Xstrata Lifts Cost Estimate for Papua New Guinea Mine

   By Robb M. Stewart 
 

MELBOURNE--Xstrata PLC (XTA.LN) has raised its estimate for the initial cost of a planned copper-and-gold mine in Papua New Guinea, partly reflecting U.S. dollar depreciation in recent years which has lifted mining costs, its minority partner in the project said Monday.

The initial cost will be US$300 million higher than had been estimated in 2010 at US$5.6 billion, Australia's Highland Pacific Ltd. (HIG.AU) said in a stock exchange statement.

It said the two companies had identified the potential to reduce the initial capital investment in the Frieda River project to about US$5 billion through changes to waste disposal at the mine.

A just-released feasibility study by Xstrata also has recommended tapping Papua New Guinea's natural-gas reserves rather than using hydro-electric power for the planned mine, Highland Pacific said.

Xstrata, which has an 81.8% stake in Frieda River, envisages an open-pit mine capable of producing an average of 304,000 metric tons of copper a year and 451,000 ounces of gold annually in the first five years of a 20-year operation.

It has estimated an average cost of US$1.11 a pound of copper over the lifetime of the mine.

Highland Pacific said a final investment decision would depend on the government of Papua New Guinea's proposed involvement in the project, further work on mining plans, the renewal of exploration licenses due in May and November, and further discussion on necessary environmental and regulatory approvals.

Write to Robb M. Stewart at [e-mail]

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