Company News

UPDATE 5-Protest shuts Chile's Chuqui mine, to hit output

* Codelco says stoppage to hurt output targets

* Union says protest at Chuquicamata is “indefinite”

* Mine owner Codelco hopes to resume negotiations soon (Updates with output details, company comments)

SANTIAGO, Dec 9 (Reuters) - World No. 1 copper producer Codelco said on Wednesday an indefinite union worker blockade that has halted mining activities at its massive Chuquicamata mine complex would hit its overall output targets.

The protest, which started before dawn on Wednesday, was not seen spreading to other Codelco [CODEL.UL] deposits, which have either settled contracts or start negotiations next year.

Codelco had expected the open-pit mine to produce 380,000 tonnes of copper this year. The adjacent Mina Sur deposit is also blockaded and was expected to bring total production in the area to 565,000 tonnes.

“The stoppage at Chuquicamata affects the production targets of Codelco Norte division and of the company,” Codelco said in a statement. It did not estimate the output loss.

The nearly century-old Chuquicamata plus the newer Mina Sur are part of the company’s Codelco Norte division that also includes the Radomiro Tomic copper deposit.

“This situation hurts the workers and will hurt the whole country if we lose output,” Codelco Chief Executive Officer Jose Pablo Arellano told reporters. “I hope the negotiations will resume soon.”

Codelco is one of the biggest revenue earners for the government, which has used billions of dollars in copper windfall savings to fund stimulus measures to claw out of the first recession in a decade due to global crisis.


TIMELINE-Chile’s major mining strikes: [ID:nN09155964]

FACTBOX-Chile’s Codelco copper output: [ID:nN07122996]


The blockage after contract negotiations collapsed will likely fan fears of supply disruption in the world’s top producer of the red metal used to build cars to refrigerators.

“The action is indefinite until the administration agrees to respect our contracts,” Armando Silva, head of one of the three unions jointly negotiating a new collective contract, told Reuters earlier.

The blockade started at 4 a.m. local time (0700 GMT) and workers arriving for their morning shifts joined the protest, halting operations at the mine, he said.

Television images showed a long line of cars and trucks backed up on the road leading to the mine complex located in Chile’s arid, northern region.

A long blockade that hurts output at the mine could boost copper prices, which fell in London and New York on Wednesday as investors cut exposure to risky assets amid concerns on the health of the economy and a stronger dollar.

Copper for three-months delivery MCU3 on the London Metal Exchange closed at $6,945 a tonne from a close of $6,980 on Tuesday. Copper for March delivery on the New York Mercantile Exchange's COMEX division HGH0 ended at a three-week low of $3.1235 per lb on rising investor risk fears. [MET/L]

In 2007, a subcontractor workers’ strike at Codelco helped push global copper prices to near record highs of $4 a lb.

Silva and leaders of other unions at Chuquicamata said the company wants to eliminate some benefits in the new contracts by offering more cash instead.


Union leaders said Codelco wants to cut benefits such as handouts for housing and vacation days, and also change contractual terms on employees starting to be hired next year.

Experts say the company aims to cut long-term costs with the new contracts to better compete with slimmer, private miners.

Critics say red tape has turned Codelco, which employs 20,000 people, into an inefficient behemoth that is losing market share against slimmer, private companies.

Chile’s conservative presidential front-runner, billionaire Sebastian Pinera, tipped to lead Sunday’s vote and win a January run-off, wants to sell up to 20 percent of Codelco to improve company efficiency. However, the plan is seen as a non-starter due to resistance from Codelco’s powerful unions and an expected divided Congress. [ID:nN07158519]

Codelco has launched an ambitious investment plan to increase output at most of its mining divisions in coming years, including an estimated $2 billion project at Chuquicamata. The company is also seen reversing years of dwindling output in 2009 on increased production at aging mines and its star Gaby deposit.

By law, workers cannot strike at the deposit until they have voted on a company wage offer before the current contract expires on Dec. 31.

Copper prices rising by 125 percent in 2009 has emboldened mine workers across the world to demand more of the windfall from mining companies.

Workers at Codelco’s Andina unit reached a wage deal last month for a 3 percent pay hike, plus bonuses and benefits. [ID:nN21541466]

After a 42-day strike, workers agreed to a 4 percent pay hike, plus bonuses and benefits, at BHP Billiton's BLT.LBHP.AX Spence mine. [ID:nN23225190] BHP had an easier time reaching a deal with works at its Escondida deposit, the world's largest copper mine. [ID:nN0971505] (Editing by Simon Gardner and Lisa Shumaker)