UPDATE 1-Strike cuts output at Southern Copper Peru mine

By Maria Luisa Palomino and Marco Aquino

LIMA, June 18 (Reuters) - A labor strike is severely cutting output at Southern Copper's (SPC.LM) (PCU.N) Cuajone mine in Peru, a company officer said on Wednesday, as the union said it would extend the walkout to demand better benefits.

The strike started on Tuesday at the mine of Southern Copper, Peru's biggest copper producer. Cuajone, located in Moquegua province, churned out 148,936 tonnes of the red metal last year.

"We have some minimal labor help, but this (strike) is greatly affecting production," Alberto Giles, the company's chief of human resources, told Reuters.

He said the company has asked the government of Peru, the world's second-largest copper producer, to declare the strike illegal and prod workers to return to work.

The strike comes as as a week-long blockade dragged on in Moquegua over how mining taxes are shared among provinces .

"It's indefinite and the stoppage continues today," union leader Roman More said. He said nearly all of the more than 500 workers in his union have downed tools at the mine.

Southern's other operation in Moquegua, the Ilo smelter, is running low on supplies.

Southern's Chief Executive, Oscar Gonzalez, told Reuters on Monday that Ilo could be paralyzed in the next week if road blocks across Moquegua continue. Residents demand their province receive a bigger share of taxes paid by the company.