Australian miner OceanaGold (OGC.AX) (OGC.TO) may slash its planned investment in a stalled Philippine gold and copper project worth $320 million due to funding difficulties, a senior state official said on Tuesday.

OceanaGold said last month it would wait for the global financial crisis to pass to secure enough funds needed to finish constructing the Didipio project.

The mine is expected to produce around 120,000 ounces of gold and 15,000 tonnes of copper concentrate a year in its first 10 years of production.

They want to proceed but they want to cut back expenditures up to a production level that's acceptable to them, Horacio Ramos, director of the state agency Mines and Geosciences Bureau, told reporters on the sidelines of a mining forum.

Ramos said OceanaGold was looking to trim its planned investment and production volume in the Didipio mine in the northern Nueva Vizcaya province but it haD yet to decide on the size of the cut.

OceanaGold may have to revise its feasibility study to reflect the downsizing of the production volume, Ramos said.

They said they can start small and once in operation they can expand later, he said.

Oceanagold has so far spent $120 million in the project and has said it wants to get a strategic partner to help fund the remaining $200 million.

OceanaGold halted development activities in Didipio in December while it searched for another investor willing to put in equity in the project. South Korea's Hyundai group was earlier identified as among several investors OceanaGold was in talks with.

Lito Atienza, the minister overseeing the mining sector, said in early January his agency has given OceanaGold up to six months to resolve its funding problem and restart project development.

Higher costs for equipment and raw materials have increased the total cost of the Didipio project to $320 million in May last year from $155 million in 2006.

The Australian miner, which also operates the largest gold mine, Macraes, in New Zealand, had already postponed the start of commercial production in Didipio by nearly a year to January 2010 even before it put the entire project on hold last month. (Reporting by Manolo Serapio Jr.; Editing by Rosemarie Francisco)

© Thomson Reuters 2009 All rights reserved