Codelco asks CEO Keller to resign after clash over cost cuts

June 6, 2014
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The former managing director at Toronto-based Brookfield Asset Management Inc. had earlier clashed with union leaders including board member Raimundo Espinoza/AFP FILE
The former managing director at Toronto-based Brookfield Asset Management Inc. had earlier clashed with union leaders including board member Raimundo Espinoza/AFP FILE
JUN 6 – Codelco, the world’s largest copper producer, asked Chief Executive Officer Thomas Keller to resign after he clashed with some board members of the state-run Chilean company over cost-cutting and expansion plans.

“Codelco is in a critical stage, it needs to be reestablished,” Chairman Oscar Landerretche told reporters after a late night board meeting in Santiago where the company is based. “The majority of the board voted for a change in leadership.”

Keller departure comes as President Michelle Bachelet’s government considered his plan to raise output and increase investments by more than $20 billion this decade. Without the spending, output would drop by more than half, Keller said in an April 7 interview.

The former managing director at Toronto-based Brookfield Asset Management Inc. had earlier clashed with union leaders including board member Raimundo Espinoza, as he strived to cut costs and boost productivity. He faced strikes in April and September last year as workers pushed for greater job security.

“I have a very clear vision and I’m not convinced that that vision is shared by the board,” Keller said in an interview with El Mercurio published yesterday. “What we have now in terms of workforce, health benefits and pay isn’t consistent with the profitability promises we made,” he told the newspaper, referring to the company’s century-old Chuquicamata mine.

The board asked Keller to resign from June 13 and is seeking to appoint a replacement within a couple of months, Landerretche said today. Five board members voted to ask for the resignation, three voted against and one abstained, the chairman said.

Codelco Profits

Keller took over as CEO from former BHP Billiton Ltd. executive Diego Hernandez in June 2012 amid a dispute between Codelco and Anglo American Plc over the world’s fifth-largest copper mine.

His predecessor recruited Keller to be chief financial officer as Codelco stepped up investments, replaced mine managers and cut workers in a bid to lift output and productivity at aging mines in Chile.

Codelco hands over all profits to the government and presents an investment proposal each year to reinvest them. Keller publicly criticized the funding constraints last year as he battled to obtain financing to carry out the projects.

The government is committed to reinvesting in Codelco, Finance Minister Alberto Arenas said in an April 14 statement. President Bachelet and Arenas have until the end of this month to approve or revise Codelco’s investment plan.

Previous Investment

Codelco invested more than $4 billion in each of the past two years under the previous administration of President Sebastian Pinera, using a mixture of bonds and profit.

President Bachelet, who took office in March, appointed Landerretche as Codelco’s chairman last month. Landerretche is a Universidad de Chile economics professor who belongs to Bachelet’s Socialist Party.

Keller has a commercial engineering degree from Chile’s Adolfo Ibanez University and a Master of Business Administration from the University of Chicago. He was previously executive president of the Collahuasi copper mine, which is owned by Anglo and Glencore Xstrata Plc.

Keller’s expansion plan, which comes as rivals scale back in the face of slowing demand from China, would surpass all investments since Codelco’s 1976 creation. The record spending includes building an underground mine at Chuquicamata, the century-old open pit expropriated by President Salvador Allende from U.S. mining companies Anaconda Corp. and Kennecott Corp. in 1971.

The expenditure requirements are partly the result of successive Chilean governments since the 1990s siphoning off the state-owned miner’s profits to help transform the nation into the region’s wealthiest country.

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