal after loan veto

Adani has scrapped a $2 billion agreement to outsource the operation of its controversial Queensland coal mine. Pictured are protesters against the mine. Source: AAP

Adani says it will bring the operation of its controversial Queensland coal mine back in house, after the state government scrapped a taxpayer funded loan.

Adani has blamed the Queensland government's decision to kill off a taxpayer-funded loan for its decision to ditch a $2 billion agreement with a major contractor.

But the Indian miner says it remains committed to building its controversial Queensland coal mine and the decision to part ways with Downer EDI has no bearing on that.

Adani had intended to outsource the operation of its Carmichael mine to Downer under an agreement that was worth $2 billion at the time of its announcement in 2014, but now says it will run the mine itself.

It made pointed references to the Palaszczuk government's loan veto and the need to keep production costs down in announcing the "mutual" split with Downer.

"Following on from the NAIF veto last week, and in line with its vision to achieve the lowest quartile cost of production by ensuring flexibility and efficiencies in the supply chain, Adani has decided to develop and operate the mine on an owner-operator basis," it said in a statement on Monday.

"Adani remains committed to develop the Carmichael project and will ensure the highest level of standards and governance."

Anti-Adani protesters, who have targeted Downer over its involvement in the project, say it's a welcome blow to the project.

"Downer walking away from Adani is the biggest nail in the coffin for the Carmichael mine thus far. Adani are unlikely to find another Australian company willing to risk building and operating such a controversial mine," Galilee Blockade spokesman Ben Pennings said.

"Adani have never operated a mine of this scale and have absolutely no experience operating mines in Australia."

The very first act of Queensland's newly re-elected Labor government was to make good on its election promise to veto a loan to Adani of up to $1 billion from the federal Northern Australian Infrastructure Fund (NAIF).

The government says it backs the mine and wants the jobs it will create, but also says the project must be viable without taxpayer funds, including federal funds.

Adani is yet to secure funding for mine. Earlier this month, Chinese lenders ruled out providing finance for the Adani Carmichael coal mine, joining Australia's big four banks in avoiding the controversial project.

But Adani said it was full steam ahead for the mine, with Downer to provide "transitional assistance" until the end of March.

"This will not affect our commitment or the number of local jobs across Queensland. This is simply a change in management structure and ensures that the mine will ultimately be run out of our Adani Australia offices in Townsville," it said.

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