BHP, Spence mine workers reach initial wage deal

Pampa Norte consist of two copper mines, Spence and Cerro Colorado. (Image courtesy of BHP.)

BHP (ASX, LON, NYSE: BHP) has reached a preliminary wage agreement with workers at its Spence copper mine in Chile, which could avoid a planned strike at the operation.

Union members and the world’s largest miner have been in talks for weeks on subjects covering the size of wage increases, bonuses and benefits. Early this month, the company requested government mediation as the parties failed to reach an agreement during the regular negotiation period.

The five-day mediation, extendable for the same period, ended with the initial wage deal announced today and which has to be submitted to the vote of union members.

BHP and union leaders have extended the deadline for the workers to either accept the company’s offer or down tools until Friday, June 14. Operations at the mine continue as usual, the Australian miner said.

Strong copper prices this year have not only boosted companies’ profits, but also raised employee expectations. Even after a recent dip, copper has kept its place among the best-performing metals this year, with prices up 27% in the last six months.

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

The events at Spence, which produced almost 250,000 tonnes of copper last year, are also being closely watched by traders for indications of how negotiations might proceed at BHP’s other Chilean mines, including its giant Escondida.

Contract negotiations at this copper mine,  the world’s largest, are due by the end of August.The outcome at Spence could also set the tone for future labor negotiations in Chile’s vital copper industry.

Spence is part of BHP’s Pampa Norte division, which includes the Cerro Colorado mine.