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Freeport Indonesia mine grinds to complete halt due to union action

February 17, 2017

http://www.reuters.com/article/us-indonesia-freeport-output-idUSKBN15V0RO

Thu Feb 16, 2017 | 7:13am EST

Freeport Indonesia mine grinds to complete halt: union

FILE PHOTO: Trucks operate in the open-pit mine of PT Freeport'
FILE PHOTO: Trucks operate in the open-pit mine of PT Freeport’s Grasberg copper and gold mine complex near Timika, in the eastern region of Papua, Indonesia on September 19, 2015 in this photo taken by Antara Foto. REUTERS/Muhammad Adimaja/Antara Foto/File Photo
By Fergus Jensen and Wilda Asmarini | JAKARTA

All work has stopped at Freeport-McMoRan Inc’s giant copper mine in Indonesia and its workers are planning a demonstration against the government’s move last month that halted exports of copper concentrate to boost domestic industries, a union said.

A prolonged stoppage at the world’s second-biggest copper mine would support copper prices, near 21-month highs this week, but would also deny the Indonesian government desperately needed revenue from one of its biggest taxpayers.

Freeport had said the Grasberg mine would have to slash output by 60 percent to approximately 70 million pounds of metal per month if it did not get an export permit by mid-February, due to limited storage.

But a strike at Freeport’s sole domestic offtaker of copper concentrate, PT Smelting, expected to last at least until March, has limited Freeport’s output options, and Grasberg’s storage sites are now full.

"Everything has stopped completely. It’s just maintenance now," Freeport Indonesia worker union chief Virgo Solossa told Reuters on Thursday, stopping short of saying how many of an estimated 33,000 workers had been sent home.

Thousands of workers plan to stage a demonstration on Friday in Timika, Papua, the province where the mine is located, to demand the government makes "a wise decision" regarding their situation, Solossa said.

"If they aren’t careful, this has and will impact (Freeport operations), both for workers as immediate beneficiaries and the broader community as recipients of benefits from Freeport’s presence."

Solossa added further action would be considered following the demonstration on Friday.

When asked about the stoppage, Freeport Indonesia spokesman Riza Pratama referred to the domestic smelter strike, and told Reuters that Grasberg’s production was now being "managed to supply PT Smelting when their operations return to normal."

He noted Freeport did not have any plan to announce a force majeure yet.

"We are continuing to cooperate (with the government) so that our exports of concentrate can return to normal," Pratama said.

Freeport estimated in January that sales of copper from Grasberg would reach 1.3 billion pounds in 2017, up from 1.05 billion pounds in 2016, assuming operations were normal.

Coal and Minerals Director General Bambang Gatot declined to comment on the work stoppage and planned demonstration, but said the company had not applied for an export permit yet.

"Let’s see what happens tomorrow," he said.

ALSO IN COMMODITIES

Indonesia introduced rules earlier this year requiring Freeport and some other miners to shift from their current ‘contracts of work’ to so-called ‘special mining permits’, before being allowed to resume exports of semi-processed ores and concentrates.

Phoenix, Arizona-based Freeport has said it will only agree to a new mining permit with the same fiscal and legal protection in its current contract.

The company has made direct contributions of more than $16 billion to Southeast Asia’s biggest economy in taxes, royalties, dividends and other payments between 1992 and 2015, according to company data.

Copper was down 0.7 percent at $6,027 a tonne on Thursday, holding near a 21-month high of $6,204 touched on Monday.[MTL]

(Editing by Joseph Radford and Mark Potter)

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