* Death toll rises to 21, hopes fade for survivors
* Unions demand thorough investigation
* Mine has been closed for a week
By Michael Taylor
JAKARTA, May 21 Freeport McMoRan Copper & Gold
Inc's Indonesian mine could face a prolonged closure and
scrutiny over its underground mining plans after one of the
country's worst-ever mining disasters, analysts and mining
The Arizona-based company closed the world's second-largest
copper mine on Wednesday last week, a day after a training
tunnel away from its main operations fell in on 38 workers. The
death toll has climbed to 21, while ten have been rescued and
seven remain missing.
The incident's impact on global copper supply has so far
been limited as the Grasberg mine complex keeps stockpiles in
reserve in case of disruptions, but that would change if the
closure drags on.
"You have to think that is not something that is going to be
resolved overnight, said Gayle Berry, an analyst at Barclays in
"The danger is that if Freeport do try to re-start Grasberg
too early, they might inflame already quite tense labour
relations at a period when they are meant to be negotiating with
unions," she added.
Freeport said it would only reopen with government
"When we ... resume operations, we will also have to consult
with the ministry of mines," Freeport spokeswoman Daisy
Primayanti at the start of the week.
Indonesian President Susilo Bambang Yudhoyono called for an
investigation and for rescue efforts to be intensified in a
Twitter message last week, urging companies in the country to
improve safety for workers.
Indonesia's mining sector has a poor safety record after a
series of previous accidents including an explosion at a coal
mine in Sumatra that killed at least 28 people in 2009 and a
landslide in 2006 that killed eight.
The government last week banned underground operations at
the West Papua mine, Primayanti said. Most metal at the
facility, in one of the most remote regions of the Indonesian
archipelago, is currently extracted from an open pit but the
company plans to increase the share from underground mining.
"Politically, they would have to leave the operations
suspended until the last of the bodies are recovered ... The
only nearby issue is how long until they restart. I'd say that
will be a number of days," said a senior mining industry source.
"The bigger strategic question is what is the implication
for the development of the underground mining operations and
therefore to Freeport's targeted production levels as it moves
into an underground phase," said a mining industry source with
knowledge of the sector in Indonesia
"Are there issues with the ground conditions or rock
mechanics that the Freeport engineers don't understand?"
Investors are also concerned the accident could further
strain relations between the company and trade unions after a
three-month strike in late 2011 and smaller disputes since.
A union leader last week demanded that Freeport keep the
mine closed while the cause of the accident was investigated.
Separately, Indonesia's largest workers' union, the
Indonesian Trade Union Confederation, held a small demonstration
of about 25 outside the mining ministry in Jakarta over the
disaster on Tuesday.
The Papua-based union leader Virgo Solossa denied that some
workers had demonstrated over the accident at the mine and
blocked roads, saying they were seeking to help with the
Freeport Indonesia could not be reached for comment on
Freeport Indonesia's President Director, Rozik Soetjipto,
said on Saturday that once the rescue efforts were finished it
would launch an investigation with the help of international
experts and Indonesian government officials.
"We will not rest until we find out how such a tragic event
could have happened and take all action possible to ensure that
it does not occur again," said Soetjipto, who visited the
accident site last week, along with Freeport President and CEO
Freeport Indonesia's sales are 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, respectively.
The rise in sales is due to higher ore grades and the
targeted ramp up in production from its underground operations.
Benchmark copper on the London Metal Exchange was
little-changed at $7,398 a tonne by 0514 GMT.