* Staff workers hold off full return over violence worries
* Wage talks with remainder of strikers to resume Friday (Updates with Codelco saying output again dips)
By Alonso Soto and Fabian Cambero
SANTIAGO, June 10 Output at Chile's El Teniente mine, the world's No. 5 copper deposit owned by Codelco, fell on Friday as staff held off a full return to work after contractor protest violence, the company's chairman said.
Gerardo Jofre told reporters the mine was operating at 40 percent of capacity, down from around 50 percent on Thursday -- when output was gradually recovering as thousands of contract workers opted to abandon a sometimes violent 17-day walkout over wages at the 404,000-tonnes-a-year mine.
Codelco had hoped to resume normal output within days before the fresh stumble.
"We were at 50 percent last night, and at the moment we are below that, at around 40 percent," Jofre said, adding output could now come in slightly below its target for this year.
He said there were no plans to declare force majeure on shipments.
The decision for full-time employees to hold off a planned full return to work was taken after contract workers again pelted mine buses with stones on Thursday, union sources said.
"We will continue with our contingency plan (of lower staffing levels) and do everything at our end so that Codelco can continue to increase production levels, as long as we have maximum security for our workers," a union source told Reuters.
German Gonzalez, head of an umbrella group of service companies, said on Thursday about 4,000 workers or 40 percent of strikers had inked individual wage deals and quit the walkout.
Codelco said in a statement on Friday around 6,000 contractors had abandoned the protest. Further contractor negotiations were scheduled the same day.
The world's largest copper producer 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 that the company had lost about 7,000 tonnes of copper so far.
Full-time staff workers halted their own activities out of concern over the contractor violence. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphic of Chile's top copper mines:
Column: Supply-side sparks fail to ignite copper
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 and 2008 that forced Codelco to halt work at El Teniente and two other mines.
Risk of contagion was seen low for now, but companies are monitoring for wage demands among contractors at their mines, union and company sources said. (Editing by Simon Gardner and Dale Hudson)