Workers plan to strike at Grasberg Mine


December 14, 2011

Workers at Freeport-McMoRan Copper & Gold Inc. (FCX)’s Grasberg mine in Indonesia’s Papua province may hold another strike from Sept. 15 should the company fail to make a new offer on wages increases, a labor union official said.

“We decided to give the management time to change their offer,” Virgo Solossa, head of organizational affairs at PT Freeport Indonesia’s labor union, said by telephone today from Timika, Papua. “If there’s no solution, then we will strike.”

Freeport and Grasberg mine’s labor union ended talks over 2011-2013 contract terms on Aug. 26 after failing to reach an agreement on wage increases. The two sides started negotiations on July 20 after about 8,000 workers put down tools for eight days to July 11, disrupting production and helping to drive up copper prices.

Freeport expected to continue discussions with its employees because under Indonesian law they can extend their talks by 30 days if they want to, Ramdani Sirait, a Jakarta- based spokesman at Freeport, said on Aug. 26.

“We give room for the management to maximize their stance and if possible to match our demands,” Solossa said. “We’re waiting for their response. If they change the offer, then we will definitely meet again. If not, then why should we meet?”

The workers have cut their wage expectations between $17.50 and $43 an hour, from $35 to $200 an hour initially, he said on Aug. 26. The employees currently get $1.50 to $3.50 an hour.

 Compensation Package

“There is no legal basis for any form of work stoppage that is considered a strike as the laws provide for sustained dialogue and mediation,” Freeport’s Sirait said by e-mail today. “During the negotiations, management has offered an attractive financial package for improving the welfare of employees for the upcoming period of the Collective Labor Agreement from October 2011 to September 2013.”

The compensation package includes an increase to basic wages for non-staff employees of 22 percent over the two-year period and bigger bonuses of as much as 230 percent for higher metal output, and a savings plan contribution of as much as 4 percent, he said.

“The package when annualized will amount to 26 times the basic monthly wage, excluding overtime,” Sirait said.

A strike at Grasberg can potentially widen a global production shortfall of copper estimated at 670,000 metric tons this year by Barclays Capital and boost prices of the metal in London that have fallen more than 11 percent from a record $10,190 a ton on Feb. 15.

Grasberg, where operations started in 1990, contains the world’s largest recoverable reserves of copper and the biggest gold reserves, according to Freeport’s website. Copper production at the mine fell to 1.22 billion pounds (553.4 million kilograms) last year from 1.41 billion pounds in 2009, according to the website. Gold output declined to 1.79 million ounces (50,745 kilograms) from 2.57 million ounces.

Copper for three-month delivery dropped 0.6 percent to $9,020 a ton on the London Metal Exchange at 3:21 p.m. Jakarta time