Shenhua's property problem: to sell or not to sell

At stake is the 14,000 hectares of prime farmland which Shenhua bought up, from 2008 onwards, under the original exploration licence to smooth the path for development of its Watermark coal mine.

If Shenhua does decide to cash in and sell its properties on the excised exploration area, it would create rare flurry in a normally sleepy market of tightly held land.

The NSW Government yesterday bought back 51 per cent of Shenhua’s 195,000ha exploration license. About 30 landholders whose farms fell in the original exploration area sold to Shenhua for a total of $200 million.

Regulations do not force Shenhua to sell their land (which is now being leased-back to farmers) but it could be tempted by the big bucks on offer for some of best agricultural land in the country.

First class black soil country in the Liverpool Plains can fetch up to $3000/acre, while red grazing and cropping country ranges between $1500-1800/acre. Lower quality country, some of which Shenhua owns, is valued at $1000/acre.

Tamworth-based rural property agent Scott Waters said if Shenhua did take its farmland to market it would drum-up great interest.

“I expect there would be genuine local demand for the first class country,” he said.

But many believe Shenhua will keep a firm grip on the land.

“​The whole purpose of buying that land was to create to a huge buffer between the mine and its neighbours to reduce headaches. My opinion is the mine will keep hold of this land to minimise the headaches when they do strike a blow with development,” said Tom Donoghue, director of Donoghue Property Valuations and Consultancy, Gunnedah.

“The country is being looked after well by its tenants and when that ceases I’m positive they’ll put it back to the market and it will be sold for what it’s worth.”

In 2008 Shenhua reportedly paid double to triple the market value for some of the red grazing country it acquired. Agents believe property values for this land have since caught up.

While speculation is rife no one is under the impression a sale would happen any time soon. Last year, NSW bought back BHP’s exploration licence for the Caroona coal mine for $220m. To date none of BHP’s 4050ha (10,000 acres) of farmland has been listed.

Mr Donaghue warned the community not to draw parallels between the two projects.

“BHP’s Caroona project has been totally abandoned – that’s not the case for Shenhua’s Breeza project."

Shenhua’s land at Breeza is zoned for agricultural and some forestry use under the Gunnedah Local Environmental Plan 2012.

The miner has retained an exploration license covering the area planned for Watermark’s three open-cut coal pits, which have been approved under the planning process to remain an open void when mining stops.

Shenhua has been contacted for comment.