South32 has dropped controversial plans to extend the footprint of its Dendrobium coking coal mine

The group won’t press ahead with plans to extend its Dendrobium coking coal mine to new areas beneath Sydney’s main water catchment area.

South32 chief executive Graham Kerr says the mining giant retains the option to revisit its plans to extend its Dendrobium coal operations, despite walking away from its controversial $US700m ($1bn) proposal on Tuesday.

South32 said it had withdrawn its current applications to extend the life of the Dendrobium mine until 2041, adding work to prolong the life of the underground mine did not make financial sense.

South32 has been reviewing its plans to extend the life of Dendrobium since they were knocked back by the NSW Independent Planning Commission in 2021, looking for an alternative way to expand the mine. It had initially lodged a mine plan that would have extended Dendrobium’s life until 2048, but revised those

The Dendrobium extension had faced significant opposition from community groups and government agency WaterNSW, as it sits below the main water catchment area for Sydney and the Illawarra region.

South32’s revised plans had won “state significant infrastructure” status from the NSW government late last year, partly due to the mine’s importance as a major supplier of coking coal to BlueScope’s Port Kembla blast furnaces.

BlueScope has previously said the loss of coal from the Dendrobium extension could force it to import coking coal from outside of NSW mines, pushing up costs and the steelworks.

Mr Kerr said on Tuesday the company had elected to put its money elsewhere, after an “an extensive analysis of the alternatives for Dendrobium together with the anticipated returns from the upfront capital investment which would be required”.

Dendrobium is expected to continue to operate until at least 2028, and South32 said on Tuesday it was looking for ways to optimise the mine within its current footprint that could extend its life further. South32 will continue to work on ways to extend the life of its other Illawarra underground mine, Appin, until at least 2039.

But Mr Kerr told The Australian there was nothing to prevent South32 revisiting its plans for Dendrobium, although the company had no plans to do so.

“The optionality will probably always exist there,” he said.

“There‘s nothing we’re doing around work at the moment that would prohibit that being revisited in the future. It’s not currently in our plans, but there’s no physical change that we’re doing that would extinguish the opportunity on the part of the business.”

While Mr Kerr said South32 had decided its development cash may be better spent on other projects, mostly likely its North American base metals projects, he said the company had no intention of exiting coal completely.

“Metallurgical coal is not thermal coal,” he said. “Metallurgical coal, and our mine, at least for the next couple of decades is an attractive commodity because the world is going to need it to make steel and lift people out of poverty. Our position hasn‘t changed.”

Mr Kerr said the decision to abandon its plans to extend the life of Dendrobium was partly the result of its difficulties in winning planning approvals, but also because of the development of new options to extend the life of Appin, which had previously been rejected due to high levels of methane gas in future mining areas.

“We‘ve also been doing a lot of work on gas extraction, and what would that mean for the current approved areas,” he said. “The economics of staying in the current approved area outweigh actually putting the capital into (the Dendrobium extension).

Environmental groups opposed to the extension welcomed the decision. The Australasian Centre for Corporate Responsibility’s Naomi Hogan said the decision was a “great outcome”.