Murchison Metals has played down reports that the cost of its half-owned Oakajee port project could hit $6.7 billion, but has confirmed that its latest estimate has risen to $5.2 billion.
Murchison was responding to media reports which claimed it had been forced to ask taxpayers to contribute more funds to the development because it was facing a $2.3 billion cost blowout.
The company said any estimation of capital costs prior to completion of the project's bankable feasibility study, due for release in the June quarter, was "premature and speculative".
But Murchison did admit there was potential for its cost estimate to increase.
"Cost escalation is clearly an issue affecting all major projects in Western Australia in the current environment, and it is therefore likely that there will be some increase from the capital estimates contained in OPR's draft BFS report, that were released to the ASX in March 2010," Murchison said in a statement to the ASX.
Murchison said its preliminary budget and engineering study for the port and rail development indicated the cost would total $5.2 billion, inclusive of common use infrastructure.
"Murchison advises that this estimate remains preliminary and indicative only, and is subject to ongoing review, optimisation and value engineering to identify potential cost refinements and savings prior to final signoff by Murchison and Mitsubishi Development," Murchison said.
Premier Colin Barnett said if the report of the cost blowout was true and OPR could not fund its part of the project "that is a danger".
He said OPR had not asked for the government to increase its contribution and ruled out putting more taxpayers' money into the project.
"The WA government is not going to finance private railway and line operations within the state, we won't do that," Mr Barnett told reporters.
"Worse comes to worse, we will have to look at a plan B, but I don't think that will happen.
"I'm confident that we will get this project finalised by the end of the year and it will be able to go into production."
