South32 Limited has announced it will not proceed with an investment in the Dendrobium Next Domain (DND) project at Illawarra Metallurgical Coal in New South Wales which would have extended the mine’s life into the 2040s.
The company said expected returns from the circa US$700 million up-front capital expenditure estimate are not sufficient to support the investment. Instead, South32 will focus on continuing to optimise Dendrobium and the broader Illawarra Metallurgical Coal complex to extend the mine life under its current licence.
The optimisation includes existing plans for Appin which will transition to a single longwall from 2025. The company’s investments at Appin include planned work to install additional ventilation capacity to enable mining in the current Area 7 until at least 2039. The approximate US$260 million investment remains subject to South32 Board approval.
Average annual saleable production of ~5.5Mt with operating unit costs of ~US$105/t to US$120/t is expected from the current configuration beyond 2023, with further improvements to be targeted to bring unit costs to the bottom of the range.
South32 Chief Executive Officer Graham Kerr said the decision follows an extensive analysis of the alternatives for Dendrobium together with the anticipated returns from the up-front capital investment which would be required.
“Over the past 18 months we have made significant progress actively reshaping our portfolio and this decision increases our capacity to direct capital towards other opportunities. This includes our world class development options in North America that have the potential to underpin a significant growth profile to produce metals critical to a low carbon future, servicing strategically important supply chains.”
In February 2021, the NSW Independent Planning Commission (IPC) blocked the expansion plans for the mine, after significant concerns were raised about the proposed mine design, subsidence, ground and surface water impacts, biodiversity and upland swamps, Aboriginal cultural heritage and greenhouse gas emissions.
While a whole-of-government assessment by the Department of Planning, Industry & Environment concluded the project was “approvable”, finding its benefits “significantly outweigh its residual costs, and that it is in the public interest”, the Commission refused the state significant development application, finding the risks of adverse impacts on the environment were high, and that those impacts were not appropriately manageable and likely to be irreversible.
“[A]fter careful examination of all the evidence and weighing all relevant considerations, the Commission has found that the longwall mine design put forward by South32 does not achieve a balance between maximising the recovery of a coal resource of State significance and managing, minimising or mitigating the impacts on the water resources and biodiversity and other environmental values of the Metropolitan Special Area,” the Commission’s Statement of Reasons for Decision read.
“[T]he level of risk posed by the Project has not been properly quantified and based on the potential for long-term and irreversible impacts — particularly on the integrity of a vital drinking water source for the Macarthur and Illawarra regions, the Wollondilly Shire and Metropolitan Sydney — it is not in the public interest.”
The Commission noted the Applicant had not appropriately addressed concerns in relation to the proposed mine design.
“The Applicant was aware of concerns raised by WaterNSW and others regarding its mine design and the associated impacts. The Applicant has made minor amendments; however, the impacts remain significant,” it stated. “The Commission notes the Applicant has offered mitigation measures for remediation of selected key stream features, financial offsets for water losses and water quality impacts and an upland swamp offset site; however, a number of these measures have not been considered acceptable by the responsible Statutory agencies.”
Despite this, Deputy Premier and Minister responsible for Resources Paul Toole in December last year declared the project a State Significant Infrastructure (SSI), with the reason being its importance to Port Kembla steelworks and its thousands of employees.
“This decision recognises the proposal’s potential economic benefits, with the mine already contributing $1.9 billion to the State’s economy each year, employing 4,500 workers and supporting another 10,000 jobs across the Illawarra,” Minister Toole said.
Minister for Planning and Public Spaces Rob Stokes said South32 had taken into consideration concerns raised by the NSW IPC.
“The decision to declare Dendrobium SSI followed support for a motion passed in the Legislative Council early this year. It will now go through a rigorous assessment process and the community will still have their say,” Mr Stokes said.
The declaration would have allowed South32 to submit a new environmental impact statement for a scaled down proposal to the state’s planning department.
