Freeport to Resume Grasberg Production March 12 After Violence

March 8 (Bloomberg) -- Freeport-McMoRan Copper & Gold Inc. agreed with its workers to resume production at Grasberg in Indonesia’s Papua province on March 12, more than two weeks after violence among employees at the mine halted operations.

Operations will gradually return to normal and the company should be able to recover lost output in four months, Virgo Solossa, head of organizational affairs at PT Freeport Indonesia’s labor union, said today by telephone from Timika near the copper mine.

“We will be able to achieve that as long as management keeps its part of the bargain and creates a conducive environment for all its workers,” Solossa said.

Supplies from Grasberg, which contains the world’s biggest recoverable copper reserves, were halted Feb. 23 after violence flared up among employees in the aftermath of a three-month strike last year over pay increases. Some workers returning to the mine “engaged in acts of violence and intimidation” against those who didn’t participate in the strike, Eric Kinneberg, a Freeport spokesman, said on Feb. 27.

Freeport is reviewing the Indonesian unit’s full-year sales forecasts after the disruptions, Kinneberg said yesterday in an e-mail. The company had forecast sales of copper to reach 930 million pounds and gold 1.1 million ounces, he said.

The strike ended in December after Freeport agreed to increase wages. Further meetings between the union and the company are planned from today until March 10 to resolve “outstanding issues and set up a solid negotiation team” that will enable discussion on a new two-year labor contract to start in 10 months, said Solossa.

New Mining Regulations

Foreign companies holding mining business licenses in Indonesia will have to cut their stakes to 49 percent within 10 years of starting production, from 80 percent, according to a decree signed by President Susilo Bambang Yudhoyono on Feb. 21. The new regulation was announced yesterday.

This extends a 2009 law that stipulates that local investors must own at least 20 percent of joint ventures by the sixth year of production.

Foreign companies that applied for mining permits before the 2009 law was passed have been issued with mining business licenses, instead of so-called Contracts of Work. Regional governments are allowed to grant, and revoke, mining business licenses, while Contracts of Work were only issued by the central government.

Miners operating under Contracts of Work, including Freeport and Newmont Mining Corp., will need to change to mining business licenses when their contracts expire, according to the decree.

To contact the reporters on this story: Soraya Permatasari in Melbourne at soraya@bloomberg.net; Liezel Hill in Toronto at lhill30@bloomberg.net

To contact the editors responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net; Andrew Hobbs at ahobbs4@bloomberg.net.