VANCOUVER (CP) -- The Petaquilla copper project will cost US$3.5 billion to develop, more than double an earlier estimate from a year ago, the partners in the Panamanian joint venture said Friday.
An interim study released by Inmet Mining Corp. [TSX:IMN], Petaquilla Copper Ltd. [TSX:PTC] and Teck Cominco Ltd. [TSX:TCK.B; NYSE:TCK] said the project is expected to take a little over 3 1/2 years to complete.
The companies said capital costs have increased substantially over previously published estimates due to changes to the project's scope - including improved environmental protection - and increased equipment and construction costs.
''Despite the increase in capital costs required to develop Petaquilla, the shareholders believe that the project still has the potential to be a world-class mining operation,'' they said.
Shares of Petaquilla Copper fell 26 cents or 13.4% to close at C$1.68 on the news, while Inmet stock was off C$3.84 or 5.4%, at C$67.31. Teck Cominco shares rose six cents to C$34.73.
Inmet currently holds a 48% equity stake in the project, while Petaquilla Copper holds a 52% interest.
Teck Cominco, the operator of the project, holds a right to acquire a 26% stake by committing by March 31 to participate in work plans and budgets leading to commercial production, and by committing to fund 52% of development costs.
''We'll spend the next six weeks looking at the opportunities to reduce the capital costs,'' Teck Cominco spokesman Greg Waller said.
Waller said the company will look at a range of scenarios in making its decision.
''It becomes a matter of developing some degree of comfort with what you think are more-likely scenarios versus less-likely scenarios,'' he said.
If Teck Cominco goes ahead, it will recoup 26% of the development costs, plus interest, before to any distributions to Petaquilla Copper.
Petaquilla Copper has the option to finance all or part of the development costs for its 26% stake in the project in lieu of funding from Teck Cominco.
UBS analyst Tony Lesiak lowered his price target on Inmet to C$86 from C$105 to reflect no value for the Petaquilla project, but maintained his ''buy'' rating on the stock.
''Renegotiation of the existing joint-venture agreement may be required assuming no cost savings materialize,'' Lesiak noted.
The proposed mine would have a life of 23 years and would produce 4.4 million tonnes of copper, 1.6 million ounces of gold and 59,500 tonnes of molybdenum, a valuable industrial metal, during the project's lifetime.
The increase in costs at Petaquilla comes as the mining industry around the world deals with rising costs and is the second project in recent months Teck has been involved in to see its expected price soar.
Late last year, Teck Cominco and NovaGold Resources called a halt to work at their Galore Creek joint-venture after rising labour and materials costs and higher-than-expected expenses related to a tailings pond drove the projected cost up from US$2 billion to as much as US$5 billion.
© The Canadian Press 2008
