By Julie Gordon
June 12 (Reuters) - Freeport-McMoRan Copper & Gold Inc on Wednesday declared force majeure to free itself from obligations to deliver copper concentrate from its Grasberg mine in Indonesia, where work has been suspended after a May accident that killed 28 people.
"Because of the temporary disruption, (Freeport Indonesia) has notified its customers of a Force Majeure event under its concentrate sales agreements," the company said in a statement.
The announcement, widely expected by metals traders, sent Freeport shares up 2.9 percent to $29.86 on Wednesday morning. Benchmark three-month copper was up nearly 1 percent, on signs of tightening supply, including the Grasberg shutdown.
Freeport said the suspension has so far impacted some 36,000 tonnes of copper output at Grasberg, or 7 percent of the some 500,000 tonnes of copper sales the company had expected from Grasberg in 2013.
Gold output has also been curbed by about 80,000 ounces, or 6 percent of the planned 1.25 million ounces for the year.
Operations were halted at the Grasberg complex on May 15, the day after a training tunnel collapsed, killing 28 people in one of Indonesia's worst mining disasters.
Freeport briefly resumed open-pit mining on May 28, but after another worker was killed in a separate accident, the Indonesian government asked the company to suspend operations until an investigation was completed.
The Arizona-based miner said the Indonesia Department of Energy and Mineral Resources had completed a preliminary review and issued recommendations, which the company is addressing.
"This was an unprecedented event in our more than 40-year history of operations in Papua," Chairman James Moffett and Chief Executive Richard Adkerson said in a joint statement. "We are taking all actions required to prevent future incidents and to assure the safety of our workforce."
It was not clear when Grasberg, the world's second largest copper mine, will be restarted. Freeport said it is working with authorities to resume operations in phases and will update its production outlook as additional information becomes available.
But a restart of operations may not be imminent, with the full review still ongoing and more recommendations expected.
Government officials said on Tuesday that they did not know when the investigation would wrap up and they would seek input from industry experts once it is completed. A government official had no further comment on Wednesday.
The declaration from Freeport is the second major force majeure to hit the copper market this year, coming just two months after a massive slide crippled production at Rio Tinto Plc's Bingham Canyon mine in Utah.
The outages have pushed spot treatment and refining charges (TC/RCs) down to around $75 per tonne/7.5 cents per lb, with offers as low as $65/6.5 cents, as supply tightened. That compares with $85/8.5 cents before the accidents. Miners or traders to smelters pay the charges to convert concentrate into refined metal.
Metal analysts said a prolonged stoppage at Grasberg could help keep copper supplies tight this year, despite the addition of new tonnes into the market from Rio's Oyu Tolgoi mine in Mongolia.
"From the reports we were getting from Grasberg's customers we knew this was coming, but this will perhaps surprise a few people in terms of the speed at which it has occurred," said Nic Brown, an analyst at Natixis in London. "The market appears to be tightening significantly, and we believe that the copper market will remain in deficit this year."
Benchmark copper was up 0.8 percent at $7120.25 per tonne on Wednesday morning.
The Grasberg complex, which also has the world's largest gold reserves, normally produces around 220,000 tonnes of concentrated ore a day, with about 140,000 tonnes from open-pit mining and 80,000 tonnes from underground operations.
Freeport, the world's largest publicly-listed copper miner, operates mines around the world and recently expanded in energy with the takeover of two U.S.-focused oil & gas companies.