Rio Tinto Ltd’s [ASX: RIO] share price was up by 2.08% this afternoon, despite news emerging that there is a strike happening at the largest copper mine in the world, Escondida.
Chile-based Escondida accounted for 5% of the world’s copper production and 2.5% of the country’s GDP in 2012, according to Rio Tinto. BHP Billiton Limited [ASX:BHP] operates the project, with a controlling stake of 57.5%. Interestingly, BHP’s share price is performing well today, and is up 1.95% at time of writing.
What’s the story?
The union who represents Escondida workers have said they could repeat the 44-day strike that took place between February and March 2017. This industrial unrest comes on the back of wage talks last week, where the union presented contract demands to management.
The proposal includes a payout of about US$34,000 per worker, the largest one-time bonus in Chilean mining history. A response from the owners of the mine should be released in a matter of days.
The shares for both Rio Tinto and BHP have arguably gained due to rising commodity prices. Fear of a work stoppage has sent the price of the red metal on the London Metal Exchange above US$7,000 per tonne, its highest level since March.
Rio Tinto has experienced a healthy level of growth as of late due to its recent business transaction involving the sale of its interest in the Winchester South coking coal project, a deal valued at $200 million.
The first round of bidding on BHP’s US shale assets could have also increased positive feeling in the mining sector in general.
What’s next for Rio Tinto?
While a strike doesn’t exactly spell out good news, it’s not having an adverse effect on the share price just yet. Perhaps, investors’ concerns are eased due to the fact that only last year, BHP went through something similar, and managed to recover just fine.
In the meantime, copper seems like an interesting area to explore.
Editor, Money Morning
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