Bloomberg News

Freeport Assesses Production Impact of Indonesia Stoppage

September 15, 2011

(Updates prices in fifth paragraph.)

Sept. 15 (Bloomberg) -- Freeport-McMoRan Copper & Gold Inc. is assessing the impact on production and deliveries at its Grasberg copper and gold mine in Indonesia after the union said 70 percent of workers started a one-month strike last night.

About 8,000 employees at Grasberg, excluding workers from contractors, joined the strike that started at midnight to demand wage increases, Juli Parorrongan, a labor union spokesman, said today. Freeport miners are also striking in Peru at the company’s Sociedad Minera Cerro Verde SAA unit, where copper production has not been “materially impacted,” it said.

“We are disappointed that union workers decided to implement an illegal work stoppage,” said Ramdani Sirait, a PT Freeport Indonesia spokesman, in a statement. “The company has negotiated in a diligent good-faith manner with union representatives to reach a mutually satisfactory agreement.”

Grasberg has the world’s largest recoverable reserves of copper and the biggest single gold reserve, according to the Freeport website. 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 after metal prices more than doubled since the end of 2008.

Copper for three-month delivery advanced as much as 1.8 percent to $8,787 a metric ton on the London Metal Exchange today and traded at $8,715 a ton at 5:23 p.m. local time.

Strikes at Grasberg in Papua province 1,940 miles (3,120 kilometers) east of Jakarta, and in Peru may widen a global shortage of copper estimated at 670,000 metric tons this year by Barclays Capital and boost prices of the metal.

Mining ‘Inactive’

Concentrate shipments from Amamapare port in Papua have been halted since 5 a.m. local time, said Virgo Solossa, head of organizational affairs at Freeport Indonesia’s labor union.

“The last deliveries left the port at 11 p.m. and this morning there are three or four vessels that were unable to load,” he said. “I could say that all mining-related activities at Grasberg are inactive at the moment.”

Freeport may complete an assessment on the impact of the strike as early as tomorrow, company spokesman Sirait said by phone, without elaborating.

In Peru, Freeport miners will continue their strike after wage talks ended in disagreement, Mining Federation General Secretary Luis Castillo said by phone. Workers and officials at Cerro Verde, Peru’s third-largest copper producer, are scheduled to resume government-brokered talks today, he said. About 1,200 workers had walked off their jobs, he said.

‘Better Welfare’

Copper and molybdenum concentrate output from the unit has not been “materially affected” by the strike, according to an e-mailed statement from spokesman Eric Kinneberg.

In Indonesia, more workers supported the strike at the Grasberg mine including non-union members, Parorrongan said.

“Workers put down their tools as per midnight and have moved down from mining sites since 6.30 a.m.,” he said today by telephone from Timika, the closest town to Grasberg. “This is purely an act for a better welfare.”

The company and labor union at Grasberg 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 their jobs for eight days in July. Cerro Verde miners held a 48-hour work stoppage last week.

Grasberg workers expect wages to increase to between $17.50 and $43 an hour from $1.50 to $3.50, said Solossa yesterday. 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.

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 from 2.57 million ounces.

--With assistance from Alex Emery in Lima. Editor: James Poole, Dale Crofts

To contact the reporters on this story: Eko Listiyorini in Jakarta at elistiyorini@bloomberg.net; Yoga Rusmana in Jakarta at yrusmana@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net.


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