Freeport Indonesia mine seen shut for two months: company

Reuters News
Posted: Jun 01, 2013 1:57 AM
Freeport Indonesia mine seen shut for two months: company

By Fergus Jensen

JAKARTA (Reuters) - Indonesia has told Freeport McMoRan Copper and Gold Inc it cannot resume production at its huge copper mine until the result of an investigation into an accident is complete, a government official said on Saturday, adding to doubt about how long the company can supply the metal.

The investigation is expected to take two months, a company official said.

Freeport suspended operations at its remote Grasberg complex in eastern Indonesia on May 15, a day after a training tunnel collapsed killing 28 people in one of Indonesia's worst mining accidents.

Another Freeport mine worker died on Saturday evening after a safety breach on Friday that prompted a union leader to tell members to stop work at the world's second-largest copper mine.

"We will do all we can to help his family get through the loss of their husband and father," Freeport Indonesia President Director Rozik B. Soetjipto said in an emailed statement on Saturday, adding that the causes of this incident were also being investigated.

"(Freeport must) stop all production activities except for maintenance until the results of the independent investigation are completed," Energy and Mineral Resources Ministry director of minerals Dede Suhendra told Reuters by text message on Saturday.

A Freeport spokeswoman confirmed that an independent investigation had begun and that the company was not allowed to resume production until after the investigation was complete.

"The investigation team formed by the government arrived in Tembagapura yesterday morning and I hear reports from the site that they have started by going to ground zero and doing investigations there," Freeport Indonesia Corporate Communications chief Daisy Primayanti told Reuters.

"They are indicating to us that they will be completing the investigation in two months," she said.

Primayanti declined to comment on the subject of ore stockpiles and shipments.

Prolonged closure could hit Freeport's ability to supply its customers and global supplies of copper.

Freeport has not said how long its stockpiles of ore might last.

Industry sources say large miners typically have three to four weeks of ore stockpiled at port, and about three days on site.

Freeport declared a force majeure on some concentrate sales about one month into a 2011 strike.

After the latest accident on Friday, in which a truck driver was seriously injured, Freeport union official Virgo Solossa asked the company to stop all activities at the remote complex in west Papua, and to review safety systems.

The accidents could have a bearing on contract renegotiations between the Indonesian government and the company, which is trying to obtain an extension beyond 2021.

The Arizona-based company wants to turn Grasberg into the world's biggest underground mining complex after 2016 when its open pit operations are due to end. Open-pit mining currently accounts for two-thirds of production.

Freeport said on Wednesday it had resumed some operations at the mine, which also holds the world's largest gold reserves.

Freeport Indonesia's sales are expected to reach 1.1 billion lb of copper and 1.2 million ounces of gold in 2013, up 54 percent and 31 percent over 2012, respectively.

Open-pit mining at Grasberg normally produces about 140,000 metric tons of copper ore a day, while underground operations yield 80,000 metric tons.

The problems at the mine have helped underpin copper prices, although a prolonged shutdown would be necessary to hit world supplies, which are still seen in a small surplus this year.

(Additional reporting by Yayat Supriatna and Michael Taylor; Writing by Jonathan Thatcher; Editing by Robert Birsel/Catherine Evans)