LONDON Jan 25 (Reuters) - Xstrata said on Friday its Las Bambas copper project in Peru would cost $5.2 billion, keeping to 2012 estimates as the miner prepares for a merger with Glencore that will see many of its growth projects come under scrutiny.
Xstrata is the world's fourth-largest producer of copper and, among the diversified miners, has the largest exposure to copper, a metal that is expected to benefit from tight supply, as mine grades deteriorate and new projects lag.
Copper, however, is also likely to be a battleground with Glencore when mining projects are reviewed once the tie-up is complete. Commodities trader Glencore favours expanding existing operations in the promising, though tough, Congolese copper belt, over plans in Latin America, where miners have battled with delays, community protests and escalating costs.
Analysts expect a review of the combined Glencore-Xstrata group's projects by the incoming management, led by Glencore Chief Executive Ivan Glasenberg, could result in cuts to Xstrata's pipeline of greenfield projects, particularly in locations like Argentina, where costs have soared and political risks are seen to be high.
Xstrata increased the cost of Las Bambas by more than 20 percent last year to $5.2 billion after permitting delays held back construction, but it stuck to that on Friday despite what some analysts had flagged as the risk of further costly delays, due to community unrest in Peru.
The project - with a capital intensity of $13,000 per annual tonne, at the mid to lower end of the spectrum - is now expected to ramp up during 2015. Xstrata expects combined annual copper production from Peru of around 700,000 tonnes from 2015, 400,000 of that from Las Bambas.