Global mining giant Rio Tinto PLC (LON:RIO) will undertake a “strategic review” of its 19 percent stake in Canada’s Northern Dynasty Minerals Ltd. (TSX:NDM) in yet another blow to the developers behind one of the world’s largest proposed copper mines.

Rio Tinto said the review could potentially conclude in a decision to divest its stake in Northern Dynasty, where it owns about 18.1 million shares, in a release on Monday.

The move comes several days after New York City and California state controllers, who oversee the billions in pension fund investment led by the two major U.S. municipalities, sent Rio Tinto a letter requesting that Rio Tinto exit its stake of just below $25 million in Northern Dynasty.

“Northern Dynasty has lost roughly 80 percent of its market value over the past two years,” wrote John Chiang and John Liu, the controllers for California state and New York City, respectively. “We believe the reputational risks the investment poses to Rio Tinto now outweigh its market valuation. We therefore request that Rio Tinto divest from the project,” they wrote.

Alaska’s giant proposed Pebble mine, which could produce $1 billion in annual mining output, has been dogged by setbacks this year, after development partner Anglo American PLC (LON:AAL) withdrew from the project in September.

Environmental activists have said for years that the project will damage the valuable nearby salmon fishing industry, and maintain that it is overwhelmingly opposed by the local population, with 80 percent of regional residents against the project.

Rio Tinto will consider whether the Pebble project fits with its “strategy of investing in and operating long-life and expandable assets,” according to Rio Tinto. Rio Tinto owns stakes in four productive copper mines and two ongoing copper developments in Peru and Arizona.

Rio Tinto spokesman David Outhwaite told International Business Times that the company hasn’t yet formulated a specific response to the letters from the public finance managers. Between them, Liu and Chiang supervise about $570 billion in pension fund assets.

On a conference call on Monday morning, Northern Dynasty CEO Ron Thiessen said the Rio Tinto move caught him by “complete surprise," when a Rio Tinto executive called him on Friday and informed him of their decision.

“I was at a loss to understand why they were announcing it publicly,” said Thiessen of the Rio Tinto strategic review. He said it was “out of character with everything they’d communicated prior to that point in time.”

He said the relative smallness of Rio’s stake, at under $25 million, made the stake almost “immaterial” to a company of Rio’s size. Rio has a market capitalization of about $100 billion.

Northern Dynasty will provide updates on the status of the Pebble project in the first quarter of 2014. Thiessen has previously said that Northern Dynasty could submit project permits in 2014, and that it could do so before securing a development partner. The mine is expected to cost $6 billion.

Rio Tinto has paid “very close attention” to the Pebble project since Anglo’s withdrawal, said Thiessen. He said he was unsure whether pressure from pension funds contributed to Rio’s decision, adding that Rio failed to provide clarity on this point.

Developers are likely to spend $800,000 a month on the project, according to their most recent guidance, after the $700 million invested to date by Anglo and Northern Dynasty.

Environmental activists cheered Rio’s decision on Monday.

“Rio Tinto’s announcement is the latest indication from the mining industry itself that Bristol Bay is no place for large-scale mining,” said Natural Resources Defense Council attorney Joel Reynolds in a statement. “The head of the watershed of the greatest salmon fishery on the planet is no place to gamble on one of the largest mining operations ever conceived. It is simply the wrong mine in the wrong place -- as Anglo-American realized last September, as Mitsubishi realized in 2011, and as Rio Tinto is recognizing today.”

Liu and Chiang wrote a letter on Nov. 4 outlining their case for a divestment from the Pebble mine, which received what they called a “perfunctory” response from Rio Tinto on Nov. 14. Environmental, regulatory and bad publicity risks to Pebble made the project a bad idea, the public officials wrote at the time.