Escondida surprise lights fire under copper price
2,800 workers at Chile's Escondida, jointly owned by BHP Billiton (ASX:BHP) and Rio Tinto (LON:RIO) will embark on two 24-hour strikes next week, idling a 1.2 million tonnes a year operation. The mine also provides around 1,900 contract workers with full time jobs.
The Sindicato No. 1 union carried out a similar 24-hour stoppage over pay and conditions last year.
That dispute was quickly settled, but during a two-week strike in the summer of 2011 output of more than 40,000 tonnes of copper was lost, forcing operator BHP to declare force majeur.
At the time of the crippling labour action, copper was trading near all time highs of $4.40 a pound.
News of the strike comes not long after BHP said the mine could substantially increase total output next year to 1.27 million tonnes.
The mine which also produces gold and silver as byproducts plays a key role in the Chilean economy, accounting for about for 2.5% of the country's gross domestic product. According to Rio Tinto’s website, in 2012 the mine generated 5% of global copper production and around 15% of the South American nation output.
Legendary explorer Dave Lowell discovered the deposit in 1981 and production began in 1990. Since October 2005 Minera Escondida also operates Escondida Norte, which is a second open pit located 5 km from the main pit.
After recovering from a near four-year low of $2.93 a pound in March, the copper price has managed to stay above the $3 a pound level, but recently came under renewed pressure due to weak economic news out of China, consumer of 45% of the globe's copper, and growing supply side worries.
Mine production is ramping up and is forecast to grow 5% this year and more than 7% in 2015, while Freeport McMoran (NYSE:FCX), Indonesia’s largest copper concentrate producer, resumed exports after a six months hiatus and Newmont Mining (NYSE:NEM) is set restart shipments from the country following a dispute over concentrate duties.