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Xstrata, AngloAmerican Chilean Copper Mine on Verge of Strike

1 November, 2010

Immediately following a 99.9% contract rejection and intent-to-strike vote on 27 October, the union representing copper miners at Chile’s Doña Ines de Collahuasi and management called for a five-day government mediation period. If unsuccessful, a strike by 1,550 permanent workers at Collahuasi in northern Chile’s Region I could begin late this week.

The 535,000-tonne copper mine, the world’s third largest, is 44% owned by Xstrata and 44% by AngloAmerican, with the remaining 12% held by a consortium of Japanese companies led by Mitsui & Co. Collahuasi miners ended a three-year contract just days ago, a contract that came into place after a four-day strike in 2007.

Miners are seeking a 10% wage increase, and a bonus comparable to the one awarded by BHP Billiton (57.5%) and Rio Tinto (30%) at its joint venture Escondida mine in Region II last year. That bonus was US$28,000. Collahuasi management is offering a wage increase of two-to-three percent less than the union’s demand, and a bonus of US$19,000.

An industry representative involved in the 2007 talks told Reuters there is no question that the company can pay what miners are demanding. A strike could prove costly for mining giants Xstrata and AngloAmerican with the price of copper at record levels. The mine posted net earnings of US$1.56 billion last year.

The strength of a strike by workers represented by Chile’s national private-sector miners’ union federation will largely depend on whether or not contract workers at Collahuasi honour strike lines. They are quite likely to do so, after staging their own week-long blockade of roads in May 2010 that caused the company to declare force majeure. There are some 4,000 contract workers employed by scores of sub-contractors at Collahuasi, which is just finishing the first phase of a US$750 million expansion project.

A strike could also set the template for other unions representing copper miners in Chile, most notably at state-run Codelco’s Radomiro Tomic mine in Region II. It is part of the company’s largest and most profitable operation – Codelco Norte – and the 760 miners at Radomiro Tomic already rejected an inferior offer in September. The collective agreement expires at the end of November.

Radomiro Tomic contributed 23% of Codelco Norte’s first-half 2010 net earnings of US$1.28 billion. The Codelco Norte division also includes the Churquicamata and Mina Sur mines, and the three mines produced 440,000 tonnes of copper in the first half of 2010, up from 391,000 tonnes in the same period of 2009.