The Escondida copper mine in Chile's Atacama Desert produces 8 per cent of the world's copper supply. BHP, which owns 57.5 per cent of Escondida, said it had decided to close the mine after striking workers blockaded the roads.

BHP said it would take legal action against union workers: "This heightened union activity means we no longer feel that are able to unequivocably guarantee the health and safety of our people or the integrity of the operations. As result, Minera Escondida has today closed its operations and ceased negotiations with the union. We will not negotiate with the union while they are carrying out this illegal activity. We will be taking legal action against the union to resolve this," said a spokeswoman for the company.

Earlier in the week, the Chilean government said it would be willing to help. "There is a negotiation under way, it's an issue between private parties, but undoubtedly the government, if there is room to help it reach fruition, will do it," President Michelle Bachelet said. This was the first offer of help from the Chilean governmet since the strike began on August 7.

The mine has 2,052 unionised workers - representing 97 per cent of the work force. They are seeking higher wages and a bonus amid a surge in global copper prices that has boosted the coffers of mining companies since the last pay agreement was made three years ago.

Copper prices dipped earlier in the week as the outlook for a resolution improved when the union reduced their demand to 10 per cent from 13 per cent. They also wanted a $30,000 bonus. The company has offered a 3 per cent increase and a $16,000 bonus.

The miners say their demands are far from unreasonable given the rocketing copper prices but BHP says the price rises are only temporary and does not reflect the productivity of the mine or its workers. It also says that its workers are among the highest paid in the country.

Copper prices rose by 2.6% to $7,480 a tonne on the back of the news but BHP's share price fell 14p to £10.25. Rio Tinto's share price also fell - it owns 30% of the mine. Its shares were off 52p at £27.30 in afternoon trading.

The remainder of the mine is owned by Japan's Mitsubishi Corporation and the International Finance Corporation.

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