$1B coal expansion cancelled due to weak profits

A multinational mining company abandoned a coal project because it would not generate enough income.

South32 recently cancelled its Dendrobium Next Domain (DND) Project at the existing Dendrobium Coal Mine, 10km west of the Wollongong CBD.

The proponent reached the difficult decision after carefully comparing development expenses versus how much money the operation could make.

“While our work on the project demonstrated the potential to meaningfully extend the life of the Dendrobium mine, expected returns from the US$700 million (A$1 billion) up-front capital expenditure estimate are not sufficient to support an investment relative to alternatives considered for the complex,” it said in a public statement.

South32 will keep optimising the existing Dendrobium operation and broader Illawarra Metallurgical Coal Complex to prolong their lifespans.

“This work includes existing plans for Appin where we have been investing to support its transition to a single longwall from fiscal 2025, bringing further operating and capital efficiencies. Looking forward our investments at Appin include planned work to install additional ventilation capacity, to enable mining in the current Area 7 until at least 2039,” it said.

QMEB can reveal these smaller works are worth a combined US$260M (A$375.2M) and subject to board approval at the time of publication.

Chief executive Graham Kerr indicated his employer might expand operations in other jurisdictions instead.

“This decision increases our capacity to direct capital towards other opportunities. This includes our … 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,” he said.

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