Codelco ousts chief executive after strategy clash

Codelco’s chief executive has been ousted after a clash over strategy with the board of the state-owned Chilean copper miner.

Thomas Keller was asked to resign by a majority of Codelco’s board, just a month after a third of its directors were newly appointed by Michelle Bachelet, Chile’s president, following her election win last year.

Oscar Landerretche, Codelco’s chairman, who is one of three new board members, said the miner was “at a critical moment” and faced with “an enormous, challenging portfolio of structural projects”.

Codelco is one of the world’s two largest miners of copper in terms of its annual output and its production, entirely from Chile, is a significant influence on the market for the metal.

Mr Keller has been seen as a moderniser advocating more investment at Codelco to overhaul some ageing mines while cutting costs. He has complained of Chilean mining’s decreasing competitiveness and has pushed for a series of “structural” projects, estimated to cost about $20bn, to allow Codelco to maintain production levels in the medium to long term.

Without them, output would fall by more than half, Mr Keller has said.

Juan Carlos Guajardo, the executive director of Cesco, a mining research group in Santiago, said: “Without those projects the viability of Codelco as a company will be seriously compromised . . . It will be a challenge to do them in the necessary timeframe.”

As a state-owned company, Codelco has often been in a tug-of-war with the government over its investment budget. Of about $100bn in profits that Codelco has transferred to the state since it was nationalised in 1971, only $4bn has been returned to the company.

In a recent interview with the Financial Times, Ms Bachelet emphasised that Codelco would be capitalised, and recognised that the $2bn transfer to the company last year was “not new money”, but represented accounting gains from the acquisition of stakes in mines owned by Anglo American.

“I don’t think there is the political will to support the changes that Codelco needs,” said a former board member, referring to the redundancies that will be necessary, the salary levels and productivity.

“I just don’t see it happening as quickly as it should,” he said, describing the wages at the Chuquicamata mine in the northern Atacama Desert, the largest opencast copper mine in the world, as “totally unsustainable”.

Mr Guajardo said Codelco faced major challenges with its unions.

“Some unions are trying to play a leading role in the company’s decisions, which is an obstacle to the business,” he said, adding that while the income of workers at Codelco is comparable to the rest of the industry, their productivity is notably lower.

“Whether or not the government supports Codelco in its fight against the workers is the million-dollar question,” Mr Guajardo said.

A new chief executive could be appointed within two months, Mr Landerretche said, with Mr Keller set to depart on June 13.