UPDATE 3-Mexico's Penoles declares force majeure on strike

(Adds details about union, metals prices, inflation data)

By Mica Rosenberg

MEXICO CITY, March 13 (Reuters) - Mexican miner Penoles declared force majeure at its MetMex precious metals refinery after a five week pay strike paralyzed work, the company said on Friday.

Some 300 striking workers in the gold and silver refinery section of the sprawling MetMex metals complex in northern Mexico laid down tools on Feb. 8, demanding a salary increase of up to 9 percent.

"(Penoles) has been obligated to advise of the temporary suspension of its contractual obligations with providers and clients ... This situation will continue if the strike is not resolved," the company said in a statement.

Penoles' (PENOLES.MX) precious metals unit Fresnillo (FRES.L), which is listed in London and operates the world's largest silver mine, processes all the gold and silver from its mines at the MetMex plant.

Another group of some 900 workers at the plant, Latin America's largest, agreed to a 6 percent salary increase and are still producing base metals for the company. Mexico's annual headline inflation MXCPIA=ECI was 6.20 percent in February.

"The lead foundry is still partially operating and the zinc plant is operating normally, both selling their products to different clients," Penoles said.

The national miner's union said workers were not lifting the strike and were waiting for the company to approach them for dialogue. The force majeure declaration would not affect the negotiations, union official Carlos Pavon told Reuters.

"This is the company's problem, not the union's problem," Pavon said.

UNION TENSIONS

Mexico's union has been at the forefront of a more than 19-month-long strike at the giant Cananea copper mine owned by Grupo Mexico (GMEXICOB.MX). The dispute began over health and safety concerns but has since been complicated by a dispute between the company and the union's leader.

The company had said earlier in the month they had enough silver and gold warehoused to meet orders but were sending material in bulk from abroad to be processed.

MetMex refines more than 90 percent of all the gold and silver mined in Mexico and produced around 580,000 kgs of silver, 54,000 kgs of gold and 460,000 tonnes of zinc in 2007, according to statistics on Penoles' website.

Shares in Penoles rose on Friday by 9.80 percent to 153.63 pesos per share following gains in the wider Mexican stock market.

The spot silver price XAG= was at $13.16 an ounce on Friday, up 1.7 percent from the previous day's close while spot gold XAU= rose slightly as well to $927.55. (Editing by Christian Wiessner)