Farmland on the Liverpool Plains, at Breeza.THE local chairman of China’s biggest miner, China Shenhua Energy, has expressed rare public frustration at his company’s unexpected eight-year long excursion through Australia’s complex of State and federal mining approvals.

Shenhua is the proponent of the Watermark coal project on the fringes of the heartland of the NSW pastoral industry, the Liverpool Plains.

The exploration permit cost Shenhua an extraordinary $300 million back in 2008. The company is yet to receive the mining lease that would see it pay another $200 million to the State under the requirements of its winning tender.

Actually building its 10 million tonnes a year thermal coal mine at Breeza, which is 40 kilometres south of the mining centre of Gunnedah, will cost a further $800 million.

The chairman of Shenhua Australia, Liu Xiang, told The Australian Financial Review that it was “easy to be sceptical about a process which has now entered its eighth year” and that has seen his company outlay $700 million “with little tangible progress to show for this investment in NSW”.

“The process has been challenging and we have faced many delays and changes to the approvals system which nobody could have foreseen when we first entered the tender process,” Liu wrote in response to our questions.

“As international investors, we have found this experience to be inconsistent with the often proclaimed enthusiasm for offshore investment in this country, particularly in the mining sector,” he wrote.

Coal frustrationsA core reason for Shenhua’s vexation at the approval process is that it was invited to join the tender process by a NSW government determined to maximise the revenue potential of a permit auction system that has subsequently been abandoned because it opened the way to ministerial corruption.

Another reason for Shenhua’s profound irritation is that coal’s price boom has come and gone and yet its coal sits in the ground. As confident as Shenhua is in the demand outlook for coal, it has missed the incentive pricing that underpinned its original investment case.

Even if Shenhua earns its Commonwealth approval next month, making a case for an $1.5 billion coal mine in the current pricing environment is going to be a far tougher task than it would have been back in 2010.

To the vast and increasingly vocal disappointment of its environmental and pastoral critics, the Watermark project secured state planning approval on January 28. Its progress now waits only on Commonwealth environmental approval and a final investment decision by Shenhua.

The 30-day statutory deadline for Commonwealth approval is March 13. But there is considerable pressure on federal Environment Minister Greg Hunt to, at very least, extend that deadline to ensure an appropriate level of scrutiny.

Science over politicsThe bloke leading that push is Hunt’s colleague in good government, New England’s own Barnaby Joyce. As well as being a local member, Joyce is the leader of the Nationals in the Senate and is the government’s Agriculture Minister.

Other notables involved in the defence of the Liverpool Plains from mining encroachment include Sydney’s powerful radio host Alan Jones and a now pretty standard concert of anti-coal activists.

But it is Joyce’s vocal engagement in a campaign to prevent mining anywhere near the of black soils of the Liverpool Plains that most likely explains and justifies the increasing anxiety reflected in Chairman Liu’s decision to make public his company’s anxiety over Watermark’s glacial progress.

“Thankfully, we recently reached a major milestone when the independent (NSW) Planning Assessment Commission approved the project after confirming it will not endanger farming on the black soil or compromise the water used by local irrigators,” Liu wrote.

“Despite this independent assessment after a long and rigorous scientific evaluation process, Shenhua continues to be the subject of backlash from a vocal minority. Shenhua has always put science and fact at the forefront of this development process. The NSW approvals system has confirmed that approach and we are hopeful the Commonwealth approvals process will also be determined on science not emotion,” he said.

“We are pleased that, to date, the Commonwealth process appears to have adopted a scientific approach, free from political interference. We will closely monitor this situation to see if this continues during the assessment,” he warned.

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