High Copper Prices Prompting Australian Miner Rio Tinto To Advance Its Resolute Copper Prospect

  • Apr 15, 2019 AEST
  • Team Kalkine
High Copper Prices Prompting Australian Miner Rio Tinto To Advance Its Resolute Copper Prospect

Copper prices are on the rise amid high demand from electric vehicle segment and improving global economic conditions. The benchmark COMEX copper futures (HG) rose from the level of $2.543 (Day’s low on 3rd January 2019) to the level of $2.925 (Day’s high on 1st March 2019). Currently, the prices are hovering at $2.937. The factor which supported the copper prices in the international market is the improving global economic and improved economic figures from the significant metal importer China. An improvement in China’s manufacturing sector for two consecutive months, marked by a rise in China Manufacturing PMI and Caixin Manufacturing PMI, supported the copper prices.

On the supply side, the global supply slid below the demand, the fall in inventories across London Metal Exchange (LME) registered warehouses suggested the decline in supply and coupled with high demand supported the copper prices.

The supply and demand scenario, where demand out-weighted the supply, led the major investment banks such as Goldman Sachs and Citigroup to turn bullish on copper prices over the long run. After an improvement in manufacturing activities in China, the liquidity and trade balance of the country also marked a rise, which in turn, signified the improvement in the relationship between the United States and China and supported the copper prices in the international market.

To take advantage of the high copper prices significant miners in Australia are investing significant capital on projects. One such example of a miner is Rio Tinto (ASX: RIO).

The Australian miner who recently declared a production loss of iron ore amid the impact of the Tropical Cyclone Veronica and crossed $100 on the Australian Stock Exchange announced on 15th April 2019 that the company approved an additional $302 million investment in Resolution copper project.

As per the notification made public by the company, the additional allocated capital will be used to advance its Resolution Copper project in the U.S. state of Arizona. The company committed the $302 million investment to fund the additional drilling and development activities such as infrastructure improvements, ore-body studies, etc.

As per the company, the prospect will be able to meet around 25% on the United States copper demand, once it becomes fully operational. Under the National Environmental Policy Act the U.S. Forest Service is currently reviewing the environmental impact and approval process, and the project is in its seventh year of a comprehensive environmental review and approval process.

The company and the associated project partners invested over $2 billion towards the development and permit activities of the prospect since 2014.

As per the Chief Executive Officer, JS Jacques, the project is a high prospect of undeveloped copper deposits in the world and the additional funding by the company demonstrates the company’s commitment towards the project to bring the mine into production.

Once completed the project could bring significant copper into the company’s product portfolio and the company would be able to take advantage of high copper prices if they arrive in the future.

After a production loss in its iron ore and capital loss from it, the company can strengthen its balance sheet upon the completion of the project.

The share of the company closed at A$100.750 (as on 15th April 2019), up by 0.249% as compared to its previous close.

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