Turmoil at No. 2 Copper Mine Deepens as Freeport Fires Thousands

(Bloomberg) -- Turmoil at the world's second-biggest copper mine intensified on Wednesday as Freeport-McMoRan Inc.'s Indonesia unit said it had fired 3,000 workers amid a strike that has lasted more than five weeks and cut production at the pit.

Freeport Indonesia said the workers at the giant Grasberg mine failed to return after being asked five times and it now considers them to have resigned, spokesman Riza Pratama told reporters in Jakarta on Wednesday. There are about 30,000 people at the mine, including 11,000 direct employees. Shipments of concentrate aren't affected, though output's not at an “optimum level” because of the ongoing strike, Pratama said, without elaborating.

Eric Kinneberg, a spokesman at Freeport's head office in Phoenix, said Wednesday the company had no additional comment beyond a statement made on May 25. At that time, Freeport said roughly 4,000 workers, including a limited number of contractors, had not reported to work and were deemed to have resigned.

The strike at Grasberg in Papua that started on May 1 has hurt mining and milling rates, according to the company. The workers are protesting against layoffs and furloughs. The stoppage has hampered a ramp-up of production after the government granted a permit to export concentrate. JPMorgan Chase & Co. has called the challenges at Grasberg the biggest threat to global supply.

“Production is not at an optimum level because there are a lot of absentees,” Pratama said. “We're thinking of how” to replace the workers, he added.

Freeport is locked in a protracted dispute with the government over the long-term conditions under which it operates in the country. The government wants the company to switch to a special mining license from a contract of work and divest a majority stake, while the producer is seeking fiscal and legal guarantees to secure its long-term future. The conflict led to a ban on concentrate exports in January, which only resumed in April.

Copper for delivery in three months on the London Metal Exchange settled on Wednesday up 0.1 percent at $5,621 a metric ton. Prices have dropped about 10 percent from this year's high in February.

To contact the reporter on this story: Fitri Wulandari in Jakarta at fwulandari@bloomberg.net.

To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net, Alexander Kwiatkowski, James Poole