Xstrata hikes cost estimate for copper mine
Swiss mining giant Xstrata said on Monday it would cost $300 million more than previously expected to develop the Frieda River copper and gold mine in Papua New Guinea.
The Swiss company had, according to a statement, handed over a feasibility study to its local partner on the project, Highlands Pacific showing that it now expects the total investments to tick in at $5.6 billion, compared with a previous estimate two years ago of $5.3 billion.
Xstrata, which owns nearly 82 percent of the project, also said it had delivered "Study Programme Report" examining the possibility of providing electricity to the mine through a gas-fired transmission line rather than the previously proposed hydro-electric dam.
"It also identified the potential for additional capital savings in relation to waste management," Paul Gow, Xstrata's manager of the project, said in the statement, pointing out that the potential savings could reduce investments to $5.0 billion.
In a separate statement, Highlands Pacific said the estimated investment increase was in part due to the depreciation of the US dollar in recent years -- something that has significantly raised costs for a number of other new mining projects around the world as well.
Last June, Xstrata hinted it might consider selling its participation in the project, as it re-evaluated its global activities.
The Frieda River mine is expected to produce 204,000 tonnes of copper and 305,000 ounces of gold over a 20-year mine life, according to Xstrata, which began managing the project in 2007.
Highlands Pacific said that it and Xstrata were set to hold discussions with the Papua New Guinea government next year to discuss equity ownership, permits and when project development can begin.