MAC: Mines and Communities

Indonesia allows Freeport to restart underground mining after accident

Published by MAC on 2013-07-09
Source: Reuters

Despite some initial tough talking from the Indonesian Government after Freeport's fatal accident (see: Indonesia: Freeport mine stays closed after accident), the Indonesian government cleared the resumption of open pit, and has now also allowed underground mining.

The trade Minister Gita Wirjawan has also said that the accident should not delay talks over the renewal of the company's mining contract.

Indonesia allows Freeport to restart underground mining


9 July 2013

JAKARTA - Indonesia's energy and mineral resources ministry said on Tuesday it will allow Freeport McMoRan Copper and Gold Inc to resume underground operations at the world's second-biggest copper mine.

Freeport halted production at the huge Grasberg mine in remote West Papua on May 15, a day after a training area in a tunnel caved in, killing 28 people.

Freeport Indonesia President Director Rozik Soetjipto said at a media conference it would take one month for underground mining operations to hit full capacity. Earlier this month, the firm said open-pit mining was now running at full capacity after a prolonged closure.

Grasberg pit back at full capacity - Freeport


4 July 2013

JAKARTA - Open-pit mining at Freeport McMoRan Copper and Gold's Indonesian unit, the world's second-largest copper mine, is now running at full capacity after a prolonged closure due to an accident at the site, the firm said on Thursday.

Freeport halted production at the huge Grasberg mine in remote West Papua on May 15, a day after a training area in a tunnel caved in, killing 28 people.

Late last month, the Arizona-based company said open-pit production had been ramped up to 60 percent capacity, just days after receiving approval from the Indonesian government to resume some mining activities.

"Yes it is," Freeport Indonesia President Director Rozik Soetjipto said by telephone, when asked whether open-pit mining was running at full capacity.

The open-pit mine normally produces between 140,000 tonnes and 150,000 tonnes of copper ore per day, while output from the underground operations is 80,000 tonnes. Freeport was forced to declare force majeure on shipments after the accident.

Underground mining was yet to resume, Soetjipto added, without elaborating.

The company has previously said that it is working closely with the government investigation team and mine inspectors with a view to eventually resuming underground operations.

Earlier this week, a member of the government team negotiating with Freeport on its mining contract, said the accident should not delay the talks.

Benchmark three-month copper on the London Metal Exchange traded at $6,961 a tonne on Thursday, or $454 lower than the day before the accident.

Grasberg is up and running again

Frik Els

9 July 2013

Freeport McMoRan Copper and Gold has restarted production at its Grasberg copper-gold mine in Indonesia after an almost two months stoppage following the completion of a government probe into recent accidents at the mine.

Reuters reports Freeport Indonesia President Director Rozik Soetjipto said while shipments have restarted, it would take a month for underground operations to return to full capacity.

It is now expected that Grasberg, the world's largest gold and third-largest copper mine with a history that dates back to the 1930s, would only produce 80% of its 2013 targeted output of 500,000 tonnes of copper, and 1.25 million ounces of gold. The mine also produces silver.

Freeport McMoRan Copper and Gold's Grasberg mine is the world's largest gold mine and third largest copper mine.

Freeport halted most operations at the mine in the remote Indonesian province of West Papua on May 15 after a tunnel collapse killed 28 workers which was followed by another fatal accidents weeks later.

The stoppage has raised questions about expansion plans for an underground mine given the tunnel collapse and ongoing contract extension negotiations between the Indonesian government and Freeport, which wants to operate past 2021.

The storied mine has been the jewel in the crown of Freeport for decades and the $26 billion company keeps a tight grip on the project despite frequent worker strikes, occasional outbreaks of sectarian violence and political interference.

The copper price reacted badly to the news of fresh supply with the red metal losing as much as 2% to touch a day low of $3.03 a pound, a near 3-year low.

Indonesia Trade Minister Eyes Speedy End to Freeport Contract Talks

By Michael Taylor


3 July 2013

JAKARTA - A deadly tunnel collapse at Freeport McMoRan Copper and Gold's Indonesian mine seven weeks ago should not delay contract talks with the U.S.-based firm, a member of the government negotiating team said, adding that he hoped to strike a deal as soon as possible.

Contract talks between Freeport Indonesia and the government were put on hold after a training area in a tunnel caved in on May 14, killing 28 people at the world's No.2 copper mine in remote West Papua.

"It is tragic what happened, but Indonesia needs to be cognizant of where it needs to be going forward as an economic relevance to the world," Trade Minister Gita Wirjawan told Reuters. "It is important for a conclusion to be reached sooner rather than later because it will reflect upon the desires of both Freeport and the Indonesian government."

"ASAP," said Wirjawan, when asked about the ideal time for the talks to be concluded. "I'm hopeful that there will be a meeting of minds between both sides."

Open-pit mining at Freeport's Grasberg mine is due to end after 2016, just five years before its current mining contract expires. Freeport estimates it will cost about $15 billion to turn the complex into a vast underground mine, an investment that only makes sense if it has a new contract with the Indonesian government beyond 2021.

The contract renegotiations have rumbled on for more than a year, with the government seeking bigger royalty payments, commitments on domestic processing and greater divestment by foreign miners.

Freeport currently owns 90.64 percent of Freeport Indonesia, while Indonesia's government owns about 9 percent.

"Things are moving in the right direction in terms of royalty distribution," said Wirjawan, who is part of the negotiating team led by chief economics minister Hatta Rajasa.

"There are one or two things that might have been pending -- one of which is the degree to which they would be open minded with building a smelter."

Last year Indonesia asked all miners to submit plans to build refineries or smelters ahead of a January 2014 ban on raw mineral exports.

Freeport has consistently said that it is willing to supply any new copper smelters in Indonesia with raw copper concentrates but is reluctant to build smelting operations itself.

Indonesian government officials appear to have softened their initial rigidness over the policy in recent months, but remain committed to adding value to resources.

Freeport currently pays a copper royalty rate that varies from 1.5 percent to 3.5 percent, and a fixed rate of 1 percent for gold and silver.

At a recent event in Jakarta, Freeport Indonesia President Director Rozik Soetjipto said the Arizona-based firm was willing to increase the copper royalty to 4 percent, with gold at 3.75 percent and silver at 3.25 percent.

The miner, which estimated that it contributed around $1 billion to the Indonesian economy last year, has also suggested it could list on the Jakarta exchange and offer the government a further 9.36 percent stake.

Change of Guard

Freeport inked a 30-year contract to tap Grasberg's riches in 1991 in a deal with former autocratic president Suharto, who stood down in 1998 after 32-years in power.

In its current contract renegotiations, Freeport has to contend with decentralization and a young democratic system that remains burdened with special interests.

Despite Wirjawan's optimism, May's accident is playing on the minds of legislators, who will closely monitor the negotiations and need to be consulted before any new contract deal is signed off by the Energy and Mineral Resources Ministry.

"Indonesia is not the same as 40 years ago," said Satya Widya Yudha, an influential member of parliament who sits on the commission for energy and natural resources. "We have to treat investors fairly, but the country is changing."

"Freeport must answer for the accident that happened," Yudha told Reuters. "They should prove if they want to stay longer, and that they're concerned about safety."

(Additional reporting by Kanupriya Kapoor, Nadhila Renaldi and Fergus Jensen; Editing by Richard Pullin)

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