Rio Tinto reviewing Australia coal mine after court bars expansion

SYDNEY (REUTERS) - Miner Rio Tinto said on Monday that it is reviewing the future of one of its coal mines in Australia after a court overturned an approval to expand the mine, citing environmental and social concerns.

The setback could hold implications for any potential sale by Rio Tinto of coal assets in Australia.

Rio Tinto said 1,300 jobs were now at risk after the New South Wales Land and Environment Court reversed a state government approval that would have extended activities at the Mount Thorley Warkworth mining complex by around 13 years to 2033. In May 2003 an approval was granted to extend mining only until 2020.

The operation yielded 4 million tonnes of thermal coal and 1.6 million tonnes of semi-soft coking coal in 2012. It is run by Rio Tinto subsidiary Coal & Allied.

Rio Tinto reportedly has hired Deutsche Bank to help sell some Australian coal assets worth billions of dollars as the company seeks to slash costs and exit non-core and under-performing businesses.

Coal & Allied Acting Managing Director Darren Yeates said it was in the process of reviewing the court judgment.

"We will also undertake a thorough review into the viability of the Mount Thorley Warkworth operation," Mr Yeates said in a statement.

"This will include looking at other development options, however this would require a significant capital investment in an environment where many Australian coal mines are struggling to survive," he said.

Coal prices have dropped dramatically this year, with demand from Asia waning as steel markets soften and more power suppliers switch to gas. Australian producers have been particularly hard hit due to the high value of the Australian dollar and steep wages.

The decision followed a legal challenge to the mine's expansion from the Bulga-Milbrodale Progress Association.

The chief judge of the Land and Environment Court, Justice Brian Preston, said in his judgment that the association's appeal should be upheld due to "the significant, diverse biological adversity, noise and dust and social impacts of the project," local media reported.