The estimated capital cost includes an $803 million 160-megawatt hydro-electric scheme that will guarantee low power costs and avoid exposure to fluctuating oil prices.
The open pit project is expected to produce 930,000 tonnes per annum of concentrate containing 246,000t copper and 379,000 ounces of gold in the first eight years of its life.
C1 cash operating costs are estimated at 43c per pound or $1.12/lb without gold credits.
At a rate of 60 million tonnes per annum, the operation will generate an average $933 million of free cash flow per year using Highlands Pacific's metal price assumptions of $2.50/lb for copper and $1000/oz for gold.
After the first eight years, the throughput rate will be 50Mtpa to produce 190,000tpa copper and 284,000ozpa gold at cash costs of 58c/lb copper, generating $612 million free cash flow per annum.
The mill will comprise two grinding circuits with each circuit containing one 40-foot SAG mill and two 26ft ball mills.
The project has resources of 8.1Mt of contained copper and 13.3 million ounces of contained gold.
Concentrate will be sent via a pipeline to the Sepik River port, which will be home to the thickener, filter plant and storage facilities.
Xstrata has spent $140 million on the project to date and funded and managed the PFS with Highlands being free-carried until the completion of the bankable feasibility study.
To maintain its 81.82% interest in the Frieda project, Xstrata has to complete the BFS by January 2012.
The Swiss miner will make a decision on advancing to a feasibility study next month.
An updated resource estimate is also due for release next month, including 111 diamond drillholes for 38,000m completed this year.
Another resource estimate for use in the feasibility study will be released in the second quarter of next year.
The joint venture partners are targeting first production in 2017 after a four-year construction period and would be in the top 15 copper producers in the world.
Meanwhile, Highlands will appoint a debt advisor with the view to securing a project financing package late next year.
Its share of production in the first eight years of operation will be 45,000tpa copper and 69,000ozpa gold and $169 million of free cash flow per annum.
A 2008 scoping study completed by Xstrata estimated capital costs of $2.57 billion for a 40Mtpa operation.