2nd UPDATE: Chile Collahuasi Copper Workers Go On Strike

Unionized workers at Chilean copper mine Dona Ines de Collahuasi went on strike at the start of the first Friday shift.

Workers were gathering at the union's headquarters in the city of Iquique, while the buses that bring the morning workers to the mine were empty, a union leader told Dow Jones Newswires.

A company spokeswoman confirmed that the strike was underway, but that things at the Collahuasi mining compound were "quiet," with no protests staged outside the mine's access road.

Government-mediated talks ended Thursday at a standstill, with the 1,551-strong union holding assemblies late Thursday to explain the company's offer, vote on the strike by a show of hands and go over plans for marches and rallies, the union leader said on condition of anonymity.

"The majority of the union members voted for the strike. We'll be holding a noon march through the streets of Iquique today," he said.

Collahuasi, one of the largest copper mines in the world, has a contingency plan in place to ensure production during the strike.

The spokeswoman declined to provide details of the plan, but said Collahuasi "sought to minimize the negative impact of the strike and meet its supply contracts."

When asked how much copper was stockpiled at the mine or how much time could pass before the company wasn't able to meet its contracts, she declined to comment.

She noted that contract workers carrying out essential mining-related duties were still on site.

The mine is owned by diversified mining companies Xstrata PLC (XTA.LN) and Anglo American PLC (AAUKY, AAL.LN), each with a 44% stake. A consortium led by Mitsui & Co. (MITSY, 8031.TO) holds the remaining 12%.

Collahuasi is located in Chile's northernmost First Region. It is 185 kilometers southeast of the port of Iquique, at 4,400 meters above sea level high in the Andes.

It produces about 500,000 metric tons of copper a year, or about 10% of Chile's annual output.

This the first major labor conflict in Chile's mining sector this year as state copper giant Corporacion Nacional del Cobre, or Codelco, averted a strike at its Salvador division.

Shortly after Diego Hernandez, formerly president of BHP Billiton Ltd.'s (BHP, BHP.AU) base-metals division, took over the helm at Codelco, he reached an early wage deal with Salvador unions, which included a 36-month contract and attractive signing bonuses.

Codelco is now due to negotiate with the union at its Radomiro Tomic mine, whose contracts expire at the end of the month.

Mining companies in Chile sign contracts varying from 24 months to 40 months and negotiations include succulent "end-of-conflict" and other contract signing bonuses that reach up to $30,000 per worker.

Strikes, however, tend to be short-lived, with the exception of 2006 strike at BHP's Escondida mine, which dragged on for a month.

"The Collahuasi strike won't likely last very long. The workers aren't prepared for a long haul like we were at Escondida. Also, things have changed for labor movements under the new government," a union leader familiar with the negotiations told Dow Jones.

The administration of conservative Sebastian Pinera has been tough on street protests, quickly calling on police to break them up.

The Collahuasi union, however, has said it is prepared to face a long strike if the company doesn't meet its wage-and-benefits demands.

The workers are seeking a 10% wage increase and improved social benefits. The company offered an increase of 2% to 3%, improved benefits, a signing bonus and an interest-free loan totaling around $27,000.

Chile is the world's leading copper producer, accounting for about 35% of global output.

-By Carolina Pica, Dow Jones Newswires; 56-2-715-8919; carolina.pica@dowjones.com

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