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Is This The Final Week For The World's Largest Copper Mine?

Escondida mine

I’ve been writing the last few weeks about brewing problems at the world’s largest copper mine: BHP Billiton’s Escondida operation in Chile.

And this week, it’s crunch time for that critical project.

BHP has been working on a new contract with mineworkers’ unions at Escondida for months now. With reports emerging that the two sides are log-jammed over pay demands.

And the standoff between workers and owners came to a head last Friday. When unions voted to launch strike action – with leaders saying they were prepared to idle Escondida for up to two months if necessary.

The strike was scheduled to begin today. But BHP gained a last-minute reprieve over the weekend – by filing for mediation with government labor authorities in Antofagasta, where the mine is located.

That move officially prevents workers from striking for five days. Meaning the strike will be pushed to next week if the two sides are unable to find a solution through mediation.

A resolution seems unlikely, given how far apart workers and management appear to be on labor demands. With unions reportedly requesting $25 million in bonuses and a 7% salary increase – while BHP is offering just $8 million bonuses and no pay increase.

If the strike does go ahead, BHP has asked unions to maintain minimum services at the mine. A request that union heads are reportedly still analyzing. Related: Keystone XL Needs Much Higher Oil Prices To Be Viable

If the unions decide against, we could see Escondida shut down completely, very soon. Perhaps for an extended period of time.

That would almost certainly give a lift to copper prices. Both because of the actual supply disruption from this key mine – and because the labor action here could entice workers at other operations across Chile to take similar action.

We’ve still got a few days for management to pull this one out of the fire. Watch to see if a solution does materialize, and for upward momentum in the copper price early next week if a strike does go ahead.

Here’s to hanging in the balance.

By Dave Forest

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