SANTIAGO - Chilean State-owned copper giant Codelco's restructuring plan may not be ready until the end of 2026, the company told Reuters on Wednesday, signalling a delay for a much-anticipated strategy meant to address years of stagnant production and mounting costs.

The turnaround plan was originally expected in October. Four sources with knowledge of the matter said it could entail a workforce reduction of between 5% and 20%, while Codelco said it was too early to speculate.

Any restructuring at Chile's largest company would resonate far beyond Codelco given mining's outsized role in the Chilean economy and run counter to President Jose Antonio Kast's pledge to lower unemployment to around 6% and recover at least 300 000 jobs by 2030.

"Codelco is currently working through a diagnostic process to figure out its strategic direction and develop a recovery plan. That's already underway and should be ready by the end of 2026," the company said.

Codelco's new CEO, Jorge Gomez, joined the company in July and the company said this sort of review was fairly standard when new leadership took over.

Asked about potential job cuts, Codelco added: "It's too early to speculate or get ahead of ourselves about what decisions might come out of this."

There has been longstanding debate in Chile over whether the state miner's payroll has become bloated relative to private-sector peers.

The four sources, three of whom work at Codelco and one who is close to the company's top management and government, said the company's new management is reassessing the size of its nearly 77 000-strong workforce to restore competitiveness.

They said the workforce reduction could range from 5% to as much as one-fifth of the payroll, underscoring that no firm decision has been made.

Some job losses could come from Codelco selling or shutting down less profitable operations or delaying projects to ease cost pressures, the sources said. Contractors, who account for eight in every 10 jobs at Codelco, would likely be hardest hit.

TURNAROUND STRATEGY

Before joining Codelco, Gomez helped stabilize production at Anglo American and Glencore's jointly owned Collahuasi, one of the world's largest copper mines.

Sources said Gomez is seeking to apply a similar turnaround strategy at Codelco, beginning with a more realistic production outlook after previous plans envisioned output reaching 1.7-million tons by the end of the decade.

Codelco chairperson Bernardo Fontaine said in August output is likely to remain around 1.3-million metric tons in coming years. He also previously said the recovery plan would involve difficult decisions aimed at restoring the miner's competitiveness. In June, Fontaine had said the restructuring plan would be presented in three to four months, and in a later radio interview said it would come in October to November.

The company's unions, grouped under the Copper Workers Federation (FTC), said they have not been formally informed of any plans to reduce headcount and argued staffing levels are already closely aligned with operational needs.

"It's a discussion that remains open, but staffing levels must be adjusted rationally, not by decree," FTC President Hector Roco told Reuters.

Juan Ignacio Guzman, head of GEM Mining Consulting, said staffing levels at Codelco's operating divisions would likely need to be maintained despite lower production targets given the complexity of the company's mining operations.

RISING UNEMPLOYMENT

Significant layoffs at Codelco could add to wider tensions over rising unemployment. Chile's unemployment rate hit 9.5% in July amid a slowdown in its economy, which is heavily reliant on copper exports and other natural-resource industries.

That was the largest share of Chileans out of work since the throes of the Covid-19 pandemic in 2021, weighing on Kast's approval ratings six months into his presidential term.

Kast has acknowledged unemployment is a "major weakness" for his government and it has fueled public frustration.

Chile's mining and finance ministries did not immediately respond to requests for comment.