BHP Says Chile Copper Mine Talks Fail, Will Restart

Thursday, August 10th 2006

BHP Billiton failed to reach agreement in talks with striking workers yesterday at Chile’s Escondida mine, the world’s largest copper supplier. The strike began two days ago.

Mine management and the union at Escondida will meet again in Chile today, Emma Meade, a spokeswoman for BHP Billiton, the world’s biggest mining company said. The Melbourne-based company didn’t make a new wage offer during the talks, according to Francisco Aedo, a press relations officer for the union.

Copper prices have jumped 77 percent this year in London as strikes and output problems led to supply disruptions. As much as 18 percent of global production may be affected by industrial action this year due to wage talks, UBS AG said in June. BHP Billiton gets about a fifth of its profit from the mine, according to ABN Amro Australia Ltd.

“It’s interesting that within one day of the strike taking place, the two sides are back at the negotiating table,” said Peter Richardson, chief metals economist at Deutsche Bank AG, in Melbourne. “The market does expect this to be a short-lived event.”

Shares in BHP Billiton, which owns 57.5 percent of Escondida, fell 57 cents, or 2 percent, to A$27.23 at the 4:10 p.m. close on the Australian Stock Exchange. Shares in Rio Tinto Group, which owns 30 percent, dropped 92.5 cents, or 1.2 percent, to A$74.40.

“Talks between Escondida and the union weren’t successful in terms of bringing the positions closer,” said BHP’s Meade. “The parties have agreed to meet again at 5 p.m. Chilean time.”

Production Drops

Production at the mine, which accounted for 8.5 percent of global output last year, has fallen by about 60 percent since the strike started, Mauro Valdes, a BHP Billiton spokesman in Santiago, said yesterday. The union said production has fallen by about 80 percent.

Union and management at the mine previously met on Aug. 5. The union wants wage increases to reflect rising company profits and is seeking salary increase of 13 percentage points above inflation and a bonus of 16 million pesos ($29,300) per worker.

Management, which said this week that its wage package is the best in the Chilean mining industry, has offered to boost wages by 3 points above inflation and pay a bonus of 8.5 million pesos per worker. Chile’s annual inflation rate was 3.8 percent in July.

The remainder of Escondida is held by Mitsubishi Corp., 10 percent, and International Finance Corp.

Source: bloomberg.com