Responding to media speculation, Murchison Metals Ltd (ASX:MMX) has admitted the cost of its Oakajee port and rail project in Western Australia is likely to increase.
Media reports have estimated that the capital cost of the project may have risen from $4.4 billion to up to $6.7 billion.
The iron ore explorer says any capital estimates made before completion of the bankable feasibility study by 30 June are "premature and entirely speculative".
However, Murchison also concedes that cost escalation in an issue affecting all major projects in Western Australia, and, it is therefore likely that there will be some increases from the original draft bankable feasibility study report released in March last year.
Murchison has a 50 per cent interest in the Oakajee Port and Rail project with the remaining interest held by Mitsubishi Development Pty Ltd.
The joint venture partners have until the end of this year to demonstrate they can develop the project.
Yesterday shares in Murchison Metals fell 6.69 per cent to close at $1.12.
For the half year ended on 31 December 2010, Murchison Metals posted a net profit of $3.3 million.
