Bloomberg News

Freeport McMoRan Miners in Peru, Indonesia Strike Over Pay

September 14, 2011

(Updates copper price in final paragraph.)

Sept. 14 (Bloomberg) -- Freeport-McMoRan Copper & Gold Inc.’s copper miners in Peru and Indonesia went on strike today after pay-increase talks broke down, union officials said.

About 1,200 workers at Freeport’s Sociedad Minera Cerro Verde SAA unit, Peru’s third-largest copper producer, walked off their jobs at 8:30 a.m. New York time, Mining Federation General Secretary Luis Castillo said today by telephone. About 8,000 non-staff workers at Freeport’s Grasberg mine in Indonesia started a one-month strike at midnight local time, said Virgo Solossa, head of organizational affairs at the labor union.

Workers in Peru, Chile, Bolivia and Indonesia have gone on strike at copper, gold and zinc mines this year, seeking improved conditions and a bigger slice of record profits. Copper yesterday rose as much as 1.5 percent as threats of mine strikes heightened concern a global shortfall will increase.

“Freeport’s offer was insufficient,” union General Secretary Leoncio Amudio Amudio said yesterday by telephone from Arequipa, 750 kilometers (466 miles) southeast of Lima. “There was no chance of reaching an agreement.”

Freeport fell 71 cents, or 1.7 percent, to $41.29 as of 10:00 a.m. in New York trading. Cerro Verde rose 10 cents, or 0.3 percent, to $39 in Lima yesterday.

Cerro Verde miners held a 48-hour work stoppage last week. Freeport and Grasberg’s labor union ended 38 days of talks over 2011-2013 contract terms on Aug. 26 after failing to agree on wages. Negotiations started after the workers walked off from their jobs for eight days in July.

Copper Shortfall

A strike at Grasberg, located in Mimika, Papua province, 1,940 miles (3,120 kilometers) east of Jakarta, and in Peru could widen a global production shortfall of copper estimated at 670,000 metric tons this year by Barclays Capital and boost prices of the metal in London that have fallen more than 14 percent from a record $10,190 a ton on Feb. 15.

“The management expects the workers to cancel the strike plan and return to the negotiation table because the law gives them room to continue negotiation,” Ramdani Sirait, a Jakarta- based spokesman at Freeport, said in a text-message. He declined to comment on the impact of the strike on production and sales.

The Grasberg workers still expect wages to increase to between $17.50 and $43 an hour from $1.50 to $3.50, Solossa said today. The union cut their expectations from $35 to $200 an hour initially, he said Aug. 26. Freeport offered a compensation package that includes an increase in basic wages for non-staff employees of 22 percent over a two-year period, Sirait said on Sept. 5.

‘No Sincerity’

“We don’t see any sincerity from the company on resolving the pay issue and coming up with a new offer,” Solossa said by telephone today from Timika, the closest town to the mine. “We’ve obtained permits from the regent and chief of police for the strike.”

Workers in Peru are demanding a 9 percent annual wage rise, while Cerro Verde is offering a one-time bonus of 1,200 soles ($705), Amudio said.

Phoenix-based Freeport will continue negotiating a new labor contract, spokesman Eric Kinneberg said on Sept. 8. Cerro Verde, which is studying a $3.5 billion expansion to increase annual copper output by 45 percent, boosted first-half output by 4 percent to 161,246 metric tons.

Grasberg, where operations started in 1990, contains the world’s largest recoverable reserves of copper and the biggest gold reserves, according to Freeport’s website. Copper production at the mine fell to 1.22 billion pounds (553.4 million kilograms) last year from 1.41 billion pounds in 2009, according to the website. Gold output declined to 1.79 million ounces (50,745 kilograms) from 2.57 million ounces.

Copper for three-month delivery declined 1.7 percent to $8,617.75 a metric ton as of 4:13 p.m. local time on the London Metal Exchange.

--Editors: Dale Crofts, Jessica Brice

To contact the reporter on this story: Alex Emery in Lima at aemery1@bloomberg.net.

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net.


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