A feasibility study by GCM in 2011 largely focused on a mine-mouth power plant to create an end use for Phulbari's coal. But if the government pushes transport infrastructure in the area, more attractive options for transport and sale may open up.
India's $1.4 billion plan
India, the world's second-largest coal importer, is also looking to make a $1.4 billion bet on infrastructure.
Indian Railways will spend the money building a 327 kilometer rail line to the eastern states of Odisha, Jharkhand and Chhattisgarh. Mining-heavy outposts with underdeveloped transport infrastructure.
Coal India hopes the new lines will jumpstart production. Company chairman S. Narsing Rao said that the line could add 300 million MT of annual coal output once functional, according to an interview with Bloomberg this week.
The Indian government is pushing the rail project to ramp up domestic coal production. Officials are worried that coal imports—which cost up to 40 percent more than Indian coal—will bankrupt the country's power sector.
Although few western producers stand to benefit from this rail development, coal investors should pay close attention its effects on the global market.
India currently imports 70 million MT of thermal coal. A significant chunk of global trade. If new railways do indeed unlock 300 million MT of annual production, these imports might dry up. Leaving sellers scrambling for new markets.
The stated timeline for the new rail project is five years.
Securities Disclosure: I, Dave Forest, do not hold equity interest in any companies mentioned in this article.
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