Saudi Arabian Mining Co (Maaden) said an aluminium venture it is developing with Rio Tinto will cost $530 million more than expected, or 28.24 billion riyals ($7.53 billion), because of higher prices.

The companies may also expand the project's planned capacity, adding to costs further, state-owned Maaden said in a statement received late on Wednesday. It was not more specific.

A delay in awarding contracts for the construction of an electricity generating plant to power the project will not affect the overall schedule, it said.

The higher price is 'taking into account projected inflation and other costs,' Maaden said without being more specific.

The company, which is looking to raise 9.25 billion riyals in July in the Middle East's biggest mining IPO, said in April last year that the project would cost 26.25 billion riyals.

Across the oil-exporting Gulf, companies have been raising their forecasts for the cost of projects, leading to delays and, in some case, cancellations.

The region is booming on record oil prices, fuelling demand for contractors, labour and materials, compounded by higher global prices for goods such as steel.

'Finalisation of contracts for the construction of the power plant has been delayed. However, this will not cause any delays to the overall schedule for the project,' Maaden said.

The project involves building a 1,400 megawatt oil fired plant, an alumina refinery with capacity of 1.4 million tonnes per year and an aluminium smelter with capacity of 720,000 per tonnes year, according to Maaden's April 2007 statement, when it agreed to develop the project with Alcan. Rio Tinto subsequently bought Alcan.

"Recently conducted studies have determined that it is feasible to increase the production capacities of both alumina and aluminium," Maaden said, without being more specific.

"These increased production capacities, together with updated capital costs estimate, will lead to an upward revision of project costs," it said.

On its website, Maaden says it could add another 1.4 million tonnes per year of capacity to the alumina refinery. Alumina is semi-processed bauxite -- the raw mineral -- used to make aluminium.

Saudi Arabia is the world's largest holder of crude oil supplies. Energy is the single biggest cost in making aluminium.-Reuters