SANTIAGO - Chile's State-owned Codelco, the world's largest copper producer, agreed on Friday to start the process of closing its troubled Ventanas smelter, the company said.

Workers had threatened action, including a strike, if the board did not invest to upgrade the facility after an environmental incident sickened dozens of people.

The mining company stopped the smelter for maintenance and operational adjustments ordered by the environmental regulator after dozens of people fell ill in its saturated industrial location on the east coast. 

"Codelco's board of directors approved by majority to advance in the preparation to cease the operation," the company said in a statement, adding that the associated copper refinery would not be affected.

The company would help workers secure jobs, offering options such as relocation, retraining or special voluntary retirement plans to deal with the transition, it said.

Ealier, a union source, who sought anonymity because of the sensitivity of the issue, told Reuters about the decision before it was made public.

Closing the smelter will require changes to a law that forces the company to smelt minerals from state-owned Enami, a company for small and medium-scale miners, exclusively at Ventanas.

Leaders of the Federation of Copper Workers (FTC), which groups the firms' unions, told Reuters they were analysing the board's decision to assess their position.

Codelco's gradual closure process will begin with temporary stoppage once the legal adjustment is approved, the firm, said.

The unionized workers have insisted that Ventanas be fitted with some capsules that retain gases, at a cost of $53 million, in order to continue operations in compliance with environment rules.

However, Mining Minister Marcela Hernando told congress this week that a complete upgrade of the unit could be as costly as building a new smelter.