A Blow to Global Metals

Unrest has returned once again to the ancient seat of the Incan Empire, threatening disruption of a key source of the world's silver, copper, zinc, and gold. Over recent weeks, we here at the Fool have tracked several isolated and regional events affecting miners in Peru. Just a week after it appeared the worst was over, the country's mining union announced a nationwide strike, effective immediately.

Barely a year following the last major strike, which crimped production and pushed global metal prices higher, the union has organized this walkout to demand the removal of caps on profit-sharing measures. In addition, the union is seeking rules for early retirement, access to state-run pension plans, and a reduced workday.

Among the mining companies affected:

  • Southern Copper (NYSE: PCU  ) 's key smelter facility at Ilo and the nearby Cajuone mine have been affected already, and workers are expected to lay down their tools at the Toquepala mine on Tuesday.
  • BHP Billiton (NYSE: BHP  ) has had to cease operations at Antamina, Peru's largest copper-zinc mine. The mine is co-owned with Swiss miner Xstrata.
  • Freeport-McMoRan (NYSE: FCX  ) employees at the Cerro Verde copper-molybdenum mine had already been on strike separately for several weeks, and are now sure to join the nationwide effort.
  • Barrick Gold (NYSE: ABX  ) has already ceased production at the Pierina gold mine, which was expected to produce at least 395,000 ounces of gold this year.
  • Newmont Mining (NYSE: NEM  ) operates the enormous Yanacocha gold mine in the northern part of the country. Newmont had forecast gold production of 900,000 ounces in 2008.
  • Companhia de Minas Buenaventura (NYSE: BVN  ) holds a minority stake in both the aforementioned Yanacocha and Cerro Verde mines. In addition, the company operates seven wholly owned mines that produce gold, silver, zinc, lead, and copper.

In a move reminiscent of the recent demonstrations in Southern Peru, miners in the silver-rich Casapalca and Morochocha mining districts (near the capitol Lima) have pledged to block highways in an effort to exert additional pressure on the Peruvian Congress.

In this Fool's opinion, there will be plenty of pressure emanating from the group of corporations listed above to resolve this issue quickly. With so many other disruptions to global metals supplies coming to light recently, I believe miners will find they have more bargaining power than they may realize.

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Fool contributor Christopher Barker captains yachts and writes about stocks. He can also be found acting foolishly within the CAPS community under the username TMFSinchiruna. He owns shares of Companhia de Minas Buenaventura, BHP Billiton, and Freeport-McMoRan. The Motley Fool has a disclosure policy.


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