Chile's Escondida, the world's largest copper mine, has declared force majeure on sales contracts for nine months due to the technical failure of the SAG mill at its Laguna Seca plant, according to a company spokesperson.
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"It's too early to evaluate potential [monetary] losses," said the official, Mauro Valdés, corporate affairs VP at the base metals division of Australia's BHP Billiton (NYSE: BHP), Escondida's controller.
Valdés added that the SAG mill stoppage will likely cause a 15% drop in concentrate production that will translate into a 10% drop in annual refined copper output.
The nine-month force majeure was declared for the period BHP Billiton estimates it will take to repair the SAG mill and return to normal production levels, Valdés said.
The executive added the company was not sure of the costs to repair the SAG mill.
"The SAG mill of the Chilean Escondida mine's Laguna Seca concentrator has experienced unplanned stoppages during the third quarter of 2008," Escondida reported in a statement to securities regulator SVS.
"The electric motor of the SAG mill has demonstrated short circuits due to problems in the functioning of the stator," the statement said. "We expect the situation will continue for some time, until the implementation of a permanent solution."
Escondida, in northern region II, produced 725,177t of copper in this year's first half.
BHP Billiton owns 57.5% of the mine, leaving 30% in the hands of Rio Tinto (LSE: RIO), 10% with Japan's JECO corporation and 2.5% with the World Bank's International Finance Corporation.
