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Freeport Declares Force Majeure on Grasberg Copper Shipments

June 13 (Bloomberg) -- Freeport-McMoRan Copper & Gold Inc. declared force majeure on shipments from its Grasberg operation in Indonesia, the world’s second-largest copper mine, after an accident killed 28 workers last month. Futures extended gains.

The company is waiting for approval from Indonesian authorities to restart operations in phases, starting with open-pit mining and processing activity, Phoenix-based Freeport said yesterday in a statement.

Force majeure is a clause in a contract invoked by commodity suppliers when they can’t meet obligations because of circumstances beyond their control. Freeport had already suspended mining and processing after the May 14 accident.

The stoppage is reducing output by about 3 million pounds of copper (1,361 metric tons) and 3,000 ounces of gold a day, the company said yesterday. That’s equal to about 2.9 percent of average daily global copper output this year, according to data compiled by Bloomberg.

Freeport’s Indonesian unit lost about 80 million pounds of copper and 80,000 ounces of gold production between May 15 and June 11, the company said.

Copper for delivery in three months advanced as much as 1 percent to $7,190 a ton on the London Metal Exchange today, extending a 0.8 percent increase yesterday. The company said it’s cooperating with the investigation into the cause of the tunnel collapse, which led to the deaths.

Independent Probe

An independent team formed by the government will report on the progress of the investigation this weekend or early next week, Ridho Wattimena, head of the team, said in a text message yesterday. He didn’t give further details. The government hasn’t set a target for completion, Thamrin Sihite, director general of coal and minerals at the energy ministry, said on June 7.

Another Grasberg worker died June 1 after a separate accident when material overflowed from an ore bin and covered a truck during maintenance activity.

The force majeure affects consignments of concentrates, a semi-processed ore that’s shipped to smelters. PT Smelting, Indonesia’s only copper smelter, is relying on stockpiles to run its plant in Gresik, East Java, President Director Makoto Miki said by phone before the force majeure was announced. The company last received cargoes from Freeport “around the timing of the accident,” he said.

“For the time being we can continue the operations,” Miki said from Jakarta. “We’re preparing for any scenario. We have had close discussions with Newmont and we have advanced shipments arrangement.”

PT Smelting receives 80 percent of the concentrate supplies for its 300,000-ton smelter from Freeport and the rest from PT Newmont Nusa Tenggara, he said.

Newmont, which runs the Batu Hijau mine on Sumbawa island, is communicating with PT Smelting and will “do our best to assist them in providing concentrate supplies,” Rubi Purnomo, a Jakarta-based spokesman, said in a text message.

To contact the reporters on this story: Liezel Hill in Toronto at; Yoga Rusmana in Jakarta at

To contact the editor responsible for this story: Simon Casey at

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