Workers say strike hits output at Freeport Indonesia mine

Tue Jul 5, 2011

* About 8,000 workers strike for second day at Grasberg
* Use of shovels, trucks dropped, mine "abandoned" - workers
* Freeport says concentrate shipments not disrupted

By Olivia Rondonuwu

JAKARTA, July 5 (Reuters) - Mining operations and production at Freeport-McMoRan Copper & Gold's mine in Indonesia have been significantly curtailed by the second day of a seven-day strike by about 8,000 workers, union workers said on Tuesday.

Freeport Indonesia said on Tuesday that concentrate shipments have not been disrupted but has declined to comment on whether operations have been affected at the remote mountain mine, which has the world's largest reserve of gold .

"This is a rough estimate but I think from full operation of 100 percent, the mining operation has now dropped to below 10 percent, which is equal to almost no operation," Virgo Solossa, one of the union heads at the mine, told Reuters by telephone.

He said the use of five shovels at the Grasberg mine had dropped to two, while trucks that normally ferry ore from the mine 80-200 times a day were now only making the trip 20 times at the most.

Solossa is one of the union leaders who has received a warning from Freeport, which has said the strike over pay is illegal.

Another worker, who declined to be identified for fear of a backlash, told Reuters that engines at the mine, including shovels, trucks and mills, have all been shut down.

"When I left the situation was like an abandoned war zone," said the mechanic, who said he was in the last batch of about 2,000 workers to leave the open pit mine.

"It was dead quiet, no operations, no cars, were moving... All engines were shut down, operation tools and the power have all been turned off," he said.

The Grasberg mine normally operates 24 hours a day. Freeport-McMoran's Indonesia unit said in March it expected copper output to fall 17 percent this year to about 1 billion lbs.

Freeport's Jakarta-based spokesman Ramdani Sirait declined to comment further on production or operations.

A third worker who does quality control at one of the concentrate plants said in the two days leading up to the strike, processing had slowed down and dropped 70 percent because the amount of ore arriving had been reduced.

The union said it staged the strike to demand a pay rise for workers getting $1.5 per hour, when it said other Freeport workers around the world were paid at least $15-30 per hour, as well as for the reinstatement of its leaders who were expecting to get sacked.

Both sides have called for negotiations but there was no sign of any talks starting yet.

"A prolonged bit of industrial action is likely to affect production undoubtedly. Force majeure for strike action is tricky legally, because it's not an act of God," said Colin Hamilton, a senior analyst at Macquarie Securities in London.

"If they started really missing contract shipments and rather than delay they had to cancel them, then they would probably have to start thinking about declaring a force majeure."

He said it was too early to tell if the strike would affect the gold or copper markets.

"At the moment, it's just started and these things can often go away quite quickly. Essentially, it's really too early to tell the overall impact."

Gold prices were up 0.5 percent on Tuesday, while copper prices were steady on the day.

Freeport's Indonesia mine is located in the remote Papua province, where a separatist insurgency and struggle over resources has lingered for decades. It is a major contributor to central government revenues.
(By Thomson Reuters)