Freeport Indonesia contractors stop work over pay dispute

TIMIKA/JAKARTA Wed May 1, 2013 4:16am EDT

TIMIKA/JAKARTA May 1 (Reuters) - The Indonesian unit of Freeport McMoRan Copper & Gold Inc said on Wednesday that some of its contract workers were striking over wages, bringing to a head pay negotiations that could slow production at the world's second-largest copper mine.

Freeport's Grasberg mine, which also sits atop the world's single-largest cache of gold in Indonesia's West Papua province, has frequently faced worker strikes over pay conditions.

Approximately 1,130 workers from three contractor companies involved in a mine expansion project stopped work on Tuesday after failing to get pay increases to meet the local minimum.

"The strike will no doubt slow Freeport Indonesia's operations, but we do not anticipate an immediate impact on our entire mine operation and production," the company said in an statement received by Reuters on Wednesday.

The last major strike at Freeport in 2011 lasted for three months, caused copper and gold output to drop 15 percent and was Indonesia's longest-ever industrial dispute, costing the country $1.5 billion in lost taxes.

The deal that was inked with workers to resolve the earlier dispute, including a 37 percent pay increase over two years, is due to end in October, potentially leading to more industrial action.

Under the 2011 deal, wage talks between union and Freeport representatives are due to start on May 2 in the town of Timika, about 100 km south of the mine in eastern Indonesia.

The company met managers of the three contractor companies -- PT Jasti Pravita, PT Osato Seike and PT Srikandi Mitra Karya -- and the Freeport workers union on Friday, asking for a peaceful settlement of the wage matter through negotiations, the statement said.

The workers plan to strike for one month, a union leader told Reuters, adding that more Freeport workers could join the labour action if the company does not meet their demands.

"I will order 18 other working units to strike in solidarity," said Freeport workers union leader Virgo Solossa.

Some Freeport contractors workers currently earn 7,000 rupiah ($0.72) an hour, which comes to around 1,700,000 rupiah a month, below a minimum of 2,050,000 rupiah a month set last June by the local regency, he said.

A spokeswoman for Freeport said the company had limited power to determine pay rates for employees of subcontractor companies.

"Every single company has their own management system including how they compensate their employees. Freeport is not really in a position to know, or to be involved directly in how [the contractors] manage their employees," Ledyani Simarmata told Reuters.

"Of course we would like this to be resolved as soon as possible."

As of 2012 Freeport employed just over 24,000 workers at its Grasberg mine, about half of whom were contractors.

Earlier, Freeport Indonesia said its sales were expected to reach 1.1 billion pounds of copper and 1.2 million ounces of gold in 2013, up 54 percent and 31 percent over 2012 figures respectively, as mining moves into higher ore grades.

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