South32 has abandoned a nearly $700m investment plan to further develop a metallurgical coal mine in New South Wales (NSW), Australia, after recent studies showed that potential returns from the move will be inadequate.

The company planned to make the investment in the Dendrobium Next Domain (DND) project at Illawarra Metallurgical Coal operations.

The project was aimed to extend the life of the Dendrobium mine by enabling operations in new areas within the existing mining lease.

However, the global miner dropped the plan after assessing recent studies and analysis of alternatives.

South32 CEO Graham Kerr said: “Our decision today follows an extensive analysis of the alternatives for Dendrobium together with the anticipated returns from the up-front capital investment which would be required.

“Over the past 18 months we have made significant progress actively reshaping our portfolio and this decision increases our capacity to direct capital towards other opportunities. This includes our world class development options in North America that have the potential to underpin a significant growth profile to produce metals critical to a low carbon future, servicing strategically important supply chains.”

South32 will now aim to optimise Dendrobium and the broader Illawarra Metallurgical Coal complex within approved domains.

Activities related to Appin Mine will also remain unaffected. This work includes expanding ventilation capacity to enable mining in the current Area 7 at least until 2039.

The $260m investment is subject to South32 Board approval.

Earlier this year, South32 announced estimated capital expenditure (capex) of around $1.7bn to develop Hermosa project in the US.