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A century in mining

Gonzalo Jiménez is executive director FBN Chile and Albert von Appen is Professor & Director Family Business Center, Universidad Adolfo Ibañez.

The Callejas family have suffered and survived both political and economical instability as a family business in Chile. Hard work and determination have ensured they remain a leading player in the mining industry, as Gonzalo Jiménez and Albert von Appen reveal

In Chile, as in the rest of the world, family businesses not only play an important role in the country's economic development, but their family members often take key roles in the development and growth of industrial sectors. If we were to single out one Chilean family to have achieved this, it would be the Callejas family, who have been a leading player in the mining business for over a century. This achievement is particularly impressive, given the ups and downs of the mining industry in the economic and political history of Chile. "We are one of the pioneering families in the development of the mining industry, and have remained loyal to this activity", states Lautaro Manríquez Callejas, CEO of El Bronce Mining Company. The mining tradition of the Callejas family is now in the hands of the fourth generation, who have the responsibility for taking the family's heritage into the future.

A born mining entrepreneur
The founder of the Callejas family's mining tradition was Paulino Callejas, a hard-working, tenacious and persevering man. He was born in the small, rural village of Freirina, in 1875, and married Margarita Zamora Díaz in 1901. They had eleven children. Currently, the heirs of this family number over 500, 110 of them holding shares in the group. Four of them are company directors belonging to the fourth generation. "Nobody here has a guaranteed position, no matter how Callejas he or she may be", says Lautaro Manríquez, of the Callejas Miranda branch.

'Don Paulino' decided to leave his job at the Labrar Foundry to initiate a new venture, attracted by 'white gold fever'. Callejas's patriarch, and his three oldest sons set out with shovel and pickaxe in hand, and worked on the nitrate mines in Northern Chile. This venture was successful until the end of the 1920s when, affected by the bad results derived from the nitrate crisis, they were forced to return to their hometown, Freirina. This is where Margarita Zamora, matriarch of the Callejas clan, comes into the picture. She had kept the family's ownership on the mining rights up to date, using part of the money from the nitrate her husband had sent her. So, instead of starting all over again as an employee, Paulino Callejas was in a position to acquire the Capote mine, allowing him to become a copper producer and an investor in a major gold mine. This important mining discovery was consolidated in 1934 with the foundation of the Capote Auriferous Society of Freirina, currently known as Minera El Bronce Holding Company.

Expansion, crisis and re-building the business
During the 1950s, following much family discussion, the Callejas family decided to expand to other locations in Chile, creating copper and gold mines in Illapel, Domeyko and Copiapó, in the north of the country. By a twist of fate, even the Labrar Foundry where don Paulino had originally been a worker ended up as property of the family.

Unfortunately, falling metal prices meant the Callejas family's investments suffered, and operations at El Bronce of Petorca ceased in 1957. Five years later the family's patriarch, Paulino Callejas, died aged 88. Despite this misfortune, and the years of political instability in Chile, his children and grandchildren's persistent entrepreneurial spirit allowed the new family leaders to re-establish gold production at El Bronce of Petorca in 1979. It was extremely successful and they became Chile's second main gold producer.

A long period of diversification began during the 1980s, including investment in Refimet Foundry, the first copper foundry to be built financed by private Chilean capital. In 1983 the El Bronce Mining Company was created and by the end of the 1980s they also had the Cerro Dominador Mining Company.
 
Rock-bottom copper prices during the 1990s meant the family were forced to sell off some of the company's assets, reduce wages, make workers redundant and enter the new century with a debt of US$16 million. During this unsettling period a new generation of Callejas took over the business with a mission to confront this financial situation through a process of restructuring, under the leadership of its current CEO, Lautaro Manríquez Callejas.
 
During this stage the turnaround team analysed the mining industry and identified the company's strengths and weaknesses. They set an ambitious goal of becoming globally competitive as an industrial mining company. They focused on three main perspectives: strategic, financial and organisational. Strategically, short-term challenges were formulated, focusing on optimising supply and production. A refinancing initiative was launched to optimise and restructure liabilities. The organisational restructuring was the most important of all and included incorporating high level professionals in all the company's key departments.

Greater operating flexibility was one of the key points to the company's recovery. "The company's macro-management must be geared towards three main areas, related to capital, production and management. These three areas interact permanently and each one depends on the other two. Cash flow cannot be maximised without developing a competitive advantage that is sustainable with production. The way to achieve this is by implementing a management system to maximise the human resource's contribution. This will always be the most important of all resources," stated CEO Lautaro Manríquez Callejas. He added: "Currently, we are facing a comfortable financial situation, allowing us to be calmer and more optimistic about the future. We understand that the only way for a company to prosper is through its results, and this means satisfied owners and content workers."

Reinforcing family and corporate governance
The new leadership has also initiated a new era to project the family group towards the future. This has all been part of the development of new projects and investments, to create competitive advantages and ensure long-term profitability.
 
The group's main operating unit, named the Cerro Dominador Mining Company, owns assets valued at over US$40 million. Additionally, it participates through Metalmin in the construction, fabrication and installation of metal structures associated with mining activities. The group also has a strong presence in real estate. However, the Group's general manager admits that, "Our management effort is mainly oriented towards mining."

Efforts have also been focused on the construction of the Santa Margarita Project, named in honour of the family's great-grandmother. For this project an investment of US$ 8 million was made.

The Callejas family have also been worried about facing family issues. They contacted a specialised Chilean consultancy firm that developed an intense working process with the Callejas family, including self-analysis, discussion and formation through workshops and family meetings. As a result of this work, a family council was formed, consisting of one representative from the fourth generation and one representative from each of the nine family branches. These 'cousins' are between 30 and 35 years old, and were voted for by each branch, where consideration was given to personal commitment, professional preparation and not related to whether they currently held company shares or not. The council has put together the Callejas's family protocol and subsequently formed family committees to deal with three main family activities:

- The design of a scholarships system. This is meant to help future generations going through economic difficulties while encouraging the formation of future leaders who can lead the company through successive generations.
- The restoring of the Casa Grande of Freirina – the building that bore the beginnings of this family dynasty and will be a project supported by future Callejas generations.
- The development of intellectual contributions orientated towards the improvement of the company's corporate governance.

Current and future perspectives
The application of these strategic changes within the family as well as the business, have contributed to an improvement of the company's position within the market, leaving behind the difficulties of previous years, and giving a new strength and determination towards the future. "Even though our management has been focused on the treatment of dregs, we think that it's time to review our mining situation," remarked Lautaro.
 
An investment of US$60 million until 2013 is projected, and the firm's goal is to produce approximately 100,000 tonnes of copper within a decade. "This plan allows for a relevant twist to the company and it shows that its current position has changed", emphasises the corporation's general manager.

This is the history and future projection of one the most important business families in the Chilean mining area. Former Chilean President, Eduardo Frei Montalva, said: "The history of Chilean mining is written in this family." There is much truth in this statement – the Callejas family isn't just history, it is also the future.

Callejas, Chile, mining
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