Xstrata Plc, the world’s fourth-largest copper producer, may sell part or all of the Frieda River copper and gold project in Papua New Guinea.
Xstrata is “assessing the best way to advance the projects and ensure the best outcome for all stakeholders,” Melissa Bowerman, a spokeswoman for the company’s copper unit, said in an e-mail today. “As part of this process we are assessing the interest of other investors in the Frieda River project.”
Xstrata follows rivals, including BHP Billiton Ltd. and Rio Tinto Plc, in rationing capital spending after a slump in commodity prices. Mining company valuations have plunged 26 percent in the past year, according to the Bloomberg World Mining Index, on concern that global economic uncertainty will curb demand for commodities. Copper prices have fallen 17 percent in the past 12 months and traded at $7,545 a metric ton yesterday on the London Metal Exchange.
The Frieda River project, 81.8 percent owned by Xstrata, is worth about $1 billion, based on the estimated copper resources of 12 million tons, according to project partner Highlands Pacific Ltd. Xstrata will complete the feasibility study on Frieda River by December, Highlands Chief Executive Officer John Gooding said today by phone from Brisbane.
An initial study in November 2010 indicated the project is capable of producing 246,000 tons of copper and 379,000 ounces of gold annually for the first eight years, Highlands said today in a separate statement. It also announced a plan to sell shares to PNG Sustainable Development Program Ltd. that will make the company a “cornerstone” investor in Highlands.
Highlands expects to raise between $10 million and $20 million selling shares to PNG Sustainable, which will hold between 10 percent and 20 percent of the company, Gooding said today. Highlands shares, which were halted today, last traded at 15 Australian cents yesterday.