Russell@ (The opinions expressed here are those of the author, a columnist for Reuters.)
* Graphic of Adani's Carmichael coal mine: http://tmsnrt.rs/2sFLtgw
LAUNCESTON, Australia, Aug 29 (Reuters) - Adani Enterprises' decision to start building Australia's biggest coal mine would appear at face value to be a straightforward announcement that a major project is finally getting underway.
The Indian conglomerate said on Aug. 28 that it will start work in October on the Carmichael coal mine in Queensland state, initially using A$400 million ($317 million) of its own funds.
There is no reason to doubt Adani intends to do exactly what it said it was planning to do by starting to build the $4 billion mine, with a goal to ship coal by 2020.
But there are several reasons to be sceptical about the timing of the announcement, and perhaps about its motivations.
It would be a brave board of company directors that approved spending hundreds of millions of dollars when there is still considerable uncertainty over the future of the overall project.
The Carmichael is slated to cost $4 billion in just its initial phase, consisting of a 25 million tonne a year mine, and a near 400 km (240 mile) railway to an existing export harbour.
This is scaled back from a $16 billion mine to produce 60 million tonnes of thermal coal a year, although Adani says it still aims to build Carmichael up to this capacity eventually.
Even the current plan for 25 million tonnes a year would make Carmichael the biggest coal mine in top exporter Australia, as well as the largest coal-mining project underway globally.
Adani still needs to secure financing for an amount under A$2 billion for Carmichael, and has appointed corporate finance firm Grant Samuels to advise it on getting loans, Reuters reported on Aug. 10, citing two sources with knowledge of the matter.
Securing funding for the mine, however, is proving a challenge for Adani, because some banks are reluctant to be associated with a venture to produce the fuel most heavily blamed for contributing to global climate change.
Deutsche Bank and Commonwealth Bank of Australia have already said they will not provide funding.
It is virtually certain that any bank that does agree to provide money will face some form of protests from environmentalists, farmers and other groups that have mounted a sustained campaign against Adani's mine.
That may lead Australian and Western banks with strong consumer operations in Australia to reconsider funding Adani, reducing the pool of available lenders for the project.
GOVERNMENT MONEY NEEDED
Even if Adani does manage to secure the funds to allow the project to go ahead, it is also reliant on winning some A$900 million from Australia's federal government to help build the railway line.
The Carmichael project is among five that have been shortlisted for potential funding by the government's rural development body, Reuters reported on July 14, citing a source with knowledge of the issue.
Both the Liberal Party-led federal government of Prime Minister Malcolm Turnbull and the Labor Party-led Queensland state government have been supportive of the Carmichael mine, which would seem to indicate that there is a good chance the government loan will be forthcoming.
But the point is that it hasn't yet been granted, or at least no public announcement has been made.
This means Adani is either massively confident it will get both private and government funding for Carmichael, or it is seeking to show how committed it is to the project by saying it will start without outside funding.
Either way, it seems a bit of a gamble on Adani's part, although the announcement that it will start building the mine could also be seen as a way of applying some subtle pressure on the government to pony up the cash.
Even if Adani does secure government and bank financing, the project will still face hurdles, with environmentalists likely to step up their campaign if building work actually commences.
In the past, green activists have used tactics such as chaining themselves to equipment to stop work they consider harmful to the environment, and filing numerous court actions to either halt or delay projects.
Adani has said the Carmichael mine will create up to 10,000 direct and indirect jobs, and generate $22 billion in taxes and royalties in the first half of its planned life.
Adani also states that the coal produced will be exported to India, mainly for use in its own power plants.
This is a somewhat controversial statement, given the current Indian government aims to reduce coal imports to zero in coming years, and appears to be working towards that goal.
India's coal imports were 119.2 million tonnes for the first eight months of the year, according to vessel-tracking and port data compiled by Thomson Reuters Supply Chain and Commodity Forecasts.
While this figure may change slightly as the final cargoes for August are assessed, the figure is still down some 13 percent from the 137.3 million tonnes imported in the January to August period last year.
As things stand, Adani has committed to spend its own money on a mine that can't be completed without yet-to-be finalised government and private loans, to supply coal to a country that has a policy of not wanting it.
(Editing by Tom Hogue)