BHP seeks legal cover over copper strike

BHP Billiton has declared force majeure over likely delays in the delivery of copper concentrates from its Chilean mine, where more than half of the workers went on strike over pay.

Force majeure is a form of legal protection that producers use when events such as natural disasters and strikes affect normal output, which in turn affects their supply commitments to customers.

The stoppage, which started yesterday, has cut output at Escondida - the world's largest copper mine - by 60%. A spokesman for BHP Billiton said it would continue to meet its commitments from its stockpile.

Workers at the mine, which accounts for about 8% of global copper output, are seeking a pay rise of 13 percentage points above inflation and a £15,355 bonus but BHP's latest offer was a 3 percentage point increase and a bonus of £8,215.

The financial impact on BHP Billiton, which owns 57.5% of the mine and on Rio Tinto, which owns 30%, has yet to be determined. Escondida accounts for 60% of BHP's copper production, and about 50% of Rio Tinto's.

John Meyer, at Numis Securities, said the copper price would have to more than double for copper profits not to be cut at the two mining giants. The mine also accounts for about a fifth of both groups' total profits.

But William Adams, at BaseMetals.com, said strikes in South America did not tend to drag on.

Copper prices were down by 1% in early morning trading after rallying by the same amount yesterday as traders waited for the US Federal Reserve meeting on today to see whether policymakers would hold or raise interest rates.