BHP opts for mediation to avert strike at Spence mine

BHP (NYSE: BHP; LSE: BHP; ASX: BHP) has requested the Chilean government to mediate talks with union leaders at its Spence copper mine to avert a strike.

The call for a five-day mediation under Chilean labour laws comes after the world’s largest miner failed to reach an agreement with the union during regular negotiations, local paper La Tercera reported.

Key issues, the union says, include the size of wage increases, bonuses and benefits, topics on which the parties remain far apart as they enter the final phase of negotiations.

Strong copper prices this year have not only boosted companies’ profits, but also raised employee expectations. Even after a recent decline, copper has kept its place among the best-performing metals this year, with futures up 16% on the London Metal Exchange.

“We’re willing to continue talks, but we want to participate in these profits,” union leader Ronald Salcedo told the Chilean paper. He warned that a strike could begin as early as June 12.

BHP said its mediation request reflected “the company’s constant willingness to dialogue to reach a mutually beneficial agreement.”

Closely watched

The company added that, as the law indicates, the parties will have the next five business days to continue conversations and reach an agreement. In the meantime, operations at Spence continue as usual. The mine is part of BHP’s Pampa Norte division, which includes the Cerro Colorado mine.

The events at Spence, which produced 244,000 tonnes of copper last year, may indicate how negotiations might proceed at BHP’s other Chilean mines, including its giant Escondida, BMO Capital Markets said on Thursday. Contract negotiations at this copper mine,  the world’s largest, are due by the end of August.

“For all Chile’s copper output problems over the last couple of years, strikes have not been a major cause,” Colin Hamilton, head of BMO’s commodities research, wrote in a note. “But higher copper prices always increase the risk of disagreements as workers seek more of the economic rent,” 

Shares in BHP closed less than 1% stronger on Thursday in Sydney at A$44.05 apiece ($40.06) compared with a small decline on Wednesday  to A$43.90. The company’s market value is A$223.4 billion.