As project costs soar, miners attract suspicion

By Jonathan Spicer

TORONTO (Reuters) - As large-scale mining projects face soaring prices for construction materials and labor, investors are growing increasingly skeptical of new ventures that tout outdated cost estimates, especially when any signs of production are far off on the horizon.

Canadian miners Teck Cominco Ltd (TCKb.TO: 株価, 企業情報, レポート) and NovaGold Resources (NG.TO: 株価, 企業情報, レポート) saw their stocks battered this week after they said construction costs at their big Galore Creek joint venture could more than double to C$5 billion ($5 billion).

That's a whopping C$2.8 billion more than the latest capital cost estimate, issued just over a year ago.

Armed with the new numbers, Teck and NovaGold pulled the plug at the copper-gold-silver asset in northern British Columbia, whose production startup had been pegged at 2012.

Their shares, especially those of smaller NovaGold, got crushed as observers wondered aloud about cost overruns that could be lurking just under the surface of similar, long-term projects.

"People will be looking at every development-stage company ... with big projects that are going to take a lot of capital, and for a lot of them, capital is going to be much higher than what people think," said Kerry Smith, senior mining analyst at Haywood Securities.

"It's obviously a trend; it's going to continue."