UPDATE 7-Strike nears end at Chile copper mine, output rises

* Nearly half of strikers quit action, take wage deals

* Staff workers say to return to work on Friday

* El Teniente output seen at normal level on Saturday

* Wage talks with remainder of strikers resume on Friday
(Adds latest estimate of output loss)

By Alonso Soto

SANTIAGO, June 9 (Reuters) - Output should return to normal
in days at the world's No. 5 copper mine, El Teniente in Chile,
after thousands of contractors abandoned a 16-day strike that
seems near its end, the company said.

Staff workers also decided to return to work on Friday
after strikers began wage talks with their employers to resolve
a sometimes violent 16-day walkout that is losing strength.

Mine owner Codelco [CODEL.UL] confirmed the mine was
producing at 51 percent capacity on Thursday.

German Gonzalez, head of an umbrella group of service
companies, said about 4,000 workers or 40 percent of strikers
have signed individual wage deals and quit the walkout.

He said dissenting contractors are gradually returning to
the 404,000 tonne-a-year mine as fears over violence persist.

Protest leaders denied so many temporary workers had
returned to work, but acknowledged hundreds have quit striking
in recent days. More wage negotiations between contractors and
their employees are scheduled for Friday after talks restarted
on Thursday.

"We will continue tomorrow. No deal has been struck yet,"
said strike leader Luis Nunez. "We decided on a truce on
violence during negotiations."

Codelco had to slow production at El Teniente to 40 percent
over the weekend to protect staff workers amid escalating
violence by protesters.

Codelco Chief Executive Diego Hernandez said on Thursday
the company has lost about 7,000 tonnes of copper so far due to
the strike.

Julio Jalil, head of El Teniente's No. 7 staff union, said
the mine's nearly 4,000 full-time staff workers agreed to
return to work on Friday. However, he warned workers would halt
operations again if violence flares up again.
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Graphic of Chile's top copper mines:

r.reuters.com/xer99r
Column: Supply-side sparks fail to ignite copper

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WAGE DEAL SEEN

Strikers are demanding higher wages and better benefits.

Juan Cristobal Silva, a labor ministry official in the
region acting as mediator, said both sides are showing signs
they want to reach a deal soon to end the walkout.

"If they are meeting again, it is because they both want to
end this soon," he said. "This conflict is taking a toll on all
sides."

Codelco said earlier this week the disruptions at El
Teniente had cost the state giant at least $30 million in lost
revenue and up to 4,000 tonnes in output.

The company is suing protest leaders for damage to private
property after protesters threw rocks at buses carrying staff
workers to the mine.

El Teniente employs more than 10,000 contractors, most of
whom support non-production operations such as reinforcing
tunnel walls, repairing machinery and distributing food. The
mine's 4,000 staff workers are directly linked to output
operations.

The protest drew comparisons to a violent demonstration by
contractors in 2007-2008 that forced Codelco to halt work at El
Teniente and two other mines. Risk of contagion was seen low at
the moment, but companies are monitoring for any wage demands
among contractors at their mines, union and company sources
said.
(Reporting by Alonso Soto; Editing by Lisa Shumaker and Carol
Bishopric)