A view over the copper production issue of the company, which may result in more production being halted if problem remains unresolved

Published By: Eunice Gettys on January 27, 2017 12:39 pm EST

Rio Tinto Plc. (ADR) (NYSE:RIO) reported that it is facing trouble with the copper production, after Indonesia stopped the exports from the Grasberg mine. This has resulted in a huge threat to the Freeport McMoRan to shut down its 60% of production, which may also result in widespread lay-offs in the area.

If the situation is not catered to by mid-February, things would go beyond the control of the company. This would mean that up to 60% of the production would be halted due to the Grasberg issue. This is where Rio has a share of production beyond a certain level due to worker productivity issues in this area.

Rio also announced that it has agreed to sell the Australian unit coal and Allied Industries Ltd to Chinese government for up to $2.4 billion in cash. It is believed that it is a good deal for the company as Rio no longer considers thermal coal as part of its core business. This means that this is a good deal for the company in the long run.

The general trend witnessed in the commodity sector has been that the non-profitable commodity businesses have been seen either liquidating or selling off. This is because of the general commodity slump that has been witnessed in 2015 and has been following since that time. Some of the commodity prices have recovered, but only gradually.

Stock Update

The stock traded $44.86, surging 0.47% as in pre-market Friday. The stock also traded in the 52-week range of $22.88-46.04. Furthermore, Rio possesses a huge market capitalization of $80.96 billion, which comes with a year-to-date (YTD) surge in stock by 17.03%. It has a price to earnings (P/E) ratio of 1760.60 and earnings per share (EPS) of 0.03.