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UPDATE 2-Miner Antofagasta picks ex-Codelco boss as CEO
July 24, 2012 / 2:45 PM / 5 years ago

UPDATE 2-Miner Antofagasta picks ex-Codelco boss as CEO

* Diego Hernandez to take top job on Aug. 1

* Follows departure from Codelco in May

* Antofagasta has sought CEO since March

* Shares climb to close up 1.75 pct on news

By Clara Ferreira-Marques and Alexandra Ulmer

LONDON/SANTIAGO, July 24 (Reuters) - Chilean copper miner Antofagasta Minerals has appointed Diego Hernandez, the former head of state miner Codelco, as its new chief executive, scooping up one of the biggest names in copper as it battles operational challenges.

London-listed Antofagasta has seen output dented by troubles at its flagship Esperanza mine, and with several growth projects in the pipeline, analysts welcomed the arrival of an industry heavyweight who has helped Codelco face its own production challenges.

The miner’s shares closed 1.75 percent higher on Tuesday, outperforming a 0.6 percent dip in the UK mining sector.

The miner has also appointed Nelson Pizarro, 71, a well-respected but lower profile veteran currently with Lumina Copper, as an independent, non-executive director. Pizarro, another former Codelco executive who ran Andina and Chuquicamata for the mining giant, has also worked for Antofagasta in the past, overseeing the construction and start-up of the key Los Pelambres mine, now core to its portfolio.

“This is a big score for Antofagasta Minerals,” said Gustavo Lagos, a professor at Universidad Catolica’s Mining Center in Santiago. “They now have the two most reputed professionals in Chilean mining.”

Antofagasta surprised the market in March with the abrupt departure of long-serving chief executive Marcelo Awad.

Analysts speculated at the time the departure was related to Esperanza’s troubled ramp-up, but the company attributed the change to a shift to a new generation of growth projects that required new leadership.

Hernandez has been rumoured to be a contender for the top job at Antofagasta since the former BHP Billiton executive stepped down from his position at Codelco, the world’s largest copper producer, in May, after two years at the helm.

That departure, as the copper producer seeks to end a bitter contract dispute with miner Anglo American, was blamed on differences between Hernandez and Codelco’s board. A hands-on executive, Hernandez was irked by what he deemed excessive interference.

Antofagasta said Hernandez, 63, would start on Aug. 1, taking over from Chairman Jean-Paul Luksic who has held the chief executive role in the interim.

“(It‘s) good to have finished the uncertainty period,” a high-placed source at Antofagasta told Reuters, adding that Hernandez appeared “committed to his team, aggressive (and the) Codelco guys only speak good things about him”.

EXECUTION

Hernandez will be taking the helm of Antofagasta as it pushes ahead with major growth projects starting with Antucoya, set to start production in the second half of 2014, against a background of soaring costs.

Analysts said the execution of Antucoya in particular would be crucial for the group.

“The biggest thing the company needs to focus on is ensuring that when it commits to a project, it has fully assessed all the engineering requirements, the process requirements - so it doesn’t get blindsided by the problems that bedevilled it at Esperanza,” analyst Peter Mallin-Jones at Canaccord said.

“But he is coming on at the very beginning stages for the next wave of projects - Antucoya, Telegrafo, Caracoles .... It is a very positive move for Antofagasta.”

Hernandez, formerly head of base metals at BHP, was named copper man of the year for 2010 by the Copper Club and is widely respected in the industry as a capable manager with strong technical know-how.

He took over as Codelco’s CEO in 2010, seeking to boost the state miner’s efficiency and buoy production in its tired mines. Heads of Codelco, which produces around 11 percent of world copper, usually stay on for four years, the length of a presidential term in Chile.

Hernandez has also run Escondida and Collahuasi, two of the world’s largest copper mines, and has worked with Brazil’s Vale in non ferrous metals.

“I think Diego Hernandez must have asked for some sort of guarantee of autonomy to run the company, because we saw what happened in Codelco,” said Lagos. “Diego is not someone who is going to be going up to the 21st floor (where Luksic has his office) every day.”

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