June 10, 2013 / 10:51 AM / 6 years ago

Indonesia's PT Smelting seeks alternative copper supply after Freeport accident

* PT Smelting in talks with Newmont for alternative copper supplies

* Chief Executive says a 3-month Freeport closure bad for the economy

* No Freeport copper concentrate shipments due, CEO says

By Michael Taylor

JAKARTA, June 10 (Reuters) - Indonesia’s only copper smelter, PT Smelting, has taken just one shipment from Freeport Indonesia after last month’s accident that killed 28 workers, the company’s chief executive said on Monday, and is in talks with other suppliers to avoid an enforced closure of its own.

Freeport McMoRan Copper and Gold Inc, which runs the world’s second-largest copper mine in remote Papua, suspended operations on May 15, a day after a training tunnel away from the mining operations caved in on 38 workers.

Freeport’s Grasberg mine in west Papua usually supplies 80 percent of the Indonesian smelter’s copper concentrate, with Newmont Mining Corp responsible for the rest, Makoto Miki, president director at PT Smelting, told Reuters.

“Inventory from the port was shipped over,” Miki said, when asked when the last Freeport material had arrived.

“I don’t remember the exact schedule, the second half of May. No (Freeport) shipments are scheduled at this moment because operations are suspended,” he added.

“We are trying to get available concentrate ... if we are not successful in our efforts to secure concentrate, we will also have to suspend operations for a short time.”

Freeport Indonesia could not immediately be contacted for comment.

Arizona-based Freeport briefly resumed open-pit mining production on May 28, but after a worker died in a separate accident, the government asked the company to suspend operations until a government investigation was completed. The probe was expected to take up to three months.

The Grasberg complex, which also has the world’s largest reserves of gold, normally produces around 220,000 tonnes of concentrated ore a day, with about 140,000 tonnes coming from open-pit mining and 80,000 tonnes from underground operations.

A stoppage of three months would cut around 125,000 tonnes of copper, or about half a percent, from global supply, Reuters estimates show. Combined with other disruptions, this could wipe out an expected small market surplus and boost global prices .

PT Smelting usually receives copper concentrate shipments from Freeport every week, said Miki, who was unable to give exact quantities but said the firm was in talks with Newmont to boost supplies.

“Suspending (Freeport) operations for too long a period will hurt the Indonesian economy ... I hope that part of the operations resume,” he said.

Newmont could not be reached for comment.

Japanese smelter Pan Pacific Copper, which also buys copper concentrate from Freeport Indonesia, said it suffered some shipment delays due to the accident, and had asked other contract suppliers to advance their shipments.

PT Smelting in Gresik, East Java, was established in 1996 and is owned by a group of foreign firms.

Japan’s Mitsubishi Materials Corp has 60.5 percent, Mitsubishi Corp owns 9.5 percent, while Nippon Mining and Metals Co. Ltd, a unit of Nippon Mining Holdings Inc., has 5 percent. The Indonesian unit of Freeport McMoRan Copper & Gold owns 25 percent.

Copper metal output at the smelter is forecast to rise to 270,000 tonnes this year from 210,000 tonnes in 2012, Miki added, due to a planned one month maintenance shutdown last year.

PT Smelting sells copper mainly to domestic and Southeast Asian buyers.

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