Freeport Copper Output Falls at Grasberg Amid ProtestLiezel Hill
Freeport-McMoRan Inc.’s output fell at its Grasberg complex in Indonesia, the world’s third-largest copper mine, after some employees stayed away in protest at safety standards following a fatal accident last month.
Operations at the open pit at Grasberg, which also produces gold, were interrupted for about two weeks after a Sept. 27 collision between a light vehicle and a truck killed four workers.
While authorities allowed work to resume Oct. 13, a “large percentage” of open-pit employees haven’t reported for their shifts, reducing production this month, Phoenix-based Freeport said yesterday. The shares fell the most in seven months.
Freeport, the largest publicly traded copper producer, has struggled to maintain operating levels at Grasberg. The mine saw a lengthy strike in 2011 and was closed for months following a tunnel collapse last year that killed 28. Exports were interrupted earlier this year after a dispute with the Indonesian government over export duties.
There may be more disruption after the union representing workers at Grasberg said Oct. 27 it notified the company that it plans to strike over safety. Production already may be at 60 percent to 70 percent of capacity as a result of stoppages by some employees, R. Sukhyar, director general of coal and minerals at Indonesia’s Energy and Mineral Resources Ministry, said by phone yesterday.
Employees’ failure to report to work conflicts with a collective labor agreement and Freeport’s local union is working with union leadership to resume normal operations as soon as possible, the company said.
Chief Executive Officer Richard Adkerson said yesterday on Freeport’s third-quarter earnings conference call that as much as 80 percent of the workforce is in place at Grasberg, which is located in a mountainous region of Papua province.
“Our safety programs are strong by international standards,” Adkerson said. “Because of the terrain, the weather and the workforce, when someone makes a mistake, unfortunately, the consequences can be tough.”
The shares fell 4.2 percent to $29.03 in New York yesterday.
Freeport reported a third-quarter profit excluding one-time items of 64 cents a share, topping the 61-cent average of 20 analysts’ estimates compiled by Bloomberg. Sales declined 7.6 percent to $5.7 billion, still beating the $5.62 billion average estimate.
The company reduced its 2014 copper sales forecast to 3.9 billion pounds, from a July prediction of 4.1 billion pounds. It also lowered its gold forecast to 1.2 million ounces from 1.3 million ounces.
“We believe the weak October production is the reason for lower annual guidance,” Fraser Phillips, a Toronto-based analyst at RBC Capital Markets, said in a note. “If a strike commences, Grasberg’s output would likely be impacted by 50 million pounds of copper and 80,000 ounces of gold, the previous sensitivity Freeport provided for each month of a strike.”
Freeport sold 258 million pounds of copper and 505,000 ounces of gold from its Indonesian operations in the third quarter.