MAC: Mines and Communities

Freeport Indonesia Mine Workers Start Strike

Published by MAC on 2011-07-11
Source: PlanetArk, Reuters (2011-07-05)

Freeport-Rio Tinto workers in West Papua claim they are paid only US$1.5 an hour, while other Freeport workers around the world receive at least ten times this amount.

Last week, 8,000 of them went on strike at the Grasberg mine, the world's biggest single source of mined gold and one of its leading copper producers.

ESPAÑOL

Thousands Of Freeport Indonesia Mine Workers Start 7-Day Strike

By Samuel Wanda

PlanetArk

5 July 2011

About 8,000 workers at Freeport-McMoran Copper & Gold Inc's Indonesian unit kicked off a seven-day strike on Monday, a union head said, in a move that could potentially disrupt operations.

Freeport said it was not anticipating any impact on production at the mine it claims on its website contains the world's largest single gold reserve.

Freeport's Indonesia unit runs the Grasberg mine in the remote Papua province, where a separatist insurgency and struggle over resources has lingered for decades.

The workers have called for a re-negotiation of their working contract, demanding a wage rise from $1.5 to $3 per hour, since they said other Freeport workers around the world are paid at least $15-30 per hour, a union official said.

"We see that from eight companies Freeport owned, Indonesia is the biggest contributor in terms of revenue ... We deserve something more," Virgo Solossa, the organisational head of Freeport Indonesia's Labor Union, told Reuters by telephone.

"We are not going to rally, we are just going on a strike, sitting tight doing nothing," Solossa added.

Thousands of workers marched from Timika city to Kuala Kencana, the Freeport town complex, on Monday morning, although many have yet to reach the Freeport complex since roads are being blockaded by police.

"We are not anticipating any impact to production," Freeport's Jakarta-based spokesman Ramdani Sirait said in an emailed statement, in response to a question on potential disruption to gold and copper output.

"The management calls all employees to keep working ... the company sees there is no legitimate justification for any form of strike, therefore it is unlawful because it is not due to failed negotiation nor the company's unwillingness to negotiate," Sirait said.

Freeport, which also has mines in North America, South America and the Democratic Republic of Congo, expects its copper output to fall 17 percent this year to about 1 billion pounds by weight.

(Editing by Neil Chatterjee)


Copper strikes threaten fragile copper supplies

By Olivia Rondonuwu and Alonso Soto

Reuters

7 July 2011

JAKARTA/SANTIAGO - Three of the world's biggest copper mines face strike-related disruptions this week, early signs of a possible resurgence in labor unrest that could strain an already fragile supply pipeline.

In Indonesia, a strike for higher pay has paralyzed output at Freeport McMoRan Copper & Gold's giant Grasberg mine, workers said on Wednesday. In Chile, some workers at state-owned Codelco are planning a one-day walk-out, while unions in Peru called off a two-day strike at the last moment.

Coupled with diminishing output at older mines and a severe cold snap that has curtailed production at other mines in Chile, which produces a third of the world's copper, news of growing dissent is helping propel prices back toward the record above $10,000 a tonne hit in February.

"It further highlights the risk to copper supply growth this year," analyst Gayle Berry of Barclays Capital said.

London Metal Exchange copper CMCU3 eased to $9,521 a tonne on Wednesday after China raised interest rates for the third time this year. But it's up more than 40 percent from a year ago as dealers bet that growing supply outages may push the market into a deficit.

The strike at Freeport's Grasberg, which entered its third day on Wednesday, highlights the rising labor costs in booming emerging markets -- especially as more workers demand a share of record revenues. Grasberg holds the world's biggest gold reserves and is one of the largest copper producers.

In Chile, workers at Codelco's top two operations, Chuquicamata and El Teniente, ratified plans to strike for 24 hours next Monday to protest against an overhaul of the country's giant state mining company. The smaller Andina and Salvador divisions have also signed up, while the Radomiro Tomic division is gearing up to vote.

It would be the first national walkout by Codelco workers since 1993, and follows several years of unusually intense labor unrest, including two strikes that shut down major mines for a month or more, among the longest disruptions on record.

The federation of mining unions in major copper producer Peru on Tuesday called off plans for a two-day nationwide strike in the mining powerhouse this week, a union leader told Reuters.

Weather Worsens Impact

Bad weather this year has repeatedly hit the mining heartland of Chile, disrupting the operations of copper miners, and more heavy snow, wind and rain is expected in Chile's copper-rich north.

An unusually severe winter storm hit operations at Collahuasi, the world's No. 3 copper mine, where union officials say output had been more than halved at a deposit that produces about 3 percent of the world's mined copper.

The mine operator said on Wednesday it was "progressively normalizing operations" at the mine, but has given no output impact figures.

"(These) adverse effects should probably not last for long, but will be contributory factors to a much tighter global copper market over the rest of the year. We therefore see good support for copper prices," Commerzbank said on Wednesday in a note.

Chile's Antofagasta said last month the ramp-up of its Esperanza copper mine, expected to contribute the lion's share of supply growth this year, would be completed in the second half, after taking longer than initially planned.

"In a different type of environment you'd expect that to help increase price," Berry said of the supply disruptions. "At the moment, the markets seem to be a lot more focused on macro events (but) you can certainly say they are providing a floor."

Worsening Ore Quality

The Freeport mine is already facing a 17 percent decline this year in production of copper because of worsening ore quality, with the strike likely to exacerbate the drop, said MineLife analyst Gavin Wendt.

Freeport has so far only said that concentrate shipments have not been affected, although it has declined to comment on whether operations and production has been disrupted.

Analysts said any force majeure, enabling Freeport to halt contract shipments to buyers, would depend on the level of stocks the U.S. mining firm maintained at the remote mountain site.

"You may not see a force majeure unless it continues over a week," said UK-based VM Group analyst Carl Firman. "Generally mines have built into their mine plans a certain buffer of stocks, and I'd imagine they will work those down first so they can keep shipments and contracts secure."

($1 = 8537.5 Rupiah)

(Additional reporting by Carrie Ho in Shanghai, Melanie Burton in London and Alonso Soto in Santiago; Writing by Neil Chatterjee; Editing by Simon Garner and Alden Bentley)

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