Xstrata Copper delivered a feasibility study to minority partner Highlands Pacific (HIG.AX) on Friday that indicated the $5.6 billion capital cost estimate, Paul Gow, general manager of the Frieda River project, said in a statement.
Rising costs have forced many miners to review the spending required on greenfield copper projects as they battle over a limited pool of skilled workers and equipment, particularly in remote locations like Papua New Guinea.
Antofagasta (ANTO.L) on Friday halted development at its $1.7 billion Chilean copper mine Antucoya as it reviews escalating costs, and Xstrata put back a target to start production at the Tampakan copper-gold mine in the Philippines by three years to 2019 earlier this month.
Xstrata had estimated the Frieda River project to cost $5.3 billion when it released an earlier study two years ago.
The company, with an 81.8 percent stake in Frieda River, sees the mine yielding 304,000 tonnes of copper at an average cost of 71 U.S. cents per pound over the first five years.
Over the entire life of the operation, it sees an average yield of 204,000 tonnes annually at a cost of $1.11 per pound.
Xstrata is expected to review its pipeline of copper projects after its takeover by Glencore International (GLEN.L).
The company is following the course of other mega miners, including BHP Billiton (BHP.AX) (BLT.L) and Rio Tinto (RIO.AX) (RIO.L), in conserving capital amid uncertainty over global growth and falling commodity prices.
Earlier this year, Xstrata flagged its willingness to potentially sell all or part of its stake in Frieda River after conducting a review of its operations worldwide.
It said on Monday it had not made a decision yet on whether to divest or partially divest the project at this stage.
"Xstrata is currently assessing the interest of other investors in the project but declines to comment about potential timetables," a company spokesman said in an email.
Highlands Pacific said discussions were planned next year to determine future ownership of the project.
"During 2013 we will hold discussions with all parties, including the PNG government to determine the project's development path and the desire of the PNG government to take up a direct 30 percent equity stake in the project," it said.
Via its Petromin investment arm, PNG has invested in 17 projects, including a $19 billion liquefied natural gas field under construction by Exxon Mobil (XOM.N).
It is allowed to take up to 30 percent of mining and 22 percent of oil and gas projects, which it must then help fund.
Exxon Mobil in November said it faces a $3.3 billion spike in costs at its gas project in Papua New Guinea.
This year BHP scrapped an $80 billion spending plan, which included delaying indefinitely the expansion of its Olympic Dam copper mine in Australia, where analysts estimated costs had ballooned three-fold to more than $30 billion in just two years.
Shares in Xstrata were trading 1.1 percent higher at 1,062 pence by 1206 GMT, outperforming a flat FTSE 100 index .FTSE.