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Freeport McMoRan’s Peru Copper Miners Strike Again Over Wage Increase

Freeport-McMoRan Copper & Gold Inc. (FCX)’s copper miners in Peru will go on strike today after wage talks collapsed, their third stoppage this month, while workers in Indonesia will resume negotiations, union officials said.

About 1,200 workers at Freeport’s Sociedad Minera Cerro Verde SAA (CVERDEC1) unit, Peru’s third-largest copper producer, are scheduled to walk off their jobs at 8:30 a.m. New York time, union General Secretary Leoncio Amudio said. The Labor Ministry ruled the strike action was legal, which bars the company from hiring outside contractors, he said.

“Talks have made little progress as the company isn’t even meeting half our demands,” Amudio said yesterday by telephone from Arequipa, 750 kilometers (466 miles) southeast of Lima. “This strike will probably last longer than last time unless we reach an agreement.”

Workers in Peru, Chile, Bolivia and Indonesia have gone on strike at copper, gold and zinc mines this year, seeking better working conditions and a greater percentage of record profits. Cerro Verde was shut for five days this month, while Freeport’s Grasberg mine in Indonesia began a month-long strike on Sept. 15, raising concerns the stoppages may widen a global metal deficit and boost prices.

The Grasberg union and PT Freeport Indonesia will resume talks tomorrow to help end the strike after negotiations on wage increases last week failed, according to Virgo Solossa, head of organizational affairs at the labor union.

Freeport plunged 7.2 percent to $32.30 in New York trading yesterday. Cerro Verde dropped 4.5 percent to $34.20 in Lima.

Force Majeure

Workers in Peru are demanding a 9 percent annual wage rise, while Cerro Verde is offering a one-time bonus of 1,200 soles ($433), Amudio said.

Cerro Verde, which is studying a $3.5 billion expansion to increase annual copper output by 45 percent, produced 312,336 metric tons last year. Copper and molybdenum concentrates weren’t “materially affected” by this month’s strikes, Freeport spokesman Eric Kinneberg said on Sept. 18.

Kinneberg didn’t immediately respond to a telephone call and an e-mail seeking comment.

“A mine the size of Cerro Verde will usually have several days of output stockpiled for shipment,” Carlos Diez Canseco, a mining consultant and former head of the National Mining Society industry group, said in an interview. “But they may have to declare force majeure if the strike goes on for more than a week.”

Force majeure is a legal clause that allows companies to miss contracted shipments because of circumstances beyond their control.

Grasberg Negotiations

“We will discuss the 2011-2013 working contract as well as the latest condition at Grasberg and the strike at tomorrow’s meeting,” Solossa said by phone from Timika, the town closest to Grasberg.

More than 1,000 of the 8,000 strikers rallied for two hours today in Timika, protesting against Freeport’s policy that replaced the employees with contractors and sanctions against several union members, Solossa said.

According to Article 144 and 145 of the 2003 Indonesian Labor Law, in an event of a strike, laborers on stoppage are entitled to wages and the company isn’t allowed to replace them with outsourced workers and to sanction the strikers. Ramdani Sirait, a Jakarta-based spokesman at Freeport, didn’t respond to a call and text-message to his mobile phone seeking comment.

“We heard that mining continues, but it’s very limited because the management is hiring inexperienced workers,” Solossa said. “We demand our pay and urge Freeport to stop using contractors to do our jobs. That’s against the law.”

Copper Prices

Copper for December delivery fell 19.3 cents, or 5.6 percent, to $3.2465 a pound on the Comex in New York, the lowest settlement since August 2010. On the London Metal Exchange, copper dropped $343, or 4.5 percent, to $7,251 a metric ton ($3.29 a pound).

The management of Freeport’s Indonesian unit, which has the world’s largest recoverable reserves of copper, is negotiating a two-year extension of a labor contract that’s set to expire on Sept. 30.

The company said on Sept. 27 it may adjust its wage offer to help end the strike, which is causing a loss of 3 million pounds (1,361 metric tons) of copper a day. Grasberg produced 553,000 tons in 2010.

To contact the reporters on this story: Alexander Emery in Lima at aemery1@bloomberg.net; Yoga Rusmana in Jakarta at yrusmana@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net; James Poole at jpoole4@bloomberg.net

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