Escondida workers say no progress in talks

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Striking workers at Chile’s Escondida copper mine, the world’s largest, said on Tuesday night that salary talks with the company failed to produce a deal but they would try again on Wednesday to seek a solution to the conflict.

The meeting came into the second day of a strike at Escondida, majority-owned by global miner BHP Billiton, and as tight international supplies of the red metal hold prices at near historic highs.

BHP said the strike, which started on Monday, meant the world’s largest copper mine was operating at about 40 per cent of its capacity, forcing the suspension of cathode production and threatening future deliveries of copper concentrate to
customers.

Force majeure clauses in supply contracts free companies from their obligations without incurring penalties, due to events beyond their control. They have often been used in response to natural disasters.

Copper prices have been rising recently because of the threat of disruption at Escondida, which supplies about 8 per cent of the world’s copper.

Prices for the metal have more than doubled in the past year because of demand from China, the biggest consumer, and because new copper mines have taken longer than expected to build, leading to shortages.

The Escondida mine, located in Chile’s Atacama desert, is 57.5 per cent owned by BHP, 30 per cent owned by mining group Rio Tinto, and 10 per cent owned by a Mitsubishi-led Japanese consortium.

Last year, Escondida produced 1.27m tonnes of copper and 182,472 ounces of gold. As a result of the commodities boom, mining groups are trying to boost production to take advantage of high metals prices.

At the same time, workers in copper-rich countries such as Chile and Mexico have been stepping up their efforts to benefit from the bonanza, putting further pressure on production through strike action.

Analysts said the stand-off between BHP and its workers suggested the copper sector was set for more labour disruption. Later this year, Codelco, Chile’s state-owned copper company and the world’s largest producer of the metal, is due to hold salary talks with its workforce.

“It looks likely that there could be copy-cat action, especially in Mexico and at other mines in Chile,” said John Meyer, a mining analyst at Numis Securities in London. “This could be quite long-running, which is why the market is taking notice of it.”

BHP said on Tuesday it was hoping to find a rapid solution to the labour conflict and reach a “reasonable agreement’’ with the Escondida workers’ union, FMC, which represents 2,052 employees in the 2,930 workforce.

The company expressed regret that the union had rejected its latest proposal, tabled last Friday, which it argued “represents the best remunerations and labour conditions on offer in the history of Chilean mining”.

BHP’s offer involved three-year contracts with a 3 per cent rise in pay, and bonus payments totalling 8.1m pe-sos ($14,900, €11,600, £7,800) a worker to avoid a strike.

But the union has called for a 13 per cent pay rise and a $30,000 net bonus per worker as a reward for productivity.

Talks between Escondida’s owners and its workers have been acrimonious, with both sides refusing to cede ground. The union began a work-to-rule protest on July 6, reducing mine production in protest at the management’s perceived failure to engage in the negotiating process. Management then reduced a monthly production bonus payment.

“Chile’s copper companies will obtain profits of $19.15bn just for this year, while investment in mining from 1973 to 2004 has been only $17bn,” said Pedro Marin, the FMC secretary.

Since the previous wage contract was negotiated in 2003 the copper price has risen from 67 cents a pound to $3.50 a pound, having reached about $4.00 a pound earlier this year. Capping union wage demands has been a key concern of mining companies this year.

Managers at the Falconbridge-controlled Lomas Bayas copper mine in Chile avoided a strike in May with a last-minute deal that included an 8 per cent pay rise and a $4,400 per worker bonus payment, setting the pattern of expectations for increases at other mines.

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