* Mine says back to normal output
* Prolonged strike could delay expansion projects-union (Recasts, Updates with Collahuasi confirmation that mine back to normal)
SANTIAGO, May 18 (Reuters) - Chile's giant Collahuasi copper mine has returned to normal operations despite a subcontractor work stoppage that entered its 12th day, the company said on Tuesday.
Collahuasi spokeswoman Bernardita Fernandez confirmed the mine resumed normal operations, but added she did not know when the operator planned to lift the force majeure on copper shipments.
Union president Manuel Munoz said the mine, one of the world's largest, returned to normal output levels Monday afternoon using full-time staff and contractors not participating in the stoppage.
Collahuasi, which produces 3.3 percent of the world's mined copper, resumed limited operations on Wednesday last week, a day after subcontractors lifted a blockade to the mine after police stormed the site.
The mine, which is jointly owned by Anglo Americanand Xstrata , produced 535,000 tonnes of copper in 2009.
A prolonged strike, Munoz said could delay expansion projects at the mine. Some in the industry fear labor troubles might spread to other mines in the world's top copper producer.
"Most of the subcontractors work in expansion projects," Munoz said. "It is very likely that the expansion objectives would be delayed."
Fernandez said the current ramp-up included work at expansion projects and added the mine's operator had moved to improve living conditions for workers.
Chile in February approved a $750 million project that allows Collahuasi to increase mineral processing capacity by 20 percent. [ID:nN01215337]
Subcontractor strike leaders, who said they represent around 4,000 workers, vowed to continue the 12-day stoppage after walking away from talks with the company late Monday.
"Subcontractors at other mines are in a state of alert, watching how things develop here," said Ricardo Arellano, one of the subcontractor leaders. "We will not let this stand."
He said subcontractors were analyzing taking further action to get the company to accept their demands to improve working conditions and raise their pay.
There have been no reports of subcontractor strife at other mines across Chile.
In 2007 and 2008, subcontractor protests that occasionally turned violent cut output at the world's top producer Codelco, forcing the state giant to pay higher wages and improve working conditions. (Reporting by Alonso Soto; Editing by Sofina Mirza-Reid)
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