Xstrata Copper delivers Frieda River feasibility study

By MALUM NALU

Xstrata Copper has delivered a feasibility study together with the extended 2012 study for the Frieda copper gold project, Papua New Guinea’s largest undeveloped open‐pit copper‐gold project, joint venture partner Highlands Pacific announced on Christmas Eve.

The extended 2012 study outlines a project with an estimated initial capital requirement of US$5.6 billion, with a 20‐year open pit mine life capable of producing on average an estimated 304,000 tpa (tonnes per annum) of copper and 451,000 ozpa (ounces per annum) of gold in its first five years and with an estimated life‐of‐mine (LOM) average output of 204,000 tpa of copper and 305,000 ozpa of gold. 

3D block model showing Horse/Ivaal/Trukai pit shell from the feasibility study and significant drill intercepts from some of the adjacent copper gold targets

Potential exists to extend the mine life with deeper drilling.

“The estimated project capital expenditure reflects a number of changes since the pre‐feasibility study was released in November 2010, most notably the substitution of a proposed hydro‐electric power‐supply scheme with gas‐generated electricity sourced from PNG’s Stanley gas field 180km away,” Highlands Pacific announced.

“ The work done by Xstrata Copper and Highlands during 2012 also identified the potential for additional capital savings in relation to waste disposal which will require further work but could reduce the initial capital spend to an estimated US$5 billion.

“The information presented in this announcement is based on the documents that have been delivered to Highlands by Xstrata Copper.

“Xstrata Copper earned 72% in the Frieda Project in January 2012 and a further 9.82% was contingent on delivery of the feasibility study and the extended 2012 study.

“Highlands and its technical consultants, Behre Dolbear Australia, will now review the documents in more detail for the purposes of the relevant obligations of Xstrata Copper under the Frieda Project joint venture agreements which were varied in November 2011.”

 In Highlands’ view,  the steps to be undertaken to make a final investment decision (FID) for the project include:

•           Further discussion between the Frieda River joint venture participants and the PNG government as to the government’s intentions to be involved in the project including any equity;

•           Further work and finalisation of some aspects of the execution model;

•           Renewal of exploration licences due in May and November 2013; and

•           Further discussions with government and other stakeholders on the necessary environmental and regulatory approvals.

Highlands has been free‐carried on Xstrata Copper’s US$300 million (approximately) investment in the project and continues to be carried in respect of costs incurred through an arrangement whereby Highlands’ share of expenditure from January 2012 to the lodgement of special mining licence (SML) application is to be repaid in the future from project cashflows when Frieda is in production.

Xstrata Copper has proposed a work programme and budget of US$20 million for 2013.