More than a year ago and before the merger with commodity-trading giant Glencore, Xstrata Copper signalled it would possibly sell its 81.82% stake of Frieda River and the divestment process remains underway.
With the project's exploration licences due to expire in November and some frustration expressed by the PNG government in recent months, an undisclosed source has told the Wall Street Journal that PanAust is in talks to buy Glencore Xstrata's full stake of Frieda River.
A source to PNGIndustryNews.net has since said that PanAust management had flown into Port Moresby about three weeks ago, with the trip likely to have included some contact with PNG's Mineral Resources Authority.
In response to the WSJ report, a Glencore Xstrata Frieda River spokesperson said its previous statement still stood.
"We are assessing the interest of other investors in the Frieda River project but there has been no decision at this stage to divest any part of the project," she said.
"While this process is ongoing, we continue to progress our operational and community programs."
PNGIndustryNews.net understands that key management from Frieda River joint venture partner Highlands Pacific are on the plane back to Australia from a recent trip to PNG.
In what might complicate any negotiations, a Highlands spokesperson indicated there was a dispute over what project stake Glencore Xstrata had earned from Highlands so far.
"Contrary to some reporting Glencore has a 72% interest, not 82%, interest in the Frieda JV, with Highlands Pacific holding 28% [instead of 18%]," the spokesperson told PNGIndustryNews.net.
"A 10% earned interest is currently in dispute between the parties and Highlands is willing to have that tested at law if need be.
"Importantly for Highlands Pacific shareholders, the company has a first right of refusal should Glencore seek to sell its 72% share."
Depending on what choices are made for power generation, with gas-fired and hydroelectricity power options possible, the feasibility study outcomes so far indicate production at Frieda River may be in the range of 204,000-291,000 tonnes per annum copper and 424,000-451,000 gold ounces per annum over the first five years.
First production could be as early as 2018 and the project has an estimated 13 million tonnes of contained copper and 20 million ounces of contained gold so far.
The remote project is located near the border of West and East Sepik provinces and about 75km northeast of the Ok Tedi copper-gold mine.
The lowest capital expenditure for the project so far has been $5 billion when excluding third party provision of gas-fired electricity, with talks underway to supply such power to the Ok Tedi mine in the future.
A hydro scheme to power the Frieda River project has previously been estimated to cost $1.2 billion.
PanAust is yet to comment on the reports.