PanAust to Acquire Frieda River Mine Project in Papua New Guinea from Glencore Xstrata

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Researched by Industrial Info Resources Australia (Perth, Australia)--PanAust Limited (ASX:PNA) (Fortitude Valley, Queensland) has agreed to buy an 80% stake of the Frieda River copper and gold mine project in Papua New Guinea from Glencore Xstrata plc (LSE:GLEN) (Baar, Switzerland) for $75 million.

Highland Pacific Limited (ASX:HIG) (Brisbane, Queensland) will keep the remaining 20% stake.

Under the agreement, PanAust Limited will pay Glencore Xstrata $75 million in two instalments, with the first $25 million being paid at the close of the transaction and $50 million on December 31, 2015. Glencore Xstrata also will receive a 2% net smelter return royalty valued at $50 million.

The Frieda River Project is located 43 miles (70 kilometres) from the Sepik River and 124 miles (200 kilometres) from the northern Papua New Guinea coastline.

A scoping study by PanAust revealed Frieda River to be economically profitable as a mid-tier development project, instead of a large-scale approach that was included in a study by Glencore Xstrata.

PanAust's study included lower annual production of 100,000 metric tonnes per year of copper and 160,000 ounces per year of gold; fuel generators being used for power instead of a hydroelectric dam; an extra 70 miles (113 kilometres) of transmission lines; combined mine and concentrator sites; and the use of a haul road, instead of a slurry pipeline, to transport concentrate to the Kubkain River Port. These changes would bring the total start-up capital to an estimated $1.5 billion to $1.8 billion, compared to more than $4 billion in Glencore Xstrata's study.

Frieda River also will require housing for 700 to 1,100 personnel. The housing would accommodate construction and operational workforces.

PanAust Limited is expected to complete its feasibility study on Frieda River in mid-2015. Prior to this completion, PanAust is expected to seek an engineering, procurement and construction/ management (E+P+C/M) firm to take the project from development into production.

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