October 17, 2011 / 4:48 AM / in 9 years

UPDATE 3-Freeport Indonesia halts Grasberg copper, gold output

* Freeport says stops output on security concerns

* Freeport says main pipe taking concentrate to port cut

* Freeport says supply lines to mine blockaded

By Olivia Rondonuwu

JAKARTA, Oct 17 (Reuters) - Freeport McMoRan Copper & Gold Inc halted production on Monday at its giant Grasberg mine in Indonesia because of security fears and worker blockades, in the worst supply disruption since a strike began a month ago.

Freeport said the main pipe carrying copper concentrate to its port from Grasberg, the world’s second-biggest copper mine and with the biggest gold reserves, was cut earlier on Monday, helping copper prices to rise on concerns over supply.

It said it did not know who cut the pipeline and is still evaluating the impact on copper shipments from the remote mountain mine, with no force majeure declared yet.

“Production is completely cut because the main pipe has been cut and because of security concerns,” Freeport Indonesia spokesman Ramdani Sirait told a news conference, adding the mine’s silver output had also been stopped.

A company source said the concentrate processing plant will be shut for 30 days, but the firm could not officially say how long it will take to fix the pipe or how long production or processing will be halted.

The stoppage is a setback for the Freeport after it said last week it had ramped up copper concentrate output at Grasberg to average more than 4,000 tonnes per day by relying largely on non-unionised and contract workers, a move criticised by the government.

The firm said it had still managed to ship 103,189 tonnes of concentrate in the past week, though with blockades to the port and rising worker tension, it was unclear if further shipments can be made.

Copper prices have so far mostly shrugged off the supply disruption during the two-month strike that started on Sept. 15 because of worries a weakening global economy would hit demand, though London three-month prices gained 1 percent on Monday.

“It’s all fairly bullish for the price, but the market doesn’t seem terribly deterred,” said Citigroup analyst David Thurtell.

Road blockades, part of the prolonged strike by around 12,000 of the mine’s 23,000 workers, have now stopped containers carrying food and medicine from reaching the mine and jet fuel from reaching the nearest airport, the company said.

“Logistics needed for production and activities in the highlands have been held at the port,” said Sirait. “There are hundreds and hundreds of containers now piling up at the port.”

The union said the blockades and damage to facilities such as a bus terminal occurred because workers were angered by the death of a colleague following a clash with police last week, as well as because of the firm’s “apathy” to worker demands.

“This is a result of unstoppable emotion of the people who were angered by the death of a worker. The union can’t do anything about this,” Juli Parorrongan, a union spokesman, told Reuters.

Parorrongan said the union had no information on who cut the pipeline, which the company called “sabotage”, and will check who was behind it.

INDEPENDENCE MOVEMENT

Rebels in the eastern province have waged a low-level insurgency against the government for four decades, and previously threatened to blockade the mine after police killed a separatist in an attack in late 2009.

Three men were killed in a shooting last week near the mine in Papua, though it was not clear if this was linked to the pay dispute or to the independence movement.

A clash earlier last week between striking workers and police near the mine led to the death of two protesters — one of whom was a member of an indigenous tribe — and injured others, as disgruntled and striking Grasberg workers protested after being barred from collecting belongings from barracks.

A Reuters witness said indigenous people carrying arrows and spears were joining workers near the blockades on Monday.

Freeport has been trying to lure strikers back to work and has been using contractors at the mine, leading the country’s labour ministry to say the U.S. miner has violated the country’s labour laws by replacing striking workers.

Freeport Indonesia has denied the claim, saying this was part of an annual hiring process as the company required more workers to operate the mine.

Miners in other developing nations have walked out this year to demand better pay as corporate profits surged.

In Peru, the union has pulled out of talks with Freeport McMoRan to end a 16 day-old walkout on Friday and members threatened to go on hunger strike to push demands for a pay rise.

The government in the Latin American country has also said Freeport was committing a “grave infraction” by relying on volunteer staff to fill jobs vacated by strikers at its Cerro Verde mine.

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