Turned off by the weaker macroeconomic environment hitting the world commodities market today, Aquila Resources Ltd. on Monday announced it will slash the budget expenditure it had initially allotted on its flagship iron ore project in Western Australia.

This, despite announcing a 40 per cent increase in total JORC iron ore resources, to 1.71 billion tonnes, from an earlier estimate.

In its quarterly report for the three months to June, the Perth-based diversified junior miner said it plans to undertake an expenditure optimisation process to identify opportunities of converting capital expenditure into operating expenditure.

The company noted it is currently in discussions with AMCI, its private US company partner, to preserve the funds until such time it gets to acquire more certainty on the endorsements needed to push and finalize the West Pilbara iron ore project.

"In this pursuit, the parties have moved to minimum expenditure, are reviewing relationships with third-party service providers, and are conducting ongoing discussions to finalise the 2013 financial year budget for the West Pilbara iron-ore project. Restricting expenditure to that which is clearly preserving and enhancing project value represents a prudent course of action, while awaiting key project approvals," Aquila executive chairperson Tony Poli said.

The project is pegged to be worth about A$5.77 billion (US$5.88 billion), based on a study two years ago. Aquila Resources Ltd. and AMCI have been seeking funding from China Development Bank for the project.

The companies had expected to finish by end of September a definitive study on the project. It said the earlier estimate will surely rise due to changes in scope and cost escalation in the Pilbara region.

Expected to churn out some 30 million tonnes a year of iron ore during the first 15 years of its expected life, the West Pilbara iron ore project has two phases. Phase 2 development is expected to support an additional ten million tonnes annually of bedded iron fines.