SANTIAGO (Reuters) - Chilean state copper giant Codelco’s CEO Diego Hernandez abruptly resigned on Thursday and will be replaced by CFO Thomas Keller, just as the world’s No. 1 copper producer is striving to end a bitter contract dispute with global miner Anglo American.
Codelco CODEL.UL told Chile’s market regulator Hernandez tendered his resignation, effective June 1, for “personal reasons.”
Company sources said Hernandez’ departure was linked to differences with Codelco’s board. There is no link between Hernandez’ resignation and the court case with Anglo, Mining Minister Hernan de Solminihac told state television.
His resignation comes just two days after Codelco announced it had agreed to go back to the negotiating table in a push to end a damaging and increasingly acrimonious dispute with Anglo over the global miner’s operations in the country’s central-south region.
Keller, 55, is known as a sharp, accomplished negotiator who was the architect of financing for the plan to buy Anglo’s south-central Chilean assets. Keller was also formerly CEO of the world’s No. 3 copper mine, Collahuasi, which is partly owned by Anglo.
Close to Hernandez, Keller is not seen drastically changing the miner’s strategy in the bitter spat with Anglo.
“There is a strong message of continuity in the designation of Thomas Keller,” said Juan Carlos Guajardo, head of mining think tank CESCO. “He has played as important a role as Diego Hernandez in this situation (with Anglo).”
“With Keller’s appointment, the board’s message is that it will continue with the same policy.”
Codelco and Anglo have been at odds since last October, in a spat over Codelco’s long-standing option to buy a minority stake in the coveted Anglo American Sur (AAS) properties, including the flagship Los Bronces mine.
After two months of secret talks in December and January came to nothing, the market had been bracing for a multibillion- dollar, tricontinental legal battle that could drag on for up to five years.
Investors have fretted that a drawn-out battle would damage both Chile and Anglo, proving a dangerous distraction for the London-listed miner’s management and one of the largest legal battles to land in Chilean courts.
Codelco produced a record 1.735 million metric tons of copper last year, but the firm forecasts its 2012 output will dip before rising to 2.1 million metric tons by 2020 as its ambitious expansion plans come on line.
Analysts say Codelco is losing a safe pair of hands with Hernandez’ departure.
“I think this is bad news for Codelco. Keller might do things well, but Diego (Hernandez) was doing very good work,” said Juan Ignacio Guzman, associate mining professor at Santiago’s Universidad Catolica.
Hernandez, formerly head of base metals at BHP Billiton, was named copper man of the year for 2010 by the Copper Club and is widely respected in the industry as a capable manager with strong technical know-how.
He took over as Codelco’s CEO in 2010, seeking to boost the state miner’s efficiency and buoy production in its tired mines. Heads of Codelco, which produces around 11 percent of world copper, usually stay on for four years, the length of a presidential term in Chile.
Some in the market see him as a strong candidate to take over as CEO of Antofagasta Minerals (AAL.L), which is seeking to replace its own veteran ex- CEO Marcelo Awad in coming weeks.
“There’s a very high probability Diego (Hernandez) will be the new head of Antofagasta Minerals,” said Guzman.
The spat between Codelco and Anglo centers on an option agreement dating back to 1978. Codelco said in October it planned to exercise the option to buy a 49 percent stake in AAS, when the option window opened this January.
Just weeks later, however, Anglo surprised markets with the pre-emptive sale of a 24.5 percent stake in AAS to Mitsubishi, with a $5.4 billion deal that dented Codelco’s ambitions but which it says secured better value for investors.
Codelco says Anglo violated the Chilean legal principle of “good faith” by selling the stake preemptively. Both Anglo and Codelco have sued each other for violating the option contract.
Anglo’s properties in southern Chile include not only expansion project Los Bronces - where Anglo has invested around $2.8 billion - but the El Soldado mine, the Chagres smelter and the Los Sulfatos and San Enrique Monolito exploration projects.
Codelco, the world’s biggest copper miner, is battling dwindling ore grades, extreme weather and labor unrest as it seeks to boost output at its ageing mines.
Codelco said on Wednesday its output fell 10 percent in the first quarter from a year earlier to 373,000 tonnes, but said it was on target to produce 1.708 million tonnes this year.
The Los Bronces deposit is adjacent to its Andina mine, and would be a major boost to the state miner’s production.
Anglo has held talks over the years with Codelco to try to buy out the decades-old option, but failed, prompting accusations from some investors that it did not do enough and underestimated the Chilean heavyweight.
With reporting by Anthony Esposito and Antonio de la Jara; Editing by Simon Gardner, Gary Hill