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Codelco Looks to 1st Female Director After CEO Fired

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.

‘Painful’ Changes

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.

New Leader

The board has set itself a “couple of months” to find a new leader, Chairman Oscar Landerretche told reporters in the copper-clad headquarters in Santiago following the June 6 meeting.

Albornoz said Codelco can’t be treated like a privately-held company because of the role it has in generating wealth in Chile. The company sits on the world’s largest copper reserves, and has profited from a decade-long copper boom. Revenue from its mines are referred to as the “Wage of Chile.”

“The workers feel part of Codelco, as copper brings money in for Chile,” Albornoz said. “There is a very emotional bond. The perspective of a woman could bring something to the debate.”

Albornoz is a familiar face for Codelco’s union leaders. As head of Womens Affairs between 2006 and 2009, she implemented a program that sought to incorporate more women into the copper industry. She recalls miners giggling when she first spoke about women’s rights at mine sites.

Mine Ceremony

Later this month, Albornoz said she will attend a ceremony at Codelco’s Gabriela Mistral mine after it achieved a target of an 8 percent female workforce. Albornoz has acted as adviser to Colombia and the Dominican Republic, which both adopted similar measures to incorporate women into the workplace.

As part of Codelco’s nine-strong board, Albornoz will vote on the company’s budget that is assessed by the finance ministry every June. The state company invested more than $8 billion during the past two years and will spend $5 billion this year. Without the investment, Codelco’s production would slump by more than half, Keller has said.

The multibillion turnaround program needed at Codelco is the result of decades of treating the company like a cash-cow to fund social spending programs, he said.

‘Brave Bet’

“It’s a brave bet, given this is the first woman and before she was in a ministry that isn’t related to mining, but she has performed excellently and in that context I can understand the faith the president has in her for this job,” said Ingrid Antonijevic, Chile’s economy minister during Bachelet’s first term in power.

Albornoz will take time out of her new assignment in September to visit the Prince of Bhutan in Thimphu to analyze a program that aspires to boost happiness levels in the Himalayan nation. She is paying for the airfare out of her own pocket and says she aims to apply what she learns to Codelco’s six mines spanning central and northern Chile.

Albornoz says she also has a role to play in improving community relations between Codelco and the populations who live close to mines. One example she gives is the abandoned town of Chuquicamata, where families who have been relocated to the nearby city of Calama are concerned the town’s cemetery will be buried under rubble.

“Everyone has got to understand the mission of this company,” Albornoz said. “They have to feel like working for Codelco is an honor, not a benefit, because they are working for the country.”

To contact the reporters on this story: Matt Craze in Santiago at mcraze@bloomberg.net; Javiera Quiroga in Santiago at jquiroga5@bloomberg.net

To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net; Andre Soliani at asoliani@bloomberg.net Stephen Cunningham, Philip Sanders

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