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Generous wage deals from Chilean peers put Codelco in tough spot

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Generous wage deals from Chilean peers put Codelco in tough spot

As it prepares to settle wage talks across its operations in the coming months, Chilean state copper miner Codelco expressed concern about the generous wage concessions made by privately owned companies in the country, Bloomberg News reported June 12, citing Codelco CEO Nelson Pizarro.

"Privately-owned miners make it more difficult for us because they have been generous," Pizarro said. "In the years of the downturn we were not only austere, we were signing contracts with no salary increase and our bonuses were a third of those paid by private miners," the executive added.

Just recently, BHP Billiton Group agreed to a 13.5 million Chilean peso bonus and a 2% wage increase at its Spence copper mine in the country. Codelco, on the other hand, signed off on an 8.7 million peso bonus and a 1% increment at the Radomiro Tomic mine in April.

Codelco signed six wage contracts this year without a strike, but it faces 11 more, including at its flagship El Teniente and Chuquicamata mines and at its Andina operation.

The higher bonuses on the back of an increase in copper prices are creating pressure for the company, which is required to give 10% of its revenue to Chile's armed forces. The company is also undertaking a record CapEx program to overhaul aging mines.

BHP is in wage talks with unionized workers at its Escondida copper mine, also in Chile, where the miners have demanded a 5% wage increase and a bonus of between 21.5 million and 25.8 million pesos. If BHP agrees to the workers' terms, it would represent the most generous payment in the country's mining sector.

Pizarro said BHP is likely to hand out a large bonus at Escondida, which would create further trouble for Codelco.

"It is very difficult to hand over money if there is no productivity," Pizarro said. "We are working with our union leaders on the idea that whatever Escondida hands over, that is not a reference. That's Escondida's reality."

Discussions with workers will focus on productivity and comparing each division with its industry peers, he said.

As of June 12, US$1 was equivalent to 635.09 Chilean pesos.