The workers' union at BHP's Cerro Colorado has called on its members to reject a final contract offer by the company, paving the way for a strike at the small deposit, Reuters reported.

It's another potential setback for the mine, after the Supreme Court ruled in favour of indigenous communities in a complaint related to water use earlier this year.

Union leader Marcelo Franco said BHP had used the regulatory issues it faced as an excuse to lowball workers with an inadequate contract proposal, the wire service reported.

Cerro Colorado is part of BHP's Pampa Norte copper operation in northern Chile.

Strike action was averted this month at the BHP-operated Escondida mine, however labour issues have flared at Codelco's Andina and Lumina Copper's Caserones mines.

Meanwhile copper supply constraints did not depend on strike action in Chile, investment bank Jefferies said earlier this month, pointing to a lack of supply growth and increasing demand.

The red metal price hit a record high of US$10,747.50 per tonne on the London Metal Exchange in May.