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Strike expands at Chile's Escondida copper mine

Strike expands at Chile's Escondida copper mine

July 27th, 2011 in News

SANTIAGO, Chile (AP) - Union members broke off negotiations Tuesday at the world's most productive copper mine, threatening to extend their five-day strike indefinitely and warning that thousands of other Chilean copper workers may soon walk off the job as well.

Union leader Marcelo Tapia told The Associated Press that the Escondida mine's 2,300 striking workers will be joined Wednesday by 7,000 contractors, and that union workers at Chile's state-owned Codelco mining company are in consultations about whether to join them on Thursday.

The main issue is a monthly production bonus: The company, majority-owned by Australian mining company BHP Billiton Ltd., is prepared to pay bonuses that would total $6,000 per worker by year's end, and declined on Tuesday to discuss an increase. The union is holding out for $10,800 per worker, Tapia said.

Shares in BHP Billiton Ltd were trading up about 1 percent at $94.83 after dropping earlier Tuesday on the strike news. Globally, prices for copper and other metals have been buoyed by fears that the dollar and euro will fall due to the U.S. debt crisis and European economic woes. Prices of copper for September delivery rose 1.6 percent Tuesday to $4.48 a pound.

Already, the strike has cost the company 15,000 tons of lost production, at an estimated cost of $150 million, the company has said.

Escondida represents the biggest single foreign investment in Chile, with BHP owning a 57 percent share. Other major investors include Rio Tinto, Mitsubishi Corp. and International Finance Corp. Each day, the mine has produced about 3,000 tons of copper, worth about $30 million. In all, the mine produces 1.1 million tons of refined copper annually. At one point, its production totaled about 8 percent of the world's copper supply, although that has declined slightly.

The amount the union wants in bonuses represents less than a penny of each dollar in annual earnings, 0.58 percent.

The situation deteriorated Tuesday when 7,000 subcontractors announced they will join the strike, adding their own demands, including a bonus equivalent to 30 percent of the amount regular employees will get, said Jorge Marin, president of Escondida's Contract Worker Federation.

The union plans to go to court Wednesday, alleging anti-union actions by the company, Tapia said.

The union also wants protections for workers who contract serious illnesses on the job, only to lose their private health care on retirement. They say company surveillance cameras violate their privacy rights, but they want to punch clocks that better control their 12-hour work days. Miners are frequently working up to 14 hours a day but don't get their overtime, Tapia alleged.

Tapia challenged company claims that bonuses are down due to lowered production, saying that it costs Escondida 90 cents a pound to produce the metal now selling at about $4.40 globally.

Escondida's last major strike, in 2009, turned out well for the workers, who got bonuses and easy credit worth $37,000 each.

As with other mines in Chile, Escondida's production has been falling as the best veins in established operations get tapped out. But BHP Billiton recently announced a major new find of 19 million tons of copper reserves. The discovery, which took four years of exploration at a cost of $381 million, means the company will be able to challenge Codelco's status as the world's biggest copper producer.

Chile's copper strikes are helping to keep prices for the commodity near all-time highs, although other factors such as the falling U.S. dollar have done more recently to drive up short-term prices, metals analyst Shayne Heffernan of Heffernan Capital Management. He said this could change should strikes expand in Chile as well as South Africa and Indonesia.

"Given the number of strikes and the speed at which they are spreading, the loss of global production is now starting to mount. Should we see another month of this activity it may raise the annual shortfall this year to over 850,000 tons and copper trading at over $6 a pound," Heffernan said. "Demand for copper is making it a more attractive inflation hedge than gold."


Associated Press Writer Michael Warren contributed to this story from Buenos Aires, Argentina.