The success of a $20 billion plan to revive Codelco, the world’s largest copper producer, may rely increasingly on its first appointed woman director following the firing last week of Chief Executive Officer Thomas Keller.
Laura Albornoz was named in May by Chilean President Michelle Bachelet to defuse a growing feud between executives and workers at the company created in 1971 through the nationalization of foreign-owned mines. She participated in a six-hour board meeting until 2 a.m. on June 6 that decided to fire Keller, a former Anglo American Plc executive.
Consensus-building between workers, executives and the state at Codelco, which has generated $110 billion in profit since its creation, is a top priority as the company looks to maintain its No. 1 ranking in the global copper market, while cutting costs, Albornoz said in an interview in Santiago June 3.
“Codelco has had management issues that isn’t just down to the international price of copper,” Albornoz said. “We can take the company a lot further than where we have got it to now.”
Albornoz will visit next week the century-old Chuquicamata mine in the Atacama Desert where relations between Keller and the workers were at their worst.
Codelco sent in troops to safeguard the smelter at the mine in December after a two-week strike by workers turned violent.
Codelco needs to make adjustments that will be “painful” for workers, Keller told El Mercurio newspaper before his dismissal. “What we have now in terms of workforce, health benefits and pay isn’t consistent with profitability promises we made,” he said, referring to the Chuquicamata mine.
Among worker benefits is a one-time bonus of more than $30,000 for signing 36-month long work contracts. They also receive subsidies for their children to study in the best colleges in Chile’s northern desert cities.
The benefits are raising the cost of developing the new mines that Codelco needs to increase production. The one-kilometer deep Chuquicamata pit, first mined by the Guggenheim family a century ago, will run out of profitable ore by 2018, requiring Codelco to dig under the main pit in a $4.2 billion project that will phase out most of the existing workforce.
Codelco is also contemplating a $6.8 billion expansion at its Andina mine near Santiago that requires a study to win community support because of concern over its impact on glaciers in the Andes Mountains. The company’s $750 million of bonds due 2023 yield 3.76 percent, 0.4 percentage point more than similar securities from Melbourne-based BHP Billiton Ltd. (BHP) The gap has narrowed from 0.46 at the end of last year.
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