Plans are afoot to expand the world's largest copper mine.
Think Chinese economic growth is going to grind to a halt, and that metal and mineral prices are set for a long term slump?
Well, Rio Tinto (LSE: RIO) and BHP Billiton (LSE: BLT) don't appear to think so, after the two mega-miners announced their intention to pump $4.5bn (£2.8bn) into expanding their copper operations.
That's the sum the two companies plan to invest in expanding the Escondida mine in Chile, which is the largest copper mine in the world. BHP owns 57.5% of the mine and Rio has 30%, with the remaining 12.5% being owned by the Japanese consortium JECO.
Meeting demand
The reason for the expansion? To keep pace with China and other developing countries as their demands keep growing. In its news release, BHP said that the aim is to "help ensure it remains the world's leading copper operation for decades to come."
A new production plant is planned, which will enable the exploitation of higher grade copper deposits at greater depths. That should help to offset last year's 25% fall in production at the mine due to declining ore grades.
Expected to be complete by 2015, by which time the mine should be producing 1.3m tonnes per year, the new investment is expected to create 7,000 new jobs.
At the same time, estimates of reserves at the mine were upped by 25%, suggesting there is enough to keep it going for at least another century.
BHP, whose first-half results showed a dip in profits but brought a rising dividend, also plans to restart production at its mothballed Pinto Valley copper mine in Arizona, reinforcing the company's strong long term outlook for copper demand.
Strong outlook
These plans were already expected, and so the muted market reaction seems understandable -- Rio shares are down 2% at £37.65 with BHP shares down 0.5% at £20.70 at the time of writing.
But it does lend long term support for future demand and pricing of copper and related commodities -- as growing economies need more of the reddish metal, other metals, coal and oil, will also be in similar demand.
So are mining shares good ones to snap up in these days of fallen commodity prices? I reckon so.
More from Alan Oscroft:
> The Motley Fool owns shares in BHP Billiton.
