Smelter union sees tough wage talks in Chile

SANTIAGO Nov 20 (Reuters) - Union workers at Chile's Altonorte copper smelter said on Friday they expect tough wage talks with owner Xstrata (XTA.L), which claims tight margins on lower treatment charges has hurt the business.

Xstrata had rejected the workers' wage hike proposal as too high, said Abdiel Sepulveda, Altonorte's union No. 1 head.

"The company told us they don't have any money and that they are nearly broke," said Sepulveda, adding that the union asked for a 6 percent wage hike for employees at the highest scale of salaries and 10 percent for those at the lowest.

"We will sit down to talk with the company, but if we don't get a deal we will take action."

The 274-member union represents about 90 percent of the labor force in charge of production and its contract expires on Dec. 18. [ID:nN20237206]

A strike at the metallurgical complex could delay copper anodes shipments from top producer Chile and force miners to seek other smelters to treat its copper concentrate, which is likely to increase their costs.

Altonorte, which produced 232,000 tonnes of copper anodes last year, processes copper concentrate from third parties.

Other foreign mining companies have struggled with labor unrest in their operations in Chile.

On Friday, workers at the Spence copper mine agreed to resume wage talks with owner BHP Billiton (BHP.AX) (BLT.L) in an effort to end a 39-day work stoppage that threatened to spread to the miner's other operations in Chile. [ID:nN2022603]

Xstrata wants a deal with the union, but warned of tough times at the smelter that halted molybdenum operations when prices for the copper byproduct collapsed during the financial crisis, company spokeswoman Emily Russell said in London.

"Actual market conditions for copper smelters are characterized by high production costs, low treatment charges and low sulphuric acid prices, resulting in tight margins that mean it is not possible to compare this business with a large mining operation," Russell said in an e-mail statement. "We hope that our employees will look at realistic possibilities as we have been very transparent about the outlook."

First-half earnings per share slid 77 percent on weak metals prices, hit by the global economic downturn. Xstrata said its financial performance was strong in the third quarter, but gave no details. [ID:nLJ123599]

Copper prices MCU3 hit a four-year low late in 2008 but have since risen about 120 percent in 2009 on strong demand from China.

(Reporting by Alonso Soto; Editing by Lisa Shumaker)