Copper trades above US$3/lb on Rio Tinto guidance

The Rio Tinto Kennecott mine is a world-class, integrated copper mining operation located just outside Salt Lake City, Utah, in the United States. Source: Rio Tinto

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By Peter Kennedy

Rio Tinto Plc [RIO-NYSE, ASX, London] on Wednesday August 18 cut its full year copper production guidance for the second time this year, a move that has helped to push the price of the red metal above US$3 a pound.

US$3 a pound has been a major inflection level for copper over the past decade.

Rio Tinto is a leading copper producer with a portfolio that includes the Oyu Tolgoi mine in Mongolia and the Kennecott operation in the U.S. The company reduced its refined copper outlook for fiscal 2020, citing a delay in restarting a smelter at the Kennecott (Bingham Canyon) mine in Utah, which has been in production for over 75 years.

The Anglo-Australian miner said the delays in restarting the smelter at its Kennecott mine, were due to planned maintenance and the company expected it to be running within two months. Full-year refined copper production is now expected to be between 135,000 tonnes and 175,000 tonnes. That is below the previous guidance range of 165,000 tonnes and 205,000 tonnes.

Adding to the tightening physical market, London Metal Exchange warehouse stocks are back at lows not seen since 2008 and before the global financial crisis, said Scotiabank in a research report.

“Back then, LME copper was trading at the US$8,900 per tonne level, which makes today’s price look relatively cheap in comparison,” Scotiabank said.

Not surprisingly shares of a number of high-profile copper producers reacted positively to the news

First Quantum Minerals Ltd. (FM-TSX) shares rose 4.74% or 60 cents to $13.27 on volume of just over one million. The shares are currently trading in a 52-week range of $14.12 and $4.71.

First Quantum is a diversified mining company that is engaged in the production of copper, nickel, gold and zinc. It has operating mines in Zambia, Finland, Turkey, Spain and Mauritania.

Lundin Mining Corp. [LUN-TSX; LUMI-Sweden] advanced 0.24% or $0.02 to $8.19 on volume of 588,313 to trade in a 52-week range of $8.59 and $4.08.

Lundin is a diversified Canadian base metals mining company with operations in Chile, the United States, Portugal, Sweden and Finland, primarily producing copper, nickel and zinc.

Aside from its traditional applications in electronics and construction, copper promises to play a key role in the transition to a low-carbon economy. As a result, global demand for copper is set to grow 1.5%-2.5% annually, driven by electrification and increasing requirements for renewable energy, Rio Tinto has said.

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