FRIEDA River copper project in Sepik basin is potentially worth more than US5.3 (K10.9 billion).
This value was the last estimate and it’s still unknown the actual value of the project until the time of the transaction of the proposed sale of the project.
Xstrata spokesperson Melissa Bowerman also said, “the mine has the potential to produce 246,000 tonnes of copper a year based on its estimated copper resources of 12 million tonnes and 18.5 million ounces of gold.
Reuters reported that the project owned 81.8% owned Xstrata Plc has put up for sale a stake in the Frieda River copper project potentially worth more than USD 2.15 billion as part of a review of its development projects worldwide.
It was already speculated by analysts that some major Chinese companies one of them has already project operating in PNG has shown interest to buy the project.
According to Reuters, analysts at broker Euroz have said that Chinese companies, possibly including Metallurgical Corporation of China could be interested in Xstrata's stake.
MCC is Highlands Pacific's partner on the Ramu nickel project.
Reuters also reported that three analysts on average value Highlands Pacific's 18.2% stake in Frieda River at AUD 477 million, more than K1 billion which would imply Xstrata's 81.8% stake may be worth about USD 2.15 billion (K4.44 billion).
Like other major miners under pressure to conserve capital amid uncertainty over global growth, rising costs and falling commodity prices world no 4 copper producer Xstrata has flagged it may slow down project spending.
An Xstrata spokeswoman reportedly told Reuters news that Xstrata has not yet decided whether to sell all or part of its 81.8% stake in Frieda River. “As part of this process we are assessing the interest of other investors in the Frieda River Project in Papua New Guinea.”
A critical concern for any buyer would be the cost of the Frieda River project, last estimated at USD 5.3 billion (K10.9 billion). That cost could fall if it secures natural gas for its power supply, a key factor in a delayed feasibility study that Xstrata has committed to deliver to its partner, Australian listed Highlands Pacific in December.
Xstrata has said that it wants to become the world's top copper producer, unseating Chile's Codelco, BHP Billiton and Rio Tinto over the next three years.
Charlie Sartain Xstrata's copper division head said that last month USD 7 billion (K14.4 billion) capital expenditure program was under way to beef up copper mining, mainly in South America and Australia.
Since then, a decline in copper prices that began in January has accelerated with the London 3 month contract fetching USD 7,545 per tonne or USD 3.42 per pound down from levels above USD 8,650 per tonne at the start of the year.
Xstrata already has projects under construction designed to boost its copper output by more than 60% to 1.5 million tonnes a year over the next 3 years including its Antapaccay project in Peru due to start producing in the second half of this year.
The company's attempt to sell the Frieda River stake suggests it may prefer to back the Tampakan copper and gold project in the Philippines, which it is looking to develop with Indophil Resources. Frieda River has an estimated resource of 12 million tonnes of copper and 18.5 million ounces of gold and could produce 246,000 tonnes of copper a year.
Highlands Pacific said that it hoped to seal an agreement in the next two days to sell a cornerstone stake in the company to PNG Sustainable Development Program Limited a large investment company with strong ties in Papua New Guinea which could assist in future development.
Meanwhile, Xstrata and its biggest shareholder Glencore saw their joint value slump by £4.2 billion last week as shareholder anger at huge payouts for directors threatened the merger of the two groups. |
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