A scoping study for the Frieda River porphyry copper/gold project in Papua New Guinea recommends open pit operations at the Horse Ivaal/Trukai and Nena deposits.

The study forecasts copper concentrate production for the joint venture project to average 190,000 tonnes annually of payable copper metal and payable gold of 295,000 ounces per annum.

The study was carried out by project operator Xstrata Copper. Highlands Pacific (16.4%) is exploring the deposit in joint venture with Xstrata Frieda River (73.7%) and OMRD Frieda Co (9.9%).

It forecast that the average C1 cash cost, net of gold credits at US$700 per ounce, over the life of the project is about US$0.81 per pound while the project shows a positive NPV above an unescalated copper price of US$1.68 per pound.

The Scoping Study runs a number of sensitivities and under one sensitivity there is the potential for an un-geared project NPV of US$681million and an IRR of 17.7% using the following variables - an initial capital estimate of US$2.57 billion, a copper price of US$2.0 per pound, a gold price of US$700 per ounce and a discount rate of 10%.

The report highlighted that there is potential to capture more value from the Nena deposit in particular and from the project in general, through further optimization.

Work scheduled for the remainder of 2008 includes 16,000 metres of drilling at Horse Ivaal/Trukai for resource definition and continuing infrastructure, environmental, process engineering, mine scheduling and planning studies.

The expenditure for the 2008 year to date is US$3.2 million and the budget for the year is US$25 million. Xstrata is funding Highlands’ share of the expenditure. To retain its interest in the project, Xstrata must complete a bankable feasibility study by January 2012.

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