* BHP recommends industry evolve and collaborate
* Challenges include lower quality ore, labor relations
(Adds quotes from BHP and Rio Tinto; context on Chile copper
By Barbara Lewis and Mitra Taj
SANTIAGO, April 4 The world's biggest copper
producer Chile needs to adopt new technologies and improve labor
and community relations in order to maintain its global
standing, industry leaders said on Tuesday.
Chile's copper industry is grappling with falling
productivity because much of the country's best-quality ore has
already been mined, although it still accounts for 30 percent of
the world's supply of the metal.
This week Chile hosts the CRU World Copper Conference in
Santiago, where the nation's declining ore grades and a dispute
at its biggest mine, Escondida, are offsetting relief that
copper prices have recovered from the lows of around
$4,300 a tonne a year ago. They remain below $6,000.
"If we don't take a proactive approach, the copper industry
in Chile will reduce its global position in the next 25 years in
line with the diminishing quality of our assets," Danny Malchuk,
president of operations at BHP Billiton's Minerals Americas
, told the conference.
Such strategies are vital to Chile, where depending on the
copper price, the metal can account for up to 15 percent of
gross domestic product.
Chile's central bank on Monday said the Escondida strike
would knock an entire percentage point off GDP growth in the
first quarter, underscoring the importance of copper to the
Meanwhile, Chile's attractiveness to foreign investors is
waning, according to some observers.
The Vancouver-based Fraser Institute's global ranking of
regions' attractiveness for mining investment, published in
February, saw Chile fall from fourth place in 2013 to position
39 in 2016, below its fast-rising neighbor Peru.
Malchuk said the Chilean mining sector's "massive
challenges" include relations with unions, which have been
emboldened by a new pro-labor law that hit the statute books
BHP is still smarting from a bruising battle with its union
at Escondida, the world's biggest copper mine in which it has a
majority stake. A 43-day strike, which ended in late March, cost
Rio Tinto , which also has a stake in
Escondida, lamented the labor situation in Chile.
"It's perturbing to me to see that most of the renegotiation
of labor agreements is done through strikes, and it doesn't have
to be that way," said Arnaud Soirat, chief executive of Rio's
Copper & Diamonds unit.
Rio on Tuesday said it had reached a labor contract
agreement with four unions that have been in collective
bargaining since late February at the Kennecott copper mine in
Soirat also cited Kennecott as an example of the use of
real-time data analysis that can transform productivity and cut
costs by removing waste from the mining process, helping to
compensate for poor-quality ore.
BHP's Malchuk said Chile's mining companies should
collaborate on technology and adopt more public-private
partnerships to work on issues such as training and often thorny
relations with local communities.
One option to support output could be to offer tax
incentives or modify regulations to encourage miners to free up
exploration contracts they do not use, Chile Deputy Mining
Minister Erich Schnake told the conference.
Too often, he said, big mining companies hold onto and renew
mining rights while they wait for market conditions to improve,
blocking access to smaller companies from making findings.
(Reporting by Barbara Lewis and Mitra Taj, Additional reporting
and writing by Rosalba O'Brien; Editing by W Simon and Meredith