Thursday 09 February 2017 4:29 pm

Rio Tinto might walk away from the world’s second biggest copper mine

Rio Tinto is weighing whether to walk away from its interest in the world's second biggest copper mine.

Chief executive Jean-Sebastian Jacques has told analysts the massive Grasberg site faces stoppages in its copper concentrate exports and permit issues with the Indonesian government, Reuters reported.

The mine's operator Freeport McMoRan warned this could lead to cuts to production and the local workforce.

A strike at the copper smelter has added to the mine's troubles.

"There is no doubt that Grasberg is a world-class resource. But the key question, especially in the light of what happened three weeks ago, is: is Grasberg a world-class business for us?" Jacques said, according to a transcript of the analyst briefing.

He added Rio will decide in the "coming weeks and months" whether to sell or walk away from its option to take an effective 40 per cent stake in Grasberg in 2021, he said.

News of a strike at another copper mine sent the metal's benchmark prices towards their highest levels of the year last night.

BHP Billiton said output will stop at its Escondida mine in Chile, the largest in the world, during a strike that began today.

Three-month copper on the London Metal Exchange gained more than two per cent Wednesday night to $5,925 per tonne, and prices have remained high today.

Swiss investment bank UBS said tight copper supplies this year, along with these disruptions, could push prices for the metal to more than $6,600 a tonne – its highest level since November 2014.